The line between aggressive business competition and unlawful conduct can sometimes be difficult to determine. Many different theories of tort liability have developed over the years to address the variations of unlawful conduct and competitive practices that are frequently presented to the courts. A recent decision in the case Caldera Holdings Ltd., et al. v. Apollo Global Management, LLC, (652175/2018), explored the interplay and strict plead requirements involved in these business torts.

Background Allegations. According to Caldera Holdings Ltd.’s complaint against private equity giant Apollo Global Management and its affiliate Athene Asset Management, Caldera is an investment firm founded and owned by former Athene employee Imran Siddiqui. Caldera planned to acquire a company that Apollo and Athene had years earlier discussed acquiring; however, Apollo and Athene believed that this business would violate the non-compete provisions of Mr. Siddiqui’s employment contract with Athene and sought to prevent it through arbitration, only to enter into a settlement a month later releasing Mr. Siddiqui from the non-compete provisions.

Notwithstanding this release, Caldera alleged that Leon Black, Apollo’s CEO, subsequently attempted to scuttle Caldera’s proposed acquisition by uncovering the identities of Caldera’s investors and warning those investors with whom he had a relationship that the proposed transaction violated Mr. Siddiqui’s contract and would be tied up in litigation for a considerable time period.  Caldera further alleged that Apollo told these investors that Apollo would not do further business with them unless they ceased their relationship with Caldera.

Hon. Andrea Masley of the Supreme Court, New York County, Commercial Division, granted Apollo’s and Athene’s motion to dismiss the myriad business tort claims asserted against them. The court found that none of the following causes of action had been pled adequately by Caldera:

Defamation. This cause of action requires “a false statement, published without privilege or authorization to a third party, constituting fault as judged by, at a minimum, a negligence standard, and it must either cause special harm or constitute defamation per se.” (Frechtman v Gutterman, 115 AD3d 102, 104 [1st Dept 2014]). The alleged statements to “investors” did not adequately identify the persons to whom that allegedly false statements were made.

Disparagement & Injurious Falsehood. “Disparagement” is “a subcategory of the tort of injurious falsehood,” which “requires the knowing publication of false and derogatory facts about the plaintiffs business of a kind calculated to prevent others from dealing with the plaintiff, to its demonstrable detriment.” (Banco Popular N. Am. v Lieberman, 75 AD3d 460, 462 [1st Dept 2010]). A plaintiff must allege “special damages.” (Christopher Lisa Matthew Policano, Inc. v North Am. Precis Syndicate, 129 AD2d 488 [1st Dept 1987].). Because Caldera alleged that it sought “damages in an amount to be determined at trial, but no less than $1.5 billion,” and Caldera made no attempt at itemization, the Court held that Caldera had pled only general damages.

Unfair Competition. “Allegations of a ‘bad faith misappropriation of a commercial advantage belonging to another by exploitation of proprietary information’ can give rise to a cause of action for unfair competition.” (Macy’s Inc. v Martha Stewart Living Omnimedia, Inc., 127 AD3d 48, 56 [1st Dept 2015]). However, such claims must allege that the plaintiff took sufficient precautionary measures to ensure the secrecy of the misappropriated data. Here, the Court found that Caldera had not alleged that its investor list had been “stolen” or that it had undertaken any precautionary measure to ensure secrecy, or that there was anything “secret” about the investor list in the first place.

Tortious Interference with Prospective Business Relations and Economic Advantage. This cause of action requires “(1) the defendant’s knowledge of a business relationship between the plaintiff and a third party; (2) the defendant’s intentional interference with the relationship; (3) that the defendant acted by the use of wrongful means or the sole purpose of malice; and (4) resulting the business relationship.” (534 E. 17th St. House. Dev. Fund Corp. v Hendrick, 90 AD3d 541, 542 [1st Dept 2011 ]). To satisfy this “wrongful means” requirement, the plaintiff must allege that the claimed interference constituted a crime or an independent tort.” (Mitzvah Inc. v Power, 106 AD3d 485, 487 [1st Dept 2013]). Because Caldera’s other causes of action for defamation and disparagement were dismissed, they could not form the basis for “wrongful means,” and therefore the Court dismissed the tortious interference claims. Nor did Apollo’s alleged threats to withhold future business if the investors did not cease their support for Caldera—“persuasion alone is not enough to constitute wrongful means.” (Ahead Realty LLC v India House, Inc., 92 AD3d 424, 425 [1st Dept 2012]).

Civil Conspiracy. Finally, the Court dismissed the causes of action alleging a civil conspiracy between Apollo and its affiliates to commit the above-reference business torts. However, the Court dismissed this claim on the grounds that no such claim exists under New York law. (Capin & Assoc., Inc., v 599 W. 7 88th St. Inc., 139 AD3d 634, 635 [1st Dept 2016) [“New York does not recognize an independent cause of action for conspiracy to commit a civil tort”]).