Lumping Defendants Together Can Result in Dismissal

If you’re going to sue a bunch of former employees for various business torts, you need to be clear in your allegations as to who did what. It’s all too easy to lump all the defendants together when describing the wrongful conduct in the complaint, especially when there are numerous defendants. Increasingly, however, Virginia courts are dismissing defendants from cases in which their specific involvement cannot be ascertained from the face of the complaint.

Recently in a Virginia federal court, Alliance Technology Group, LLC (Alliance), an IT services provider, sued a cadre of its employees and Achieve 1, LLC (Achieve), a competing company, for conspiracy, fraud, misappropriation of trade secrets, and other claims. One defendant, William Ralston, moved to dismiss due to the fact that many of the allegations of the complaint lumped all the defendants together, accusing all the defendants of committing tortious conduct collectively.

The rules are pretty lenient on what a complaint must contain to survive a motion to dismiss. A complaint must include a short and plain statement of the claim showing that the pleader is entitled to relief, and enough factual information to give the defendant fair notice of the nature of the claim. It must allege enough facts–not conclusions–to make the asserted right to relief plausible on its face rather than merely speculative or conceivable.

According to the complaint, Michael Thomas joined Alliance intending to steal trade secrets and proprietary information for Achieve, a company he’d formed earlier. Thomas directed eight employees while at Alliance, all subject to confidentiality agreements with Alliance. But he and the other employees began competing against Alliance while they were still working there, using Achieve to do it. Eventually, they all joined Achieve where, Alliance alleges, they used proprietary information to appropriate its clients and business.

The complaint ties each defendant, except Ralston, to at least one specific transaction and specific date for joining Achieve. Ralston was lumped into the allegations against “the Defendants” except for allegations that he joined Alliance mere weeks before Thomas resigned and he now works for Achieve.

The court dismissed the common law and statutory conspiracy claims against Ralston. Common law conspiracy in Virginia requires (1) two or more persons, (2) acting in concert, (3) “to accomplish some criminal or unlawful purpose, or to accomplish some purpose, not in itself criminal or unlawful, by criminal or unlawful means.” To satisfy the unlawful act requirement, at least one of the alleged co-conspirators had to have committed an underlying tort like the alleged inducement to breach a contract.

The complaint alleged the conspiracy had been going on since at least November 2011, but Ralston didn’t join Alliance until March 2012 and no allegations claimed he’d joined in an ongoing conspiracy. It may have been conceivable that he was part of it before he joined the company, but that was pure speculation, which wasn’t sufficient.

Statutory business conspiracy arises when two or more persons “combine, associate, agree, mutually undertake or concert together for the purpose of willfully and maliciously injuring another in his reputation, trade, business, or profession by any means whatsoever.” The complaint didn’t allege that Ralston joined the conspiracy before hiring on with Alliance or that he joined the others in malice or with knowledge of others’ malice. So the court could not reasonably infer that he joined Alliance with a present intent to accomplish an unlawful purpose.

The fraud claim also failed for insufficient pleading. In Virginia, one who alleges fraud must allege: (1) a false representation, (2) of a material fact, (3) that was made intentionally and knowingly, (4) with the intent to mislead, (5) reasonable reliance by the party misled, and (6) resulting damage to the party misled. Because the allegations lumped Ralston in with the others on this count, the complaint lacked the necessary specific time, place and contents of false representations attributable to Ralston. The Court accordingly dismissed the fraud claim as well. Several claims remain, however, including breach of fiduciary duty, misappropriation of trade secrets, and tortious interference with existing contract, contract expectancy, prospective business relationship and economic advantage.



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