Defendants Who Were Parties to a Contract Not Liable for Tortious Interference With it

On May 20, 2020, Justice Cohen of the New York County Commercial Division issued a decision in Shyer v. Shyer, 2020 NY Slip Op. 31519(U), holding that defendants who were parties to a contract could not be held liable for tortious interference with it, explaining:

Tortious interference with contract requires the existence of a valid contract between the plaintiff and a third party, defendant's knowledge of that contract, defendant's intentional procurement of the third-party's breach of the contract without justification, actual breach of the contract, and damages resulting therefrom.

It is well established that only a stranger to a contract, such as a third party, can be liable for tortious interference with a contract.

The Individual Defendants are not strangers to the Agreements: in addition to being contracting parties themselves, they are also alleged to have controlled Zyloware, the alleged breaching party, as co-CEOs of the company.

According to the Estate, although the Individual Defendants were parties to some of the provisions of the Agreements, they were not parties to the ones covered by alleged tortious interference. Stated differently, the Estate maintains that in multilateral agreements like these, a contracting party can still be a stranger in relation to specific obligations running between co-parties to the contract.

But while some courts have held that a party to a multilateral agreement can be found liable for tortious interference with the agreement, that has generally been where the alleged tortfeasor has rights and duties that are separate from those of the breaching party. In UBS, the First Department dismissed a tortious interference claim against a hedge fund because it was a party to the contracts with which it is alleged to have interfered, and was essentially the alter ego of the parties it induced to breach the agreements. Here, the Estate fails to explain how, in light of the Individual Defendants' interwoven roles, they have rights and duties that are separate from those of Zyloware under the Agreements. Therefore, to the extent multilateral agreements represent an exception to the standard rule precluding claims of tortious interference against contracting parties, the Estate has not shown that this case fits within that exception.

(Internal quotations and citations omitted).

In New York, there are circumstances where someone can be held liable for causing someone else to break their contract with you (tortious interference with contract), and they can even be held liable for causing someone not to enter into a contract with you in the first place (tortious interference with prospective economic advantage). Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client think someone has interfered with your rights relating to a contract.