Pretrial Practice and Civil Procedure Category Archives — Page 10 of 10 — The Virginia Business Litigation Blog Published by Virginia and Washington, D.C. Litigation & Appeals Attorney

November 17, 2009

Discovery in the Information Age

The discovery process, the primary fact-finding tool available to litigants, has always been contentious. Parties are loathe to hand over potentially embarrassing or incriminating documents, and the costs involved can be staggering. The information age has only served to make things more complicated. As the Northern District of Illinois observed in the 2002 case of Byers v. Illinois State Police, “[m]any informal messages that were previously relayed by telephone or at the water cooler are now sent via e-mail.” Now that so many casual conversations are documented in e-mail and are, therefore, potentially subject to discovery, the discovery costs in the typical case have skyrocketed . Two recent United States District Court Cases, one out of Minnesota, Kay Beer Distributing, Inc. v. Energy Brands, Inc., and the other out of Florida, Kilpatrick v. Breg, Inc., provide a window into just how daunting electronic discovery can be, how judges are adapting traditional discovery rules to deal with these new problems, and how parties can do their part to avoid potential problems.

Information is generally discoverable if it is non-privileged and either directly relevant to a party’s claim or reasonably calculated to lead to the discovery of evidence that is directly relevant. In the Kay Beer case, Kay alleged that an oral contract gave it the exclusive right of distribution for Energy Brands’ products. Energy Brands claimed that by its understanding of the agreement, Kay’s distribution rights were limited. This was essentially a run-of-the-mill contract dispute. What made the case unique, however, was the plaintiff’s demand that the defendant hand over five DVDs containing nearly 13 gigabytes (between 650,000 and 975,000 pages) of e-mails and other documents. Each of the documents had been identified as referencing “Kay Beer”, “Kay Distributing”, or simply “Kay” by a keyword search of Energy Brands’ archives. Kay Beer argued that the documents might contain discoverable evidence showing that Energy Brands originally shared Kay’s understanding of their agreement.

The court’s approach to the discovery contest was to weigh Kay Beer’s interest in obtaining the documents against the burden Energy Brands would experience in turning them over. The court found that just because a document references a party does not support the conclusion that it contains relevant evidence. It further reasoned that in contract litigation, the only relevant statements are those made between the representatives of the companies involved; statements made by lower-level employees not empowered to speak for the company are not relevant to the official understanding of the contract. The court concluded that Kay Beer’s interest in the documents was relatively minor.

September 28, 2009

Lawyers Held Not Entitled to Withdraw Despite Not Getting Paid

by Lee E. Berlik

Lawyers who represent clients in litigation often assume that they can simply withdraw from the case if the client stops paying the lawyer’s bills. Engagement letters and representation agreements often provide that an attorney will withdraw in the event of nonpayment. A federal court sitting in Richmond, Virginia, however, denied a law firm’s withdrawal request in such a situation, demonstrating that lawyers representing corporations in Virginia’s federal courts cannot assume they will be released from their litigation duties when their clients are being uncooperative–even if their clients are not paying the lawyer’s bills.

In Reynolds v. Reliable Transmissions, Inc., the law firm of ThompsonMcMullan, P.C., filed a motion to withdraw from its representation of the defendant. The grounds of the motion were typical: the client failed to make the required fee deposit, failed to pay the law firm’s bill, and failed to respond to the lawyers’ efforts to communicate about the case. The law firm filed its motion early in the case: no discovery had taken place, and no trial date had been set. The posture of the case was such that most lawyers would consider a court’s granting of the motion to be fairly automatic. After all, the Virginia Rules of Professional Conduct expressly permit withdrawal where “the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services,” provided that court approval is obtained. The plaintiff did not even oppose the motion.

Judge Dohnal explained, however, that nonpayment of fees is usually not a sufficient basis, standing alone, to permit an attorney to withdraw from pending litigation in the absence of another attorney ready to take over the case. In Virginia state and federal courts, corporations must appear by counsel; they cannot represent themselves. For this reason, and because no other attorney had been identified to assume the representation, the court denied the motion to withdraw.

September 27, 2009

In Virginia Fraud Case, Defendant’s Website Held Insufficient Basis for Personal Jurisdiction

by Lee E. Berlik

To file a lawsuit in Virginia’s state or federal courts against a non-resident of Virginia or an out-of-state corporation, it is necessary to establish “personal jurisdiction” over the defendant. A court has no power over parties to a lawsuit absent such jurisdiction. Personal jurisdiction will exist only if (1) Virginia’s “long-arm” statute authorizes it; and (2) the defendant has certain “minimum contacts” with Virginia “such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice,” which is required by constitutional due process. In a recent case from the Eastern District of Virginia, Judge Trenga held that a passive website not purposefully targeted at Virginians was not sufficient to create a basis for personal jurisdiction and he dismissed the case.

The case, which contains counts for actual fraud, constructive fraud, negligence, and breach of fiduciary duty, was filed by Dr. Olimpia Rosario, a Virginia psychiatrist, against professional psychic Jeffrey Wands, who operates Psychic Eye Media in New York. Dr. Rosario became impressed with Mr. Wands several years ago when he correctly predicted that she would obtain a residency in a New York-based hospital. Ever since, Dr. Rosario has sought counseling and guidance from Mr. Wands on a wide range of issues, including spiritual issues and substance abuse problems, despite the fact he held no degree or license to practice any type of healing art, medicine, counseling, or social work in either Virginia or New York.

Eventually, Mr. Wands became concerned about certain of Dr. Rosario’s behavior and reported it to both the New York Police Department and the Virginia Board of Medicine. Dr. Rosario sued, claiming Mr. Wands caused her condition to worsen and denying abuse of prescription drugs. Mr. Wands, a resident of New York, moved to dismiss the case for lack of personal jurisdiction.

July 11, 2009

Virginia Court Declines to Enforce Liability Disclaimer in Business Contract

by Lee E. Berlik

Faced with an issue that has not yet been decided by the Virginia Supreme Court, a federal court sitting in Roanoke, Virginia, ruled that contracting parties may not agree in advance to exempt each other from liability resulting from future intentional misconduct. To the extent parties include in their contract a disclaimer purporting to limit liability and legal theories to exclude causes of action targeted at intentional or reckless misconduct, Virginia courts should strike them down as violative of public policy, the court held.

The case was filed in January by All Business Solutions, Inc., against NationsLine, Inc. Both companies provide telecommunications services. The parties entered into a contract providing that NationsLine would manufacture certain telecommunications products and that ABS would market and sell them for a commission. According to ABS, when one of its customers for direct inbound dialing numbers (“DIDs”) realized that ABS was also conducting business with one of its competitors, it resolved to “injure or destroy” ABS and caused NationsLine to abruptly terminate the contract.

One legal theory pursued by ABS was that of statutory business conspiracy under the Virginia Business Conspiracy Act, Va. Code § 18.2-499, -500. The business conspiracy statute is popular among plaintiffs’ attorneys due primarily to its triple-damages provision and allowance for recovery of attorneys’ fees. NationsLine moved to dismiss the claim, arguing (among other things) that the claim was barred by the limitation of liability provision in the parties’ contract.

June 19, 2009

BB&T Wins Summary Judgment in Virginia Employment Case

by Lee E. Berlik

Proving once again that no good deed goes unpunished, a former employee of BB&T Insurance Services to whom BB&T graciously paid 30 days of severance pay despite terminating his employment for cause–and apparently without requiring the employee to sign a release–sued the company for wrongful termination. On June 17, 2009, however, Judge Wilson of the Western District of Virginia in Harrisonburg had “no hesitancy” in tossing out the case on summary judgment.

The employee’s job duties involved identifying, contacting, and providing services to existing and potential new insurance customers. To assist him in performing those duties, BB&T allowed him to use a company laptop with access to confidential files on the company’s network. At the time of his termination, the employee had 8 years’ worth of sensitive client information stored on his laptop.

While traveling, the employee left the laptop unattended overnight in his vehicle while it was parked in a hotel parking lot. It was stolen. When BB&T learned of the theft, it notified those of its clients affected by the data breach and offered them a credit-monitoring service. These programs cost the company over $24,000.

June 6, 2009

Loudoun County Judge Rejects Bright-Line Test for Work Product Protection

by Lee E. Berlik

In a case brought by two ousted golf-club members against the Benchmark Management Company, the management company behind Lansdowne Golf Club in Leesburg, Virginia, Judge James H. Chamblin ruled that a “case by case” test for determining applicability of the work-product doctrine is preferable to the “bright-line rule” several other Virginia courts have followed.

At issue was whether 23 internal Lansdowne documents concerning an alleged assault on the premises were prepared “in anticipation of litigation” within the meaning of Virginia Supreme Court Rule 4:1(b)(3), which provides that a litigant may not compel an opponent to produce copies of documents prepared in anticipated of litigation except under certain limited circumstances. After reviewing the documents privately, Judge Chamblin found that the documents were prepared in anticipation of litigation and that, because there was no argument by counsel that any exception applied, the documents were protected from discovery by the work-product doctrine.

There has not been a consensus among Virginia circuit courts with respect to determining when litigation is “anticipated.” Some courts apply a bright-line test that applies work-product protection to a document the moment an attorney becomes involved. Other courts decide the issue on a case-by-case basis, examining the particular facts and circumstances of each case and determining whether litigation was reasonably foreseeable, regardless of whether an attorney has been retained. Judge Chamblin favored the case-by-case approach “because things can be done in anticipation of litigation before an attorney becomes involved.”