Virginia Business Litigation Lawyer Blog

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.

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.

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.

Filing a lawsuit against another company or individual in Virginia is not always about money. Sometimes, it is necessary to get a court order compelling the defendant to take some desired action (like perform a contractual obligation to purchase real estate) or restraining the defendant from acting in a manner that would harm your business (like sharing trade secrets with a competitor).  The injunction remedy does not award money damages to the injured party, but protects property and other rights from irreparable injury by prohibiting or commanding acts that would (or are likely to) result in such injuries.

When time is of the essence, Virginia courts will allow a plaintiff to move for a temporary, preliminary injunction to restrain or compel the conduct at issue at the outset of a case, pending further investigation and trial. The purpose of a preliminary injunction is to preserve the relative positions of the parties (i.e., the "status quo") either while the suit is pending or for some shorter period of time determined by the court.  In certain emergency situations, it may be possible to obtain an injunction at a hearing of which the defendant is not notified.  This is sometimes necessary when there is a legitimate fear that the defendant would take the feared action (or inaction) upon learning of the lawsuit or motion.

An injunction is considered an "extraordinary" remedy and is generally more difficult to obtain than an award of money damages.  Of the different types of injunctions available, the form that compels another party to perform an act (as opposed to merely preserving the status quo and prohibiting certain actions) is considered the most extraordinary and is the most difficult to obtain in court.

Whether you are in United States District Court (i.e., "federal court") or Virginia Circuit Court (i.e., "state court"), the requirements for obtaining injunctive relief are generally the same.  The touchstone for obtaining an injunction, a form of equitable relief, is the existence of an imminent threat of "irreparable harm," that is, harm that is of such a nature that it cannot adequately be compensated with money damages.  

To obtain a preliminary injunction, it will also be necessary to convince the court that the "balance of hardships" should be decided in your favor.  This generally means a showing that the irreparable harm to be suffered by the plaintiff if an injunction is not granted outweighs the harm that the defendant would suffer if the injunction is granted.  Courts generally examine the following factors when balancing the hardships: (i) the likelihood of irreparable harm to the plaintiff if the preliminary injunction is not granted; (ii) the likelihood of harm to the defendant if the preliminary injunction is granted; (iii) the likelihood that the plaintiff will succeed on the merits when the case goes to trial; and (iv) whether the public interest would be served by granting the preliminary injunction.

Regardless of whether you succeed in obtaining a preliminary injunction on an expedited basis, you can ask for a permanent injunction at trial.  Permanent injunctions are available on the same proof required to obtain preliminary injunctions, but the test is applied more strictly due to the permanency of the remedy and the fact that usually more evidence is available.  

In some cases, your job is made easier by the Virginia Code.  When a specific statute provides for the availability of injunctive relief, the standards are relaxed significantly.  Most importantly, a showing of irreparable harm is unnecessary when such a statute applies.  

An injunction can be a powerful remedy, but difficult to secure in court.  Businesses would be well advised to include clauses in their contracts containing express agreements to allow future breaches or threatened breaches to be enjoined by injunctive relief.

Qualified individuals with disabilities are entitled to an equal opportunity to benefit from the full range of employment-related opportunities available to others.  The Americans with Disabilities Act (ADA) prohibits discrimination in the workplace (as well as in government and other contexts) on the basis of disability.  It applies to employers with 15 or more employees and covers recruitment, hiring, promotions, training, pay, social activities, and other privileges of employment.  The ADA also restricts the questions that can be asked about an applicant's disability before a job offer is made, and it requires that employers make reasonable accommodations to the known physical or mental limitations of otherwise qualified individuals with disabilities, unless doing so would result in undue hardship.

To be protected by the ADA, one must qualify as having a "disability" (or as having a close relationship with a disabled person) as that term is defined in the Act.  Under the ADA, a disabled person is: (1) one having a physical or mental impairment that substantially limits one or more major life activities, (2) a person who has a history or record of such an impairment, or (3) a person who is perceived by others as having such an impairment. See 42 U.S.C. § 12102(2).  The ADA does not specifically list or identify all possible impairments that would be considered disabilities.

Continue reading "Your Rights as a Disabled Employee" »

So you want to sue your boss for harassment.  For years, you have put up with his antics, but now you've had enough.  He has humiliated you in front of your co-workers, berated you for trivial things, and insulted you.  Basically, he is a jerk.  But do you have grounds for a lawsuit?  Has your boss "harassed" you within the meaning of Title VII of the Civil Rights Act of 1964?

Federal anti-discrimination statutes do not prohibit all harassing behavior.  They do not guarantee that your boss will be "nice" to you.  They do, however, offer powerful protection against unwelcome verbal or physical conduct based on race, color, religion, sex, gender identification, national origin, age (if you are 40 or older), disability (mental or physical), sexual orientation (depending on the circumstances and jurisdiction), and retaliation against an employee who complains of discrimination, participates in an investigation, or voices opposition to discriminatory practices.
 

Continue reading "What Is Harassment?" »

A trademark is a type of intellectual property that generally consists of a distinctive sign or indicator used to identify the originating source of the products associated with the trademark, so that consumers can distinguish the trademark owner's products from those originating from other sources.  Section 45 of the Trademark Act defines the term "trademark" as "any word, name, symbol, or device, or any combination thereof-

(1) used by a person, or

(2) which a person has a bona fide intention to use in commerce and applies to register on the principal register...,

to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown."  See 15 U.S.C. §1127.  An example of a "word" mark would be TOSHIBA.  There are also design marks, like Nike's instantly recognizable Swoosh.  Even a sound can constitute a trademark (for example, NBC's "ding, dong, ding" chimes).  If you own a trademark, no one else can use it if their use would confuse consumers.  Trademarks are identified in commerce by the symbols ™ (indicating that the trademark has not been registered) and ® (for registered trademarks). 

While registration of trademarks is not required, owners of registered trademarks may commence legal proceedings for trademark infringement to prevent the unauthorized use of that trademark. Unregistered trademarks, known as "common law" trademarks, may also be enforced in court, but generally only within the geographical area within which it has been used or will be used.  A federally registered trademark, on the other hand, provides nationwide protection.  

The term "trademark" technically only applies when the product identified by the mark is a good.  When the mark is applied to identify a service, it is known as a "service mark."  Another similar term is "trade dress," which applies to a product's total image and overall appearance. 

Unlike patents, another form of intellectual property, trademarks can be renewed forever as long as they continue to be used in commerce.