Posted March 4th, 2015 in Legal Insights
“But Your Honor, My Attorney Told Me It Would Be OK!” – Minnesota Supreme Court Says Reliance on (Poor) Advice from Outside Counsel Satisfies Justification Defense
Today the Minnesota Supreme Court ruled on a case involving whether the justification defense for a tortious interference with a contract claim encompasses reliance on the incorrect advice of counsel.
In Sysdyne Corporation v. Brian Rousslang, et al., appellant Sysdyne Corporation sued respondent Xigent Solutions for tortious interference with a contract resulting from Xigent’s hiring of a former Sysdyne employee. That employee did not dispute that he breached the non-compete agreement, and the trial court awarded damages ($158,240) to Sysdyne. Still, the trial court ruled in favor of Xigent on Sysdyne’s tortious interference with contract claim, concluding that Xigent’s interference was justified because it honestly believed, based on the (incorrect) advice of counsel, that the agreement was unenforceable.
The Court of Appeals affirmed, and today the Minnesota Supreme Court did as well. The Supreme Court relied on its decision in Kallok v. Medtronic in which it impliedly recognized that a defendant’s interference with a contract may be justified by reliance on the advice of counsel: “The implication of our decision in Kallok is that the trier of fact could have properly determined that the defendant’s interference was justified if the inquiry had been reasonable. Given the fact-based nature of the justification-defense inquiry and our reasoning in Kallok, we conclude that the lower courts did not err when they determined that the justification defense may be satisfied by a defendant’s reliance on advice of outside counsel when that reliance is reasonable.”
In other words, in Minnesota, the justification defense may be satisfied by a defendant’s reliance on advice of outside counsel – even if that advice is erroneous – as long as the defendant’s reliance is reasonable.
The decision stresses the importance of consulting outside counsel before hiring someone with a noncompete. The Supreme Court stressed that Xigent’s attorney produced billing records confirming that he had read and discussed the noncompete agreement with Xigent’s president, and that Xigent gave its attorney all the relevant information (offer letter, noncompete agreement, job duties, etc.) he should have needed to analyze the enforceability of the noncompete agreement. Accordingly, companies should adopt a similar approach to protect themselves from tortious-interference-with-contract claims in the future.
Nilan Johnson Lewis labor and employment attorney Jeremy D. Robb is available to comment on this ruling. Contact him at 612.305.7716 or firstname.lastname@example.org.