Elise Schwarz

Tortious Interference With a Business Relationship.

Tortious interference with a business relationship may arise where, although you do not have an existing contract, you do have an ongoing relationship with a company (or an individual). For example, if you fully expect to do business with someone in the future, but your competitor, knowing this, approaches the company and secures a future contract that could have been yours, you may have a cause of action for tortious interference with a business relationship.

This is likely if the competitor acted with wrongful purpose (which can include physical violence, dishonest means, or other improper actions).

However, if the competitor simply saw a business opportunity and acted in a manner in keeping with the ethical standards of the industry, you may not have a cause of action for tortious interference with a business relationship.

New York law distinguishes between interference when there is an existing contract, and where there is no current enforceable contract, but there is an existing business relationship.

New York Courts will impose liability for tortious interference of existing contracts because respect for individual contracts outweighs the public benefit to be derived from unfettered competition. See, e.g. White Plains Coat and Apron v. Cintas, 460 F3d 281, 283 (2d Cir 2006).

However, if the interference is with prospective contracts (or “business relations”), Courts require a showing of greater wrongdoing by the defendant than when there is an existing contract.

The distinction intends to protect free market values while ensuring an element of security when a contract has been agreed to.

Four conditions that must exist for a successful cause of action for tortious interference with business relations:

• Plaintiff had business relations with a third party
• Defendant interfered with those business relations
• Defendant acted for a wrongful purpose or used dishonest, unfair or improper means
• Defendant’s acts injured the relationship

Can you prove it?

A successful Plaintiff must provide actual proof of the interference: mere suspicions are inadequate to support either claim

Is it really “interference”?

Sending regular advertising and soliciting business in the normal course does NOT constitute inducement of the breach.

If you believe that a competitor has wrongly interfered with your business relations with a prospective client, or, if you are being accused of this, please contact Elise Schwarz, Esq., at (212) 566 5500 or via email at elise@eschwarzesq.com

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Tortious Interference With An Existing Business Contract

Tortious interference with an existing business contract may arise where you have a contract with a client, but your competitor, knowing of your contract, approaches the client, makes them an offer they cannot refuse, and your client breaches its contract with you, and does business with your competitor instead.

You may have a cause of action for tortious interference with an existing business contract if your competitor intentionally and improperly procured the breach.

However, if the competitor already had an economic interest in your client then you may not have a cause of action for tortious interference with an existing business.

New York Courts will impose liability for tortious interference of existing contracts because respect for individual contracts outweighs the public benefit to be derived from unfettered competition. See, e.g. White Plains Coat and Apron v. Cintas, 460 F3d 281, 283 (2d Cir 2006).

However, if the interference is with prospective contracts (or “business relations”), Courts require a showing of greater wrongdoing by the defendant than when there is an existing contract.

The distinction intends to protect free market values while ensuring an element of security when a contract has been agreed to.

Four conditions that must exist for a successful cause of action for tortious interference with an existing contract:

• Existence of a valid contract with a third party
• Defendant’s knowledge of that contract
• Defendant’s intentional and improper procuring of a breach
• Damages.

Can you prove it?

A successful Plaintiff must provide actual proof of the interference: mere suspicions are inadequate to support either claim

Is it really “interference”?

Sending regular advertising and soliciting business in the normal course does NOT constitute inducement of the breach.

Are there any defenses to tortious interference with an existing contract?

If a competitor has an “economic justification” for the interference, it may not be liable. In this scenario, the competitor has an interest in the business which is equal to or greater than the contracting party’s.

But, a competitor who is simply the contracting party’s competitor and knowingly solicits its contract customers is not economically justified in procuring a breach of contract.

If you believe that a competitor has wrongly interfered with your existing contracts, or if you are being accused of this, please contact Elise Schwarz, Esq., at (212) 566 5500 or via email at elise@eschwarzesq.com

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A Promissory Note is an instrument for the payment of money. When a lendee fails to pay the amount due on a promissory note, the lendor can initiate legal proceedings.

New York State has a particular mechanism to expedite judgment in matters involving a promissory note (and others involving an instrument for the payment of money only, or upon any judgment) CPLR 3213 provides for notice of a motion for summary judgment in lieu of a complaint. This means that, rather than filing a complaint, waiting for an answer, perhaps going through discovery, and then filing a motion for summary judgment, can instead go straight to the motion. This mechanism does not exist in Federal Court.

The threshold issue is whether a Promissory Note is an instrument for the payment of money only, and does not include other obligations. This is an important point to remember in drafting a Promissory Note at the outset: if you can avoid bells and whistles, do.

In order to prevail on a motion for summary judgment in lieu of complaint based on a promissory note, the Plaintiff is required to present evidence that defendants executed the note and defaulted thereon. See, e.g., Kehoe v Abate, 62 AD3d 1178, 1180 [3d Dept 2009].

Great care must be taken to ensure the defendant is properly served and given enough time to answer the motion. The Defendant must be given the same amount of time as he or she would have to answer a complaint. This is usually longer than the amount of time given to answer a motion. If the Defendant is not given the correct amount of time to answer, the motion will be denied, even if the Defendant defaults. See e.g. Goldstein v. Saltzman, 13 Misc. 3d 1023, 821 N.Y.S. 2d 746 (Sup. Ct. Nassau County; Sept. 21, 2006).

The length of time the Defendant has to answer cannot be reduced, not even by Order to Show Cause. This is because the CPLR  provision is not, strictly speaking, a motion (which typically can be brought using the expedited procedure) but an action (which cannot).

The motion may also be denied if the Defendant can present a proper defense, such as duress: i.e. he or she agreed to the terms of a promissory note only under duress.

In extreme cases, denial means the case will be dismissed in its entirety (such as in Goldman, Id.) In other cases, denial results in the case being converted into an ordinary action, and the motion papers being treated as a complaint. Like any complaint, Defendant has a certain amount of time to answer, which is typically 20 or 30 days.

Risk: When you bring a motion for summary judgment in lieu of a complaint, you hope to be able to expedite the litigation process. However, if for whatever reason you are not successful on your motion, you may have put cost yourself a month or two while the suit reverts to the regular litigation schedule.

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The Implied Covenant of Good Faith and Fair Dealing

The implied covenant of good faith and fair dealing exists in every contract. The covenant holds that neither party will act (or omit) in any way to impede the other’s ability to enjoy the fruits of the contract.

The Implied Covenant of Good Faith and Fair Dealing is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement.[1]

The Implied Covenant of Good Faith and Fair Dealing imposes an obligation on the parties to refrain from “intentionally and purposefully [doing] anything to prevent the other party from carrying out the agreement on his part.”[2] While The Implied Covenant of Good Faith and Fair Dealing does not “imply obligations ‘inconsistent with other terms of the contractual relationship”, it does encompass “any promises which a reasonable person in the position of the promisee would be justified in understanding were included.”[3]

Breach of The Implied Covenant of Good Faith and Fair Dealing can be brought as a cause of action, providing certain conditions are met.

Breach of The Implied Covenant of Good Faith and Fair Dealing must be deliberate. The plaintiff must allege facts which tend to show that the defendant sought to prevent performance of the contract or to withhold its benefits from the plaintiff.[4]

In addition, it must, be based on facts different for the facts on which breach of an express term of the contract is based.[5] However, it cannot be pled in the absence of an underlying contract. [6]

Breach of The Implied Covenant of Good Faith and Fair Dealing is considered a breach of the underlying contract. [7]

[2] Manhattan Motorcars, Inc. v Automobili Lamborghini, S.p.A., 244 FRD 204, 214 [SDNY 2007]

[3] Manhattan, Id.,

[4] See, e.g. Dvoskin v. Prinz, 205 A.D.2d 661, 662, 613 N.Y.S.2d 654; Holmes Protection of N.Y. v. Provident Loan Soc. of N.Y., 179 A.D.2d 400, 577 N.Y.S.2d 850).

[5] ICD Holdings S.A. v. Frankel, 976 F.Supp. 234, 243-44 (S.D.N.Y.1997), “A claim for breach of the implied covenant will be dismissed as redundant where the conduct allegedly violating the implied covenant is also the predicate for breach of covenant of an express provision of the underlying contract.”

[6] Jordan Panel Systems, Corp. v. Turner Const. Co., 45 A.D.3d 165, 841 N.Y.S. 2d 561 (1^st Dep’t 2007)

[7] “Under New York law, parties to an express contract are bound by an implied duty of good faith, but breach of that duty is merely a breach of the underlying contract.” Fasolino Foods Co. v. Banca Nazionale del Lavoro, 961 F.2d 1052, 1056 (2d Cir.1992)Harris v Provident Life and Acc. Ins. Co., 310 F3d 73, 80 [2d Cir 2002]

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The Award of Attorney’s Fees

The Award of Attorney’s Fees can be a major motivating factor in a decision to sue, settle, or simply walk away from a lawsuit.

Some cases are billed on a contingency, “no win no fee” basis, where the attorney is only paid from the winnings (usually 33.33%). Others are billed at an hourly rate. This latter category is typical in defense, but also very common when a party is a plaintiff too.

In either event, even if a party is successful in their case, they may owe significant sums to their attorney.

Some cases, however, allow for the award of attorney’s fees and costs by the losing party. Where the parties have a contract which includes a provision for the award of attorney’s fees, for example, they can be awarded. Likewise, if there is a statute governing the issue, for example, the New York State Labor Law for Non-Payment of Wages or Benefits (N.Y. Lab. L. §198 (1-a)), the award of attorney’s fees will likely be granted to the successful Plaintiff.

If, however, no statute or contractual provision applies, attorney fees will not be awarded. See, e.g. Mike Bldg. & Contr., Inc. v Just Homes, LLC, 27 Misc 3d 833 [Sup Ct 2010], citing U.S. Underwriters Ins. Co. v. City Club Hotel, LLC, 3 N.Y.3d 592, 597, 789 N.Y.S.2d 470, 822 N.E.2d 777 [2004] (noting, “it is well settled that legal fees are not recoverable unless provided under the terms of a contract or authorized by statute.”)

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