Virginia Business Litigation Lawyer Blog

To survive the early stages of litigation in federal court, you need to ensure your complaint not only alleges facts that, if proven true, would support a legal cause of action, but that present a plausible claim for relief. While you are far more likely to win your case at trial if you are represented by an attorney, one of the few situations in which your task may be easier without a lawyer is surviving an initial motion to dismiss. This is because the United States Supreme Court has held expressly that a "pro se" plaintiff (i.e., a litigant not represented by a lawyer) must be held to less stringent standards than those who have legal representation and are more familiar with the rules of formal pleadings.

Michael Bogan is representing himself in a Title VII employment-discrimination action against The Roomstore in Richmond, Virginia. Judge Henry E. Hudson recently denied The Roomstore's motion to dismiss for failure to state a claim, finding that Mr. Bogan alleged "scant but marginally sufficient" factual allegations to support a claim for discriminatory discipline, an employment practice prohibited by federal employment laws. Had an attorney drafted the complaint, the result might have been different.

Mr. Bogan, an African-American, alleges that his Caucasian supervisor at The Roomstore demanded that he undergo a drug test even though a similarly situated white employee was not required to submit to the test. He claimed the white employee was involved in illegal activity and had missed several days of work. The complaint alleges that The Roomstore terminated his employment for refusing to submit to the test.

Mr. Bogan did not identify which form of employment discrimination he was relying on, so the court gave him the benefit of the doubt and analyzed his claim under the two most likely theories, disparate treatment and discriminatory discipline.

To properly state a claim for disparate treatment, a plaintiff must allege facts demonstrating that: (1) he is a member of a protected class; (2) he has satisfactory job performance; (3) he was subjected to adverse employment action; and (4) similarly situated employees outside his class received more favorable treatment. Mr. Bogan failed to sufficiently plead this theory because he had not pled any facts to support that his job performance was satisfactory.

However, Judge Hudson found that Mr. Bogan did sufficiently plead discriminatory discipline. For that theory, it is necessary to allege: (1) he is a member of a protected class; (2) his prohibited conduct was comparably serious to misconduct by employees outside the protected class; and (3) the disciplinary measures taken against him were more harsh than those enforced against other employees. The facts alleged in the complaint were found to present a plausible claim that The Roomstore is liable if it engaged in the alleged conduct.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lawyers who represent clients in litigation often assume that they can simply withdraw from the case if the client stops paying the lawyer's bills. Engagement letters and representation agreements often provide that an attorney will withdraw in the event of nonpayment. A federal court sitting in Richmond, Virginia, however, denied a law firm's withdrawal request in such a situation, demonstrating that lawyers representing corporations in Virginia's federal courts cannot assume they will be released from their litigation duties when their clients are being uncooperative--even if their clients are not paying the lawyer's bills.

In Reynolds v. Reliable Transmissions, Inc., the law firm of ThompsonMcMullan, P.C., filed a motion to withdraw from its representation of the defendant. The grounds of the motion were typical: the client failed to make the required fee deposit, failed to pay the law firm's bill, and failed to respond to the lawyers' efforts to communicate about the case. The law firm filed its motion early in the case: no discovery had taken place, and no trial date had been set. The posture of the case was such that most lawyers would consider a court's granting of the motion to be fairly automatic. After all, the Virginia Rules of Professional Conduct expressly permit withdrawal where "the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services," provided that court approval is obtained. The plaintiff did not even oppose the motion.

Judge Dohnal explained, however, that nonpayment of fees is usually not a sufficient basis, standing alone, to permit an attorney to withdraw from pending litigation in the absence of another attorney ready to take over the case. In Virginia state and federal courts, corporations must appear by counsel; they cannot represent themselves. For this reason, and because no other attorney had been identified to assume the representation, the court denied the motion to withdraw.

The result might be different, the court noted, if there were individual defendants remaining in the case whose interests were aligned with the corporation. The law firm in such a situation would likely be permitted to withdraw because individuals may appear pro se (i.e., represent themselves) and would likely address (at least indirectly) the interests of the similarly-situated corporation.

To file a lawsuit in Virginia's state or federal courts against a non-resident of Virginia or an out-of-state corporation, it is necessary to establish "personal jurisdiction" over the defendant. A court has no power over parties to a lawsuit absent such jurisdiction. Personal jurisdiction will exist only if (1) Virginia's "long-arm" statute authorizes it; and (2) the defendant has certain "minimum contacts" with Virginia "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice," which is required by constitutional due process. In a recent case from the Eastern District of Virginia, Judge Trenga held that a passive website not purposefully targeted at Virginians was not sufficient to create a basis for personal jurisdiction and he dismissed the case.

The case, which contains counts for actual fraud, constructive fraud, negligence, and breach of fiduciary duty, was filed by Dr. Olimpia Rosario, a Virginia psychiatrist, against professional psychic Jeffrey Wands, who operates Psychic Eye Media in New York. Dr. Rosario became impressed with Mr. Wands several years ago when he correctly predicted that she would obtain a residency in a New York-based hospital. Ever since, Dr. Rosario has sought counseling and guidance from Mr. Wands on a wide range of issues, including spiritual issues and substance abuse problems, despite the fact he held no degree or license to practice any type of healing art, medicine, counseling, or social work in either Virginia or New York.

Eventually, Mr. Wands became concerned about certain of Dr. Rosario's behavior and reported it to both the New York Police Department and the Virginia Board of Medicine. Dr. Rosario sued, claiming Mr. Wands caused her condition to worsen and denying abuse of prescription drugs. Mr. Wands, a resident of New York, moved to dismiss the case for lack of personal jurisdiction.

Dr. Rosario's main argument in support of jurisdiction was that Mr. Wands maintained a website accessible to residents of Virginia (as well as everyone else in the world having an Internet connection) and touting a national following. The court disagreed that such a website was sufficient to establish a "presence" in Virginia sufficient to form a basis for personal jurisdiction. Citing a Fourth Circuit case, the court noted that "a person who simply places information on the Internet does not subject himself to jurisdiction in each State into which the electronic signal is transmitted." There were no allegations that Mr. Wands' website was interactive or that users could conduct transactions through the website. The court also noted the absence of any facts demonstrating that Mr. Wands was intentionally targeting citizens of Virginia. For these reasons, the court found general jurisdiction lacking.

Specific jurisdiction was also found to be absent. This more limited type of jurisdiction, the court noted, exists when a defendant "purposefully directed his activities at the residents of the forum" and the plaintiff's causes of action "arise out of those activities" (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)). In Virginia, courts must consider the following in determining whether specific jurisdiction should be asserted: "(1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the State; (2) whether the plaintiffs' claims arise out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable" (citing Consulting Eng'rs Corp. v. Geometric, Ltd., 561 F.3d 273, 278 (4th Cir. 2009)). Dr. Rosario argued that Mr. Wands purposefully directed his activities at Virginia when, for seven years, he and Dr. Rosario participated in quarterly telephone discussions. The court found such minimal contact insufficient, especially since Mr. Wands never physically came to Virginia for any of those discussions.

Getting fired or laid off is hard enough without your boss trashing your reputation to your co-workers. I receive many calls from prospective clients interested in pursuing their former employer for defamation. Virginia employers, however, have a lot of leeway in what they can say about an employee being considered for termination before they will be liable for slander or libel. Virginia recognizes a qualified privilege against defamation claims where statements by an employer are made in connection with discharging that employee. To overcome that privilege, a plaintiff must prove common law malice by clear and convincing evidence.

Consider the recent Hanover County case of Koegler v. Green, decided on September 1, 2009. Carl Koegler sued his former employer, the Richmond-East Moose Lodge, as well as several of his former co-workers and employers, for defamation. The defendants demurred (i.e., moved to dismiss the case), citing the qualified privilege, and the court agreed with them and dismissed the case. The court emphasized that defamation claims against employers in Virginia will not be permitted to go forward absent strong evidence of malice.

The facts, according to the allegations in the complaint, were as follows: Mr. Koegler was employed by the Lodge in various positions over the years. An audit conducted by the international parent company resulted in Mr. Koegler's termination in 2008. Some of his former coworkers and managers talked to other employees about the firing. The acting Governor of the Lodge, for example, held a staff meeting and discussed what had been said in board meetings about Mr. Koegler and that Mr. Koegler had been suspended for stealing money. Another officer of the Lodge sent emails describing Mr Koegler as having "questionable character." Mr. Koegler sued for defamation and harm to his reputation.

The court held that, to state a claim for defamation, the plaintiff would have to allege sufficient facts to enable a reasonable jury to find clear and convincing evidence of "common law malice," defined as "some sinister or corrupt motive such as hatred, revenge, personal spite, ill will, or desire to injure the plaintiff; or what, as a matter of law is equivalent to malice, that the communication was made with such gross indifference and recklessness as to amount to a wanton or willful disregard of the rights of the plaintiff." In the end, the court concluded that Mr. Kroegler had not presented a case sufficient to enable a reasonably jury to find clear and convincing evidence of malice, and dismissed the case.

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.

Proving once again that no good deed goes unpunished, a former employee of BB&T Insurance Services to whom BB&T graciously paid 30 days of severance pay despite terminating his employment for cause--and apparently without requiring the employee to sign a release--sued the company for wrongful termination. On June 17, 2009, however, Judge Wilson of the Western District of Virginia in Harrisonburg had "no hesitancy" in tossing out the case on summary judgment.

The employee's job duties involved identifying, contacting, and providing services to existing and potential new insurance customers. To assist him in performing those duties, BB&T allowed him to use a company laptop with access to confidential files on the company's network. At the time of his termination, the employee had 8 years' worth of sensitive client information stored on his laptop.

While traveling, the employee left the laptop unattended overnight in his vehicle while it was parked in a hotel parking lot. It was stolen. When BB&T learned of the theft, it notified those of its clients affected by the data breach and offered them a credit-monitoring service. These programs cost the company over $24,000.

BB&T fired the employee for "cause," defined in the parties' employment agreement as "termination...for failure of Employee to adhere, after Employee has received written notice from [the Company] of such failure, and been given 30 days in which to cure such failure (if such failure can be cured), in any material respects to written policies, procedures, and the Code of Ethics established from time to time by [the Company]...." BB&T had distributed policies indicating in clear terms that all employees in possession of sensitive company information were obligated to protect the information, which duty included specifically a prohibition against leaving laptops unattended in vehicles.

The court threw out the employee's breach-of-contract case, rejecting his arguments that he was not bound by the parent company's policies, and that even if he were, he should have been given 30 days in which to "cure" the violation. The court found both arguments entirely lacking in merit, writing that no jury could reasonably agree with them.

In a case brought by two ousted golf-club members against the Benchmark Management Company, the management company behind Lansdowne Golf Club in Leesburg, Virginia, Judge James H. Chamblin ruled that a "case by case" test for determining applicability of the work-product doctrine is preferable to the "bright-line rule" several other Virginia courts have followed.  

At issue was whether 23 internal Lansdowne documents concerning an alleged assault on the premises were prepared "in anticipation of litigation" within the meaning of Virginia Supreme Court Rule 4:1(b)(3), which provides that a litigant may not compel an opponent to produce copies of documents prepared in anticipated of litigation except under certain limited  circumstances.  After reviewing the documents privately, Judge Chamblin found that the documents were prepared in anticipation of litigation and that, because there was no argument by counsel that any exception applied, the documents were protected from discovery by the work-product doctrine.  

There has not been a consensus among Virginia circuit courts with respect to determining when litigation is "anticipated."  Some courts apply a bright-line test that applies work-product protection to a document the moment an attorney becomes involved.  Other courts decide the issue on a case-by-case basis, examining the particular facts and circumstances of each case and determining whether litigation was reasonably foreseeable, regardless of whether an attorney has been retained.  Judge Chamblin favored the case-by-case approach "because things can be done in anticipation of litigation before an attorney becomes involved."

When companies establish internal policies to investigate, document, or otherwise manage incidents involving violence, accidents, contract disputes, or other problems, and the purpose of the policy is to protect the company from litigation, courts applying the case-by-case test will generally not require the company to share any documents prepared pursuant to that policy with an opposing party in subsequent litigation.