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DEFENDANT TORTIOUSLY INTERFERED WITH PLAINTIFF’S CONTRACT BUT DID NOT TORTIOUSLY INTERFERE WITH PLAINTIFF’S BUSINESS RELATIONS OR ENGAGE IN UNFAIR COMPETITION; THE ELEMENTS OF THE THREE CAUSES OF ACTION EXPLAINED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined defendant was properly found to have tortiously interfered with plaintiff’s contract but should not have been found to have tortiously interfered with plaintiff’s business relations or to have engaged in unfair competition. The elements of each cause of action are clearly explained in the decision. With respect to tortious interference with business relations, the court wrote:

“While a cause of action for interference with prospective contract or business relationship is closely akin to one for tortious interference with contract, the former requires proof of more culpable conduct on the part of defendant” … . “This standard is met where the interference with prospective business relations was accomplished by wrongful means or where the offending party acted for the sole purpose of harming the other party” … . “Wrongful means” has been defined to include “physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure” … . “[A]s a general rule, the defendant’s conduct must amount to a crime or an independent tort. Conduct that is not criminal or tortious will generally be ‘lawful’ and thus insufficiently ‘culpable’ to create liability for interference with prospective contracts or other nonbinding economic relations” … . In addition, conduct which is motivated by economic self-interest cannot be characterized as solely malicious … . Stuart’s, LLC v Edelman, 2021 NY Slip Op 04569, Second Dept 7-29-21

 

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ONE DEFENDANT BREACHED A CONTRACT; THE OTHER DEFENDANT TORTIOUSLY INTERFERED WITH PLAINTIFF’S PROSPECTIVE BUSINESS RELATIONS; THE JURY AWARDED SEPARATE DAMAGE-AMOUNTS FOR EACH DEFENDANT; SUPREME COURT SHOULD NOT HAVE HELD BOTH DEFENDANTS JOINTLY AND SEVERALLY LIABLE FOR THE COMBINED AMOUNT OF DAMAGES (SECOND DEPT). ​

The Second Department, in a full-fledged opinion by Justice Cohen, reversing Supreme Court, determined the defendants, one of which was found by the jury to have breached a contract, and the other which was found to have tortiously interfered with plaintiff’s prospective business relations, should not have been deemed jointly and severally liable. Each was separately liable for the separate damage-amounts assigned by the jury:

The jury determined that the plaintiff sustained damages in the amount of $60,000 resulting from [defendant] DIG’s interference with the plaintiff’s prospective business relationship with [defendant] B1 Advanced, and that the plaintiff sustained damages in the amount of $657,000 resulting from B1 Advanced’s breach of contract. Contrary to the Supreme Court’s determination, the damages arising out of DIG’s tortious interference could, in fact, differ from the damages arising out of B1 Advanced’s breach of contract. The jury assessed the amount of damages against DIG based on the plaintiff’s loss of prospective profits resulting from DIG’s tortious interference with the plaintiff’s ongoing business relationship with B1 Advanced … . Conversely, “[d]amages for breach of contract include general (or direct) damages, which compensate for the value of the promised performance, and consequential damages, which are indirect and compensate for additional losses incurred as a result of the breach, such as lost profits” … . The jury’s apportionment of damages reflects its finding that DIG was not responsible for all of the damages caused by B1 Advanced’s breach of contract. Achieve It Solutions, LLC v Lewis, 2020 NY Slip Op 04137, Second Dept 7-22-20

 

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TORTIOUS INTERFERENCE WITH BUSINESS RELATIONS CAUSE OF ACTION PROPERLY SURVIVED A MOTION TO DISMISS, LAW OF THE CASE DOCTRINE APPLIES ONLY TO COURTS OF COORDINATE JURISDICTION.

The First Department determined plaintiff had stated a cause of action for tortious interference with business relations. Plaintiff, a Broadway musical producer, alleged defendant made false statements implicating plaintiff in investor fraud (committed by a nonparty). The court noted that the law of the case doctrine applies only to courts of coordinate jurisdiction, not to the appellate courts:

The tortious interference claim was properly sustained insofar as it was premised on emails sent by defendant to a key investor, but not insofar as it was premised on comments made by defendant’s attorney that were quoted in various news articles.

As to the emails, plaintiff adequately pled that defendant’s conduct was unlawful or for the sole purpose of inflicting intentional harm on plaintiff … – as we observed in a related action premised on these same emails (see Rebecca Broadway L.P. v Hotton, 143 AD3d 71, 77 [1st Dept 2016]). Specifically, plaintiff alleged that, in sending the emails, defendant misappropriated confidential information he was privy to as a result of his position as the musical’s press agent and committed the independent tort of defamation … . Sprecher v Thibodeau, 2017 NY Slip Op 02519, 1st Dept 3-30-17

 

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Elements of Tortious Interference with Contract and Tortious Interference With Prospective Business Relations Explained

The Second Department, over a dissent, determined that the counterclaims alleging tortious interference with contract and tortious interference with prospective business relations were properly dismissed. The counterclaims alleged that the plaintiffs-attorneys, who represented defendant, Landmark, improperly sought payment of attorney’s fees for a negotiated stipulation of settlement directly from the party with whom Landmark settled, rather than from Landmark. In dismissing the counterclaims, the court explained the required elements of each:

A necessary element of [tortious interference with contract] is the intentional and improper procurement of a breach and damages … . Here, Landmark failed to adequately plead facts that would establish that the plaintiffs, in communicating with the third party to secure their attorney’s fees, intentionally procured that party’s breach of the stipulation of settlement… . …

A claim for tortious interference with prospective business relations does not require a breach of an existing contract, but the party asserting the claim must meet a “more culpable conduct” standard … . This standard is met where the interference with prospective business relations was accomplished by wrongful means or where the offending party acted for the sole purpose of harming the other party … . ” Wrongful means’ include physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure” … . As a general rule, the offending party’s conduct must amount to a crime or an independent tort, as conduct that is neither criminal nor tortious will generally be “lawful” and thus insufficiently “culpable” to create liability for interference with prospective business relations … . The mere violation of an attorney disciplinary rule will only create liability if actual damages are incurred as a result of the violating conduct  … . In addition, where the offending party’s actions are motivated by economic self-interest, they cannot be characterized as solely malicious … . Law Offs. of Ira H. Leibowitz v Landmark Ventures, Inc., 2015 NY Slip Op 06575, 2nd Dept 8-19-15

 

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“But For” Causation Element of Tortious Interference with Contract and Prospective Business Relationship Not Present—Notwithstanding the Actions of the Defendants, there Was Evidence the Contract Was Cancelled for Financial Reasons

The Third Department, in finding the causes of action should have been dismissed, explained the “but for” element of tortious interference with contractual relations and prospective business relationships.  The complaint alleged that defendants made disparaging and false remarks about the plaintiff which caused plaintiff to lose a consulting contract.  However the evidence demonstrated the contract was cancelled for financial reasons.  Therefore the “but for” element was not present:

Causation is an essential element of a claim for tortious interference with contractual relations. Such a cause of action requires proof that, “but for” the defendants’ conduct, the plaintiff would not have breached its contract with a third party … .

In opposition to defendants’ motion for summary judgment, plaintiffs submitted a letter — not previously disclosed during discovery —… . * * * This letter established that, regardless of whether defendants acted in such a manner as to interfere with the consulting contract, the contract … was terminated for financial reasons … . Thus, it cannot be shown that “but for” defendants’ alleged interference, plaintiffs’ contractual relationship … would have continued … . Ullmanglass v Oneida Ltd, 2014 NY Slip Op 07234, 3rd Dept 10-23-14

 

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