On April 18, 2023, Justice Borrok of the New York County Commercial Division issued a decision in Triad Holding Co., LLC v. Triad Consulting Engrs. Holdings, Inc., 2023 NY Slip Op. 31231(U), holding that the economic interest doctrine barred a tortious interference claim, explaining:
To plead tortious interference of contract, a plaintiff must allege (i) the existence of a valid contract between plaintiff and a third party, (ii) the defendant’s knowledge of that contract, (iii) the defendant’s intentional procuring of the breach, and (iv) damages. Where a plaintiff alleges interference with contract, a defendant may raise an economic interest defense, i.e., that it acted to protect its own legal or financial stake in the breaching party’s business.
New York courts have held that the economic interest privilege applies to a stockholder alleged to have interfered with a contract entered into by any subsidiary, affiliate, or company in which that stockholder had a financial stake. Inasmuch as the Buyer is a wholly owned subsidiary of AMA which in turn, is a portfolio company of DCCP, the economic interest privilege appears to apply.
However, the economic interest privilege is not without exception. In order to come within the exception, a plaintiff must plead specific facts showing that the defendants engaged in malicious, illegal or fraudulent behavior. Even a showing of bad faith,
(Internal quotations and citations omitted) (emphasis added).
without more, does not satisfy the malice requirement. As discussed above, the Buyer alleges that the defendants changed the LSIS Reserve from 50% to 100% just one day before the deadline to resolve the Disputed Items to avoid paying the earnout. Although perhaps bad faith, this does not constitute malicious, illegal or fraudulent conduct. Among other things, as discussed above, the Seller could still object and the issue would be resolved by independent accountants as provided for in the SPA. For the avoidance of doubt, discovery may reveal that there was appropriate reason for the change in position and, in any event, the Seller was on notice from the outset that the LSIS Reserve was being heavily discounted.