Tort law is an expansive legal area which concerns one party’s alleged misconduct, and another’s claimed damages. Personal injury lawsuits are torts (a negligent driver who causes a crash can be held liable for a victim’s injuries) as are malpractice claims (a professional can be held accountable for a client’s resulting losses). There are also torts which relate to business.
Business Torts Explained
Also known as “economic torts,” business torts refer to wrongful acts against businesses that result in, or are likely to result in, losses.
While a personal injury claim may deal with “injury” to a person, business torts concern “injuries” to business interests. These are typically financial losses, but they may arise from or relate to lost business opportunities, clients, and professional relationships or reputation.
As civil wrongs, bustiness torts are not criminal offenses (though some may arise from conduct which can result in charges against a wrongdoer), and as such concern a defendant’s responsibility (or lack thereof) for damages suffered by plaintiffs. Those damages can be losses which have already occurred, or they may be losses likely to occur in the future.
Elements of a Business Tort
Proving liability for damages caused by a wrongful act (which may be a negligent, intentional, or reckless act) requires claimants to establish a few essential elements:
- Legal Duty (i.e. a defendant owed a “duty of care” to the plaintiff);
- Breach of Duty (the defendant failed to meet the duty of care);
- Damages (the plaintiff suffered actual damages, which were “reasonably foreseeable,” as a result of the defendant’s breach).
How a business tort is resolved is a fact-specific, and can vary case to case depending on a number of factors, including the nature of the claim and the severity and scope of damages. Resolutions may take the form of:
- Damages – In many cases, plaintiffs that prevail in business torts are awarded monetary compensation for their damages (which requires a careful accounting of any past and future expected losses suffered). This may include not only compensatory awards for actual damages (i.e. lost profits), but also punitive or exemplary damages, which may be awarded in cases involving egregious conduct (i.e. intentional malice, fraud) as a means to further punish and deter.
- Equitable Remedies – Equitable remedies can vary, but often include injunctions that order defendants to cease certain conduct or acts injurious to the plaintiff. Other equitable remedies include court-appointed receivership, profit disgorgement, forfeiture of fees, court-ordered dividends, recession, trustee removal, and asset freeze.
Although similar in intent, contractual breaches which give rise to a dispute, or legal action for breach of contract, are not “torts” by definition. While tort law imposes many implied duties owed by one party to another (in a non-contractual relationship), contracts create specific rights and responsibilities which between parties in a written agreement (a contractual relationship). Each have their unique rules and procedures, concerns and challenges, and available remedies.
Examples of Common Business Torts
- Breach of Fiduciary Duty – A claim that a defendant’s conduct constituted a breach of fiduciary duty owed to the plaintiff, and resulted in damages for which they should be liable or subject to some other equitable remedy (i.e. injunctive relief).
- Shareholder Oppression / Derivative Actions – A shareholder oppression cause of action may no longer exist in Texas, but there remain viable claims for minority shareholders to pursue when fighting back against squeeze-outs and corporate misconduct.
- Theft of Trade Secrets – Claims concerning a defendant’s trade secret violation / misappropriation of a plaintiff’s confidential information key to their competitive success (i.e. business plan, financial data, processes), and appropriate remedies (such as preliminary / permanent injunction or damages).
- Tortious Interference – Claims where defendants are alleged to have interfered with a plaintiff’s prospective business relationships (i.e. false claims or unlawful acts that dissuade clients or business partners), and caused the plaintiff damages. Tortious interference actions may also claim disruption of contracts.
- Fraud / Misrepresentation – Allegations of a defendant’s intentional deception of another, who relied on the fraudulent misrepresentation to their detriment. These claims typically seek compensatory damages, and in some cases may result in awards for punitive damages, or involve component to crime.
Business Litigation Attorneys: Prevention, Enforcement, Defense.
Business torts are complex, nuanced legal actions, and they require a careful accounting of available options, potential remedies, and appropriate courses of action. At Hendershot Cowart P.C., our Houston lawyers leverage decades of experience to help businesses and individuals address their legal needs – be they proactive protections to prevent and mitigate risks of litigation, or responsive action to stop wrongful acts / seek relief or defend against claims.
If you have questions about contracts, litigation, or other legal services for your business, call (713) 909-7323. Based in Houston, we serve clients across Texas and beyond.