Businesses of all sizes in many different industries have faced countless struggles in 2024 alone. Despite this, it’s imperative that business owners remain aware of potential conflicts that could arise and hurt or derail operations even further. Having a good understanding of the several different types of business torts that could arise and what they entail can help business owners be aware of potential threats to their company.
At Feldman & Feldman, our Houston business litigation lawyers understand the current environment and where your company may face risks in the future. To understand more about how your business may be at risk of tort action, contact us to arrange a consultation today.
What are Business Torts?
Also known as an economic tort, a business tort refers to a wrongful action taken against a business intending to cause it harm. These specific types of torts may result in lost profits, negatively affected reputation, loss of competitive advantage, and loss of market share, among other issues. Business torts can be committed intentionally by a competing business or they can be the result of negligent behavior by individuals or other companies.
Various tort laws serve two basic purposes: to compensate a victim for any losses caused as a result of the action and to deter them from making the same violation in the future. Some of the most common types of business torts include the following:
Tortious Interference
Tortious interference can happen prior to a contract being formed between two parties and is the deliberate and unlawful interference within a company’s contractual dealings or business relationships. Such interference with a contract can happen when a third-party intentionally causes a contracting party to commit a breach of contract or when the third-party disrupts the ability of another to perform their obligations under the contract.
This results in the business not receiving the performance promised within the contract terms. Companies that suffer tortious interference have the right to seek remedies for frivolous pleadings and claims under Texas law.
A qualified business litigation law firm like Feldman & Feldman can manage your response to tortious interference while you focus on your company’s success.
Restraint of Trade
Restraint of trade is a type of economic injury involving meddling with a business’s ability to conduct business freely. According to Texas Business and Commerce Code Title 2 Chapter 15, monopolies and conspiracies to restrain fair trade are unlawful and subject to appropriate civil action from the affected entities. This can refer to any activity that limits sales, trade, and transportation via interstate commerce or otherwise severely affects interstate commerce.
Additionally, different businesses and individuals must not partake in certain actions or enter into agreements that would result in another business ceasing to operate as normal.
Injurious Falsehood
Injurious falsehood is an intentionally false statement made in order to cause damage to another business. Injurious falsehood is classified as a business tort, as false statements can damage a person’s business reputation or the reputation of a business as a whole.
In order to prove an injurious falsehood occurred, the plaintiff must present evidence that the defendant acted maliciously with intent to harm the plaintiff’s business ventures. They must show the individual or competing business knew that the statements were false when they were made. Cases involving injurious falsehood may also include allegations of slander of title, trade libel, and disparagement.
Unfair Competition
Unfair competition refers to the competing of two businesses on unequal terms as a result of favorable or disadvantageous conditions that have been applied to some competitors but not others. Additionally, unfair competition can also be found in situations where the actions of certain competitors harm others by preventing competition on equal terms.
Examples of unfair competition behaviors include:
- Breach of a restrictive covenant in real property transfer
- Disparagement
- Failure to truthfully disclose a product’s origin or manufacturer
- Theft of trade secrets or confidential information
- Trademark or copyright infringement
Fraudulent Misrepresentation
Fraudulent misrepresentation is deliberate deception in order to secure unfair or unlawful gain. The intent behind this business tort makes it one of the most deliberate types of misrepresentation that carries severe penalties. Fraudulent misrepresentation can be any act that would ultimately deceive another person or business, including gestures, innuendos, half-truths, or even silence.
Shareholder Oppression and Derivative Actions
Shareholder oppression occurs frequently in privately owned companies where some members hold a majority share of the stock. They can effectively force minority shareholders into actions the minority individuals may not necessarily support, by virtue of having a larger vote percentage. When the majority operates in bad faith, the minority holders must demonstrate their oppressive acts.
While the Texas Supreme Court decision in Ritchie v. Rupe significantly altered the viability of shareholder oppression in the state, minority shareholders still have options when treated unfairly. When squeeze-outs loom, they can turn to derivative actions through the assistance of qualified business litigation attorneys to protect their rights and holdings.
These shareholders must provide support for their claims by meeting reasonable expectations and fair dealing tests. The Court’s majority opinion ruled that minority shareholders now have the option to define a company’s abuse of authority to include the intent to cause harm along with actual damage. Finally, the decision established rehabilitative receivership as the sole remedy for shareholder oppression under Texas Business Organizations Code 11.404.
How to Defend Your Company Against Business Torts
The first step in defending your business against unfair torts is to identify the problem and who is at fault. With established procedures and safeguards, you can likely determine these factors before too much harm occurs. However, there may be instances where the threat is subtle or hard to trace. Regardless of the circumstances, your business tort attorney can put their support team to work uncovering the critical details so you can proceed.
Once you understand the scope of the issue, you may consider a few remedies against the at-fault party:
- Financial compensation: You may demand a monetary payment equal to the actual economic losses and the reputational damage your company suffered.
- Court injunction: You and your lawyer can petition a court to issue an injunction against the liable party, forcing them to halt their actions and the harm to your business.
- Enact contractual breach clauses: If the harm occurs between parties to a contract, the agreement may have clauses describing each party’s remedies in the event of a breach. Your company may formally request the other party honor the contract terms by action or payment, enlisting judicial support when necessary.
Take Action Early
The best way to fight against business torts is to institute preventative business practices that seek to stop problems before they start. By maintaining transparent methods and actions, accurately and ethically representing your products or services, and openly addressing issues, you build trust with your consumers and set defenses against unscrupulous actors. Always use contracts to clearly define business relationships with employees, contractors, vendors, suppliers, and other companies.
It’s also crucial that your business protect and vigorously defend its copyrights, trademarks, patents, and trade secrets. In any situation where your business fails to respond to infringement or theft, it steals time and resources from your company’s growth to take legal action and risks damaging your reputation. Employees must be properly trained and watchful for risks, reporting them immediately for legal action.
How a Business Litigation Law Firm Can Protect Your Company Against Business Torts
In addition to planning for growth and market share, you must prepare for obstacles such as business torts that can sidetrack the expansion your company needs. Doing so requires a sustained relationship with experienced business litigation attorneys who assess your current business environment and identify threats.
Your law firm can help your business institute protective measures and take aggressive action when risks arise.
At Feldman & Feldman, we counsel our clients regarding commercial disputes in all areas of commerce and guide them through contract drafting. It’s vital to build a strong defense through contract law and then continue fighting for your company’s future through fierce legal action when its rights are infringed. For over 40 years, we have advised companies across Texas to create a full suite of tools to promote and protect their business interests.
Types of Commercial Litigation Cases We Handle
Regardless of your company’s size or market share, you deserve superior legal representation when your financial future is under threat. Our team is ready to come to your aid in a range of case types, including:
- Breach of contract
- Breach of fiduciary duty
- Business appeals, dissolutions, and divorce
- Construction and real estate disputes
- Non-compete agreement disputes
- Employment litigation
- Franchise and partnership disputes
- Officer and director liability
When needed, we put our skills and experience to work, building the strongest case possible and negotiating settlements where appropriate. However, we are prepared for the courtroom from the beginning, with highly developed litigation skills to present documentation of your financial and reputational harm. We work to persuade the court of the other party’s negligence or malicious actions and their intent to damage your company.
Learn More About How Feldman & Feldman Can Protect Your Company’s Interests
Business torts can cause serious harm to the reputation of a company, as well as its day-to-day practices. The experienced commercial litigation attorneys at Feldman & Feldman can help ensure your business is protected when the unexpected happens. For over six decades, our law firm has focused on guiding Houston businesses through successful growth by ensuring they build effective defenses against threats.
At Feldman & Feldman, we know that business litigation requires strategic and effective legal strategies in order to hold the responsible parties accountable. If you believe your business has suffered due to a business tort caused by another operation or individual, contact our offices today to see how we can help.