White Plains Coat & Apron Co. v. Cintas Corp., 8 N.Y.3d 420 (2007)

A generalized economic interest in soliciting business for profit does not 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.

Summary

White Plains Coat & Apron Co., a linen rental business, sued Cintas Corp., a competitor, for tortious interference with existing customer contracts. White Plains alleged that Cintas knowingly induced its customers to breach their exclusive service contracts. The Second Circuit certified a question to the New York Court of Appeals regarding whether a generalized economic interest in soliciting business constitutes a defense to tortious interference when there is no prior economic relationship with the breaching party. The Court of Appeals held that it does not, emphasizing the need to protect existing contracts while still allowing fair competition.

Facts

White Plains Coat & Apron Co. had five-year exclusive service contracts with customers for linen rental. Cintas Corp., a competitor, allegedly knew about these contracts and intentionally solicited White Plains’ customers, inducing them to breach their contracts and enter into agreements with Cintas. White Plains informed Cintas of the existing contracts and demanded that Cintas cease solicitation, but Cintas denied knowledge and continued.

Procedural History

White Plains sued Cintas in the Southern District of New York for tortious interference. The District Court granted summary judgment to Cintas, holding that Cintas’s legitimate interest as a competitor triggered the economic justification defense, and White Plains failed to show malice or illegality. The Second Circuit, on appeal, certified the question of whether a generalized economic interest is a sufficient defense to the New York Court of Appeals.

Issue(s)

Whether a generalized economic interest in soliciting business for profit constitutes 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?

Holding

No, because a generalized economic interest in soliciting business, without a prior economic relationship with the breaching party, is insufficient to justify inducing a breach of contract.

Court’s Reasoning

The Court of Appeals emphasized the balance between protecting contractual rights and promoting competition. While New York law recognizes tortious interference with both prospective and existing contracts, existing contracts are accorded greater protection. To establish tortious interference with a contract, a plaintiff must show the existence of a valid contract, the defendant’s knowledge of the contract, intentional and improper procuring of a breach, and damages. The economic interest defense allows a defendant to justify interference if it acted to protect its own legal or financial stake in the breaching party’s business, such as being a significant stockholder, parent company, or creditor. The court reasoned that “mere status as plaintiffs competitor is not a legal or financial stake in the breaching party’s business that permits defendant’s inducement of a breach of contract.” Allowing a generalized economic interest to suffice as a defense would blur the line between interference with existing and prospective contracts. The court noted that protecting existing contractual relationships does not negate a competitor’s right to solicit business, but liability arises from improper inducement to breach a contract. As the court stated, “When the defendant is simply a competitor of the plaintiff seeking prospective customers and plaintiff has a customer under contract for a definite period, defendant’s interest is not equal to that of plaintiff and would not justify defendant’s inducing the customer to breach the existing contract.”