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Delaware Supreme Court Clarifies Elements of Claim for Tortious Interference with Contractual Relations

By Francis G.X. Pileggi

ASDI, Inc. v. Beard Research, Inc., Del. Supr., Consol. Nos. 296/301/308, 2010, (Nov. 23, 2010), read opinion here.  This is an appeal from two separate decisions of the Delaware Court of Chancery in the same case. The first decision dealt with penalties for spoliation of evidence. The second decision appealed from was a merits-based decision reported at 2010 WL 1644177. The Delaware Supreme Court affirmed both decisions. Although relying on what it described as the 'well-written' opinions of the trial court, this short ruling provided an additional basis for the affirmance of the merits-based decision only. See discussion of opinions appealed from in the Court of Chancery here, here and here.

Issue Addressed
This decision clarified Delaware law that in a claim for tortious interference with contractual relations, the lawful termination of a contract by a third-party with the plaintiff will not by itself, bar a claim that the defendant tortiously interfered with that contract.

Brief Summary of Ruling
The Supreme Court emphasized that the focus of the claim for tortious interference with contractual relations is upon the defendant's wrongful inducement of a contract termination, 'not upon whether the termination itself was legally justified.' The Court referred to the Restatement (Second) of Torts, which 'recognizes a claim for tortious interference with contractual relations where the defendant utilizes 'wrongful means' to induce a third-party to terminate a contract.'

In addition to allowing a claim for tortious conduct which induces a third-party to terminate a contract with the plaintiff unlawfully, it is not essential to this cause of action that the termination be unlawful. Rather, conduct amounting to tortious interference has been found actionable even where the third-party lawfully is entitled to terminate a contract 'at-will.'

Such claims have been recognized in other states in situations involving at-will employment contracts, commercial contracts such as attorney-client relationships, supply contracts and marketing contracts. See cases cited at footnotes 7 through 11. Relying on decisions from other jurisdictions, the Court explained that even when the termination of a contract is lawful, such a termination is not fatal to a claim of tortious interference with contractual relations because 'the focus of the claim is on the defendant's wrongful conduct that induces the termination of the contract, irrespective of whether the termination is lawful.'

In this six-page decision, Delaware's High Court overruled two decisions of the Delaware Superior Court to the extent that they are inconsistent with the holding in this case. See footnote 15.

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on November 28, 2010 (boomark / email).