An Overview of Business Torts

At some point during the course of doing business, every entrepreneur will encounter a legal dispute. Unfortunately, when these conflicts involve fraud, misrepresentation of facts, interference with contracts, or theft of trade secrets, a business can suffer serious damage to their reputation and profit margin. If you own a company, it’s crucial to understand what a business tort is — and the legal options you may have if someone has harmed your financial and business interests.

What is a Business Tort?

A business tort is a wrongful action that is taken against a business with the intention of causing it harm. These types of torts can result in loss of profits, competitive advantage, and market share — as well as adversely affect a company’s reputation among its consumer base. Such actions may be taken intentionally by a competitor, or they can be caused by the negligent behavior of another company or individual.

Common business torts can include the following:

• Fraud and misrepresentation— Fraud and misrepresentation can occur in business law when a party makes false promises or material misrepresentations that others rely upon to the detriment of the aggrieved party.
• Breach of fiduciary duty — This tort occurs when a party acts in accordance with their own self-interests, rather than that of the company.
• Tortious interference with a contract — Tortious interference with a contract occurs when a party improperly disrupts a company’s contractual relationship with a third-party.
• Unfair competition — Unfair competition can occur when a defendant creates and markets a product that would lead consumers to be confused about the source or origin.
• Trade secret theft — Trade secret theft occurs when a party knowingly misappropriates or steals a trade secret to the economic benefit of a party other than the owner.
• Wrongful interference with a business relationship — This tort arises when a party intentionally interferes with the legitimate business interests of a company.
• Misuse of business assets — If a party embezzles company assets or misuses them, a business may have suffered significant economic damages.

If a business suffers financial harm as a result of the defendant’s actions, it may seek compensation for their losses. In many cases, the damages also have to do with the company’s intangible assets, such as the impact on the company’s reputation or business relationships. How a party is compensated can depend upon the extent of the damage that has occurred, whether the harmful conduct is ongoing, and the likelihood of recovery.

Legal Remedies for Business Torts

The legal remedies for business torts can depend upon the specific facts and circumstances. Generally, business tort legal remedies are meant to compensate the company for the damages incurred by the wrongdoer and stop their harmful actions. In some cases, a remedy can also serve as a deterrent to prevent the wrongdoer from engaging in the same or similar conduct in the future. Specifically, business owners in California may seek the following remedies for business torts:

• Compensatory damages — Compensatory damages are calculated based on the amount of money lost due to the defendant’s wrongful conduct.
• Punitive damages — Punitive damages are not awarded in every business tort matter, but they may be granted in cases where a defendant acted in a particularly egregious, malicious, or reckless manner.
• Injunctive relief — Injunctive relief is a remedy that restrains the defendant from acting in a certain way or requires them to take certain actions. It will typically only be granted in cases where there is no other remedy and irreparable harm would result if such relief is not granted.

If a business tort occurs, it’s best to act sooner rather than later to prevent further harm to your company by filing a business torts claim. In some situations, business torts can be resolved outside the courtroom between the parties through mediation, arbitration, or another form of alternative dispute resolution. However, if the parties cannot reach a settlement, litigation may be required — and a judge will determine the outcome of the case.

Contact an Experienced California Business Law Attorney

If your business has suffered financial harm due to the wrongdoing of another, it’s essential to take the necessary legal action to protect its reputation and bottom line. Business torts can be complex and it’s important to have the representation of a knowledgeable business attorney to help you navigate the process. At White and Bright, LLP, we work with business owners and entrepreneurs in California for a wide variety of business tort matters. We welcome you to contact or call us at (760) 747-3200 to learn more about our legal services.