Virginia Business Litigation Lawyer Blog

While most people know that the Americans with Disabilities Act (ADA) protects employees who have obvious visual, hearing, and physical impairments, how the law relates to employees with cancer and intellectual disabilities can sometimes raise questions. The Equal Employment Opportunity Commission (EEOC), the agency that enforces the employment provisions of the ADA and where an employee must initiate a charge of discrimination before filing a lawsuit, endeavors to answer these questions with its recently issued guidelines on how the ADA applies to employees with these conditions.

For employees living with cancer, the new guidelines discuss when an employer may ask an applicant or employee questions about their cancer, what type of reasonable accommodations employees may need, and handling safety concerns about employees with cancer. An employee who has cancer and is currently undergoing treatment or has a history of cancer has a disability within the meaning of the ADA. Misguided assumptions and discrimination abound about an employee's ability to concentrate and how much leave they will need for treatment and doctor visits. These Guidelines explain in detail who may be told about an employee's cancer, the various accommodations available from telecommuting to control over the office thermostat, and when an employer may or may not grant the accommodation requested.

The Guidelines characterize "intellectual disabilities" as significant limitations both in intellectual functioning and in adaptive behavior that may affect a person's daily social and practical skills such as communication. The EEOC lists several accommodations for employees with intellectual disabilities such as demonstrating what a job entails (not just describing it), reallocation of marginal tasks to other employees, repeating instructions, breaking tasks down into manageable chunks, and the use of detailed schedules for task completion. The EEOC guidelines also discuss, in detail, when an supervisor can ask about a person's intellectual disability and what may be asked.

For employees with these disabilities, the EEOC describes how employees may directly or indirectly request accommodations, who within the employment environment can know about the employee's disability, and the confidentiality of medical records. It's important to request accommodations, which many employees suffering from cancer and living with intellectual disabilities are reluctant to do because they may not want to be perceived as less capable than others. However, the ADA has expanded the protections it affords to these employees and requires employers to step up with their compliance. If employers do not? Well, the employee (or applicant) should and can file a charge of discrimination for violation of the ADA.

by Amy Gluck - Contributor

The Fourth Circuit clarified last week that after a case is filed in state court, a defendant desiring a federal forum should seek removal rather than file a separate declaratory judgment action in its federal district court of choice. In VRCompliance v. HomeAway, Inc., the court noted that the federal removal statute is the primary avenue for obtaining federal court review of already pending state law claims, and allowing a party to file a case in a federal forum when the same claims are pending in state court would result in a "regime of forum shopping."

HomeAway, Inc. operates websites that facilitate vacation home rentals. These rentals, unlike the booking of hotel rooms, tend to deprive localities of tax revenue. Eye Street Solutions has developed computer software that can identify vacation homeowners who have not paid locality taxes. Eye Street licensed the software to VRCompliance, LLC, and VRCompliance uses the software to investigate tax compliance on behalf of localities such as the Colorado Association of Ski Towns ("CAST").

Believing that Eye Street's software was impermissibly accessing its websites and "scraping" data, HomeAway sent a letter to Eye Street and CAST demanding that CAST's members stop using the software. HomeAway asserted that the software's access of HomeAway's websites violated the terms of conditions of use of the sites and constituted unlawful interference with contractual relations as well as a deceptive and unfair trade practice in violation of state law. HomeAway sent a second letter to CAST and copied CAST's members, and it sent a letter to Eye Street and VRCompliance reiterating its allegations and threatening legal action unless the companies ceased scraping data from HomeAway's websites and turned over any data already obtained.

HomeAway sued Eye Street, VRCompliance and CAST in the District Court of Travis County, Texas asserting Texas state-law claims. The Defendants asserted various state-law counterclaims, and Eye Street filed its own action against HomeAway in the U.S. District Court for the Eastern District of Virginia seeking declaratory judgments that it was not violating state common law and statutory law as asserted in HomeAway's Texas complaint and that it was not violating the federal Computer Fraud and Abuse Act nor federal copyright law. Eye Street also asserted nondeclaratory Virginia state-law claims. HomeAway moved to dismiss the federal action for improper venue or, alternatively, to transfer venue to the U.S. District Court for the Western District of Texas. The district court stayed the action pending the resolution of Home Away's Texas lawsuit, and Eye Street challenged the decision to stay.

The district court based its decision to stay on factors set forth in case law that district courts use to decide whether to stay declaratory judgment actions in deference to parallel state proceedings. The district court found that (1) Texas had a strong interest in deciding the issues raised, (2) the Texas Court would likely resolve the issues more efficiently, and (3) allowing the federal case to go forward would result in unnecessary entanglement between the federal and state court systems. The Fourth Circuit found the district court's analysis to be thorough and accurate, but held that the stay was justified for the additional reason that Eye Street failed to seek removal of the Texas action to federal court.

The court noted that Eye Street insisted on proceeding with its federal action even after HomeAway indicated that it would not oppose removal. This demonstrated to the court that Eye Street did not just desire a federal forum but one that it believed would approach the dispute on Eye Street's terms. The court called Eye Street's strategy "procedural fencing" that federal case law has attempted to prevent. The court held that the federal removal statute is the primary avenue for obtaining federal court review of claims already pending in a state court. Under that statue, a defendant in a state court action can seek to remove the action only to the federal district court for the district and division within which the action is pending. The court reasoned that if a defendant could secure a federal forum in any district with personal jurisdiction over the plaintiffs simply by filing a federal action recasting the claims against it as declaratory claims, the removal statute would be rendered ineffective and would be supplanted with a "regime of forum shopping." Therefore, district courts have discretion to consider a litigant's deliberate decision to forego removal as a reason to stay a federal declaratory action. Given the strong case for a stay as analyzed by the district court and Eye Street's deliberate choice to forgo removal, the Fourth Circuit affirmed the district court's decision to stay.

A shareholder acting on behalf of a corporation may bring a "derivative suit" against corporate directors and management for fraud, mismanagement, self-dealing or dishonesty. Before bringing such a suit, the shareholder must make a written demand that clearly identifies the alleged wrong and demands the corporation take action to redress it. A court will examine a complaint and a written demand to insure that they are sufficiently connected. A Norfolk Circuit Court recently addressed the sufficiency of a demand letter in Williams v. Stevens and Dornemann.

Alex Williams, Eric Stevens and Karl Dornemann were the sole shareholders of Dogsbollocks, Inc., a corporation that managed restaurants. Williams alleged that Stevens and Dornemann (the defendants) prevented him from involvement with the corporation and refused to give him pertinent corporate information. He also alleged that the defendants developed a restaurant independently. Williams' attorney sent two letters to the defendants. The first letter demanded access to the corporation's financial records and requested the name of the corporation's accounting firm, and the second letter accused defendants of ignoring the first letter and gave the defendants notice that Williams was requesting financial records pursuant to Virginia Code § 13.1-774. Williams later filed a derivative suit. In response to an Amended Complaint, defendants filed a plea in bar, arguing that Williams' suit was barred because he failed to make a written demand before bringing the derivative action. Williams contended that his two letters fulfilled the demand requirement.

The court considered what components a document must contain in order to satisfy the written demand requirement. No Virginia court had previously addressed the question, so the court looked to rules established in North Carolina, where the demand requirement is almost identical to Virginia's. Neither state's statutes specify the form of the demand other than requiring it to be written. North Carolina courts have held that the document should set forth the facts of share ownership and describe the remedy demanded with enough specificity to allow the corporation to correct the problem or bring a lawsuit on its own behalf. See e.g., LeCann v. CHL II, LLC, 2011 NCBC 29 (2011). In North Carolina, emails, sworn affidavits and letters have satisfied the written demand requirement where they identified the allegedly wrongful acts and demanded redress in a clear and particular manner sufficient to put the corporation on notice as to the substance of the shareholder's complaint.

The Virginia court extracted three principles from the North Carolina case law and adopted them in applying the Virginia statute: (1) The statutory demand requirement serves to put the corporation on notice of a shareholder's objection to an alleged wrong and allows the corporation an opportunity to redress the wrong; (2) a plaintiff may not bring a derivative action seeking redress of wrongs not first addressed in a written demand, as in such a situation, the corporation would not have sufficient notice and opportunity to act first on its own behalf; and (3) a written demand must be sufficiently clear and particular to give the corporation reasonable notice of the alleged wrongs but it need not discuss any specific legal theory nor every relevant fact.

Applying these principles, the court considered (1) whether the document at issue identified an alleged wrong; (2) whether the document demanded action on the part of the corporation to redress the alleged wrong; (3) whether the demands in the document were clear and particular enough to have put the corporation on notice as to the substance of the alleged wrong and allow the corporation to assess its rights and obligations with regard to the alleged wrong; and (4) whether the alleged wrong and the claims asserted in the plaintiff's complaint were sufficiently connected.

In the Williams case, the two letters identified several alleged wrongs such as failure to provide financial information and file tax returns and breach of fiduciary duty. Williams also demanded that these alleged wrongs be redressed. The court found that the demands were clear and particular enough to put Dogsbollocks on notice regarding the substance of the alleged wrongs. Williams' demands gave Dogsbollocks the opportunity to assess its rights and obligations and take action.

The court then examined whether any allegation in the complaint related to a wrong not sufficiently addressed in Williams' written demands. The wrongs that Williams alleged in his written demands all related to the corporation's financial records and the corporation's failure to give Williams access to those records. The complaint alleged breach of fiduciary duty based on these facts, but it also alleged breach of fiduciary duty based on a usurpation of corporate opportunities; i.e., that defendants had developed a restaurant independently. Williams' written demands did not mention usurpation of corporation opportunity. The court held that Williams had not sufficiently demanded redress of the alleged usurpation of corporate opportunity and therefore was not permitted to seek redress of any alleged usurpation in his lawsuit. The court sustained the defendants' plea in bar with regard to Williams' allegation of usurpation and otherwise overruled the plea in bar.

Musical artist Cameron Jibril Thomaz, better known as "Wiz Khalifa," recently saw his breach of contract case against It's My Party get dismissed. Mr. Thomaz had hired The Agency Group as his booking agent for a new tour which would have included a concert at The Patriot Center in Northern Virginia. The Agency Group asked It's My Party Inc. (I.M.P.) to promote the concert, and it represented to I.M.P. that Mr. Thomaz would soon release a new album. The Agency Group emailed a contract to I.M.P. and asked I.M.P. to sign and return it to The Agency Group for approval and signature by Mr. Thomaz. The contract provided that it would not be binding unless signed by all parties. The contract was never signed.

Mr. Thomaz' release of a new album was crucial to I.M.P.'s interest in promoting the concert because it did not believe he could attract a sufficient number of fans to warrant his appearance at the venue without the support of a new album. I.M.P. asserted that the parties tentatively agreed upon a date for the concert and the terms of I.M.P.'s promotion of the concert, but it denied having committed to promote the concert.

Mr. Thomaz argued that the parties entered into a contract for him to perform a live concert and that he relied on I.M.P.'s representations in turning down an opportunity to perform on the same date at a different venue using a different promoter. According to Mr. Thomaz, I.M.P. partially performed the contract by advertising, promoting and marketing the concert. He also contends that he partially performed the contract but that I.M.P. refused to pay him any money and canceled the concert after fans already had purchased tickets. I.M.P. asserted that it declined to execute the contract but agreed to reschedule the concert because Mr. Thomaz's album release was delayed. The Agency Group and I.M.P. agreed to sell tickets to the concert before finalizing the agreement, but as I.M.P. had predicted, sales tanked in the absence of the album release. The parties were unable to come to mutually agreeable terms, and I.M.P. ultimately cancelled the concert and withdrew its offer to promote it. Mr. Thomaz sued I.M.P. for breach of contract and I.M.P. moved to dismiss the complaint.

A party claiming breach of contract must establish that the defendant owed a legally enforceable obligation. A contract can exist despite the absence of a signature if the parties' actions suggest an intention to form an agreement, but if the parties intend to sign a formal agreement and do not, a presumption that no contract exists is created which is overcome only with strong evidence.

A meeting of the minds is essential to the existence of a contract. Whether the parties have a common intention is a question of fact that is determined objectively by considering how a third person would interpret the parties' words and actions. In this case, Mr. Thomaz did not argue that he relied on I.M.P.'s oral representations; rather, he asserted that the written contract was proof of the agreement between the parties. However, the express terms of the written document provided that it was not binding unless signed by all the parties. The court found that the terms of the alleged contract were unambiguous and that the parties did not intend the agreement to be binding unless signed by both parties. Therefore, the court presumed that no contract existed, and Mr. Thomaz was required to demonstrate strong evidence that the actions of the parties showed otherwise.

I.M.P. asserted that it explicitly avoided assenting to the terms of the written contract because Mr. Thomaz had not released an album, and it presented supporting evidence. Conversely, Mr. Thomaz presented little evidence of the parties' conduct during negotiations. Evidence indicated that Mr. Thomaz also agreed that the contract would not be binding until signed by all parties. Ticket sales alone were not enough to prove that I.M.P. intended to enter a contract given the countervailing evidence.

The written agreement also included an arbitration clause requiring the parties to submit any dispute to arbitration. The court noted that if Mr. Thomaz considered the contract to be binding, he would have submitted the matter to arbitration. The court held that there was insufficient evidence to defeat the presumption that the contract did not exist and it dismissed the complaint.

When Cecil Addison was passed over for promotion, he sued Volvo Trucks North America and Ivan Mitchell in the Western District of Virginia for breach of contract and discrimination. Volvo Trucks had a contract agreement with the United Auto Workers Union. Addison alleged the defendants changed the contract's job requirements without Union approval so they could put a white male employee in the position for which Addison, a black male, was the most senior qualified employee. He also claimed that, when he complained, they retaliated by terminating his employment. Addison sought $25 million for the career he said they destroyed, and an additional $25 million for pain and suffering. But this wasn't the first time he filed a lawsuit like this.

Addison made substantially the same allegations, plus others, in an earlier suit he filed in the same court in 2009. In that case, he didn't communicate with the defendants for over five months, failed to appear at his own scheduled deposition and, when the magistrate judge ordered him to show cause why the case shouldn't be dismissed, failed to respond. So that case was dismissed.

The principle of res judicata (Latin for "a thing adjudicated") bars a party from filing a new lawsuit if that party has filed a prior suit on the same claim or on claims arising from the same transactions that could have been raised in that prior suit. The Supreme Court has acknowledged the important reasons for this doctrine, which include (1) preventing the cost and vexation of multiple lawsuits, (2) conserving judicial resources, and (3) preventing inconsistent judicial decisions so parties can rely on adjudications.

Res judicata bars a federal case where (1) there has been a final judgment on the merits in a prior suit, (2) the same cause of action for the same facts was raised in both suits, and (3) the same parties or their privies were parties in both suits.

Addison's first case was dismissed for failure to comply with a court order. But was it a dismissal on the merits? Subject to a few exceptions, which didn't apply here, Rule 41(b) of the Federal Rules of Civil Procedure deems involuntary dismissals adjudications on the merits. The order dismissing the first action didn't state whether the dismissal was with or without prejudice. But in the absence of a clear statement in the order, under Rule 41(b), the dismissal is presumed to have been made "upon the merits."

Res judicata bars both the claims raised and those arising out of the same transaction or occurrence that could have been raised. The language and claims in the two complaints were virtually identical. Though the new complaint clarified a breach of contract claim, the first claim involved the same contract and Addison could have raised the breach claim in the first case.

Both cases also involved identical parties. Thus, Judge James C. Turk concluded that the two cases were essentially identical, satisfying all three elements of res judicata, and dismissed Addison's second complaint.

Judge Turk also dismissed the case against Volvo Trucks. Rule 4(m) of the Federal Rules of Civil Procedure requires defendants to be served within 120 days after the complaint is filed. Though the court ordered Addison to serve Volvo Trucks and gave him extra time to do so, Volvo was never served. Judge Turk rejected Addison's argument that serving Mitchell at his workplace constituted 'serving' the company as well. Dismissal under Rule 4(m) is without prejudice, but Judge Turk made a point of noting that any attempt to refile that claim would be barred by res judicata.

Federal laws protect whistleblowers from retaliation because the government wants people to report fraud in government contracts. When Weihua Huang, a principal investigator on a National Institutes of Health (NIH) research grant at the University of Virginia, discovered unauthorized changes that diverted grant money to unrelated salaries and expenses, he reported it to the head of UVa's Department of Psychiatry and Neurobehavioral Sciences. Soon thereafter, he was told his employment contract wouldn't be renewed. Huang sued for False Claims Act retaliation and won a jury verdict of $159,915 in lost wages plus $500,000 in compensatory emotional-distress damages. Not surprisingly, the defendants (Huang's supervisor Dr. Ming D. Li, and Department Chair Dr. Bankole A. Johnson) asked the court to reduce the damages award as excessive.

Specifically, the defendants invoked a process known as remittitur, asking Judge Norman K. Moon to either reduce the emotional distress damages to $10,000, or order a new trial. They pointed out that the only evidence of emotional distress was Huang's own unsupported testimony. There was no evidence, for example, of medical treatment or other corroborating evidence. They argued that where the injury consists of emotional distress, the Fourth Circuit usually finds six-figure damages awards excessive when not supported by medical evidence.

A jury's compensatory damages award will be considered excessive if it is "against the clear weight of the evidence or based on evidence which is false." Under Rule 59(a) of the Federal Rules of Civil Procedure, if a plaintiff won't accept a trial court's reduction of an excessive jury award, the court can order a new trial.

The court agreed with the defendants, but only up to a point. The court agreed that six-figure awards for emotional distress are often found to be excessive, but noted that there is no bright line test prohibiting such awards per se. The cases are very fact-specific. What is important is that the damages award be proportional to the plaintiff's injury. In theory, emotional distress damages can be proved solely through a plaintiff's self-serving testimony, but conclusory statements are not enough. If a plaintiff is going to rely solely on his own testimony, he must reasonably and sufficiently explain the circumstances of his distress.

To determine whether a jury award of emotional-distress damages is excessive, courts consider factors such as the extent to which medical, psychiatric, or psychological treatment was sought or received, the degree of mental distress suffered, the factual context, whether there is evidence to corroborate the plaintiff's testimony, the nexus between the defendant's conduct and the emotional distress, the existence of mitigating circumstances, loss of income, and whether any physical injuries were manifested. Perhaps most importantly, courts look to past awards based on similar evidence to use as a guideline.

Circumstances that support higher awards include insidious bad behavior by the defendants, serious and/or long term or permanent physical injuries to plaintiffs, physical symptoms of stress, injuries requiring significant medical or psychological treatment or medication, terminations leading to prolonged unemployment, and unlawful terminations. These are not specifically required but the more objective verification of emotional distress a plaintiff offers, the higher the award is likely to be and the more likely the verdict will be upheld by the court.

In this particular case, Judge Moon concluded that Huang's $500,000 award was excessive. It was more than three times the largest award in a similar Fourth Circuit case and it wasn't proportional to Huang's injuries. In short, the court found the award to be against the weight of the evidence. Huang presented no medical evidence of his emotional distress and offered no testimony regarding any medical, psychiatric or psychological treatment. Still, Judge Moon found his testimony supported a substantial award.

This was Huang's first NIH grant as principal investigator. It represented a major professional and personal accomplishment. The retaliation ended his academic career at UVa and the grant failed. This made it harder for him to receive other NIH grants, thereby limiting his career options. He looked for other jobs and couldn't even get interviews. He lost fifty pounds and suffered sleep disruption. This testimony was specific as to the type and extent of his physical and mental distress. He also testified that losing his job strained his marriage and his wife had to find a job to support him.

The unlawfulness of Huang's termination also supported a larger award. He testified to specific physical symptoms, lost income, and changes in conduct. Taking all this into account, Judge Moon reduced the award to $100,000 which, he concluded, would adequately compensate Huang for his emotional harm while not being disproportionate to the award for back pay.

If a literal reading of 28 U.S.C. 1441 (the forum defendant rule) would lead to an absurd result, then it should not be interpreted that way, according to a recent decision of Judge Morgan of the Norfolk Division of the Eastern District of Virginia.

Eddie Campbell sued his former employer, Hampton Roads Bankshares, Inc., and related entities in the Circuit Court for the City of Norfolk for breach of contract. Mr. Campbell is a citizen of North Carolina. The bank defendants, who are citizens of Virginia, removed the action to federal court prior to being served with process. Mr. Campbell moved to remand the case back to Norfolk state court, and the court granted the motion.

Federal law permits a defendant to remove a state court action to federal court only if the plaintiff could have originally filed that action in federal court. The defendants claimed federal jurisdiction was proper because the case raised a federal question under 18 U.S.C. § 1331 and claimed diversity jurisdiction under 18 U.S.C. § 1332.

Federal question jurisdiction applies to "all civil actions arising under the Constitution, laws, or treaties of the United States." Courts look to the well pleaded complaint to see if it presents a federal question. Even where a federal cause of action isn't expressly pled, a federal question exists if federal law creates the cause of action or the plaintiff's right to relief depends on the resolution of a substantial question of federal law.

The defendants argued that federal "golden parachute rules" prohibited paying Campbell the severance package at the heart of Campbell's claim. But Campbell had pled a state law breach of contract claim. The defendants' argument centered on a defense they would assert. A defense cannot be a basis for removal.

For diversity jurisdiction, a federal district court has original jurisdiction, under 28 U.S.C. § 1332(a)(1), of "all civil actions where the matter in controversy exceeds the sum or value of $75,000 and is between citizens of different states." But under 28 U.S.C. § 1441(b)(2), an action removable on this basis can't be removed "if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought."

The defendants are citizens of the State in which the action was brought. But they argued that, technically, they hadn't been served with the complaint and were not "properly joined and served" so the barrier to removal couldn't apply. Campbell argued that, though this was the literal reading of the statute, it would be absurd to allow forum defendants to remove an otherwise unremovable action to federal court solely because they hadn't yet been served.

Generally, courts adhere to a statute's plain unambiguous language. Some courts have read the statute literally, only prohibiting removal where at least one party in interest, properly joined and served as a defendant, is a citizen of the forum state. These cases are not remanded if the forum defendant hasn't been served. But some courts hold that, where strict adherence to a literal reading would create an absurd result that is "so gross as to shock the general common sense," allowing removal runs counter to the purpose and intent behind § 1441(b)(2) and the cases should be remanded.

Judge Morgan found it would be an absurd result if a forum defendant could seek federal jurisdiction through removal while, at the same time, arguing that it can't be barred from removal because it hadn't been served so it wasn't a proper party to the action. He construed "served" to mean "actual notice and involvement in the case," and found these defendants had been served in that sense of the word. They obviously knew about the case and had become involved by seeking removal.

Because the defendants were citizens of Virginia, removal was improper, so the court remanded the case.

Jennifer Taylor worked for Allied Waste Industries. When Allied merged with Republic Services, Inc., Taylor found the new management's style different and problematic. Her new supervisors were described as "micromanagers," and Taylor clashed with them over many issues, including her job performance with which her supervisors' were dissatisfied. Taylor attempted to resolve the issues through the Human Resources office, but ultimately separated from Republic. According to Taylor, she would have continued employment with Republic but for the allegedly tortious actions of her supervisors. Taylor sued Republic and her supervisors for various torts including tortious interference with business expectancy. Defendants moved for summary judgment on the tortious interference claim.

To state a claim for tortious interference in Virginia, a plaintiff must prove: (1) a valid contractual relationship or business expectancy; (2) knowledge of the relationship or expectancy on the part of the interferer; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted. In an at-will employment situation such as this, the plaintiff must also prove that the method of interference was improper. Improper methods of interference include means that are contrary to law or regulation and methods that employ violence, threat, intimidation, or fraud. Actions motivated by spite do not necessarily constitute improper means.

A tortious interference claim usually requires three actors - two parties to the contract and a third party who interferes with the contract, so typically, the alleged interferer is not a party to the contract. However, a tortious interference claim may lie where an agent of one of the contractual parties acts outside the scope of his employment in tortiously interfering with the contract. An act is within the scope of employment if (1) it was expressly or impliedly directed by the employer or is naturally incident to the business, and (2) it was performed with the intent to further the employer's interest.

According to Taylor, defendant Rains tortiously interfered with her employment by copying a superior on emails and allegedly fabricating performance issues. The court found that since all of the emails were work related, they occurred within the scope of employment and could not form the basis of a tortious interference claim. Additionally, Rains did not use any improper means. The court also noted that Taylor did not provide evidence that Rains fabricated her performance issues - the fact that she disagreed with his appraisal of her work did not create a factual issue sufficient to overcome the motion for summary judgment.

Taylor alleged that defendant Calloway intentionally and falsely portrayed her as having performance issues and sought to drive her out of the company because she rejected his advances and reported him to Human Resources. Taylor relied on various emails which did not support her allegations and instead merely demonstrated that Calloway was monitoring her work performance. Additionally, as Vice President of Human Resources for the Eastern Region, Calloway's allegedly tortious actions fell squarely within the scope of his employment.

Taylor asserted that defendant Krall denied her a bonus and fabricated performance issues in order to drive her out of the company, and she submitted several email messages from Krall asking about her whereabouts and other issues. The court found that Taylor had submitted no evidence that Krall acted outside the scope of his employment or used improper methods as his email messages to her were all work-related and consistent with his treatment of all employees.

The court granted Defendants' Motion for Summary Judgment because Taylor could not show that the defendants acted outside the scope of their employment or used improper means that led to her separation from Republic. On top of that, the claims were also time-barred.

Spoliation of evidence can result not only in an adverse inference instruction to the jury, but in an award of attorneys fees and expenses incurred in proving the spoliation. As demonstrated by the contentious trade secret litigation between E.I. DuPont de Nemours and Company and Kolon Industries, Inc., those fees and expenses can be substantial.

Several months ago, the court found that several key Kolon employees had intentionally deleted relevant emails, hampering DuPont's ability to present and prove its case. As a result, the court granted DuPont's request to instruct the jury that it could assume the destroyed evidence contained information damaging to Kolon. DuPont won the case, then sought an award of fees and expenses incurred in connection with proving the spoliation.

The court noted that DuPont had engaged in a "long, and oftentimes tortuous, journey" to discover emails Kolon had deleted and documents it had destroyed. Complicating DuPont's burden was what the court called Kolon's "overall obfuscatory conduct." Still, DuPont had to prove the reasonableness of the fees requested.

Under the lodestar approach, the court multiplies the number of hours attorneys reasonably spent on a matter times a reasonable hourly fee which is based on prevailing rates in the relevant community. Only fees incurred for issues on which DuPont prevailed could be included.

DuPont sought $4,497,047.50 in attorneys' fees and expenses and the court granted all of it, finding that amount to be reasonable under the circumstances. Kolon did not object to the rates DuPont applied but objected to the 6,917 hours of attorney service claimed. DuPont had already excluded some fees it had incurred, worth some $390,000 or about twenty percent of the total claimed.

Kolon claimed DuPont had been "recklessly inefficient" in investigating the spoliation and argued that the fees should be reduced by seventy five percent. The court rejected this. First, the search was based on information taken from screen shots of Kolon computers and was reasonable given the need to narrow the scope of the documents that must be reviewed and the risk of omitting relevant evidence.

Second, though DuPont had spent considerable time developing the spoliation issue before alerting Kolon's counsel to the problem, litigants must exercise due diligence before making a spoliation charge and telling Kolon earlier would not have reduced the time spent on the issue. Kolon knew of the spoliation earlier and concealed it, the court found, then evaded discovery requests relating to it, so the court would not conclude the company would have cooperated had it been told.

Third, though DuPont used only one document from its spoliation efforts, that was not surprising because many critical documents were never recovered. So DuPont had to use an adverse inference instead.

The court also rejected Kolon's assertion that the number of hours spent on the spoliation issue was excessive. The hours were reasonable because spoliation was central to DuPont's vital need to protect its trade secrets, Kolon's efforts to hide the spoliation amplified the hours needed, those who spoliated evidence were Kolon employees centrally involved with Kolon's para-aramid process and the misappropriation of trade secrets, and DuPont had proof showing that the deleted information had probative value in proving that misappropriation.

Kolon did not object to amounts Dupont sought for investigating and litigating the spoliation, computer forensics analysis services and expert testimony, contract attorneys to review and analyze the documents, and for translations. Based on DuPont's affidavits, the court awarded $2,068,313.60 for these costs.

If you're going to file a lawsuit against someone, you'd better explain the basis for it. A complaint doesn't need to include much detail, but it must at least allege facts showing that you've been wronged and that you are entitled to a remedy of some sort. In federal court, you must also demonstrate a basis to invoke the court's jurisdiction. Failure to do so can result in monetary sanctions.

Take the case of Michael Harris v. Jeffrey Seto, brought in the Harrisonburg Division of the Western District of Virginia. Michael F. Harris and his company, M. F. Harris Research, Inc., filed a complaint against Jeffrey K. Seto, Matthew S. Johnson, and others, alleging fraud, breach of fiduciary duty, and corporate diversion. Harris stated in conclusory fashion that Seto and others defrauded him by scheming to take over his company and steal confidential information and business opportunities.

The complaint consisted of a two-page handwritten document. (Hint: that's not the best way to make a good first impression with the judges). The complaint alleged nine counts but did not set forth the factual basis supporting them. According to the civil cover sheet filed with the complaint, Harris asserted the court's jurisdiction was based on a federal question. He checked boxes describing the case as being in the nature of "Assault, Libel & Slander," "Property Damage Product Liability," and "Patent." Defendant Johnson was the only defendant served and he wisely moved to dismiss the action for failure to state a claim.

In the federal court system, U.S. magistrate judges handle many aspects of pending cases subject to review by district judges. In this case, Magistrate Judge Waugh Crigler recommended that the case be dismissed with prejudice (i.e., permanently, without opportunity to reopen or refile) for failure to prosecute. The magistrate judge also issued a show cause order requiring Harris to prove the court had subject matter jurisdiction and explain how Harris Research, a corporation, could proceed without an attorney. The magistrate judge apparently took into account the fact that Harris had filed the same complaint in the Roanoke Division of the Western District where it was dismissed without prejudice for lack of proof of service on the defendants. The plaintiff's motion to reopen the case there was denied because the complaint failed to state a claim upon which relief could be granted.

District Judge Michael F. Urbanski focused on the apparent lack of the court's jurisdiction. The complaint raised no federal law violations that would suggest federal question jurisdiction and the parties were all based in Virginia so there could be no diversity jurisdiction. Judge Urbanski accepted the recommendation to dismiss the action for lack of subject matter jurisdiction, but dismissed it without prejudice, thereby leaving the door open to yet another bite at the apple. Given how much leeway Harris had already been given, the court cautioned that, if he does re-file the case, Rule 11 sanctions may be imposed if he doesn't properly demonstrate the existence of subject matter jurisdiction.

When analyzing personal jurisdiction, the Fourth Circuit (which includes both Virginia and South Carolina) had held that it is proper to consider the location where the effects of the alleged wrongdoing are felt. The so-called "effects test" is applied narrowly, however, and cannot be used to supplant the minimum contacts analysis required by the United States Constitution. The United States District Court for the District of South Carolina recently had occasion to apply the test in Power Beverages v. Side Pocket Foods.

Power Beverages, a South Carolina company, contracted with Side Pocket, an Oregon distillery, to manufacture and sell Ying Yang vodka and ship the product where directed. Power Beverages wired money to Side Pocket in Oregon to pay for materials, and Side Pocket delivered the vodka to a South Carolina licensed distributor.

A dispute arose between the founders of Power Beverages, and one of the founders demanded that Power Beverages cease operations. Side Pocket informed Power Beverages that the contract between them would terminate in thirty days, and it sent Power Beverages a final invoice which Power Beverages contested. Upon direction from one of the founders, Side Pocket released the remaining inventory to a distributor in California. Power Beverages then sued Side Pocket in South Carolina for breach of contract, fraud, conversion, unfair trade practices and conspiracy. Side Pocket argued that the South Carolina court lacked personal jurisdiction over it.

A federal court may exercise personal jurisdiction over a non-resident corporation if the state's long-arm statute authorizes jurisdiction and the exercise of jurisdiction complies with the due process clause of the Fourteenth Amendment. The South Carolina long arm statute authorizes jurisdiction to the same extent as does the due process clause which requires the party to have sufficient minimum contacts with the forum state such that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. Consulting Engineers Corp. v. Geometric Ltd., 561 F.3d 273, 277 (4th Cir. 2009).

A court can exercise either general or specific jurisdiction over a non-resident corporation depending on the extent of the corporation's contacts with the forum state. Where contacts are continuous and systematic, a court may exercise jurisdiction over the party in matters unrelated to the party's contact with the state. Where contacts are not continuous and systematic, a court may still exercise jurisdiction over matters arising out of the party's contact with the state. To decide whether specific jurisdiction is appropriate, the court considers (1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the state; (2) whether the plaintiff's claims arise out of those activities; and (3) whether the exercise of jurisdiction is constitutionally reasonable.

Here, Power Beverages insisted that the court had jurisdiction over Side Pocket because the contract between the parties required Side Pocket to supply goods in South Carolina and the goods would be used or consumed in South Carolina. Power Beverages also alleged that Side Pocket maintained an inventory in South Carolina and appointed a South Carolina distributor as its agent in South Carolina in order to penetrate the South Carolina market. Power Beverages asserted that Side Pocket shipped its products to South Carolina where they were received and sold.

Side Pocket argued that it is not registered to do business in South Carolina, has never owned property in South Carolina nor maintained an office in South Carolina, has not paid taxes in South Carolina, appointed an agent for service of process in South Carolina nor entered into a contract to be performed in South Carolina. Side Pocket denied hiring a South Carolina distributor and instead contends that it agreed to send some of its own products along with the Ying Yang vodka to the South Carolina distributor who paid for the products and their shipping. Side Pocket did not register brands in South Carolina.

The court found that the factors normally associated with physical presence in the forum state were absent here: an official agent, employees, a business license, incorporation, and corporate facilities. Even if Side Pocket had registered its brand in South Carolina, the court found that would be insufficient to satisfy minimum contacts. The court held that the facts did not support a finding that Side Pocket had continuous and systematic contacts with South Carolina to support general jurisdiction. As to specific jurisdiction, a contract with a South Carolina party alone cannot establish sufficient minimum contacts. Rather, the court must consider who initiated the agreement, where negotiations occurred, the extent of communication, where the agreement was executed and where the agreement was to be performed.

Here, the contract was negotiated, executed and primarily performed in Oregon, and the alleged breach occurred in Oregon. All of the alleged omissions and wrongs occurred in Oregon. Although the contract contained a South Carolina choice of law provision, the court noted that a choice of law provision is not dispositive and is rather only one factor to consider in evaluating personal jurisdiction.

Power Beverages also argued that the court could exercise personal jurisdiction over Side Pocket under the effects test. The effects test is three pronged and applied where: (1) the defendant committed an intentional tort; (2) the plaintiff felt the brunt of the harm in a forum that can be said to be the focal point of the harm; and (3) the defendant expressly aimed tortious conduct at the forum in a manner that the forum can be said to be the focal point of it. The court held that because the vodka and funds were allegedly converted in Oregon, the conversion claim did not meet the second prong. Additionally, the court found that South Carolina was not the focal point of the alleged tortious activity as Side Pocket did not expressly aim its allegedly tortious actions at South Carolina.

Although the court found that it did not have personal jurisdiction over Side Pocket, rather than dismissing the case, it transferred the case to the District of Oregon.

If you're going to sue a bunch of former employees for various business torts, you need to be clear in your allegations as to who did what. It's all too easy to lump all the defendants together when describing the wrongful conduct in the complaint, especially when there are numerous defendants. Increasingly, however, Virginia courts are dismissing defendants from cases in which their specific involvement cannot be ascertained from the face of the complaint.

Recently in a Virginia federal court, Alliance Technology Group, LLC (Alliance), an IT services provider, sued a cadre of its employees and Achieve 1, LLC (Achieve), a competing company, for conspiracy, fraud, misappropriation of trade secrets, and other claims. One defendant, William Ralston, moved to dismiss due to the fact that many of the allegations of the complaint lumped all the defendants together, accusing all the defendants of committing tortious conduct collectively.

The rules are pretty lenient on what a complaint must contain to survive a motion to dismiss. A complaint must include a short and plain statement of the claim showing that the pleader is entitled to relief, and enough factual information to give the defendant fair notice of the nature of the claim. It must allege enough facts--not conclusions--to make the asserted right to relief plausible on its face rather than merely speculative or conceivable.

According to the complaint, Michael Thomas joined Alliance intending to steal trade secrets and proprietary information for Achieve, a company he'd formed earlier. Thomas directed eight employees while at Alliance, all subject to confidentiality agreements with Alliance. But he and the other employees began competing against Alliance while they were still working there, using Achieve to do it. Eventually, they all joined Achieve where, Alliance alleges, they used proprietary information to appropriate its clients and business.

The complaint ties each defendant, except Ralston, to at least one specific transaction and specific date for joining Achieve. Ralston was lumped into the allegations against "the Defendants" except for allegations that he joined Alliance mere weeks before Thomas resigned and he now works for Achieve.

The court dismissed the common law and statutory conspiracy claims against Ralston. Common law conspiracy in Virginia requires (1) two or more persons, (2) acting in concert, (3) "to accomplish some criminal or unlawful purpose, or to accomplish some purpose, not in itself criminal or unlawful, by criminal or unlawful means." To satisfy the unlawful act requirement, at least one of the alleged co-conspirators had to have committed an underlying tort like the alleged inducement to breach a contract.

The complaint alleged the conspiracy had been going on since at least November 2011, but Ralston didn't join Alliance until March 2012 and no allegations claimed he'd joined in an ongoing conspiracy. It may have been conceivable that he was part of it before he joined the company, but that was pure speculation, which wasn't sufficient.

Statutory business conspiracy arises when two or more persons "combine, associate, agree, mutually undertake or concert together for the purpose of willfully and maliciously injuring another in his reputation, trade, business, or profession by any means whatsoever." The complaint didn't allege that Ralston joined the conspiracy before hiring on with Alliance or that he joined the others in malice or with knowledge of others' malice. So the court could not reasonably infer that he joined Alliance with a present intent to accomplish an unlawful purpose.

The fraud claim also failed for insufficient pleading. In Virginia, one who alleges fraud must allege: (1) a false representation, (2) of a material fact, (3) that was made intentionally and knowingly, (4) with the intent to mislead, (5) reasonable reliance by the party misled, and (6) resulting damage to the party misled. Because the allegations lumped Ralston in with the others on this count, the complaint lacked the necessary specific time, place and contents of false representations attributable to Ralston. The Court accordingly dismissed the fraud claim as well. Several claims remain, however, including breach of fiduciary duty, misappropriation of trade secrets, and tortious interference with existing contract, contract expectancy, prospective business relationship and economic advantage.

Russell Lee Ebersole recently won a $45,000 judgment in a case for defamation and business conspiracy, racking up over $135,000 in attorney fees to obtain it. In September, Judge Cacheris ruled that only around $80,000 of the incurred fees were reasonable, and awarded fees to the plaintiff accordingly. Alas, it appears that Mr. Ebersole is never going to see any of this money, because he owes the government--which timely perfected its restitution lien--over $700,000.

Shortly after the judgment was entered, the government applied for a Writ of Continuing Garnishment to enforce its lien against the proceeds. Ebersole's lawyers intervened and objected, claiming that the superpriority of their attorney's lien (under 26 U.S.C. § 6323(b)(8)) applied to all fees billed to their client, not just the amount deemed reasonable by Judge Cacheris.

The priority of a federal lien based on an order of restitution is generally determined by who got there first, i.e. "first-in-time, first-in-right," and the government's lien was filed first. But there is an exception to that rule. An attorney's lien "to the extent of his reasonable compensation for obtaining such judgment" enjoys superpriority status under 26 U.S.C. § 6323(b)(8). Regulations interpret "reasonable compensation" as the amount customarily allowed under local law for similar legal work based on the individual case circumstances.

The government argued that the law firm had superpriority only to the extent of the $79,786.42 that Judge Cacheris had ordered the defendant to pay Ebersole's attorneys in the earlier action. Judge Cacheris had expressly excluded fees over that amount from the "reasonable compensation" he'd awarded, including the fees equal to the $45,000 in compensatory and punitive damages the defendant had to pay. Thus, it argued, the entire $45,000 fell outside the amount of reasonable compensation that might be accorded superpriority. The law firm argued that Virginia law would consider the full contractual amount "reasonable compensation."

Judge Brinkema agreed with the government, finding that the superpriority exception only applied to that portion of the firm's fees that had been adjudged "reasonable" in the earlier matter.

Earlier this year I noted the case of Precision Franchising, LLC v. Catalin Gatej, a breach of contract case filed by the Leesburg-based franchisor of the Precision Tune Auto Care system against a Massachusetts resident. The Eastern District of Virginia had denied the defendant's motion to dismiss the case and had issued a detailed written opinion explaining the grounds therefor. What happened next? Mr. Gatej promptly fired his lawyers, then proceeded to ignore Precision's discovery requests until several weeks after responses were due. The predictable result was another written opinion, this time granting summary judgment in favor of Precision Franchising.

Requests for admissions are deemed admitted if not timely answered. Gatej failed to respond timely to Precision's requests for admissions, resulting in certain key facts being deemed established. Precision, relying on those admissions, moved for summary judgment. Late responses, however, are generally treated as motions to withdraw or amend the admissions, which courts can allow if allowing the late or amended responses would promote "the presentation of the merits of the action" and "would not prejudice the party that obtained the admission." (See Federal Rule of Civil Procedure 36). Gatej filed late responses.

Judge Cacheris found that although allowing Gatej to amend his responses would certainly promote presentation on the merits, it would cause prejudice to Precision. Precision reasonably relied on the deemed admissions in preparing its motion. Allowing Gatej to amend his responses so late in the process would force Precision to expend more time and money to prove what the deemed admissions already conclusively established. Perhaps most importantly, Gatej filed his responses over two months beyond an extended deadline as part of a pattern of "general unresponsiveness and repeated delinquency." The looming discovery deadline left no room for Precision to complete more discovery. And the Court had already warned Gatej that his repeated noncompliance could result in sanctions, including the entry of a default judgment. Though the result was perhaps harsh, Judge Cacheris concluded that litigants must be able to rely on the rules of procedure or there is no point to having them.

In yet another case involving alleged defamatory Yelp reviews, Hadeed Carpet Cleaning has filed a "John Doe" action in Alexandria Circuit Court, seeking to first learn the identities of the anonymous posters, then recover damages from them. Yelp is based in California but conducts substantial business in Virginia, so Hadeed served Yelp's registered agent with a subpoena duces tecum seeking to identify the individuals who wrote the negative reviews. Yelp refused to comply.

Yelp objected to the subpoena on several grounds. It argued that serving a Virginia subpoena on its registered agent was insufficient to confer jurisdiction over a California company, that its advertising agreement with Hadeed required the parties to resolve their disputes in California, and that Hadeed did not meet constitutional requirements to compel Yelp to reveal the anonymous posters' identities.

The court rejected these arguments, finding that Hadeed complied with Virginia Code § 8.01-407.1, which spells out what a party must do to discover the identities of anonymous posters on the Internet. The court found that service of a subpoena on the registered agent was sufficient to confer jurisdiction, but even if it wasn't, Yelp would be subject to personal jurisdiction anyway due to its substantial business activities in Virginia. The forum-selection clause in Yelp's advertising agreement was inapplicable because the dispute did not arise under that contract.

Though anonymous and even false speech are entitled to some protection under the First Amendment, they do not receive the same level of protection that truthful speech and political speech are entitled to. To obtain the identity of an anonymous Internet poster, Virginia Code § 8.01-407.1 requires the requesting party to show that the statements "may be tortious" and that the identity of the anonymous communicator "is centrally needed to advance the claim, relates to a core claim or defense, or is directly and materially relevant to that claim or defense."