Virginia Business Litigation Lawyer Blog

Business litigation often involves allegations that a competitor engaged in unfair competition or business tactics designed to injure the plaintiff's business. Such cases will only be successful, however, if the defendant business has crossed the line between legitimate competitive activity and tortious conduct. In a new Fourth Circuit opinion written by Judge Mark S. Davis of the Eastern District of Virginia, the court affirmed summary judgment in favor of BMW, explaining that not all aggressive competition will be deemed unfair or unlawful; a competitor pursuing its legitimate business interests will often be permitted to do so without incurring liability.

BCD, LLC v. BMW Mfg. Co. involved a dispute over a project to build a new school of engineering on the Clemson University campus. The plaintiff, Rosen (and the companies controlled by him) and BMW were each involved in different aspects of the construction project. Rosen had entered into a tentative agreement with Clemson in 2002, which outlined the responsibilities each would each have in the construction of a wind tunnel. The agreement was not binding, however, because there remained certain unresolved details, and the written agreement specifically allowed either party to withdraw from the project if they could not agree as to those unresolved details. The agreement was thus in the nature of an "agreement to agree" rather than a final, binding contract.

Clemson and BMW, on the other hand, had entered into a final agreement to which each party was bound, and BMW had received a $25 million grant from the state for the project. As preparation for the construction of the school was getting underway, Rosen declared that he wanted the new school to be built on land he owned, but BMW objected because it wanted to keep the state-funded school separate from the privately-funded wind tunnel. As time wore on, little to no progress was made on the construction of the wind tunnel, and Clemson and Rosen were still unable to come to an agreement on the unresolved details from the 2002 agreement. Finally, Rosen and Clemson signed a new agreement in 2003 that negated the 2002 agreement, resolved all of the details, and included a sale of Rosen's land to Clemson so the school could be built on land that was now publicly-owned. Rosen did not want to cede control over the property, and felt that BMW coerced Clemson into stalling on the wind tunnel project so BMW could exert control over Rosen's property. He thus sued BMW for tortious interference with a contract, intentional interference with prospective contractual relations, and civil conspiracy.

The court affirmed summary judgment for BMW on all counts. In doing so, the court explained the legal elements of each of Rosen's tort claims and explained clearly why the conduct complained of did not satisfy these requirements. (The case was decided under South Carolina law, which is substantially similar to Virginia law in this area).

Dealing first with the tortious interference allegation, the court laid out the elements as: "(1) the existence of the contract; (2) the other party's knowledge of the contract; (3) the other party's intentional procurement of a breach of the contract; (4) the absence of justification; and (5) resulting damage." The court rejected Rosen's claim because no enforceable contract existed between Rosen and Clemson at the time of the alleged interference. The court noted that because either party could opt out of the 2002 agreement, it was not a binding contract, and without a binding contract, there can be no tortious interference.

The court next tackled the claim of interference with prospective contractual relations. The elements for this tort are: "(1) intentionally interfer[ing] with the plaintiff's potential contractual relations; (2) for an improper purpose or by improper methods; (3) causing injury to the plaintiff." The court easily affirmed summary judgment on this count because Rosen had offered no evidence that BMW had utilized improper methods or had taken any action for an improper purpose. The court observed that BMW was merely attempting to further its own business interests by seeking understandably to exercise control over a project in which it was intimately involved. There was no evidence, for example, that BMW had used "violence, threats, bribery, fraud, misrepresentation, deceit, or duress" in the course of affecting Rosen's relationship with Clemson.

Regarding the conspiracy claim, the court set forth the elements as "(1) a combination of two or more persons, (2) for the purpose of injuring the plaintiff, (3) which causes the plaintiff special damage." The court found that Rosen had failed to meet his burden to produce evidence that BMW's actions were taken for the purpose of causing injury to Rosen. Rather, it appeared from the evidence that BMW was merely acting to protect the interests all competitors in a capitalistic economy share: to succeed in business, which often comes at the cost of the competitor.

The court affirmed judgment in BMW's favor, finding insufficient evidence to hold BMW liable on any of Rosen's business-tort theories. The court reasoned that to punish BMW for pursuing its legitimate business interests would be to indict our entire economic system.

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.