Tortious Interference with Economic Relations in New York: Elements & Defenses

I. Elements

What is tortious interference? Tortious interference is a common law tort that most often arises in commercial litigation when one party damages another party’s contractual or business relationship with others. Most jurisdictions recognize separate claims for tortious interference with contract and tortious interference with business relationships.

The claim for tortious interference with economic relations has four elements. To establish a claim for tortious interference with economic relations or prospective business advantage, a plaintiff must demonstrate that:

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]

While a similar standard and claim compared to tortious interference with a contract, tortious interference with economic relations is generally harder to prove in court. This is because unlike proving tortious interference with a prospective economic relationship, proving tortious interference with economic relations is often more difficult than proving tortious interference with a contract because courts are more protective of existing contracts than potential opportunities.

The Plaintiff Had Business Relations With a Third Party

The first element, as stated above, is that the plaintiff had business relations with a third party. In this case, a third party is any person or entity who is not the plaintiff or defendant. Where a plaintiff can show a valid contract, the interference need not be independently unlawful to be actionable. Prospective relationships, in contrast, can fail for many legitimate reasons, such as economic competition.[2] Courts thus set a high bar before they impose liability on third parties for a prospective relationship's failure.[3] One such example of a prospective business relationship is an employer recruiting an employee and preparing to offer an employment contract.

The Defendant Interfered with Those Business Relations

The second element, as stated above, is the defendant must interfere with the relationship. The plaintiff must show that the defendant induced or otherwise caused the economic relationship between the plaintiff and third party to breakdown or prevented such relationship from occurring.[4]

The Defendant Acted with the Sole Purpose of Harming the Plaintiff or by Using Unlawful Means

The third element, being intent to interfere with the economic relationship, is often hardest to prove. The plaintiff must show that the defendant used dishonest, unfair, or improper means to interfere.[5] Generally speaking, in order to be deemed improper or dishonest, the action must be a crime or intentional tort. For example, fraud can qualify as a crime or independent tort to which one could improperly interfere with another’s business relationship.[6]

There Was Resulting Injury to the Business Relationship

The last element and generally one of the easier to prove is the resulting injury. Usually, this can take the form of a lost business relationship. A contract that should have been executed but was not can be deemed an injury under the law as a lost economic relationship. The resulting damages could be calculated by what the contract would be worth in value to the plaintiff.[7]

II. Defense

The most common defense to tortious interference with economic relations is that the defendant can claim their status of a competitor, otherwise known as the defense of professional persuasion.[8] In many of these cases, the relationship being interfered with is between potential employer and employee. Because a competitor is usually motivated by economic self-interest, the defendant’s status as a competitor will usually protect them from claims of tortious interference. This is a policy decision done by the courts in order to protect economic competition and freedom of choice for both employees and employers alike. This is especially true in the case of at-will employees, who do not have written employment contracts.[9]

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).

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