Opinion ID: 1226463
Heading Depth: 2
Heading Rank: 3

Heading: interference with business relations claim

Text: In the absence of enforceable contracts, the Catskill Group hopes to prevail on a claim for tortious interference with business relations. To state a claim for this tort under New York law, four conditions must be met: (1) the plaintiff had business relations with a third party; (2) the defendant interfered with those business relations; (3) the defendant acted for a wrongful purpose or used dishonest, unfair, or improper means; and (4) the defendant's acts injured the relationship. See Lombard v. Booz-Allen & Hamilton, Inc., 280 F.3d 209, 214 (2d Cir.2002) (describing the tort by an alternative name, tortious interference with prospective economic advantage); Goldhirsh Group, Inc. v. Alpert 107 F.3d 105, 108-09 (2d Cir.1997) (stating the elements as constitutive of tortious interference with . . . business relations). Only the third and fourth elements are at issue here, and we do not reach the latter because we conclude below that the Catskill Group has failed to present a triable issue of fact on element three, wrongful means. The wrongful means requirement makes alleging and proving a tortious interference claim with business relations more demanding than proving a tortious interference with contract claim. Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 191, 428 N.Y.S.2d 628, 632, 406 N.E.2d 445, 449-50 (1980) (describing the interference with business relations tort by an alternative name, interference with prospective contractual relations and describing element three as wrongful means). The standard is more demanding because a plaintiff's mere interest or expectation in establishing a contractual relationship must be balanced against the competing interest of the interferer, id., 428 N.Y.S.2d at 632, 406 N.E.2d at 449, as well as the broader policy of fostering healthy competition, NBT Bancorp Inc. v. Fleet/Norstar Fin. Group, Inc., 87 N.Y.2d 614, 623, 641 N.Y.S.2d 581, 586, 664 N.E.2d 492, 497 (1996). While a defendant's commission of a crime or an independent tort clearly constitutes wrongful means, such acts are not essential to find wrongful means. See Carvel Corp. v. Noonan, 3 N.Y.3d 182, 189, 785 N.Y.S.2d 359, 361-62, 818 N.E.2d 1100, 1102-03 (2004); see also Hannex Corp. v. GMI, Inc., 140 F.3d 194, 206 (2d Cir.1998) (holding that participating in a knowing breach of fiduciary duty can constitute wrongful means). Here, the Catskill Group contends that the record contains ample evidence to permit reasonable jurors to conclude that Park Place engaged in wrongful means. The Catskill Group's claim centers around the following three themes:  Park Place defrauded two individualsGary Melius and Ivan Kaufman to obtain favorable introductions to the Tribe, and then defrauded the Tribe by falsely representing to the Tribe that no delay in the project would be occasioned by partnering with Park Place;  Park Place committed the tort of knowing participation in another's breach of fiduciary duty, specifically Kaufman's breach of his fiduciary duty to the Tribe, by intentionally slowing payroll at the Akwesasne casino. Park Place then ratified or knowingly accepted the benefits of that breach by positioning itself as the Tribe's financial savior; and  Park Place exerted economic pressure on the Tribe by making Park Place's $3 million loan to the Tribe contingent upon the Tribe's abandonment of the Catskill Group. We reject each of these theories.

There is no dispute that Park Place gained initial access to the Tribe through Melius and Kaufman, each of whom had pre-existing relationships with the Tribe. The Catskill Group contends, however, that Park Place used fraudulent means to induce Melius and Kaufman to introduce Park Place to the Tribe, thereby committing the requisite wrongful act for an interference claim. The district courtwithout determining whether Park Place had engaged in the fraud allegedheld that Park Place's action could not form the basis of an interference with business relations claim because the alleged conduct was not directly injurious to either the Catskill Group or the Tribe. Catskill III, 217 F.Supp.2d at 439-40. The district court's holding is entirely consistent with what we have previously recognized in other contexts: a plaintiff must demonstrate both wrongful means and that the wrongful acts were the proximate cause of the alleged injury. State St. Bank & Trust Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 171-72 (2d Cir.2004) (citing Pacheco v. United Med. Assocs., P. C., 305 A.D.2d 711, 712, 759 N.Y.S.2d 556 (3d Dep't 2003)); Jabbour v. Albany Med. Ctr., 237 A.D.2d 787, 790, 654 N.Y.S.2d 862 (3d Dep't 1997). Because any fraud by Park Place against Kaufman and Melius did not directly cause the Catskill Group (or the Tribe) any harm, this theory of liability fails as a matter of law. See Excel Group, Inc. v. Permis Constr. Corp., 254 A.D.2d 451, 452, 678 N.Y.S.2d 778, 778 (2d Dep't 1998) (defendant's improper use of a report in violation of its agreement with a third-party did not make the defendant's interference with plaintiff's business relationship wrongful). Two cases upon which the Catskill Group relies Sommer v. Kaufman, 59 A.D.2d 843, 399 N.Y.S.2d 7 (1st Dep't 1977), and Pagliaccio v. Holborn Corp., 289 A.D.2d 85, 734 N.Y.S.2d 148 (1st Dep't 2001)are inapposite. In both of those cases the defendant's wrongful conduct against third-parties bore a direct nexus to the relationship with which the defendant interfered. See Sommer, 59 A.D.2d at 843, 399 N.Y.S.2d at 7-8 (defendants directly injured plaintiff by bribing public official to deny plaintiff a building permit for the subject project); Pagliaccio, 289 A.D.2d at 85, 734 N.Y.S.2d at 149 (defendants alleged to have directly injured plaintiff by threatening plaintiff's employer with harm if plaintiff's employment was not terminated). Here, by contrast, the alleged fraud against Melius and Kaufmanwhich netted an introduction to the Tribehad at most a tenuous relation to the harm alleged.
The Catskill Group's claim that Park Place also committed fraud against the Tribe when, in the final stages of negotiations, Park Place announced that it could switch the limited approval the Catskill Group had obtained to Park Place's site without any significant loss of time. The district court held that Park Place's assurance (which turned out to be false) was not actionable because it was mere puffery, and the Tribal Chiefs testified that they did not rely on [Park Place's] corporate braggadoccio. Catskill III, 217 F.Supp.2d at 437. Although the Catskill Group acknowledges the general principle that statements of opinion generally cannot constitute fraud, see, e.g., George Backer Mgmt. Corp. v. Acme Quilting Co., 46 N.Y.2d 211, 220, 413 N.Y.S.2d 135, 140, 385 N.E.2d 1062, 1067 (1978), the Catskill Group relies on the narrow exception to that rule: namely, that opinions  may constitute actionable fraud where a present intent to deceive exists. Magnaleasing, Inc. v. Staten Island Mall, 563 F.2d 567, 569 (2d Cir.1977) (emphasis added); see also Harsco Corp. v. Segui, 91 F.3d 337, 346 n. 7 (2d Cir.1996) ([F]raud liability may attach when a person state[s] that something was to be done when he kn[ows] all the time it was not to be done and that his representations were false. (internal quotation marks omitted)). In particular, the Catskill Group maintains that Park Place made the assurance of timeliness to the Tribe knowing full well that its assurance was false. The fatal shortcoming of the Catskill Group's theory, however, is the absence of any facts to support it. Clive Cummis Park Place's former vice-president, who made the alleged assurancetestified that his statement was based upon his then-knowledge of the federal approval process, which was based on advice of counsel. Moreover, the Tribal Chiefs testified in their depositions that they did not rely on Park Place's alleged assurance, and that testimony stands uncontroverted. Absent any evidence that Cummins's statement was motivated by an attempt to deceive, that it did in fact deceive the Tribe, or that Park Place had any knowledge superior to the Tribe's with respect to the anticipated timing of events beyond either party's control, the district court properly rejected the Catskill Group's allegation of wrongful means against the Tribe.
The Catskill Group further contends that Park Place used wrongful means insofar as it knowingly participated in a breach of fiduciary duty owed to the Tribe by Kaufman as the principal of the manager of the Tribe's Akwesasne casino. More specifically, the Catskill Group contends that Kaufman improperly used his position at Akwesasne to slow that casino's payroll, in an attempt to put a financial squeeze on the Tribe, with the ultimate aim of inducing the Tribe to look to Park Place for a financial bailout. The Catskill Group contends that Kaufman was motivated by the significant fee allegedly promised to him by Park Place in the event that Park Place took over the management contract at Akwesasne and/or entered into a contract with the Tribe for a new casino in the Catskills. In Hannex Corp., we recognized that the commission of the tort of knowing participation in a breach of fiduciary duty supports a finding of wrongful means. 140 F.3d at 206. The elements of that tort are: (1) a breach by a fiduciary of obligations to another; (2) the defendant's knowing inducement of or participation in the breach; and (3) damages suffered by the plaintiff from the breach. Id. at 203. With respect to the second element, [o]ne participates in a fiduciary's breach if he or she affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables it to proceed. Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 284 (2d Cir.1992), overruled on other grounds by Gerosa v. Savasta & Co., 329 F.3d 317, 319 (2d Cir.2003). As factual support for its claim that Park Place knowingly participated in Kaufman's alleged breach of duty to the Tribe, the Catskill Group relies almost exclusively on an excerpt from a taped conversation on February 16, 2000 between Kaufman and Cummis: KAUFMAN: . . . But you got to remember the pressure on them with how we're squeezing them in Akwesasne is huge. I mean theyyou know, I have kind of delayed their payrolls and CUMMIS: Yeah. KAUFMAN:slowed it down so badly that, you know, they're looking at Arthur as the savior [i.e., Arthur Goldberg, Park Place's then-CEO]. CUMMIS: Yep, they are. KAUFMAN: And it is great. I mean I never would have thought that you would have gotten where you have gotten, but I guess Arthur is a genius. CUMMIS: He's pretty good. I'm not bad. He's pretty good. KAUFMAN: You must be a hell of a team. CUMMIS: Yeah. KAUFMAN: I mean I have been around a little bit, but not as much as you guys. But to take a situation like thisremember we started with our letter of intent and they said never would they give an exclusive. CUMMIS: Yeah. KAUFMAN: But you guys can maneuver. I'm impressed. CUMMIS: They've given it to us now. Now, we had better get together about the financial situation.    The Catskill Group contends that reasonable jurors could infer from this conversation that Park Place: (1) devised the alleged scheme to financially squeeze the Tribe; (2) provided advice or encouragement to act; (3) provided financial comfort to Kaufman by offering him money in the event that Park Place took over the management of Akwesasne; and (4) ratified Kaufman's breach by entering into agreements with the Tribe notwithstanding Park Place's knowledge of Kaufman's breach. The first two contentions warrant little discussion. The tape at most suggests that Park Place knew about Kaufman's plan to financially squeeze the Tribe through payroll slowdown. There is no evidence, however, that Park Place devised the scheme. Moreover, given that the conversation in the tape occurred after the payroll slowdowns, the tape itself cannot be used to demonstrate that Park Place provided advice or encouragement to act. The Catskill Group's remaining contentions warrant closer scrutiny, however. With respect to their financial support theory, the Catskill Group principally relies on S & K Sales Co. v. Nike, Inc. 816 F.2d 843 (2d Cir.1987), in which we held that the defendant had participated in the breach of a third-party's fiduciary duty to his employer, the plaintiff. Id. at 850. Although it is fair to assume from the facts of that case that the third-party took comfort in breaching his duty to plaintiff in light of defendants' offer of employment to the third-party, it was not on that basis and certainly not on that basis alonethat we found the defendant to have knowingly participated in the breach of fiduciary duty. Rather, unlike in this case, the evidence in S & K Sales Co. was that the defendant directly and concretely participated in the breach of duty by, inter alia, (1) sending misleading letters to the plaintiff on the basis of the third-party fiduciary's request, and (2) authorizing the third-party fiduciary to solicit the plaintiff's employees to work for defendant. Id. Thus, even if Park Place had assured Kaufman of financial comfort to induce his alleged breach of duty, we believe that assurance is insufficient, on its own, to establish the participation necessary to support a claim. Nor is Park Place's alleged ratification of Kaufman's breach sufficient, either alone or in combination with plaintiff's other assertions, to establish wrongful means. The Catskill Group's ratification theory is drawn principally from Diduck, in which we affirmed the district court's finding that a defendant had participated in a union official's breach of fiduciary duty to an ERISA fund. 974 F.2d at 284. We held that the defendant's continued association with the union official and underpayments to the union, after the defendant was put on notice of the breach, crossed the threshold of tortious participation: Once put on notice of the breach, [the defendant] could not continue its association with [the union official] as if his conduct were not questionable. Its failure to inquire into the propriety of that conduct and take appropriate action was a substantial factor facilitating the breach. Making payments that [the defendant] knew or should have known short-changed the funds effectively ratified [the union official's] conduct. Id. Diduck is distinguishable, however, because the defendants' conduct of, inter alia, making short payments to the ERISA fund proximately caused a portion of the alleged injury. See id. In stark contrast, Park Place's dealings with Kaufman after the alleged breach occurred were not a substantial factor causing the Catskill Group any harm. Moreover, the Catskill Group's claim that Park Place should be accountable simply because it continued associating with Kaufman after, and with knowledge of, his alleged breach cannot be squared with our decision in S & K Sales Co. There, we questioned the propriety of a jury instruction that permitted a finding of liability if the defendant participated in [the third party's] breach of his duty of loyalty, or that [defendant] knowingly accepted the benefits of [the third-party's] breach of his duty of loyalty. S & K Sales Co., 816 F.2d at 849. It was the instruction's disjunctive orand in particular the knowing[] accept[ance] prong of itthat troubled us. Ultimately, we did not in S & K resolve the issue of whether the challenged instruction was legally erroneous, because we found no prejudice to the defendant in light of the charge as a whole, which made clear that liability could attach only if the defendant both participated in the third-party's breach and if the defendant accepted the benefits of the breach. Id. at 849-50. We now hold what we intimated in S & K Sales Co.: the knowing acceptance of benefits alone is insufficient to sustain a claim for participating in the breach of a fiduciary duty. See id. at 849 (Nike could not have been prejudiced because the charge as a whole correctly conveyed to the jury the proper standard and emphasized the element of `participation' as the essence of the claim.).
Finally, we reject the Catskill Group's claim that Park Place used wrongful means, in the form of economic pressure, to interfere with the Catskill Group's business relations with the Tribe. In particular, the Catskill Group claims that Park Place sought to capitalize on the Tribe's financial difficulty by agreeing to loan the Tribe $3 million in exchange for a contract giving Park Place exclusive development rights with the Tribe. In Carvel Corp., the New York Court of Appeals explained that for economic pressure to constitute wrongful means, such pressure must have been for the sole purpose of inflicting intentional harm on plaintiffs. 3 N.Y.3d at 190, 785 N.Y.S.2d at 362, 818 N.E.2d at 1103 (quoting NBT Bancorp, Inc., 215 A.D.2d at 990, 628 N.Y.S.2d at 408-10). There is no evidence of that here; indeed, the evidence shows that Park Place offered the loan to promote its own legitimate business interests in the gaming industry. As the district court succinctly explained: The situation here is relatively simple. The Tribe needed money. Park Place had money. The Tribe asked Park Place for money. Park Place had no obligation to give the Tribe any money. So it bargained with the Tribe. Both parties came to the decision that an exclusive casino development contract was a fair trade for the immediate $3 million loan. That is not improper economic pressure. Catskill III, 217 F.Supp.2d at 439. We agree. Because the Catskill Group has failed to present a triable issue of fact on the required element of wrongful means, we affirm the district court's grant of summary judgment to Park Place dismissing the tortious interference with business relations claim.