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What Your Company Needs to Know When There Is Tortious Interference with a Business Relationship By A Competitor

Business competition, especially in New York, is always tough and at times, it can be ferocious. The question is what happens when someone goes too far, crosses the line, and unfairly interferes with your business and its opportunities. These intentional (and in some instances, negligent) actions are incredibly disruptive to any business and can cause massive economic losses with serious legal consequences. 

One of the most famous matters involving tortious interference is the landmark case of Penzoil v. Texaco which went to the U.S. Supreme Court. The facts, in brief, are as follows; in 1984, Penzoil had reached an agreement in principle to acquire the Getty Oil Company. Texaco, who knew about the agreement and was aware that Penzoil did not have a signed contract and was in the process of finalizing the agreement, contacted Getty, disrupted their negotiations, interfered in the Penzoil transaction, and negotiated its own deal with Getty. Penzoil filed a lawsuit, which went to a jury trial and Penzoil was awarded $10.5 billion for Texaco’s intentional interference, which included $3 billion in punitive damages. At the time, it was the largest jury award in a civil lawsuit; which was later modified on appeal. This case is a stark example of the profound consequences and potentially enormous damages caused by this type of tortious conduct. In today’s business marketplace, this type of behavior appears to be occurring with alarming frequency. We trust the information provided herein will assist you in protecting your business and pursuing your rights.  

Formal and Informal Agreements 

Here are some of the key points for business owners to consider when they enter into agreements that benefit their companies or organizations. Whether the agreement is formal or informal, outside parties should not interfere with these business arrangements. 

Those who own and operate businesses rely on the terms of their agreements with:

  • Vendors
  • Contractors
  • Insurers
  • Lenders and creditors
  • Distributors
  • And more

When a third party interferes with a contractual or business agreement, it can harm the related companies. For instance, suppose that a third party convinced your company’s supplier to break their contract with you. 

Alternatively, imagine that a third party obstructed you from purchasing a piece of property. In this case, you may have the option to bring legal action against the interfering party.

These actions are called “tortious interference” cases. If someone unfairly interfered with a professional agreement or contract, reach out to a skilled attorney to pursue recourse.

Types of Relationships Subject to Interference

Generally, there are two types of professional relationships that are subject to third-party interference. These are:

  • Existing contracts
  • Prospective economic advantage

The first type of interference implies that there is an existing formal agreement or professional contract in place. The second type is less formal. It relies only on a reasonable expectation of financial advantage.

If a third party interferes with an existing contract, a successful tortious interference case will rely on proving the following elements:

  • An existing contract between two parties
  • The validity of the existing contract
  • The third-party entity was aware of the contract
  • The third-party entity purposefully interfered with the agreement
  • The third-party entity’s wrongful actions harmed the business relationship

When there is no formal contract involved, it can be more difficult to prove tortious interference. For example, a company may be involved in negotiating the specific terms of a contract. An outside party could act in a way that derails the negotiation. In a case like this, the business that was negotiating may have a legal claim against the third party.

For a successful “interference with prospective economic advantage” case, the claimant must prove the following:

  • The business had an established professional relationship
  • A third party was aware of this business relationship
  • The outside party wrongfully disrupted the professional relationship
  • The interference caused harm to the established relationship

Wrongful conduct by a third party can take many forms. Behaviors that might interfere with a contract or business relationship include:

  • Fraud
  • Economic pressure
  • Filing civil or criminal lawsuits
  • Misrepresentation
  • Physical violence or threats of violence
  • Breach of fiduciary duty

The deciding factor in the success of a tortious interference case is whether the third party’s actions were inappropriate. It is important for a skilled attorney to show that the third party’s interference was purposeful and direct.

Other factors are relevant in tortious interference cases, as well. For instance, suppose the third party has a pre-existing relationship with the business in question. Alternatively, imagine that the third party had a financial motivation to harm the business. Factors like these will be relevant to the case.

Damages in Tortious Interference Cases

If you have been the victim of tortious interference, it is important to consult with a knowledgeable business lawyer. Make sure to contact a legal professional who has experience in corporate litigation.

Filing a tortious interference claim can help to ensure that your business assets are protected against harmful meddling. The accomplished legal team at Woods Lonergan PLLC has plenty of experience in corporate law.

When you file a successful tortious interference claim, you can recover the following financial damages:

  • Financial losses that the company can document
  • Expected loss of profits resulting from the interference
  • Punitive damages (intended to punish the defendant)

Punitive damages are intended to deter future incidents of tortious interference.

Please Contact Woods Lonergan at our New York City Office

If you have any questions on a potential tortious interference case, please contact our legal team to schedule a complimentary consultation to review your matter and provide you guidance on your legal options.