General Messenger Service, Inc. v. Corporate Express, Inc.

97-5245 (U.S. Dist. D. N.J. 1998) (Unpublished)
  • Opinion Date: June 3, 1998

CONTRACTS; CONFIDENTIALITY; TORTIOUS INTERFERENCE—The Court analyzes the tort of intentional interference with prospective economic advantage where allegations are made that a confidentiality agreement was breached, but the aggrieved party only had a month-by-month contract with the customer that it lost.

A very large courier delivery service negotiated with the intention of acquiring a relatively small courier company. In connection with these negotiations, the parties entered into a confidentiality agreement which provided that the potential acquirer would not use the smaller company’s confidential information to the detriment of the smaller company for a period of two years. The smaller company alleged that it then disclosed certain confidential business information, particularly about its relationship with its largest customer. The smaller company also alleged that after negotiations ended without an agreement, the potential acquirer approached that customer and obtained the work that the smaller company had been performing for the customer. It further alleged that the larger company was able to underbid it through the use of the confidential information and by improperly characterizing its own drivers as “independent contractors” as opposed to employees. Characterizing drivers as independent contractors purportedly results in substantial tax savings that would have allowed the larger company to underbid the complaining company. The smaller company also made substantially the same allegations with respect to the luring away of another significant customer.

The complainant made a claim for unfair competition, two claims for tortious interference with prospective economic advantage, and a claim for breach of the confidentially agreement. The potential acquirer sought to have the complaint dismissed for failure to state a claim.

Under New Jersey Law, the five elements of a tortious interference claim are: (1) the plaintiff’s existing or reasonable expectation of economic benefit or advantage; (2) the defendant’s knowledge of that expectancy; (3) the defendant’s wrongful, intentional interference with that expectancy; (4) the reasonable probability that the plaintiff would have received the anticipated economic benefit in the absence of the interference; and (5) damages resulting from the defendant’s interference. With respect to the smaller company’s reasonable expectation, the Court rejected the larger company’s argument that the lack of an existing contract barred the smaller company’s claims. The larger company then argued that the smaller company had no legitimate or reasonable expectation of a prospective relationship because its contract with its major customer was a short-term, month-by-month agreement and that the customer placed its work out for bid. The Court rejected those arguments, stating that just because the renewal was not guaranteed was not dispositive. “Certainty of economic advantage need not be shown; reasonable probability of that advantage, absent interference, suffices.” With respect to the requirement that interference be intentional or malicious, the Court also rejected the larger defense allegation that its use of independent contractors was part of a nationwide practice, and therefore was not specifically intended to interfere with the smaller company’s contracts in New Jersey. Instead, the Court said that the element of intentional or malicious interference is satisfied when the plaintiff proves the defendant acted improperly with knowledge that interference would result. If, as alleged, the larger company used the smaller company’s confidential information, that element would be satisfied. As to the larger company’s argument that malice could not be established since it was only motivated by profit, the Court also disagreed. To the Court, it was not just the larger company’s motivation at issue, but also its means. The other contested issue related to damages. In essence, the larger company asserted that the smaller company had suffered no damages since it did not lose a long term contract. The Court rejected that argument, stating that “if the existence of a long term contract were a pre-requisite to establishing damages, a claim of tortious interference with prospective economic advantage would be subsumed by the claim of tortious interference with contract.”

Ultimate disposition on the claims of unfair competition and breach of the confidentially agreement was left to be resolved by a motion for a summary judgment or a trial because the complaint was found to be sufficient on its face.

With respect to the claims regarding alleged tax violations, the primary argument raised by the larger company was that the smaller company had no standing to seek punitive damages for, or to enjoin, its alleged tax violations. Its first argument was that there was no private right of action to compel it to comply with the tax laws. The Court rejected that argument because the smaller company was not seeking relief under a private right of action, but rather, was bringing claims of tortious interference and unfair competition. The larger company then argued that its much smaller competitor did not have standing simply because the parties were competitors. The Court disagreed citing New Jersey Law and “sound public policy” which says that “[T]he law-abiding business deserves protection from a competitor who seeks to attract trade by promising and delivering improper benefits that the honest business cannot match… .” Even though the acts about which the smaller competitor complained may have involved alleged tax violations, the primary thrust of its suit was a civil cause of action for unfair competition and tortious interference with prospective economic advantage. Consequently, the Court also found that there was no need on the part of the complaining party to exhaust any administrative tax remedies, such as complaints to the taxing authorities, before it proceeded with its own action.