Minnesota Supreme Court: Sysdyne Corp. v. Rousslang, et al.
— N.W.2d — (Minn. 2015)
Incorrect Legal Advice Justification for Tortiously Interfering with a Contract?
The Minnesota Supreme Court recently held in Sysdyne Corp. v. Rousslang, et. al., that “[t]he justification defense against a claim of tortious interference with contract may be satisfied by a defendant’s good faith reliance on advise of outside counsel, provided that the legal advice is obtained through a reasonable inquiry.”
This case arose when Sysdyne Corporation (“Sysdyne”) sued Xigent Solutions (“Xigent”) for tortious interference with contract. The tortious interference with contract resulted from Xigent’s hiring of Brian Rousslang (“Rousslang”), a former employee of Sysdyne who was subject to a non-compete agreement in favor of Sysdyne. Rousslang did not dispute he violated the non-compete. In addition to the tortious interference with contract claim, Sysdyne also brought breach of contract claims in regards to some of Sysdyne’s customers that Rousslang brought with him to Xigent. The trial court awarded damages on those breach of contract claims.
However, on the tortious interference with contract claim, the trial court held that Xigent was justified in knowingly interfering with the non-compete because they received advice from outside counsel who told Xigent that the non-compete was unenforceable. The court of appeals affirmed.
On appeal, the Minnesota Supreme Court analyzed, among other things, whether the justification defense to a claim of tortious interference with contract claim may be justified by reliance on incorrect advice of counsel.
Elements of Tortious Interference in Minnesota
To prove a tortious interference with contract claim, the following elements must be present:
- The existence of a contract
- The alleged wrongdoer’s knowledge of the contract
- Intentional procurement of its breach
- Without justification, and
Furlev Sales & Assoc., Inc. v. N. Am. Auto Warehouse, Inc. 325 N.w.2d 20, 25 (Minn. 1982). The Minnesota Supreme Court zeroed in on the one element at issue—element four, “without justification,” which must be proved by the defendant.
In addressing Sysdyne’s arguments that no justification existed because Xigent was not asset its own protected interest, the Court stated, “we have not indicated that interference with a contract is justified only when a defendant asserts in good faith a legally protected interest what would be impaired or destroyed by performance of the contract.” The Court was specifically referring to its decision in Kjesbo v. Ricks, which Sysdyne cited, that stated “[t]here is no wrongful interference with a contract where one asserts ‘in good faith a legally protected interest of his own….’” 517 N.W.2d 858, 588 (Minn. 1994).
Further, the Court stated, “[n]ot only have we failed to reject reliance on the advice of counsel as a justification for interference with a contract, but [we have previously] impliedly recognized that a defendant’s interference with a contract may be justified by reliance on the advice of counsel.” The Court concluded that since the justification defense is a fact question, the lower courts did not err when they determined that reasonable reliance on outside counsel can be a justification for tortious interference with a contract.