Share to Social Media:
April 2017 Newsletter Article Employers must not only address the problematic situations that arise when former employees violate terms of a non-compete agreement, they must also address those situations when third parties, also typically former employees, go a step further and attempt to impair an existing contract. It's also not uncommon for a well-established company to hinder a proposed contract between an old customer and a new competitor, like a former employee. While the public policy underlying the legal theory of tortious interference supports the fulfillment of contractual obligations between parties to a contract without third-party interference, not all competitive acts between rival businesses constitute tortious interference. Historically, tortious interference is not an entirely new legal concept as it dates back to the 17th Century as "trespass on the case." However, in Texas, it is seemingly continuing to evolve although lacking some consistency in application. There are two general types of tortious interference: interference with an existing contract, and interference with a prospective contract or business relation. A look at Baty v. ProTech Ins. Agency,Â 63 S.W.3d 841, 857 (Tex. App.-Houston [14th Dist.] 2001) illustrates the requisite elements of both. The elements of tortious interference with an existing contract are: (1) the existence of a contract subject to interference; (2) the occurrence of an act of interference that was willful and intentional; (3) the act was a proximate cause of the plaintiff's damage; and (4) actual damage or loss occurred. According to the 14th Court of Appeals in Baty, to establish the element of a willful and intentional act of interference, the plaintiff must show that the defendant was an enthusiastic, willing participant and knowingly induced one of the contracting parties to breach its obligations under the contract. To accomplish this, the plaintiff must produce evidence of the breach of an obligatory provision of the contract. However, this is not a simple proposition to prove in a court of law. Of course, there must be an identifiable contract in existence that was the subject of willful and intentional interference, the results of which caused damages. "To prevail on a tortious-interference claim, a plaintiff must present evidence that the defendants interfered with a specific contract." Funes v. Villatoro,Â 352 S.W.3d 200, 213 (Tex. App.-Houston [14th Dist.] 2011, pet denied). "To prevail on a claim for tortious interference with a prospective business relationship, the plaintiff must establish that the defendant intentionally prevented the formation of the business relationship." Baty, 63 S.W.3d at 860. The elements of tortious interference with a prospective business relationship are: (1) a reasonable probability that the plaintiff would have entered into a business relationship; (2) an independently tortious or unlawful act by the defendant that prevented the relationship from occurring; (3) the defendant did such act with a conscious desire to prevent the relationship from occurring or the defendant knew the interference was certain or substantially certain to occur as a result of the conduct; and (4) the plaintiff suffered actual harm or damages as a result of the defendant's interference. This tort is typically more difficult to prove. If no signed contract is in existence, a plaintiff must present proof that there is a reasonable probability the participating parties would finalize an agreement or business relationship; and some willful and intentional "independently tortious" act of interference occurred which caused damages to the plaintiff, one of the hypothetical parties to the contract or business relationship. Conduct that is independently tortious or unlawful consists are defined by Texas law as "acts which alone would give rise to a cause of action." Thus, torts such as fraud, misrepresentation, misappropriation of trade secrets, violation of a non-compete agreement, or other actionable conduct may permit recovery of lost profits, economic damages, and even punitive damages based on a legal theory of tortuous interference. If you are a party to an existing or proposed business agreement or contract and believe that such a relationship may be the subject of some wrongful or tortuous interference, R. D. Adair, PLLC may help determine if all of the requirements for such a cause of action exist while ensuring that you receive a full and just recovery.