Like the related tort of interference with contractual relations,1 the claim of tortious interference with a prospective business relationship is based upon recognition that a person’s business relationships are a property interest and, as a result, are entitled to protection from unjustified tampering.2 The difference between the two torts is that tortious interference with contractual relations affords greater protection to the plaintiff because the contractual relationship between the contracting parties takes legal precedence over the defendant’s conflicting right to compete.3
It can be said that the extent of outside interference that is permissible is inversely related to the legal enforceability of the business relationship that is interfered with. Thus, in the case of tortious interference with a prospective business relationship, where there is no enforceable contractual business relationship, but there is only an expectation of future economic gain, the rights of others are allowed greater scope, including the rights of others to compete. The actionable limit of the right to compete comes, however, when the outside competition is malicious and motivated by ill will, and then parties with an expectation of future economic gain can seek damages if this expected relationship is interfered with.4
Illinois courts generally recognize four elements that must be proven in order to prevail on a claim for tortious interference with a potential business relationship5: (1) plaintiff had a reasonable expectation of entering into a valid business relationship; (2) defendant knew of plaintiff’s expectancy; (3) defendant’s purposeful interference that prevents the plaintiff’s legitimate expectancy from ripening into a valid business relationship; and (4) resulting damages to plaintiff.6
In order to establish the first element of tortious interference with a potential business relationship, a reasonable expectation of entering into a valid business relationship, the plaintiff must identify specific persons, other than the person who is accused of tortious interference,7 who actually considered entering into a business relationship with the plaintiff, but did not as a result of defendant’s interference. It is not enough to just produce evidence of a past relationship with the third person.8
In the recent case of Chicago’s Pizza, Inc. v. Chicago’s Pizza Franchise Limited USA, a case involving pizza chain owners who contended that the advertisements and trade practices of a competing and similarly named pizza restaurant intentionally misled former and potential customers, the court found that plaintiff had sufficiently pled potential business relationships by naming six former or potential customers of plaintiff’s pizza restaurants, out of a large pool of potentially affected customers, who each stated that they had been misled by defendant’s advertising and trade practices into placing orders with defendant’s pizza restaurant when intending to order from plaintiff.9 (However, the court later found that plaintiff had failed to establish its damages, in part because each of the specifically named potential customers had become customers of the plaintiff after the confusion between the pizza restaurants had been resolved.)10
A potential business relationship is sufficiently established by evidence that the plaintiff was in the preliminary stages of negotiation with the third party,11 or by demonstrating that a terminable, at-will contractual relationship existed with the third party.12 Illinois courts are careful to limit the scope of these relationships to the business arena, however. The expectation of a future economic advantage is not sufficient if it is based upon a governmental, rather than a business, relationship.13
Because less protection is provided to a potential business relationship, as opposed to a contractual relationship, a plaintiff must allege more than just interference in order to state a claim for tortious interference with a potential business relationship – the “intentional and malicious” nature of the defendant’s interference must also be alleged. 14 This requirement should be viewed in light of the defendant’s privilege of competition. In the context of interference with a potential business relationship, commercial competitors are privileged to interfere in each other’s prospective business relationships, as long as their intent, at least in part, is to further their business, and “not solely motivated by spite or ill will.”15 However, the Illinois Supreme Court has noted that interference that employs fraud, deceit, intimidation, or deliberate disparagement is not protected by a privilege to compete, and thus, qualifies as sufficient “purposeful interference.”16
The existence of damages must also be specifically pled in order to state a claim for tortious interference with a potential business relationship. Alleging potential damages that may occur at some time in the future is insufficient to state a claim.17
Aside from the privilege of competition which protects interference that is not solely motivated by ill will, other defenses are available to the defendant that can defeat a claim of malicious interference. For example, agents or corporate officers can argue as an affirmative defense that they had a duty to protect the interests of their principal, and that any interference was in service of this duty. 18 Similarly, interference is considered justified where it occurs to protect one’s financial interest.19
1 A similar tort, tortious interference with a valid business relationship or expectancy, pertains to interference with relationships that are not based upon contract, but rather are pre-existing at the time of interference, such as at-will employment. See Dowd and Dowd, Ltd. v. Gleason, 352 Ill.App.3d 365, 816 N.E.2d 754 (1st Dist., 2004).
2 Belden Corp. v. InterNorth, Inc., 90 Ill.App.3d 547, 551, 413 N.E.2d 98, 101 (1st Dist., 1980).
4 Id. at 552, 102.
5 The elements of tortious interference with a potential business relationship vary from state to state. See, e.g. United Educational Distributors, LLC v. Educational Testing Service, 350 S.C. 7, 14, 564 S.E.2d 324, 328 (S.C.App., 2002) (stating that the elements of the tort of intentional interference with prospective contractual relations under South Carolina law are (1) intentional interference with plaintiff’s potential contractual relations, (2) for an improper purpose or by improper methods, and (3) causing injury to the plaintiff).
6 Fellhauer v. City of Geneva, 142 Ill.2d 495, 511, 568 N.E.2d 870, 878 (Ill., 1991).
7 Illinois courts have held that a defendant cannot interfere with its own prospective business relationship with the plaintiff. Citylink Group, Ltd. v. Hyatt Corp., 313 Ill.App.3d 829, 840, 729 N.E.2d 869, 877 (1st Dist., 2000).
8Intervisual Communications, Inc. v. Volkert, 975 F.Supp. 1092, 1103 (N.D.Ill., 1997) (applying Illinois law).
9 893 N.E.2d 981, 993 (1st Dist., 2008).
10 Id, at 995.
11 Clarage v. Kuzma, 342 Ill.App.3d 573, 582, 795 N.E.2d 348, 357 (3rd Dist., 2003).
12 Storm & Associates, Ltd. v. Cuculich, 298 Ill.App.3d 1040, 1052, 700 N.E.2d 202, 210 (1st Dist., 1998); see also, Anderson v. Anchor Organization for Health Maintenance, 274 Ill.App.3d 1001, 1013, 654 N.E.2d 675, 685 (1st Dist., 1995) (finding third-party plaintiff stated a cause of action for tortious interference with a prospective economic advantage where third-party plaintiff had entered into an attorney-client relationship and expected to earn substantial legal fees from said relationship until third-party defendant induced the clients to discharge her as their attorney).
13 Village of Itasca v. Village of Lisle, 352 Ill.App.3d 847, 858, 817 N.E.2d 160, 171 (2nd Dist., 2004).
14 Small v. Sussman, 306 Ill.App.3d 639, 649, 713 N.E.2d 1216, 1224 (1st Dist., 1999) (holding that alleging that defendant’s conduct was “intentional or with reckless indifference” was insufficient).
15 Imperial Apparel, Ltd. v. Cosmo’s Designer Direct, Inc., 227 Ill.2d 381, 392, 882 N.E.2d 1011, 1019 (Ill., 2008).
17 United Laboratories, Inc. v. Savaiano, 2007 WL 4557095 at *7 (N.D.Ill., 2007) (applying Illinois law).
18 IK Corp. v. One Financial Place Partnership, 200 Ill.App.3d 802, 818, 558 N.E.2d 161, 172 (1st Dist., 1990) (superseded by statute as to other holdings).
Lauryn E. Parks received her JD from the University of Michigan Law School and is an associate with Mom-kus McCluskey, LLC practicing in the area of commercial litigation.