The Virginia Business Litigation Blog

January 15, 2025

Parent Companies Not Automatically Liable for Actions of Subsidiaries

Corporate successor liability is a nuanced area of law, often entangling issues of contracts, corporate structure, and equity. The recent decision in PAE National Security Solutions, LLC v. Constellis, LLC (Va. Ct. App. Jan 7, 2025) serves as a reminder that when a company acquires another’s assets, the acquiring company does not automatically assume the seller’s debts and liabilities unless an exception applies. As articulated in La Bella Dona Skin Care, Inc. v. Belle Femme Enterprises, LLC, 294 Va. 243 (2017), Virginia recognizes four exceptions to the general rule:

Express or Implied Assumption of Liabilities: The buyer explicitly or implicitly agrees to assume the seller’s obligations;
De Facto Merger or Consolidation: The circumstances surrounding the transaction warrant a finding that there was a consolidation or de facto merger of the two corporations;
Mere Continuation: The buyer is a continuation of the seller, often sharing leadership, operations, or other characteristics; or
Fraudulent Transaction: The sale is a sham designed to defraud creditors.

In the PAE case, the court examined these exceptions and found no grounds to impose successor liability.

December 11, 2024

Enforceable Restrictive Covenant Deemed Insufficient for Injunctive Relief

by Lee E. Berlik

Restrictive covenants in employment agreements (like non-compete and non-soliciation provisions) are disfavored in Virginia and only enforced when narrowly crafted so that the restrictions are no broader than necessary to protect the employer’s legitimate business interests. Even when the contract is well written and enforceable, however, there’s no guarantee the employer will be able to obtain an injunction to prevent a former employee from violating its terms. Injunctive relief is considered an “extraordinary” remedy in Virginia and is never automatic. I highlighted a Fairfax County case illustrating this principle a few years ago. Today, let’s examine how the Eastern District of Virginia ruled when presented with a similar scenario.

The basic facts of Tactical Rehabilitation, Inc. v. Youssef go like this: Tactical Rehabilitation, a Florida-based company selling durable medical equipment, employed Alaina Youssef under an agreement that included non-compete, non-solicitation, and confidentiality clauses. After Youssef’s termination, Tactical alleged that she breached these agreements by soliciting its clients and diverting business to her new employer, a direct competitor. Tactical sought injunctive relief to prevent Youssef from continuing these activities, citing significant revenue losses and harm to its business relationships.

October 23, 2024

Nonsuits May Not Be Taken as to Claims Already Submitted for Decision

by Lee E. Berlik

As discussed previously on this blog, plaintiffs who wish to nonsuit their claims can do so at virtually any time, subject to very limited exceptions. One such exception is that a nonsuit may not be taken as to any claim that has been submitted to the judge for a decision. Some lawyers seem to be of the mistaken belief that if a court has not formally dismissed a claim with prejudice, a nonsuit may be taken as to that claim. The Fairfax County Circuit Court issued a letter opinion a few months ago explaining that such is not the case. Nonsuits may only be taken as to active, unresolved claims that have not yet been submitted for final resolution.

In Brian Morrison v. George Mason University, the plaintiff filed a variety of claims (including whistleblower retaliation, fraud, defamation, and common law conspiracy to defame and retaliate) against a number of different defendants. Demurrers and pleas in bar followed, some of which were sustained with leave to amend, some of which were sustained without leave to amend, and at least one of which was overruled. Prior to the court-ordered deadline for filing an amended complaint, the plaintiff sought to nonsuit the entire action, including the claims that had been the subject of the demurrers and pleas. His reasoning was that the court had not formally ordered the dismissal of any claims. The court refused to allow the nonsuit as to the claims that had already been eliminated from the case.

September 25, 2024

The Mootness Doctrine Requires a Live Controversy

by Lee E. Berlik

Virginia courts exist to resolve disputes between litigants. They’re there to apply the law to a set of facts established by the evidence and declare and enforce the parties’ respective legal rights. Courts aren’t required to offer advisory opinions on abstract legal questions when there isn’t an actual controversy between the parties. Under the mootness doctrine, if the issues under a court’s consideration cease to be “live,” or the parties before it “lack a legally cognizable interest in the outcome,” the case becomes moot and the court will dismiss it. (See McCarthy Holdings LLC v. Burgher, 282 Va. 267, 275 (2011)). There are some exceptions to the rule, but as demonstrated by an opinion issued last month in Doe v. Fairfax County School Board, the mootness doctrine is applied stringently.

Anonymous petitioner “Jane Doe,” a high-school senior at the time, sued the school board for various alleged civil rights violations, claiming she was subjected to religious discrimination, sex discrimination, and viewpoint discrimination while attending school. She asked the court to award both declaratory and injunctive relief. Shortly after filing the lawsuit, however, she graduated.

August 28, 2024

Substantially Similar Claims Can (and Should) Be Tried Together

by Lee E. Berlik

In theory, Virginia follows a “one plaintiff per suit” rule: even if two plaintiffs are similarly situated, they should file their lawsuits separately and not jointly. There’s an exception for when there are at least six plaintiffs. The Multiple Claimant Litigation Act allows six or more plaintiffs to join together for purposes of filing a lawsuit if their claims involve common issues of fact and arise out of the same transaction or occurrence. (See Va. Code § 8.01-267.5). As a practical matter, however, multiple plaintiffs with similar claims often end up having their claims tried together regardless of the number of plaintiffs involved. If two cases are substantially similar and involve common issues of law or fact, trial courts can consolidate them for discovery and/or trial irrespective of the requirements of the Multiple Claimant Litigation Act.

Many trial courts take a pragmatic approach to litigation and will consolidate cases that involve identical claims and overlapping evidence. In the recent case of Rejuvenation Clinic, LLC v. Thang Van Dang, for example, two separate plaintiffs filed a lawsuit together in violation of the “one plaintiff per suit” rule. Having fewer than six plaintiffs, they did not meet the requirements of the Multiple Claimant Litigation Act that would have permitted them to file jointly. The Fairfax County Circuit Court acknowledged the procedural impropriety and severed the two cases, but immediately consolidated them for discovery and trial, recognizing the practicality and efficiency of trying these cases together.

July 16, 2024

Discovery Continues Even After Filing of Potentially Dispositive Motions

by Lee E. Berlik

Suspending discovery while dispositive motions are pending may seem logical to most defendants. Why waste time and money responding to discovery requests in a case that might soon be dismissed? If a dispositive motion–such as a demurrer or plea in bar–is sustained, the ruling could resolve the case entirely or at least narrow the issues, rendering some of the discovery requests irrelevant. In Virginia state court, we have a rule that discourages such thinking. It says, “Discovery continues after a demurrer, plea or dispositive motion addressing one or more claims or counter-claims has been filed and while such motion is pending decision–unless the court in its discretion orders that discovery on some or all issues in the action should be suspended.” (See Va. Sup. Ct. R. 4:1(d)(2)). In other words, courts will not suspend discovery while dispositive motions are pending…unless they decide that they will.

Under the rule, trial courts have the authority to stay discovery pending the resolution of potentially dispositive motions, but the rule is silent as to the factors courts should consider in exercising such authority. There isn’t a lot of case law on the subject, but the Fairfax Circuit Court issued an opinion last month in Son v. Benson that offers some guidance.

May 24, 2024

The Parol Evidence Rule in Virginia

by Lee E. Berlik

Virginia’s parol evidence rule prohibits the use of prior or contemporaneous oral statements or agreements to contradict, modify, or supplement the terms of a written contract that is intended to be a complete and final representation of the parties’ agreement. The rule is designed to protect the integrity of written contracts. It’s based on the premise that when parties have entered into a written agreement, the document itself is the best evidence of the terms of the agreement and the mutual intent of the parties. The parol evidence rule ensures the stability, predictability, and enforceability of finalized written instruments by excluding evidence of the parties’ intent not expressed in the written contract. Memories fade and people lie. Contracting parties need to be able to rely on the written agreement without the prospect of the other party having the ability to claim that certain verbal modifications or additions were made to it.

The parol evidence rule requires a court to construe a document according to its plain terms if it is clear and unambiguous on its face. In such a case, the court will not look for meaning beyond the instrument itself. (See Ott v. L & J Holdings, LLC, 275 Va. 182, 187 (2008)). The rule doesn’t always result in the exclusion of extrinsic evidence, however. There are times when a court may need to consider parol evidence to determine the intent of the parties, such as when the written contract is ambiguous, where it may be subject to a condition precedent, or where the contract was induced by fraud, mistake, or duress. (See Price v. Taylor, 251 Va. 82, 86–87 (1996); Jones v. Franklin, 160 Va. 266, 270 (1933)).

April 9, 2024

Suing the Wrong Entity

by Lee E. Berlik

If you’re going to file a lawsuit, it’s always a good idea to first do the necessary research to determine the correct identity of the person or corporate entity you’re suing. Failure to do so could result in permanent dismissal. The likelihood of this happening depends largely on the nature of the mistaken identity. The term “misnomer” refers to the situation where a plaintiff has used the wrong name to refer to an otherwise correctly identified party. In these situations, courts typically allow the plaintiff to amend the pleadings to correct the mistake. The term “misjoinder,” on the other hand, refers to the situation where a plaintiff names a completely incorrect party. In this situation, the plaintiff has filed a lawsuit against a person or entity who should not have been included in the lawsuit. This is the more serious mistake that often results in dismissal.

By way of example, take a look at the case of Dawn Monroe v. Mary Washington Healthcare. Ms. Monroe suffered a fall and injury while on the premises of the Tompkins-Martin Medical Plaza in Fredericksburg, Virginia. She filed a lawsuit against two defendants: Mary Washington Hospital, Inc., and Mary Washington Healthcare, both of which she believed were the owners of the Medical Plaza. She was wrong about that. The defendants were able to show (by directing the court’s attention to publicly available information online) that the Medical Plaza was actually owned by Tompkins-Martin Medical Plaza LLP, a separate corporate entity. Ms. Monroe then moved to simply substitute the correct defendant for the incorrectly named defendant and move on with the case. The trial court wouldn’t allow the amendment and dismissed the case with prejudice. On appeal, the Court of Appeals affirmed this decision.

February 15, 2024

Business Tort Claims Dismissed as Untimely in Dispute Between Wildlife Removal Companies

by Lee E. Berlik

In this patent and trade-secret dispute between Safe Haven Wildlife Removal and Property Management Experts and Meridian Wildlife Services, the defendant tried to raise the stakes by inserting a number of business torts (including breach of fiduciary duty, tortious interference with contract and business expectancies, and business conspiracy) but the court dismissed these claims as time-barred and ordered that the case proceed only on the patent and trade-secret claims.

Those of you preparing for the Great Backyard Bird Count (which starts tomorrow!) and who spend much of your leisure time doing everything in your power to attract birds to your property may be surprised to hear that “bird removal” is big business. The plaintiff in this case, Safe Haven, “specializes in the safe, effective, and humane bird and wildlife removal solutions for facilities.” (See para. 19 of its Amended Complaint). Meridian, the defendant, describes itself as “an innovator and industry leader in [bird removal and wildlife management] services with extensive experience assisting commercial clients throughout the United States with interior bird removal, exterior bird population reduction, wildlife relocation, nest removal and full facility inspection services.” (See para. 9 of Meridian’s Answer). I guess it’s safe to assume these companies won’t be participating in the popular annual birding event.

January 9, 2024

Declaratory Judgments Intended to Guide Future Conduct, Not Remedy Past Disputes

by Lee E. Berlik

Declaratory judgments are court decisions that clarify the legal relationship between parties and their rights in a situation. Unlike traditional judgments, which might involve the awarding of damages or the enforcement of rights, declaratory judgments simply declare the rights, duties, or obligations of each party. (See Virginia Code § 8.01-184, giving the courts the power to make “binding adjudications of right” in “cases of actual controversy”). This type of judgment is often sought when a party seeks an official determination of the legal status or interpretation of a law or contractual obligation. As the Fairfax Circuit Court recently held, however, declaratory judgments are not appropriate in all circumstances. They are designed to help parties understand legal rights and obligations without engaging in full-blown litigation. The key aspect of declaratory judgments is that they are preventive and aim to resolve legal uncertainty rather than to provide a remedy for a wrong already done.

Prior to the Declaratory Judgment Act (Virginia Code §§ 8.01-184 to -191), the common law usually precluded judicial resolution of contractual disputes unless they encompassed a fully formed, prima facie claim (consisting of an enforceable contract, an unexcused breach, and resulting damages). The Declaratory Judgment Act introduced a nuanced judicial approach, creating an intermediary tier between fully matured claims and those deemed insufficient under traditional common law. (See Ames Ctr., L.C. v. Soho Arlington, LLC, 301 Va. 246, 253 (2022)). Declaratory judgments cannot be used as a means of issuing advisory opinions or deciding moot or speculative matters, but they can be used to adjudicate actual conflicting assertions of rights, even absent immediate consequential harm. The Act’s purpose “is to afford relief from the uncertainty and insecurity attendant upon controversies over legal rights, without requiring one of the parties interested so to invade the rights asserted by the other as to entitle him to maintain an ordinary action therefor.” (See Va. Code 8.01-191).

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