Tortious Interference and Breach of Fiduciary Duty

Defining Tortious Interference Claims

A claim for interference with an existing contract “requires five elements: (1) the existence of a contract; (2) the alleged wrongdoer’s knowledge of the contract; (3) intentional procurement of its breach; (4) without justification; and (5) damages” (Kallok v. Medtronic, Inc., 573 N.W.2d 356 (Minn. 1998)). The burden of proving justification is on the defendant. Inducing a party to breach its contract with you is the typical example.

Interference with a prospective business relationship is narrower. Under Gieseke v. IDCA, Inc., 844 N.W.2d 210 (Minn. 2014), you must prove a reasonable expectation of economic advantage, the defendant’s knowledge of it, intentional interference that is independently tortious or in violation of a state or federal statute or regulation, a reasonable probability that you would have realized the advantage absent the wrongful act, and damages. Conduct that is merely unfair does not qualify, and you must specifically identify the third party involved.

Elements of Breach of Fiduciary Duty

A breach of fiduciary duty claim “consists of four elements: duty, breach, causation, and damages” (Hansen v. U.S. Bank National Association, 934 N.W.2d 319 (Minn. 2019)).

First, you need to demonstrate the existence of a fiduciary relationship between you and the defendant. This can be a formal relationship, such as an attorney-client or trustee-beneficiary relationship, or an informal one, like a business partner or advisor. The key is to show that the defendant had a duty to act in your best interests.

Next, you must define the duty boundaries within that relationship. What specific obligations did the defendant have towards you? Were they responsible for managing your assets, providing confidential advice, or making decisions on your behalf? Clearly establishing these duty boundaries will help you prove that the defendant breached their fiduciary duty.

Proving Intent and Knowledge

Knowledge and intent are elements of tortious interference: you must show that the defendant knew of the contract or expectation and intentionally interfered with it. They are not listed among the four fiduciary duty elements above, although what a fiduciary knew can bear on whether a breach occurred.

In cases involving corporate espionage, for instance, you might need to prove that the defendant knew about the confidential information and intentionally misused it to gain an unfair advantage. This could involve showing that the defendant had access to confidential documents or trade secrets and used them to further their own interests.

To prove intent and knowledge, you can rely on circumstantial evidence, such as emails, phone records, or testimony from witnesses. You may also need to establish a pattern of behavior or a history of similar conduct to demonstrate the defendant’s mental state. By carefully assembling the evidence, you can build a strong case that the defendant possessed the requisite intent and knowledge to be held liable for interference.

Damages and Remedies Available

Establishing the extent of damages and available remedies is crucial in tortious interference cases, as it enables you to quantify the harm suffered and seek appropriate relief from the defendant. When calculating damages, you’ll need to demonstrate the economic losses you’ve incurred as a direct result of the defendant’s actions. This may include lost profits, business opportunities, or reputational harm. You may also be eligible for punitive damages, which are designed to punish the defendant for their deliberate disregard for the rights or safety of others.

To secure the desired remedies, you’ll need to present a strong case, supported by robust evidence and expert testimony. This may involve engaging financial experts to quantify your economic losses or hiring industry specialists to testify about the impact of the defendant’s actions on your business. You may seek injunctive relief, such as a court order to cease the interfering behavior or restore your business to its pre-interference state. By carefully documenting your damages and crafting a compelling case, you’ll be well-positioned to secure the remedies you need to recover from the harm inflicted by the defendant’s tortious interference.

Real-World Examples and Case Law

In Kallok v. Medtronic, Inc., 573 N.W.2d 356 (Minn. 1998), a competitor hired an employee it knew might be bound by noncompete agreements. The Minnesota Supreme Court held that if the noncompete is valid and the elements are established, interference by a third party is a tort for which damages are recoverable, and that consulting counsel on incomplete information did not justify the interference. The court also allowed recovery of the attorney fees the employer spent enforcing the agreements. Kallok predates Minn. Stat. § 181.988, which voids most covenants not to compete in agreements entered on or after July 1, 2023, so confirm that a noncompete is valid before building an interference claim on it.

In Gieseke v. IDCA, Inc., 844 N.W.2d 210 (Minn. 2014), the court recognized the claim for interference with prospective economic advantage and held that a projection of future business with unidentified customers, without more, is insufficient as a matter of law.

Frequently Asked Questions

Can a Tortious Interference Claim Be Brought Against a Former Employee?

You’re wondering if a former employee can be liable for tortious interference; the answer is yes, if they’ve violated former obligations or acted with competitive motives, such as soliciting clients or misusing confidential information.

Is a Fiduciary Duty Owed to a Non-Shareholder?

You should understand that a fiduciary duty is typically owed to shareholders, but you may wonder if it extends to non-shareholders. Generally, fiduciary scope is limited, and stakeholder rights aren’t automatically implied, requiring specific circumstances to apply.

Can a Breach of Fiduciary Duty Be Committed by an Agent?

You should know that an agent can breach fiduciary duty if they exceed authority limits, as their actions are bound by the principal’s scope of authority, and agent liability arises from violating these limits.

Do Fiduciary Duties Apply to Non-Profit Organizations?

You should know that fiduciary duties indeed apply to non-profit organizations, as they’re vital in non-profit governance, ensuring board members and executives uphold charitable obligations, acting in the best interests of the organization and its beneficiaries.

Can a Fiduciary Duty Be Waived or Released by Contract?

You should know that, generally, fiduciary duties can be waived or released by contract, but only to the extent permitted by law, and contractual limitations must be clear and unambiguous, with fiduciary exemptions explicitly stated.