Last September, I noted the case of Dunlap v. Cottman Transmissions Systems, LLC, in which the Fourth Circuit certified two questions to the Virginia Supreme Court seeking clarification with respect to Virginia’s business conspiracy statute and the applicable statute of limitations for tortious interference claims. The Virginia Supreme Court has now answered those questions, holding that causes of action for tortious interference with contract and tortious interference business expectancy qualify as the requisite “unlawful act” to proceed on a business conspiracy claim under Va. Code §§ 18.2-499 and -500 because both claims are predicated on an independent common law duty arising outside of contract. The court also held that claims for tortious interference are governed by § 8.01-243(B)’s five-year statute of limitations because such claims involve injury to property rights.
James Dunlap sued Cottman Transmission Systems, LLC, and Todd Leff for tortious interference with contract, tortious interference with business expectancy, and business conspiracy in violation of Virginia Code § 18.2-499 and § 18.2-500. The claims arose from Dunlap’s franchise agreements with AAMCO Transmissions, Inc. When a new owner of AAMCO (who already owned a controlling interest in Cottman) sought to convert Cottman Franchises into AAMCO franchises, Dunlap’s franchises were closed, and Dunlap claimed that the closings were due to a conspiracy between Cottman and others.
The United States District Court for the Eastern District of Virginia dismissed the business conspiracy claim for failure to allege an unlawful act or purpose, holding that the duties at issue all arose out of contractual obligations and that to allow allegations of contractual interference to serve as the requisite unlawful act for purposes of the business conspiracy statute would turn contract claims into torts. The district court dismissed Dunlap’s remaining tort claims as barred by the two year statute of limitations applicable to personal-injury claims.
On Dunlap’s appeal, the Fourth Circuit certified two questions to the Virginia Supreme Court: (1) May a plaintiff use tortious interference with contract or with business expectancy as the predicate unlawful act for a claim under Virginia’s business conspiracy statute; and (2) Does a two-year or five-year statute of limitations apply to claims of tortious interference with contract and with business expectancy?
Business conspiracy has been actionable by statute in Virginia since 1964. The statute currently provides for civil relief, including treble damages, where two or more persons have combined for the purpose of willfully and maliciously injuring the plaintiff in his business, and the plaintiff has suffered damages as a result. The wrong done under the conspiracy is the basis of
The court examined the nature of claims for tortious interference to determine whether such causes of action may qualify as the requisite unlawful act. Tortious interference is rooted in the principle that the common law right of contract brought with it a right to seek recompense against those who interfered with a valid contract. To establish tortious interference, a plaintiff must show (1) the existence of a valid contractual relationship or business expectancy, (2) knowledge of the relationship or expectancy on the part of the interferer; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy, and (4) resultant damage to the party whose relationship or expectancy has been disrupted. If a contract is terminable at will or involves only a business expectancy, the plaintiff must also allege and prove that the defendant employed improper means.
Relying on the court’s decision in Station #2, Cottman asserted that a tortious interference claim cannot form the requisite unlawful act because it depends on and is not independent of contractual obligations. However, in Station #2, the unlawful act was the breach of the contract. The plaintiff did not allege tortious interference, and there was no independent duty arising outside the contract. The court concluded that the nonperformance of a contract could not alone qualify as the requisite unlawful act. Conversely, conduct that violates independent common law duties (e.g., bribery, breach of fiduciary duties) can constitute the requisite unlawful act.
Tortious interference, the court held, is predicated on the common law duty to refrain from interfering with another’s contractual and business relationships. Those duties do not arise from the contract itself but are common law corollaries of the contract. Accordingly, the court held that tortious interference with contract and with business expectancy could serve as the requisite unlawful act under Virginia’s business conspiracy statutes.
Next the court addressed the statute of limitations question. A personal injury action is subject to a two year statute of limitations whereas an action for injury to property carries a five year statute of limitations. The dispositive issue was whether tortious interference with contract and business expectancy involve injury to person or property, and the analysis centered on whether the wrong done and damage done was directed to the estate or property of the plaintiff or to the plaintiff personally. The court found that the intentional interference with a contract or business expectancy is directed at and injuries a property right – the right to performance of a contract and to reap profits and benefits from it. The court disagreed with Cottman’s argument that tortious interference involved nothing more than disappointed economic expectations which can be redressed by the law of contract. Accordingly, the court held that the five year statute of limitations applied to the tortious interference claims.