Client Poaching: Tortious Interference and the Competitor’s Privilege
No matter what industry a company operates in, every business is in the business of sales. Bringing in new customers and maintaining relationships with old ones is a key part of having a profitable growing business. So, it is only natural that the law would have something to say about the act of one company taking business away from another. Consequently, a company who loses a client to a competitor may have a claim for tortious interference with that business relationship.
However, competition between companies is also fundamental to the American economy. The law is set up on the notion that such competition makes companies better and provides better options for consumers. Therefore, the law includes a “competitor’s privilege,” a defense that competitors who poach clients can raise against claims of tortious interference.
Tortious Interference Basics
Tortious interference is a Florida law claim that allows people to seek damages for the loss of a business relationship or contract that a third party improperly interfered with. Importantly, a lawsuit for tortious interference is brought against the third party who interferes with the contract, not against the former customer or business associate.
Florida law includes a three-part test for when someone has tortiously interfered with a business relationship. First, there must be a preexisting business relationship between two people that the defendant was aware of. This relationship can be anything from a formal contract to a mere history of past dealings. Second, the defendant must convince the third party to end that agreement. Third, the ending of that relationship must have caused some sort of damage to the plaintiff, such as lost profits.
The Competitor’s Privilege
However, not all interferences with a business relationship will give rise to a claim for tortious interference. The law gives certain people the right to interfere with business relationships with impunity, provided they do so in the right way. One of the most common of these classes of people are competitors, who may attempt to pull clients away from other companies in the industry.
Importantly, the mere fact that the two companies are competitors is not enough to provide a shield against a claim of tortious interference. Instead, Florida law imposes four conditions that a defendant must satisfy in order to claim the protection of the competitor’s privilege. First, the business relationship between the plaintiff and the third party must involve an area where the plaintiff competes with the defendant. Second, the defendant may not pull the client away through the use of improper means, such as fraud. Third, the defendant cannot create an illegal restraint of competition, meaning that it cannot violate antitrust laws. Fourth, the defendant’s purpose must be at least in part to advance its competitive interest with the plaintiff; it cannot interfere with the relationship completely out of spite or malice. However, having spite or malice as a motive in addition to legitimate competitive interest will not destroy the defense.
Although fair competition is the norm between businesses, there are times when it can go too far. If you are currently involved in a dispute with a competitor over a client, contact a West Palm Beach business litigation attorney today. The attorneys at Pike & Lustig, LLP are happy to provide you with legal guidance.