A person is liable for tortious interference with a contract when he or she interferes with and causes the breach of a contract if those interfering actions are intentional and without justification. The tort of interference with contract seeks to balance the need to protect an interest in the security of contractual relationships with the importance of protecting legitimate competition in the marketplace. Wild v. Rarig, 234 N.W. 2d, 775. (Minn. 1975).
Elements of Intentional Interference with a Contract
A plaintiff must establish five elements in order to prevail in a tortious interference with contract claim. The plaintiff must establish:
- the existence of a contract,
- the alleged wrongdoer’s knowledge of the contract,
- intentional procurement of its breach,
- without justification, and
- damages. Kallok v. Medtronic, Inc., 573 N.W.2d , 356, 362. (Minn. 1998).
Existence of a Contract
This element is usually easily satisfied or is undisputed by the parties. The parties are usually able to satisfy this element merely by producing evidence of the contract or agreement. However, there are times when the existence of a contract will be disputed and the party may offer proof in order to establish the contract either by the written agreement itself or testimony about the agreement.
Wrongdoer’s Knowledge of the Contract
The second element compels the plaintiff to establish that the alleged defendant had knowledge that the contract existed. However, the plaintiff does not need to establish actual knowledge to meet this element. Instead, it is sufficient to show that the defendant “had knowledge of facts which, if followed by reasonable inquiry, would have led to a complete disclosure of the contractual relations and the rights of the parties.” Swaney v. Crawley, 191 N.W. 583, 154 Minn. 263 (1923).
As stated, knowledge of the contract can be established by showing actual knowledge of the contract. But, the plaintiff may also satisfy the knowledge requirement by showing that the tortfeasor has the facts that would have led him or her to realize that a contract existed. An example of this was laid out in the case of Salon 2000, Inc. v. Dauwalter, No. A06-1227, 2007 WL 1599223, at *5, (Minn. App., June 5 2007). In that case, Dauwalter terminated her employment with Salon 2000 in May 2005. Dauwalter was subject to a non-compete agreement with Salon 2000 that stated that one year after she voluntarily left Salon 2000 she could not directly or indirectly engage in any business competitive with the business carried on by Salon 2000 within a 10-mile radius of Salon 2000’s place of business.
After Dauwalter left Salon 2000, she entered into a lease agreement with another salon called Beehive Salon. Under that agreement, Dauwalter would rent space in Beehive Salon and Beehive Salon receives the income from any sale of salon products to Dauwalter’s customers. Salon 2000 brought a suit against both Dauwalter and Beehive Salon, saying that Dauwalter had breached her employment agreement and that Beehive Salon had tortiously interfered with the contract between Salon 2000 and Dauwalter. In upholding Salon 2000’s claim of tortious interference with contract, the court held that because the president of Beehive Salon knew that Salon 2000 had previously used non-competes and that the owner of Beehive Salon is a former employee of Salon 2000, that Beehive had constructive knowledge; meaning, Beehive had facts that with due diligence would have revealed a non-compete agreement.
Intentional Procurement of the Contract’s Breach
The third element that the plaintiff must establish is that the defendant intentionally procured the breach of the contract. Usually plaintiffs are able to satisfy this element by providing evidence that the tortious party offered a contract that was more favorable, therefore inducing the person to breach the contract with the plaintiff.
The defendant in a tortious interference with contract claim bears the burden of establishing its justification for the interference of the contract. Thus, sometimes this element is considered an affirmative defense instead of part of the plaintiff’s prima facie case. Either way, there will be evidence regarding whether the tortious party had justification or not to interfere with the contract.
To determine whether the interference was justified is usually fact-intensive. The Minnesota Supreme Court has said interference is “not justified when a plaintiff demonstrates that the defendant had knowledge of facts which, if followed by reasonable inquiry, would have led to a complete disclosure of the contractual relations and the rights of the parties.” Kallok v. Medtronic, Inc. 573 N.W.2d, 356, 362. (Minn. 1998).
It is not necessary, however, for a plaintiff to show that bad motive was a part of the defendant’s justification for interfering, although evidence of a bad motive is often persuasive.
The last element in a tortious interference with contract claim is the proof that the plaintiff has suffered damages as a result of the interference. Such damages are limited to the natural and approximate consequence of the wrongful act of the defendant. If a plaintiff wants to collect attorney’s fees, however, he or she must establish that both the defendant committed the tortious interference and that the tortious interference caused the litigation expenses to be recovered.