Introduction. In a large number of cases businesses have their own separate torts. For example, a company who
has spent a considerable amount of money and time on a new drug would want to protect that investment.
A. Example. Or a company who has built a large customer list would want to protect that list. This will
usually come into play when an employee leaves the company and starts competing against his former
employer.
B. Business Tort Defined. The text defines business torts as wrongful interference with another's business
rights. We will cover the five causes of action list on page 78. They are:
1. Wrongful Interference with a Contractual Relationship.
2. Wrongful interference with a business relationship.
3. Wrongfully entering into business.
4. Infringement of trademarks, trade names, patents, and copyrights.
5. Disparagement of Property or Reputation.
II. Wrongful Interference with a Contractual Relationship.
A. Element which will Constitute Wrongful Interference with a Contractual Relationship. The text list three
elements which are necessary to prove that a wrongful interference with a contractual relationship exists.
They are:
1. A valid, enforceable contract must exist between the parties.
2. A third party must know that this contract exits.
3. The third party must "intentionally" cause either of the parties to the contract to break the
contract.
B. Example. Floyd has been training Gomer to become a barber. In fact, Gomer has become so good at
cutting hair that Floyd and Gomer entered into a contract. The contract states that Gomer will cut hair
only in Floyd's shop.
1. Howard Sprange recognizes Gomer's talent and he was also aware of the contract between Floyd
and Gomer. Howard persuades Gomer to cut hair in his new barber shop. What's the result.
Answer. Howard has interfered with the Contract between Floyd and Gomer because:
a. There was a valid contract between Floyd and Gomer
b. Howard knew about the contract
c. Howard intentionally caused Gomer to break the contract when Gomer came to work for
him
.
C. Texaco, Inc. v. Pennzoil Co.
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1. Facts. Pennzoil agreed to purchase and Getty Oil agreed to sell its controlling interest in Getty
Oil. While the finishing touches were being worked out, in comes Texaco with a new and
improved bid. Getty's board of directors accepted Texaco's bid. Of course Penzoil sued.
2. Trial Court. The trial court agreed with Penzoil and really stuck it to Texaco. Among other
things it found
a. That there was a valid agreement between Pennzoil and Getty;
b. Texaco "knowingly and intentionally" interfered with this agreement;
c. Damages were assessed at over $10 billion dollars (that's with a "B").
3. Findings of the Court of Appeals. The Appellate Court agreed with the lower court's
decision. The court's major points were:
a. There was a contract between Getty Oil and Penzoil as long as the essential terms
were agreed upon.
b. The court said as long as the party has knowledge of the contract he is interfering with is
sufficient. HE NEED NOT APPRECIATE THE LEGAL SIGNIFICANCE.
c. The court said Texaco knew of the agreement between Getty Oil and Penzoil. The court
lists several factors which lead them to that decisions including:
(1) Notice of the Contract in the Wall Street Journal.
(2) Texaco's strategy to defeat Penzoil's deal by stopping the signing. AND
(3) Getty Oil's demand for full indemnity from Texaco against any claims by
Penzoil arising from their agreement.
III. Wrongful Interference with a Business Relationship.
A. Introduction. The general rule is "one can not interfere unreasonably with another's business." The key
to this section is what is unreasonable behavior?
1. The primary focus of this portion of the chapter is to distinguish between good competition and
behavior that borders on being a tort.
2. Text's Emphasis. Although there is no clear definition of what a wrongful interference with a
Business Relationship is, the text list several key points:
a. A business can not unreasonably interfere with an economic advantage gain by a
competitor through advertising
(1) The text gives an example of Store A positioning himself in front of Store B and
taking Store B's prospective customers.
b. A salesperson can not follow another company's salesperson through the city, soliciting
the same customers.
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(1) One reason for this is that the other salesperson would get the benefit of the first
one's effort. I'm not sure I agree with this!!
B. Azar v. Lehigh Corp.
1. Facts. Lehigh Corp. was a developer of real estate.
a. It's practice was to get solicit individuals to look at its property in hope of purchasing
lots or condominiums.
b. Lehigh would provide prospective customers with accommodations while they give you
the "pitch" to purchase their product (Just like time shares).
c. Azar knew Lehigh's process because he used to work for them.
d. When Azar saw a prospective client go into Lehigh's office, he also made a play for
them, offering them similar property at a cheaper price.
e. Lehigh brought an injunction against Azar to keep him from during this. Lehigh claimed
this was Azar was tortitiously interfering with the business relationship between Lehigh
and his customers.
f. Azar said this is merely friendly competition.
2. Trial Court. The trial court allowed the injunction thus restraining Azar from interfering with
Lehigh.
3. Court of Appeals. The court of appeals agreed with the trial court. The found that Azar conduct
was unfair because it met the requirements of interference with a business relationship. The 3
requirements were:
a. the existence of a relationship where plaintiff has legal rights
b. Intentional, unjustified Interference and
c. Damages resulted.
C. Defenses to Wrongful Interference with a Contractual or Business Relationship. When allegations of
wrongful interference are alleged, the classic defense it is "this is merely bona fide competition."
1. Public Policy Favors Free Competition. Bona fide competition is usually a good defense because
public policy favor competition.
a. Key Point. The primary point I'm trying to make is the customer has a right to buy his
product from anyone he wants.
b. Example 1: Mr. ??? what about this; Seimens sells telephone switches to Bellcore for
$25,000 apiece. Northern Telecom calls Bellcore and tells them that they can sell the
same switch to Bellcore for $22,000 plus give them more feature. Is this illegal???
c. Example 2: Mr. ??? what do you think about this: Seimens sells telephone switches to
Bellcore for $25,000. Northern Telecom hires "Andy" as a sales representative. Andy's
dad is a chief executive of Bellcore. Bellcore starts to purchase from Northern vs.
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Seimens. Is this illegal.
IV. WRONGFULLY ENTERING INTO BUSINESS.
A. General Rule.
