New York Law Review

Tag: tortious interference

  • Oddo Asset Management v. Barclays Bank PLC, 19 N.Y.3d 584 (2012): Fiduciary Duty in Structured Investment Vehicles

    19 N.Y.3d 584 (2012)

    In an arm’s length transaction between a debtor and a note-holding creditor, no fiduciary duty exists absent a special relationship of confidence and trust demonstrating a higher level of reliance.

    Summary

    Oddo Asset Management sued Barclays and Standard & Poor’s (S&P) for aiding and abetting breach of fiduciary duty and tortious interference related to the collapse of two structured investment vehicles (SIV-Lites). Oddo, a mezzanine noteholder, claimed the collateral managers of the SIV-Lites breached their fiduciary duty by acquiring impaired sub-prime mortgage-backed securities at inflated prices, and that Barclays and S&P aided this breach. The court held that the collateral managers did not owe a fiduciary duty to Oddo, as the relationship was an arm’s length transaction, and Oddo failed to demonstrate an underlying breach of contract for its tortious interference claim. Thus, the claims were dismissed.

    Facts

    Barclays created Golden Key and Mainsail, two SIV-Lites, and selected Avendis and Solent as collateral managers, respectively. The collateral managers were responsible for investing the proceeds raised from issued notes. Oddo purchased mezzanine notes in Golden Key and Mainsail. Barclays sold warehoused mortgage-backed securities to the SIV-Lites. S&P rated the mezzanine notes AAA. Oddo alleged the warehoused securities were toxic, and their acquisition caused significant losses to the SIV-Lites. The SIV-Lites ultimately collapsed, causing Oddo to lose its investment. Oddo claimed that Avendis and Solent breached their fiduciary duty to the investors of Mainsail and Golden Key, and that Barclays and S&P aided and abetted these breaches.

    Procedural History

    Oddo sued Barclays, S&P, and Solent in New York Supreme Court. The Supreme Court dismissed the claims against Solent for lack of personal jurisdiction and all claims against Barclays and S&P for failure to state a cause of action. The Appellate Division affirmed. The New York Court of Appeals granted leave to appeal and affirmed the Appellate Division’s order.

    Issue(s)

    1. Whether the collateral managers of the SIV-Lites owed a fiduciary duty to Oddo, a mezzanine noteholder.

    2. Whether Barclays tortiously interfered with Oddo’s contracts with Golden Key and Mainsail.

    Holding

    1. No, because there was no special relationship of confidence and trust between the collateral managers and Oddo to establish a fiduciary duty.

    2. No, because there was no actual breach of contract by Golden Key and Mainsail.

    Court’s Reasoning

    The court reasoned that a fiduciary relationship arises when one party is under a duty to act for the benefit of another. Such a relationship is fact-specific and grounded in a higher level of trust than is normally present in arm’s length business transactions. Generally, there is no fiduciary obligation in a contractual arm’s length relationship between a debtor and a note-holding creditor because there is no special relationship of confidence and trust. Even though the mezzanine notes had some equity-like features, there was no factual basis to elevate Oddo’s rights to those of a shareholder. The court noted that “if [the parties] do not create their own relationship of higher trust, courts should not ordinarily transport them to the higher realm of relationship and fashion the stricter duty for them” (quoting Northeast Gen. Corp. v Wellington Adv., 82 NY2d 158, 162 [1993]).

    The court further stated that Oddo had no contractual relationship with Avendis and Solent and no direct dealings with them, precluding a finding of higher trust. Because no fiduciary duty was owed, Barclays and S&P could not be liable for aiding and abetting a breach of fiduciary duty.

    Regarding the tortious interference claim, the court stated that a valid contract, the defendant’s knowledge of the contract, intentional procurement of a breach, an actual breach, and resulting damages must be shown. Here, Golden Key and Mainsail never breached their contractual obligations to Oddo by expanding their investment portfolios and acquiring the additional securities. The court emphasized that “the Warehousing Party [Barclays] has agreed to acquire specified Investments for the Issuer [Golden Key and Mainsail] … and hold them for purchase by, or transfer to, the Issuer. The Issuer will . . . purchase . . . the Warehousing Investments; provided, that the Issuer will not purchase or take delivery of any Warehousing Investment that at the time of purchase or delivery by it is not an Eligible Investment.” The warehousing provision required the SIV-Lites to pay Barclays’ purchase price, regardless of market fluctuations. Because there was no underlying breach of contract, the tortious interference claim failed.

  • Carvel Corp. v. Noonan, 3 N.Y.3d 182 (2004): Tortious Interference with Prospective Economic Relations Requires Wrongful Means

    3 N.Y.3d 182 (2004)

    To sustain a claim for tortious interference with prospective economic relations in New York, a plaintiff must demonstrate that the defendant’s conduct constituted a crime, an independent tort, or conduct aimed solely at harming the plaintiff; otherwise, the conduct must be considered egregious wrongdoing.

    Summary

    Carvel franchisees sued Carvel Corporation, alleging that Carvel’s supermarket distribution program tortiously interfered with their prospective economic relations. The New York Court of Appeals was asked to determine if the evidence presented at trial permitted a jury finding in favor of the franchisees on this claim. The court held that it did not, clarifying that to succeed on such a claim, the franchisee must show either criminal or tortious conduct, actions intended solely to inflict harm, or, at minimum, egregious wrongdoing. Carvel’s conduct, motivated by economic self-interest and not aimed solely at harming franchisees, did not meet this threshold.

    Facts

    Until the early 1990s, Carvel distributed its ice cream exclusively through franchised stores, assuring franchisees of this practice. Facing declining business, Carvel implemented a supermarket program, selling its products through supermarkets either directly or through franchisees who opted into the program (at a cost). Most franchisees did not participate. The franchisees alleged the supermarket program, including bargain pricing and coupon discrepancies, harmed their businesses. Franchise agreements varied: “Type A” agreements restricted Carvel from establishing another store within a quarter mile, while “Type B” agreements were non-exclusive and allowed Carvel to sell through various channels, including supermarkets.

    Procedural History

    Several franchisees sued Carvel in federal court. Juries awarded damages to three franchisees on tort and contract claims. Carvel appealed to the Second Circuit Court of Appeals. The Second Circuit certified questions to the New York Court of Appeals regarding the tortious interference claim and punitive damages.

    Issue(s)

    1. Under applicable standards for a claim of tortious interference with prospective economic relations, did the evidence of the franchisor’s conduct in each of the three trials on review in these consolidated appeals permit a jury finding in favor of the franchisee?

    Holding

    1. No, because Carvel’s conduct, while potentially harmful to franchisees, did not constitute a crime, an independent tort, or conduct aimed solely at harming the franchisees, and was not egregious enough to support a tortious interference claim.

    Court’s Reasoning

    The court distinguished between inducing breach of contract and interfering with non-binding economic relations, noting the latter requires more culpable conduct. Referencing Guard-Life Corp. v. S. Parker Hardware Mfg. Corp. and NBT Bancorp Inc. v. Fleet/Norstar Fin. Group, Inc., the court explained that generally, a defendant’s conduct must amount to a crime or an independent tort to establish tortious interference with non-binding relations. An exception exists if the conduct is “for the sole purpose of inflicting intentional harm on plaintiffs,” but this did not apply as Carvel was motivated by economic self-interest. The court emphasized the “means” employed by Carvel were not “wrongful” or “culpable.” Making goods available in supermarkets at attractive prices, like any form of price competition, is not “economic pressure” rising to the level of wrongful conduct. The court stated the relationship between franchisor and franchisee is complex and contractual. The court reasoned that coupon programs and distribution are also economic pressure, but it is best decided by contract rather than tort law. As such, the Court of Appeals determined that tort law should not be used in this case. Judge Graffeo concurred, arguing that the improper conduct standard should apply in cases involving non-competitors but agreed that the Carvel did not act improperly and also answered the first certified question negatively.

  • Vogt v. Witmeyer, 657 N.E.2d 999 (N.Y. 1995): Tortious Interference with Prospective Inheritance Requires Independently Tortious Conduct

    Vogt v. Witmeyer, 657 N.E.2d 999 (N.Y. 1995)

    New York does not recognize a cause of action for tortious interference with prospective inheritance unless the interference is accomplished by independently tortious conduct.

    Summary

    The plaintiff, originally a beneficiary in a revocable trust, sued the trustee, attorneys, and another beneficiary after being removed from the trust via a later amendment. She alleged tortious interference with prospective inheritance, among other claims. The New York Court of Appeals upheld the dismissal of the tortious interference claim, reiterating that New York does not recognize such a claim unless the interference involves independently tortious conduct, which the plaintiff failed to adequately plead.

    Facts

    The settlor created a revocable trust. The plaintiff was designated as a one-fifth remainder beneficiary in an August 1986 amendment to the trust. In December 1988, the settlor executed a fourth amendment, removing the plaintiff as a beneficiary. The settlor died three years later, with the fourth amendment still in effect. The plaintiff was unaware of the fourth amendment until after the settlor’s death.

    Procedural History

    The plaintiff sued the settlor’s trustee, her attorneys, and one of the remainder beneficiaries in Supreme Court. The Supreme Court dismissed all causes of action. The Appellate Division affirmed the Supreme Court’s decision. The New York Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    Whether a cause of action for tortious interference with prospective inheritance can be maintained in New York absent independently tortious conduct.

    Holding

    No, because New York does not recognize a right of action for tortious interference with prospective inheritance unless the interference is accomplished by some type of independently tortious conduct.

    Court’s Reasoning

    The Court of Appeals affirmed the lower courts’ decisions, emphasizing that New York law does not recognize a claim for tortious interference with prospective inheritance without independently tortious conduct. The court cited Hutchins v Hutchins, 7 Hill 104, and the Restatement (Second) of Torts § 774B. The court noted that the plaintiff failed to plead any tortious acts by the defendants that caused the settlor to modify the trust, relying instead on conclusory assertions. The court stated, “New York, however, has not recognized a right of action for tortious interference with prospective inheritance and, in any event, such a cause of action would require that the interference be accomplished by some type of independently tortious conduct.”

  • Alexander & Alexander of New York, Inc. v. Barber, 67 N.Y.2d 968 (1986): Establishing Requirements for Conspiracy and Tortious Interference Claims

    Alexander & Alexander of New York, Inc. v. Barber, 67 N.Y.2d 968 (1986)

    A cause of action for conspiracy requires an underlying tortious act, and a claim for tortious interference with prospective economic advantage necessitates allegations of improper means or actions taken solely to injure the plaintiff.

    Summary

    Alexander & Alexander (A&A) sued Barber and others, alleging conspiracy to divert business opportunities and tortious interference. The New York Court of Appeals affirmed the dismissal of these claims against Barber. The court held that a conspiracy claim requires an underlying tort, and the alleged diversion of business opportunities failed to state a claim for interference with prospective economic advantage because it lacked allegations of improper means or malicious intent. Further, A&A lacked standing to sue for tortious interference with the employment relationship between Fritzen, Bikoff and AGR (another corporation), as any duty was owed to AGR, not A&A.

    Facts

    A&A, an insurance company, claimed Barber conspired with others to divert business opportunities away from A&A. The complaint alleged 25 “overt acts” by Barber. A&A also claimed that Fritzen and Bikoff, employees of Albert G. Ruben, Inc. (AGR), a related corporation of A&A, breached a fiduciary duty owed to A&A and that Barber interfered with this relationship.

    Procedural History

    Barber moved to dismiss the complaint under CPLR 3211 or, alternatively, for summary judgment under CPLR 3212. The lower court ruled in favor of Barber, dismissing the claims. The Appellate Division affirmed this decision. A&A appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether a cause of action for conspiracy can stand alone without an underlying actionable tort.

    2. Whether a claim for interference with prospective economic advantage requires allegations of improper means or actions taken solely to injure the plaintiff.

    3. Whether A&A has standing to sue for tortious interference with the employment relationship of Fritzen and Bikoff, who were employees of AGR.

    Holding

    1. No, because “a mere conspiracy to commit a [tort] is never of itself a cause of action.”

    2. Yes, because a claim for interference with prospective economic advantage requires an allegation that the defendant used improper means or acted solely for the purpose of injuring the plaintiff.

    3. No, because A&A lacked standing to sue for tortious interference with the employment relationship of Fritzen and Bikoff because they were employees of AGR, and any fiduciary duty was owed to AGR, not A&A.

    Court’s Reasoning

    The Court of Appeals relied on established precedent, stating that “a mere conspiracy to commit a [tort] is never of itself a cause of action” (Brackett v Griswold, 112 NY 454, 467). It clarified that allegations of conspiracy are only permitted to connect the actions of separate defendants to an otherwise actionable tort. The court found that the alleged diversion of business opportunities, framed as interference with prospective economic advantage, was insufficient because it lacked allegations that Barber used improper means or acted solely to injure A&A, citing Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183. The court also addressed the issue of standing, noting that A&A’s claim was based on the assertion that as employees of AGR, Fritzen and Bikoff owed a fiduciary duty to A&A. The court rejected this argument, holding that A&A lacked standing to sue for tortious interference with the employment relationship because Fritzen and Bikoff were employees of AGR, and therefore any fiduciary duty was owed to AGR, not A&A. The Court emphasized that the plaintiff’s own briefs contradicted the claim of an explicit contractual relationship, further undermining its standing to sue.

  • Alvord & Swift v. Stewart M. Muller Constr. Co., 46 N.Y.2d 276 (1978): Establishing Tortious Interference with Contractual Relations

    46 N.Y.2d 276 (1978)

    To establish a claim for tortious interference with contractual relations, the interference must be intentional, not merely negligent or incidental to another legitimate business purpose.

    Summary

    Alvord & Swift, a subcontractor, sued New York Telephone, the owner of a construction project, alleging tortious interference with its subcontract due to delays. The New York Court of Appeals affirmed the lower court’s grant of summary judgment to New York Telephone. The court held that while a plaintiff’s submissions can be considered on a summary judgment motion even if the pleadings are deficient, the plaintiff failed to present evidence of intentional interference by New York Telephone. The interference, at most, was incidental to New York Telephone’s business purpose and thus did not meet the standard for tortious interference.

    Facts

    New York Telephone contracted with Stewart M. Muller Construction Co. for renovations. Alvord & Swift subcontracted with Muller to perform HVAC work. The prime contract stipulated no contractual relationship between the owner (New York Telephone) and any subcontractor. Alvord’s subcontract incorporated the terms of the prime contract and granted Alvord the same rights against Muller as Muller had against New York Telephone. Construction was significantly delayed, increasing Alvord’s expenses. Alvord sued New York Telephone alleging, in its sixth cause of action, that the owner failed to adequately supervise the project, disrupting Alvord’s work.

    Procedural History

    The Supreme Court, Special Term, granted summary judgment to New York Telephone, interpreting Alvord’s sixth cause of action as a breach of contract claim barred by lack of privity. Alvord appealed, arguing the claim was for tortious interference. The Appellate Division affirmed. Alvord appealed to the New York Court of Appeals.

    Issue(s)

    Whether summary judgment can be granted against a plaintiff who, despite pleading deficiencies, presents evidence of a cause of action in their submissions.

    Whether a tort cause of action for interference with contractual relations is established when the interference is not intentional, but incidental to a legitimate business purpose.

    Holding

    Yes, but summary judgment was still properly granted in this case. Modern principles of procedure do not permit an unconditional grant of summary judgment against a plaintiff who, despite defects in pleading, has in his submissions made out a cause of action.

    No, because the interference must be intentional and unjustified to constitute tortious interference with contractual relations.

    Court’s Reasoning

    The court reasoned that on a motion for summary judgment, courts should look beyond the pleadings to determine the true nature of the case. While a deficient pleading is not necessarily fatal, the plaintiff must still demonstrate a triable issue of fact. In this case, Alvord argued that New York Telephone tortiously interfered with its subcontract. The court acknowledged that intentional interference with contractual relations is a recognized tort. However, it emphasized that the interference must be intentional, not merely a consequence of negligence or incidental to a lawful purpose.

    The court found that Alvord failed to produce evidence that New York Telephone intentionally and unjustifiably interfered with Alvord’s work. The court stated, “There has never been any indication that an intentional tort was committed in the sense of an intention to harm plaintiff without economic or other lawful excuse or justification.” The court distinguished cases where a property owner may have a contractual obligation not to interfere, stating that such obligations arise from privity, which was absent here. The court concluded that without evidence of intentional interference, summary judgment was proper. As the court held, “Statements in a pleading shall be sufficiently particular to give the court and parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved and the material elements of each cause of action or defense.”

  • Felsen v. Sol Cafe Mfg. Corp., 24 N.Y.2d 682 (1969): Corporate Officer’s Liability for Inducing Breach of Contract

    Felsen v. Sol Cafe Mfg. Corp., 24 N.Y.2d 682 (1969)

    A corporate officer is not liable for inducing a breach of the corporation’s contract unless they engaged in independently tortious conduct or acted outside the scope of their corporate duties.

    Summary

    Felsen sued his former employer, Yonkers Child Care Association (the Association), for breach of contract and individual directors for tortiously interfering with the contract. Felsen claimed he was wrongly terminated. The Court of Appeals held that there was enough evidence for the jury to find the Association breached the employment contract. However, the court found no evidence that the individual directors engaged in independently tortious conduct and thus could not be held liable for inducing the breach. This case clarifies the circumstances under which a corporate officer can be held liable for inducing a breach of contract by the corporation.

    Facts

    Felsen was employed by the Yonkers Child Care Association. His employment contract had a defined term. The Association terminated Felsen’s employment before the contract expired. Felsen sued the Association for breach of contract and individual directors for tortiously inducing the breach.

    Procedural History

    The trial court found in favor of Felsen against both the Association and the individual directors. The Appellate Division reversed the judgment against the individual directors, finding insufficient evidence. The Court of Appeals modified the Appellate Division’s order by reversing the dismissal of the cause of action against the association, remitting it for consideration of the facts, and affirming the dismissal of the claim against the individual defendants.

    Issue(s)

    1. Whether there was sufficient evidence to support the jury’s verdict that the Association breached its employment contract with Felsen.

    2. Whether the individual directors of the Association could be held liable for tortiously inducing the breach of the employment contract.

    Holding

    1. Yes, because the evidence did not establish as a matter of law that Felsen’s termination was for cause.

    2. No, because there was no evidence that the individual directors engaged in independently tortious conduct.

    Court’s Reasoning

    The Court reasoned that the jury’s verdict on the counterclaim regarding Felsen’s insurance allowance use precluded the conclusion that this constituted cause for discharge as a matter of law. The court also noted that Felsen’s failure to appear at a hearing scheduled by the board could not be considered a breach of contract by Felsen, as the hearing was for his benefit and he could waive it.

    Regarding the individual directors, the Court relied on the principle that “[a] director of a corporation is not personally liable to one who has contracted with the corporation on the theory of inducing a breach of contract, merely due to the fact that, while acting for the corporation, he has made decisions and taken steps that resulted in the corporation’s promise being broken.” The Court further stated, quoting Buckley v. 112 Cent. Park South, Inc., that “[A] corporate officer who is charged with inducing the breach of a contract between the corporation and a third party is immune from liability if it appears that he is acting in good faith as an officer * * * [and did not commit] independent torts or predatory acts directed at another.” Because there was no evidence of independently tortious conduct by the directors, they could not be held liable.

  • Jack L. Inselman & Co. v. FNB Financial Co., 41 N.Y.2d 1078 (1977): Tortious Interference Requires Breach of Contract

    Jack L. Inselman & Co. v. FNB Financial Co., 41 N.Y.2d 1078 (1977)

    A claim for tortious interference with a contract requires proof that the defendant’s actions caused the contracting party to breach the contract.

    Summary

    Jack L. Inselman & Co. sued FNB Financial Company for tortious interference with a contract Inselman had with Guilford Industries. FNB had a factoring agreement with Guilford, guaranteeing certain accounts receivable. Inselman’s credit limit with Guilford was exhausted, and Guilford demanded cash payment for further deliveries, as per their contract. Inselman refused and claimed the contract was canceled. FNB then purchased the goods from Guilford. The New York Court of Appeals held that because Guilford did not breach its contract with Inselman, a necessary element for tortious interference was missing, and dismissed Inselman’s claim.

    Facts

    Guilford Industries and Inselman had contracts for the sale of fabric, with credit terms allowing Guilford to demand cash payment if Inselman’s credit limit was exhausted. Guilford had a factoring agreement with FNB, guaranteeing Guilford’s accounts receivable from credit-approved purchasers, including Inselman, up to $60,000. Inselman purchased $54,300.18 worth of fabric on credit, depleting most of its credit line. Guilford manufactured additional goods worth $76,273.75 but, because FNB refused to extend further credit approval to Inselman, Guilford demanded cash payment before delivery, consistent with the terms of their contract. Inselman refused to pay cash and insisted on immediate delivery on credit. Guilford rejected Inselman’s demand. Subsequently, FNB purchased the goods from Guilford.

    Procedural History

    Inselman sued FNB for tortious interference with its contract with Guilford. FNB counterclaimed for damages resulting from Inselman’s refusal to repurchase the goods and for outstanding invoices assigned to it by Guilford and another company. Special Term denied FNB’s motion for summary judgment dismissing Inselman’s complaint and for judgment on its counterclaims. The Appellate Division reversed, dismissed Inselman’s complaint, and granted judgment on FNB’s counterclaims. Inselman appealed to the New York Court of Appeals.

    Issue(s)

    Whether FNB’s refusal to extend further credit to Inselman, resulting in Guilford’s demand for cash payment as per their contract, and FNB’s subsequent purchase of the goods from Guilford, constituted tortious interference with the contract between Inselman and Guilford.

    Holding

    No, because a cause of action for tortious interference with a contract requires a breach of that contract by the other party, and no such breach occurred here.

    Court’s Reasoning

    The Court of Appeals reasoned that Guilford was entitled to demand cash payment from Inselman once Inselman exhausted its line of credit, as per the credit terms of their agreement. FNB was within its rights to refuse extending further credit and demanding payment of outstanding invoices. FNB’s subsequent purchase of the goods occurred after Inselman had repudiated the contract. The court emphasized that a breach of contract is an essential element of a claim for tortious interference, citing Israel v Wood Dolson Co, 1 NY2d 116, 120; Campbell v Gates, 236 NY 457; and Lamb v Cheney & Son, 227 NY 418. Because Guilford did not breach the contract, Inselman’s claim for tortious interference failed. The court affirmed the dismissal of the complaint and the granting of summary judgment on FNB’s counterclaims, as there was no dispute of liability. The court stated, “In order for the plaintiff to have a cause of action for tortious interference of contract, it is axiomatic that there must be a breach of that contract by the other party…a situation not here present. An essential element of the case against FNB, then, is a breach by Guilford. No such breach had occurred and thus the complaint was properly dismissed.”

  • Felsen v. Sol Cafe Mfg. Corp., 24 N.Y.2d 682 (1969): Stockholder’s Privilege to Interfere with Subsidiary’s Contract

    Felsen v. Sol Cafe Mfg. Corp., 24 N.Y.2d 682 (1969)

    A parent company, as the sole stockholder of a subsidiary, has a qualified privilege to interfere with the subsidiary’s contract with a third party if the interference is to protect its economic interest and does not involve malicious or illegal means.

    Summary

    Felsen, employed by Sol Cafe, sued Sol Cafe for breach of contract and Chock Full O’Nuts for malicious inducement of that breach after his termination. Chock Full O’Nuts, the sole stockholder of Sol Cafe, argued it had a privilege to interfere to protect its economic interest. The court held that Chock Full O’Nuts, as the sole stockholder, did have a qualified privilege to interfere with the contract, absent malicious intent or illegal means. The plaintiff failed to prove malice or illegal means, thus the claim against Chock Full O’Nuts should have been dismissed.

    Facts

    Felsen was employed by Sol Cafe as treasurer, comptroller, and general administrator under a written contract from May 1961 to December 1965. The contract included a salary, benefits, and severance pay if not renewed. Sol Cafe prepared instant coffee for sellers, including Chock Full O’Nuts. Chock Full O’Nuts bought Sol Cafe’s stock in August 1962. In January 1965, Chock Full O’Nuts informed Felsen his contract was terminated.

    Procedural History

    Felsen sued Sol Cafe for breach of contract and Chock Full O’Nuts for malicious inducement. Sol Cafe claimed discharge for cause. A jury found for Felsen against both. The Appellate Division affirmed. Chock Full O’Nuts appealed to the New York Court of Appeals.

    Issue(s)

    Whether Chock Full O’Nuts, as the sole stockholder of Sol Cafe, was privileged to interfere with Felsen’s contract with Sol Cafe, absent a showing of malice or illegal means.

    Holding

    Yes, because as the sole stockholder, Chock Full O’Nuts had an economic interest in Sol Cafe that it was privileged to protect, and Felsen failed to prove that Chock Full O’Nuts acted with malice or used illegal means.

    Court’s Reasoning

    The court recognized a qualified privilege for a stockholder to interfere with a company’s contract to protect their financial interest. The court cited Morrison v. Frank, 81 N.Y.S.2d 743, stating that a stockholder is privileged to interfere with a contract if their purpose is to protect their own interest and they do not employ improper means. The court noted the importance of identifying a particular interest that provides “just cause or excuse” for interference. It stated: “Procuring the breach of a contract in the exercise of equal or superior right is acting with just cause or excuse and is justification for what would otherwise be an actionable wrong.” (Knapp v. Penfield, 143 Misc. 132, 134-135). Since Felsen did not prove malice or illegal means by Chock Full O’Nuts, his claim for malicious inducement failed. The court found the evidence suggested a reasonable concern by Chock Full O’Nuts regarding the management of Sol Cafe. The court modified the order, dismissing the cause of action against Chock Full O’Nuts.