Intentional Interference With Contract in Massachusetts
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In business, competitors interfere with each other's business relationships all the time. That is, after all, the nature of competition. There are times, however, when the conduct of a competitor or other business can cross the line and become actionable.
In Massachusetts, there is a legal claim known as tortious interference with contract. It is important as a business owner to understand what is legitimate competition and what might subject you to a claim for tortious or intentional interference. In some situations, the conduct may be bad enough to also rise to the level of an unfair competition claim. An Existing or Prospective Contract or Economic Relationship The first requirement is that you have an existing or prospective contract or economic relationship with a third party. This can be an actual written contract, an oral agreement or course of dealing, or even a prospective relationship that has not yet become a contractual relationship.
Most commonly these are actual or potential customer relationships. This theory can also apply, however, to restrictive covenants your business may have with a former employee. |
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Intentional Interference
If someone has taken action which costs you the contractual relationship, you will have to prove that the defendant knew of the relationship and that the defendant intended to interfere with it.
Examples of intentional acts include direct communication with the third party. They can also include actions which have the effect of preventing the third party from doing business with you. The key point in this stage of the analysis is their knowledge of the relationship and intention to interfere.
Examples of intentional acts include direct communication with the third party. They can also include actions which have the effect of preventing the third party from doing business with you. The key point in this stage of the analysis is their knowledge of the relationship and intention to interfere.
Improper Means or Motive
The defendant's conduct must either have an improper motivation or involve some wrongful or unlawful behavior.
With respect to motive, economic motivations are not improper. A competitor who wants to make more money by luring away your customers is allowed to do so. An improper motive might be a personal grudge. Actions motivated by a desire to gain leverage in some other dispute or business relationship might be considered improper.
The reality, however, is that most interference in the business context is about economic gain. This means that most claims of intentional interference turn on the question of whether the means of interference was improper. Below are some examples of means that might be considered improper.
With respect to motive, economic motivations are not improper. A competitor who wants to make more money by luring away your customers is allowed to do so. An improper motive might be a personal grudge. Actions motivated by a desire to gain leverage in some other dispute or business relationship might be considered improper.
The reality, however, is that most interference in the business context is about economic gain. This means that most claims of intentional interference turn on the question of whether the means of interference was improper. Below are some examples of means that might be considered improper.
- Misrepresentation. If a competitor is giving false and misleading information to your customers, this could be considered improper means.
- Breach of Contract. If the defendant's actions are in breach of an agreement they have with you or someone else, this could also be considered improper means.
- Breach of a Fiduciary Duty. Certain business and employment relationships create a higher duty of care between the parties, known as a fiduciary duty. This duty exists for certain high level employees who occupy a relationship of trust and confidence with their employer. It also exists between shareholders of closely held corporations and between partners. If the defendant's conduct amounts to a breach of this duty, that too could be considered improper means.
Breach of Contract or Loss of Relationship
In the case of interference with a contract, the plaintiff must prove that the defendant's actions actually induced a breach of that contract. An unsuccessful attempt to interfere will not support an interference claim.
in the case of interference with a prospective economic relationship, you must also be able to prove the loss of that relationship. This is not as straightforward as showing the loss of a specific contract. If the interference involves prospective customers, you will need to be able to show that they would have done business with you absent the interference.
in the case of interference with a prospective economic relationship, you must also be able to prove the loss of that relationship. This is not as straightforward as showing the loss of a specific contract. If the interference involves prospective customers, you will need to be able to show that they would have done business with you absent the interference.
Intentional Interference in the Employment Context
Massachusetts courts have been clear that claims for interference with contractual relations generally do not apply in the employment context. The reasoning is that you cannot interfere with your own contract. Employer actions may be subject to other claims, like discrimination or retaliation, but are not subject to an interference claim.
There are some limited exceptions to this rule. Individuals within a company who wrongfully interfere with another employee's status could face an interference claim. If applicable, this claim would only run against the individual, not the employing company.
There are some limited exceptions to this rule. Individuals within a company who wrongfully interfere with another employee's status could face an interference claim. If applicable, this claim would only run against the individual, not the employing company.
Intentional Interference and Non Compete Agreements
When an employee leaves and goes to work for a competitor, the former employer may try to enforce a non compete agreement against the individual. Often they will also threaten to sue the new employer for intentional interference with that non compete.
In that situation, it is important to carefully analyze the improper means test. The motive of the new employer is almost always economic, therefore not improper. They also have no contractual or other relationship themselves with the former employer, and in most cases no fiduciary or other duty to them.
That means that the new employer can only be liable for interference if they did something improper. Simply knowing about the non compete is not likely enough. The plaintiff would have to show some other wrongful action.
This could include making false representations or gaining access to information improperly. It could also include knowingly asking the former employee to disclose trade secrets or confidential information. In most cases, however, simply hiring someone who is subject to a non compete will not amount to interference.
In that situation, it is important to carefully analyze the improper means test. The motive of the new employer is almost always economic, therefore not improper. They also have no contractual or other relationship themselves with the former employer, and in most cases no fiduciary or other duty to them.
That means that the new employer can only be liable for interference if they did something improper. Simply knowing about the non compete is not likely enough. The plaintiff would have to show some other wrongful action.
This could include making false representations or gaining access to information improperly. It could also include knowingly asking the former employee to disclose trade secrets or confidential information. In most cases, however, simply hiring someone who is subject to a non compete will not amount to interference.
How We Can Help
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We have years of experience representing individuals and small businesses in disputes involving contracts and interference with contracts. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.
