Interference Claims in California
Aug. 22, 2022
Business competition can sometimes be ruthless, but just competing with another entity for customers, sales, and profits is not generally illegal. However, both California contract law and tort law allow for legal action when a third party wrongfully interferes with a contract or ongoing business relationship to the detriment of the affected party.
This type of action falls under the general label of tortious interference. A tort, unlike a crime, is a civil wrong that can be addressed in civil court.
Generally, there are three types of tortious interference recognized in California. One is interference with contractual relationships (IWCR). Another is interference with prospective economic advantage (IWEP). A third type, not based on intentional acts, is negligent interference with an economic advantage when no contract is involved.
If you feel your business is being harmed by tortious or negligent interference, contact the business law attorneys at Robinson Bradford LLP. With offices in Stockton, Temecula, and Costa Mesa, we proudly serve business clients in the Golden State.
With a combined half-century of experience, our attorneys can examine the circumstances of your claim, advise you of your legal options, and help you mount any legal or other action necessary to protect your business interests.
Understanding Tortious Interference
Perhaps the most famous case of tortious interference in the United States came in 1984 when Texaco interfered with efforts by Pennzoil to purchase Getty Oil. Pennzoil prevailed and was awarded $10 billion in economic and punitive damages, with the two parties later agreeing on $3 billion.
Tortious interference is not a single statute on the books in California or any other state but evolves through court cases and precedents set. In fact, as recently as 2020, the California Supreme Court was still interpreting the requirements for proving any type of tortious interference.
In Ixchel Pharma, LLC v. Biogen, Inc., the court ruled that in any type of tortious interference claim, the plaintiff must show “independent wrongfulness” by the defendant or interfering party. Otherwise, it said, legitimate business competition could be chilled and restrained.
Types of Tortious Interference
As referenced earlier, there are three forms of tortious interference – two intentional, one negligent, one involving contracts, and the others ongoing or prospective business relationships. These are:
INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONSHIPS: In this type, there needs to be a written or oral contract governing the activities of the parties to the contract. For instance, Company A may contract with Company B to supply chips to power its line of manufacturing plant robots. Company C steps in and offers Company B more for its chips. B agrees and either shortchanges its shipments to A, eliminates them altogether, or says it won’t comply until the higher price is met. C has intentionally interfered with a contracted agreement.
INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE: Here there may not yet be a contract, but A and B are in the stages of agreeing on a business plan that will benefit both. C interferes to siphon off any prospective advantage to itself. The business arrangement between A and B may already be ongoing, and C’s actions threaten to or actually do disrupt the advantages enjoyed or envisioned by A and B.
NEGLIGENT INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE: Here the interference by C may result in the same loss of advantage by A and B, or one or the other, but the interference need not be shown to be intentional. The standard is that the defendant, or interfering agent, knew or should have known about the relationship and economic prospects enjoyed by A and B but interfered anyway.
Proving Tortious Interference
If you go to court and prevail, you can generally recover damages, usually lost profits. Punitive damages are also available if the interfering party acted with “malice, fraud or oppression.” In other words, the defendant not only intended to interfere but also aimed to cause deliberate harm.
In any tortious interference lawsuit, the plaintiff alleging the interference must show:
There was an existing contract or business relationship based on economic necessity.
The interfering party knew or should have known about this relationship.
The defendant, intentionally or wrongfully, interfered with that relationship.
The interference caused economic and/or other losses to the plaintiff.
Turn to Skilled Legal Guidance
If you suspect someone or another business is interfering with your contracts, business relationship, or prospective economic advantage, you need skilled and experienced legal counsel on your side to assess the situation and propose legal options going forward.
The business law attorneys at Robinson Bradford LLP stand ready to help you with any tortious interference claim. Not every instance needs to go to court, but all need to be dealt with and resolved, either through negotiations and confrontation or filing a lawsuit.
Contact Robinson Bradford LLP when you feel your business is illegally interfered with in Stockton, Temecula, or Costa Mesa, California.