Minnesota law has long recognized a cause of action for tortious interference with contract (“TI”). Rooted in a principle of fairness, this doctrine seeks to ensure that once two parties form a binding contract, no third party may induce one of them to breach the agreement for its own benefit, unless it can demonstrate a legally justified basis for its conduct. While this cause of action offers a potent remedy for those harmed by wrongful interference, Minnesota courts also strive to protect legitimate business competition. As a result, courts impose a demanding standard on plaintiffs seeking relief under this tort, ensuring that legal redress does not chill healthy economic activity.
Historical Overview and Conceptual Foundations
The common law tradition of tortious interference can be traced back to early English decisions, later adopted in American jurisdictions. At its core, this tort balances the sanctity of contractual relationships against the freedom to compete and innovate. Minnesota courts have maintained that if an individual or entity endeavors to disrupt an ongoing contract without justification, it may be liable for the ensuing losses.
While Minnesota recognizes tortious interference with both existing contracts and prospective business relationships, this article focuses on tortious interference with contract. A party asserting this claim must show that a valid contract existed, the defendant knew of that contract, the defendant intentionally procured a breach, the breach was unjustified, and the plaintiff was damaged.
The 5 Elements of Tortious Interference with Contract
1. Existence of a Valid Contract
A threshold question is whether the plaintiff can prove the existence of a valid, enforceable contract. Minnesota courts have declined to protect mere understandings or agreements that remain contingent. For instance, where a condition precedent has not been met, no contractual obligations arise, rendering a tortious interference claim untenable. In First Union Mgmt., Inc. v. Kmart Corp., No. C1-93-2258, 1994 WL 385645 (Minn. Ct. App. July 26, 1994), the court held that the plaintiff could not bring a TI claim because contractual obligations had never ripened into a binding agreement.
2. Knowledge of the Contract
The defendant must have actual or constructive knowledge of the contract. While actual knowledge is most common, constructive knowledge may suffice if circumstances would lead a reasonable person to inquire and discover the contractual relationship. This element ensures that defendants are not held liable for unwittingly disrupting an agreement they had no reason to suspect.
3. Intentional Procurement of a Breach
Perhaps the most litigated element is whether the defendant’s actions caused or procured the breach. Courts do not require proof of malice but do require a clear nexus between the defendant’s conduct and the breaching party’s decision to break its contractual obligations. In Auto Servs. Fin., LLC v. Frugal Indus., Inc., No. C7-01-6811, 2003 WL 23816530 (Minn. Dist. Ct. Aug. 13, 2003), the plaintiff’s claim failed because it could not show that the defendant directly caused the breach. Merely coinciding with a breach in time—absent evidence of inducement—falls short of the procurement requirement.
Case law emphasizes that a party must do more than profit incidentally from a breach. Instead, the interference must be both intentional and targeted. In Norwest Lighting, Inc. v. Viking Elec. Supply, Inc., No. C8-01-851, 2002 WL 77072 (Minn. Ct. App. Jan. 22, 2002), the court deemed timing insufficient to establish intentional procurement where a supplier’s termination of a contract happened near the time the defendant entered the market. Plaintiffs must demonstrate specific conduct linking the defendant to the breach.
4. Lack of Justification
Even if a defendant intentionally procures a breach, it may avoid liability by showing a valid justification for its conduct. Minnesota courts have consistently viewed this as a question of whether the defendant’s actions were “reasonable under the circumstances.” In Sysdyne Corp. v. Rousslang, 860 N.W.2d 351 (Minn. 2015), the Minnesota Supreme Court clarified that justification involves evaluating whether the defendant was safeguarding a legally protected interest or relying on counsel’s advice in good faith.
A defendant may raise various justifications:
- Protecting a Legal Right or Interest: If a defendant is party to its own contract or business arrangement that risks impairment by another’s performance of the disputed contract, that interest can justify its actions.
- Legitimate Economic Competition: When a defendant competes lawfully for customers or markets, courts will ordinarily not penalize vigorous but honest rivalry. The interference must amount to an impermissible act—such as fraud, defamation, intimidation, or other unlawful tactics—to lose the benefit of this defense.
- Reliance on Counsel: If a defendant sought legal advice and acted upon it reasonably, this factor may support a finding that the defendant’s conduct was justified under the circumstances.
The Minnesota Supreme Court has occasionally declined to find justification if the interfering party used unlawful, improper, or deceitful means. In Kjesbo v. Ricks, 517 N.W.2d 585 (Minn. 1994), the defendant used a strawman arrangement to thwart a contract involving farmland, leading the court to hold that no legitimate justification existed for such a scheme. Likewise, Johnson v. Radde, 293 Minn. 409, 196 N.W.2d 478 (1972), stands for the general principle that most affirmative defenses in TI cases turn on whether the interfering party’s conduct amounts to an otherwise permissible business activity or crosses a line into unlawfulness.
5. Damages Resulting from the Breach
Finally, a plaintiff must prove actual damages resulting from the breach. Minnesota courts generally permit recovery of both direct and consequential damages that are the natural, foreseeable result of the induced breach. A court may measure these damages similarly to traditional contract damages, taking into account lost profits, costs incurred by the plaintiff in mitigating the breach, and any other losses that flow directly from the disrupted contractual relationship.
Representative Cases and Illustrations
Qwest Comms. Co., LLC v. Free Conferencing Corp.
Though decided in federal court, Qwest Comms. Co., LLC v. Free Conferencing Corp., 905 F.3d 1068 (8th Cir. 2018), is instructive. Qwest, a long-distance carrier, sued Free Conferencing Corp. (FC), alleging it knowingly induced a local exchange carrier to bill Qwest for calls outside the scope of permissible charges. The Eighth Circuit upheld the district court’s finding of tortious interference, reasoning that FC knew the billing arrangement violated the contract and actively profited from the breach. The court also determined that FC had no valid justification. This decision underscores how foreseeability of damages, knowledge of the contract, and the intentional nature of inducement can combine to yield liability under Minnesota’s tortious interference principles.
Harman v. Heartland Food Co.
In Harman v. Heartland Food Co., 614 N.W.2d 236 (Minn. Ct. App. 2000), the Minnesota Court of Appeals underscored the importance of distinguishing bona fide competition from tortious interference. The court stated that a defendant with a “legitimate economic interest” could justify actions that might otherwise appear to induce a breach, provided the conduct did not involve fraud, coercion, or other improper means. This clarification aligns with the overarching view that Minnesota courts will not penalize healthy competitive behavior but will intervene if a third party resorts to wrongful tactics.
Practical Implications for Litigants
From a strategic perspective, plaintiffs must carefully structure their TI allegations:
- Establish a Clear Chain of Causation: Plaintiffs should document how the defendant persuaded, induced, or otherwise drove the contracting party to breach. Vague or circumstantial claims often fail.
- Anticipate Justification Defenses: Defendants frequently assert legitimate business interests. Plaintiffs must be ready to show that the defendant used improper means or had no genuine right to interfere.
- Calculate Damages with Precision: Well-pleaded damages require more than an estimate. Courts look for evidence of foreseeability and actual harm attributable to the breach.
Defendants, on the other hand, should:
- Identify a Valid Justification: Demonstrate a credible economic or contractual right. Engage counsel early to document the legitimacy of your actions.
- Distinguish Fair Competition from Unlawful Interference: Courts do not punish aggressive but lawful competition. Show that your conduct falls within permissible competitive boundaries.
- Minimize Exposure through Transparency: If you discover a competitor’s contractual arrangement, be mindful of steps you take that could induce a breach. Substantial planning or confidential agreements with the other party may invite closer judicial scrutiny.
Developments and Recent Trends
While the basic elements of tortious interference with contract remain constant, Minnesota courts continue to refine application of the justification defense and the precise standards for showing inducement. Appellate courts have remained consistent in stressing that a defendant’s knowledge and active role in procuring a breach are crucial. Moreover, the reliance on counsel defense, first articulated in Sysdyne, continues to play a prominent role in determining justification.
No major legislative amendments have altered Minnesota’s common law approach in this arena. However, practitioners should note that federal regulatory frameworks—especially in heavily regulated industries like telecommunications—can influence whether a party has the right to charge or collect certain fees, as illustrated in Qwest.
Key Cases
A party cannot interfere with its own contract. Bouten v. Richard Miller Homes, Inc., 321 N.W.2d 895 (Minn. 1982).
A defendant cannot be held liable for tortious interference unless it is shown to have caused the breach; coincidental timing or indirect influence is insufficient. Auto Servs Fut., LLC v. Frugal Indus., Inc., No. C7-01-6811, 2003 WL 23816530 (Minn. Dist. Ct. 8/13/2003).
A party cannot assert tortious interference if no evidence shows that the alleged interference caused the breach. Community Ins. Agency, Inc. v. Kemper, 426 N.W.2d 471 (Minn. Ct. App. 1988).
If a condition precedent to a contract is not fulfilled, no contractual obligations exist to be interfered with. Cunningham Implement Co. v. Deere & Co., No. C7-95-1148, 1995 WL 697555 (Minn. Ct. App. 11/28/1995).
Tortious interference cannot exist when there is no valid contract due to an unfulfilled condition precedent. First Union Mgmt., Inc. v. Kmart Corp., No. C1-93-2258, 1994 WL 385645 (Minn. Ct. App. 7/26/1994).
A legitimate economic interest, such as a party’s own business contracts, can justify interference unless improper means are used. Harman v. Heartland Food Co., 614 N.W.2d 236 (Minn. Ct. App. 2000).
Justification is a common affirmative defense in tortious interference, often requiring proof that the defendant acted to protect a legitimate interest without improper means. Johnson v. Radde, 293 Minn. 409, 196 N.W.2d 478 (1972).
Using improper means to manipulate contractual obligations, such as through deceitful schemes, negates justification for interference. Kjesbo v. Ricks, 517 N.W.2d 585 (Minn. 1994).
A defendant cannot be held liable for tortious interference unless its actions directly caused the breach, and mere coincidence is insufficient to establish causation. Norwest Lighting, Inc. v. Viking Elec. Supply, Inc., No. C8-01-851, 2002 WL 77072 (Minn. Ct. App. 1/22/2002).
Tortious interference liability arises when a defendant knowingly induces a breach of contract without justification, causing foreseeable damages to the plaintiff. Qwest Comms. Co., LLC v. Free Conferencing Corp., 905 F.3d 1068 (8th Cir. 2018).
Justification in tortious interference cases requires showing that the defendant acted reasonably under the circumstances, which often depends on factual determinations. Sysdyne Corp. v. Rousslang, 860 N.W.2d 351 (Minn. 2015).
Conclusion
Tortious interference with contract in Minnesota offers a decisive avenue of relief for parties harmed by a third party’s wrongful disruption of a binding agreement. The law’s underlying policy is to protect contractual stability without hampering fair competition. Plaintiffs must therefore meet the high burden of demonstrating an existing contract, the defendant’s knowledge, intentional inducement of a breach, lack of justification, and resulting damages. Defendants who can show a legitimate economic interest, reliance on counsel, or other permissible reasons for their conduct may prevail.
This carefully balanced approach ensures that contractual obligations are respected, while business actors remain free to vie for market advantages using lawful methods. Minnesota courts strive to maintain that equilibrium, upholding the principle that contracts should not be broken through improper means, yet also recognizing that healthy competition is essential to economic growth.
Credits: Special thanks to attorney Joseph Pull for the inspiration for this article from Mr. Pull’s article, The ABCs of TI: Understanding Tortious Interference with Contract, published in the Minnesota Bench & Bar, April, 2019.
