4th Circuit Vacates Tortious Interference Judgment
The Fourth Circuit Court of Appeals recently reversed a large judgment in favor of a computer security solutions company headquartered in Virginia, which involved a claim of tortious interference with a business expectancy.
The dispute began between Worldwide Investigations & Research, Inc. (Worldwide) and BNX Systems Corporation (BNX) over the intellectual property rights to software BNX developed under a contract with Worldwide. While a Florida case over the issue was pending, BNX filed for bankruptcy protection in the Eastern District of Virginia, Alexandria Division and sought to liquidate its assets. Worldwide objected to the sale of assets that it claimed ownership over; however, such claim was rejected by the Bankruptcy Court.
Shortly thereafter, Worldwide filed a complaint seeking a determination of the ownership rights to some of BNX’s assets, and a separate objection to BNX’s motion to sell its assets. Moreover, the president of Worldwide asserted in a letter to the U.S. Department of Commerce that the sale would violate export restrictions. The latter action resulted in a government inquiry and caused a delay in the sale process.
As a result of Worldwide’s actions and court filings, BNX asserted a claim against it for abuse of process and tortious interference with business expectancy. In its counterclaim, BNX argued that Worldwide intentionally interfered with the sale of its assets by filing false claims. Most importantly, it claimed that Worldwide and its president filed false claims in order to delay the sale process in hopes that Worldwide would be able to purchase the assets at a reduced price. The bankruptcy court ruled in favor of BNX, awarding it over $300,000 in damages.
However, the Appeals Court vacated the entire award. The Court determined that BNX failed to prove the existence of a business expectancy – noting that a business expectancy must be “based upon something that is a concrete move in that direction.” BNX’s argument that it had a business expectancy in having an auction process free from the effects of improper filings was rejected by the Court.
Given the interests of competing companies in today’s marketplace, it is not surprising that tortious interference claims are routinely seen in courts. As this case illustrates, claims for tortious interference with business expectancy will be dismissed where the plaintiff merely alleges, in general terms, that a defendant has interfered with potential business opportunities. Virginia courts have also held that the following also do not satisfy this standard: sales to unidentified potential buyers; retroactive promotions; and continuing to do or remaining in business.
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