Chicago Business Litigation Lawyer Blog
Sued for Tortious Interference After Hiring a Competitor’s
People? In Illinois, the Defense Starts With Your Right to
Compete
You hired three good salespeople away from a competitor, or you won
an account the competitor thought was his, and the letter came within
the week. It accuses your company of tortious interference. It says you
raided his workforce, poached his customer, and cost him business he was
entitled to keep, and it demands that you unwind the hires, walk away
from the account, and pay for the privilege. The letter treats healthy
competition as though it were a tort, which is exactly the confusion
Illinois law refuses to indulge.
Competition and interference look alike to the party that just lost,
but the law draws a sharp line between them. In Illinois a business is
privileged to compete, to pursue customers, and to hire the people who
want to come work for it, and the tort of interference is reserved for
the narrow case where a competitor crosses into wrongful conduct. The
company that competed hard and cleanly usually holds the stronger
position, and the defense begins not with an apology but with the right
to compete in the first place.
Understand what the plaintiff has to prove, because the elements are
demanding. Interference with contract, as the Supreme Court set out in
HPI Health Care Services, Inc. v. Mt. Vernon Hospital, Inc., requires a
valid and enforceable contract, the defendant’s awareness of it, the
defendant’s intentional and unjustified inducement of a breach, an
actual breach caused by the defendant’s conduct, and damages.
Interference with a prospective business relationship, under Fellhauer
v. City of Geneva, requires a reasonable expectancy of a valid
relationship, the defendant’s knowledge of the expectancy, purposeful
interference that defeats it, and resulting damage. The words
unjustified and purposeful are where most of these claims come
apart.
The first defense is that there was nothing the law protects. A mere
hope of continued business is not an enforceable contract, and an
expectancy that was never legally protectable will not support the tort,
as the Supreme Court recognized in Anderson v. Vanden Dorpel. When the
competitor’s employees were at will, free to leave whenever they chose,
and when the customer had no binding commitment, what the plaintiff
calls a stolen contract is usually an open field that anyone was
entitled to enter. If the plaintiff had no enforceable non-compete and
no binding customer agreement, the case is already built on sand.
The heart of the defense is the competitor’s privilege. Illinois
follows the rule that one who diverts business from a competitor does
not interfere improperly when the matter concerns competition, so long
as the actor does not employ wrongful means, does not create an unlawful
restraint of trade, and acts at least in part to advance his own
competitive position. The Appellate Court applied that privilege in
Soderlund Brothers, Inc. v. Carrier Corp., recognizing the right to draw
business away from competitors generally and from a particular
competitor as well, provided the purpose is to further one’s own
business rather than mere spite or ill will. Judge Posner put it more
bluntly for the Seventh Circuit in Speakers of Sport, Inc. v. ProServ,
Inc., where, applying Illinois law, he wrote that competition is not a
tort. A company is allowed to win.
The privilege has particular force where the relationship was
terminable at will. As Speakers of Sport explains, persuading a customer
or an employee to end an at-will relationship is analyzed as
interference with a prospective advantage, not with a binding contract,
and the law permits a competitor to induce the lawful termination of an
arrangement that either side was free to end at any time. Hiring an
at-will employee who chose to come, or winning a customer who was free
to switch, is the ordinary work of competition, and the law protects
it.
The privilege has a boundary, and knowing exactly where it lies is
the difference between a defense and a liability. What forfeits the
privilege is the use of wrongful means. The competitor who lied,
threatened, bribed, defamed a rival, or misused another company’s trade
secrets or confidential customer lists has stepped outside the
protection, because the law draws its line at independently wrongful
conduct, not at effective competition. This is why these cases so often
turn on how the hiring was done. An employee who arrived with his own
book of contacts is competition. An employee who walked out with the
former employer’s confidential files is a problem, and the defense is
strongest when the company can show it welcomed the former and refused
the latter.
There is a structural defense that defeats a category of these claims
outright. A party cannot tortiously interfere with its own contract. As
the Appellate Court held in Douglas Theater Corp. v. Chicago Title &
Trust Co., the defendant must be a third party, a stranger to the
relationship, and a company cannot be liable for interfering with its
own agreements, including the relationships with its own employees.
Where the plaintiff has named a defendant who was in fact a party to the
very relationship at issue, or the agent of a party, the claim fails at
the threshold.
The individuals a plaintiff names alongside the company have a
privilege of their own. Corporate officers, directors, and managers who
act within their authority and in the company’s interest are
conditionally privileged, and they are not liable for interference
unless they acted with actual malice or purely for their own benefit
against the company’s interest. The Seventh Circuit recognized that
protection in Stafford v. Puro and again in Nation v. American Capital,
Ltd., and the Supreme Court’s decision in HPI is to the same effect. The
manager who did his job by recruiting talent for his employer is not
personally on the hook for having done it well.
One more point of law shifts the weight of the case, and it is easy
to overlook. Once the defendant’s conduct appears to be privileged,
whether as competition or as the act of a corporate officer, the burden
falls on the plaintiff to plead and prove that the conduct was
unjustified or malicious, and to do it with specific facts rather than
conclusions. HPI places that burden squarely on the plaintiff. A
complaint that asserts, in the abstract, that the defendant acted
maliciously, without facts that would show it, has not met the standard
the tort demands.
Three things put a company in the strongest posture. First, preserve
the hiring record, the offer letters, the onboarding materials, and any
instruction given to new employees, because a clean paper trail showing
lawful recruitment and a written warning not to bring a former
employer’s confidential information is the best answer to a raiding
claim. Second, determine at once whether the rival’s contracts were at
will and whether any non-compete was even enforceable, because the
answer often decides whether there was a protectable interest at all.
Third, answer the claim with the privilege at the front, not as an
afterthought, because framing the company’s conduct as lawful
competition from the first filing shapes how the court sees everything
that follows.
A tortious interference claim is often a competitor’s way of
litigating a loss he could not prevent in the market. Some interference
is real, and a company that lies, steals, or induces the breach of a
binding contract will answer for it. But hiring the willing, winning the
customer, and competing hard are not wrongs in Illinois. They are the
privilege the law extends to everyone in the market, and the company
that competed cleanly should not have to pay for having competed
well.