By Fredrick P. Niemann, Esq., a New Jersey Contract Attorney
New Jersey courts protect the right of a person to advance one’s own business free from the undue influence our courts recognize that “wrongful and malicious conduct may be grounds for [legal action].” For example, New Jersey courts protect the rights of real estate brokers whose clients cut them out of a transaction to avoid paying a brokerage commission. Our courts now call this an action for tortuous interference with New Jersey business dealings.
Tortious Interference With a Contract in New Jersey
There are two claims for tortuous interference: tortious interference with contract and tortious interference with prospective economic advantage. The primary distinction between the two is the existence of an enforceable contract. Each claim is intended to protect business relationships.
To establish a claim for tortious interference with contractual relations, a plaintiff must prove: (1) actual interference with a contract; (2) that the interference was inflicted intentionally by a defendant who is not a party to the contract; (3) that the interference was without justification; and (4) that the interference caused damage.
One acts “intentionally”, if they have known of the existence of a contract,” but are not a party to that contract. Thus, this claim does not involve a breach of contract case. Rather, this claim addresses the injury caused by a third party inducing a party to a contract to breach that contract. Viewed from the perspective of plaintiff’s counsel, having a claim against a party for inducing that breach provides two potential claims to recovery.
The law in New Jersey governing this claim is relatively straightforward, that is the protection of a relationship between parties under contract.
To prevail on a claim for tortious interference with prospective economic advantage, you must prove: a reasonable expectation of advantage from a prospective contractual or economic relationship; that the defendant interfered with this advantage intentionally and with malice – that is, without justification or excuse; that the interference caused the loss of the expected advantage; and that the injury caused economic damage.
Summing up the standard for determining the existence of a reasonable expectation of economic advantage, one group of commentators has concluded:
[I]t is vital for the plaintiff – when pursuing a claim – to make certain that there is a bona fide and reasonable expectancy of a continuing and reasonable expectancy of a continuing and prosperous relationship, not just the mere desire or possibility for one. In a prospective advantage case, the plaintiff must demonstrate that expected benefit with a reasonable degree of specificity. More than a mere hope or optimism is needed; although the law does not require reasonable probability of economic benefit from a valid prospective relationship.
The Absolute Requirement of Malice to Prove a Claim
New Jersey courts describe malice in a variety of ways. First, the courts make clear that malice does not mean ill will. Rather, malice means that the conduct was engaged in without justification or excuse. In the typical business case, competition between parties may constitute justification. The courts, however, require more than competition: A defendant must have a legitimate business/economic motive, such as success in the marketplace, and employ legitimate means to obtain that goal.
The New Jersey law has addressed malice when competition is invoked as a justification. The law holds that there is nothing wrong with targeting a competitor, and that targeting a competitor by offering lower prices is, in fact, “the very essence of competition.”
New Jersey law does not permit a competitor to use wrongful means. New Jersey courts use the term “malice” to describe conduct that is “injurious and transgressive of generally accepted standards of common morality or of law.”
The New Jersey courts have reduced this inquiry to whether the conduct was sanctioned by the “rules of the game.” The rules of the game standard have become the standard for determining malice in tortious interference cases.
The tort of tortious interference with prospective economic advantage requires that business competitors act within the moral and ethical framework required by society, as well as their own industry. The rules of the game standard depend on the customs, practices or code of ethics of the industry, which have typically been vetted time and again by what is necessary to achieve efficiency in the marketplace.
New Jersey courts have articulated several examples of what may constitute fraudulent, dishonest or illegal conduct, but the list is by no means exhaustive. For example, liability will ensue where a competitor uses “violence, fraud, intimidation, misrepresentation, criminal or cruel threats, and/or violations of the law.” Moreover, the conduct complained of must be independently actionable. For example, one case addressed whether the defendant had violated the antitrust laws through the use of extremely low pricing. Absent a violation of the antitrust laws, a claim of tortious interference should not be based on “extremely low, or unprofitable prices” because that conduct was not independently actionable.”
If you have any questions regarding tortious interference with a New Jersey contract, contact Fredrick P. Niemann, Esq., toll-free at (888) 800-7442 or e-mail him at firstname.lastname@example.org/. He will be happy to assist you.