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Wednesday, March 7, 2007

Just Doing Business or Tortious Interference?

800pxnyscourtofappeals1jpgYou can only keep Contracts and Torts separate for so long… This month, New York’s highest court will hear oral argument on a question certified by the Second Circuit in White Plains Coat & Apron Co. v. Cintas Corp. The case raises an interesting question about what X Corporation may permissibly do to solicit the clients of Z Corporation when the corporations sell the same service but X Corporation has no existing relationships with the solicited clients.

Here are the facts: White Plains Coat & Apron Co. (WPL) rents napkins, tablecloths and other “laundered articles” to bars and restaurants. Generally, using a form contract, WPL enters into 5-year exclusive deals to provide customers with the laundered linens. Cintas Corp. (Cintas) rents, among other items, similar linen products as WPL. WPL claims that Cintas tortiously interfered with WPL’s existing linen rental contracts when Cintas sales representatives intentionally solicited and induced dozens of WPL customers to breach agreements with WPL and enter into agreements with Cintas.

Cintas moved for summary judgment on the age old theory: “that’s business.” In legalspeak, Cintas asserted the economic interest defense – which, if proved, requires WPL to demonstrate malice or illegality in order to establish the tortious interference claim. WPL’s response: the economic interest defense does not apply because Cintas did not have any existing relationships with any of WPL’s customers and the best Cintas can claim is a general economic interest.

The district court granted Cintas summary judgment in an oral decision, reasoning that Cintas had “a legitimate economic interest as a competitor to go sell or rent the linens.” On appeal, the Second Circuit certified the following question to the New York State Court of Appeals:

Does a generalized economic interest in soliciting business for profit constitute a defense to a claim of tortious interference with an existing contract for an alleged tortfeasor with no previous economic relationship with the breaching party?

In other words, does Cintas’ general economic interest in soliciting WPL’s clients allow Cintas to assert the economic interest defense to tortious intereference? If so, WPL would be required to show that Cintas acted with malice.

New York precedent does not provide coherent guidance. The economic interest defense allows a third party to procure a breach of contract if that third party is exercising an “equal or superior right” to the party alleging the interference. What constitutes an “equal or superior right” to trigger this defense? Is it enough that the businesses sell the same products? Or, must Cintas allege a specific economic interest in these clients? What would form the basis of that specific interest?

White Plains Coat & Apron Co. v. Cintas Corp.

[Meredith R. Miller]

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