Virginia Business Litigation Lawyer Blog

Access Designs, Inc., a company that manufactures TubcuT®, a product that alters regular bathtubs to convert them into walk-in showers, has filed a trademark-infringement suit against The BathWorks Company in federal district court in Charlottesville, Virginia. According to the allegations of the Complaint, two former representatives of Access Designs, Greg and Ellen Murphy, formed BathWorks in Rhode Island and began selling a product similar to TubcuT® and marketing it under the name "Tubcut" or "Tubcuts", creating a likelihood of confusion in the marketplace with respect to the origin of the customized bathtubs.

The suit is based on the provisions of the Lanham Act that govern trademark infringement and unfair competition, 15 U.S.C. §§ 1114 and 1125(a). To win on both allegations, Access Designs must prove three things: (1) that its mark is valid, (2) that The BathWorks Company's use of the mark is unauthorized, and (3) that BathWorks' use of the mark is likely to cause customers to be confused.

Access Designs has a little bit of a head start in that TubcuT® is registered with the Patent and Trademark Office, as registered marks carry a presumption of validity. The key issue in the case is likely to be whether BathWorks is using a mark that is likely to cause confusion among consumers as to the source of the parties' respective products. To determine the likelihood of consumer confusion, courts generally consider factors such as (1) the strength of plaintiff's mark; (2) the relatedness or "proximity" of the parties' goods or services; (3) similarity of the parties' marks; (4) evidence of actual confusion; (5) marketing channels used; (6) the degree of care likely to be exercised by purchasers; (7) the defendant's intent in selecting the mark; and (8) the likelihood of expansion of product lines.

Whether or not Access Designs can prove its allegations at trial remains to be seen.

Even in Virginia, which recently placed first in a ranking of the "Best States for Business" by Forbes.com, businesses often fail. Particularly in small companies, relationships among the owners sour and partnership disputes arise. Here in Fairfax County, where my practice is located, it is not uncommon for disgruntled partners to attempt to withdraw large sums from corporate bank accounts prior to dissolution or to attempt to block other owners' access to the company's accounts. Banks need to be careful not to get caught in the crossfire by inadvertently facilitating a wrongful cash grab by one of the business owners. Fortunately, as illustrated by a recent decision by Fairfax Judge Bellows, Virginia's adoption of the Uniform Commercial Code provides some valuable protection to banks.

Khan v. Alliance Bank (Fairfax Circuit Court, Dec. 22, 2009) involved a dispute between two owners of Advantage Title and Escrow, LLC, Khan and Kazmi. Both were authorized signatories on the company's account held with Alliance Bank. After the two had a falling out, Kazmi instructed the bank to remove Khan as a signatory. A few days later, Khan wrote a $35,000 check against Advantage Title's account in exchange for a cashier's check for that amount. Upon learning of the transaction, Kazmi sent an "Affidavit of Unauthorized Transaction" to Alliance Bank. This document alleged, under oath, that Khan obtained the cashier's check through fraud as Khan was (according to Kazmi) not authorized to withdraw funds from the company's account. In reliance on that affidavit, Alliance Bank canceled the cashier's check and credited $35,000 back to the Advantage account.

Normally, putting a stop-payment order on a check is not a big deal. But cashier's checks, which are governed by the UCC, are different. Unlike personal checks, cashier's checks carry a promise of the bank to the holder. For that reason Khan sued Alliance Bank, claiming that the promise was unconditional and that, by terminating payment, Alliance was liable to Khan for breach of contract and conversion.

The court disagreed and threw out the case. Under the applicable provisions of the UCC, a bank will only be liable for canceling a cashier's check if the bank acted "wrongfully." A bank is justified in refusing to honor a cashier's check if the bank "asserts a claim or defense of the bank that it has reasonable grounds to believe is available against the person entitled to enforce the instrument" or the bank "has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument." See Va. Code § 8.3A-411(c).

In this case, Kazmi's affidavit gave Alliance Bank all the protection it needed. The affidavit (like all affidavits) was made under oath, and its allegations were reasonable on their face. Therefore, the court found, the sworn statement provided the bank with reasonable grounds to believe the check was procured by fraud, which is a defense to the negotiability of the check. Alliance Bank did not act "wrongfully" within the meaning of the UCC, so the court dismissed the case.

Business litigation often involves allegations that a competitor engaged in unfair competition or business tactics designed to injure the plaintiff's business. Such cases will only be successful, however, if the defendant business has crossed the line between legitimate competitive activity and tortious conduct. In a new Fourth Circuit opinion written by Judge Mark S. Davis of the Eastern District of Virginia, the court affirmed summary judgment in favor of BMW, explaining that not all aggressive competition will be deemed unfair or unlawful; a competitor pursuing its legitimate business interests will often be permitted to do so without incurring liability.

BCD, LLC v. BMW Mfg. Co. involved a dispute over a project to build a new school of engineering on the Clemson University campus. The plaintiff, Rosen (and the companies controlled by him) and BMW were each involved in different aspects of the construction project. Rosen had entered into a tentative agreement with Clemson in 2002, which outlined the responsibilities each would each have in the construction of a wind tunnel. The agreement was not binding, however, because there remained certain unresolved details, and the written agreement specifically allowed either party to withdraw from the project if they could not agree as to those unresolved details. The agreement was thus in the nature of an "agreement to agree" rather than a final, binding contract.

Clemson and BMW, on the other hand, had entered into a final agreement to which each party was bound, and BMW had received a $25 million grant from the state for the project. As preparation for the construction of the school was getting underway, Rosen declared that he wanted the new school to be built on land he owned, but BMW objected because it wanted to keep the state-funded school separate from the privately-funded wind tunnel. As time wore on, little to no progress was made on the construction of the wind tunnel, and Clemson and Rosen were still unable to come to an agreement on the unresolved details from the 2002 agreement. Finally, Rosen and Clemson signed a new agreement in 2003 that negated the 2002 agreement, resolved all of the details, and included a sale of Rosen's land to Clemson so the school could be built on land that was now publicly-owned. Rosen did not want to cede control over the property, and felt that BMW coerced Clemson into stalling on the wind tunnel project so BMW could exert control over Rosen's property. He thus sued BMW for tortious interference with a contract, intentional interference with prospective contractual relations, and civil conspiracy.

The court affirmed summary judgment for BMW on all counts. In doing so, the court explained the legal elements of each of Rosen's tort claims and explained clearly why the conduct complained of did not satisfy these requirements. (The case was decided under South Carolina law, which is substantially similar to Virginia law in this area).

Dealing first with the tortious interference allegation, the court laid out the elements as: "(1) the existence of the contract; (2) the other party's knowledge of the contract; (3) the other party's intentional procurement of a breach of the contract; (4) the absence of justification; and (5) resulting damage." The court rejected Rosen's claim because no enforceable contract existed between Rosen and Clemson at the time of the alleged interference. The court noted that because either party could opt out of the 2002 agreement, it was not a binding contract, and without a binding contract, there can be no tortious interference.

The court next tackled the claim of interference with prospective contractual relations. The elements for this tort are: "(1) intentionally interfer[ing] with the plaintiff's potential contractual relations; (2) for an improper purpose or by improper methods; (3) causing injury to the plaintiff." The court easily affirmed summary judgment on this count because Rosen had offered no evidence that BMW had utilized improper methods or had taken any action for an improper purpose. The court observed that BMW was merely attempting to further its own business interests by seeking understandably to exercise control over a project in which it was intimately involved. There was no evidence, for example, that BMW had used "violence, threats, bribery, fraud, misrepresentation, deceit, or duress" in the course of affecting Rosen's relationship with Clemson.

Regarding the conspiracy claim, the court set forth the elements as "(1) a combination of two or more persons, (2) for the purpose of injuring the plaintiff, (3) which causes the plaintiff special damage." The court found that Rosen had failed to meet his burden to produce evidence that BMW's actions were taken for the purpose of causing injury to Rosen. Rather, it appeared from the evidence that BMW was merely acting to protect the interests all competitors in a capitalistic economy share: to succeed in business, which often comes at the cost of the competitor.

The court affirmed judgment in BMW's favor, finding insufficient evidence to hold BMW liable on any of Rosen's business-tort theories. The court reasoned that to punish BMW for pursuing its legitimate business interests would be to indict our entire economic system.

As any experienced litigation attorney will tell you, the discovery process is where many cases are won and lost. Consequently, the process is often contentious and characterized by wild fishing expeditions, invasion of privacy, and abusive tactics. The Federal Rules of Civil Procedure, however, allow judges to sanction attorneys who cross the line between aggressive, zealous representation and outright discovery abuse. A recent decision out of the United States District Court for the Eastern District of Virginia lays out the guidelines for whether to punish such tactics by awarding attorneys' fees to the other side, and if so, how much to award.

In Rutherford Controls Int'l Corp. v. Alarm Controls Corp., both the plaintiffs ("Rutherford") and the defendants agreed to an extended deadline by which the defendants would produce all documents responsive to Rutherford's discovery requests. The day of the deadline came, and by the close of business, the plaintiffs had not received the promised documents. Rutherford promptly filed a motion to compel the required discovery. The defendants did produce some material prior to receiving notice of the motion to compel, but the production was minimal. The court heard arguments, and while it did not officially grant Rutherford's motion, the judge expressed serious dissatisfaction with the defendants' discovery responses (calling them "absolute nonsense") and commanded them to answer all of the requests more thoroughly and accurately. The defendants, without protest, complied with the judge's demands.

Rutherford proceeded to move for sanctions in the form of reimbursement of the $11,858.07 in attorneys' fees it incurred in connection with the motion. Rule 37(a)(5)(A) specifically permits the recovery of "reasonable expenses" incurred in moving to compel discovery, "including attorney's fees." The court quickly determined that an award of attorneys' fees was appropriate. Rutherford made a good faith attempt to obtain the discovery without court action, the defendants' inadequate response was not substantially justified, and there were no extenuating circumstances that would make an award of expenses unjust. The real question was whether it would be reasonable to award Rutherford the full amount of fees they incurred.

The court clarified that even where the attorneys' fees incurred are reasonable on their face, an analysis still must be performed to determine what amount would be reasonable to assess against the party whose discovery conduct necessitated the motion. The opinion recites all the key legal precedent for performing this analysis, ultimately identifying 22 separate, enumerated considerations. Attorneys will find the opinion a useful reference when moving for an award of fees.

In this particular case, while the court found the amount of the claimed fees to be reasonable (including the hourly billing rates of Rutherford's attorneys, which ranged from $410 to $510), the court nevertheless awarded only half of them as a discovery sanction, reasoning that an award of nearly $12,000 would not be appropriate where the majority of the late production involved material from third party sources for whom Rutherford could have issued subpoenas, and where the defendant ultimately prevailed in the litigation.

Virginia employment lawyers who represent plaintiffs are often looking for creative legal theories to help their clients receive justice. Employees seeking redress for perceived wrongful termination face a steep hurdle in the employment-at-will doctrine, under which a private employer, subject to certain exceptions, is free to discharge its employees at any time, for any reason or no reason at all, without incurring civil liability. While it is usually the corporate employer who gets cast in the role of defendant, plaintiffs' lawyers have occasionally tried to impose liability on the individual manager who terminated or discriminated against the employee, usually without much success. A recent decision from the Eastern District of Virginia's Richmond Division, however, opens the door to possible claims of "tortious interference" against the individual bad actor.

Williams v. Autozone Stores, Inc. is a sexual harassment case brought under Title VII of the Civil Rights Act of 1964, which prohibits harassment of employees where the conduct is sufficiently severe or pervasive to create a "hostile work environment," or where the harassing conduct results in a tangible change in an employee's employment status or benefits (such as getting fired). Williams, a former employee of Autozone, claimed that her manager, Willie Pugh, touched her inappropriately and made sexually-charged comments toward her. After asking Pugh to stop, Williams alleges that he wrote her up for nonexistent problems and that she was consequently transferred to a different store and eventually fired. Williams sued Autozone for alleged discrimination, but also sued Pugh himself on the theory that he tortiously interfered with her employment contract with Autozone. Autozone moved to dismiss the claim, arguing that Pugh was an agent of the company and that a company cannot interfere with its own contracts, but Judge Spencer allowed the claim to go forward.

Pugh pointed out that claims for tortious interference with contract require the existence of three separate parties: the two parties to the contract, and a third party who induces one of the two contracting parties to breach the agreement. As an employee of the company, he argued, he and Autozone were the same entity, negating the possibility of a third party. Pugh also pointed out that Williams acknowledged in her complaint that Pugh was an employee acting within the scope of his employment with Autozone.

Judge Spencer responded by noting that the plaintiff's admission in her pleadings that Pugh was an agent of Autozone did not preclude a finding that Pugh acted outside the scope of his employment. A party may plead inconsistent facts, the court held, provided they relate to different claims. Turning to the question of whether Pugh's actions were necessarily the actions of Autozone, the court found that a tortious interference claim could very well be viable even when the interfering party is an employee of one of the contracting parties. The employee would be acting as a third party if his actions were taken outside the scope of his employment, such as if they "arise wholly from some external, independent, and personal motive". If there is doubt as to whether an employee was acting within the scope of his employment, the court held, then the issue should be resolved by the jury, not decided by the judge prior to trial.

Conducting business in Virginia can be a cutthroat affair. Our capitalist system demands that firms compete with each other in price, quality, and technology, and the most innovative company will often win the largest number of lucrative government contracts. Unfortunately, some contractors utilize unfair, unethical, or illegal methods in the name of competition. Virginia is one of several states that have enacted "business conspiracy" statutes designed to discourage and punish some of these practices. The statute is very popular with Virginia lawyers, due in no small part to its provisions allowing recovery of both treble damages and attorneys fees.

In Turbomin AB v. Base-X, Inc., a case pending in the federal court sitting in Lynchburg, the plaintiff (Turbomin) had a contract to perform services for Base-X, a government contractor located near Lexington. In winning this contract, Turbomin beat out another defendant in the case, Lindstrand Technologies Ltd. Eventually, however, Base-X terminated its contract with Turbomin and refused to pay the balance allegedly owed to Turbomin. Turbomin's officers suspected that disgruntled Lindstrand employees convinced Base-X employees to breach the contract. Invoking Virginia's business conspiracy statute, Turbomin alleges that Base-X and Lindstrand "conspired to interfere with a business reputation".

Judge Norman Moon, in granting the plaintiff's motion to add a business conspiracy count to its complaint, clarified the requirements of this Virginia law. In order to win this type of conspiracy claim, a plaintiff must prove three things: that the defendants (1) engaged in a concerted action, (2) with legal malice, (3) resulting in damages. Judge Moon explained that a "concerted action" is any association or agreement among the defendants to engage in the conduct that caused the plaintiff injury. Legal malice, the court held, requires showing "that the defendant acted intentionally, purposefully, and without lawful justification" to injure the plaintiff. Judge Moon also observed that while a plaintiff need not prove that the defendant's "primary and overriding purpose" in forming the conspiracy was to injure the plaintiff's reputation, trade, or business, such must be at least one of the purposes of the conspiracy.

The action that the defendants agree to do must be unlawful in and of itself for an actionable conspiracy to arise. In other words, just because two businesses agree to take a course of action that ultimately does not work out well for another party, does not necessarily mean they engaged in a conspiracy to interfere with the injured party's business reputation. In the Turbomin case, the unlawful act that the plaintiff accused the defendants of conspiring to commit was to breach the contract with Turbomin. Breach of contract is an unlawful purpose that may form the basis of a conspiracy claim, the court confirmed.

Finally, due to the defendants' conspiracy to commit an unlawful act, the plaintiff must suffer a measurable, economic loss. Simply put, the plaintiff must be able to quantify its damages in a dollar amount.

For businesses harmed by the anti-competitive acts of an unscrupulous tortfeasor, Virginia's business conspiracy statute provides a powerful tool that can be used to both recover damages and deter future competitors from engaging in such conduct. For more information about protecting your business from wrongdoers, consult an attorney.

The Internet has been a boon to business. It brought local economies into the global market, cut down on communications costs, and made accessible information that was once only available through painstaking research. That is not to say, however, that the technology has not had its drawbacks. Towards the end of the 1990's, peer-to-peer file sharing websites became a haven for piracy of software, music, and movies. At first, those perpetrating these crimes were only a small segment of society, but gradually the practice became more widely accepted and piracy became prevalent in nearly every demographic. Various industries took notice and scrambled to fight back. Many are familiar with the Recording Industry Association of America's (RIAA) resort to the courts to sue and force settlements with those who share music over the Internet. While the RIAA pioneered this strategy, many companies are now following suit by filing suit. One such case was filed recently by Saregama India, Ltd., the biggest recording company in India, in the United States District Court for the Eastern District of Virginia.

Saregama discovered that many of its songs, popular both in India and among the Indian population in the United States, are being made available as ringtones on a website called Dishant.com. Saregama alleges that Dishant.com and its owners, Dishant Shah and Meeta Shah, violated Saregama's copyrights because they never bought the rights to these songs nor received approval from Saregama to share the songs as ringtones. Further, Saregama claims that Dishant.com displayed Saregama logos next to the titles of the songs, which would be a trademark violation.

Under the Copyright Act, the right to distribute copies of copyrighted work, or to prepare derivative works based on the copyrighted work, belongs solely to the copyright owner. Under the Act, if Saregama can prove that the materials provided by Dishant.com are identical to or substantially identical to any property owned by Saregama, and that Dishant.com provided those materials without permission, then Saregama's burden will be met. The consequences for a copyright violation can be substantial. If Saregama prevails, it may be entitled to recover any profits Dishant.com made from the use of the songs (or statutory damages up to $150,000 if the infringement was willful), plus reimbursement of its attorneys' fees.

The trademark aspect of Saregama's suit is based on the Lanham Act, the primary source of federal trademark law in the United States. The use of another's trademark in connection with the sale of a product constitutes infringement if it is likely to cause consumer confusion as to the source of the product or as to the sponsorship or approval of the product. In deciding whether consumers are likely to be confused, courts will typically look to a number of factors, including: (1) the strength of the mark; (2) the proximity of the goods; (3) the similarity of the marks; (4) evidence of actual confusion; (5) the similarity of marketing channels used; (6) the degree of caution exercised by the typical purchaser; and (7) the defendant's intent. Trademark violations can be costly as well. Under 15 U.S.C. 1117(a), a successful plaintiff may be entitled to defendant's profits, damages sustained by the plaintiff, and reimbursement of the costs of the action (including reasonable attorneys' fees in "exceptional cases"). Damages may be trebled upon showing of bad faith.

If you own rights to a trademark or copyright that is being infringed by another, don't wait for an industry trade group to bring legal action on your behalf. Consult an intellectual property attorney and find out whether action is needed to protect your business assets.

The tort of defamation is widely misunderstood. Social media outlets like Facebook, LinkedIn and Twitter, which allow easy publication and dissemination of information to a wide audience, are leading to a rise in defamation lawsuits in Virginia and around the country. To be insulted by another, especially when it happens in a public forum, can be hurtful and embarrassing. Whether the insult constitutes actionable defamation under Virginia law, however, can present some complicated issues, often implicating the United States Constitution. Relevant considerations for any lawyer examining a defamation claim include the type and context of the speech, the identity of the speaker, the identity of the plaintiff, and the existence of qualified immunity or other defenses.

In Virginia, defamation includes both libel (written defamation) and slander (spoken defamation). There is no need for clever mnemonic devices to distinguish libel from slander, because Virginia law makes no meaningful distinction between the two and speaks only of the merged tort of defamation. The essence of any defamation claim is that a defendant published a false factual statement that concerns and harms the plaintiff or the plaintiff's reputation. While it is common to recite that "truth is a defense," that is not technically true, as falsity is a required element of the plaintiff's proof.

Proof of several elements is required. The defendant must know that the statement was false or must have lacked a reasonable basis for believing it to be true. Defamatory words that cause prejudice to a person in her profession are actionable as defamation "per se," meaning that it is not necessary to prove actual injury to reputation. Expressions of opinion, however, are constitutionally protected as free speech. Therefore, mere statements of opinion cannot form the basis of a defamation lawsuit.

The "publication" requirement means that the remarks were heard by a third party who understood the remarks as referring to the plaintiff in a defamatory sense. This is a fairly easy standard to meet (assuming a defamatory statement), as even accidental publication will suffice.

The Constitution plays two parts in the defamation analysis. First, it gives higher protection to those who speak on matters of public concern or about public figures. When an ordinary person brings a defamation claim that concerns a statement of no public concern, he only needs to prove the requisite elements by a preponderance of the evidence. When the plaintiff is a public figure (e.g., a celebrity or public officeholder), or when the statement at issue was one of public concern, then the bar is raised. The plaintiff would then need to prove, by "clear and convincing" evidence, that the defendant acted with actual malice. A defendant acted with actual malice if he knew the statement to be false or recklessly failed to verify the claim. "Clear and convincing" evidence is difficult to define but is a higher level of proof than a mere "preponderance." (You can think of it as requiring 75% certainty rather than 51% certainty, though that is not the legal definition).

The second constitutional requirement is that punitive damages may only be awarded upon the same clear and convincing finding of actual malice regardless of who the plaintiff is or if the statement was one of public concern.

The law of libel and slander is far too complicated to discuss in this small space. Consult an attorney if you have been the subject of defamatory speech, especially if your business or profession is being harmed as a result. While the First Amendment protects freedom of speech, a corresponding legal requirement exists to ensure that citizens be held responsible for abuse of that right.

Trial lawyers drafting lawsuits on behalf of their clients generally try to plead as many causes of action as possible. In particular, they often try to add "tort" claims to a case that is really just about a breach of contract. Virginia law generally does not permit recovery on tort claims when the duty that is breached is based on a contractual relationship. What's the difference? For one thing, when it comes to assessing damages, the law of contracts looks to those that were within the contemplation of the parties when framing their agreement. Contract remedies are designed to compensate parties for foreseeable losses suffered as a result of a breach of a duty created by the contract itself. Tort law provides remedies for losses resulting from a breach of duty arising independently of any contract.

A recent case decided by Judge Conrad of the Western District of Virginia illustrates the distinction. In Raleigh Radiology, Inc. v. Eggleston and Eggleston, P.C., Raleigh Radiology ("RRI"), the plaintiff, entered into a contract with Eggleston, a practice management services business, which authorized Eggleston to manage and collect reimbursements owed to RRI for radiological services and which gave Eggleston control over RRI's accounts in order to facilitate the process. In return for Eggleston's work, the contract specified that RRI was to pay Eggleston $5.40 for each reimbursement it secured. Eventually, however, RRI came to believe that Eggleston had overcharged for services performed and had been billing for nonexistent reimbursements.

RRI sued Eggleston for breach of contract, unjust enrichment (a theory of implied contract) and the tort of conversion. Eggleston responded with a motion to dismiss the conversion claim on the ground that the duty breached was purely a contractual one, which precluded the filing of a tort claim. The court disagreed.

Focusing on the origin of the duties Eggleston allegedly breached, the court held that plaintiffs could legitimately assert conversion claims in conjunction with breach of contract claims when the breached duty arises separately from those required by the contract. The court defined the tort of conversion as "any distinct act of dominion or control wrongfully exerted over the property of another, either inconsistent with, or in denial of, the owner's rights." RRI claimed that Eggleston used its control over RRI's accounts to transfer payment for the alleged overcharges and nonexistent reimbursements into Eggleston's account. While Eggleston's access to RRI's accounts was only made possible by the contract, the court did not dismiss the conversion count because it was not merely redundant of a breach of contract claim. The court observed that every person owes a duty not to improperly make use of another person's bank accounts and that this duty exists regardless of whether parties have entered into a contract. Because the breached duty existed outside of the contract, RRI was not limited to remedies specified in the parties' agreement.

Windows 7 was not my idea. But the new amendments to the Federal Rules of Civil Procedure? Maybe! A few years ago I received a stern reprimand from a federal judge in the Eastern District of Virginia for supposedly filing a brief past the 5-day deadline. I respectfully explained to the court that, under the Rules then in effect, because weekend days are not counted in time periods of less than 11 days, and because additional days are added to the deadline when papers are served by facsimile, and because if a deadline expires on a Saturday then the deadline is extended to the following Monday--or Tuesday if Monday happens to be a national holiday--then a "5-day deadline" can actually allow up to 147 days! The judge was not impressed. But I was right (up to a point), so now the Rules have been amended to prevent this sort of nonsense.

Effective today, "days" means days. For lawyers who practice in federal court, this is a radical concept. Perhaps even more radical, defendants now have 21 days in which to respond to a lawsuit rather than merely 20. I pity those about to take the bar exam. In any event, here is a summary of what are, in my view, the most significant changes to the Federal Rules of Civil Procedure:

Rule 6. Computing and Extending Time; Time for Motion Papers
No longer are intermediate weekend and holiday days excluded from the computation for periods of less than 11 days. Every day is counted. This means that 10-day deadlines will no longer (in some circumstances) result in time periods longer than those permitted by 14-day deadlines. Additionally, what was once a 5-day deadline for noticing hearings has been converted to a 14-day deadline. Supporting affidavits must be filed with the motion and any opposing affidavits are now due a full 7 days before the hearing instead of just 1 day as under the previous Rule.

Rule 12. Defenses and Objections: When and How Presented; Motion for Judgment on the Pleadings; Consolidating Motions; Waiving Defenses; Pretrial Hearing
Hold onto that motion for default judgment! Defendants now have 21 days in which to serve an answer, as they do in Virginia state court, rather than 20 days. The new 21-day period also applies to counterclaims and cross-claims.

Rule 13. Counterclaim and Crossclaim
In the past, negligent lawyers who failed to file a compulsory counterclaim could turn to Rule 13(f), which permitted a late counterclaim if its omission was the result of "oversight, inadvertence, or excusable neglect." That Rule is gone! However, not all hope is lost: Rule 15 still provides a procedure for adding an omitted counterclaim.

Rule 15. Amended and Supplemental Pleadings
Under the former Rule, a plaintiff had a right to amend its complaint once, as a matter of course, only before being served with a responsive pleading. That right has been extended, presumably to encourage the informal resolution of early motions to dismiss without burdening the court's docket. Now, a plaintiff may amend its complaint (without leave of court) a full 21 days after service of a responsive pleading or Rule 12(b) motion.

Rule 56. Summary Judgment
The procedure for obtaining summary judgment in federal court has historically been very complicated, requiring numerous calculations. Under new Rule 56, the procedure is streamlined. Absent a local rule to the contrary, any party may now move for summary judgment at any time until 30 days after the close of discovery. The party defending against summary judgment then has 21 days in which to file a responsive brief. The movant has 14 days after that to file a reply brief.

Numerous other amendments were made to the Federal Rules, but I am not going to discuss them all here. A useful generalization (not without exceptions) is that most deadlines throughout the Rules have been converted to multiples of 7: previous deadlines of 1, 3, or 5 days are now 7 days; periods of 10 or 11 days are now 14 days; and 20-day deadlines now allow 21 days. Most discovery deadlines, however, remain unaffected. Litigants still have 30 days in which to respond to document requests and interrogatories.

Fraud is a word that is thrown around a lot in everyday life. When pundits discuss the latest political or Wall Street scandal, the discussion often turns to the bad actors' "fraudulent" behavior. In ordinary, non-legal parlance, the word fraud can mean anything from merely bad intent to criminal behavior. Outside the courtroom, accusing someone of fraud is generally synonymous with calling that person a cheat or a swindler. Sometimes this casual definition of fraud will overlap with the legal definition, but more often it does not. The law does not consider every act of dishonesty to amount to actionable fraud. You may be owed compensation, however, if you have truly been defrauded in a legal sense.

Actionable fraud requires more than just broken promises or a breach of contract. The law looks more harshly upon fraud. It is considered a tort, for which punitive damages are available. (Punitive damages are not recoverable in actions for breach of contract). Because a successful fraud claim will usually result in a higher damages award than an ordinary contract claim, lawyers often try to convert a contract claim into a fraud claim through artful drafting of their client's complaint. Under Virginia law, a party alleging fraud must prove by clear and convincing evidence (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 to him. (See Thompson v. Bacon, 245 Va. 107, 111 (1993)). Let's take a closer look at these elements.

1. False Representation. This is the essence of a fraud claim. The defendant must have misrepresented the truth. If somebody steals your wallet but does not communicate with you, you have not been "defrauded" and cannot maintain a fraud action against that person. (You would have other remedies you could pursue, but the correct legal theory would not be fraud because no misrepresentation was made).

2. Present, Material Fact. The defendant must have made a misrepresentation about a present fact. A fact is present only if it could have been definitively determined at the time the misrepresentation was made. It is not a promise that something will or will not happen in the future. For example, if a car salesman promises a car will resell in 10 years for at least half of its new value, it is not a fraudulent statement even if it proves untrue. This is because, at the time the statement was made, its falsity could not be known. If, however, that same salesman promises that the car has anti-lock brakes when it, in fact, does not, then the statement can form the basis for fraud.

The misrepresented fact must also be material in some respect. For example, when a fraudulent statement is made in connection with a commercial transaction, materiality means that the fact must go to the essence of the deal itself (the thing being bargained for), and it must be of such importance that the deal hinges upon its being true. Going back to the car sale, the lie about the anti-lock brakes is material because it concerns the car, the thing the parties are bargaining for, and, because anti-lock brakes are an important safety device, if the car did not have them it is likely that a sale would not be made. If, however, the car salesman had lied by stating that he, like the potential buyer, was a former Boy Scout, then the misrepresentation would not be deemed material because the deal concerned the sale of a car and the lie had nothing whatsoever to do with the car.

3, 4. Intent. A fraud case arises when a defendant intentionally lies about something and does so for a reason. While a separate tort of "negligent misrepresentation" exists, the tort of fraud does not supply a cause of action against someone who mistakenly misrepresents a fact. The bad actor must have intentionally misrepresented the truth, with the further intent of inducing you to rely on the statement to your detriment.

5. Reasonable Reliance. You cannot sue someone for fraud, even if that person lied to you, if you didn't take any action in reliance on the statement. For example, if you don't believe the false statement, then you haven't really been defrauded. If you do believe the misrepresentation and rely on it, then your reliance must be reasonable. The law will only grant relief to those who act prudently and with ordinary care for their own well being. If common sense dictates that a quick phone call or Google search could verify the defendant's statement, but you decide unwisely to simple accept the person's statement as true without independent verification, a court may deny you any recovery. In the used-car scenario, your fraud claim against the salesman would likely be defeated if a prominently displayed sticker on the car read "NO ANTI-LOCK BRAKES" and you chose to ignore it.

6. Damages. Finally, the plaintiff must have suffered damages as a result of the false statement. The law strongly believes in the "no harm, no foul" concept.

The above criteria are the essential elements of a civil action for fraud. There is much more to it than is commonly understood. If you or your business have been wronged by another but your fact pattern does not fit within the legal definition of fraud, not all hope is lost. There are several paths to recovery in Virginia's courts. Meet with a Virginia lawyer to learn whether you are entitled to monetary or non-monetary relief under the law.

The discovery process, the primary fact-finding tool available to litigants, has always been contentious. Parties are loathe to hand over potentially embarrassing or incriminating documents, and the costs involved can be staggering. The information age has only served to make things more complicated. As the Northern District of Illinois observed in the 2002 case of Byers v. Illinois State Police, "[m]any informal messages that were previously relayed by telephone or at the water cooler are now sent via e-mail." Now that so many casual conversations are documented in e-mail and are, therefore, potentially subject to discovery, the discovery costs in the typical case have skyrocketed . Two recent United States District Court Cases, one out of Minnesota, Kay Beer Distributing, Inc. v. Energy Brands, Inc., and the other out of Florida, Kilpatrick v. Breg, Inc., provide a window into just how daunting electronic discovery can be, how judges are adapting traditional discovery rules to deal with these new problems, and how parties can do their part to avoid potential problems.

Information is generally discoverable if it is non-privileged and either directly relevant to a party's claim or reasonably calculated to lead to the discovery of evidence that is directly relevant. In the Kay Beer case, Kay alleged that an oral contract gave it the exclusive right of distribution for Energy Brands' products. Energy Brands claimed that by its understanding of the agreement, Kay's distribution rights were limited. This was essentially a run-of-the-mill contract dispute. What made the case unique, however, was the plaintiff's demand that the defendant hand over five DVDs containing nearly 13 gigabytes (between 650,000 and 975,000 pages) of e-mails and other documents. Each of the documents had been identified as referencing "Kay Beer", "Kay Distributing", or simply "Kay" by a keyword search of Energy Brands' archives. Kay Beer argued that the documents might contain discoverable evidence showing that Energy Brands originally shared Kay's understanding of their agreement.

The court's approach to the discovery contest was to weigh Kay Beer's interest in obtaining the documents against the burden Energy Brands would experience in turning them over. The court found that just because a document references a party does not support the conclusion that it contains relevant evidence. It further reasoned that in contract litigation, the only relevant statements are those made between the representatives of the companies involved; statements made by lower-level employees not empowered to speak for the company are not relevant to the official understanding of the contract. The court concluded that Kay Beer's interest in the documents was relatively minor.

Turning to an examination of Energy Brands' burden, the court noted that before the documents could be produced, Energy Brands would have to review each one for privilege and relevancy. The company estimated that the time involved in examining 650,000 to 975,000 would cost $120,000. The court found the cost unduly burdensome, and after weighing this burden against the slim possibility that relevant evidence might be discovered, held that Kay was not entitled to the requested discovery.

Kilpatrick differed slightly in fact but was consistent in outcome. Kilpatrick, the plaintiff, claimed that the pain pump manufactured by the defendant, Breg, and used in his October, 2004 shoulder surgery gave him a condition called chondrolysis. Kilpatrick's suit alleged that Breg knew of the risk of chondrolysis but marketed the product regardless of the dangers and without warning. Just weeks before trial, Kilpatrick demanded the production of nearly 6 years' worth of Breg's archived, intra-office e-mails. In depositions, several Breg employees testified inaccurately that they learned of the risk of chondrolysis in March of 2006, when documents obtained by Kilpatrick indicated clearly that the risk was known as early as December of 2005. Kilpatrick theorized the misstatements were part of a cover-up and sought extensive discovery to substantiate the theory.

Performing a balancing test similar to that in Kay Beer, the court first looked to the likelihood that relevant evidence would be discovered in the requested e-mails. The court acknowledged that the inaccurate testimony did raise some suspicions, but noted there was no evidence in the record indicated Breg knew of the chondrolysis risk prior to December 2005. The court found the misstatements were likely honest mistakes, reasoning that the depositions occurred nearly three years after the events in question and that the deponents were only off by about three months in their statements.

The court then took into account the significant burden such extensive, last-minute discovery would place on Breg. It denied the requested discovery in light of this burden, but granted Kilpatrick a limited right to further explore the Breg employees' misstatements by allowing discovery into a sampling of the archived e-mails, at Kilpatrick's expense.

This balanced approach to electronic discovery shows that seemingly antiquated discovery rules are still applicable in this new age. While some flexibility is required, a little common sense can make a complicated scenario a little more manageable. That being understood, a party, when making discovery requests, would be wise to be mindful of the opposing party's position and attempt to curb any burden the request might impose. Such a measured approach can help tip the balancing test in your favor.

In Virginia, an action for trespass is no longer the only remedy a landowner has against a trespasser. A Norfolk judge recently held that a landowner may sue for rent even in the absence of an express or implied lease agreement. A duty to pay rent can arise under the doctrine known as quantum meruit.

In the case of City of Norfolk v. Muladhara, LLC, Norfolk managed several lots of prime commercial real estate on which the city collected rents. The Defendant, Muladhara, began conducting business on one of the lots without ever receiving permission from Norfolk. Upon discovering the trespasser, Norfolk informed Muladhara that the city managed the land and collected rent for its use. This conversation prompted the Defendant to pay the back rent the city claimed was due. However, Muladhara continued to occupy the space without any further payment.

The court held that Norfolk may base its claim for recovery on two distinct theories. First, the court found that the conversation between the city and Muladhara that led to the payment of back rent could form the basis of an implied contract. Judge Hall clearly laid out the three elements of an implied contract: offer, acceptance, and a meeting of the minds. Simply put, the city offered to overlook the previous trespass if Muladhara paid back rent, and Muladhara accepted the offer. Even though this agreement only covered Muladhara's past occupation of the parcel, the Defendant's payment of back rent constituted a meeting of the minds as to the rental value of the land. Should Muladhara continue to occupy the land, the meeting of the minds forms the content of the implied contract. The city, therefore, is allowed to sue for payment of rent due, and the amount will be determined by looking to the parties' prior agreement.

Implied contract is a fairly common vehicle for the collection of rent when no formal agreement exists. The court, however, added a new tool to the landowner's toolbox: quantum meruit, or quasi-contract. This differs from an implied contract in that a meeting of the minds (the basic terms of the contract) is not necessary. All that is required is that the city reasonably expected to be compensated for the use of its land, and that the trespasser, aware of the city's reasonable expectation, still made use of the land. Historically, quantum meruit only applied to a plaintiff's services or materials consumed by the defendant, not to a defendant's use of real property. But, as Judge Hall pointed out, the Virginia Supreme Court has defined quantum meruit to apply whenever a defendant "acquires property of another," and real property need not be excluded from this definition. Consequently, no established precedent prevents a plaintiff from pursuing the reasonable rental value of the property even if no agreement was ever reached concerning the value of the property.

The Virginia Electric and Power Company (VEPCO) and the Trans-Allegheny Interstate Line Company (TrAILCo) plan to build a 265-mile, 500-kilovolt transmission line between Loudoun County, Virginia, and Washington County, Pennsylvania. They claim that due to rapid growth in the Washington, DC metro area, energy consumption along the Potomac will likely continue to grow to levels unsupportable by the current infrastructure, and the anticipated blackouts and line failures would put them in violation of federal regulations. The State Corporation Commission approved the power line, and after a challenge by the Piedmont Environmental Council, the Supervisors of Fauquier County, Prince William County, and Culpeper County, and other interested groups, the Supreme Court upheld the construction permits.

In the case of Piedmont v. VEPCO, the court shed some light on the role of Virginia's State Corporation Commission in developing an effective and efficient system for energy production and distribution. First, before new lines of that size can be constructed, the North American Electric Reliability Corporation (NERC) must find that they are needed to avoid regulatory violations. Second, regardless of federal approval, because the proposed placement of the lines was in Virginia, approval must be obtained from the State Corporation Commission, to whom regulatory authority has been delegated by the Virginia legislature.

The plaintiffs argued, and the court acknowledged, that the federal approval process heavily favors new transmission line construction over other possible solutions such as demand-side regulation, new power generation, and conservation efforts. The Commission, on the other hand, is required by the Commonwealth to consider the viability of these other possible solutions. Therefore, the plaintiffs claimed, the Commission's reliance on the NERC's findings was flawed because the federal process is biased against alternative solutions. The plaintiffs demanded that the Commission independently investigate alternative solutions and require them to be incorporated into their interstate operations.

The Virginia Supreme Court, while agreeing with the plaintiffs in spirit, affirmed the SCC's approval. Justice Koontz noted that the Commission's duty to independently investigate all applications for new transmission line construction does not prevent the Commission from considering data that may be biased by a federal regulatory process that seeks different goals. Further, the Court held that even if alternative solutions were feasible, a state regulatory agency lacks the authority to require that action be taken on an interstate scale. Finally, the Court held that the Commission's role is not to dictate interstate policy but to determine if a proposal will serve the anticipated needs of Virginia residents. The Commission's decision was upheld because it critically reviewed all arguments and data, and its decision was reasonably based on the facts and current law.

The First Amendment protects a public employee from retaliation by his or her employer when the employee speaks out on a matter of public concern. But before discharged government employees go rushing into court to sue the government entity for which they worked, they would be well advised to take advantage of any and all internal grievance processes offered by the government. A recent case decided by Judge Samuel G. Wilson of the Western District of Virginia demonstrates the potential perils of skipping this important step.

In Stickley v. Sutherly, the court laid out current jurisprudence as it applies to a public employer's liability under 42 U.S.C. § 1983. (Section 1983 is a federal statute that creates liability for any local government or government officials who violate a person's clearly-established constitutional rights, such as freedom of speech). Stickley was a police lieutenant in Strasburg, Virginia. Sutherly, the chief of police, demoted Stickley and another officer for violations of department policy. Shortly thereafter, the Northern Virginia Daily (a local newspaper) published an article criticizing Sutherly's personnel practices. Prompted by the article, a member of Strasburg's Town Council asked Stickley about his demotion, and Stickley expressed his dissatisfaction about it. After the councilman confronted Sutherly about Stickley's demotion, Sutherly fired Stickley for insubordination.

Stickley, instead of pursuing the town's official grievance process, filed suit against Sutherly and the Town of Strasburg. Stickley argued that his firing was in retaliation for his exercise of his First Amendment right to speak freely about matters of public concern; namely, the personnel practices of the police department.

With regard to Stickley's complaint against the town of Strasburg, Judge Wilson explained that a municipality may be liable under Section 1983 if the violation of a constitutional right occurred as a direct result of official municipal policy or custom, but that qualified immunity would shield a municipality from such charges if a terminated employee fails to exhaust local appeal procedures available to him. Because Sutherly's decision could have been overturned through an internal appeal process, Sutherly was not a final policy-maker.

Ultimately, because no source of liability under § 1983 could be found against either Sutherly or the Town of Strasburg, the Court dismissed Stickley's suit. The lesson to be learned here is be sure to exhaust all avenues of redress provided by your employer before looking to the courts to protect your rights, especially if you work (or worked) for the government.