Key Business Court Decisions

An Employee May Have a Separate Common Law Duty Not to Interfere with a Former Employer

Where the common law duty not to interfere in a business’ contracts is separate from any contractual obligation not to compete, a business can maintain an additional tort claim.  Gallaher v. Ciszek, 2020 N.C.B.C. 76 (J. Bledsoe).  As a result, because the employee’s contractual duty not to compete was separate from his common law duty not to tortiously interfere with his employer’s contracts, the business’ tort claim was not barred by the economic loss rule.

When coming to work for Cape Fear Neonatology Services, P.A. (“Company”), Plaintiffs signed agreements not to compete with the Company. At that time, the Company had a non-exclusive contract with a local hospital to provide neonatology services.  In late 2018, the Company was negotiating a new neonatology contract with the hospital when Plaintiffs, while still employed with the Company, allegedly entered into negotiations with the hospital to provide neonatology services themselves.  After reaching an agreement with the hospital in principle, Plaintiffs resigned from the Company and shortly thereafter entered into a contract with the hospital to provide the neonatology services.  Plaintiffs filed a lawsuit against the Company, which filed a counterclaim and asserted claims for breach of the non-compete agreement, tortious interference with its hospital contract and tortious interference with perspective economic advantage.  Plaintiffs filed a motion to dismiss the tort claims, contending that the only duty they owed the Company was based upon the contractual duties of their non-compete agreements.  Because their sole duty arose from a contractual obligation, Plaintiffs contended that the Company’s tort claims were barred by the economic loss rule (which precludes recovery for purely economic loss by means of a claim in tort).

The Business Court disagreed and found that the Company’s tort claims were not barred by the economic loss rule.[1]  While acknowledging the economic loss rule bars a tort claim based upon a contractual duty that alleges only economic harm, the Business Court nonetheless found that the Company’s tort claims were based upon Plaintiffs’ breach of a duty separate from their contractual non-compete duty; namely, the common law duty of a third party not to interfere with another’s right to freedom of contract or benefit of a contract.  The Business Court noted that the Company’s contract with the hospital was not an exclusive contract.  As a result, if it were determined the Plaintiffs induced the hospital to breach its agreement with the Company, the Plaintiffs would have violated not only their duties under the non-compete agreement, but also the common law duty to not tortiously interfere with another party’s contract.[2]

Based upon this decision, a business which discovers its former employees have violated their contractual duties not to compete may also consider bringing additional tort-based claims, which could greatly increase the business’ potential recovery.

[1]  The Court ultimately determined that the Company’s tort claims could not survive Plaintiffs’ other argument that the Company had failed to allege facts showing Plaintiffs induced the breach of the hospital’s contract with the Company.  (Opinion, ¶30). However, the Business Court dismissed that claim without prejudice, allowing the Company to reassert the tort claims with additional factual allegations that satisfied the inducement element. (Id., ¶31).

[2] The Business Court implied that had the Company had an exclusive arrangement with the hospital, then the Plaintiffs’ contractual duty may not have been distinguishable from their common law duty. (Opinion, ¶26).

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