If you asked me to list my favorite torts, tortious interference with prospective economic advantage would be near the bottom of the list.
But that tort was front and center in Judge McGuire’s Opinion in KRG New Hill Place, LLC v. Springs Investors, LLC, 2015 NCBC, 2015 NCBC 19, which addressed the proof required for an essential element of the tort.
To prove tortious interference with prospective economic advantage, "a plaintiff must show that the defendant, without justification, induced a third party to refrain from entering into a contract with the plaintiff, which would have been made absent the defendant’s interference." Op. ¶4.
The Defendant Springs Investors — which was asserting a tortious interference counterclaim — said that the Plaintiff KRG’s breach of an agreement to develop a 123 parcel of real estate caused a third party (Kaplan) to back out of a Joint Venture to develop a residential apartment complex on adjoining property owned by Springs.
Defendant said that the Plaintiff’s breach had met the requirement that its actions induced Kaplan’s decision to refrain from entering into the Joint Venture, because the breach had caused Kaplan’s decision to decide to refuse to go ahead with the Joint Venture.
That was insufficient to make out a claim for the prospective interference tort, said Judge McGuire. He relied on a Court of Appeals decision affirming a Business Court ruling. In that case, the COA held, in interpreting the word "induce" in a contract, that:
The relevant definition of ‘induce’ is (1) ‘to move by persuasion or influence[;]’
(2) “to call forth or bring about by influence or stimulation[;]’ and (3) “to cause the formation of[.]’ Similarly, Black’s Law Dictionary defines inducement as ‘[t]he act or process of enticing or persuading another person to take a certain course of action.’ We note that all of the above-cited definitions of . . . ‘induce’ are similar in that they involve active persuasion, request, or petition.
Op. ¶26 (quoting Inland Am. Winston Hotels, Inc. v. Crockett, 212 N.C. App. 349, 354, 712 S.E.2d 366, 369 (2011) (citing Merriam-Webster’s Collegiate Dictionary 637 (11th ed. 2005) and Black’s Law Dictionary 845 (8th ed. 2009)).
So, "inducing" something has to mean more than just causing something. As Judge McGuire put it:
To equate ‘induced’ with ’caused’ would mean that any type of conduct by a party that caused a third party to refrain from entering into a contract with a claimant would be grounds for asserting the claim. This would have broad implications for contractual relations in this State as it would make every contracting party potentially liable for the types of damages available for intentional torts, including compensatory and punitive damages, whenever the failure to fulfill a contract for any reason caused the other party to the contract to lose a prospective business opportunity.
Judge McGuire granted Plaintiff’s Motion to Dismiss the tortious interference counterclaim because the Defendant had not made any allegations of purposeful conduct by the Plaintiff directed towards Kaplan.