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Civil Conspiracy

Running a small business takes a lot of time and energy. It can be frustrating when someone negatively affects your business. Not all actions that harm your business are unlawful, but you may have recourse under civil law.

What Are Torts?

Torts are legal wrongs that cause harm or injury to someone and come in various forms. When it comes to business, these wrongs are called business or economic torts.

Business torts involve wrongful acts that lead to financial losses in business transactions or relationships. These can include things like unfair competition or tortious interference. These torts provide a way to address harmful behaviors in business and seek compensation for the resulting damages.

Most states do not consider civil conspiracy a separate cause of action. This means there must be an underlying tort to bring a civil conspiracy claim.

What Is Civil Conspiracy?

Civil conspiracy has three main components:

  • A group of individuals or entities (co-conspirators) work together to commit an unlawful act
  • The act has an unlawful purpose
  • The act leads to harm or damages to another party

This harm can manifest as financial losses, personal injuries, or damage to reputation. Civil conspiracy laws originate from common law principles and statutory provisions. These common law doctrines establish civil conspiracy claims' elements, liability, and remedies.

Courts in the United States began recognizing this legal claim in the late 1800s. In Crump v. Commonwealth, the Virginia Supreme Court found a plan to undermine someone else's business is a valid legal claim. This idea spread, with citations in other state courts and later federal district courts.

Since then, many jurisdictions have enacted laws that address civil conspiracy. These statutory provisions often:

  • Codify certain aspects of civil conspiracy
  • Clarify procedural requirements
  • Establish specific remedies

Criminal Conspiracy vs. Civil Conspiracy

Criminal and civil conspiracy are distinct legal concepts. Criminal conspiracy involves people or entities conspiring to commit a criminal act. The focus here is on the criminal nature of the act. The participants may face criminal charges, fines, and potentially imprisonment if proven guilty.

Civil conspiracy pertains to a group collaborating to engage in an unlawful act that harms another party. While the act may not be criminal, it could result in civil liability. It often involves business disputes or personal injury cases. The injured party may seek monetary compensation through a civil action to recover damages. The outcomes of civil conspiracy cases typically involve financial remedies rather than criminal penalties.

Proving a Civil Conspiracy

A person must prove the elements to succeed in a civil conspiracy case. According to the Restatement of Torts, the elements of a civil conspiracy are:

  • Agreement: The defendant made an express agreement with another to commit a wrong.
  • Overt Act in Furtherance: A tortious or unlawful act results in the furtherance of the conspiracy.
  • Economic Loss: The plaintiff suffered economic loss as a result.

Civil conspiracy requires the plaintiff to show that a tortious act occurred. Examples of torts in the context of business are unfair competition and wrongful interference with a business contract or relationship. If the acts were lawful under tort law, the claim for civil conspiracy would fail. If the claim for the underlying tort claim fails, the civil conspiracy will also fail.

The plaintiff must also prove that the conspirators intended to commit an unlawful or tortious act. If the actors had no knowledge of the wrongful nature of the act and no intention to cause harm when they agreed to take the particular course of action, the civil conspiracy claim would fail.

Co-Conspirators and Liability

Each co-conspirator is liable for the group's actions, even if they didn't directly commit the underlying tort. This means that if one party in a conspiracy commits a tortious act, all co-conspirators are responsible for the damages.

If a person was present during the wrongful conduct but not in agreement with the other actors, no civil conspiracy is present. While an officer can be a party to a civil conspiracy, a corporation cannot. The only way to avoid liability for acts related to the conspiracy is to withdraw from the agreement. The co-conspirators must have notice of the withdrawal.

Examples of Business Conspiracy

Business torts include a range of unlawful means that harm a business. This includes unfair competition, tortious interference, and breach of fiduciary duty. In that case, the injured party may have grounds to pursue a civil conspiracy and other tort claims.

  • Tortious Interference: If a competitor induces a breach of contract between you and a client, and other parties assist in this breach, it may constitute a civil conspiracy.
  • Unfair Competition: Coordinated efforts to spread false information about your business to gain an advantage could be a civil conspiracy.
  • Fiduciary Duty Violations: If individuals within your company conspire to breach their duties for personal gain, it could lead to a civil conspiracy claim.

Protecting Your Business Against Civil Conspiracy

While it may be hard to prevent every conspiracy, small business owners can take measures to safeguard their interests:

  • Build Strong Contracts: Ensure your business contracts are thorough and cover potential interference scenarios. Include noncompete and nondisclosure clauses when appropriate.
  • Monitor Competition: Pay attention to your competitors' actions. Be aware of any suspicious behavior that could indicate a potential business conspiracy.
  • Document Everything: Maintain rLegal Consultation:ecords of business transactions, communications, and interactions with competitors and other parties.
  • Employee Training: Educate your employees about civil conspiracy and the potential signs to watch for. Encourage a culture of integrity and reporting any suspicious activities.
  •  Seek legal advice from experienced attorneys in business law to establish the best preventive measures and, if necessary, pursue legal action in case of a conspiracy.

Legal Process and Remedies

The statute of limitations is typically around two years to file a civil conspiracy claim. If a civil conspiracy claim is successful, the trial court may award damages to compensate the injured party for their losses. In some cases, courts can award punitive damages to deter future similar behavior. These damages can vary depending on the severity of the harm caused.

In the recent opioid lawsuits, federal courts ordered health care damages. Health care damages in opioid lawsuits seek to hold pharmaceutical companies, distributors, and other parties accountable for contributing to these harmful consequences.

The courts can award treble damages to provide a stronger deterrent against such wrongful actions. Treble damages refer to a remedy where the court awards the plaintiff three times the actual damages they suffered. This award serves not only to compensate the plaintiff for their losses but also to punish the conspirators for their behavior.

Getting Legal Help

Contact a local business litigation attorney to discuss your options if you believe a civil conspiracy has damaged your business.

You can visit FindLaw's section on Business Torts for more information and resources related to this topic.

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