Business torts, also called "economic torts," are wrongful acts committed against business entities -- often intentional but sometimes due to negligence or recklessness -- that cause (or are likely to cause in the future) some kind of financial loss. They are not criminal offenses, although some business torts also may be charged as such (including restraint of trade in some cases). Businesses that are financially injured through the intentional or negligent act of another business or individual may seek monetary damages in civil court, although sometimes courts will issue injunctions ordering the defendant to cease certain unlawful activities.
This section covers a wide range of business torts, including fraudulent misrepresentation, civil conspiracy, trade libel, and breach of fiduciary duty. Understanding these torts not only will help you identify when you have a valid claim but also will help your organization avoid committing such acts.
Business Torts at a Glance
Since many business torts involve damage to business relationships, public reputation, or the ability to function in the marketplace in general, financial losses are often based on future projections. For example, a tortious interference claim often will focus on the actual losses suffered by the interference of the contract. If the company lost a client, then damages will be based on that specific loss. But if the loss of the client through tortious interference hurts the company's ability to attract new clients, a more general restraint of trade claim may be filed. In such a case, the plaintiff will try to recover for the profits they believe will be lost in the future.
Common Business Torts
Since the general definition of a business tort is an unlawful act that prevents a business from operating as it otherwise would, the list of specific business torts is relatively fluid. Injuries from business torts range from loss of business opportunities and clients to a damaged reputation or ability to stay in business. Some common business torts are listed below:
- Tortious Interference - This occurs when one party intentionally interferes with a contract (or, less formally, an economic expectancy) between the plaintiff and another party, causing damages to the plaintiff. Even something as nuanced as silence or the nod of one's head, if in reply to a valid inquiry, can be construed as tortious interference in some instances.
- Restraint of Trade - While restraint of trade is a common law doctrine and not a specific tort, it refers to claims in which the defendant's act itself may not have caused the plaintiff's immediate economic loss, but a much broader hindrance in its ability to conduct business as usual. Some "reasonable" restraints of trade, such as non-compete clauses, are valid.
- Theft of Trade Secrets - Just as it sounds, theft of trade secrets occurs when one party unlawfully obtains proprietary information from a business with the intent of gaining an unfair competitive advantage.
- Fraudulent Misrepresentation - Two parties entering into an agreement, whether it's contractual or sealed with a handshake, must do so in good faith. If you misrepresent your position, intentions, or a material aspect of the deal -- and it causes financial harm to the other party -- it may give rise to a civil claim.
Remedies for Business Torts
As one can imagine, calculating and collecting for such losses is quite difficult. Economic losses are often projections, but keep in mind that damages for any tort must be "calculable with reasonable certainty." So while it's impossible to predict the future, courts will generally accept estimations of losses that seem reasonable and calculated in good faith. If the defendant is still committing the unlawful act at issue, the court may issue an injunction.
Click on a link below to learn more about business torts, and speak with a local attorney if you have additional questions.