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

New York Court of Appeals · Contracts

ContractsTortious interference with contractEconomic interest defenseCompetitiontortious interferenceexisting contractseconomic interest defensecompetitor

Facts

White Plains, a linen rental company, alleged that it had five-year exclusive service contracts with customers and that Cintas, a competitor, knowingly induced dozens of those customers to breach and switch to Cintas. White Plains sent Cintas a letter demanding that it stop soliciting and servicing White Plains' contract customers and enclosed a list of customers allegedly solicited improperly. Cintas denied knowledge of any contracts and continued its solicitation. The certified question assumed no previous economic relationship between Cintas and the breaching customers and focused on whether Cintas' profit-seeking competitive motive alone supplied an economic interest defense.

Issue

Does a generalized economic interest in soliciting business for profit constitute a defense to a claim of tortious interference with an existing contract when the alleged tortfeasor has no previous economic relationship with the breaching party? More specifically, can a defendant rely on the economic interest defense merely because it is the plaintiff's competitor seeking business?

Rule

In a claim for tortious interference with an existing contract, the plaintiff must show a valid contract with a third party, the defendant's knowledge of that contract, the defendant's intentional and improper procuring of a breach, and damages. The economic interest defense applies when the defendant acts to protect its own legal or financial stake in the breaching party's business, such as a stockholder, parent-subsidiary, creditor, or managerial relationship; mere status as the plaintiff's competitor or a generalized profit motive is not such a stake and does not justify inducing breach of an existing contract. Ordinary advertising and solicitation in the normal course do not by themselves constitute inducement of breach.

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In Cleveland, Orion Office Systems has a signed three-year exclusive copier service agreement with Lakefront Medical Group. After receiving a copy of the agreement from a departing employee, rival firm Summit Ridge Imaging offers to cover any early-termination fees if Lakefront cancels immediately and signs with Summit Ridge instead. Summit Ridge has never lent money to, owned part of, or managed Lakefront.

If Orion sues Summit Ridge for tortious interference with an existing contract, what is Summit Ridge's strongest likely argument, and how should a court rule under the majority's doctrine?

Explanation. The economic interest defense is limited to defendants protecting their own legal or financial stake in the breaching party's business, such as a stockholder, parent, creditor, or manager. Mere competitor status and a generalized desire for profit do not qualify. Here, Summit Ridge is only a competitor with no prior legal or financial relationship to Lakefront, so that defense is unavailable. Liability would still require Orion to prove the other elements, including knowledge, intentional and improper procurement of breach, and damages. (Derived from White Plains Coat & Apron Co. v. Cintas Corp. (n.d.).)