Tortious Interference with Prospective Economic Advantage

A century-old claim that finally got a name and a test

Minnesota courts allowed this claim under shifting names for decades: interference with noncontractual business relationships, interference with prospective advantage, and interference with prospective contractual relations. Gieseke, 844 N.W.2d at 216-17. The underlying principle reaches back more than a century. Tuttle v. Buck, a 1909 case about a rival who opened a competing barbershop to drive the plaintiff out of business, did not use today’s label, but in Gieseke the court said of it: “Although we did not describe the claim as ’tortious interference with prospective economic advantage,’ we clearly recognized that the unjustified interference with a noncontractual business expectancy is actionable.” Gieseke, 844 N.W.2d at 215 n.3 (discussing Tuttle v. Buck, 107 Minn. 145, 119 N.W. 946 (1909)).

The defendant in Gieseke argued that the Minnesota Supreme Court had never formally recognized the tort. The court rejected that argument, reaffirmed its longstanding recognition of the claim, and held the cause of action “is a viable claim in Minnesota.” Gieseke, 844 N.W.2d at 216-17. What was new in 2014 was narrower: a settled name and, for the first time, a list of elements.

One naming point matters when you read the cases. “Tortious interference with a prospective business advantage” and “tortious interference with prospective economic advantage” are the same claim, governed by the same five elements. The varying phrases “describe the general contours of a single type of claim.” Gieseke, 844 N.W.2d at 216-17.

The dispute behind the decision

The case arose out of a dispute between two brothers, Michael Hogenson and Arthur Hogenson, who had jointly owned Standard Water Control Systems, Inc. since 1984. The brothers had a falling out in 1999 and reached an agreement to end their business relationship. Mike became the sole owner of Standard, and Arthur became the sole owner of Hogenson Properties, another family-owned business. John Gieseke, a friend of Arthur’s, was terminated from his employment with Standard. In 2000, Gieseke started a company, Diversified, to compete with Standard, and Arthur joined that business as a part owner. Mike then formed a new company, IDCA, Inc., to purchase Arthur’s 50 percent interest in Diversified in order to put Diversified out of business.

Gieseke brought the lawsuit on behalf of Diversified, claiming conversion of Diversified’s equipment, replevin, and tortious interference with prospective economic advantage. At trial in November 2011, Diversified presented testimony that IDCA converted its equipment (which prevented Diversified from doing business), changed its registered business address, settled a judgment for much less than it was worth, and obtained its tax returns. Diversified also presented testimony that it saw a dramatic decrease in business.

How the case came out

An advisory jury found that IDCA had tortiously interfered with Diversified’s prospective economic advantage and awarded $220,000. IDCA moved for judgment as a matter of law, arguing among other things that tortious interference with prospective economic advantage is not a recognized cause of action in Minnesota. The district court denied the motion. Gieseke, 844 N.W.2d at 214.

The Court of Appeals affirmed, holding that tortious interference with prospective economic advantage is a recognized cause of action in Minnesota and that the evidence was sufficient to support the jury’s verdict on liability and damages. Gieseke ex rel. Diversified Water Diversion, Inc. v. IDCA, Inc., 826 N.W.2d 816, 823, 832-33 (Minn. Ct. App. 2013), rev’d, 844 N.W.2d 210 (Minn. 2014).

The Minnesota Supreme Court then granted review and reversed. It reaffirmed that the tort is a viable claim in Minnesota, but it reversed the Court of Appeals and remanded “to the district court with instructions to enter judgment as a matter of law in favor of appellants on that claim.” The disposition line reads “Reversed and remanded.” Gieseke, 844 N.W.2d at 223. The only thing the court affirmed was the tort’s continued viability, not the judgment.

The reversal was claim-specific. Diversified’s separate conversion judgment was not appealed and was unaffected. Gieseke, 844 N.W.2d at 223 n.12. That is a practical reason to plead a free-standing claim alongside an interference claim: a recovery can survive even when the interference count fails.

The five elements

To recover for tortious interference with prospective economic advantage, you must prove five elements: (1) the existence of a reasonable expectation of economic advantage; (2) the defendant’s knowledge of that expectation of economic advantage; (3) that the defendant intentionally interfered with your reasonable expectation of economic advantage, and the intentional interference is either independently tortious or in violation of a state or federal statute or regulation; (4) that in the absence of the wrongful act of the defendant, it is reasonably probable that you would have realized your economic advantage or benefit; and (5) that you sustained damages. Gieseke, 844 N.W.2d at 219.

That formulation is still the law. The Minnesota Court of Appeals restated all five elements, including the independently-tortious requirement, in a published 2024 decision. Metropolitan Transportation Network, Inc. v. Collaborative Student Transportation of Minnesota, LLC, 6 N.W.3d 771 (Minn. Ct. App. 2024). The Eighth Circuit stated the same five elements as the governing test under Minnesota law in C.H. Robinson Worldwide, Inc. v. Traffic Tech, Inc., 60 F.4th 1144 (8th Cir. 2023).

A note on where the elements came from, because it is often reported wrong. The Gieseke court quoted Restatement (Second) of Torts § 766B (1979) as a description of the tort, but the elements are the court’s own holding, drawn from its earlier decisions in Witte Transportation, Wild v. Rarig, and United Wild Rice. On the point that matters most, Minnesota is stricter than the Restatement: where § 766B asks only whether the defendant acted “intentionally and improperly,” Minnesota requires that the intentional interference be “either independently tortious or in violation of a state or federal statute or regulation.” Gieseke, 844 N.W.2d at 217-19. Note also that § 766B is a freestanding section on prospective contractual relations, not a subsection of § 766, which governs inducing breach of an existing contract.

You must name the third party

This is the requirement that decided Gieseke, and the requirement Minnesota courts have used since to end these claims as a matter of law. A plaintiff “must specifically identify a third party with whom the plaintiff had a reasonable probability of a future economic relationship,” and “a plaintiff’s projection of future business with unidentified customers, without more, is insufficient as a matter of law.” Gieseke, 844 N.W.2d at 221-22.

Diversified’s theory was that it had served roughly 100 customers a year and expected that level of business to continue. It named no specific existing or prospective customer for whom it expected future work, so its evidence of a prospective economic advantage was insufficient as a matter of law. Gieseke, 844 N.W.2d at 222. The burden is yours: “The plaintiff bears the burden to demonstrate the existence of a reasonable expectation of an economic advantage.” Gieseke, 844 N.W.2d at 220.

How much identification is enough remains partly open. The court did not decide whether every third party you seek damages for must be named, but it warned that “[t]he failure to specifically identify all the third parties, however, may limit a plaintiff’s damages.” Gieseke, 844 N.W.2d at 222 n.11. Practically, what you cannot identify may limit what you can recover.

What does not count as damages

Two damages theories that feel natural to an aggrieved owner both failed in Gieseke. Diversified argued it lost future warranty work from existing customers but did not identify any of those customers, and the court called the alleged damages speculative. It added that “general damage to Diversified’s business reputation is insufficient to establish that an expectation of economic advantage was damaged.” Gieseke, 844 N.W.2d at 222. A drop in revenue and a bruised reputation, without an identified lost relationship, will not carry the claim.

The interference must be independently tortious or unlawful

Aggressive competition is not this tort. “To ensure that fair competition is not chilled, a claim for tortious interference with prospective economic advantage must be limited to those circumstances in which the interference is intentional and independently tortious or unlawful, rather than merely unfair.” The court explained why it drew the line there: “The requirement of independently tortious or unlawful conduct adequately apprises potential defendants of the conduct that will subject them to liability, but ensures that businesses may rigorously compete with one another without fear of liability, as long as they do so lawfully.” Gieseke, 844 N.W.2d at 218-19.

Read element three as the disjunctive test it is. Interference that violates a state or federal statute or regulation satisfies the element even without proof of a separate tort. Gieseke, 844 N.W.2d at 219.

Carelessness is not enough either. Minnesota has “never allowed a recovery for negligent wrongful interference with a business relationship” and instead requires the plaintiff to show “wrongful” or “unlawful” interference. Gieseke, 844 N.W.2d at 218-19.

This claim versus interference with an existing contract

Business owners routinely conflate the two interference torts. A cause of action for “interference with a contract protects an interest in the security of contractual relationships,” while a cause of action for “interference with business relationships protects an interest in the reasonable expectation of economic advantage.” And “the law affords greater protection to existing contractual relationships, than to prospective business relationships.” Gieseke, 844 N.W.2d at 218. If the relationship interfered with was a signed contract, the separate claim for interference with an existing contract governs that relationship, and Minnesota gives contractual relationships greater protection. The two claims protect different interests, so one dispute can involve both.

What Gieseke left open

Because the claim failed on the reasonable-expectation and damages elements, the court did not address IDCA’s challenge to the sufficiency of the evidence on the defendant’s knowledge of the expectation or on causation. Gieseke, 844 N.W.2d at 223 n.14. Gieseke therefore settles nothing about what proof those two elements require.

Courts applying Gieseke

Minnesota and federal courts applying Minnesota law have applied Gieseke’s five elements ever since it was decided on March 26, 2014. The Minnesota Court of Appeals reaffirmed both the five-element test and the requirement that a plaintiff identify a specific third party in Metropolitan Transportation Network, Inc. v. Collaborative Student Transportation of Minnesota, LLC, 6 N.W.3d 771 (Minn. Ct. App. 2024), and the Eighth Circuit recited the same five elements as Minnesota’s governing test in C.H. Robinson Worldwide, Inc. v. Traffic Tech, Inc., 60 F.4th 1144 (8th Cir. 2023). No Minnesota Supreme Court decision since 2014 has revisited this tort.

Two decisions from the summer of 2014 remain useful illustrations of how the elements fail in practice.

Peterson v. Northern Gaul Properties, Inc.

Peterson v. Northern Gaul Properties, Inc., No. A13-2161 (Minn. Ct. App. June 30, 2014), is an unpublished Minnesota Court of Appeals opinion, filed June 30, 2014, affirming the Anoka County District Court; its caption states that the opinion “will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2012).” In 2020 the Legislature deleted that statutory restriction on citing unpublished court of appeals opinions, effective August 1, 2020, and applicable to cases filed at the Minnesota Court of Appeals on or after that date. 2020 Minn. Laws ch. 82, § 3. The appellate rule amended effective that same date provides that “[n]onprecedential opinions and order opinions are not binding authority except as law of the case, res judicata or collateral estoppel, but nonprecedential opinions may be cited as persuasive authority.” Minn. R. Civ. App. P. 136.01, subd. 1(c). Treat Peterson as persuasive, not binding.

Elizabeth Peterson and her then husband formed a corporation, Holiday Recreational Industries, Inc., to sell recreational vehicles. Elizabeth’s mother-in-law was the sole shareholder of HRI and the title owner of the real property where HRI did business. Ownership of HRI and title to the real property were later transferred to Elizabeth’s daughter, Patricia Peterson. Elizabeth and her husband operated the dealership but did not own its assets. After the couple divorced, Elizabeth sued Patricia and HRI over ownership of HRI and the real property. Patricia conveyed the real property by deed to RV Princess, LLC, an entity she had formed. Patricia was found in contempt of court and ordered to transfer ownership of HRI to Elizabeth. Elizabeth had possession of the dealership property, but Patricia had surrendered HRI’s dealer license, which made it impossible for Elizabeth to continue doing business as HRI. Patricia prevailed on appeal and regained control of the business; she alleged that no assets of HRI remained.

Foreclosure proceedings began on some of the real property, and one of the encumbrances was transferred to Northern Gaul Properties, Inc. Northern Gaul redeemed and was issued a certificate of redemption by the sheriff, then began a Torrens proceeding subsequent for a new certificate of title. RV Princess contested the redemption as improper. The appellants, Patricia Peterson, Mark Pehlke, Holiday Recreational Industries, Inc., and RV Princess, LLC, sued alleging fraud, conversion, unjust enrichment, accounting, intentional infliction of emotional distress, tortious interference with a prospective business advantage, and defamation. On the interference claim, they alleged that false statements were made about the title and future ownership of the dealership real property while it was being marketed for sale: specifically, that a prospective purchaser was told there were “title problems” with the property and that no prospective purchaser should buy from Patricia.

The court of appeals applied the third Gieseke element, which requires interference that is either independently tortious or in violation of a state or federal statute or regulation, and reviewed the district court’s determination that the alleged statements were not independently tortious. Peterson, slip op. at 12. The court observed that the appellants’ briefing did not clearly indicate the legal theory on which they claimed the statements were independently tortious: at times they claimed the statements were defamatory, and at oral argument they seemed to contend that the statements amounted to a slander of title. Peterson, slip op. at 12. Neither theory worked. Statements about property rather than about a person cannot be defamatory, true statements cannot be the basis for either slander of title or defamation, and an actionable misrepresentation must involve a past or present fact. Peterson, slip op. at 12-13.

Applying those rules to the statements at issue, one of which concerned an ongoing foreclosure, the court wrote:

The “title problems” which Rick Aberle allegedly represented to Todd Olson were both the existence of liens and an ongoing mortgage foreclosure that had once been successfully challenged, but was recommenced in 2007. In context, the claim of “title problems” was not false. Although appellants claim the existence of equity in the property above the lien totals, they neither allege nor offer any evidence of statements by any respondent that the property had no equity. Rick Aberle’s alleged statement that there were “title problems” is true.

Rick Aberle’s other statement, that Northern Gaul would own the property in the future, was also not independently tortious. First, it was a statement of present intention, rather than one of fact. . . . Second, Northern Gaul later redeemed the property from the foreclosure and obtained a new certificate of title for the real property. . . . For both reasons, this alleged statement was not tortious. Because neither of Rick Aberle’s alleged statements were independently tortious, appellants’ tortious-interference claim fails as a matter of law.

Peterson, slip op. at 13-14 (citations omitted).

The court added an alternative ground for affirmance:

Even if we were to hold that Rick Aberle’s alleged statements were independently tortious, appellants would still have to carry their burden on the fourth element, namely, “in the absence of the wrongful act of defendant, it is reasonably probable that plaintiff would have realized his economic advantage or benefit.” There is no record evidence that Todd Olson or anyone else would have purchased the property after an independent examination of title revealed the ongoing foreclosure proceedings, regardless of whether Rick Aberle had disclosed those title issues.

Peterson, slip op. at 14 (citations and internal quotation marks omitted).

The court then named the fourth element for what it is: but-for causation. The buyer’s only record testimony was an affidavit stating that “nothing derogatory about Patricia Peterson was ever discussed,” and the purchase agreement contained a standard title-examination contingency allowing the purchaser to rescind and recover his earnest money if the seller could not provide reasonable assurances of marketable title. The appellants presented no evidence that the alleged statements were the “but-for” cause of the buyer’s decision not to purchase. Peterson, slip op. at 14. If an ordinary contract term or a routine title search would have produced the same outcome, the causal chain breaks.

Ahlers v. CFMOTO Powersports, Inc.

Ahlers v. CFMOTO Powersports, Inc., No. 13-1221 (DSD/JSM) (D. Minn. June 9, 2014), is an unpublished federal district court order applying Minnesota law, so it is persuasive only; the controlling authority for the elements it recites is Gieseke.

An employment dispute arose when Ahlers was terminated from her employment at CFMOTO. CFMOTO alleged that after her termination she accessed company email and computer systems and drafted emails to business partners and dealers falsely claiming that CFMOTO had unsafe products, was unfair in its dealings, and was in violation of various federal and state safety laws. Ahlers filed the complaint on employment claims. On September 10, 2013, CFMOTO counterclaimed, alleging defamation, tortious interference with contract, tortious interference with existing and prospective economic advantage, breach of employee duties to employer, and a violation of the Computer Fraud and Abuse Act. Ahlers moved to dismiss the counterclaims, and the court granted the motion in part. Ahlers, slip op. at 1-2, 12.

The court dismissed the prospective-advantage counterclaim on the pleadings. It made no finding about the severity of her conduct, and severity is not an element of the tort. The defect was that CFMOTO alleged only intent:

[A] claim for tortious interference with prospective advantage may exist where such interferences “induc[es] or otherwise caus[es] a third person not to enter into or continue the prospective relation or (b) prevent[s] the other from acquiring or continuing the prospective relation.” . . . CFMOTO points to no authority to suggest that mere intent to interfere with prospective economic advantage gives rise to a cause of action. . . . As a result, dismissal is warranted.

Ahlers, slip op. at 8 (citations and internal quotation marks omitted).

The same order dismissed the companion tortious-interference-with-contract counterclaim on the identical defect: CFMOTO “pleaded only that Ahlers intended to procure a contract’s breach, not that she was successful in so doing.” Ahlers, slip op. at 7. For either interference claim, you have to plead and prove that the interference actually worked.

What this means for your business

If you are evaluating a claim, three questions decide most of it. Can you name the customer, prospect, or deal you lost, rather than pointing to a general decline in business? Can you identify conduct that was independently tortious or that violated a statute or regulation, rather than conduct that was merely aggressive or unfair? And can you show the relationship would probably have closed but for that conduct, with proof that survives the other side’s ordinary contract terms and independent diligence? If any of the three is missing, Gieseke and the decisions applying it show the claim failing as a matter of law.