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Arzoomanian v. British Telecommunications, PLC

2007 WL 132983 (U.S. Dist. Ct. D. N.J. 2007) (Unpublished)

CONTRACTS; TORTUOUS INTERFERENCE —An individual who injects herself or himself into a negotiation representing that he or she is authorized to negotiate for one of the parties, has no cause to complain, whether under the theory of tortuous interference or that of interference with a prospective economic advantage, when the other negotiation party contacts the purported principal and then notifies the interjecting individual that it will no longer continue to negotiate with him or her.

A multinational telecommunications company reevaluated its voice, data, and computer technology expenditures and considered consolidating its many arrangements with suppliers into one primary subcontract. Over the course of several months the company negotiated with its suppliers and eventually signed a contract with a single supplier.

Prior to signing the contract, an individual interjected himself into the transaction by representing to the supplier that he was authorized to negotiate for the telecommunications company. The individual was the president of a smaller entity that provided software application assistance and staffing to the company. By virtue of this relationship, the individual learned that the provider was considering the aforementioned subcontracting of its voice and data communication activities. Specifically, a member of the company commented that if the individual could find a supplier that would save the company money and he would see that the supplier pay the individual. Significantly, this member was located in a separate office from the company’s executives who were leading the negotiations and the member was not empowered to bind the company in negotiations.

Nonetheless, the individual attempted to negotiate on behalf of the company for about two weeks. The supplier was skeptical of the individual’s authority and contacted the company. Upon learning from the company that that individual was not authorized to negotiate on behalf of the provider, the supplier notified the individual, in a writing, that it was no longer interested in working with him. Six months later, following a series of proposed offerings and rejections between the supplier and the company, the contract was signed.

Thereafter, the individual sued the company and the supplier alleging that he was owed a brokerage fee for assisting the supplier land the deal. The individual sued for tortuous interference with contractual relations, tortuous interference with prospective advantage, and quantum meruit. The provider was dismissed for lack of jurisdiction and the supplier moved for summary judgment.

The Court held a hearing on the motion, during which it heard oral testimony and reviewed extensive written communications between the parties. The Court held that the supplier was entitled to summary judgment on all three counts because there was no genuine issue of material fact.

First, the Court found no tortuous interference with contractual relations under New Jersey law because the individual could not prove that a contract existed. There was no “meeting of the minds” between the individual and the company; at best the individual possessed an opportunity to enter into a contract with the company due to its limited business contacts. As the Court noted, there was no term, no compensation, and the parties were not identified. Further, the Court held that had a contract existed, there was no tortuous interference because the individual could not prove the supplier’s actions were intentional or malicious. The supplier’s executives simply acted to fulfill their fiduciary obligations by attempting to ascertain the individual’s authority. Their actions in contacting the company and notifying the individual that they would not work with him was prudent decision making.

Second, the Court held that the individual could not prove the prima facie elements of tortuous interference with prospective economic advantage. There was no showing that the suppliers took any actions beyond a reasonably prudent investigation of the individual’s role. The Court set forth the elements of tortuous interference with prospective economic advantage as follows: 1) existing or reasonable expectation of economic advantage or benefit; 2) knowledge of the expectancy; 3) wrongful and intentional interference with that expectancy; 4) a reasonable probability that the anticipated economic advantage would have been received absent such interference; and 5) damages resulting from the interference. The Court noted that the supplier’s actions could not be characterized as “wrongful,” because the supplier terminated communication with the individual immediately upon learning of his lack of authority. Also, there was no reasonable probability that the individual would have received a commission because he was not the “efficient producing cause of the sale.” There were no terms negotiated between the individual and the supplier, the provider and the supplier had an ongoing business relationship prior to the individual’s involvement, the proposal the individual put forth was rejected, and the final contract was not signed until months later.

Third, the Court held that individual was not entitled to quantum meruit because the individual acted on his own initiative and at his own risk. The elements of quantum meruit required the individual to prove: 1) the performance of services in good faith; 2) the acceptance for those services by the entity to which they were rendered; 3) an expectation of compensation therefore; and 4) the reasonable value of the services. Here, the individual’s actions were not undertaken at the request of the supplier and the deal proposed by the individual was ultimately rejected by the company. Moreover, the individual’s misrepresentation of his authority was wrongful and illegal and thus unavailing of equitable relief.

Finally, the Court discussed the report of an expert witness offered by the individual. The report described the role of an “Intermediary” and discussed the usual compensation process. The Court observed that the report itself was correct, but in fact undermined rather than support the individual’s case.

In concluding remarks, the court elucidated the policies in favor of its ruling. It observed that denying summary judgment “would be a license for aggressive entrepreneurs to assert a broker relationship in a myriad of cases,” and that the better policy is to “foster basic contract law, and promote firm contractual relationships…. [Individuals] should negotiate at least basic terms of a contract up front, before any work is performed.” Thus, summary judgment on all three counts was granted in favor of the supplier.

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