Texas Law and Tortious Interference with Prospective Business Relations

Tortious interference with business relations involves a third party using false claims against a business in order to drive business away or prevent the business from entering a relationship with another party. The key difference between interference with prospective business relations and interference with an existing contract is that the former does not require an existing contract. Interference with a prospective contract is enough. Due to the inherent lack of an existing contract, however, this tort can sometimes be more difficult to prove than its counterpart.

The Elements of Tortious Interference with Business Relations

To prevail on a claim for tortious interference with prospective business relations, a plaintiff must establish that (1) there was a reasonable probability that the plaintiff would have entered into a business relationship with a third party; (2) the defendant either acted with a conscious desire to prevent the relationship from occurring or knew the interference was certain or substantially certain to occur as a result of the conduct; (3) the defendant’s conduct was independently tortious or unlawful; (4) the interference proximately caused the plaintiff injury; and (5) the plaintiff suffered actual damage or loss as a result.[1]

Reasonable Probability of Prospective Business Relations

In order to assert tortious interference with prospective business relations, a plaintiff must prove that the defendant interfered with a reasonably probable contract that would have been entered into but for the interference.[2] Without a probable contract, there is no “interest” to tortiously interfere with.[3] To establish a claim for tortious interference, a plaintiff must prove that more than mere negotiations occurred but does not have to prove that the contract would have “certainly be made but for the interreference.”[4] The result must simply be reasonably probable considering all the facts and circumstances.[5] Thus, as addressed in more detail below, a plaintiff must not only establish that the defendant committed an independent tort but must also prove that the defendant’s conduct actually interfered with a reasonably probable contract.[6]

Willful and Intentional Act of Interference

To satisfy the second element, a plaintiff must prove that the defendant either desired to prevent the relationship from occurring or knew the interference was “certain or substantially certain to occur as a result of the conduct.”[7] The Supreme Court of Texas has explained that interference is intentional “‘if the actor desires to bring it about or if he knows that the interference is certain or substantially certain to occur as a result.’”[8]

Defendant’s Conduct Was Independently Tortious or Unlawful

The plaintiff must prove that the defendant’s conduct was independently tortious or unlawful, but need not prove all the elements of the independent tort itself.[9] A plaintiff need only prove that the defendant’s conduct would be actionable under a recognized tort. The Texas Supreme Court has held to the Restatement’s limitation of unlawful conduct “characterized by violence, fraud or defamation, and was tortious in character” as it preserves the tort’s utility and fills a gap in affording compensation in situations where a wrong has been done.[10] Thus, torts such as fraud, assault, illegal boycotts, misrepresentation, misappropriation of trade secrets, violation of a non-compete agreement, are all examples of independently tortious or unlawful conduct that would support a tortious interference claim.[11] Conduct that is “merely sharp or unfair,” however, cannot be the basis for an action for tortious interference with prospective relations.[12]

Proximately Caused Injury

Just as with tortious interference with an existing contract, a plaintiff alleging tortious interference with business relations must prove that the defendant’s interference proximately caused its injury.[13] Proximate cause requires proof of both cause-in-fact and foreseeability.[14] The test for cause-in-fact is whether the tortious conduct was a substantial factor in bringing about the alleged injury, i.e., a factor without which the injury would not have occurred.[15]

Interference Caused Actual Damage or Loss

Finally, a plaintiff must show that actual damage or loss occurred as a result of the alleged interference.[16] Texas courts have held that there is no cause of action for conduct that merely delays execution of a contract.[17]

Remedies

In an action for interference with the business relations of another, the plaintiff may recover damages that are a natural and proximate consequence of the interference.[18] A defendant may be liable for damages such as (a) the pecuniary loss of the benefits of the contract or the prospective relation; (b) consequential losses for which the interference is a legal cause; (c) emotional distress or actual harm to reputation if they are reasonably to be expected to result from the interference. [19]

Limitations

The statute of limitations for tortious interference with prospective business relations is two years from accrual of the cause of action. Accrual begins when existing negotiations, which are reasonably certain of resulting in a contract, are interfered with such that the negotiations terminate and harm to the plaintiff results.[20]

Defenses

Defenses to tortious interference with prospective business relations include limitations, immunity, privilege or justification, or plaintiff’s fault. Because tortious interference with prospective business relations is an intentional tort, a defendant can assert that the plaintiff’s own actions caused or contributed to plaintiff’s injury.[21] Justification and privilege are defenses in a claim for tortious interference with prospective relations only to the extent that they are defenses to the independent tortious nature of the defendant’s conduct. Otherwise, the plaintiff need not prove that the defendant’s conduct was not justified or privileged, nor can a defendant assert such defenses.[22] An interfering party is justified if the interference, such as a lawsuit, is done in a bona fide exercise of their own rights or if the interferer has an equal or superior right in the subject.[23]

[1] Richardson–Eagle, Inc. v. William M. Mercer, Inc., 213 S.W.3d 469, 475 (Tex.App.-Houston [1st Dist.] 2006, pet. denied) (listing elements).

[2] Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 924 (Tex. 2013); Richardson–Eagle, 213 S.W.3d at 475–76.

[3] Hill v. Heritage Res., Inc., 964 S.W.2d 89, 115 (Tex. App.—El Paso 1997, pet. denied) (with no non-consent interest to sell, there could be no actual damages).

[4] Richardson–Eagle, 213 S.W.3d at 475–76; Cooper v. Steen, 318 S.W.2d 750, 757 (Tex.App.—Dallas 1958, no writ) (sufficient that P introduced testimony from prospective buyer that buyer would have consummated sale but for interference.)

[5] Id. at 476.

[6] Coinmach Corp., 417 S.W.3d at 924.

[7] RESTATEMENT (SECOND) OF TORTS § 766B cmt. d (1979).  (the restatement further provides that “[i]f [the actor] had no desire to effectuate the interference by his action but knew that it would be a mere incidental result of conduct he was engaging in for another purpose, the interference may be found to be not improper.”) But See Bradford v. Vento, 48 S.W.3d 749, 757 (Tex. 2001) (interference was at most only incidental when defendant stated that plaintiff did not own property the plaintiff was intending to purchase while responding to police questioning about an unrelated disturbance).

[8] Bradford, 48 S.W.3d at 757 (quoting RESTATEMENT (SECOND) OF TORTS § 766B cmt. d (1979)); Coinmach Corp., 417 S.W.3d at 929 (Tex. 2013); see also Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 861 (Tex.App.-Houston [14th Dist.] 2001, pet. denied) (“Mere participation in the transaction is not sufficient to establish an intentional action to harm [the plaintiff].”).

[9] Wal–Mart Stores, Inc. v. Sturges, 52 S.W.3d 711, 726 (Tex.2001).

[10] RESTATEMENT (SECOND) OF TORTS § 766B cmt. b (1979).

[11]  Sturges, 52 S.W.3d at 726; see also Chandler v. Pilgrim’s Pride Corp., 9:20-CV-78-RC-ZJH, 2021 WL 2786558, at *3 (E.D. Tex. Mar. 22, 2021), report and recommendation adopted sub nom. CLARK CHANDLER v. PILGRIM’S PRIDE CORP., 9:20-CV-78-MJT, 2021 WL 2946436 (E.D. Tex. July 14, 2021).

 

[12] Sturges, 52 S.W.3d at 726.

[13] Hill, 964 S.W.2d AT 126.

[14] Immobiliere Jeuness Establissement, 525 S.W.3d at 880.

[15] Palla, 424 S.W.3d at 728 (Tex. App.—Dallas 2014, no pet.) (noting that damages are necessarily limited to those proximately caused by the interference).

[16] Richardson–Eagle, 213 S.W.3d at 475–76.

[17] Texas Disposal Sys. Landfill, Inc. v. Waste Mgmt. Holdings, Inc., 219 S.W.3d 563, 590–91 (Tex.App.—Austin 2007, pet. denied).

[18] Gonzalez v. Gutierrez, 694 S.W.2d 384, 390 (Tex. App.—San Antonio 1985, no writ).

[19] RESTATEMENT (SECOND) OF TORTS § 774A (1979).

[20] Hill, 964 S.W.2d at 116 (Tex. App.—El Paso 1997, pet. denied).

[21] Exxon Corp. v. Allsup, 808 S.W.2d 648, 659 (Tex.App.—Corpus Christi 1991, writ denied).

[22] Ash v. Hack Branch Distrib. Co., Inc., 54 S.W.3d 401, 414 (Tex. App.—Waco 2001, pet. denied).

[23] Hill v. Heritage Res., Inc., 964 S.W.2d 89, 115 (Tex. App.—El Paso 1997, pet. denied).

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