The Virginia Business Litigation Blog

March 26, 2014

To Establish Personal Jurisdiction, Minimum Contacts Must Be With Forum State, Not Just its Resident

Due Process is satisfied when a non-resident has sufficient minimum contacts with a state such that exercise of jurisdiction over him does not offend traditional notions of fair play and substantial justice. The minimum contacts analysis focuses on the relationship between the defendant, the forum and the litigation, and the defendant’s conduct must create a substantial connection with the forum state. The relationship must arise out of contacts that defendant himself creates with the forum state, and the contact must be with the forum state itself rather than merely with persons who reside there. The United States Supreme Court recently addressed these concepts in Walden v. Fiore.

Anthony Walden was working as a DEA agent at the Atlanta airport when, after using a drug-sniffing dog to perform a sniff test, he seized almost $97,000 in cash that Nevada residents Gina Fiore and Keith Gipson claimed to have won gambling in San Juan. Walden later helped draft an affidavit to establish probable cause. Fiore and Gipson sued Walden in Nevada alleging violation of their Fourth Amendment rights. Specifically, they asserted that Walden violated their rights by (1) seizing the cash without probable cause; (2) keeping the money after concluding it did not come from drug-related activity; (3) drafting and forwarding a probable cause affidavit to support a forfeiture action while knowing the affidavit contained false statements; (4) willfully seeking forfeiture while withholding exculpatory information; and (5) withholding that exculpatory information from the United States Attorney’s Office.
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March 24, 2014

To Enjoin Violation of Non-Compete, Must Prove Legitimate Business Interest

by Lee E. Berlik

To obtain a preliminary injunction in Virginia, a plaintiff must show (1) that he is likely to succeed on the merits; (2) that he is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips in his favor; and (4) that an injunction is in the public interest. Real Truth About Obama v. Federal Election Com’n, 575 F.3d 342 (4th Cir. 2009). To enjoin an ex-employee from violating his non-compete agreement, getting past the first element requires the plaintiff to persuade the court that the noncompete is no broader than necessary to protect a legitimate business interest. Courts will examine the function, scope, duration, and overall reasonableness of the restriction when making this determination. An opinion issued earlier this month in Fairfax County Circuit Court demonstrates what a high burden this can be for a plaintiff seeking to prevent its employees from working for a competitor.

Wings, LLC, provides commercial and residential vinyl, fabric, and leather repair services in Northern Virginia, the District of Columbia, Southern Maryland, and West Virginia. Wings’ customers consist primarily of auto dealerships and collision centers who hire Wings to repair car interiors on site. Wings hired two gentlemen as vinyl, velour and leather repair technicians and required them to sign agreements containing non-solicitation and non-competition provisions that prohibited them from working as technicians anywhere in Virginia, Maryland, West Virginia, and any other state in which Wings transacted business, for a period of two years following the termination of employment. (See pages 2 and 3 of the opinion for the full text of the noncompete provision).
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March 17, 2014

Business Conspiracy Can Be Based On Tortious Interference

by Lee E. Berlik

Last September, I noted the case of Dunlap v. Cottman Transmissions Systems, LLC, in which the Fourth Circuit certified two questions to the Virginia Supreme Court seeking clarification with respect to Virginia’s business conspiracy statute and the applicable statute of limitations for tortious interference claims. The Virginia Supreme Court has now answered those questions, holding that causes of action for tortious interference with contract and tortious interference business expectancy qualify as the requisite “unlawful act” to proceed on a business conspiracy claim under Va. Code §§ 18.2-499 and -500 because both claims are predicated on an independent common law duty arising outside of contract. The court also held that claims for tortious interference are governed by § 8.01-243(B)’s five-year statute of limitations because such claims involve injury to property rights.

James Dunlap sued Cottman Transmission Systems, LLC, and Todd Leff for tortious interference with contract, tortious interference with business expectancy, and business conspiracy in violation of Virginia Code § 18.2-499 and § 18.2-500. The claims arose from Dunlap’s franchise agreements with AAMCO Transmissions, Inc. When a new owner of AAMCO (who already owned a controlling interest in Cottman) sought to convert Cottman Franchises into AAMCO franchises, Dunlap’s franchises were closed, and Dunlap claimed that the closings were due to a conspiracy between Cottman and others.
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March 10, 2014

White House Crasher’s Tortious Interference Claim Reinstated on Appeal

by Lee E. Berlik

Readers may remember Tareq and Michaele Salahi from the national attention they gained in November 2009 when they crashed a White House state dinner in honor of India’s Prime Minister Manmohan Singh or from their run on the reality show “The Real Housewives of D.C.” The Salahis are no stranger to litigation, having gone through a messy divorce in 2012. Most recently, the Supreme Court of Virginia heard Mr. Salahi’s appeal from a decision of the Circuit Court of Warren County regarding claims against the couple’s former agent, DD Entertainment, LLC.

According to Mr. Salahi, he and his then wife had a verbal agreement to appear on reality T.V. shows, talk programs and other media outlets to promote their entertainment partnership, “The Salahis,” and they were to use the profits from the partnership for their mutual benefit. DD Entertainment acted as the Salahis’ agent and procured additional projects for them. Mr. Salahi alleged that DD Entertainment was aware of the couple’s business partnership and used improper means to interfere with the partnership by encouraging Mrs. Salahi to leave the enterprise and become the adulterous mistress of Journey guitarist Neal Schon in violation of Virginia’s adultery statute, Virginia Code § 18.2-365.
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March 3, 2014

Age Bias Not Enough to Prevail Under ADEA

by Lee E. Berlik

The Age Discrimination in Employment Act (“ADEA”) prohibits an employer from discriminating against an employee on the basis of age. To prevail on an ADEA claim, it is not enough to show that a supervisor was biased against older employees. A successful plaintiff needs to show that she suffered an unfavorable employment action that she would not have suffered but for age discrimination. All illustrated by the recent case of Lavina D. Jernagin v. John M. McHugh, even if a supervisor refers to an employee as an “old-timer” and a “dinosaur,” if age was not the “but for” cause of an unfavorable employment action, the plaintiff will be unable to recover.

Lavina Jernagin began civilian employment with the United States Army in 1997, working as a Logistics Management Specialist with the Army’s Directorate of Logistics (DOL). In 2003 and 2005, Ms. Jernagin received annual performance ratings of “outstanding” or “excellent.” In 2007, Sergeant Travania Fair and Pamela Kent became Ms. Jernagin’s first and second line supervisors. Sergeant Fair considered Ms. Jernagin’s performance below average. In July 2007, as part of a branch reorganization, Lawrence Lawson and Mary Costa became Ms. Jernagin’s first and second line supervisors. At trial, witnesses testified that Ms. Costa had made several derogatory age-related statements toward Ms. Jernagin and her coworkers.
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February 24, 2014

Subpoena for Production of Hard Drives Deemed Unreasonable in Maryland

by Lee E. Berlik

Small businesses often find themselves the target of defamatory online reviews left by anonymous reviewers. In most cases, a subpoena can be issued to the website owner or Internet Service Provider to reveal the poster’s identity (or at least the I.P. address from which the post was written). See, for example, Yelp v. Hadeed Carpet Cleaning, in which the Virginia Court of Appeals held that Yelp could be compelled to comply with such a subpoena. Any such subpoena, however, cannot subject the recipient to undue burden. As illustrated by the recent Maryland case of In re: Subpoena of Daniel Drasin, an overreaching subpoena that places an undue burden on the recipient will be quashed.

Advanced Career Technologies, Inc. (“ACT”) sued John Does 1-10 in a Colorado federal court based on allegedly defamatory comments posted anonymously on the “Random Convergence” blog. In an attempt to discover the identity of the John Does, ACT served a third party subpoena on the blog’s administrator, Daniel Drasin, commanding him to produce any hard drives, servers and any other devices he used to administer the blog, and data stored online via website or application. Drasin moved to quash the subpoena pursuant to Federal Rule of Civil Procedure 45(c)(3) asserting that it was unreasonable, imposed an undue burden and was not likely to lead to relevant evidence.
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February 20, 2014

EEOC Announces Record Monetary Recovery from Employers in 2013

by Guest Blogger

The U.S. Equal Employment Opportunity Commission (“EEOC”) recently released a comprehensive set of fiscal year 2013 data tables showing that it obtained the highest monetary recovery in agency history through its administrative process, increasing by $6.7 million to $372.1 million of the 93,727 charges received in fiscal year (“FY”) 2013.

There was actually a nearly 6% decrease in charges filed in FY 2013 from FY 2012. In total, 93,727 employees filed charges with the EEOC. Consistent with past years, retaliation was the most commonly cited basis (more than 35,500 charges) for discrimination charges and increased in FY 2013. The next most commonly charge was racial discrimination (more than 33,000 charges) followed by gender/sexual harassment/pregnancy discrimination (nearly 28,000 charges) and then disability discrimination (with almost 26,000 charges). EEOC’s data showed more than 3,000 charges were found to be “reasonable cause,” where the evidence gained in the investigation rendered a conclusion that discrimination occurred. The data also demonstrated that the EEOC successfully conciliated 1,437 charges (approximately 40%). A “successful conciliation” is described by EEOC as one that results in substantial relief to the employee citing discrimination and all others adversely affected by discrimination.
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February 17, 2014

Are Purchase Orders Enforceable Contracts?

by Lee E. Berlik

They can be. The Uniform Commercial Code provides that a contract for the sale of goods may be made in any manner sufficient to show agreement, and that “an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods.” In MidAtlantic International Inc. v. AGC Flat Glass North America Inc., a federal court in Norfolk examined whether purchase orders reflected an enforceable contract between the parties and concluded that they did.

MidAtlantic supplied Spanish dolomite to AGC under a contractual relationship that their predecessors began in the late 1990s. At the end of each calendar year, AGC sent MidAtlantic a purchase order providing a rough estimate of its needs for the coming year. AGC supplemented the annual purchase order with monthly orders that were more exact. Each purchase order set forth requirements and conditions for the delivery of the product and contained the price and quantity of the product, details regarding how the agreement could be cancelled, shipment requirements and other details necessary for both sides to understand how the transactions were to occur. The quantity of dolomite was occasionally altered via email and phone between the parties. Additionally, the purchase orders provided requirements for the chemical composition and physical properties of the product. For example, the maximum allowable levels of iron, silicon dioxide and acid insoluble particles were specified, and no acid insoluble particle was to be coarser than 30 mesh.
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February 3, 2014

Principal and Agent Acting Within Scope of Duties Cannot Conspire

by Lee E. Berlik

To recover for statutory business conspiracy in Virginia, a plaintiff must show (1) concerted action between two or more people; (2) legal malice towards plaintiff’s business; and (3) resulting damage to the plaintiff’s business. Where the defendants have a principal/agent or employer/employee relationship, and the agent is acting within the scope of his or her duties, the first element is not met because the parties are not separate entities, and a single entity is not legally capable of conspiring with itself. Applying these principles, the United States District Court for the Eastern District of Virginia granted the defendants’ motion for summary judgment in Rogers v. Deane.

Prior to their separation and divorce, Edwina and Edward Rogers employed Jon Deane, a certified public accountant, for tax and accounting services. After the Rogers divorced, Mrs. Rogers sued Mr. Deane for statutory business conspiracy and other claims, contending that Mr. Deane diverted hundreds of thousands of dollars in credits and tax deductions into Mr. Roger’s tax return, that he diverted tax liability into her tax returns, and that he intentionally damaged her reputation and business.

Mrs. Rogers, faced with a motion for summary judgment, argued that her husband and Mr. Deane should be treated as two separate entities capable of forming a conspiracy because (1) there was no agency relationship, and (2) even if there was, the defendants’ actions fell outside the scope of the agency. The court disagreed.

January 27, 2014

Rule 8’s Plausibility Requirement Not Modified By Rule 9’s “Allege Generally” Provision

by Lee E. Berlik

Federal Rule of Civil Procedure 8(a) requires a complaint to contain a short and plain statement of the claim showing that the pleader is entitled to relief so as to give the defendant fair notice of the claim and the ground upon which it rests. The Supreme Court has interpreted this rule to require factual allegations sufficient to demonstrate that a claim is plausible on its face. Rule 9(c), on the other hand, allows plaintiffs to plead contractual conditions precedent “generally.” In Chesapeake Square Hotel v. Logan’s Roadhouse, Inc., the court was faced with the question of whether Rule 9(c) permits a lesser pleading standard than Rule 8, permitting plaintiffs in such cases to avoid the plausibility requirement. While the court did not answer the question directly since it found the plaintiff had presented a plausible claim anyway, the court’s discussion suggests that Rule 8’s plausibility requirement cannot be avoided by pointing to a provision in the Rules permitting a “general” pleading.

Chesapeake Square involved a contract for the sale of commercial real estate to Logan’s Roadhouse. The contract imposed conditions on both parties to be performed prior to closing. Defendant allegedly terminated the contract claiming that plaintiff failed to satisfy contractual preconditions. Plaintiff alleged breach of contract and sought specific performance. Defendant moved to dismiss, arguing that the complaint failed to adequately allege that plaintiff satisfied contractual conditions precedent that would entitle it to specific performance of the contract.

The court noted that when the Rule 9(c) general pleading requirement for conditions precedent is read without restriction, it allows parties to allege generally that all conditions precedent have occurred. In this case, the plaintiff alleged generally that it satisfied all of the preconditions to defendant’s obligations under the contract and therefore met the Rule 9(c) pleading requirement when read without restriction.

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