Torts Category Archives — The Virginia Business Litigation Blog Published by Virginia and Washington, D.C. Litigation & Appeals Attorney

January 11, 2023

Mass Resignation to Form Competing Business Leads to Litigation

No employer likes to see a large number of its employees band together and leave en masse to form a competing business. A large number of employees leaving at once can lead to a loss of institutional knowledge and experience, not to mention customers and revenues. Mass departures hurt morale and can lead to increased costs for recruitment and training. A company’s reputation can be irreparably damaged once word gets out that a mass resignation has taken place, making it more difficult for the business to attract new talent. Depending on the circumstances, litigation against the former employees, as well as against the company that hired them, may or may not be warranted.

Possible legal claims include breach of fiduciary duty, breach of non-compete and/or non-solicitation agreement, tortious interference, business conspiracy, misappropriation of trade secrets, and more. Let’s take a quick look at how a Hampton Roads body-piercing business dealt with the sudden resignation of seven employees who went on to form their own body-piercing business in the same region. In the case of Chanah, Inc. v. Summers, currently pending in the Chesapeake Circuit Court, the plaintiff pursued a number of business torts against the departing employees. Most of the counts survived demurrer.

December 4, 2020

Participants in Business Expectancy Can’t Tortiously Interfere

by Lee E. Berlik

Virginia recognizes a cause of action against those who tortiously interfere with the contractual expectancies of another. To prove tortious interference with business expectancy under Virginia law, a plaintiff must show (1) the existence of a valid business expectancy; (2) knowledge of the expectancy on the part of the interferor; (3) intentional interference inducing or causing a breach or termination of the expectancy; (4) that the defendant employed improper methods when engaging in the intentional interference; and (5) resulting damage to the party whose expectancy has been disrupted. (See Dunlap v. Cottman Transmission Sys., LLC, 287 Va. 207 (2014)). Not long ago, the Virginia Supreme Court clarified that “[a]n action for tortious interference with a contract or business expectancy…does not lie against parties to the contract, but only lies against those outside the contractual relationship, i.e., strangers to the contract or business expectancy.” (See Francis Hosp., Inc. v. Read Props., LLC, 296 Va. 358 (2018)). This means that parties directly involved in the business expectancy may not be held liable for tortious interference with that expectancy.

Last month, the Eastern District of Virginia dismissed a count of tortious interference against a staffing company after it found that the staffing company was not really a stranger to the expectancy. Here’s what happened, according to the opinion issued in ITility, LLC v. The Staffing Resource Group, Inc.

July 13, 2020

Principal and Agent Are Not Separate Persons for Purposes of Tortious Interference Claim

by Lee E. Berlik

To state a claim for tortious interference with a business expectancy (as opposed to a realized contract), a plaintiff must allege: (1) the existence of a valid business relationship or expectancy “with a probability of future economic benefit”; (2) knowledge of the relationship or expectancy; (3) reasonable certainty that, absent intentional misconduct, “the claimant would have continued in the relationship or realized the expectancy”; and (4) damage as a result of the interference. (See Glass v. Glass, 321 S.E.2d 69, 77 (Va. 1984)). The intentional, interfering misconduct must involve “improper methods” such as unfair competition, unethical conduct, sharp dealing, misuse of confidential information, or breach of fiduciary duty. Only strangers to the relationship can be held liable for interfering with it. Tortious interference requires interference in a plaintiff’s relationship with another, rather than in plaintiff’s relationship with the defendant or his principal.

Where the party interfered with and the alleged interferor are in a principal-agent relationship, the interferor is not considered a third party. Agents, for example, can’t be liable for tortiously interfering with business expectancies to which their principals are parties. (See Livia Prop., LLC v. Jones Lang LaSalle Americas, Inc., No. 5:14cv53, 2015 WL 4711585, at *6-7 (W.D. Va. Aug. 7, 2015). Think of it this way: if your answer to the second element of tortious interference (whether the defendant had knowledge of the existence of the business expectancy) is “of course the defendant had knowledge–he was part of it!”, that would be a good sign that the defendant is not a stranger to the relationship and can’t be sued for tortious interference.

March 14, 2020

No Tortious Interference Claim Unless Expectancy is Real

by Lee E. Berlik

Virginia recognizes claims for both tortious interference with existing contracts and tortious interference with prospective, anticipated contracts, known as business expectancies. If your business is counting on winning a major contract but then the work suddenly goes to a competitor instead, it may be natural to wonder whether the competitor won the business fairly or through unfair competition or other improper methods. The success of a tortious interference claim based on some unrealized economic benefit anticipated in the future depends heavily on the certainty with which that benefit was expected. There is no claim for tortiously interfering with one’s dreams and aspirations.

The first element of a tortious interference claim is showing “the existence of a business relationship or expectancy, with a probability of future economic benefit to plaintiff.” (See Am. Chiropractic v. Trigon Healthcare, 367 F.3d 212, 228 (4th Cir. 2004)). A mere possibility of future economic benefit is insufficient. A recent case out of the Norfolk Division of the Eastern District of Virginia provides a good example.

September 27, 2019

Tortious Interference with Anticipated Future Contract

by Lee E. Berlik

Virginia does recognize a legal cause of action for improper interference with an anticipated business contract. The tort is known as “tortious interference with business expectancy,” “tortious interference with future economic benefit,” “tortious interference with prospective economic advantage,” or some variant of that phrase. It’s what you sue for when your business is about to close on a big deal but then the whole thing is called off as the result of some form of meddling by a third party. You’re not suing for breach of contract at this point because there is no contract. Instead, you’re suing for the loss of an anticipated future economic benefit. For the claim to be valid, however, there must be reason to believe that you would have closed on the deal were in not for the defendant’s unlawful conduct. There is no claim for interference with a contract you merely hoped to enter into, or for interference with a mere possibility of some economic benefit.

Tortious interference with business expectancy requires proof of the following elements: (1) the existence of a business relationship or expectancy, with a probability (not just possibility) of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship or expectancy; (3) a reasonable certainty that absent defendant’s intentional misconduct, plaintiff would have continued in the relationship or realized the expectancy; and (4) damages to the plaintiff.

July 9, 2019

Business Conspiracy Claims Survive Under Third-Party Rule

by Lee E. Berlik

Not long ago, Serco, Inc., won summary judgment on various claims asserted against it by L-3 Communications Corp. and L-3 Applied Technologies, Inc., including claims for statutory business conspiracy, common law conspiracy, and tortious interference with business expectancy. On appeal to the Fourth Circuit, however, the court found that the district court erred in granting summary judgment on the conspiracy claims and sent the case back to the Eastern District of Virginia for further proceedings.

The dispute centered around rights to a lucrative government contract. In 2004, the Air Force awarded a prime contract to Serco that called for testing and upgrading services to protect certain Air Force sites from “high altitude electromagnetic pulse” (“HEMP“) events. The Air Force would periodically issue work orders for various projects, and if Serco could not complete the work itself, it could issue a request for proposals (“RFP”) to invite subcontractors to bid on the work.

December 4, 2018

Only Strangers to a Contract Can Interfere with It.

by Lee E. Berlik

You can’t interfere with your own contract. A contract is a bargained-for exchange that may entitle you to certain benefits, like money, products, or services. If you do not realize the benefit of your bargain because the other party does not honor the agreement, you may be entitled to sue for breach of contract. What you probably cannot do, if all we’re talking about is disappointed economic expectations resulting from the failure of one party to fulfill his end of the bargain, is sue for tortious interference with contract. From the moment tortious interference became recognized as a cause of action in Virginia in 1985, the claim has been available only against strangers to the contract at issue. In other words, if the person causing the interference is a party to the contract, the appropriate claim for the plaintiff to bring is for breach of contract and not tortious interference.

Under Virginia law, a claim for tortious interference consists of the following four elements:

the existence of a valid contractual relationship or business expectancy;
knowledge of the relationship or expectancy on the part of the interferor;
intentional interference inducing or causing a breach or termination of the relationship or expectancy; and
resultant damage to the party whose relationship or expectancy has been disrupted.

(See Schaecher v. Bouffault, 290 Va. 83 (2015)). In the 1985 case of Chaves v. Johnson, the Virginia Supreme Court explained that these elements can only be asserted against someone outside the contractual relationship:

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June 20, 2018

“Improper Methods” Often Key to Tortious Interference Liability

by Lee E. Berlik

Perhaps a colleague at work is trying to get you fired. Or maybe you did already get fired, and your former boss is contacting prospective employers to make sure you don’t get hired. Either way, you’re not going to be very happy about it, and you may start to look into your legal options. When one person interferes with the employment status of another person, and does or says something with the intention of getting that person fired, and succeeds in that endeavor, the legal claim most often applicable is that of tortious interference with contract. A recent federal case, however, illustrates that successful claims require more than just an intent to disrupt another person’s employment; they require a showing that “improper methods” were used in the course of that disruption.

Because employment contracts are generally terminable at the will of either party (employees can quit, and employers can fire the employee, without being in breach of contract), tortious interference with employment relationships will not be actionable absent additional wrongdoing in the form of so-called improper methods. There is no hard-and-fast definition of “improper methods,” but Virginia cases have held that improper methods include:

Actions that are illegal or independently tortious
Violations of an established standard of a trade
Fraud or deceit
Unethical conduct
Sharp dealing
Overreaching
Actions that fall far outside the accepted practice of the “rough and tumble” world of free market competition

(See Duggin v. Adams, 234 Va. 221, 228 (1987); Lewis-Gale Med. Ctr., LLC v. Alldredge, 282 Va. 141, 153 (2011)).

March 17, 2018

The Source of Duty Rule

by Lee E. Berlik

Zealous lawyers seeking to maximize their clients’ monetary recovery in court will often sue for as many different claims as their highly trained legal minds can conjure up. And they will usually try to come up with at least one viable tort claim (such as fraud or business conspiracy) to pursue in addition to any breach-of-contract claims, because tort claims often allow the recovery of punitive damages in addition to compensatory damages. But there are important differences between the law of contracts and the law of torts. The law of torts is designed to protect broad societal interests such as safety of persons and property. Contract law, on the other hand, is concerned with the protection of bargained-for expectations. Therefore, several rules have developed to prevent turning every breach-of-contract claim into a tort action.

The economic loss rule, for example, holds that where a contracting party’s loss is limited to disappointed economic expectations, his remedy is limited to one for breach of contract. A similar rule is known as the “source of duty” rule. It looks to the source of the duty alleged to have been violated. Before a court will allow a contracting party to recover on a tort theory, it must be satisfied that the duty tortiously or negligently breached is a common law duty, and not one existing solely by virtue of a contract between the parties. If the source of the duty allegedly violated is a contract, then the plaintiff should be limited to remedies available in breach-of-contract actions.

September 2, 2017

Remedies for Revenge Porn

by Lee E. Berlik

Most laws were written before people started texting naked pictures of each other on their phones. No one had heard of so-called revenge porn until around 2010, when the controversial website “Is Anyone Up?” launched, allowing users to upload sexually explicit images of former romantic partners. That site ceased operation just two years after it started, but revenge porn is now more widespread than ever. So widespread, in fact, that several states (Virginia included) have decided that existing laws against copyright infringement, intentional infliction of emotional distress, and bullying were not offering victims sufficient protection. In Virginia, revenge porn is now a crime, as well as a civil cause of action for which legal remedies are available.

Under Virginia Code § 8.01-40.4, victims can sue for compensatory damages, punitive damages, and attorney’s fees. Injunctive relief may also be available. But what kind of financial recovery can vicitms expect to receive? How does one measure the emotional harm suffered as a result of sexual cyberbullying? If you bring a lawsuit and win, will the rewards outweigh the uncomforable and expensive process of open-to-the-public litigation? These are difficult questions to answer because–at least here in Virginia–few (if any) civil actions have been tried to verdict under the new revenge porn statute. But looking to some other jurisdictions may provide a clue as to what kinds of damage awards you might expect here in Virginia.