I’m writing this post about the Business Court’s past decisions involving tortious interference with contract because "tortious interference" is one of the most common searches leading readers to this blog.
So, here’s a summary of more than a dozen Business Court decisions which involve that tort, with links to the summaries of the cases on this blog, which in turn have links to the full opinion and also to the briefs if they were available.
Tortious interference claims survived dispositive motions in these cases:
In Webb Builders, LLC v. Jones, January 24, 2002 (unpublished), a homebuilder was pursuing tortious interference claims against a dissatisfied customer. The customer had complained to others for whom the builder was working, and some of those customers had terminated their relationships with the builder. The customer also complained to prospective customers, some of whom declined to do business with the builder. The Court considered the factors set out in the Restatement (Second) of Torts §767, which include "(a) the nature of the actor’s conduct, (b) the actor’s motive, (c) the interests of the other with which the actor’s conduct interferes, (d) the interests sought to be advanced by the actor, (e) the social interests in protecting the freedom of the actor and the contractual interests of the other, (f) the proximity or remoteness of the actor’s conduct to the interference, and (g) the relations between the parties." The Court held that this tort does not require a showing of of force, or threat, or intimidation, and also that it does not require independently tortious conduct.
In Sunbelt Rentals, Inc. v. Head & Engquist Equipment LLC, 2002 NCBC 4 (N.C. Super. Ct. July 10, 2002), the Court engaged in a thorough discussion of the tort of interference with prospective economic advantage (or prospective economic relations) and let survive a claim between two competitors. It found that there were issues of fact "whether defendants prevented plaintiff from making contracts by means other than legitimate methods of competition." Those facts, generally, involved the defendant’s use of the plaintiff’s confidential information and a deliberate pattern of undermining the plaintiff’s business. The Court also allowed a claim for tortious interference for the manner in which defendant had recruited plaintiff’s employees. (The Sunbelt case, which was affirmed by the North Carolina Court of Appeals, is probably the most significant North Carolina case involving tortious conduct between competitors).
In CNC/Access, Inc. v. Scruggs, 2006 NCBC 20 (N.C. Super. Ct. Nov. 15, 2006), the Court found issues of material fact whether the plaintiff had interfered with the defendant’s prospective relationships with certain customers. The Court dismissed plaintiff’s claims for tortious interference, finding that the covenants not to compete on which those claims were based were unenforceable. The parties were competitors.
The Business Court has dismissed tortious interference claims on multiple occasions, including cases involoving lenders, competitors, trust beneficiaries, and insurance agents:
In Reeve and Assocs., Inc. v. UCB, 1997 NCBC 2 (N.C. Super. Ct. Oct. 6, 1997), the Court held that there was no tortious interference claim by a junior lender against a senior lender which had required the borrower to sell off its collateral in order to pay down the senior debt.
In Praxair v. Airgas, Inc., 1999 NCBC 5 (N.C. Super. Ct. May 26, 1999) and Praxair v. Airgas, Inc., 1999 NCBC 9 (N.C. Super. Ct. Oct. 20, 1999), the Court dismissed a tortious interference claim between competitors. It held (in the second opinion) that "absent proof that a competitor has acted maliciously or otherwise unlawfully, courts should be reluctant to impose liability for conduct that can be characterized fairly as legitimate competition." The defendant therefore had a legitimate right to bid to acquire a business in which plaintiff had a right of first refusal. The Court let survive, however, a tortious interference claim that the defendant had enouraged others to breach their rights to the plaintiff under that right of first refusal.
In Staton v. Brame, 2001 NCBC 5 (N.C. Super. Ct. May 31, 2001), the Court dismissed a tortious interference claim against the beneficiary of a charitable trust who had terminated a contract between a foundation formed by the trust and the defendant. The Court noted the differing treatment under North Carolina for "outsiders" and "non-outsiders" to contracts, and determined that plaintiff was a non-outsider who had acted with what she believed was a legitimate interest in protecting her trust income, and who therefore had a qualified right to terminate the contract in question..
In Hinson v. Trigon Healthcare, Inc., August 23, 2001 (unpublished), the lawsuit was between parties in the business of insurance. Defendant had sent letters to persons for whom the plaintiffs, insurance agents, had written policies informing them that it was exiting the business and that they should find substitute insurance. The Court held that the defendant had a "legitimate business purpose in sending the letters" so that its policyholders could avoid gaps in their coverage, and dismissed the tortious interference claim.
The case of Durham Coca-Cola Bottling Co. v. Coca-Cola Bottling Co., 2003 NCBC 3 (N.C. Super. Ct. Apr. 28, 2003) involved a letter of intent, which the Court found to be an agreement to agree at a future date, and subject to a future, more complete acquisition agreement. The letter of intent therefore could not form the basis for a tortious inteference claim. The Court went on to say, however, that summary judgment would have been appropriate in any event on the basis of justification. The defendant, a competitor of plaintiff, was competing with plaintiff for the purchase of the business in question and plaintiff therefore could not show that it was acting with bad faith or malice so as to justify its tortious interference claim.
In Sports Quest, Inc. v. Dale Earnhardt, Inc., 2004 NCBC 3 (N.C. Super. Ct. Feb. 12, 2004), the claim was dismissed because the action was between two competitors, and the Court held that interference with contract is justified if motivated by a legitimate business purpose, as when the parties are competitors.
In Epes v. Healthsouth Corp., February 8, 2008 (unpublished), the Court dismissed the claim because it found that the contract upon which the claim was based lacked mutual assent as to material elements necessary to create an enforceable contract, including the price to be paid, identification of the parties, and the subject matter of the contract. The letter merely expressed the intent and desires of the parties, rather than their agreement.
In Webb v. Royal American Company, LLC, March 17, 2008 (unpublished), the Court dismissed a tortious interference claim against a lender. Although Plaintiffs had recited all of the elements of that claim, the face of the complaint demonstrated that there was a valid business justification for the Defendant’s actions. The Court held that a lender exercising its rights to collateral under a standard commercial financing arrangement ordinarily has justification for its actions, and the plaintiff must make something more than conclusory allegations about justification.
In Gateway Management Services, Ltd. v. Advanced Lubrication Technology, Inc., June 19, 2008 (unpublished), the Court granted a motion to dismiss a tortious interference claim between the plaintiff and its former supplier. The plaintiff alleged that the defendant had acted improperly by selling product to plaintiff’s competitor. The Court held that the defendant "had the right to do so," and that "competition does not in and of itself represent tortious interference." The Court held that it is a legitimate justification to seek business from common customers.