The Minnesota Supreme Court recently published a decision that clarifies when advice of counsel can provide a defense to a claim for tortious interference with contract.
In Sysdyne Corp. v. Rousslang et al., Sysdyne sued a company named Xigent Solutions, LLC for hiring a former employee who was subject to a noncompete agreement. No. A13-0898 (Minn., Mar. 4, 2015). Although Sysdyne prevailed on its claim for breach of contract against the former employee, the trial court held that Xigent was not liable for tortious interference because its actions were justified based on its reliance on advice of legal counsel. Sysdyne appealed and argued that the justification defense cannot be satisfied by a defendant’s honest but erroneous belief, based on the advice of counsel, that a contract is unenforceable.
The Minnesota Supreme Court affirmed the lower court’s decision that Xigent was not liable for tortious interference. The Court emphasized that any reliance on advice of counsel with respect to a noncompete agreement must be reasonable under the circumstances to provide a defense. The Court affirmed the trial court’s decision that Xigent’s actions were reasonable because Xigent provided its attorney with the noncompete agreement, the employee’s original offer letter from Sysdyne, informed its attorney that the employee would be doing the same work for Xigent, and consulted with the attorney regarding the enforceability of the noncompete.
The Court explained that the focus of the analysis is on whether the defendant’s consultation with legal counsel is reasonable, not whether the attorney’s legal analysis was reasonable. The Court also held that the attorney’s advice may be verbal and does not necessarily need to be written.
Takeaway: Reasonable reliance on advice of counsel may provide a defense to claims of tortious interference with contract based on hiring a competitor’s employee who is subject to a noncompete. Although written advice is not absolutely necessary, it may be helpful from an evidentiary standpoint in proving the defense. It is also important to remember that relying on advice of counsel may waive attorney-client privilege with respect to the advice in question and will not necessarily protect the employee from liability for breach of contract.