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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: August 23, 2020

Tortious Interference With a Prospective Business Relationship Claim Fails Without Allegations of Wrongful Means or Malicious Purpose

On August 10, 2020, Justice Masley of the New York County Commercial Division issued a decision in GMX Tech., LLC v. Pegasus Capital Advisors, L.P., 2020 NY Slip Op. 32634(U), holding that a claim for tortious interference with a prospective business relationship fails without allegations of wrongful means or malice, explaining:

GMX alleges that defendants intentionally and without justification interfered with GMX’s prospective business opportunity with potential investor in China by (a) meeting with the Chinese company, and (b) improperly disclosing GMX’s confidential and proprietary business information about its products and financial information, in violation of the parties’ NDA. GMX further alleges that defendants tried to convince the investor to cut GMX out and deal directly with defendants. It is further alleged that the investor did not invest in GMX.

A claim for tortious interference with a prospective business relationship (i.e., an economic advantage) must allege: (1) the defendant’s knowledge of a business relationship between the plaintiff and a third party; (2) the defendant’s intentional interference with the relationship; (3) that the defendant acted by the use of wrongful means or with the sole purpose of malice; and (4) resulting injury to the business relationship. A claim for tortious interference with prospective business relations must allege that interference by wrongful means. Wrongful means include physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure; they do not, however, include persuasion alone although it is knowingly directed at interference with the contract.

GMX alleges that defendants falsely informed the investor that defendants, under the TOA, had the right to acquire up to 51% of GMX. GMX also alleged that defendants threatened to not sign off on the deal with the investor; although, it is not clear who defendants threatened. These allegations show that the alleged interference was neither wrongful nor motivated solely by malice, as opposed to normal economic interest. GMX fails to allege facts suggesting that defendants used any unlawful means or acted with the sole purpose of harming GMX. Thus, this claim is dismissed.

(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 business relations). 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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