The Virginia Business Litigation Blog

October 6, 2017

Fraudulent Misrepresentations

In Virginia, a civil action for fraud requires more than just dishonest or unethical behavior on the part of the individual or business being sued. People lie all the time, and tort liability usually does not arise. The law of fraud is more concerned about pecuniary loss resulting from the intentional misrepresentation or nondisclosure of material facts. Several years ago, I posted a blog entry entitled “Fraud: What It Is, and What It Is Not.” There, I explained that a plaintiff bringing an action for fraud must allege and prove (1) a false representation, (2) of a present, material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reasonable reliance by the party misled, and (6) resulting damage. Today, I want to elaborate on the first of those elements: the requirement of a fraudulent misrepresentation.

First of all, when we talk of false or fraudulent misrepresentations, we’re not just dealing with the written word. Just as the hearsay rule can apply to nonverbal conduct intended as an assertion, the first element of fraud can apply to nonverbal conduct that amounts to an assertion of fact inconsistent with the truth. If a person acts in such a way as to suggest the existence of a fact, and that fact does not exist, a misrepresentation has occurred upon which a fraud action may potentially be based.

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.

June 28, 2017

You Can Sue If Someone Intentionally Hacks Into Your Email

by Lee E. Berlik

Unauthorized access to another’s email account can give rise to a variety of claims. The Computer Fraud and Abuse Act (“CFAA”), for example, prohibits a wide variety of improper computer activity, including unauthorized access to another’s email account. Specifically, it makes it illegal to intentionally access a computer without authorization and to thereby obtain information which results in a loss worth at least $5000 over the course of a year. (See 18 U.S.C. § 1030(a)(2)(C)). In Virginia, the Computer Crimes Act prohibits “computer fraud,” which occurs when a person uses a computer without authority and thereby obtains property or services by false pretenses. It also makes it a crime to commit “computer invasion of privacy,” which occurs when a person, without permission, logs onto someone else’s computer and examines that person’s employment, salary, credit, or any other financial information.

To obtain relief under the Virginia Computer Crimes Act, a plaintiff must have suffered injury to person or property. (See Va. Code § 18.2-152.12). And as mentioned above, you need at least $5000 in damages to recover anything under the CFAA. But what if someone hacks into your email and reads your personal messages without actually causing any direct pecuniary loss or personal injury?

May 23, 2017

How To Sue for Fraud in Virginia

by Lee E. Berlik

Actual fraud is defined in Virginia as a misrepresentation of a material fact, made knowingly and intentionally, with the intent to mislead another person, when the person to whom the misrepresentation was made reasonably relies on that misrepresentation and suffers damages as a result. In other words, you commit fraud when you lie to someone for the purpose of tricking that person into doing something (or refraining from doing something), and the person believes you and falls for it. The misrepresentation does not need to be expressed in words; it can be communicated through nonverbal conduct. Sometimes even silent non-communication can amount to “fraud by omission.” If you know that remaining silent would cause someone to reasonably (but erroneously) infer certain facts and you intentionally fail to speak up, that could be actionable as fraud. If the misrepresentation causes the recipient to do something he would not have done had he not heard the lie, he is said to have relied on the misrepresentation.

If you don’t want your fraud lawsuit to get dismissed at the outset, be sure to allege in the complaint that the misrepresentation was made concerning a present or past fact. A common mistake is to confuse fraudulent misrepresentations with broken promises. You can sometimes sue for a broken promise, but a broken promise is not fraud because a promise is an undertaking to take some action in the future. Assuming you’re not psychic or clairvoyant (which is an assumption the judge is going to make, I assure you), you don’t know what the future holds, so you can’t “misrepresent” the future. If you say you will do something in the future but then you don’t actually do it, you have broken a promise and perhaps breached a contract; you haven’t committed fraud.

April 22, 2017

Accessing Former Employer’s Google Account May Violate CFAA

by Lee E. Berlik

Suppose your employer asks you to create a Google account for the company. So you do. You set up everything yourself: Google Drive, Google+, Gmail–the works. You even set the password to your dog’s name. All of Google’s terms and conditions are accepted by you personally when creating the account. You proceed to use the account on behalf of the company, using Google Drive to store hundreds of company documents. Then you leave your job. Is the Google account yours? You created it, so are you free to make whatever use of the account you wish? Can you delete it?

Marcelo Cuellar thought so, but he was wrong. According to papers filed in Estes Forwarding Worldwide v. Cuellar in the Eastern District of Virginia, here are the facts. Cuellar joined Estes Forwarding Worldwide (“EFW”)–a transportation logistics company–in 2010. EFW has developed trade secrets relating to the best transportation solutions for various types of shipments, including information about type of freight, freight dimensions, routing decisions, vendor selection, and so on. It keeps this information in spreadsheets and other electronic documents.

March 9, 2017

Hypothetical Overbreadth May Invalidate Noncompete

by Lee E. Berlik

The “janitor test” isn’t the only hypothetical scenario that, when applied to a non-compete agreement governed by Virginia law, can render the contract unenforceable. In NVR, Inc. v. David Nelson, the federal court in Alexandria imagined a number of hypothetical situations when struggling to interpret an ambiguous geographic limitation in a noncompete agreement. When some of those hypotheticals resulted in an unreasonable restriction, the court decided the noncompete was overly broad and therefore unenforceable.

Noncompete agreements are disfavored in Virginia because they restrain free trade. For this reason, if such an agreement is ambiguous, it will be construed in favor of the employee. Before a court will enforce the agreement, the employer will have to demonstrate that the restraint is no greater than necessary to protect a legitimate business interest; that it is not unduly harsh or oppressive in curtailing the employee’s ability to earn a livelihood; and that the terms are reasonable in light of sound public policy. Courts examine reasonableness primarily by looking at three factors: function (i.e., the activity being restricted), geographic scope (the area in which the restriction applies), and duration.

February 6, 2017

Public Disclosure of Discovery

by Lee E. Berlik

If you look up “deposition” on YouTube, you’ll likely find over 200,000 videos to choose from. Many include graphics and commentary that the uploader added after the deposition was taken, usually with the aim of mocking the witness being deposed. The purpose of the discovery process is to require witnesses and corporations in possession of information potentially relevant to a case to divulge information to the requesting party for the purpose of assisting in the preparation of a litigated dispute for trial. Depositions are a specific form of discovery designed to allow litigants to obtain sworn testimony from witnesses in advance of the trial date and to get that testimony in a video format suitable for presenting to a jury. With the soaring popularity of video-sharing social-media sites, the temptation can be great to humiliate your opponent in litigation by posting embarrassing video depositions (or other discovery responses) on Facebook or YouTube, either during the pendency of the litigation or after it has ended. Is this permissible in Virginia?

There are authorities coming out on both sides of this question. On the one hand, “pretrial depositions and interrogatories are not public components of a civil trial.” (See Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33 (1984)). Thus, while the public generally has a common law right of access to court orders and legal proceedings, information collected through discovery is not a matter of public record to which that right extends. In other words, regardless how entertaining it might be to watch a celebrity make a fool of himself at a deposition, it’s really nobody’s business outside of the confines of the court proceeding. On the other hand, dissemination of pretrial discovery materials by the receiving party is not automatically prohibited absent a protective order.

January 7, 2017

Remedies for a Broken Engagement or Marriage

by Lee E. Berlik

So your fiancée broke off your engagement because she fell in love with your best friend and decided she likes him better. On top of that, she won’t return the $20,000 engagement ring you bought her. So the marriage is off, your finances are in shambles, and your (former) best friend is at least partially to blame because he asked your former fiancée on a date when he knew she was already engaged. What legal rights do you have?

Engagements are normally a happy and exciting time for the couple, but not all engagements result in marriage. Circumstances change, sparks fade, and life intervenes. Breakups are never easy, but introducing valuable personal property into the mix complicates things further. Only the most vindictive and bitter ex-boyfriends and girlfriends would demand the return of small gifts exchanged during a relationship, but attitudes change significantly when a $20,000 or $50,000 diamond is at stake. Who gets the ring if the engagement is called off? And what liability does the best friend have for seducing your fiancée?

December 19, 2016

Fraud by Hindsight Insufficient to State Claim

by Lee E. Berlik

To sue a business for fraud in Virginia, a plaintiff must allege (and eventually prove) (1) a false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party misled, and (6) resulting damage to the party misled. When a business breaches a contract, it is not necessarily indicative of fraud. Broken promises are covered by the law of contracts rather than the law of fraud. Some courts have recognized, however, that if a corporation, at the time of making a contractually-enforceable promise, had no intention of ever actually making good on that promise, an aggrieved party could sue for fraud on the theory that the defendant impliedly misrepresented its true intentions.

This does not mean that a plaintiff can convert any ordinary breach-of-contract case into a fraud case. It would be all to easy to simply claim, any time a contract with your company is breached, and with the benefit of hindsight, that the party breaching the contract must have never had any intention of ever performing it. Under Rule 9(b), fraud claims must be pled with particularity so that well-meaning defendants who are unable to perform contractual obligations don’t suffer undue harm to their reputations or have to defend against frivolous lawsuits. To file a fraud complaint on the mere assumption that a breaching party must have committed fraud based solely on its lack of performance is inviting the court to dismiss the case for failure to state a claim.

November 8, 2016

How to Win Millions of Dollars in Court

by Lee E. Berlik

If you or your business needs to bring a lawsuit, it’s natural to wonder whether you may be entitled to recover millions of dollars. You read about celebrities winning $115 million against magazines who published unauthorized photos, or you hear about women winning millions of dollars against fast-food chains after spilling hot coffee into their laps. Litigation sounds wonderful, doesn’t it? Short of winning the lottery, how else can someone obtain so much money is so short a time with such a small amount of effort? Well, the people you hear about who have won enormous monetary awards in court (at least those that have been upheld on appeal) generally have one thing in common: they suffered an enormous amount of harm as a result of something truly devastating that was done to them, causing them severe pain, extreme emotional distress, or vast economic hardship. In other words, those winning huge jury verdicts tend to be those who have suffered the most pain. You don’t necessarily want to be that person.

The legal term we use when referring to financial awards obtained in court is “damages,” of which there are essentially two types, compensatory and punitive. Compensatory damages are those designed to compensate a plaintiff for the loss or injury actually suffered as a result of the defendant’s conduct. It includes things like damage to property, personal injuries, physical pain, lost economic expectations, and emotional suffering. Compensatory damages are not supposed to give the plaintiff a windfall, make him rich, or punish the defendant. Rather, they are designed simply to make the plaintiff “whole,” to the extent that can be accomplished. They are designed to put the plaintiff roughly in the same position he was in before the wrong was committed.

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