In both federal and state court, the rules give the court discretion to order a case to be divided into two or more parts, each to be tried separately. See Va. Code 8.01-272 (“The court, in its discretion, may order a separate trial for any claim”); Fed. R. Civ. P. 42 (“the court may order a separate trial of one or more separate issues, claims, crossclaims, counterclaims, or third-party claims”). The term “bifurcation” normally refers to the separation of certain issues in the case, while “severance” normally refers to the removal of claims or parties. When issues are bifurcated, the issues typically remain part of the same case; they are just tried separately. For example, when a party has a claim that allows for the recovery of reasonable attorneys’ fees, the decision might be made to bifurcate the attorneys’ fees issue so that the main issues in the case don’t get muddied by lengthy arguments about the reasonableness of attorneys’ fees. If the court orders the fee issue to be tried separately, the issue would still be decided as part of the same case, resulting in a single judgment. Severance, on the other hand, normally involves severing a claim from the lawsuit such that any separate trial on the severed action would be independent of the original action.

Fed. R. Civ. P. 42 permits a court to order severance “[f]or convenience, to avoid prejudice, or to expedite and economize” trial. Relevant considerations include (1) whether the issues are significantly different from one another in the two cases; (2) whether the severable issues require different witnesses and documentary proof; (3) any prejudice to the non-moving party if the motion is granted; and (4) any prejudice to the moving party if the motion is denied. (See Chmura Economics & Analytics, LLC v. Lombardo, Civ. Action 3:19cv813 (E.D. Va. Dec. 18, 2020)). Similarly, bifurcation of issues in state court “is a matter for the trial court’s discretion and requires consideration of whether any party would be prejudiced by granting or not granting such request, as well as the impact on judicial resources, expense, and unnecessary delay.” (Allstate Ins. Co. v. Wade, 265 Va. 383, 393 (2003)).

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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.

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About a year ago, a disgruntled systems engineer for government contractor Federated IT was sentenced to two years in prison for illegally accessing his former employer’s network systems, stealing critical servers and information, and causing a loss valued at over $1.1 million. In a civil lawsuit against his girlfriend and arising out of much of the same conduct, a former project manager at the same company has been held in default and ordered to pay over $150,000 in damages for breach of fiduciary duty, conversion, and conspiracy.

The facts of the case, which are assumed to be true by virtue of the fact the defendant was held in default for violating a court order, are as follows. Federated IT provides cyber security, information technology, and analytic and operations support services, and managed a contract with the U.S. Army Office of the Chief of Chaplains. Ashley Arrington was a project manager for the Army contract and a direct supervisor of Barrence Anthony, the engineer currently serving a two-year prison sentence. Arrington and Anthony were romantically involved but did not notify Federated IT about the relationship. At some point during Anthony’s tenure, he began to behave insubordinately and failed to show up for work, eventually leading to his termination. He decided to go out with a bang. Among other spiteful acts he was accused of before and after he left, Federated IT alleged he:

  • deactivated all administrator accounts except his own and refused to share the master password with his replacement
  • changed the responsible-party contact information on Federated IT’s Amazon Web Services account to “Anthony Enterprises”
  • modified Federated IT’s Help Desk email address to redirect emails to his personal email account
  • deleted files from a SharePoint project folder, including encryption keys, account information, and network diagram files
  • wiped the hard drive on his work laptop
  • made unauthorized copies of the Army’s servers which contained their Financial Management System
  • attempted thousands of “brute force cyberattacks” against the Chief of Chaplains’ web application system, which necessitated a shutdown of one of Federated IT’s servers.

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Under Federal Rule of Evidence 802, hearsay evidence is generally not admissible in court. In preliminary injunction proceedings, however, the rules of evidence don’t necessarily apply. Here in the Fourth Circuit, courts relax evidentiary rules when faced with motions for preliminary injunctive relief, mostly due to practical considerations such as the exigent nature of the proceeding and the unavailability of a detailed factual record at the very outset of the case. There is some disagreement among federal circuit courts on this issue, but here in Virginia, “district courts may look to, and indeed in appropriate circumstances rely on, hearsay or other inadmissible evidence when deciding whether a preliminary injunction is warranted.” (See G.G. ex rel. Grimm v. Gloucester Cty. Sch. Bd., 822 F.3d 709, 725 (4th Cir. 2016), vacated on other grounds, 137 S. Ct. 1239 (2017)). Failure to consider hearsay evidence at preliminary injunction proceedings may even be deemed an abuse of discretion.

Relying on hearsay evidence is exactly what the district court did when it granted the plaintiff’s motion for a temporary restraining order and/or preliminary injunction in the case of Edward D. Jones & Co. v. Samuel (Ed) Clyburn, Jr., a non-solicitation case filed in the Roanoke Division of the Western District of Virginia. Here’s what happened, according to the facts recited in the opinion:

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When specific and identifiable litigation becomes reasonably foreseeable, those likely to be involved in the litigation and with awareness of their likely involvement have a duty to preserve potentially relevant evidence. Failure of such a party to take reasonable steps to preserve the evidence–or intentional alteration, concealment, or destruction of evidence–is known as “spoliation of evidence” (often misspelled as “spoilation of evidence,” which is not a thing) and can result in severe sanctions if other litigants are prejudiced by their inability to use the missing evidence at trial. (See Va. Code § 8.01-379.2:1) Typically, the court will instruct the jury that it may (or must) presume that the evidence–had it been preserved–would have been unfavorable to the party who failed to preserve it. Sometimes, however, in particularly egregious circumstances, the court can dismiss the action (if the plaintiff is guilty of spoliation) or enter a default judgment (if spoliation was committed by the defendant).

Case in point: QueTel Corp. v. Hisham Abbas, No. 18-2334 (4th Cir. (Va.) July 16, 2020). QueTel brought this action against Hisham Abbas, Shorouk Mansour, and Finalcover, LLC, for misappropriation of trade secrets, copyright infringement, and other claims. The gist of the lawsuit was that Abbas–a former QueTel employee–allegedly stole source code from QueTel’s copyrighted software (TraQ Suite 6) and used it in a competing product (CaseGuard). QueTel sent the defendants a cease-and-desist letter in which it demanded that they:

  1. cease infringing on QueTel’s intellectual property including the source code underlying the TraQ Suite 6 software;
  2. cease all advertising, promotion, and sale of the CaseGuard software;
  3. provide an accounting of all sales of the CascGuard software made to date; and
  4. allow QueTel to copy and inspect a complete copy of all versions of the CaseGuard source code as well as any computers that Abbas used during the period from January l, 2014 to the present.

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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.

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If you sue someone for fraud, you can win punitive damages in addition to regular compensatory damages. If you’re suing only for breach of contract, punitive damages are a no-go. As punitive damages can add up to $350,000 to the value of the plaintiff’s claim, plaintiffs naturally try to add fraud claims to their breach-of-contract lawsuits whenever possible. The “source of duty” rule, however, limits the circumstances under which plaintiffs can pursue such a strategy. The rule provides that tort claims (like fraud) can only be pursued if the source of the duty allegedly breached is the common law and not a contract entered into between the parties. The Virginia Supreme Court has clarified in recent years that if a fraudulent misrepresentation is made within a contract, the plaintiff is limited to contract remedies, but if a misrepresentation is made for the purpose of inducing another party to enter into a contract, a separate fraud claim can be pursued.

If a fraudulent misrepresentation is made before a contract even comes into existence, it’s a pretty good bet that you’re dealing with a separate fraud claim and won’t be limited to contract remedies. After a contract is formed, however, it can be tricky to determine the source of the duty violated. One reason for this is that courts have applied the source-of-duty rule to exclude fraud claims when they are based on misrepresentations that are closely related to promises made within the contract, even if the misrepresentations are not made expressly therein. (See Tingler v. Graystone Homes, Inc., 834 S.E.2d 244, 257–58 (Va. 2019) (noting that “a putative tort can become so inextricably entwined with contractual breaches that only contractual remedies are available)). If a fraudulent act “arises out of” a contractual relationship and the damages caused by the fraud also arise out of that relationship, that can be enough for application of the source-of-duty rule.

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One of the delightful aspects of practicing law in Virginia is that we still get to use antiquated legal terms that most states stopped using a century or so ago. Where a lawyer might file a motion to dismiss in some states, here we file a “demurrer” or a “plea in bar.” Rather than move for a directed verdict or judgment as a matter of law at the close of the plaintiff’s evidence at trial, we make a “motion to strike.” Until relatively recently, we weren’t even initiating lawsuits with complaints; we were filing “motions for judgment” instead. In today’s blog post, I’m going to tell you about a fun little motion we call a “motion craving oyer.”

A motion craving oyer sounds a lot more exotic than it is. To “crave oyer” is simply to demand production of a written instrument when a plaintiff files a lawsuit based on that instrument but fails to attach a copy to the complaint. It’s based on the idea that a court can’t rule intelligently on a claim without having the opportunity to see all essential documents upon which the claim is based. “When a court is asked to make a ruling on any paper or record, it is its duty to require the pleader to produce all material parts.” (Culpeper National Bank v. Morris, 168 Va. 379, 382-83 (1937)). Motions craving oyer should be granted, however, only where the missing documents are essential to the claim. (Byrne v. City of Alexandria (Va. Sup. Ct. May 28, 2020)). These motions can be useful when a defendant may have defenses to a lawsuit that aren’t apparent without examining the instrument in question. If oyer is granted, the instrument becomes part of the complaint and a defendant can proceed to file other responsive pleadings that may be appropriate.

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Express contracts are easy enough to understand. An express contract is a legally enforceable agreement formed by an exchange of promises, the terms of which are declared, either orally or in writing, at the time the agreement is formed. A mutual meeting of the minds is required, and the agreement must be supported by consideration. If I promise to pay you $10 to wash my car, and you accept my offer and proceed to wash my car, we’ve formed a contract and I am legally obligated to fork over that $10. But what if you just decided on your own to wash my car without discussing it with me first? Or maybe I ask you to wash my car and you accept, but we never discuss price? In situations like these, I may still be required to pay you a fair price for the service you provided, even though we never actually formed a contract. The legal concepts involved are known as unjust enrichment and quantum meruit. Let’s review what these related-but-distinct terms mean.

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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.

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