The Virginia Business Litigation BlogIn civil litigation, there is a time limit for taking legal action, as determined by the statute of limitations applicable to the claim. To determine whether the deadline has passed, it becomes necessary to identify the date from which the time period (typically 2-5 years) should be measured. In most breach-of-contract actions, for example, the limitations period would start to run from the date the contract was breached. In cases where the wrong is continuous and ongoing, however, it can be difficult to identify a specific start date for the statute of limitations. Some states will postpone the expiration of the statute of limitations until the continous wrong comes to an end, though Virginia will usually look only to the date the continuous activity commenced. On the other hand, when wrongful acts are not continuous but occur only at recurring intervals, each occurrence is considered a separate wrong and starts the clock on a new limitations period. Sometimes a judge can rule as a matter of law as to whether a particular breach should be regarded as continuous or recurring; other times, however, such as when material facts are in dispute, juries must make the determination. Whether particular activity can be properly characterized as “continuing” or “recurring” will often make or break the case.
Enforceable Noncompetes Require Careful Tailoring
In Virginia, restrictive covenants—particularly non-compete and non-solicitation clauses—are enforceable only if narrowly tailored to protect a legitimate business interest without unduly burdening an individual’s ability to earn a livelihood. Courts apply a three-part test: the restraint must (1) be no broader than necessary to protect the employer’s interests, (2) not be unduly harsh or oppressive to the employee, and (3) be reasonable in light of sound public policy. (See Modern Env’ts v. Stinnett, 263 Va. 491, 493 (2002)). Importantly, any ambiguity in the language is construed against the drafter (the employer, typically). The Supreme Court of Virginia has long emphasized that restrictive covenants are disfavored and must be drafted with surgical precision if they are to withstand judicial scrutiny. Earlier this month, the Norfolk Circuit Court decided Knepper v. The Lawson Companies, Inc., in which it analyzed an employer’s restrictive covenants and found them unenforceable due to indefinite language and multiple instances of overbreadth.
Kristopher Knepper, a former executive at The Lawson Companies (TLC), was hired in 2016 to serve as Director of Development and Acquisitions, later rising to Vice President. As part of his employment onboarding, Knepper signed a standalone “Restrictive Covenants Agreement” that prohibited him from engaging in low-income housing development work within broad geographic boundaries for two years after his departure. Separately, in 2020, Knepper became a partial owner of TLC’s affiliated holding company, TLC Holding, LLC, when he was granted Class B membership units. That ownership interest triggered a second set of restrictive covenants, this time embedded in the company’s Operating Agreement. These restrictions were functionally similar to those in the earlier agreement but extended indefinitely, applying as long as Knepper remained a member of the LLC.
Anticipatory Breach and Adequate Assurance in Virginia
Parties to long-term service contracts often face considerable uncertainty when signs emerge that the other party may not follow through on its obligations. At common law, a party may bring an action for anticipatory breach only when the other party’s repudiation is “clear, absolute, and unequivocal”. Courts have long demanded a high threshold for such a claim, in part to guard against frivolous accusations of breach based on mere suspicion or miscommunication. But this stringent standard gives rise to a critical practical dilemma: what should a party do when it reasonably suspects the other party is not going to perform, yet cannot point to any definitive repudiation? Suppose, for example, that a contractor repeatedly misses deadlines, stops responding to communications, and is rumored to be insolvent—but has not explicitly stated an intent not to perform. Has that party repudiated? Under traditional common law principles, perhaps not. But the aggrieved party is left in a perilous bind: do they continue investing time, money, and resources into a contract that may collapse, or do they terminate the agreement and risk being accused of breach themselves?
This is precisely the kind of commercial uncertainty that the Restatement (Second) of Contracts § 251 and Uniform Commercial Code § 2-609 aim to mitigate. (See Virginia Code § 8.2-609). These doctrines create a mechanism for managing contractual insecurity without requiring parties to wait helplessly for either full breach or explicit repudiation. Under both frameworks, when one party has “reasonable grounds for insecurity” regarding the other’s performance, it may demand “adequate assurance” that the other will fulfill its obligations. This is not a demand to terminate, but a demand for clarity. If the other party fails to provide such assurance within a “reasonable time”—defined by the U.C.C. as not to exceed thirty days—that failure itself may be treated as a repudiation. This shifts the analysis from one focused solely on the subjective intentions of the potentially breaching party, to one that also accounts for the objective commercial realities faced by the insecure party. It empowers the party to take protective measures—up to and including suspending performance—without having to meet the virtually unreachable threshold of proving an unequivocal anticipatory breach at common law.
No Contract Without Meeting of the Minds
In Virginia, as in other states, there must be a “meeting of the minds”—mutuality of assent—before a contract will be formed. This concept of mutual assent requires that the parties have a common, distinct and unambiguous intention regarding the material terms of the agreement. (See Phillips v. Mazyck, 273 Va. 630, 636 (2007)). To determine whether mutual assent has been reached sufficient to form an enforceable contract, courts look to the parties’ words and actions. Before finding a meeting of the minds has been reached, courts will want to see evidence that the parties both communicated their intentions to each other. A party’s internal, private thoughts will not be considered.
The Court of Appeals decided a case last week demonstrating these principles. The case of Somers v. W.D. Campbell and Son, Inc. basically involved a situation where an individual believed an insurance company was obligated to maintain insurance on his daughter’s vehicle but the insurance company disagreed, pointing out that the parties never reached a meeting of the minds as to any such arrangement. The case was initiaed in general district court, was appealed to circuit court, and appealed again to the Virginia Court of Appeals. Each court reached the same conclusion: that without a meeting of the minds, no contract was ever formed.
Tortious Interference with Nonsolicitation Agreements
Employees bound to non-solicitation agreements know they can get in trouble with their former employer if they try to recruit their former colleagues to join them at a competing company. What many don’t realize is that the new employer can also wind up in legal trouble if it is aware of the non-solicitation (or-noncompetition) agreement and actively encourages the employee to violate its terms. The new employer didn’t sign the non-solicitation agreement and obviously isn’t bound by its terms but can be held liable for “tortious interference” when certain requirements are met.
Under Virginia law, a claim for tortious interference with contract requires four elements: (1) A valid contractual relationship or business expectancy; (2) Knowledge of that relationship by the defendant; (3) Intentional interference causing a breach or termination; and (4) Resultant damages. In the recent case of Brillient Corp. v. RELI Group, Inc., the defendant sued for tortious interference with a non-solicitation contract tried to get the case dismissed by arguing that despite its knowledge of the contract, its terms had not been violated because the employees at issue applied for jobs of their own volition and had not been solicited or induced to do so by the defendant. The Eastern District of Virginia rejected the argument and allowed the claim to proceed.
Parent Companies Not Automatically Liable for Actions of Subsidiaries
Corporate successor liability is a nuanced area of law, often entangling issues of contracts, corporate structure, and equity. The recent decision in PAE National Security Solutions, LLC v. Constellis, LLC (Va. Ct. App. Jan 7, 2025) serves as a reminder that when a company acquires another’s assets, the acquiring company does not automatically assume the seller’s debts and liabilities unless an exception applies. As articulated in La Bella Dona Skin Care, Inc. v. Belle Femme Enterprises, LLC, 294 Va. 243 (2017), Virginia recognizes four exceptions to the general rule:
- Express or Implied Assumption of Liabilities: The buyer explicitly or implicitly agrees to assume the seller’s obligations;
- De Facto Merger or Consolidation: The circumstances surrounding the transaction warrant a finding that there was a consolidation or de facto merger of the two corporations;
- Mere Continuation: The buyer is a continuation of the seller, often sharing leadership, operations, or other characteristics; or
- Fraudulent Transaction: The sale is a sham designed to defraud creditors.
In the PAE case, the court examined these exceptions and found no grounds to impose successor liability.
Enforceable Restrictive Covenant Deemed Insufficient for Injunctive Relief
Restrictive covenants in employment agreements (like non-compete and non-soliciation provisions) are disfavored in Virginia and only enforced when narrowly crafted so that the restrictions are no broader than necessary to protect the employer’s legitimate business interests. Even when the contract is well written and enforceable, however, there’s no guarantee the employer will be able to obtain an injunction to prevent a former employee from violating its terms. Injunctive relief is considered an “extraordinary” remedy in Virginia and is never automatic. I highlighted a Fairfax County case illustrating this principle a few years ago. Today, let’s examine how the Eastern District of Virginia ruled when presented with a similar scenario.
The basic facts of Tactical Rehabilitation, Inc. v. Youssef go like this: Tactical Rehabilitation, a Florida-based company selling durable medical equipment, employed Alaina Youssef under an agreement that included non-compete, non-solicitation, and confidentiality clauses. After Youssef’s termination, Tactical alleged that she breached these agreements by soliciting its clients and diverting business to her new employer, a direct competitor. Tactical sought injunctive relief to prevent Youssef from continuing these activities, citing significant revenue losses and harm to its business relationships.
Nonsuits May Not Be Taken as to Claims Already Submitted for Decision
As discussed previously on this blog, plaintiffs who wish to nonsuit their claims can do so at virtually any time, subject to very limited exceptions. One such exception is that a nonsuit may not be taken as to any claim that has been submitted to the judge for a decision. Some lawyers seem to be of the mistaken belief that if a court has not formally dismissed a claim with prejudice, a nonsuit may be taken as to that claim. The Fairfax County Circuit Court issued a letter opinion a few months ago explaining that such is not the case. Nonsuits may only be taken as to active, unresolved claims that have not yet been submitted for final resolution.
In Brian Morrison v. George Mason University, the plaintiff filed a variety of claims (including whistleblower retaliation, fraud, defamation, and common law conspiracy to defame and retaliate) against a number of different defendants. Demurrers and pleas in bar followed, some of which were sustained with leave to amend, some of which were sustained without leave to amend, and at least one of which was overruled. Prior to the court-ordered deadline for filing an amended complaint, the plaintiff sought to nonsuit the entire action, including the claims that had been the subject of the demurrers and pleas. His reasoning was that the court had not formally ordered the dismissal of any claims. The court refused to allow the nonsuit as to the claims that had already been eliminated from the case.
The Mootness Doctrine Requires a Live Controversy
Virginia courts exist to resolve disputes between litigants. They’re there to apply the law to a set of facts established by the evidence and declare and enforce the parties’ respective legal rights. Courts aren’t required to offer advisory opinions on abstract legal questions when there isn’t an actual controversy between the parties. Under the mootness doctrine, if the issues under a court’s consideration cease to be “live,” or the parties before it “lack a legally cognizable interest in the outcome,” the case becomes moot and the court will dismiss it. (See McCarthy Holdings LLC v. Burgher, 282 Va. 267, 275 (2011)). There are some exceptions to the rule, but as demonstrated by an opinion issued last month in Doe v. Fairfax County School Board, the mootness doctrine is applied stringently.
Anonymous petitioner “Jane Doe,” a high-school senior at the time, sued the school board for various alleged civil rights violations, claiming she was subjected to religious discrimination, sex discrimination, and viewpoint discrimination while attending school. She asked the court to award both declaratory and injunctive relief. Shortly after filing the lawsuit, however, she graduated.
Substantially Similar Claims Can (and Should) Be Tried Together
In theory, Virginia follows a “one plaintiff per suit” rule: even if two plaintiffs are similarly situated, they should file their lawsuits separately and not jointly. There’s an exception for when there are at least six plaintiffs. The Multiple Claimant Litigation Act allows six or more plaintiffs to join together for purposes of filing a lawsuit if their claims involve common issues of fact and arise out of the same transaction or occurrence. (See Va. Code § 8.01-267.5). As a practical matter, however, multiple plaintiffs with similar claims often end up having their claims tried together regardless of the number of plaintiffs involved. If two cases are substantially similar and involve common issues of law or fact, trial courts can consolidate them for discovery and/or trial irrespective of the requirements of the Multiple Claimant Litigation Act.
Many trial courts take a pragmatic approach to litigation and will consolidate cases that involve identical claims and overlapping evidence. In the recent case of Rejuvenation Clinic, LLC v. Thang Van Dang, for example, two separate plaintiffs filed a lawsuit together in violation of the “one plaintiff per suit” rule. Having fewer than six plaintiffs, they did not meet the requirements of the Multiple Claimant Litigation Act that would have permitted them to file jointly. The Fairfax County Circuit Court acknowledged the procedural impropriety and severed the two cases, but immediately consolidated them for discovery and trial, recognizing the practicality and efficiency of trying these cases together.