Tortious Interference: Judicial Application of the Third Restatement

Tortious interference, long considered a “peculiar” tort in business law, recently received a makeover from the American Law Institute. 3 Dan B. Dobbs et al., The Law of Torts 500 (2d ed. 2011). Released in 2020, the Restatement (Third) of Torts: Liability for Economic Harm institutes a dramatic evolution in tortious interference from the Restatement (Second) of Torts. This article reviews these changes and identifies some of the issues courts have recently encountered in applying sections 17 and 18 of the Third Restatement.

Two Major Changes

The Third Restatement establishes two major changes related to tortious interference. See generally Restatement (Third) of Torts: Liability for Economic Harm §§ 17–18 (Am. L. Inst. 2020). First, it divides “tortious interference” into two separate torts: interference with contract and interference with economic expectation. Courts choose which tort to apply based on whether the defendant allegedly caused the breach of a binding contract or the rupture of a prospective economic advantage. These torts have separate elements, with the standard for liability set higher for plaintiffs who did not have a contract.

Second, the Third Restatement replaces an improper interference requirement with a wrongful conduct analysis. Rather than assessing the impropriety of the defendant’s conduct through an abstract balancing test, the Third Restatement sets narrow and concrete standards for liability. For interference with contract, the defendant is liable only if the defendant (i) appropriated the benefits of the plaintiff’s contract, (ii) committed an independent and intentional legal wrong, or (iii) engaged in conduct solely to harm the plaintiff. For interference with economic expectation, this standard is even higher—the defendant cannot be liable unless the defendant committed an independent and intentional legal wrong.

Wrongful Conduct after the Relationship Ends

The first published case to address section 17 or section 18 of the Third Restatement was Barclay v. Castruccio, 230 A.3d 80 (Md. 2020). In Barclay, the decedent bequeathed $6.7 million to the plaintiff. However, the plaintiff alleged that the defendant, the decedent’s widow, had tortiously interfered with the inheritance by filing frivolous lawsuits to deplete the estate through attorney fees. This raised two questions for the Court of Appeals of Maryland: whether the state recognized tortious interference with inheritance as an actionable tort and, if so, whether the plaintiff had properly alleged this claim. To answer these questions, the court relied on the Third Restatement’s approach to interference with economic expectation, as well as its approach to interference with inheritance or gift (section 19).

First, the court adopted the Third Restatement’s test for interference with inheritance. It agreed with the Third Restatement that “[l]ogically, interfering with an expected inheritance is just a species of interference with economic expectancy. . . .” Barclay, 230 A.3d at 87. Because Maryland has a long history of allowing recovery for interference with economic expectancy, it would not make sense for the court to arbitrarily deny that remedy simply because of the type of economic relationship with which the defendant interfered. The court also adopted the Third Restatement’s limitations for this tort, choosing to limit claims for interference with inheritance only to matters where a remedy in probate court is unavailable.

Second, the court held that the plaintiff’s allegations did not constitute a proper claim for interference because the allegedly wrongful conduct happened after the relationship had ended. The court agreed with the Third Restatement that liability can apply only if the defendant committed an independent and intentional legal wrong. However, it noted that none of the illustrations or examples contained in section 18 or section 19 identify wrongful conduct that occurred after the relationship ended. Instead, the Restatement exclusively applies these torts to ongoing or prospective relationships. Thus, the court found an implicit requirement in the Restatement that the wrongful conduct occur while the relationship in question is ongoing—not after the relationship ends for alternative reasons. Because the wrongful conduct alleged in Barclay (meritless litigation) occurred after the decedent had died, the relationship between the plaintiff and the decedent had ended. Therefore, the allegations were insufficient to establish this element, and the court dismissed the claim.

Interfering with One’s Own Contract and the Independent and Intentional Legal Wrong Requirement

In Meridian Medical Systems, LLC v. Epix Therapeutics, Inc., 250 A.3d 122 (Me. 2021), the Supreme Judicial Court of Maine also addressed the Third Restatement’s approach. Here, the plaintiff sued three defendants for a variety of business torts claims, generally alleging a conspiracy to reduce the value of plaintiff-owned technology. The trial court dismissed each of the plaintiff’s claims, and the plaintiff appealed. The appellate court upheld the dismissal, turning to the Third Restatement to find two reasons to dismiss the plaintiff’s claim for tortious interference.

First, the court cited the Third Restatement for the rule that a defendant cannot be liable for interfering with the defendant’s own economic agreement. The court dismissed the tortious interference claim against two defendants on this ground. One defendant was party to the economic agreement at issue; the other was only vicariously liable through the defendant that was party to the agreement. The court refused to hold either defendant liable for interfering with their own agreement.

Second, for the last defendant, the court turned to the Third Restatement’s independent and intentional legal wrong requirement. In Maine, a plaintiff alleging interference with prospective advantage must prove that the defendant interfered through fraud or intimidation. For support for this precedent, the court relied on the Third Restatement’s approach to interference with economic expectancy. It noted that the Third Restatement had heightened the standard for liability from the Second Restatement by requiring that the defendant commit an independent and intentional legal wrong. The court saw the independent and intentional legal wrong requirement as akin to Maine’s fraud or intimidation requirement—both tests set narrow standards for liability and exempt defendants who merely participated in sharp practice or unethical behavior. For this reason, the court dismissed the interference claims against the third defendant, as the plaintiff failed to allege any legal wrong or intimidation by this defendant.

Interference with the Plaintiff’s Own Performance

The most recent published case addressing section 17 or section 18 of the Third Restatement is the decision of the District of Columbia Court of Appeals in PHCDC1, LLC v. Evans & Joyce Willoughby Trust, 257 A.3d 1039 (D.C. 2021). There, a tenant brought counterclaims against its landlord, alleging that the landlord tortiously interfered with the tenant’s contract with a third-party financer by improperly hindering the tenant’s performance of the contract. The trial court dismissed the tortious interference claim, holding that a plaintiff cannot bring a tortious interference claim against a defendant for interfering with the plaintiff’s own performance of the contract. Instead, the trial court found liability could arise only when the defendant interferes with a third party’s performance of the contract.

The D.C. Court of Appeals vacated the trial court’s ruling, holding that liability can attach when the defendant interferes with the plaintiff’s performance of a contract. In doing so, the court cited a comment in the Third Restatement that suggested that, while it was not the ordinary situation, liability could result in this scenario. Interestingly, the court recognized that this holding conflicted with dicta from a previous D.C. Court of Appeals case. Still, it decided to adopt the Third Restatement’s approach over its own precedent, seeing “no reason not to follow the Restatement on this issue.” PHCDC1, 257 A.3d at 1046.

Conclusion

Barclay, Meridian, and PHCDC1 address various elements of sections 17 and 18 of the Third Restatement, including the new heightened standards for liability and the rules that apply in unique situations where the defendant interferes with the defendant’s own contract or the plaintiff’s performance of a contract. However, the lack of judicial opinions citing the Third Restatement suggests that courts are only beginning to wrestle with its significant departures from the Second Restatement. Practitioners should keep an eye out in the coming years to see whether courts adopt the Third Restatement’s approaches or continue to apply the Second Restatement’s tests.