Tortious Interference in Michigan: Where Competition Ends

What Tortious Interference Means in Michigan

Michigan recognizes tortious interference with a contract and tortious interference with a business expectancy as separate causes of action with different elements and different burdens. The governing Michigan appellate authority is Dalley v. Dykema Gossett, 287 Mich. App. 296 (2010), which clarified how courts distinguish between the two claims and apply the improper means analysis.

Neither claim is a remedy for losing business to a competitor. Hard competition, including aggressive pricing, poaching employees, and marketing directly to a rival's customers, is protected conduct under Michigan law. What crosses the line is not the competitive act itself but the means used to accomplish it. The rest of this article explains exactly where that line falls.

The Two Claims: Elements Side by Side

Tortious Interference with a Contract

To establish this claim, a plaintiff must prove: (1) a valid contract existed between the plaintiff and a third party; (2) the defendant knew about that contract; (3) the defendant intentionally and improperly interfered with it; and (4) the plaintiff suffered damages as a result.

The contract must be existing and enforceable. If the agreement was void, terminable at will, or never reduced to a binding obligation, this claim does not reach it.

Tortious Interference with a Business Expectancy

This claim requires proof of: (1) a valid business expectancy, meaning a prospective business relationship with a reasonable likelihood of producing future business; (2) the defendant's knowledge of that expectancy; (3) intentional and improper interference that caused the expectancy to terminate or be disrupted; and (4) resulting damages.

The expectancy claim covers relationships that have not yet ripened into a binding contract, which is why it appears so frequently in referral-relationship disputes between lenders and realtors.

Comparison Table

Plaintiffs frequently plead both claims simultaneously. Michigan courts treat them differently at summary judgment: the contract claim tends to turn on whether the agreement was enforceable, while the expectancy claim turns heavily on the improper means analysis. Michigan appellate courts have addressed tortious interference claims with notable frequency in commercial disputes over the past several years, reflecting how routinely this issue reaches the Court of Appeals.

The Line Between Hard Competition and Actionable Conduct

The improper means or motive standard is the single most litigated element in Michigan tortious interference cases. Getting this analysis right determines whether a claim survives summary judgment or gets dismissed.

What Qualifies as Improper

Michigan courts require conduct that goes beyond aggressive competition. Improper means include fraud, material misrepresentation, defamation, physical threats, and conduct motivated by pure malice without any legitimate business justification. If a loan officer told a referral partner that a competing lender was under regulatory investigation when that was false, that statement would almost certainly constitute improper means.

Improper motive, as distinct from improper means, covers situations where the defendant's conduct was not illegal on its face but was motivated entirely by a desire to harm the plaintiff rather than to advance any genuine business purpose.

What Does Not Qualify

Aggressive pricing, hiring a competitor's top producers, marketing directly to a competitor's customer base, and calling a referral partner to introduce your firm are all lawful competitive acts. Michigan courts will not convert normal business development into a tort claim simply because it worked.

The Privilege Defense

Michigan courts recognize that a defendant may be privileged to interfere when acting in pursuit of a legitimate business purpose through proper means. This privilege defense is the most common reason tortious interference claims fail at summary judgment. A lender who calls a realtor and honestly explains why its products are superior is privileged. A lender who calls that same realtor and makes false statements about a competitor's pricing, timeline, or regulatory status is not.

The improper means analysis is highly fact-specific. The same act, calling a referral partner, can be privileged or actionable depending entirely on what was said during that call. This is why documentation of what was communicated, not just that contact occurred, is critical to both plaintiffs and defendants.

What This Looks Like in the Mortgage Industry

Loan officer turnover in the mortgage industry is persistently high, and that level of movement creates a recurring environment where referral relationships and borrower pipelines are at risk every time a producer changes firms. Industry surveys consistently place financial services companies among the sectors most likely to face disputes involving departing employees and alleged diversion of client or referral relationships, with tortious interference named as a claim in a significant share of those matters.

Three Common Fact Patterns in Michigan Mortgage Lending

Pipeline diversion by a departing loan officer. A senior loan officer resigns on a Friday and begins contacting active borrowers over the weekend, telling them their files are being transferred to his new firm. No non-solicitation agreement exists. The conduct may or may not be tortious depending on what he told those borrowers, whether he used the prior employer's pipeline data, and whether his statements about the transition were accurate.

Referral partner poaching through false statements. A competing lender contacts a realtor who had a standing referral relationship with your firm and represents that your firm has recently had multiple closings fall through due to underwriting problems. The statement is false. That misrepresentation directed at a referral partner, with the intent to divert that referral relationship, is the kind of fact pattern Michigan courts have recognized as satisfying the improper means element.

Wholesale lender interference with broker agreements. A wholesale lender approaches brokers who have existing pricing agreements with a competitor and falsely represents that the competitor is exiting a product line. Brokers redirect their volume. If the representation was materially false and made with knowledge of the broker agreements, both a contract and an expectancy claim may be available.

Where no enforceable non-solicitation agreement exists, tortious interference and trade secrets claims under the Michigan Uniform Trade Secrets Act are often the only tools available. For more on how Michigan courts handle employee departures and restrictive covenants in the employment context, see our briefing on non-solicitation agreements and Michigan employment law.

These claims frequently travel alongside misappropriation of trade secrets, breach of fiduciary duty, and, where applicable, breach of a non-solicitation agreement. Each companion claim adds leverage and covers gaps the others may not reach.

If your company is evaluating whether a situation rises to the level of actionable conduct, the business litigation team at Beckett & Moss works with lenders and operators through exactly this kind of analysis.

The statute of limitations for tortious interference is three years under MCL 600.5805(2), running from the date the plaintiff knew or should have known of the interference. In mortgage contexts, delayed discovery is common: a referral partner does not announce that she is sending business elsewhere. She simply becomes less responsive, and volume drops gradually. That gradual shift can make the start date of the limitations period a genuinely contested issue, which is one more reason early detection and documentation matter.

Remedies: What You Can Recover

Available damages include lost profits from diverted contracts, loss of prospective business value, and consequential damages that flow directly from the interference. Proving lost profits requires concrete, historical evidence: loan volume data by referral source, commission records, referral frequency logs, and pipeline reports showing the relationship's economic value before the interference.

Punitive damages are not available as a standalone remedy for tortious interference in Michigan. Where the interference involved fraud or other malicious conduct, a companion fraud claim may support a request for punitive or exemplary damages. The viability of that path depends on the specific facts.

Injunctive relief may be available as an interim remedy while litigation proceeds. If a competitor is actively and continuously redirecting your referral partner's business through ongoing false statements, a court order stopping that conduct can be sought while the damages claim is litigated. The quality of your records at the time interference is suspected directly controls what you can recover later. Companies that track referral relationships with contemporaneous documentation have a materially stronger position than those that do not.

Building Your Record Before and After Interference Occurs

When interference is suspected, time spent internally debating whether to act is time the other side uses to re-entrench the referral relationship. Start preserving evidence immediately.

Evidence Preservation Checklist

1. CRM records showing referral frequency and loan volume by source, covering at least 24 months before the suspected interference.
2. Email and text communications with the referral partner, both before the relationship changed and any communications after the volume dropped.
3. Written statements or secondhand accounts of what the competitor said to the referral partner. Even informal notes from a conversation are better than nothing.
4. Loan pipeline reports showing active files that were redirected to a competitor rather than closed with your firm.
5. Social media posts by the departing employee or competing lender, particularly any statements about your firm's products, service, or regulatory standing.
6. Written agreements with the referral partner, even informal ones, showing the nature and expected continuity of the relationship.
7. HR records documenting the employee's departure, offboarding checklist, and any exit interview notes.

The MCL 600.5805(2) clock starts when the plaintiff knew or should have known of the interference. Early detection extends your window to act and improves the quality of evidence you can gather while facts are fresh.

This checklist also applies to defendants. If you are a loan officer or branch manager who recently changed employers, document that your outreach to former contacts was lawful, factual, and not based on information taken from a prior employer's systems. That documentation is your privilege defense.

Where Companies Go Wrong

Michigan mortgage lenders and operators make the same mistakes repeatedly in tortious interference situations. Recognizing them in advance is far less expensive than correcting them after the fact.

Mistake 1: Waiting too long to consult counsel. Every week of internal deliberation is a week the referral partner spends re-entrenching with the competitor, witnesses' memories fade, and electronic records become harder to reconstruct. Early consultation does not commit you to litigation; it preserves your options.

Mistake 2: Assuming the claim requires a non-compete or non-solicitation agreement. It does not. Tortious interference is a standalone tort. The absence of a restrictive covenant affects which conduct is privileged, but it does not eliminate the claim. The improper means element is what matters, not whether you had a signed agreement.

Mistake 3: Overstating the claim. Labeling every instance of competitive loss as tortious interference weakens your credibility with courts and can expose your company to sanctions for frivolous pleading. The claim requires improper means or motive, not just the fact that a competitor won business you expected to retain.

Mistake 4: Failing to track referral relationships contemporaneously. If your CRM does not record referral source, volume, and frequency by contact, proving the value of the expectancy you lost is nearly impossible. Build that record before you need it.

Mistake 5: Ignoring the three-year statute of limitations under MCL 600.5805(2). Companies sometimes spend months in internal discussions, then discover the limitations clock ran while those discussions were ongoing. If you suspect interference, the legal analysis needs to happen in parallel with the business response, not after it.

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This article is educational and does not constitute legal advice. Tortious interference analysis is highly fact-specific; the application of Michigan law to any particular situation requires consultation with qualified legal counsel.

If your company is dealing with a situation that may involve tortious interference, whether as a potential plaintiff or a defendant, Beckett & Moss is available to discuss whether the facts support a claim and what a practical response looks like. This is a conversation, not a commitment, and it starts with understanding your specific situation.