Todd E. Soloway

In their latest article for the New York Law Journal, Pryor Cashman Partners Todd Soloway, head of the firm’s Hotel + Hospitality and Real Estate Litigation Groups, and Bryan Mohler explore how tortious interference claims can arise when a hotel owner decides to terminate an operative hotel management agreement (HMA) before it has expired. 

The Business Challenges Posed by Long-Term HMAs 

Because HMAs are often structured as long-term agreements that can run anywhere from 20 to 50 years, the likelihood that the relationship between a hotel owner and operator will change – possibly even devolve - over the course of the contract is considerable. 

When parties find themselves “stuck” in a business relationship that is no longer mutually satisfying, they may be left to consider terminating the HMA before it has expired. In exploring this option, hotel owners must assess both the legal and practical ramifications of securing a new replacement operator to manage the hotel. Adding further complexity to this task is the fact that the replacement operator may be wary of assuming this role for fear that it might expose itself to liability for tortious interference with the existing HMA. 

In these cases, there are several factors hotel owners and operators should consider to minimize the risk of a tortious interference claim. 

Tortious Interference Torts in New York 

New York state courts recognize two distinct tortious interference torts: tortious interference with contract, and tortious interference with prospective business relationships. 

Bringing a Claim for Tortious Interference with Contract 

To bring an action for tortious interference with contract, a plaintiff must plead: 

• The existence of its valid contract with a third party;
• Defendant’s knowledge of that contract;
• Defendant’s intentional and improper procuring of a breach; and
• Damages. 

Soloway and Mohler explain that the difficulty of assessing these kinds of claims lies in determining whether the procurement of the breach was “improper.” In evaluating this issue, courts will look at a variety of factors, including: 

• The nature of the conduct of the person who interferes (courts have stated that parties are not prohibited from sending regular advertisements and soliciting business in the normal course);
• The interest of the party being interfered with; and
• The relationship between the parties. 

The “Economic Interest” Defense 

Hotel owners and operators should be aware of the “economic interest” defense to tortious interference with contract claims. 

While New York courts have historically applied this defense narrowly, a defendant can avail itself of the defense if it can show that it “acted to protect its own legal or financial stake in the breaching party’s business.” If this is established, an action for tortious interference cannot stand, unless there is a showing of illegality or malice.  

Advice for Hotel Owners and Potential Replacement Operators 

In their article, Soloway and Mohler emphasize the “fact-intensive nature” of tortious interference with contract claims, stressing that “hotel owners and prospective replacement operators should proceed cautiously and deliberately when discussing a potential partnership.” 

To read the full NYLJ article, please click here. 

More About the Authors  

Todd Soloway leads Pryor Cashman’s Hotel + Hospitality and Real Estate Litigation Groups. He has been named a leading attorney in real estate law by Best Lawyers in America and Super Lawyers, and is a frequent contributor to industry publications. 

Bryan Mohler is a partner in Pryor Cashman’s Hotel + Hospitality and Real Estate Litigation Groups. He has been recognized as a “Rising Star” by Super Lawyers. Both he and Soloway were members of the litigation team from Pryor Cashman that won a $44M judgment against Starwood Hotels in a matter involving breaches of the operative HMA. 

Jason Mencher, an associate in Pryor Cashman’s Real Estate and Litigation Groups, also assisted with the preparation of this article.