The Virginia Business Litigation Blog

March 17, 2014

Business Conspiracy Can Be Based On Tortious Interference

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.
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March 10, 2014

White House Crasher’s Tortious Interference Claim Reinstated on Appeal

by Lee E. Berlik

Readers may remember Tareq and Michaele Salahi from the national attention they gained in November 2009 when they crashed a White House state dinner in honor of India’s Prime Minister Manmohan Singh or from their run on the reality show “The Real Housewives of D.C.” The Salahis are no stranger to litigation, having gone through a messy divorce in 2012. Most recently, the Supreme Court of Virginia heard Mr. Salahi’s appeal from a decision of the Circuit Court of Warren County regarding claims against the couple’s former agent, DD Entertainment, LLC.

According to Mr. Salahi, he and his then wife had a verbal agreement to appear on reality T.V. shows, talk programs and other media outlets to promote their entertainment partnership, “The Salahis,” and they were to use the profits from the partnership for their mutual benefit. DD Entertainment acted as the Salahis’ agent and procured additional projects for them. Mr. Salahi alleged that DD Entertainment was aware of the couple’s business partnership and used improper means to interfere with the partnership by encouraging Mrs. Salahi to leave the enterprise and become the adulterous mistress of Journey guitarist Neal Schon in violation of Virginia’s adultery statute, Virginia Code § 18.2-365.
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March 3, 2014

Age Bias Not Enough to Prevail Under ADEA

by Lee E. Berlik

The Age Discrimination in Employment Act (“ADEA”) prohibits an employer from discriminating against an employee on the basis of age. To prevail on an ADEA claim, it is not enough to show that a supervisor was biased against older employees. A successful plaintiff needs to show that she suffered an unfavorable employment action that she would not have suffered but for age discrimination. All illustrated by the recent case of Lavina D. Jernagin v. John M. McHugh, even if a supervisor refers to an employee as an “old-timer” and a “dinosaur,” if age was not the “but for” cause of an unfavorable employment action, the plaintiff will be unable to recover.

Lavina Jernagin began civilian employment with the United States Army in 1997, working as a Logistics Management Specialist with the Army’s Directorate of Logistics (DOL). In 2003 and 2005, Ms. Jernagin received annual performance ratings of “outstanding” or “excellent.” In 2007, Sergeant Travania Fair and Pamela Kent became Ms. Jernagin’s first and second line supervisors. Sergeant Fair considered Ms. Jernagin’s performance below average. In July 2007, as part of a branch reorganization, Lawrence Lawson and Mary Costa became Ms. Jernagin’s first and second line supervisors. At trial, witnesses testified that Ms. Costa had made several derogatory age-related statements toward Ms. Jernagin and her coworkers.
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February 24, 2014

Subpoena for Production of Hard Drives Deemed Unreasonable in Maryland

by Lee E. Berlik

Small businesses often find themselves the target of defamatory online reviews left by anonymous reviewers. In most cases, a subpoena can be issued to the website owner or Internet Service Provider to reveal the poster’s identity (or at least the I.P. address from which the post was written). See, for example, Yelp v. Hadeed Carpet Cleaning, in which the Virginia Court of Appeals held that Yelp could be compelled to comply with such a subpoena. Any such subpoena, however, cannot subject the recipient to undue burden. As illustrated by the recent Maryland case of In re: Subpoena of Daniel Drasin, an overreaching subpoena that places an undue burden on the recipient will be quashed.

Advanced Career Technologies, Inc. (“ACT”) sued John Does 1-10 in a Colorado federal court based on allegedly defamatory comments posted anonymously on the “Random Convergence” blog. In an attempt to discover the identity of the John Does, ACT served a third party subpoena on the blog’s administrator, Daniel Drasin, commanding him to produce any hard drives, servers and any other devices he used to administer the blog, and data stored online via website or application. Drasin moved to quash the subpoena pursuant to Federal Rule of Civil Procedure 45(c)(3) asserting that it was unreasonable, imposed an undue burden and was not likely to lead to relevant evidence.
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February 20, 2014

EEOC Announces Record Monetary Recovery from Employers in 2013

by Guest Blogger

The U.S. Equal Employment Opportunity Commission (“EEOC”) recently released a comprehensive set of fiscal year 2013 data tables showing that it obtained the highest monetary recovery in agency history through its administrative process, increasing by $6.7 million to $372.1 million of the 93,727 charges received in fiscal year (“FY”) 2013.

There was actually a nearly 6% decrease in charges filed in FY 2013 from FY 2012. In total, 93,727 employees filed charges with the EEOC. Consistent with past years, retaliation was the most commonly cited basis (more than 35,500 charges) for discrimination charges and increased in FY 2013. The next most commonly charge was racial discrimination (more than 33,000 charges) followed by gender/sexual harassment/pregnancy discrimination (nearly 28,000 charges) and then disability discrimination (with almost 26,000 charges). EEOC’s data showed more than 3,000 charges were found to be “reasonable cause,” where the evidence gained in the investigation rendered a conclusion that discrimination occurred. The data also demonstrated that the EEOC successfully conciliated 1,437 charges (approximately 40%). A “successful conciliation” is described by EEOC as one that results in substantial relief to the employee citing discrimination and all others adversely affected by discrimination.
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February 17, 2014

Are Purchase Orders Enforceable Contracts?

by Lee E. Berlik

They can be. The Uniform Commercial Code provides that a contract for the sale of goods may be made in any manner sufficient to show agreement, and that “an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods.” In MidAtlantic International Inc. v. AGC Flat Glass North America Inc., a federal court in Norfolk examined whether purchase orders reflected an enforceable contract between the parties and concluded that they did.

MidAtlantic supplied Spanish dolomite to AGC under a contractual relationship that their predecessors began in the late 1990s. At the end of each calendar year, AGC sent MidAtlantic a purchase order providing a rough estimate of its needs for the coming year. AGC supplemented the annual purchase order with monthly orders that were more exact. Each purchase order set forth requirements and conditions for the delivery of the product and contained the price and quantity of the product, details regarding how the agreement could be cancelled, shipment requirements and other details necessary for both sides to understand how the transactions were to occur. The quantity of dolomite was occasionally altered via email and phone between the parties. Additionally, the purchase orders provided requirements for the chemical composition and physical properties of the product. For example, the maximum allowable levels of iron, silicon dioxide and acid insoluble particles were specified, and no acid insoluble particle was to be coarser than 30 mesh.
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February 3, 2014

Principal and Agent Acting Within Scope of Duties Cannot Conspire

by Lee E. Berlik

To recover for statutory business conspiracy in Virginia, a plaintiff must show (1) concerted action between two or more people; (2) legal malice towards plaintiff’s business; and (3) resulting damage to the plaintiff’s business. Where the defendants have a principal/agent or employer/employee relationship, and the agent is acting within the scope of his or her duties, the first element is not met because the parties are not separate entities, and a single entity is not legally capable of conspiring with itself. Applying these principles, the United States District Court for the Eastern District of Virginia granted the defendants’ motion for summary judgment in Rogers v. Deane.

Prior to their separation and divorce, Edwina and Edward Rogers employed Jon Deane, a certified public accountant, for tax and accounting services. After the Rogers divorced, Mrs. Rogers sued Mr. Deane for statutory business conspiracy and other claims, contending that Mr. Deane diverted hundreds of thousands of dollars in credits and tax deductions into Mr. Roger’s tax return, that he diverted tax liability into her tax returns, and that he intentionally damaged her reputation and business.

Mrs. Rogers, faced with a motion for summary judgment, argued that her husband and Mr. Deane should be treated as two separate entities capable of forming a conspiracy because (1) there was no agency relationship, and (2) even if there was, the defendants’ actions fell outside the scope of the agency. The court disagreed.

January 27, 2014

Rule 8’s Plausibility Requirement Not Modified By Rule 9’s “Allege Generally” Provision

by Lee E. Berlik

Federal Rule of Civil Procedure 8(a) requires a complaint to contain a short and plain statement of the claim showing that the pleader is entitled to relief so as to give the defendant fair notice of the claim and the ground upon which it rests. The Supreme Court has interpreted this rule to require factual allegations sufficient to demonstrate that a claim is plausible on its face. Rule 9(c), on the other hand, allows plaintiffs to plead contractual conditions precedent “generally.” In Chesapeake Square Hotel v. Logan’s Roadhouse, Inc., the court was faced with the question of whether Rule 9(c) permits a lesser pleading standard than Rule 8, permitting plaintiffs in such cases to avoid the plausibility requirement. While the court did not answer the question directly since it found the plaintiff had presented a plausible claim anyway, the court’s discussion suggests that Rule 8’s plausibility requirement cannot be avoided by pointing to a provision in the Rules permitting a “general” pleading.

Chesapeake Square involved a contract for the sale of commercial real estate to Logan’s Roadhouse. The contract imposed conditions on both parties to be performed prior to closing. Defendant allegedly terminated the contract claiming that plaintiff failed to satisfy contractual preconditions. Plaintiff alleged breach of contract and sought specific performance. Defendant moved to dismiss, arguing that the complaint failed to adequately allege that plaintiff satisfied contractual conditions precedent that would entitle it to specific performance of the contract.

The court noted that when the Rule 9(c) general pleading requirement for conditions precedent is read without restriction, it allows parties to allege generally that all conditions precedent have occurred. In this case, the plaintiff alleged generally that it satisfied all of the preconditions to defendant’s obligations under the contract and therefore met the Rule 9(c) pleading requirement when read without restriction.

January 22, 2014

Can I Sue for Emotional Distress in Virginia?

by Lee E. Berlik

Virginia recognizes a cause of action for “intentional infliction of emotional distress,” but the claim is not favored and is difficult to maintain. A plaintiff alleging a claim for intentional infliction of emotional distress in Virginia must allege in his complaint all facts necessary to establish the cause of action in order to withstand challenge on a motion to dismiss or demurrer. The elements of a prima facie case are (1) intentional or reckless conduct; (2) outrageous and intolerable conduct; (3) a causal connection between the alleged wrongful conduct and the emotional distress; and (4) severe distress.

For conduct to satisfy the “outrageous and intolerable” element, the alleged conduct must be “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” Russo v. White, 241 Va. 23, 27 (1991). In other words, to state a claim, the conduct at issue must violate generally accepted standards of decency and morality; mere bad manners are not enough.

The latest example of an unsuccessful attempt to pursue a claim for IIED is the case of Melaney Dao v. Paul M. Faustin, a case involving allegations of a hostile work environment. According to the allegations of the complaint, the plaintiffs were former employees of Infused Solutions, LLC, where defendant Paul Faustin was the Chief Financial Officer. Dao claimed that on one occasion in the beginning of 2017, Faustin grabbed her hand while they were riding in a car together. She shook her hand away and told him not to touch her, but he persisted in a course of conduct involving near-daily unwanted hugs. A second plaintiff also complained of unwanted hugs. The court found that the alleged behavior was certainly “offensive, unacceptable, and wrongful,” but held that the conduct was not sufficiently “extreme or outrageous” to support a claim for IIED.

January 2, 2014

Deceitful Behavior Not Enough to Warrant Preliminary Injunction

by Lee E. Berlik

Upon a litigant’s motion, a court can enter a “preliminary injunction” preventing a party from pursuing a particular course of action until the conclusion of a trial on the merits. A preliminary injunction is considered an extraordinary remedy and requires the moving party to establish that (1) he is likely to succeed on the merits of the case at trial; (2) he is likely to suffer irreparable harm unless the injunction is granted; (3) the balance of the equities tips in his favor; and (4) an injunction is in the public interest. The party must make a clear showing that he is likely to succeed on the merits. Where a defendant has acted in an underhanded manner, but the plaintiff is unable to establish these factors, a court will deny the request for injunctive relief. In BP Products v. Southside Oil, the United States District Court for the Eastern District of Virginia considered and denied BP’s request for a preliminary injunction even though it was clear that Southside had acted deviously.

Defendant Southside owns gas stations and also has fuel supply agreements with independent gas stations. BP decided to stop owning stations and simply sell gas to BP stations through middlemen. As part of its strategic plan, BP sold many of its Virginia gas stations to Southside, and Southside agreed to continue to market BP products at BP’s former stations. The parties renewed the contract in 2010 and agreed that BP would have a Right of First Offer (ROFO) as to any proposed sale of any of Southside assets. Before Southside sold any BP stations or changed any BP stations to other brands, it was required to provide a term sheet outlining its goals; BP could then either negotiate with Southside or allow negotiation with other buyers. Southside was not required to accept any offer by BP to purchase its assets.

The 2010 agreement also gave BP a Right of First Refusal (ROFR) requiring Southside to give BP written documentation regarding any proposed sale so that BP could determine whether to buy Southside’s entire business. The 2010 contract expired on October 2, 2013. During renewal negotiations, BP sent a “notice of non-renewal” indicating that if the parties failed to reach a new agreement by October 2, 2013, the contractual relationship would end. Southside declined to renew the agreement and the relationship ended.

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