Business and Corporate Category Archives — The Virginia Business Litigation Blog Published by Virginia and Washington, D.C. Litigation & Appeals Attorney

April 17, 2026

Fairfax Court Rejects Ambiguous, Overly Broad Non-Solicitation Agreement

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.

January 15, 2025

Parent Companies Not Automatically Liable for Actions of Subsidiaries

by Lee E. Berlik

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.

December 11, 2024

Enforceable Restrictive Covenant Deemed Insufficient for Injunctive Relief

by Lee E. Berlik

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.

April 21, 2023

Shareholders Don’t Need Stock Certificates

by Lee E. Berlik

In business litigation, it’s often necessary to determine whether the litigants are shareholders in a corporation. To bring a lawsuit against an officer or director of a corporation for breaching a fiduciary duty owed to the corporation, for example, the plaintiff must be a shareholder and bring the suit derivatively on behalf of the corporation. (See Va. Code. § 13.1-672.1). In small, closely held corporations, it can be unclear who the shareholders actually are. If an entire corporation is owned and managed by only two or three people, those people may not run the corporation with the same level of formality as a larger company. Board “meetings” may happen in line at Starbucks or not at all. Stock ledgers acquired during the formation of the business may not actually get used. Small corporations often aren’t good about documentation and record-keeping, so when the time comes to issue shares to their stockholders, they may not get around to actually issuing formal stock certificates. Sometimes the only evidence of stock ownership is in the form of a text message or email. This can be a problem when litigation arises because the parties may not agree on how many shares each shareholder owns or who the shareholders even are.

What’s important to note here is that while it’s always preferable to follow corporate formalities and maintain accurate records, shareholders don’t actually need to produce paper stock certificates to prove their status as the owner of corporate stock. Stock is intangible property: it represents ownership in a corporation but does not have a physical form. Stock certificates have physical form but stock certificates are not stock; they are merely evidence of stock ownership. In many cases, stock ownership can be proven without the existence of a stock certificate. Courts look to the totality of the circumstances.

January 11, 2023

Mass Resignation to Form Competing Business Leads to Litigation

by Lee E. Berlik

No employer likes to see a large number of its employees band together and leave en masse to form a competing business. A large number of employees leaving at once can lead to a loss of institutional knowledge and experience, not to mention customers and revenues. Mass departures hurt morale and can lead to increased costs for recruitment and training. A company’s reputation can be irreparably damaged once word gets out that a mass resignation has taken place, making it more difficult for the business to attract new talent. Depending on the circumstances, litigation against the former employees, as well as against the company that hired them, may or may not be warranted.

Possible legal claims include breach of fiduciary duty, breach of non-compete and/or non-solicitation agreement, tortious interference, business conspiracy, misappropriation of trade secrets, and more. Let’s take a quick look at how a Hampton Roads body-piercing business dealt with the sudden resignation of seven employees who went on to form their own body-piercing business in the same region. In the case of Chanah, Inc. v. Summers, currently pending in the Chesapeake Circuit Court, the plaintiff pursued a number of business torts against the departing employees. Most of the counts survived demurrer.

September 10, 2021

Bare Legal Conclusions Insufficient to Satisfy Notice Pleading Requirements

by Lee E. Berlik

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)).

December 4, 2020

Participants in Business Expectancy Can’t Tortiously Interfere

by Lee E. Berlik

Virginia recognizes a cause of action against those who tortiously interfere with the contractual expectancies of another. To prove tortious interference with business expectancy under Virginia law, a plaintiff must show (1) the existence of a valid business expectancy; (2) knowledge of the expectancy on the part of the interferor; (3) intentional interference inducing or causing a breach or termination of the expectancy; (4) that the defendant employed improper methods when engaging in the intentional interference; and (5) resulting damage to the party whose expectancy has been disrupted. (See Dunlap v. Cottman Transmission Sys., LLC, 287 Va. 207 (2014)). Not long ago, the Virginia Supreme Court clarified that “[a]n action for tortious interference with a contract or business expectancy…does not lie against parties to the contract, but only lies against those outside the contractual relationship, i.e., strangers to the contract or business expectancy.” (See Francis Hosp., Inc. v. Read Props., LLC, 296 Va. 358 (2018)). This means that parties directly involved in the business expectancy may not be held liable for tortious interference with that expectancy.

Last month, the Eastern District of Virginia dismissed a count of tortious interference against a staffing company after it found that the staffing company was not really a stranger to the expectancy. Here’s what happened, according to the opinion issued in ITility, LLC v. The Staffing Resource Group, Inc.

October 21, 2020

Project Manager Sabotages Employer, Ordered to Pay Triple Damages

by Lee E. Berlik

About a year ago, a disgruntled systems engineer for government contractor Federated IT was sentenced to two years in prison for illegally accessing his former employer’s network systems, stealing critical servers and information, and causing a loss valued at over $1.1 million. In a civil lawsuit against his girlfriend and arising out of much of the same conduct, a former project manager at the same company has been held in default and ordered to pay over $150,000 in damages for breach of fiduciary duty, conversion, and conspiracy.

The facts of the case, which are assumed to be true by virtue of the fact the defendant was held in default for violating a court order, are as follows. Federated IT provides cyber security, information technology, and analytic and operations support services, and managed a contract with the U.S. Army Office of the Chief of Chaplains. Ashley Arrington was a project manager for the Army contract and a direct supervisor of Barrence Anthony, the engineer currently serving a two-year prison sentence. Arrington and Anthony were romantically involved but did not notify Federated IT about the relationship. At some point during Anthony’s tenure, he began to behave insubordinately and failed to show up for work, eventually leading to his termination. He decided to go out with a bang. Among other spiteful acts he was accused of before and after he left, Federated IT alleged he:

deactivated all administrator accounts except his own and refused to share the master password with his replacement
changed the responsible-party contact information on Federated IT’s Amazon Web Services account to “Anthony Enterprises”
modified Federated IT’s Help Desk email address to redirect emails to his personal email account
deleted files from a SharePoint project folder, including encryption keys, account information, and network diagram files
wiped the hard drive on his work laptop
made unauthorized copies of the Army’s servers which contained their Financial Management System
attempted thousands of “brute force cyberattacks” against the Chief of Chaplains’ web application system, which necessitated a shutdown of one of Federated IT’s servers.

February 17, 2020

Non-Compete Agreements Between Businesses More Likely to Be Held Enforceable

by Lee E. Berlik

Noncompete agreements are typically found in employment agreements between employers and their employees. But that’s not the only place these clauses are found. Sometimes you’ll have two sophisticated companies of roughly equal bargaining power who, for whatever reason, wish to enter into a binding agreement placing restrictions on the one of the entity’s ability to compete with the other. Perhaps one company has acquired or merged with another and needs to ensure that the target company’s former officers and directors don’t immediately form a competing business and take their old clients with them. Or perhaps, as was the case recently in the dispute between wood-flooring contractors Lumber Liquidators and Cabinets To Go, two businesses with overlapping ownership simply seek to reach an agreement to reduce competition and minimize the sharing of confidential information. The important thing to note is that most of the reasons Virginia courts disfavor noncompete agreements have to do with fairness to the employee and do not apply when the two contracting parties are both businesses. Therefore, courts are much more likely to enforce noncompete agreements found in a business-to-business context than in an employment setting.

The basic facts of Lumber Liquidators v. Cabinets To Go are as follows. About 10 years ago, hardwood flooring retailer Lumber Liquidators learned that its Chairman and largest shareholder, Thomas D. Sullivan, was also involved in the ownership and operation of Cabinets To Go, which sold kitchen and bath fixtures and building supplies. Concerned that Sullivan might divert business opportunities or confidential business information over to Cabinets To Go, Lumber Liquidators entered into a number of agreements with Cabinets To Go. Among the agreements formed between the companies was a pair of “reciprocal restrictive covenants” in which Cabinets To Go agreed not to engage in the sale of hardwood flooring anywhere in the world during the term of the agreement and a period of two years thereafter. Lumber Liquidators similarly agreed not to sell kitchen cabinets.