The Virginia Business Litigation Blog

June 21, 2022

Public Employees Can’t Be Fired for Exercising Free Speech Rights

Freedom of speech is protected by the First Amendment to the United States Constitution. In the employment context, the First Amendment offers special protection to state and federal employees. Public employees have some extra job security as they cannot (at least not legally) be terminated for exercising their free-speech rights. (If you work for a private company, the First Amendment doesn’t do much for you because it’s a limit on government power, not private entities). If a public employee gets fired for saying something his government employer didn’t like, he may, in appropriate circumstances, be entitled to pursue a Section 1983 claim for monetary damages.

If you’ve been following the drama down in Pound, Virginia, you know that the town is on the verge of collapse. Town funds were embezzled, the Town Attorney was fired, and so many council members quit that the council was left without a quorum and unable to conduct business. This is a place that actually did defund the police, terminating the employment of the town’s entire police department. The town may or may not exist at the end of next year. But back to the Town Attorney. As a public employee, he enjoyed the First Amendment right to freely express his personal views without giving his employer grounds to terminate him. But according to the complaint he filed against former Town Council member Clifton Cauthorne and others (a complaint which, as an interesting aside, appears to have been written with a typewriter), the Town fired him in retaliation for his criticism of the Town’s Mayor. A federal judge recently opined that if the allegations in the complaint are true, the Town violated the attorney’s First Amendment rights.

March 31, 2022

No Post-Judgment Interest on Trebled or Punitive Damages

by Lee E. Berlik

A successful civil lawsuit generally results in a judgment for some amount of money. Interest accumulates on that judgment, either at the rate lawfully specified in the contract or at Virginia’s standard “judgment rate” of six percent. (See Va. Code § 6.2-302). Money judgments can consist of many different types of damages awarded to the plaintiff, such as compensatory damages, punitive damages, costs and expenses, liquidated damages, trebled damages, and other damages authorized by statute. For years, many successful plaintiffs have garnished wages, seized assets, and taken other action to collect their judgments on the assumption that they were entitled to add 6% interest to the total amount of the judgment, regardless of how that judgment amount was reached. On March 24, 2022, the Supreme Court of Virginia held that post-judgment interest should only run on the portion of the judgment representing compensatory damages. Things like punitive damages and trebled damages do not fit within this category.

Yacoub Sidya v. World Telecom Exchange Communications, LLC, was a business dispute between a telecommunications company, its former CEO, and the owner of Y-Telecom, a vendor to World Telecom. World Telecom sued Sidya on various counts and was successful on its claims for misappropriation of trade secrets, tortious interference with business expectancy, and business conspiracy. The jury awarded $1.332 million, trebled to $3.996 million, punitive damages of $350,000, attorneys fees, and post-judgment interest of 6% applied to the judgment as a whole. Sidya had a problem with the trial court awarding 6% interest on the entire judgment of roughly $6.5M rather than applying interest only to the $1.332M attributable to compensatory damages. On appeal, the Virginia Supreme Court didn’t agree with all of Sidya’s arguments, but it agreed that post-judgment interest should be restricted to awards that are compensatory, rather than punitive, in nature.

January 29, 2022

Put Your Contracts In Writing

by Lee E. Berlik

If it’s important, put it in writing. Seems like common sense, doesn’t it? Yet you’d be surprised how much business gets done in the absence of a written agreement. Legally speaking, written contracts aren’t strictly necessary in many situations. A contract will exist, regardless of whether reduced to writing, if the evidence shows an offer was made and accepted, that legally sufficient consideration was exchanged, and that both parties agreed on all material terms. The statute of frauds requires that certain types of contracts–like real estate contracts and contracts for the sale of goods worth over $500–be in writing or supported by written evidence, but contracts not covered by the statute of frauds are enforceable in Virginia even if they are purely oral. (See Va. Code §§ 8.2-201, 11-2). But why would you want to go through the trouble of having to prove the existence of a verbal agreement? The whole point of entering into a contract is to acquire a legally enforceable right. If the other party breaches the agreement and you need to enforce your rights in court, you’ll need to be able to prove the existence of a valid contract, that it was breached by the other party, and that you were damaged as a result. Proving these three things is a lot easier if the terms of the agreement are reflected in a document signed by both parties.

As I read the recent opinion in Monogram Snacks Martinsville, LLC v. Wilde Brands, Inc. (a case that involved a dispute between two snack-food manufacturers, one of which is one of the largest in the country), I was surprised to learn the parties never bothered to put the terms of their agreement in writing. As a result, when Monogram decided to sue Wilde for breach of contract, it had to go through a whole ordeal to convince the court that a contract even existed in the first place.

December 11, 2021

Preliminary Injunctions Not Automatic in Noncompete Cases

by Lee E. Berlik

When I wrote about how to enforce a noncompete agreement against a departed employee a couple of years ago, I made it sound pretty easy: write an enforceable noncompete agreement, then move for a preliminary injunction to prevent the employee from doing further damage to your business. It should be noted, however, that injunctive relief is considered an “extraordinary” remedy in Virginia and is by no means automatic, even if an employee is in clear violation of an enforceable noncompete agreement. A recent decision from Fairfax County showcases what can happen if the employer is unable to prove irreparable harm.

To obtain a preliminary injunction against a former employee, the employer needs to convince the court that all of the following are true: (1) the employer will suffer irreparable harm if a preliminary injunction is not granted; (2) the employee will not be harmed if the preliminary injunction is granted (or would suffer less than the employer would suffer if the injunction is denied; in other words, the “balance of equities” tips in the employer’s favor); (3) the employer will likely succeed on the merits (i.e., win the case) when it ultimately goes to trial; and (4) the public interest would be served (or at least not harmed) by granting the preliminary injunction. (See Real Truth About Obama, Inc. v. Fed. Election Comm’n, 575 F.3d 342 (4th Cir. 2009); Wings v. Capitol Leather, LLC, 88 Va. Cir. 83 (Fairfax 2014)).

October 6, 2021

VUTSA Preemption Held Insufficient Basis for Pretrial Dismissal

by Lee E. Berlik

The Virginia Uniform Trade Secrets Act (“VUTSA”) contains a section stating that “this chapter displaces conflicting tort, restitutionary, and other law of this Commonwealth providing civil remedies for misappropriation of a trade secret.” (See Va. Code § 59.1-341). Known as the preemption provision, it is designed to prevent inconsistent theories of relief for the same underlying harm by eliminating alternative theories of common law recovery premised on misappropriation of trade secrets. (See Smithfield Ham & Products Co., Inc. v. Portion Pac, Inc., 905 F.Supp. 346, 348 (E.D. Va. 1995)). The General Assembly has decided that if you’re going to file a lawsuit for a tort based on the unlawful taking or use of a trade secret, your sole remedy should lie in VUTSA. Any common-law claim premised entirely on a claim for misappropriation of a trade secret will be deemed preempted by the statute. To avoid preemption, a plaintiff must be able to demonstrate that the distinct theories of relief sought are supported by facts unrelated to the alleged misappropriation of the trade secret. (See Combined Ins. Co. of Am. v. Wiest, 578 F. Supp. 2d 822, 833 (W.D. Va. 2008)).

If a plaintiff sues a defendant for misappropriation of trade secrets under VUTSA but also for conversion, unjust enrichment, and tortious interference, one might suppose that the three common-law torts would be preempted and that a motion to dismiss would be in order. As noted by a recent decision in the case of Signature Flight Support, LLC v. Catherine Carroll, however, the preemption issue often cannot be decided at the outset of a case and must wait for trial to be resolved. This is primarily because the determination of whether a particular piece of confidential commercial information qualifies as a “trade secret” under VUTSA is generally a question of fact to be determined at trial. If the plaintiff can’t prove the existence of trade secrets, then preemption won’t apply and the tort claims would become viable.

September 10, 2021

Bare Legal Conclusions Insufficient to Satisfy Notice Pleading Requirements

by Lee E. Berlik

Virginia is considered a “notice pleading” jurisdiction, which means that a complaint need only contain allegations of material facts sufficient to inform a defendant (i.e., put the defendant on notice) of the true nature and character of the plaintiff’s claim. To meet this standard, though, a plaintiff must allege actual facts rather than conclusory assertions. When ruling on a motion to dismiss for failure to state a claim, courts generally must accept the plaintiff’s allegations as true for purposes of ruling on the motion, as well as all reasonable inferences arising from those facts, but courts are not required to accept “allegations that are merely conclusory, unwarranted deductions of fact,…unreasonable inferences” or “allegations that contradict matters properly subject to judicial notice or by exhibit.” (See Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002)). When a plaintiff’s cause of action “is asserted in mere conclusory language” and supported only by “inferences that are not fairly and justly drawn from the facts alleged,” it is proper to sustain a defendant’s demurrer. (See Bowman v. Bank of Keysville, 229 Va. 534, 541 (1985)).

This basically means that whatever conclusion the plaintiff wants the court to draw from the alleged facts, the plaintiff must allege not just the actual desired conclusion, but specific facts that, if true, would support the accuracy of that conclusion. For example, a court wouldn’t have to accept a plaintiff’s allegation that she suffered “severe emotional distress” or “extreme emotional distress” without accompanying factual allegations demonstrating the specific forms of emotional distress experienced. (See Russo v. White, 241 Va. 23, 28 (1991)). In a defamation case, where a plaintiff must allege that a defamatory statement is “of and concerning” him, it’s not enough to just allege that a statement was indeed “of and concerning” him; he needs to include in his complaint the specific facts that would enable the trial judge to determine that the “of and concerning” characterization is indeed accurate. (See Dean v. Dearing, 263 Va. 485, 490 (2002)). In a conspiracy case, the plaintiff must allege facts showing the defendants acted with a common purpose to injure the plaintiff; it’s not enough to just say, “the defendants conspired against me.” (See Brown v. Angelone, 938 F. Supp. 340, 346 (W.D. Va. 1996)). And in a trade secrets case, the plaintiff can’t survive dismissal simply by alleging that the defendant used “improper means” to acquire its trade secrets; the plaintiff must identify the supposed trade secrets and describe the means used to acquire them that were supposedly improper. (See Preferred Systems Solutions, Inc. v. GP Consulting, LLC, 284 Va. 382 (2012)).

July 20, 2021

Professor’s Trade Secrets Claim Against EVMS Allowed to Proceed

by Lee E. Berlik

According to the allegations of a complaint filed by Amy H. Tang, a professor of microbiology and molecular cell biology, against the Eastern Virginia Medical School (“EVMS”), EVMS misappropriated her trade secrets and discriminated against her due to her Chinese ethnicity. She sued the school for violations of both the Defend Trade Secrets Act and the Virginia Uniform Trade Secrets Act, plus a host of other claims. EVMS was successful in getting some of the claims dismissed, but the court ruled that Professor Tang had sufficiently alleged all the requisite elements of a trade secrets case to survive the school’s motion to dismiss.

Tang’s allegations were essentially as follows. EVMS employs Tang as a Professor of Cancer Biology. She had developed certain treatments related to the exploitation and use of ethylenediaminetetraacetic acid for anti-NFkB, anti-inflammatory, and antiseptic treatments, which she disclosed to EVMS in an invention disclosure. Tang claimed these treatments were entitled to trade secret protection considering she had taken measures to keep the information secret (including securing all data electronically and requiring staff to leave data locked within the lab facilities and password-protected computer systems) and that the information had independent economic value.

June 19, 2021

Violation of Corporate Opportunity Doctrine Held Actionable

by Lee E. Berlik

The fiduciary duty owed by corporate officers and directors includes an obligation not to usurp a corporate business opportunity for personal gain but to allow that opportunity to be enjoyed by the corporation, to which it is said to belong. (See Feddeman & Co. v. Langan Assocs., P.C., 260 Va. 35, 46 n.1 (2000)). As fiduciaries, officers and directors have a duty of loyalty that requires them to act in the best interests of the corporation at all times. A breach of fiduciary duty may arise if a corporate officer becomes personally interested in an opportunity of legitimate interest to his employer. Conflicts of interest must be avoided and all corporate opportunities must be presented to the corporation before the officer takes it for himself or offers it to others. If a corporate officer violates this so-called “corporate opportunity doctrine,” the corporation may sue for damages.

Technically, a violation of the corporate opportunity doctrine is a breach of fiduciary duty, but according to a recent opinion from the Western District of Virginia, it doesn’t really matter what you call it; it’s a tort, for which monetary damages can be recovered.

April 24, 2021

Emotional Distress Doesn’t Always Require Corroboration

by Lee E. Berlik

Emotional distress claims are tricky because they are so easily faked. Anyone can assert that they suffered unbearable pain and suffering as the result of a defendant’s wrongful act, regardless of the degree of humiliation actually felt. It’s kind of hard to disprove another person’s subjective emotions. The Fourth Circuit has criticized emotional-distress cases for being “easily susceptible to fictitious and trivial claims” and has warned that awards of emotional-distress damages can be set aside when based solely on the plaintiff’s own conclusory, unsupported, subjective assertions. (See Hetzel v. County of Prince William, 89 F.3d 169, 171-72 (4th Cir. 1996); Price v. City of Charlotte, 93 F.3d 1241, 1250 (4th Cir. 1996)). In Virginia state court, however, the Virginia Supreme Court has clarified that corroborating evidence of emotional injury is not a prerequisite for obtaining such damages. And emotional-distress damages can be substantial.

Not every claim allows for the recovery of emotional-distress damages. In fact, as a general rule, emotional-distress damages are not recoverable absent accompanying physical harm or wanton and willful conduct. (See Fairfax Hosp. By & Through INOVA Health Sys. Hosps., Inc. v. Curtis, 254 Va. 437, 445–46 (1997)). An exception to this rule is where a cause of action exists independently of the emotional distress, such as when compensatory damages are expressly permitted by statute. (See Sea-Land Serv., Inc. v. O’Neal, 224 Va. 343, 354 (1982) (“[W]e have approved the recovery of damages for humiliation, embarrassment, and similar harm to feelings, although unaccompanied by actual physical injury, where a cause of action existed independently of such harm.”) Earlier this month, the Supreme Court of Virginia dealt with such a case and held that emotional distress damages were recoverable even in the absence of monetary damages or physical injuries.

March 13, 2021

Forum Non Conveniens Is About Fairness to Everyone (Not Just You)

by Lee E. Berlik

If you get sued in an inconvenient, far-away forum and want the court to consider moving the case to a court closer to home–and you want to flex your Latin proficiency–file a motion for “forum non conveniens.” This common law doctrine allows a court to dismiss or transfer a case, even one filed properly in a permissible venue, if an alternative forum is available and would be more convenient to the parties and witnesses. The doctrine is codified at 28 U.S.C. § 1404 (applicable in federal court) and Va. Code § 8.01-265 (applicable in state court). When bringing such a motion, however, keep in mind that the court is going to want to look at the totality of the circumstances and not just what’s most convenient to the moving party.

A party seeking to dismiss a case for forum non conveniens must show that an alternative forum is (1) available; (2) adequate; and (3) more convenient in light of the public and private interests involved. (See Jiali Tang v. Synutra Int’l, Inc., 656 F.3d 242, 248 (4th Cir. 2011)). The party seeking dismissal or transfer has the burden of persuading the trial court that considerations of convenience, fairness, and judicial economy warrant invoking forum non conveniens. (See Galustian v. Peter, 591 F.3d 724, 731 (4th Cir. 2010); Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 432 (2007)). In examining the convenience of parties and the interests of justice, courts will typically consider one or more of the following factors:

the plaintiff’s choice of forum;
the state that is most familiar with the governing law;
the location where agreements were negotiated and executed;
the parties’ contacts with the forum;
the contacts relating to plaintiff’s cause of action in the chosen forum;
the cost of litigation in the competing forums;
the location of witnesses;
the availability of compulsory process to compel attendance of unwilling non-party witnesses;
the ease of access to sources of proof; and
the existence of a valid forum-selection clause in a contract between the parties.

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