Articles Posted in Conspiracy

Business litigation often involves allegations that a competitor engaged in unfair competition or business tactics designed to injure the plaintiff’s business. Such cases will only be successful, however, if the defendant business has crossed the line between legitimate competitive activity and tortious conduct. In a new Fourth Circuit opinion written by Judge Mark S. Davis of the Eastern District of Virginia, the court affirmed summary judgment in favor of BMW, explaining that not all aggressive competition will be deemed unfair or unlawful; a competitor pursuing its legitimate business interests will often be permitted to do so without incurring liability.

BCD, LLC v. BMW Mfg. Co. involved a dispute over a project to build a new school of engineering on the Clemson University campus. The plaintiff, Rosen (and the companies controlled by him) and BMW were each involved in different aspects of the construction project. Rosen had entered into a tentative agreement with Clemson in 2002, which outlined the responsibilities each would each have in the construction of a wind tunnel. The agreement was not binding, however, because there remained certain unresolved details, and the written agreement specifically allowed either party to withdraw from the project if they could not agree as to those unresolved details. The agreement was thus in the nature of an “agreement to agree” rather than a final, binding contract.

Clemson and BMW, on the other hand, had entered into a final agreement to which each party was bound, and BMW had received a $25 million grant from the state for the project. As preparation for the construction of the school was getting underway, Rosen declared that he wanted the new school to be built on land he owned, but BMW objected because it wanted to keep the state-funded school separate from the privately-funded wind tunnel.jpgwind tunnel. As time wore on, little to no progress was made on the construction of the wind tunnel, and Clemson and Rosen were still unable to come to an agreement on the unresolved details from the 2002 agreement. Finally, Rosen and Clemson signed a new agreement in 2003 that negated the 2002 agreement, resolved all of the details, and included a sale of Rosen’s land to Clemson so the school could be built on land that was now publicly-owned. Rosen did not want to cede control over the property, and felt that BMW coerced Clemson into stalling on the wind tunnel project so BMW could exert control over Rosen’s property. He thus sued BMW for tortious interference with a contract, intentional interference with prospective contractual relations, and civil conspiracy.

Conducting business in Virginia can be a cutthroat affair. Our capitalist system demands that firms compete with each other in price, quality, and technology, and the most innovative company will often win the largest number of lucrative government contracts. Unfortunately, some contractors utilize unfair, unethical, or illegal methods in the name of competition. Virginia is one of several states that have enacted “business conspiracy” statutes designed to discourage and punish some of these practices. The statute is very popular with Virginia lawyers, due in no small part to its provisions allowing recovery of both treble damages and attorneys fees.

In Turbomin AB v. Base-X, Inc., a case pending in the federal court sitting in Lynchburg, the plaintiff (Turbomin) had a contract to perform services for Base-X, a government contractor located near Lexington. In winning this contract, Turbomin beat out another defendant in the case, Lindstrand Technologies Ltd. Eventually, however, Base-X terminated its contract with Turbomin and refused to pay the balance allegedly owed to Turbomin. Turbomin’s officers suspected that disgruntled Lindstrand employees convinced Base-X employees to breach the contract. Invoking Virginia’s business conspiracy statute, Turbomin alleges that Base-X and Lindstrand “conspired to interfere with a business reputation”.

Judge Norman Moon, in granting the plaintiff’s motion to add a business conspiracy count to its complaint, clarified the requirements of this Virginia law. In order to win this type of AngryFace.jpgconspiracy claim, a plaintiff must prove three things: that the defendants (1) engaged in a concerted action, (2) with legal malice, (3) resulting in damages. Judge Moon explained that a “concerted action” is any association or agreement among the defendants to engage in the conduct that caused the plaintiff injury. Legal malice, the court held, requires showing “that the defendant acted intentionally, purposefully, and without lawful justification” to injure the plaintiff. Judge Moon also observed that while a plaintiff need not prove that the defendant’s “primary and overriding purpose” in forming the conspiracy was to injure the plaintiff’s reputation, trade, or business, such must be at least one of the purposes of the conspiracy.

Faced with an issue that has not yet been decided by the Virginia Supreme Court, a federal court sitting in Roanoke, Virginia, ruled that contracting parties may not agree in advance to exempt each other from liability resulting from future intentional misconduct. To the extent parties include in their contract a disclaimer purporting to limit liability and legal theories to exclude causes of action targeted at intentional or reckless misconduct, Virginia courts should strike them down as violative of public policy, the court held.

The case was filed in January by All Business Solutions, Inc., against NationsLine, Inc. Both companies provide telecommunications services. The parties entered into a contract providing that NationsLine would manufacture certain telecommunications products and that ABS would market and sell them for a commission. According to ABS, when one of its customers for direct inbound dialing numbers (“DIDs”) realized that ABS was also conducting business with one of its competitors, it resolved to “injure or destroy” ABS and caused NationsLine to abruptly terminate the contract.

One legal theory pursued by ABS was that of statutory business conspiracy under the Virginia Business Conspiracy Act, Va. Code ยง 18.2-499, -500. Thecontract.jpg business conspiracy statute is popular among plaintiffs’ attorneys due primarily to its triple-damages provision and allowance for recovery of attorneys’ fees. NationsLine moved to dismiss the claim, arguing (among other things) that the claim was barred by the limitation of liability provision in the parties’ contract.

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