Virginia Business Litigation Lawyer Blog

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.