California Cannabis Claims: Intentional Interference with Contractual Relations

Welcome back to our litigation series on California cannabis claims. Today, we’ll be discussing intentional interference or “tortious interference” – which may apply to your situation if you find that a third party is improperly interfering with you and your contractual relationships.

Introduction

This claim stems from California’s basic recognition that contractual relationships are worthy of protection from the acts of third parties. Therefore, any third party that intentionally seeks out to disrupt or otherwise interfere with an existing contractual relationship can be liable for the damage that results from interference.

Statute of Limitations

The statute of limitations on an intentional interference with contractual relations is two years. That clock starts ticking on the date of the third party’s wrongful act or, if unknown, no later than the date the contract is breached as a result of the tortious interference.

Elements of an Intentional Interference with Contractual Relations Claim

The elements of a cause of action for intentional interference with contractual relations are:

1. A valid contract: a valid agreement must exist between the plaintiff and a third party.
2. The defendant is not itself a party to the contract: this claim only applies to a third party that isn’t involved in your contractual relationship. Courts are somewhat vague about how distant that third party needs to be, but generally, the third party cannot be a party or an agent of a party to the contract. On the other end, the third party doesn’t have to be a total stranger either – it can have some kind of relationship to the contracting parties. This is a determination of facts made on a case by case basis.
3. The defendant has knowledge of the contract: pretty basic, but the third party has to know the contract exists. (This is because of the next element, intent.)
4. The defendant has intent to interfere with the contract: the third party’s acts must have been “designed” to induce a breach or other interference with the contract. Note: intent can be inferred if the third-party’s conduct was “substantially certain” to cause interference.
5. A breach or interference of the contractual relationship: there must be a breach of, or interference with, the contractual relationship between the parties. Even making either party’s ability to perform the terms of the contract more burdensome or costly will qualify – you don’t need to show that the third party’s action resulted in a total breach of the contract.
6. Causation: the plaintiff has to show that, but for the third party’s interference, the contract would have been performed.
7. Damages/harm: finally, the plaintiff has to show actual damages that resulted from the interference.

Remedies

Two types of damages are available here:

• Compensatory damages: the plaintiff can potentially recover all damages flowing from the third party’s interference, including expenses, lost profits, and prospective profits. Again, lost and future profits are only recoverable when “their nature and occurrence can be shown by evidence of reasonable reliability.”
• Punitive damages: if the plaintiff can show by clear and convincing evidence that the third party acted with “oppression, fraud or malice,” punitive damages are recoverable as well.

We’ll be wrapping up this series with our final claim, violation of California’s Unfair Practices Act, shortly! For previous posts in this series check out the following: