The Virginia Business Litigation Blog

June 29, 2026

First Material Breach Must Go to Root of Contract

An often-invoked defense to an action for breach of contract is to claim that the contract cannot be enforced by a party who committed the first material breach. Significantly, the rule does not bar recovery unless the prior breach goes to the “root of the contract.” If both sides breach but neither breach is particularly severe, the contract will normally be enforced albeit with appropriate offsets. A recent application of this rule comes from a recent Virginia Court of Appeals opinion in Inviting Structures, Inc. v. Royal, where the court held that the first-material-breach rule did not bar either party’s recovery.

The case arose from a $232,180 landscaping contract between Inviting Structures, Inc., d/b/a State of the Art Landscape (“SOTAL”), and homeowners Margit Royal and Jerry Wolford. SOTAL agreed to build a bluestone terrace, patio, and steps; plant a Japanese garden according to a detailed landscape plan; install lighting; accept delivery of a copper spa tub from the manufacturer and install it on the property; and build a structure to house the spa tub’s mechanics. The homeowners would pay on a draw schedule tied to project milestones: a $60,000 deposit, $60,000 after concrete subslabs were poured, $60,000 after veneer stones were laid, $40,000 after the spa tub was delivered, and $12,180 after planting was completed. The contract also contained a change-order provision requiring that any modifications be in writing and either signed by both parties or approved via email.

May 27, 2026

Malfeasance Alone Insufficient to Escape Source-of-Duty Rule

by Lee E. Berlik

Virginia courts apply the “source of duty” rule to distinguish contract claims from tort claims. A contracting party may recover in tort only if the breached duty arises independently under common law, not merely from the parties’ contract. If the duty exists only because of the contract, the plaintiff is limited to contract remedies. A persistent question in Virginia commercial litigation is whether a defendant’s affirmative wrongdoing (e.g., a lie or a forged invoice) transforms what would otherwise be a breach of contract into an independent tort. Surely fraud, by its nature, lies outside the contract, the plaintiff’s argument typically goes. The Court of Appeals of Virginia took up this question earlier this month in Precision & Performance Auto Care, LLC v. James River Petroleum, Inc. Affirmative wrongdoing is necessary to escape the source-of-duty rule, it held, but wrongdoing alone is not sufficient to avoid application of the source-of-duty rule. The wrongdoer’s state of mind matters, but so does the source of the duty he violated. Tort claims will generally be barred unless the plaintiff can point to a common-law duty independent of the contract, a special relationship between the parties, fraudulent inducement (not just fraudulent breach), or damages that differ in kind from contract damages.

The facts of the opinion describe the following scheme. James River Petroleum, a fuel distributor, issued WEX-backed credit cards to commercial customers. Two cardholders used their cards to “buy” goods and services from SS&B Distributor, LLC, an entity owned by Sharon Britt, and from a separate auto dealership Britt also owned. The relationships among the players were close: Britt jointly owned a residence with one of the cardholders, and she lived on the same street as the other. By late 2023, monthly nonfuel charges across James River’s customer base had spiked from a few thousand dollars to roughly half a million, with the two cardholders responsible for approximately 99 percent of those charges. Fuel purchases showed identical gallon counts at identical per-gallon prices across multiple dates (a forensically improbable pattern given that fuel prices fluctuate). The cardholders ultimately defaulted on more than half a million dollars in card balances.

April 17, 2026

Fairfax Court Rejects Ambiguous, Overly Broad Non-Solicitation Agreement

by Lee E. Berlik

When drafting non-solicitation agreements, precision matters. Undefined terms and sweeping restrictions can render an entire covenant unenforceable. And in Virginia, courts won’t lift a finger to fix the problem. Employers drafting non-solicitation agreements need to define their key terms with specificity and include reasonable temporal and geographic limitations. If an employee can’t be reasonably expected to understand what the agreement restricts him from doing, he probably won’t be required to adhere to it. Restrictions against the solicitation of customers should be limited to customers the employee actually served, and non-recruitment clauses should be tied to competing services rather than all employment positions. Notably, Virginia courts (unlike those in some other states) construe ambiguities in the agreement against the employer and will not rewrite a poorly drafted covenant to save it. A recent Fairfax County Circuit Court opinion illustrates just how quickly a non-solicitation provision can unravel when its key terms are ambiguous and its reach extends beyond what is reasonably necessary to protect a legitimate business interest.

Let’s take a look at Intercoastal Mortgage LLC v. Wampler (Fairfax Cir. Ct. Mar. 30, 2026). Intercoastal Mortgage LLC (“ICM”) is a mortgage company that originates, underwrites, and funds mortgages across 19 states. The individual defendants—a husband, wife, and son who are military veterans and mortgage professionals, along with two support staff members—left their employment at ICM to join a competitor, Primis Mortgage. Some of their customers followed them. ICM sued, relying primarily on two non-solicitation provisions (Sections 3.3 and 4.2) in its Outside Loan Officer Employment Agreement, as well as an employee non-recruitment clause. Judge Manuel A. Capsalis granted the defendants’ plea in bar, holding that the non-solicitation provisions in the plaintiff’s employment agreement were overbroad and unenforceable as a matter of law.

March 19, 2026

Treble Damages Held Mandatory Under Business Conspiracy Statute

by Lee E. Berlik

Under Virginia’s business-conspiracy statute, a successful plaintiff may recover three times the actual damages caused by the conspiracy: “Any person who shall be injured in his reputation, trade, business or profession by reason of a violation of § 18.2-499, may sue therefor and recover three-fold the damages by him sustained,” the statute reads. (See Va. Code § 18.2-500). But is a trial court required to triple the damages? The appellant in Sidya v. World Telecom Exch. Communs., LLC, 301 Va. 31 (2022) argued that the trial court had erred in treating the statute as mandatory when it is phrased in permissive language. The Virginia Supreme Court declined to address the issue, however, because it determined that the appellant had not assigned error to that specific question so it was obligated to affirm the award of treble damages regardless of whether the statute mandates or merely permits an award of treble damages. The issue arose again more recently in Fairfax Circuit Court, where Judge Oblon carefully interpreted the business-conspiracy statute and concluded that it does, in fact, mandate treble damages.

The case is Bala Jain, LLC v. Amit Jain. The plaintiff, Bala Jain, had sued Amit and Monika Jain for statutory business conspiracy as well as other claims. The jury awarded $5,429,608.77 in damages against each of the defendants, without any consideration of tripling that amount. The successful plaintiff then asked the court to triple that amount to over $16M, which it claimed was required by the terms of the statute. The trial court ultimately agreed and tripled the damages, holding it lacked discretion to avoid or reduce them.

February 7, 2026

Surprise HOA Assessments May Not Be Legally Enforceable

by Lee E. Berlik

If your homeowners association has started levying assessments you never agreed to pay, you may have more legal recourse than you think. A recent Virginia Court of Appeals decision demonstrates that not all associations claiming HOA or POA status actually qualify as such under state law. If the association doesn’t legally qualify as an HOA or POA, its assessment powers will be limited by contract law. In Terrace View Property Owner’s Association, Inc. v. Jannah, decided February 3, 2026, the Virginia Court of Appeals sided with homeowners who challenged their association’s authority to collect fees, holding that the association did not qualify as a POA and that the vague language in its governing documents did not create an enforceable financial obligation.

The opinion lays out the following factual background. The Terrace View Subdivision in Forest, Virginia, was developed in 2000. When the subdivision was created, the developer recorded a Declaration of Protective Covenants that authorized (but did not require) the creation of a property owners association. The Declaration gave the developers the right to transfer common areas to Terrace View POA, and stated that the association “shall have the right to establish and collect assessments,” with lot owners deemed to have “agreed to pay same when and as due” by purchasing property in the subdivision.

January 15, 2026

Plaintiffs Bear the Burden of Proving Damages, Even if the Defendant Controls the Data

by Lee E. Berlik

Proof of damages is an essential element to any claim for breach of contract. The plaintiff has the “burden of proving with reasonable certainty the amount of damages and the cause from which they resulted.” (See Sunrise Continuing Care, LLC v. Wright, 277 Va. 148, 156 (2009)). A fundamental feature of our legal system is that the party bringing the litigation must produce the evidence needed to support the claims. Defendants generally aren’t required to produce any evidence at all. The rule sounds innocuous but can be unforgiving in practice. In Virginia, a plaintiff seeking monetary relief must prove not only liability but the amount of its damages with reasonable certainty. Sometimes, the defendant is in sole possession of the relevant financial data, making it difficult (if not impossible) for a plaintiff to prove its case. According to a recent decision of the Virginia Supreme Court, rules are rules; they can’t be broken as a matter of equity or convenience.

In the case of Appian Corp. v. Pegasystems, Inc., a jury returned a verdict exceeding $2 billion after finding that a competitor had misappropriated trade secrets through what the record described as sustained corporate espionage. That massive judgment did not survive appellate review. Although the evidence was deemed sufficient to support the jury’s finding of trade secret misappropriation, the trial court had improperly instructed the jury that the defendant bore the burden of proving which portions of its profits were untainted by the misappropriation. That instruction reflected a widely accepted national approach to trade-secret damages. But it was held to be inconsistent with controlling Virginia law.

December 17, 2025

Filing a Responsive Pleading After the Deadline? You’ll Need a Good Reason

by Lee E. Berlik

A common mistake many lawyers make is to assume that deadlines can be missed without consequence. Judges want to hear cases on the merits, the thinking goes, so as long as you file a motion after the missed deadline and just explain why your pleading is late, the judge will almost certainly grant your motion “in the interests of justice” and allow the late filing. This way of thinking isn’t entirely faulty but misses an important caveat: the explanation needs to be a good one. Deadlines exist for a reason. Sure, courts prefer to adjudicate cases on the merits, but such adjudication is only possible for parties who show respect for the rules. Lawsuits are serious business; if you get served with one, you have an obligation to respond promptly. The rules will allow you to avoid a default judgment for good cause, but “good cause” requires more than just having a meritorious defense and lack of prejudice by the other side. Good cause means good cause.

Under Rule 3:8(a), defendants must file responsive pleadings within 21 days after service of process. Failure to do that results in default under Rule 3:19. Under Rule 3:19(b) provides that “[p]rior to the entry of judgment, for good cause shown the court may grant leave to a defendant who is in default to file a late responsive pleading.” (Emphasis added). The Virginia Supreme Court has found good cause to exist in circumstances involving (1) lack of prejudice to the opposing party; (2) good faith of the moving party; (3) promptness of the moving party in responding to the opposing party’s decision to progress with the case; (4) the existence of a meritorious claim or substantial defense; (5) the existence of legitimate extenuating circumstances, and (6) a justified belief that the suit has been abandoned or will be allowed to remain dormant on the docket. (See Westfall v. Westfall, 196 Va. 97, 103 (1954); Eagle Lodge, Inc. v. Hofmeyer, 193 Va. 864, 870 (1952); Worsham v. Nadon, 156 Va. 438, 443 (1931)). Ultimately, trial courts have discretion to rule as they see fit; this list of justifiable circumstances is not exhaustive or necessarily determinative, and the trial judge may decide to refuse leave to file late responsive pleadings even if good cause is shown. (See AME Fin. Corp. v. Kiritsis, 281 Va. 384, 392-393 (2011)).

November 1, 2025

Unjust Enrichment May Provide Remedy When Contract Unenforceable

by Lee E. Berlik

When parties invest time, money, and effort into a contract they believe to be enforceable, only to later discover it fails for indefiniteness or some other fatal defect, the legal and financial consequences can be severe. But under Virginia law, an aggrieved party may not be entirely without recourse. In certain cases, unjust enrichment can operate as a fallback remedy when the purported contract is deemed unenforceable.

In Ressa Construction, Inc. v. Dillaman (Va. Ct. App. Sept. 30, 2025), the Virginia Court of Appeals affirmed a circuit court ruling that a construction agreement was an unenforceable “agreement to agree” despite the fact that an installment payment had been made and building plans had been submitted to the county. When a dispute arose between the homeowners and the construction company hired for a remodeling project, the plaintiffs were allowed to back out and recover their deposit on a theory of unjust enrichment. The court held the construction contract was unenforceable as no meeting of the minds was ever reached regarding the scope of the project. The failure of the contract meant that the law of unjust enrichment came into play.

September 16, 2025

Illusory Agreements Are Not Enforceable

by Lee E. Berlik

Contracts require both mutuality of assent and consideration to be enforceable. Legally sufficient consideration consists of bargained-for promises and obligations. If the consideration for the promise of one party is the promise of the other party, “there must be absolute mutuality of engagement, so that each party has the right to hold the other to a positive agreement. Both parties must be bound, or neither is bound.” (Am. Agric. Chem. Co. v. Kennedy & Crawford, 48 S.E. 868, 870 (Va. 1904)). A contract consisting solely of illusory promises will be deemed to lack consideration and will therefore not be enforceable. An illusory promise is one that—upon closer inspection—is not really a promise at all. An illusory promise leaves one party with complete discretion as to whether to perform the promise or abandon it. If the promise can be ignored at the will of the party, the promise has no value and will render the contract unenforceable.

Truist Bank learned this when the Western District of Virginia refused to enforce a boilerplate arbitration clause in a contract with one of its customers. In Kiser v. Truist Financial Corporation, the court denied Truist’s motion to compel arbitration, concluding that even if an arbitration agreement existed, it was illusory and therefore unenforceable.

August 19, 2025

Continuing Breach vs. Recurring Breach

by Lee E. Berlik

In 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.

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