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 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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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 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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Creating a Business Entity Can Protect Yourself Personally

If you are in business, but you do not create a business entity, you may become personally liable for your business debts. Incorporation can also alleviate tax liability in certain circumstances too.

Creating a business entity (incorporation) creates a separate entity. This entity can do most things an individual can: enter into contracts, sue or be sued, buy real estate etc etc. Perhaps most importantly from the owner’s viewpoint, it can shield the owner from personal liability and company debt.

Corporations do not die with their owners. They continue until dissolved. They can be dissolved voluntarily, by the shareholders, and with consent from the State Tax Commission (New York State Department of Taxation and Finance).

At inception, the corporate bylaws are drawn up. These set the rules for the company. Aside from these rules, the corporation must also hold a yearly Directors and Shareholders meeting, keep written minutes of major company decisions, and ensure the bylaws are complied with.

Creating a Business Entity: DBA (Doing Business As)

This is a sole proprietorship (if there is more than one owner, it’s known as a “General Partnership”). It is also known as a “Fictitious Name” entity.

1. 1. This is not separate from the owner, it’s just a way for the owner to do business under another name.
   2. The owner does not get any protection, and is personally liable for the company and all its debt.
   3. The owner is also personally liable for all taxes.

Creating a Business Entity: Regular Corporation (C-Corporation)

1. 1. This provides personal liability protection. This entity can deduct expenses like health insurance, travel, and entertainment. Shareholders own the stock (and get issued certificates to show what they own). They elect the board of directors, who in turn appoint the officers (President, Secretary, Treasurer, etc), who then run the company

Creating a Business Entity: S Corporation

If you elect “S-Corporation Status” (which can only be done after incorporation, and requires a filing with the Internal Revenue Service) you maintain protection against personal liability, while enjoying a tax benefit. The corporate tax liability is passed through to the shareholders, which avoids double taxation: where taxes are paid on the profits, as well as on the income given back to the shareholders as dividends. However, an S-Corporation cannot deduct certain expenses, like health insurance, travel, and entertainment.

S-Corporations are still regular corporations, and must keep the corporate formalities of a regular corporation (board meetings, minutes, resolutions, etc). But there are certain restrictions to an S-Corporation. They can only have a maximum of 100 shareholders, all of whom must be United States Citizens, and they cannot own or be owned by other business entities.

Creating a Business Entity: Limited Liability Company

Limited Liability Companies are becoming increasingly popular. They do not require the issuance of stock (they have “members”, not “shareholders”), and have fewer formalities than regular corporations. They require an operating agreement, which sets the rules for operating the company. Other than what is contained in the operating agreement, the only formalities are the holding of an annual meeting, and member approval of any changes to the operating agreement. Their owners are taxed personally, but are not personally liable for their debts.

For Assistance in Choosing The Right Corporate Entity for You, Contact the Law Offices of Elise Schwarz, (212) 566 5500

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The Corporation provides its owners with a “veil” behind which they can hide to protect against personal liability. But this veil is not fool-proof. In certain circumstances personal liability can arise regardless of whether an individual has incorporated.

In order to win the piercing of the corporate veil, and allow liability to be placed at the feet of the individual defendant, rather than the corporation, plaintiffs must show that the defendant exercised complete domination and control with respect to the transaction attacked, and that such domination was used to commit a fraud or wrong against it. Teachers Ins. Annuity Ass’n of America v. Cohen’s Fashion Optical of 485 Lexington Ave. Inc.  45 A.D.3d 317, 318, 847 N.Y.S.2d 2, 3 (N.Y.A.D. 1 Dept.,2007). The domination must be such that the corporate entity had no separate will of its own. Chase Manhattan Bank (Nat. Ass’n) v. 264 Water Street Associates,  174 A.D.2d 504, 505, 571 N.Y.S.2d 281, 282 (N.Y.A.D. 1 Dept.,1991).

Piercing of the corporate veil may also be allowed where there has been overlap in ownership and directorship, or common use of office space and equipment Forum Ins. Co. v. Texarkoma Transp. Co.  229 A.D.2d 341, 342, 645 N.Y.S.2d 786, 787 – 788 (N.Y.A.D. 1 Dept.,1996), citing Wm. Passalacqua Bldrs. v. Resnick Developers South, 933 F.2d 131, 139 [2nd Cir.] ).

Therefore, merely having a corporation may not be enough to protect an individual from personal liability.

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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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The Mechanic’s Lien is an “encumbrance” on the property on which the work has been performed or the materials been supplied for. While it is in effect, the owner no longer has “clear title” to the property. The Mechanic’s Lien alerts prospective buyers that, if they buy the property, they are buying the seller’s debt. Since it is rare for anyone to want to buy a debt, much less one that will subject them to an imminent lawsuit, the lien often has the effect of rendering the property unable to be sold. For this reason, the Mechanic’s Lien is at its most effective when a property owner wants to sell quickly. Of course, they can still sell, but they have to satisfy the debt, and get the Mechanic’s Lien removed first.

A Mechanic’s Lien must be properly prepared, filed and served in order to have any legal effect.

In the case of a single family private dwelling, the lien must be filed within 4 months of the last date labor or materials were provided.

For any other property, the time to file is extended to 8 months.

If you have not met the necessary deadline, a Mechanic’s Lien is not for you. In that case, you will likely need to file a lawsuit and get a temporary restraining order to have the same effect. Since a judge may not give you the temporary restraining order, it is always in your best interests to act expeditiously and file the less laborious Mechanic’s Lien in good time.

A Mechanic’s Lien lasts for one year. However, you can extend it so long as you do so within that one year.

The Mechanic’s Lien is filed in the appropriate county: the county in which the property is situated.

The Mechanic’s Lien must be served on the owner five days before filing OR 30 days after filing. There are various methods of filing available, depending on the circumstances. However, if you choose the wrong method, or if you don’t serve it at all, the Mechanic’s Lien will be voided.

Once the Mechanic’s Lien is filed, the property owner can bond the Mechanic’s Lien or start legal proceedings to discharge it.

If the property owner does pay you (and payment often comes as soon as the property owner realizes it is encumbered), you can discharge the Mechanic’s Lien by filing a certificate in the same county that the lien was filed, acknowledging the satisfaction and release of the Mechanic’s Lien.

Whatever the property owner decides to do, if it does not involve paying you then your next step is to bring an action to foreclose on the Mechanic’s Lien. This could result in a court ordering the property be sold to satisfy the lien.

However, if you do nothing, the Mechanic’s Lien will be automatically discharged one year after filing.

Other Pitfalls

If you exaggerate the circumstances around the Mechanic’s Lien, or submit incorrect information to get the Mechanic’s Lien, or if you file it late, or serve it improperly, you will not be protected. Furthermore, depending on the circumstances, you could expose yourself to some fairly hefty liability: treble damages and attorneys fees being awarded against you – and in favor of the property owner!

Therefore, you should always act via a trusted attorney.

The Law Offices of Elise Schwarz can assist you in filing an effective and accurate mechanics lien, as well as taking action to foreclose on the lien.

If you feel you have had a Mechanic’s Lien placed on your property unfairly, The Law Offices of Elise Schwarz can act to have it removed.

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