Taking a Stand Against Stolen Accounts
If you lose a subscriber account to someone (e.g. a current or former employee) who may not be under any contract with you that restricts his/her activity with your subscribers, you may have a legal remedy under the cause of action of tortious interference. This person who ends up with your subscriber (I won’t say steals just yet) may have tortiously interfered with your contractual relationship.
Tortious interference is by definition wrong, in a civil sense, and is actionable. It falls within the tort, as opposed to contract law, category, which is why even though you do not have a contract with this person who stole your accounts you may potentially proceed against them. The benefits of a lawsuit alleging tortious interference may include monetary and injunctive or other equitable relief. Such a suit must usually commence in a court of general jurisdiction versus small claims or other lower court.
To allege tortious interference, the first criterion is having a contract with the subscriber being interfered with. Otherwise the relationship is “at will” and susceptible to termination at any time without penalty. Thus, when you lose the account you really have no certain damages. An enforceable contract still within its term, where you have an expectation of continued performance by your subscriber, is generally required.
Next, you will usually be required to show you derive some benefit from your subscriber; that you make a profit on the relationship or the relationship is valuable for other reasons. Maybe it gives you access to a market or territory or is a prestigious account you advertise to attract business. To recover monetary damages you’ll likely have to show what you lost or will lose. If you seek equitable damages, to enjoin the other party (a tortfeasor) from continuing to tortiously interfere with subscribers, monetary damages may not be required.
Tortious inference does require some level of wrongful conduct. Even if you have a profitable contract with a subscriber, the fact that a competitor takes that account and ends up with a contract for the same service does not make it tortious interference. You will have to prove that the competitor knew you had a contract with the subscriber and did something wrong to entice the subscriber to breach your contract.
Examples of wrongful conduct:
- A former employee takes your subscriber information, including name, address, contract terms, type of system, codes and pricing. The employee, not under any contractual restrictive covenant, solicits your subscribers offering to provide the same service for half the price.
- Same scenario, but instead the ex-employee knocks on the subscriber’s door to let them know you are no longer in business, or did something so terrible that you shouldn’t be in business, and they are there to service and take over the system.
What does not constitute wrongful conduct? Here are two examples where there was clearly no “interference”:
- A former employee not under any restriction who gets a call from a subscriber to take over a system.
- A competitor who gains access to a subscriber through advertising or canvassing, and offers to provide the services without making comparison to you or the existing service.
Often there is no bright-line test to indicate whether a tortious interference cause of action will be successful. Each case needs to be evaluated independently to determine if the conduct is wrongful, constitutes a tort, is actionable and worth pursuing. Bottom line, if you’re seeing a loss of accounts and you identify a culprit acting with impropriety, you may have a legal remedy worth pursuing.
Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. (www.kirschenbaumesq.com). His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
The opinions expressed in this column are not necessarily those of SSI, and not intended as legal advice.
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