Bare Legal Conclusions Insufficient to Satisfy Notice Pleading Requirements

Virginia is considered a “notice pleading” jurisdiction, which means that a complaint need only contain allegations of material facts sufficient to inform a defendant (i.e., put the defendant on notice) of the true nature and character of the plaintiff’s claim. To meet this standard, though, a plaintiff must allege actual facts rather than conclusory assertions. When ruling on a motion to dismiss for failure to state a claim, courts generally must accept the plaintiff’s allegations as true for purposes of ruling on the motion, as well as all reasonable inferences arising from those facts, but courts are not required to accept “allegations that are merely conclusory, unwarranted deductions of fact,…unreasonable inferences” or “allegations that contradict matters properly subject to judicial notice or by exhibit.” (See Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002)). When a plaintiff’s cause of action “is asserted in mere conclusory language” and supported only by “inferences that are not fairly and justly drawn from the facts alleged,” it is proper to sustain a defendant’s demurrer. (See Bowman v. Bank of Keysville, 229 Va. 534, 541 (1985)).

This basically means that whatever conclusion the plaintiff wants the court to draw from the alleged facts, the plaintiff must allege not just the actual desired conclusion, but specific facts that, if true, would support the accuracy of that conclusion. For example, a court wouldn’t have to accept a plaintiff’s allegation that she suffered “severe emotional distress” or “extreme emotional distress” without accompanying factual allegations demonstrating the specific forms of emotional distress experienced. (See Russo v. White, 241 Va. 23, 28 (1991)). In a defamation case, where a plaintiff must allege that a defamatory statement is “of and concerning” him, it’s not enough to just allege that a statement was indeed “of and concerning” him; he needs to include in his complaint the specific facts that would enable the trial judge to determine that the “of and concerning” characterization is indeed accurate. (See Dean v. Dearing, 263 Va. 485, 490 (2002)). In a conspiracy case, the plaintiff must allege facts showing the defendants acted with a common purpose to injure the plaintiff; it’s not enough to just say, “the defendants conspired against me.” (See Brown v. Angelone, 938 F. Supp. 340, 346 (W.D. Va. 1996)). And in a trade secrets case, the plaintiff can’t survive dismissal simply by alleging that the defendant used “improper means” to acquire its trade secrets; the plaintiff must identify the supposed trade secrets and describe the means used to acquire them that were supposedly improper. (See Preferred Systems Solutions, Inc. v. GP Consulting, LLC, 284 Va. 382 (2012)).

To use a recent example of how this principle is applied by federal courts sitting in Virginia, let’s take a quick look at Power Home Solar, LLC v. Sigora Solar, LLC. Power Home and Sigora are solar energy companies that sell solar systems to homeowners and commercial businesses. Power Home sued Sigora in federal court on various grounds arising from the departure of two of its employees. Power Home alleged that two employees left Power Home to join Sigora and in doing so, absconded with its trade secrets at the behest of Sigora. The complaint contained 12 counts:

  1. breach of noncompete agreements by the two employees
  2. aiding and abetting breach of restrictive covenants
  3. misappropriation of trade secrets under the federal Defend Trade Secrets Act (“DTSA”)
  4. aiding and abetting misappropriation of trade secrets under the DTSA
  5. misappropriation of trade secrets under Virginia’s Uniform Trade Secrets Act (“VUTSA”)
  6. common law unfair competition
  7. business conspiracy
  8. tortious interference with contract
  9. turnover of property to Power Home and for an accounting
  10. unjust enrichment
  11. motion for preliminary and permanent injunctive relief; and
  12. punitive damages

Sounds scary, right? Yet all 12 counts were summarily dismissed or otherwise decided in the defendants’ favor. Why? The court entered summary judgment in the defendants’ favor on the noncompete claim because it found the agreements unenforceable as a matter of law. With respect to the 11 other claims, Power Home failed to properly allege facts showing it could potentially recover. With respect to its trade-secrets and conspiracy house-of-cards-225x300claims, the court found that Power Home had alleged only legal conclusions rather than actionable facts.

On the trade screts claims, the court found that Power Home had failed to properly allege the existence of trade secrets. Under both the DTSA and VUTSA, various requirements must be met before a particular piece of commercial information will qualify as a trade secret. Under the DTSA, for example, to qualify as a trade secret, the information must derive “independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.” (See 18 U.S.C. § 1839(3)). To get past a motion to dismiss, a plaintiff needs to describe the alleged trade secret with a level of specificity sufficient to enable the court to find the information qualifies as a trade secret. “Naked assertions” are insufficient. Here, Power Home included vague references to “proprietary” and “confidential” information, but never actually described or explained what the information is or how the company derived economic value from it. “Ultimately, the complaint contains conclusions, not facts,” the court wrote.

Power Home met a similar fate on its business conspiracy claim. To prevail on such a claim, a plaintiff must allege (1) a combination of two or more persons for the purpose of willfully and maliciously injuring the plaintiff in his business, and (2) resulting damage to the plaintiff. The court noted that to survive a motion to dismiss such a claim, plaintiffs must plead concert of action and unity of purpose “in more than mere conclusory language.” A conspiracy claim will be dismissed if the plaintiff “fails to allege with any specificity the persons who agreed to the alleged conspiracy, the specific communications amongst the conspirators, or the manner in which any such communications were made.” (See A Soc’y Without A Name v. Virginia, 655 F.3d 342, 347 (4th Cir. 2011)). In other words, merely declaring in conclusory fashion that the defendants “conspired” together, without additional facts demonstrating an actual conspiracy, will not be enough to survive dismissal. The court found that Power Home had alleged nothing more than legal conclusions. Noting that it takes more to state a valid claim than to simply reiterate the legal elements of that claim without proffering specific examples of how the defendants’ conduct satisfied those requirements, the court dismissed the conspiracy claim.

So yes, while it is true that “notice pleading” generally means that a defendant must understand the reasons he or she is being sued, the pleading requirements in both state and federal court require more than that. A plaintiff must plead actual facts–not mere legal conclusions–that demonstrate an entitlement to relief.



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