The Virginia Business Litigation Blog

September 30, 2026

No Respondeat Superior Liability for Conspiracy Completed After Employment Ends

The doctrine of respondeat superior holds that an employer is liable for the tortious act of his employee if the employee was performing his employer’s business and acting within the scope of his employment. The doctrine “applies only when the relation of master and servant is shown to exist between the wrongdoer and the person sought to be charged for the result of some neglect or wrong at the time and in respect to the very transaction out of which the injury arose.” (See Manuel v. Cassada, 190 Va. 906, 913 (1950)). An employer’s exposure for its employee’s torts generally ends when the employment ends. But what if an employee conspires with another while on the job but doesn’t carry out the plan after his employment is terminated? The Court of Appeals of Virginia dealt with this issue in an opinion published yesterday and answered the question in the employer’s favor. It held that a civil conspiracy formed during employment does not extend the employer’s liability to injuries inflicted after termination, because in Virginia a civil conspiracy is actionable only when the underlying tort causes damage, and here that happened only after the employment relationship had ended.

The facts of Hubbard v. All Maid Up, LLC, are troubling. A franchisee of the MaidPro cleaning service advertised that it ran background and criminal history checks on every staff member before hiring. In February 2021, it hired Xavier Hudspeth, the son of a current employee, without running a background check. Hudspeth had a juvenile record involving theft, firearms, and violence, and was allegedly a gang member. He quit in September 2021. Over the next several weeks, two customers reported to the company that firearms were missing from homes Hudspeth had cleaned. The company did not investigate or notify police. Instead, in January 2022 it rehired Hudspeth, again without a background check, and two days later sent him to clean the Norfolk home of William Moore and Connie Hubbard, longtime customers. Hudspeth entered a room the cleaners were forbidden to enter, and Hubbard caught him leaving it. A handgun later turned up missing. Around the same time, Hudspeth told an associate, Andra Brown, that he had found a home with guns, and the two agreed to rob it.

September 14, 2026

Deleting a Typo Is Not Blue-Penciling

by Lee E. Berlik

When a noncompete sentence trails off into an incomplete clause, is fixing it a permissible typo correction or an instance of “blue-penciling” that Virginia law does not allow? The Court of Appeals considered this issue last month in C&A Scientific Co. v. Yu. In the course of invalidating a departing shareholder’s noncompete agreement, it clarified that the rule against blue-penciling does not apply to the remedy known as reformation. A party asking a court to delete a defective clause from a restrictive covenant is actually asking for reformation, not blue-penciling. The remedy is only available, however, upon clear and convincing proof of what the parties actually intended. Not every scrivener’s error will qualify for judicial correction. Where the record does not reveal what the botched clause was supposed to say, there is nothing to reform toward and the noncompete will usually fail.

The dispute grew out of a falling-out between two cousins. Sam Xiang’s family founded C&A Scientific, a wholesaler of scientific and educational supplies, and Xiang brought in his cousin Kenny Yu in 2017 to help rescue the then-struggling company. Yu succeeded in overseeing a substantial increase in gross revenue and he was given a 30% stake under a shareholder agreement that contained a noncompete provision that ended mid-thought. It barred a departing shareholder, for one year after conveying his shares, from being “employed, concerned, or financially interested, either directly or indirectly, in the same or a similar business as that conducted by the Corporation, or compete with the Corporation for a one-year period following the date the departing Shareholder conveys his or her shares if any customers of the same, similar, or competing business.” (Emphasis added). The sentence stopped there.

August 12, 2026

Think You’re Entitled to Attorney Fees? Explain Yourself.

by Lee E. Berlik

A party with an ironclad statutory or contractual right to attorney fees can still lose that right by failing to plead it correctly. That is the lesson of Pinnacle Flooring Solutions, LLC v. Premier Homes Group, LLC, Record No. 250618 (Va. July 30, 2026), in which the Supreme Court of Virginia held that Virginia Rule 3:25’s requirement that parties “identify the basis upon which the party relies in requesting attorney fees” is satisfied only by affirmatively identifying the basis for a fee request in the pleading itself, regardless of whether the other party is aware of the basis for requesting legal fees. Reversing the Court of Appeals, the Court reinforced that Rule 3:25 is a pleading requirement, not a notice requirement, and that the distinction is dispositive.

Premier Homes Group had subcontracted with Pinnacle Flooring Solutions to install flooring in three homes Premier was constructing. Each of the three nearly identical subcontracts contained a Section 8(b) providing that if Pinnacle defaulted and failed to cure after notice, Premier could take whatever corrective steps it deemed necessary at Pinnacle’s cost, with Pinnacle liable for that cost plus Premier’s reasonable overhead, profit, and attorney fees. When the relationship broke down, Pinnacle sued for nonpayment, attaching the subcontracts as exhibits to its complaint. Premier counterclaimed, alleging that Pinnacle’s work was defective and below industry standards and requesting that the court award it the attorney fees it incurred in prosecuting the matter. Premier incorporated various paragraphs from the subcontracts into its pleading—including the paragraph authorizing recovery of attorney fees—but did not expressly state a basis for its request for attorney fees.

July 28, 2026

Doing Work and Incurring Costs Is Insufficient to Create Unjust Enrichment

by Lee E. Berlik

A party that performs services and incurs expenses does not automatically acquire an equitable claim for compensation. In certain circumstances, claims for unjust enrichment or quantum meruit may arise, but these claims require the claimant to prove the defendant either requested the services or at least knowingly accepted the services and retained a benefit under circumstances making nonpayment unjust. In an unpublished decision of the Virginia Court of Appeals earlier this month, a trucking company had incurred time and expenses relating to providing labor, drivers, transportation, and storage in connection with returning dozens of loaded trailers to its former customer. It demanded payment for those services. The customer had made post-termination payments that looked, at least superficially, like recognition of an ongoing obligation. The Court of Appeals, however, held that none of that entitled the trucking company to equitable relief. The trial court found that the customer had terminated the arrangement, paid what it owed, and repeatedly demanded return of its property. The Court of Appeals reasoned that returning property one is already obligated to return confers no benefit for which the law implies a promise to pay.

The case is Webb’s Truck Leasing Corp. v. CHKD Thrift Stores, LLC, Record No. 0246-25-1 (Va. Ct. App. July 21, 2026). The facts go something like this. CHKD Thrift Stores receives donated goods, sells them, and remits the net proceeds to benefit the Children’s Hospital of the King’s Daughters. For years, CHKD and Webb operated under an oral arrangement in which Webb stored and transported trailers holding CHKD’s excess charitable-donation inventory. Beginning in March 2018, CHKD notified Webb that the arrangement was terminated and demanded return of the donations. Webb neither returned the donations nor allowed CHKD to retrieve them. CHKD reiterated the termination in July 2018, paying Webb’s outstanding invoices of $60,694.76 in an effort to make a “clean break.” Then, in a July 1, 2019 letter, CHKD’s counsel declared that all agreements would conclude on August 31, 2019, enclosed a payment of $73,425 stated to satisfy “any and all obligations,” and warned that CHKD would pay “no additional money” and have “[n]o obligation of any kind” to Webb thereafter. Webb cashed the check and admitted that, as of August 31, 2019, CHKD owed it no debt related to the donations.

June 29, 2026

First Material Breach Must Go to Root of Contract

by Lee E. Berlik

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.

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