In a highly competitive market, it’s not uncommon for businesses to lose customers, employees, or deals to rivals or competitors. Most of the time, that’s just business. The law may only step in when a third party crosses the line by intentionally disrupting a business relationship or contract through deceptive or wrongful conduct.
This is called Tortious Interference, and it’s a legal claim rooted in the idea that fair competition ends where malicious or unjustified interference begins.
It typically starts with behind-the-scenes actions: a competitor pressures a vendor to cut ties, an ex-employee recruits clients despite a non-solicitation agreement, or one business spreads false claims to undermine a competitor’s deal. If those result in lost revenue, severed contracts, or reputational damage, what began as strategic maneuvering can escalate into a legal claim.
How Michigan Law Defines Tortious Interference
In Michigan, the legal standards for proving claims are well-defined, but not always well-understood.
Courts recognize two distinct types of tortious interference: one involving existing contracts, and another involving business relationships or economic expectancy. To bring a valid claim, it’s not enough to show that a competitor lured away a client or employee. Claims involving interference with a contract must involve a valid, existing agreement, and a third party who intentionally caused a breach without being part of that contract.
For interference with a business relationship or the expectancy of profit, the standard is slightly broader, covering situations where no formal contract exists, but there was a reasonable prospect of economic gain.
How the Law Plays Out: What Courts Actually Require
Michigan case law shows that while tortious interference claims are frequently alleged, they are rarely straightforward, and often fail when the alleged conduct doesn’t meet the high threshold for wrongful intent or unjustified interference.
In Henslee, Monek & Henslee v. D.M. Central Transportation, a law firm sued an employer for settling directly with a client and allegedly interfering with a contingency fee agreement. The United States District Court for the Western District of Michigan rejected the claim, finding no wrongful conduct on the employer’s part and concluding that the fee agreement didn’t cover the value of the client’s re-employment. The ruling underscored how courts weigh justification heavily, even in sensitive legal arrangements.
A similar outcome emerged in Auburn Sales v. Cypros Trading, where a parts distributor blamed a business partner for sabotaging its Chrysler supply chain. Despite serious fallout – including an FBI raid and Auburn’s collapse – the United States District Court for the Eastern District of Michigan dismissed the tortious interference claim. Auburn couldn’t show that Cypros specifically intended to interfere with its Chrysler relationship, and the oral agreement between them was unenforceable under Michigan’s statute of frauds. That statute requires certain contracts (including those for the sale of goods over $1,000) to be in writing to be legally enforceable – highlighting the importance of formal agreements in business.
By contrast, Michigan’s Macomb County Circuit Court in Standex International v. Hamood allowed tortious interference and unfair competition claims to proceed. A former executive allegedly violated non-compete and non-solicitation agreements after joining a rival company, helping it recruit employees and expand in direct competition with Standex. While the trade secret claim was dismissed due to lack of specificity, the remaining claims carried on, proving that courts will scrutinize competitive behavior when it involves breaking valid agreements like non-competes or no-poaching clauses.
Preventing and Responding to Tortious Interference
Because tortious interference claims are so difficult to prove, the best protection is prevention. Businesses should start by establishing clear contractual boundaries, maintaining strong documentation, and creating internal protocols for pursuing new customers, employees, or vendors – all of which reduce the risk of both liability and vulnerability.
These are the best practices to follow:
- Use written contracts wherever possible. Oral agreements, while sometimes enforceable, are far harder to defend in court, especially under Michigan’s statute of frauds.
- Define restrictive covenants clearly. If your business uses non-compete, non-solicitation, or confidentiality agreements, ensure they are narrowly tailored, legally valid, and consistently enforced. Courts are more likely to intervene when these protections are in place and reasonably applied.
- Avoid aggressive recruitment tactics. When targeting employees or clients of a competitor, ensure your team avoids using confidential information, disparagement, or undue pressure. Consulting legal counsel before making a strategic hire or acquisition is a wise step.
- Train leadership on legal boundaries. Managers and executives should understand what qualifies as fair competition and what could be interpreted as interference.
If you suspect another party has crossed the line into interference, early action is critical. Start by documenting everything to show the nature of your business relationship and how it was disrupted. Then evaluate the strength of your position: Was there a valid contract or a clearly defined business expectation? Can you demonstrate that the interference was intentional and unjustified?
Before taking any direct action against the other party, consult legal counsel. An attorney can assess whether you have a viable claim and help you build a strategy that safeguards both your rights and your reputation. While not every unfair loss rises to the level of a lawsuit, having the right legal guardrails in place gives your business the best footing to respond effectively.
Protect What You’ve Built – And Who You Work With
When business relationships are on the line, timing, strategy, and legal expertise matter. August Law helps clients assess risk, assert their rights, and resolve interference disputes with precision and purpose.
Contact us to know how our Business Litigation team can help you take the next step with clarity and confidence.