Business Torts

Business torts are the noncontractual claims that show up alongside, or instead of, a breach of contract case: fraud, unfair competition, and interference with a business relationship. They matter for a reason that's easy to miss: unlike a straight breach of contract claim, a business tort can support punitive damages under California Civil Code section 3294, if the plaintiff proves the defendant acted with malice, oppression, or fraud by clear and convincing evidence. That's a meaningfully higher bar than ordinary breach of contract, but it opens a category of damages contract claims can't reach. See the contract disputes page for how the two differ.

TencerSherman LLP pursues and defends business tort claims for companies across San Diego and Southern California, often in cases where a competitor or former business partner has crossed from aggressive competition into something the law treats as actionable.

Fraud

Fraud claims allege that one party intentionally misrepresented a material fact to induce another party into a transaction, a payment, or a signature. To prove fraud in California, a plaintiff generally has to show a false representation of material fact, knowledge that it was false (or reckless disregard for the truth), intent to induce reliance, actual and reasonable reliance, and resulting damage. Fraud claims are pleaded with more specificity than most civil claims: California courts require the who, what, when, where, and how of the misrepresentation to be spelled out, not just alleged in general terms.

Fraud can also be an internal problem rather than a claim against an outside party. An employee who falsifies expense reports, diverts company funds, or conceals a conflict of interest has committed fraud against the employer, and those claims often run alongside a separate breach of fiduciary duty claim if the employee held a position of trust.

Unfair competition

California's Unfair Competition Law, codified at Business and Professions Code section 17200, is unusually broad. It covers any business act or practice that's unlawful, unfair, or fraudulent, which means conduct that violates another law (a UCL claim can piggyback on almost any other statutory violation), conduct that's fraudulent under the ordinary fraud standard, or conduct that's simply "unfair" under a standard courts have applied inconsistently but that generally looks at whether the practice is immoral, unethical, oppressive, or substantially injurious to competitors or consumers.

Common fact patterns include:

• Illegal pricing practices, including below-cost pricing intended to drive out a competitor.
• Deceptive advertising or labeling that misleads consumers about a product's origin, quality, or composition.
• Trademark and trade dress imitation, where a competitor's packaging or branding is designed to confuse customers about the source of a product, which also overlaps with the intellectual property litigation page.
• Misuse of confidential information, which often overlaps with a trade secret claim; see the trade secret disputes page.

A UCL claim can be brought by a competitor, a consumer, or a public prosecutor, and remedies are primarily equitable (injunctions, restitution) rather than damages, though a UCL claim is often filed alongside other tort or contract claims that do support damages.

Tortious interference

Tortious interference claims come in two forms under California law. Interference with an existing contract requires a valid contract, the defendant's knowledge of it, intentional acts designed to disrupt performance, actual disruption, and resulting damage. Interference with prospective economic relations requires an economic relationship with the probability of future economic benefit, the defendant's knowledge of it, intentional wrongful acts to disrupt it, actual disruption, and damage, and it requires the interfering conduct to be independently wrongful, meaning unlawful by some measure beyond the interference itself.

The distinction matters in practice: a competitor is generally allowed to compete for a customer's future business, even aggressively, without liability. It's when the competing extends into wrongful conduct, misrepresentation, breach of a duty, or violation of another law, that interference becomes actionable.

What you can recover

A successful business tort claim can support compensatory damages for actual losses, and, where malice, oppression, or fraud is proven by clear and convincing evidence, punitive damages under Civil Code section 3294. Injunctive relief is also available in ongoing unfair competition or interference situations, to stop conduct rather than just compensate for past harm.

Frequently asked questions