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Understanding Tortious Interference Claims in California

William B. Hanley Nov. 24, 2020

Business competition can be disruptive and sometimes even ferocious in nature. So what happens when an outside party interferes with an existing business relationship and causes economic or other losses? Through either willful or negligent actions, wrongfully harming the ongoing operation of a business enterprise can have serious legal consequences. 

This is what is commonly referred to as tortious interference, or in California, economic interference. As opposed to a criminal act, a tort is a civil wrong that causes harm to others. Thus, tortious interference is legally actionable by the aggrieved or harmed parties.  

Tortious interference might be present any time one party is aware (or should be aware) of a business relationship between two or more other parties and then acts in a way to disrupt that arrangement.  

Whether you have a written agreement or not, tortious interference claims are your legal avenue to stopping an outside party from harming your business. If you find yourself in this type of situation in or around Irvine, California, the law office of William B. Hanley, Attorney-at-Law, has 40 years of experience in commercial and business litigation. Contact attorney William B. Hanley immediately for personalized and dedicated legal counsel to stop outside interference. 

Examples of Tortious Interference 

As mentioned above, tortious interference refers to the action of a third party who causes harm to an ongoing business arrangement, whether that arrangement includes a contract, written or otherwise, or just relies on the relationship between two or more parties for purposes of economic expectancy. 

Perhaps the most famous example of a tortious interference lawsuit occurred in 1984 when Pennzoil sued Texaco for interfering in its purchase of part of Getty Oil. Pennzoil prevailed and was awarded $10 billion in economic and punitive damages. Later, the parties settled on $3 billion.

As you can see, the stakes in a claim of tortious interference can be high, but regardless of whether or not billions of dollars are involved, tortious interference should not be ignored if you’re the victim. In California, there are three types of tortious interference: 

  • Interference with prospective economic advantage, or IWPEA

  • Interference with contractual relationships, or IWCR

  • Negligent interference with economic advantage (but not for contractual relationships) 

Generally speaking, the first two types of interference (IWPEA and IWCR) are the most common. IWPEA interference and IWCR interference differ only in that the IWCR occurs when the interfered-with parties had a written or oral contract by which they were operating. The IWPEA involves parties who have been cooperating for economic advantage without a contract of any sort, though one may be pending. 

California is also unique in that it also recognizes that outside interference does not have to be intentional. It can happen when the interfering party either had knowledge of the economic relationship it was disrupting, or should have had knowledge, and acted negligently. California courts, however, do not recognize negligent claims when a contract exists. 

Sometimes, attorneys will sue under both the IWPEA and the IWCR, so if one fails, the other may still prevail. 

What Intentional and Negligent Acts of Tortious Interference Have in Common 

It’s important to note that the acts of interference, when judged on the surface, can be entirely legal. So to prove a case of tortious interference, intent to harm must generally be shown, except in some IWPEA cases where negligence can be shown. In an IWPEA case, the courts have held that the interference must have been wrongful "by some measure beyond the fact of the interference itself" and “fall outside the boundaries of fair competition.” In either case, actual harm must be proven. 

To prevail in a tortious interference lawsuit, a claimant must show that: 

  • There was an existing business relationship, either by contract or based on economic expectancy

  • The defendant third party knew or should have known about the relationship

  • The third-party, whether intentionally or by wrongful means, interfered with that relationship

  • The interference caused economic and/or other harm to the business relationship 

Some examples of improper conduct are the use of fraud or misrepresentation, trade libel, trademark infringement, blackmail, economic pressure, initiating civil lawsuits or criminal prosecutions, and even physical violence.  

Damages Recoverable Under the Law 

The third-party can claim that its actions were designed solely to advance its own economic advantage and not to harm another business enterprise — that it was just “fair competition.” Claimants must then show that the third party’s actions were improper or wrongful, amounting to a tort, which makes the third party legally liable. 

If successful, a tortious interference claim can lead to compensation for economic loss, including expenses, lost profits and prospective profit; punitive damages if the plaintiff can be shown to have acted with “oppression, fraud or malice”; and injunctive relief (which is basically a cease-and-desist order). 

Hire a Skilled Tortious Interference Attorney in Orange County, California

Since 1974, William B. Hanley, Attorney-at-Law, has been serving clients in Irvine, California and across Orange County, Los Angeles County, and San Diego County in business and commercial litigation matters. He provides personalized legal services designed to meet the unique needs of each client’s case. He is also dedicated to working with you on a personal basis to outline an effective legal strategy aimed at pursuing the best possible outcome for your case. If you’re considering a tortious interference case in California, contact William B. Hanley, Attorney at Law today, and put an experienced business and commercial litigation attorney on your side.