Activision Blizzard v Netflix Inc. – The Tort of Inducement to Breach or Interfere with Contractual Relations: A Look at the Malaysian Position

tort of interference - Activision v Netflix
[Image by Szilárd Szabó from Pixabay]

By Bryan Boo

Video game publishing company Activision Blizzard has initiated a suit against Netflix Inc. for, among other things, allegedly poaching its former Chief Financial Officer, Spencer Neumann. Amongst the many allegations, Activision Blizzard also alleges that Netflix had induced Neumann to breach Neumann’s employment agreement with Activision Blizzard. Activision Blizzard’s Complaint filed at the Superior Court of California may be accessed below:

The inducement to breach or interfere with contractual relations is a tort that is recognised in Malaysia. This article discusses the tort of inducement to breach or interfere with contractual relations in Malaysia.

Elements of the tort of inducement to breach or interfere with contractual relations

For a plaintiff to succeed in a suit premised upon the tort of inducement to breach or interfere with contractual relations, the plaintiff must prove the following elements:

  1. There must be a direct or indirect interference (in the event of indirect interference, the plaintiff must also establish the use of unlawful means);
  2. The defendant must be shown to have knowledge of the relevant contract;
  3. The defendant must be shown to have the intent to interfere;
  4. The plaintiff must show that the plaintiff has suffered special damages (which is to say that it is more than just nominal damages); and
  5. So far as it is necessary, the plaintiff must successfully rebut any defence based on justification that the defendant may put forward.

What amounts to “interference”?

“Interference” within the meaning of the tort of inducement to breach or interfere with contractual relations is not only confined to directly inducing the party to breach his/her contract with the third party. “Interference” here also includes acts that prevent the party from performing his duties under the contract with the third party even if this does not amount to a breach of contract.

Good faith and malice irrelevant

Once the plaintiff proves the 5 elements of the tort of inducement to breach or interfere with contractual relations, then whether or not the defendant had acted in good faith, without malice or under a mistaken understanding as to the defendant’s legal rights is irrelevant and is not a defence to the tort of inducement to breach or interfere with contractual relations.

The sanctity of a contract

The importance of a well-drafted contract cannot be overstated. Where, as in the case of Activision Blizzard, it involves persons with access to highly sensitive documents or being involved in crucial competitive negotiations, it is even more important that the terms of the contract must be clear so as to protect the business/company. However, this does not prevent competitors from poaching and/or inducing such an employee to breach his/her employment contract. In such a situation, the company may resort to initiating a suit against the inducer premised on the tort of inducement to breach or interfere with contractual relations.

While the suit between Activision Blizzard and Netflix Inc. relates to Neumann’s employment agreement, the tort of inducement to breach or interfere with contractual relations does not only apply in employment matters. This may apply to any situation in which a person induces another to breach his/her contract with a third party thereby causing the third party to suffer losses or damage/injury.