Sunday, June 26, 2011

What is the Difference Between Tortious Interference with a Contract and with a Business Relationship?

In Texas, a lot.   On first blush, it would appear that the tort of interference with a business relationship (sometimes also called a "prospective business relationship") would be the more potent tort because it would cover more situations.    Where a contract exists, a business relationship must surely exist, while some business relationships may not involve existing contracts.    However, the tort of interference with a contract is actually the more potent of the two because of the nature of the conduct required to make each tort actionable.

In Walmart Stores, Inc. v. Sturges, 52 S.W. 3d 711 (Tex. 2001), the supreme court held that, in order to be actionable as interference of a business relationship, the interfering conduct itself had to be tortious or otherwise unlawful.    Otherwise lawful conduct cannot form the basis for interference with a business or prospective business relationship.    This holding makes that tort much less potent because, if independently actionable conduct were committed by the defendant, one already has a basis for liability, and the interference claim would be nothing more than icing on the cake in most circumstances.    One circumstance where it might be more than that would be if the damages flowing from the interference were greater than those flowing from whatever tortious conduct was involved in committing the interference.

On the other hand, the conduct that can constitute tortious interference with a contract can be completely legal.    The Court gave an example where A was under contract to perform a particular service to B; and C, knowing this, simply induced A to breach his contract with B by offering him a better deal.    Offering A a better deal is not of itself illegal or actionable.

Thus, where there is a contract, this is a tort which is much easier to prove.     If a contract exists and the defendant knows it, any induced breach causing damages will be actionable.    cf.,  ACS, Invs. Inc., v. McLaughlin, 943 S.W. 2d 426, 430 (Tex. 1997).    And this will be true even if the inducement was otherwise legal.    Wal-Mart Stores, supra, at 716, 717.

Monday, June 13, 2011

Is the Primary Purpose of Federal Rule 11 Fee Shifting or Deterrence?

Deterrence.    This was made clear in the 1993 amendments to Rule 11 and the Advisory Committee Notes accompanying it.    The rule itself in part (c) (4) states that the sanction must only be what is necessary to achieve deterrence; moreover, it specifically states that if a violator is required to pay "part or all" of the attorney fees directly attributable to the violation, such a sanction may only be made only if warranted to achieve effective deterrence.     Thus, the rule envisions that fee shifting will be rare.    The Advisory Committee Notes go on to state, in Paragraph 13, that the even when some amount of fee shifting is ordered, it is appropriate for the court to exercise discretion, taking into account, among other things, whether the person sanctioned has "modest financial resources."

Also, as I mentioned in my earlier post about the Texas Legislature's "loser pays" bill, sanctions for filing frivolous litigation are also subject to a Constitutional threshold.    In Professional Real Estate Investors, Inc. v. Columbia Pictures, Inc., 508 U.S. 49 (1993), as interpreted by subsequent cases such as iLOR v. Google, Inc., 631 F. 3d 1372 (Fed. Cir. 2011), the Court forbids punishing counsel for filing allegedly frivolous cases unless the case is "objectively baseless."    "Objective baselessness" is then defined as applying only to a case where "no reasonable litigant could realistically expect to succeed on the merits."    Thus, if the case is less "frivolous" than that standard, imposition of any sanctions would violate the First Amendment right to petition the government for redress of grievances.

The real heyday for fee shifting and other very punitive sanctions under Rule 11 was 1983 to 1993.    The Fifth Circuit, for instance, has not affirmed a fee shifting sanction under Rule 11 subsequent to the 1993 rule amendment.

Monday, June 6, 2011

Do Lawyers Make Good Witnesses? How About Good Defendants?

"Yes" to the first question; "no" to the second.

First, there seems to be some level of conventional wisdom that lawyers do not make good witnesses.    I do not concur with that.  As third party witnesses, I regard lawyers as better than average witnesses.     I understand that the public sometimes has negative views toward lawyers.    But if a lawyer takes the stand as a third party witness, the  general tendency of jurors to believe a witness unless circumstances strongly militate to the contrary kicks in.    Moreover, lawyers generally are better skilled at expressing themselves than the average person.    They are also less likely to fall into traps.    As all trial lawyers know, there are many types of evidence that are, in effect, double-edged swords--it helps in one way, hurts in another.    Lay witnesses are more likely not to see the trouble coming from the negative side.

Professor Kingsfield, in the movie "The Paper Chase," famously said that beginning law students started with "a head full of mush" but ended their three years "thinking like a lawyer."    Of course, not all lay persons have heads full of mush.    But there is enough of an element of truth to this to say that a lawyer/witness is more likely to be able to finesse the "negative" side of the double-edged swords.   They have more presence of mind about that sort of thing.

The second question asks about lawyers as defendants, but the same considerations apply to lawyers as plaintiffs.    Here, the public's relative antipathy toward the legal profession has more relevance.    I would not describe it as white-hot anger toward lawyers.    Rather, jurors simply tend to be much less forgiving of lawyers for mistakes or misconduct than they are for non-lawyers.    It seems to be an attitude of "ok, you're so smart--you should have known better."    Probably for this reason, I have found that lawyers defending legal malpractice cases tend to be less willing than the average to allow a case to go all the way to trial.    This is not to say that lawyers cannot win as parties; they can, but they have a somewhat heavier burden.