Virginia Business Litigation Lawyer Blog

In the consolidated cases of Bank of America Investment Services, Inc. v. Michael A. Byrd and Gregory F. Harris, Judge Davis of the Eastern District of Virginia (Norfolk division) denied Bank of America's motion for a preliminary injunction or temporary restraining order seeking to enjoin its former brokers from contacting clients with whom they had established personal relationships.

Both defendants were financial advisors in Norfolk who left Bank of America in March to join Wells Fargo Advisors. After switching employers, both defendants placed telephone calls to their former Bank of America clients and informed them of their departure and provided new contact information. Bank of America contended that this conduct violated their respective non-solicitation agreements, which provided that the employee:

"will not directly or indirectly solicit, invite, encourage or request any client or customer of the Company...for the purpose of: obtaining that client or customers' business for himself or herself or any other person or entity, causing such client or customer to discontinue doing business with the Company or otherwise interfering with the relationship between such clients or customers and the Company."

The Defendants insisted they did not "solicit" clients but merely provided them with updated contact information. Bank of America attempted to prove solicitation by introducing affidavits of two individuals which relied primarily on the hearsay statements of others. The court discounted the weight of the plaintiff's evidence because neither witness bothered to testify in person at the injunction hearing, and both affidavits consisted of "double hearsay."

Judge Davis noted that the issuance of a preliminary injunction is "an extraordinary remedy" which should only be granted where the moving party "clearly establishes entitlement to the relief sought." Applying the familiar Blackwelder test from the 4th Circuit, the court found that Bank of America failed to make a sufficiently strong showing of irreparable harm. While several judicial decisions have established that injunctive relief may be available where the loss of future customers or harm to goodwill makes it difficult to calculate money damages, the court wrote, injunctive relief is neither automatic nor required in such cases. The court proceeded to deny Bank of America's motion.

The lesson to Virginia businesses? If former employees are improperly soliciting customers, first consider whether an award of money damages would address the situation sufficiently. It will always be easier to sue the former employees for money than to obtain an injunction or TRO. Next, if you have actual evidence that customers are taking their business elsewhere as a result of improper solicitation, demonstrate to the court that the issue is important to your business. Don't rely on affidavits or declarations. Send a senior executive to the hearing to testify in person. If the matter is not important enough to miss a day of work for this purpose, the judge will be difficult to convince that irreparable harm is at stake. Finally, if you must rely on affidavits, at least get them from the people with personal, first-hand knowledge of the relevant events. Affidavits that rely on hearsay do not carry the same weight as affiant statements.

Faced with an issue that has not yet been decided by the Virginia Supreme Court, a federal court sitting in Roanoke, Virginia, ruled that contracting parties may not agree in advance to exempt each other from liability resulting from future intentional misconduct. To the extent parties include in their contract a disclaimer purporting to limit liability and legal theories to exclude causes of action targeted at intentional or reckless misconduct, Virginia courts should strike them down as violative of public policy, the court held.

The case was filed in January by All Business Solutions, Inc., against NationsLine, Inc. Both companies provide telecommunications services. The parties entered into a contract providing that NationsLine would manufacture certain telecommunications products and that ABS would market and sell them for a commission. According to ABS, when one of its customers for direct inbound dialing numbers ("DIDs") realized that ABS was also conducting business with one of its competitors, it resolved to "injure or destroy" ABS and caused NationsLine to abruptly terminate the contract.

One legal theory pursued by ABS was that of statutory business conspiracy under the Virginia Business Conspiracy Act, Va. Code § 18.2-499, -500. The business conspiracy statute is popular among plaintiffs' attorneys due primarily to its triple-damages provision and allowance for recovery of attorneys' fees. NationsLine moved to dismiss the claim, arguing (among other things) that the claim was barred by the limitation of liability provision in the parties' contract.

The clause at issue disclaimed liability as follows: "In no event shall NationsLine be liable for special, indirect, incidental, punitive or [consequential] damages, including loss of profits, arising through the relationship or the conduct of business contemplated herein." According to the disclaimer, ABS's sole remedy was for commissions earned.

The court, after observing that the Virginia Supreme Court has apparently not yet determined the effect of such contractual language, held that while parties to a business contract may generally limit their risk of loss through contract, it would be against Virginia public policy to exempt a party from liability for intentional, conspiratorial misconduct. The motion to dismiss was denied.