When most people think about business law, they probably think about the law of contracts. While the majority of business disputes revolve around bargained-for agreements between parties, there are also causes of action sounding in tort that might be applicable.
Tort law involves civil liabilities for harm done or inflicted, intentionally or not, typically to one’s person or property. However, there are also tort theories that provide a basis to recover for harm done to a business’s practice and/or reputation. These claims can result in an award of compensatory damages for lost business, punitive damages as a penalty to the defendant, and/or injunctive relief to stop the defendant’s tortious behavior.
Business torts generally result in harm to a business’s reputation, relationships with other business parties, and/or intellectual property. The most common Arizona law business torts our attorneys litigate are summarized below.
Breach of Fiduciary Duty
Fiduciary duty claims are perhaps the most common tort cause of action associated with business disputes, and often involve a contractual element. There are two types of fiduciary relationships: (1) those specifically created by a contract or formal legal proceeding; and (2) those implied in law arising from specific relationships and/or transactions between the parties. With regard to the latter, the existence of a fiduciary duty depends on specific facts, including the nature and scope of the parties’ relationship.
In the business context, Arizona courts have found fiduciary relationships to exist between the following parties: attorney and client; corporate director and corporation; amongst partners in a partnership; general partner to limited partner; joint ventures; broker and client; agent and principal; real estate agent/broker and principal; escrow agent to parties to a transaction; and trustee and parties to, or beneficiaries of, a trust. Additionally, accountants and auditors may owe their clients fiduciary duties under certain circumstances.
An array of business-related injuries can give rise to fraud claims, ranging from misrepresentation of financial records or other business documents to embezzlement. Notably, plaintiffs bringing breach of fiduciary duty and/or fraud claims in connection with business relationships should pay heed to the economic loss rule – a common law rule recognized by Arizona courts that may operate to bar tort claims in some instances where a specific contract governs the parties' relationship.
Tortious interference arises where a company attempts to economically damage a competitor by interfering with an existing or prospective contract or business relationship with a third-party. While Arizona courts have not been universal in their terminology, Arizona law generally recognizes two causes of action: (1) tortious interference with a contract; and (2) tortious interference with a business expectancy. The general difference between these two claims is whether there was an existing contract between the plaintiff and the third-party or merely an expectation of a prospective business relationship or economic advantage. In either case, the plaintiff must show, among other elements, that the defendant had knowledge of the contract or business expectancy interfered with.
Defamation, Disparagement, and Trade Libel
There are multiple potential causes of action that arise from communications of false and damaging statements about a business. Generally, defamation arises from harms to a business’s reputation, while disparagement arises from harms to the business’s economic potential. Arizona courts have also recognized claims for trade libel which involves false statements that disparage property or a specific product associated with a business.
Our attorneys have substantial experience litigating all types of business matters, including those involving business torts. If you are involved in a dispute which might involve tortious business conduct, please contact Grant Frazier ([email protected]) or Olivier Beabeau ([email protected]).