Law School Case Brief
Foster v. Churchill - 87 N.Y.2d 744, 642 N.Y.S.2d 583, 665 N.E.2d 153 (1996)
A claim of tortious interference requires proof of (1) the existence of a valid contract between the plaintiff and a third party, (2) the defendant's knowledge of that contract. (3) the defendant's intentional procuring of the breach of that contract, and (4) damages.
Plaintiffs Mark Foster and Don Franco are the founders and former chief executive officers of defendant Microband Companies Incorporated (Microband). The company founders filed suit against Microband, their former company; TA defendants, a group of venture capital firms; the TA principals, Richard H. Churchill, Jr., and David D. Croll, who were also directors of Microband; and others alleging claims including tortious interference, breach of employment agreements, defamation resulting in wrongful termination of employment, and breach of fiduciary duties. The lower court found that although Microband had breached its contracts with the company founders, and although the venture capital firms and principals had intentionally caused the breach, nevertheless TA venture capital firms and principals were protected by the defense of economic justification. This judgment was affirmed by the Appellate Division of the Supreme Court in the First Judicial Department (New York). Plaintiff founders sought further review.
Did the Appellate Division err in concluding that plaintiff company founders had not established a claim of tortious interference?
On review, the court found that the company founders had failed to sustain their burden of showing malice, fraud, or illegality in order to defeat the defense of economic justification successfully raised against the company founders' tortious interference claim. Further, although statements made regarding the company founders in communications to the board of directors had been defamatory, the statements were protected by qualified privilege. Finally, the finding that the venture capital firms had acted without good faith was not inconsistent with the determination that they had acted without malice.
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