Business Torts – How they can Affect Your Business?

August 5, 2021

Torts are intentional, neglectful, or reckless acts that cause individuals or entities unlawful harm. Economic (business) torts refer to wrongful acts specifically impacting businesses. These acts may involve anything from trade secret theft to false and disparaging statements. While trademark infringement, defective products, and breached employment agreements might also harm businesses, Virginia recognizes a handful of traditional business torts.

Recovering compensation for these wrongs requires a detailed economic analysis of the entity’s actual and projected losses, and courts often dismiss economic tort claims for evidentiary failures. If your business recently suffered harm stemming from unlawful conduct, you need a business litigation lawyer from McClanahan Powers, PLLC. Connect with our Virginia and D.C. economic tort attorneys today by calling (703) 520-1326 or contacting us online.

Understanding How Traditional Business Torts Impact Businesses

Every state recognizes different economic torts, but they often cover the same wrongful conduct. The state where the harm occurred generally dictates an entity’s recovery rights, but most states recognize the following major business torts.

Tortious Interference with a Business Relationship or Contract Expectancy

Both Virginia and D.C. recognize this tort, which covers intentional misconduct that essentially destroys an otherwise established business relationship or contract. Examples include employees undercutting the business to steal clients, i.e., offering to perform the services for less, or competitors lying to suppliers to steal lucrative contracts. These unlawful actions often damage your reputation while simultaneously siphoning needed profits. To prove tortious interference in Virginia, the business entity must show that:

  • A profitable business relationship or contract existed with probable future economic benefits
  • The wrongdoer, either another business or individual, knew about the relationship/contract
  • The wrongdoer intentionally interfered with that business relationship/expectancy and, absent this misconduct, the business would have economically benefited from the relationship, and
  • The wronged business suffered damages

Damages generally include the value of the lost opportunity, including expected profits, but might also include lost goodwill. Importantly, this tort only covers established (or sure to be established) business relationships or contracts. It’s not unlawful for another company to entice your clients lawfully or compete for business. But it is unlawful for them to convince clients to breach an established contract by lying to valuable customers about your products.

Business Defamation (Commercial Disparagement or Trade Libel)

With the popularity of online reviews and ratings, many businesses rely on positive online feedback. One scathing review can completely change your online rating and public perception. Corporate entities may sue individuals or other businesses for publishing – either speaking or writing – clearly false statements that negatively impact the company. The statements must relate to the business itself or business owners closely associated with the entity.

Trade libel is considered defamation per se in Virginia. This means courts assume the statements damaged the business’s goodwill without requiring specific proof of damages. Unfortunately, recovering damages for and removing false online customer reviews presents legal challenges. Most web hosts, i.e., Facebook or Yelp, are protected from liability for third-party statements by federal law. Reviewers might also implicate the Consumer Review Fairness Act. If you’ve heard rumors or located blatantly false online statements about your company, connect with local business defamation counsel immediately. Some claims expire after only one year.

Theft of Trade Secrets

Both federal and state laws protect businesses’ valuable trade secrets, which often include prototypes, recipes, algorithms, formulas, blueprints, and strategic plans. These protections stem from legislation, including the Virginia Uniform Trade Secrets Act and federal Defend Trade Secrets Act, but entities may enforce these rights in civil court. To successfully recover damages for trade secret theft, businesses must derive economic value from their secrecy and take reasonable steps to protect them from exposure. Trade secret exposure could completely undercut your business’ value. [Learn more about protecting company trade secrets, especially in a remote work environment, here.] 

Civil Conspiracy & Breach of Fiduciary Duties

If two or more individuals conspire together to commit unlawful acts against businesses, entities might demand compensation for civil conspiracy. Cases involving one or more corporate officers or managers, i.e., stealing client lists and then quitting to join competitors, might also implicate breach of fiduciary duty claims. Civil conspiracy claims require committing an underlying business tort, such as unlawfully disparaging the company and multiple participants. Because these are civil and not criminal claims, attempted civil conspiracy cannot support business tort litigation. However, officers might still bear liability for breaching fiduciary duties by attempting to undermine your business. If multiple employees resigned to join competitors or you suspect corporate espionage, connect with the Virginia and D.C. civil conspiracy litigators at McClanahan Powers, PLLC immediately.

Recovering Compensation for Tortious Conduct Impacting Businesses

Courts understand how even one false review, stolen contract, or exposed trade secret can disproportionately devalue your company. Many small businesses put it all on the line to obtain valuable contracts and may face bankruptcy after tortious interference. As such, business entities might recover substantial financial damages following successful economic tort litigation. Damages may include the following:

  • Lost expected profits
  • Lost business goodwill and reputation
  • Marketing expenses for restoring goodwill and combating false statements
  • The value of stolen trade secrets
  • Expenses to replace contracted employees and minimize losses due to corporate espionage
  • Legal costs and attorney’s fees
  • Triple damages (punitive damages) for malicious trade secret theft

Establishing these damages frequently requires expert business economists, as companies cannot recover money for speculative losses. For example, a business might recover its expected profits after tortious interference with a contract but cannot generally demand compensation for future potential business stemming from the broken relationship. It’s also difficult to calculate lost goodwill without assistance from experts in your trade. While businesses might have strong evidence supporting liability, these claims often fail for unproved damages.

Speak with a Virginia & D.C. Business Torts Attorney at McClanahan Powers, PLLC

One malicious complaint or rumor can damage your business value overnight. It’s essential to connect with the corporate litigators at McClanahan Powers, PLLC, immediately after discovering tortious conduct to minimize damages and recover your economic losses. Schedule an economic tort consultation today by calling (703) 520-1326 or contacting us online