Bad Blood Makes Good Law: Minnesota Supreme Court Recognizes Tortious Interference Claim

In Gieseke v. IDCA, Inc., et al., No. A12-0713 (March 26, 2014), the Minnesota Supreme Court ruled that “tortious interference with prospective economic advantage” is a viable claim under Minnesota law. In so holding, the court formally recognized a cause of action, which had existed in Minnesota since at least 1909, though the state’s appellate courts had used a variety of phrases through the years to describe it.

The case arose out of a dispute between two brothers, Mike and Art, who co-owned Standard Water Control Systems, Inc., a drain tile installation business. When the brothers had a falling out, Art left Standard. John Gieseke, a fired Standard employee, then started a competing business, Diversified Water Diversion, Inc. Later Art joined Standard as a co-owner. Mike formed a new corporation, IDCA, Inc., which he used to purchase Art’s 50 percent interest in Diversified and shut the business down.

Diversified presented testimony that IDCA tortiously interfered with its business. Specifically, the testimony established that IDCA converted Diversified’s equipment preventing Diversified from doing business, changed Diversified’s registered business address, and obtained Diversified’s tax returns. Diversified also presented testimony that it saw a dramatic decrease in business. IDCA contended, however, that Diversified had failed to show the specific contracts or prospective economic advantage with which it had interfered.

The Minnesota Supreme Court held that a claim for tortious interference with prospective economic advantage is a recognized cause of action under Minnesota law. Relying on the Restatement (Second) of Torts § 766(B) and existing jury instructions for wrongful interference with an existing contract, the court set forth five elements necessary to successfully pursue such a claim. To recover for tortious interference with prospective economic advantage, a plaintiff must show the following:

  1. the existence of a reasonable expectation of economic advantage;
  2. the defendant’s knowledge of that expectation of economic advantage;
  3. that the defendant intentionally interfered with the plaintiff’s reasonable expectation of economic advantage, and the intentional interference was either independently tortious or in violation of a state or federal statute or regulation;
  4. that in the absence of the wrongful act of the defendant, it is reasonably probable that the plaintiff would have realized an economic advantage or benefit; and
  5. that the plaintiff sustained damage.

Although the court affirmed the lower courts’ holding recognizing tortious interference with prospective economic advantage as a viable claim under Minnesota law, the court reversed the judgment in favor of Diversified. The court held that the company had failed to establish each of the five elements of the claim; in particular, Diversified did not specifically identify third parties with whom it had had a reasonable expectation of a future economic relationship and failed to prove that its damages had been caused by the wrongful interference with such a relationship. As a result, the court ruled that Diversified’s claim had failed and that judgment as a matter of law should have been entered in favor of IDCA.

 

Topics:  Appeals, Economic Injuries, Family Businesses, Tortious Interference

Published In: Business Torts Updates, Civil Procedure Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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