Tortious interference may occur in a few different contexts, but most commonly they are done in either interference with contracts, prospective business relations, or existing economic relations. In New York, the standard test for finding if a defendant has committed tortious interference with a prospective contract is: “(1) the plaintiff had business relations with a third party; (2) the defendant interfered with those business relations; (3) the defendant acted with the sole purpose of harming the plaintiff or by using unlawful means; and (4) there was resulting injury to the business relationship.”[1]
Tortious interference with prospective real estate broker contracts is not exempt from such causes of action, as New York courts have long recognized this cause of action. Because it is a prospective contract, there is a higher standard than that of a contract that has already been signed and executed.
In order for a real estate broker to recover on a claim of tortious interference with a prospective contract, the broker must show greater than a “qualified probability” that without interference by a third party, that the real estate broker contract would be executed, and a commission would have been earned.[2] In the Court of Appeals case, Keviczky v. Lorber, the Court found that, “Since [the broker] would have earned the commission if defendants had not conspired to refrain from dealing with plaintiff and thus prevented him from earning the commission, such a conspiracy is an actionable wrong giving rise to liability...”[3] If a court finds that there was a professional relationship in which the broker, “produced a buyer ready, willing, and able to purchase the property” and can show that such factors would have led to the broker earning his commission, then the “qualified probability” requirement will be satisfied.[4]
Additionally, a court may also accept evidence that negotiations were at a stage advanced enough that had a defendant not interfered with the negotiations, then the broker would have earned his commission.[5] In Spitzer v. Sachar, the court found that, when a negotiates with prospective purchaser, “another party could not agree to become partner of prospective purchaser and while knowing of broker's employment, privately negotiate with owner of property and thereby deprive broker of his commission on sale.”[6] More simply put, a defendant cannot knowingly break up advanced negotiations between broker and third party, in order to earn their own commission. Courts will generally look unfavorably on these undercutting’s of potential broker agreements and their negotiations.
For help navigating restrictive covenants and drafting employment agreements, contact KI Legal’s knowledgeable labor & employment attorneys by calling (212) 404-8644 or emailing info@kilegal.com. We are here to help protect your business and interests.
[1] N. State Autobahn, Inc. v. Progressive Ins. Grp. Co., 102 A.D.3d 5, 21, 953 N.Y.S.2d 96, 108 (2012); Thome v. Alexander & Louisa Calder Found., 70 A.D.3d 88, 108, 890 N.Y.S.2d 16; citing Carvel Corp. v. Noonan, 3 N.Y.3d 182, 189–190, 785 N.Y.S.2d 359, 818 N.E.2d 1100).
[2] See Sutton & Edwards, Inc. v. Samuels, 187 A.D.2d 501, 589 N.Y.S.2d 609 (1992).
[3] Keviczky v. Lorber, 290 N.Y. 297, 305–06, 49 N.E.2d 146, 149 (1943).
[4] Sutton at 611.
[5] See Spitzer v. Sachar, 4 A.D.2d 53, 162 N.Y.S.2d 810 (1957).
[6] Id.
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