What is tortious interference with contract or business expectancy?

In our business litigation practice, we have represented clients (both individual business clients and business organizations) who have been the victim of a wrong called "tortious interference." What is tortious interference, exactly?

First, let's get the name right. It is "tortious" interference. It is not "tortuous" interference. (These cases can indeed be "tortuous" to handle.  But that is not the name of the cause of action. And if you see a lawyer writing about this subject matter using the word "tortuous," that's a sign that they don't know what they're talking about.)

When Does a Claim for Tortious Interference Happen?

In Virginia, a claim for tortious interference arises when (a) there is a valid contract or business expectancy between the plaintiff and a party other than the defendant, (b) someone who is not a party to the contract (the defendant) has knowledge of its existence, (c) the defendant intentionally causes the contract to be broken (breached) by one of the parties to the contract (not the plaintiff) and (d) the breach of contract causes damages to the plaintiff.  If each of these elements are present, tortious interference with the contract case may exist.  If the contract in question was "terminable at will," meaning that either party had the legal right to break it, a case may still exist.  However, an additional showing must be made by the plaintiff that the defendant used "improper methods" to interfere with the contract that was terminable at will.  This same additional requirement applies to legal relationships that are in the category of business "expectancies" but that do not rise to the level of a contract.  Business expectancies may also be interfered with in a way that leads to a liability for damages.  But improper methods of interference must be shown.

After reading that, you may be wondering what all of this means. After all, these elements that I just outlined are filled with a lot of legalese.

An Example To Illustrate Tortious Interference

Let's say, for example, that a hypothetical food distributor called Agriculture Company has a contract to deliver vegetables for a five-year term to a very popular restaurant and bar in town called Bunny's Bar & Grill. The contract is not terminable at will. In other words, it cannot be unilaterally terminated by either party during the five-year term without that party being in breach of (i.e., in violation of) the contract.

Next, let's say that a third hypothetical company, Carrott Company, is in the same business as Agriculture Company but, unlike Agriculture Co., Carrott Co. specializes in exotic heirloom carrots. As a competitor of Agriculture Co., Carrott Co. wishes that it had the contract with Bunny's. After all, Carrott Co. is convinced that its carrots are far superior to the bland carrots sold by Agriculture Co. So it feels justified in trying to take Bunny's business away from Agriculture Co. 

One day, Carrott Co.'s CEO, Charley Crook, comes up with a plan for stealing the business away from Agriculture Co. and of convincing Bunny's that it should break the agreement with Agriculture Co. As part of this plan, Mr. Crook calls Bunny's owner (Bunny Burgess), and tells Ms. Burgess that Agriculture Co. has had a problem with outbreaks of salmonella in its food supplies. This, of course, is not true. Mr. Crook says these are just "rumors," but he stresses that he is well connected in the food supply industry, and he just wanted to let Ms. Burgess know about the rumors out of concern for her business and customers. Mr. Crook then goes onto a food supply services blog site, creates an anonymous account, and posts a blog post alluding to the salmonella rumors at Agriculture Co. Shortly after her communication with Mr. Crook, Bunny's terminates its contract with Agriculture Co. As a result of this, Agriculture Co. loses tens of thousands of dollars in revenue that it anticipated making from its sales to Bunny's in the coming years.

In the foregoing example, Agriculture Co. has a tortious interference with contract claim against Carrott Co. because:

• There was a contract between Agriculture Co. and Bunny's that was not terminable at will;
• Carrott Co. knew about the contract;
• Carrott Co. intentionally took actions to interfere with the contract, which actions caused the contract to be broken; and
• Agriculture Co. suffered damages in the form of lost revenues from the breach.

It should be pointed out that Agriculture also has a case for "breach of contract" against Bunny's because the contract was not terminable at will and Bunny's unilaterally terminated it.

Another point to observe from this example is that the methods used by Mr. Crook and Carrott Co. were not just intentional. They were improper. They were defamatory. The CEO of Carrott, Mr. Crook, intentionally spread lies about Agriculture Co. for the purpose of harming its business and its reputation. Therefore, even if the relationship between Agriculture and Bunny's was not to the level of being a contract not terminable at will (i.e., it was terminable at will or was only a "business expectancy"), Agriculture would likely still have a case for tortious interference against Carrott Co., albeit a case for interference with a business expectancy rather than a contract.

As explained in one case from the Supreme Court of Virginia that is often cited, Duggin v. Adams, "[m]ethods of interference considered improper are those means that are illegal or independently tortious, such as violations of statutes, regulations, or recognized common-law rules. Improper methods may include violence, threats or intimidation, bribery, unfounded litigation, fraud, misrepresentation or deceit, defamation, duress, undue influence, misuse of inside or confidential information, or breach of a fiduciary relationship."

Non-compete Agreement Could Be Used in a Claim for Tortious Interference

Tortious interference can arise in all sorts of situations and sour business dealings. For example, it often arises in cases where one company hires a valued employee away from another company. If the employee had a non-compete agreement with the first company that will be violated by the employee changing jobs, and the second company knew about that non-compete agreement, the old company may have a claim against the second company for tortiously interfering with its contractual relationship with its employee.

For a jury to sort through these issues in a court, the court provides the jury with a set of instructions, called "jury instructions", to help them decide the issue. The jury instructions explain the issues in the case and serve as an outline for the jury to follow when making its decision. Here is the published civil jury instruction in Virginia state court for tortious interference:

You shall find your verdict for the plaintiff if he proved by the greater weight of the evidence:

(1) that there was a business expectancy or a valid contractual relationship between the plaintiff and (name of third party); and

(2) that the defendant knew of this business expectancy or contractual relationship; and

(3) that the defendant intentionally interfered and caused the [breach; termination] of the expectancy or relationship; and

(4) that the plaintiff was damaged by the [breach; termination].

You shall find your verdict for the defendant if: (1) the plaintiff failed to prove any one or more of these elements; or (2) the defendant proved by the greater weight of the evidence that the interference was justified, privileged, or not improper.