BUSINESS TORTS ABDEL-KHALIK FALL 2015
Course Overview:
Unfair Competition:
-individual/catch-all COA: “I cannot place the actual COA, but D did something scummy.”
*Js may allow this because it leaves room for the unknown and allows COA for new/undiscovered kinds of UC
-other Js will not allow a catch-all because it does not give people notice as to what “scummy” really means
-the specific kinds of UC tend to fall in to two categories: Misrepresentation and Misappropriation
Misrepresentation
-MR as tort (fraud)
-False Advertising
-Commercial Disparagement
-False Endorsement/Attribution
-TM: when talking about lying to the public (but see Misappropriation for recent propertization trend)
Misappropriation:
-Trade Secret
-ROP: the taking is what matters
-Hot News Misappropriation
-Intentional Interference: focuses on the taking of an interest, but can be improperly taken through a misrepresentation (keep that in mind)
-TM: propertization trend
*applies mostly to dilution and domain name disputes
Three Main Prongs for TM:
1. Acquiring Rights
a. CL v. Registration
b. For any type of right:
i. Mark
ii. SID
iii. Use
1. FR: use in commerce (interstate or intrastate with interstate effects)
c. CL: Excludes: the things considered in registration (other than scandalous and disparaging)
i. Think of it as Prohibited v. Limited (need distinctiveness)
d. Registration: the LA Process
i. Excluded here: scandalous and disparaging
2. Enforcing
3. Defenses
Quick Intro:
-Business torts usually refer to unfair competition: e.g. antitrust
*AT: e.g. a huge telephone company would be a problem because they can set the prices however they want
-this same company is coming back, but it is not a problem, because now there are so many options
-with competition, you must consider: is it a competitive market; does one company own too much; do they have the potential to own too much
-focus of this class is company v. company****
-unfair competition: where do you cross the line from Sheldon’s neener-neener to actual UC?; we still need commercial transactions to function in a predictable manner while discouraging companies from acting badly…but what is badly?
-IN GENERAL: § 1 of Restatements of Unfair Competition: all competition is fair (default) unless deceptive marketing, trademark infringement, infringement of intangible trade value (things that encompass goodwill/reputation: TMs, right to publicity (persona that could be used for marketing)); other acts that are unfair methods of competition
*what to pull from this: because mentions competition, probably entity to entity (i.e. not a personal cause of action); may be worried about the effect on the general public and the effect that it could have on the general public
*there is a catchall at the end of the Restatement to show that there are general UC claims, but there is a general UC claim that people usually make in the alternative
-Intent of the D does not matter all the time
*e.g. TM is actually strict liability (intent is not necessary; if infringe innocently, too bad so sad)
-COAs we will be focusing on:
*Intentional Interference with K, Business Expectancy, K Performance
*Misrepresentation
*Unfair Competition (general claim)
*Trademark Infringement (will add as the class goes on…)
Intentional Interference with a Contract
General Ideas: keep in mind that default is “all competition is fair unless…”
-we have that default just to make sure that we find a balance between fostering competition (and keeping consumers from having to deal with monopolies) and allowing schmuckitude to rule the day
-sometimes a party may have a COA against a non-party to a K who may cause another party to breach that K
-first reported in Lumley v. Gye (English case in 1853): D encouraged an opera singer to breach K with P and sing at a different opera house
-finding the answer to the question: when is taking business away from competitors unjust?
-the elements come from § 766 of Restatement (Second) of Torts: one who intentionally and improperly interferes with the performance*** of the K (excluding a K to marry) between another and 3P by inducing/otherwise causing the 3P not to perform the K, is subject to liability to the other for pecuniary loss resulting to other from the failure of the 3P to perform the K
-POLICY/RATIONALE: right to perform K and to reap profits from it and the right to performance by the other party, are ppy rights entitling each party to fulfillment of the K by performance; and the intentional interference with the K relation without just cause so as to effect a breach is wrong and wrongdoer should be held accountable for damages
-PURPOSE: -the tort was created to try and encourage D to participate in proper K relationships (not induce someone to break a K to enter another)
*meant to preserve certainty in Ks, reliability, reduces monitoring costs and the like, and avoids dispute resolutions
Graph: always do the graph…it will help!!!
*B—-Ks with——-A——induced to go away by—–C
*C: the schmuck that is stealing A away; the defendant/interferor
*A: the third party (not a party to the suit, usually)
*B: the “other” from the language of the R; the plaintiff
-indirect liability: it has been hinted at that this is possible; there could be another person “D” who encourages C to steal away A (i.e. D pushes C to interfere)
*no R suggests that it is a viable claim, but there are cases that lean towards it
-e.g. Coke ks with AA Distribution; Pepsi enters into
gh inducement is most common); when dealing with different kinds of inducement, such as “moral persuasion,” you must apply a balancing act; look for any conduct that influences 3P not to deal with the other
*in other words, sometimes MP will qualify as inducement that leads to interference; the balancing act balances free enterprise v. fairness
*action: (from Fowler): Any act by D which is wrongful or unlawful done intentionally without cause or excuse which is for the indirect purpose of injuring the P or of benefitting the D at the expense of the P will constitute tortious interference
-CAUSATION PART 2: but for the affirmative/active steps, would there have been a breach?
*the party breaching would have performed and wanted to perform and would have done so if the party had NOT interfered
*e.g. O’Grady (within TC): where one of the K parties has already determined to rescind/breach before entering into negotiations with Ds, then no finding of tortuous interference
-e.g. Kerr
*intent inferred: Waugh testified that knew if city believed that Kerr would not allow state inspectors, the project would go bad
*causation: project stopped within hours of KW’s report; I said that decision to breach was because of the report***
-e.g. TriContinental:
*intent: Neidhardt did induce the switch (did some wheeling and dealing to get R a deal with CIT…)
*causation: NOT there; R seemed to have already made up his mind to switch to CIT absent the affirmative actions, etc. from N and L
Element 4: BUT FOR Test (don’t think in terms of K being breached…think in terms of the damage): “but for the actions, P would not have been damaged”
-e.g. Kerr: but for KW report to MODOT, the problems would NOT have arisen and the Kerr would NOT have been damaged****
Element 5: an action is NOT justified if use improper means and improper purpose
-ABSENCE OF JUSTIFICATION: the absence of any legal right to take the actions about which the other party complains
-Improper Means Definitions:
*from Kerr: IMs: independently wrongful, including threats, violence, trespass, defamation, etc.; false statements tending to prejudice or injure a person in the person’s business, by suggesting the person is unreliable, insolvent, etc.
-i.e. don’t lie
-misrepresentation is also an IM
