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Published: 2008-03-26

Interference With Contractual or Business Relations: The Business Claim



In recent years much commercial litigation in Georgia has involved claims for tortious interference with contractual or other business relations. This type of claim is based on the notion that the possessor of a contract or other property right is entitled to pursue a claim against an intermeddler who adversely affects those property rights. This claim was originally applied in an English case reported in 1853 where a singer under contract to sing at the plaintiff's theater was induced by the defendant, who operated a rival theater, to break her contract. The court held that the plaintiff was entitled to recover money damages from the rival theater owner for his interference with the singer's contract, which was essentially a form of unlawful competition. Since that case, this type of claim has been applied in a wide variety of business contexts.

The Georgia Code states the basic principle that "every act of another which unlawfully interferes with the enjoyment of personal property is a tort for which an action shall lie." The courts have further defined the claim of tortious interference to require proof that the defendant did the following: (1) acted improperly and without privilege; (2) acted purposefully and maliciously with intent to injure; (3) induced a third party or parties not to enter into or continue a business relationship with the plaintiff; and (4) caused the plaintiff some financial injury. In order to support a claim for tortious interference with contract, there must also be proof of a contractual relationship. A claim for tortious interference with business relations, however, may be actionable even when there is no contract. "Business relations" has been broadly defined to include inchoate rights which a party has or hopes to have.

One limiting element imposed by the courts on this potentially wide-ranging doctrine is that the defendant must be a stranger to the relationship alleged to have been harmed. This follows the notion that one who is involved in the relationship at issue, prior to the alleged interference, cannot be said to be an intermeddler. While the Georgia courts have employed this doctrine to dismiss various claims, the courts have disregarded this requirement where the evidence tends to show that the defendant has acted in bad faith or engaged in other intentional misconduct.

Tortious interference claims are often pursued in actions between competing businesses. Some examples of actions which may give rise to liability include inducing customers to breach a contract with a competitor, mass hirings of employees from a competitor or making false statements about a competitor to lure customers or employees away.

As with any tort claim, recoverable damages include all damages proximately caused by the misconduct, whether such damages were foreseeable or not. This is in contrast to the amount of damages recoverable for breach of contract which is limited to foreseeable damages. Successful claimants may potentially recover, in addition to actual damages, general damages, attorney's fees and, where egregious wrongdoing has occurred, punitive damages.

Defenses to tortious interference claims include various privileges, such as the privilege of fair competition. It has long been recognized that fair competition is always legal. An employee, after leaving employment, may, so long as he does not use his former employer's trade secrets, avail himself of whatever expertise he has acquired from his former employer, may compete for the same customer dollars, may even go to customers who have been procured for the former employer and endeavor to persuade them to change their trade to his advantage. Even the destruction of a competing business by means of attracting its customers in the fair course of competition is not actionable. (To protect themselves from such a calamity, many employers use employment contracts containing restrictive covenants.)

The touchstone for liability under this tort is a showing of some improper or illegal action as an intermeddler. Businesses should therefore evaluate whether contemplated actions could be construed to have an appearance of impropriety which could expose the company to tortious interference claims.