Commercial Division Blog

Posted: February 16, 2015 / Categories Commercial, Tortious Interference

Frivolous Lawsuit Insufficient Basis for Tortious Interference Claim

On February 10, 2015, the First Department issued a decision in Arnon Ltd (IOM) v. Beierwaltes, 2015 NY Slip Op. 01156, holding that a frivolous lawsuit could not serve as the basis for a tortious interference claim.

In Arnon Ltd, the parties brought claims and counterclaims relating to the sale of an artwork. One of the issues on appeal was the trial court's dismissal of the defendants' tortious interference counterclaim. The First Department affirmed the dismissal, explaining:

The court also properly dismissed the counterclaim for tortious interference with prospective economic relations. The claim requires a showing that the interference was accomplished by wrongful means or with malicious intent. Wrongful means includes physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure. Where the interfering conduct is a civil suit, it must be shown that the suit was frivolous.

Accepting defendants' allegations as true and affording them every favorable inference, defendants have set forth sufficient facts to support their claim that plaintiff's action against them was frivolous. However, conduct constituting tortious interference with business relations is, by definition, conduct directed not at the plaintiff itself, but at the party with which the plaintiff has or seeks to have a relationship. Here, the interfering lawsuit was not directed at the defendants' customers so as to induce or cause them to terminate business relations with defendants. Rather, the suit was directed at defendants to prevent them from carrying out their obligations to sell the sculpture to the new buyer. Defendants' argument that their business relationships with each other have been damaged by plaintiff's suit is unsupported and unavailing.

(Internal quotations and citations omitted) (emphasis added). We see the utility of a bright-line rule in this situation, but we can also imagine situations where a lawsuit would deter someone from entering into a contract even though the suit was directed at the prospective contract counter-party, not them.