If You Don’t Believe It and Mean It, Don’t Threaten It!

By: Neal Jacobs, Esq., Jonathan Sacks, Esq., and Richard Miller, Esq.

The concept of tortious interference with prospective business relations is relatively well known on the legal side of business. The intentional actions of a third party interfere with the business or potential business between two other parties, causing a loss of business.  Perhaps less thought of in this regard, is the idea that the threat of litigation could potentially be deemed to be a tortious interference.

In Soterion Corp. v. Soteria Mezzanine Corp.^[1], Soteria Investment Holdings, Inc. (“Soteria”) was attempting to sell medical imaging centers when it claimed that Soterion Corporation (“Soterion”) began tortiously interfering with the prospective sales.  According to Soteria, the threat of, and ultimate filing of a complaint by Soterion, which included statements Soterion knew to be false, caused the prospective buyer, Tenet Healthcare Systems to delay the closing of the sale on one of the properties.^[2] 

Prior to the filing of the complaint, Soterion took an active role in meddling in Soteria’s business affairs when it sent a fax to the CEO of Lake Cumberland, the prospective buyer of another Soteria property.  The fax included a draft of the complaint (“Complaint”) that Soterion was preparing to file as well as a copy of a separate lawsuit filed by another party, Juju, LLC (“Juju”), against Soteria.^[3]  According to the letter that was part of the fax, the Complaint was going to be filed that day, November 1, 2010, but was not ultimately filed for another three months.^[4]  Further, the letter alleged that Soteria was attempting to sell assets without proper authorization.  After receiving the fax, Lake Cumberland was unwilling to close the deal with Soteria until all lawsuits were resolved, thereby putting a hold on all business dealings with Soteria.^[5] 

The Delaware Chancery Court used a four step test to determine whether a tortious interference with a prospective business opportunity occurred.  In order to prove this claim, Soteria had to show: (a) the reasonable probability of a business opportunity, (b) the intentional interference by Soterion, (c) proximate causation, and (d) damages.^[6] 

After a review of each the above four prongs, the court found that all but (c) were met.  It was clear that there was a reasonable business opportunity that Soterion intentionally interfered by sending the fax to Lake Cumberland and ultimately filing suit against Soteria.  Further, Soteria was clearly damaged as its prospective business opportunity fell through as a result of Soterion’s actions.  What was not possible to show, according to the court, was proximate causation.

Delaware recognizes “but for” causation where a “defendant’s conduct is a cause of the event if the event would not have occurred but for that conduct…”^[7] (emphasis added).  In Soterion, the court reasoned that because Soteria’s litigation with Juju predated the fax sent to Lake Cumberland and Soteria was going to have to disclose this information at some point to a prospective property buyer, the transaction would have been put on hold without Soterion’s interference.^[8]  As a result, the court found that there was no proximate (“but for”) causation linking Soterion’s actions to the deterioration of Soteria’s sale arrangement. 

Without Soteria’s litigation with Juju, the court would have likely found that Soterion’s act of faxing a draft complaint to Lake Cumberland to be a tortious interference.  The proximate causation was clear without the Juju litigation as the deal would have been completed but for Soterion’s fax to Lake Cumberland.  As such, it is important to keep in mind that actions always have reactions.  Even the threat of litigation can lead to litigation as a result of that threat of litigation.  What a mouthful!