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What is an Economic Tort?
An economic tort is injury to a person’s business or business interest that results in damages. The four main categories of economic tort are conspiracy, inducement to breach of contract, unlawful interference, and intimidation. Courts are often careful to balance the claims of an economic tort lawsuit and the right to fair competition under business and labor laws. Unions are often sued for tort damages, with the primary claims being based on intimidation or conspiracy. Plaintiffs may also claim tort damages based on breach of contract lawsuits in employment or business relations.
The aim of economic tort law is to protect the wealth of individuals who conduct a trade. Injuries that go beyond the scope of a pure economic loss, which is financial loss only and not a physical, mental, or emotional injury, are often not considered as tort damages. For example, damages that result from a loss of product value because of a defendant’s unlawful interference with the plaintiff’s production of goods is a pure economic loss. The plaintiff would sue under a broader tort law if he or she also suffered a physical injury as a result of the defendant’s interference. Plaintiffs often file these tort claims as secondary claims, and the primary claims are often based on tort, contract, or other laws.
A conspiracy economic tort is when two or more persons agree to cause damage to a business by an unlawful act. Crimes, torts, or breaches of contract are common unlawful acts that are proved in these types of tort lawsuits. An inducement to breach of contract is when a defendant convinces a third party to break a contract with the plaintiff or uses unlawful means to stop the contract from being performed according to its terms. Unlawful interference is when the defendant is accused of unlawful conduct that results in an unfair competitive advantage over the defendant. Intimidation occurs when the plaintiff claims that the defendant made threats that resulted in damages to the plaintiff’s business.
Good faith and fair dealing are often expectations of business owners when conducting a business or trade, and these expectations are protected by economic tort laws. Contracts often imply both, and when there’s a breach of good faith or fair dealing in performing contractual obligations, there is a resulting tort. The plaintiff would still have to prove pure economic loss damages, but he or she could also claim tort damage based on lack of good faith and fair dealing claims.
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![An economic tort is an injury to a person's business that can result in a lawsuit.]()
By: epitaviAn economic tort is an injury to a person's business that can result in a lawsuit.
Discussion Comments
@Azuza - I disagree. I really think that our industries need to be less regulated in this country. If two businesses want to conspire to run another business out, and it works, the business must not have been that strong to being with. Why should this be illegal? Or, if someone is induced to breach their contract, they must not have been that set on keeping it anyway!
In my opinion, economic torts don't have a place in court, unlike a tort of negligence. Business dealings aren't as cut and dried as something like reckless driving!
@burcidi - I'm pretty sure that anyone can be sued for an economic tort. It doesn't have to be one business suing another business. It could be a business suing an individual, another business, or an organization like a labor union. I'm not sure that a strike would count as a tort. Although, I'm not an expert in the law of tort, so I could be wrong!
Anyway, I think it's great that businesses can seek legal remedies in court for stuff like this. Fair competition is one thing, but "playing dirty" is quite another, and shouldn't be allowed!
I don't understand how labor unions can be sued for economic torts. An economic tort is filed when there's physical and monetary losses, right? But a labor union is not a business and it doesn't aim to make profits, so how can it be sued for economic tort?
Labor unions work to protect the rights of workers. I understand that a business can have monetary losses if the workers go on strike and not work for a while. But aren't there rules that prevent labor unions to call for a strike except under certain conditions? After all, the strike is to regain the rights of workers.
If every business sued a labor union every time there was a strike, labor unions could not survive financially.
@ddljohn-- Yes, that would be considered an economic tort, specifically, the conspiracy to injure.
Price fixing was a common practice between firms before tort laws were made which prohibited them. But it's no longer considered legal. Firms are not allowed to conspire and make agreements where they collectively and intentionally change how much product they are putting out or what they're prices are. If they do this and it's proven, they can face huge fines by the government.
I think it must be very challenging for courts to determine if there is an economic tort of it's just competition.
For example, in the article I read for class, it had an example about several firms cooperating and lowering their prices to drive another firm out of that market.
Now is this a pure economic loss tort or just competition?
It seems like there is such a thin line to distinguish between the two.
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