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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: August 20, 2019

Economic Interest Defense Defeats Tortious Interference Claim

On August 1, 2019, Justice Scarpulla of the New York County Commercial Division issued a decision in GCA Advisors, LLC v. Onion, Inc., 2019 NY Slip Op. 32341(U), holding that the economic interest defense defeated a tortious interference claim, explaining:

In moving to dismiss the tortious interference claim, Univision raises its economic interest in the Onion, which is a defense to an action for tortious interference with a contract. The imposition of liability in spite of a defense of economic interest requires a showing of either malice on the one hand, or fraudulent or illegal means on the other.

The economic interest defense has been applied in cases where defendants were significant stockholders in the breaching party’s business. Here, the complaint alleges that Univision acquired a 40.5% interest in the Onion for $27,100,000. Therefore, accepting the allegations of the complaint as true, Univision’s economic interest in the Onion is sufficient to make out a defense of economic interest for allegedly interfering with the Onion’s obligation to pay a transaction fee to GCA.

To overcome Univision’s economic interest defense, GCA must allege facts showing that Univision acted with malice or employed illegal or fraudulent means. Review of the complaint, however, demonstrates that even the issue of whether the Onion’s failure to pay the transaction fee constituted a breach of contract is far from clear. Moreover, the complaint fails to allege that Univision’s alleged interference even “exceeded a minimum level of ethical behavior in the marketplace. Thus, even if Univision directed the Onion not to pay the fee, that conduct alone does not amount to malicious or fraudulent conduct, particularly because the contracting parties have reasonably interpreted the contract terms differently.

Also, GCA’s allegation that Univision was likely bolstering a prior relationship by allegedly diverting the transaction fee to a third party is a bare conclusion without any factual support and is insufficient to support a claim for tortious interference with contract.

Because GCA has failed to adequately allege facts in support of a claim for tortious interference with contract, Univision’s motion to dismiss the complaint against it is granted.

(Internal quotations and citations omitted).

In New York, there are circumstances where someone can be held liable for causing someone else to break their contract with you (tortious interference with contract), and they can even be held liable for causing someone not to enter into a contract with you in the first place (tortious interference with prospective economic advantage). Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client think someone has interfered with your rights relating to a contract.

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