The Virginia Business Litigation Blog

April 30, 2012

Arlington Sheriff’s Office Wins Summary Judgment in Title VII Case

A former employee of the Arlington County Sheriff’s Office failed to produce sufficient evidence of race discrimination to survive summary judgment. Such was the determination of Judge O’Grady of the Eastern District of Virginia, who entered summary judgment in favor of Arlington Sheriff Beth Arthur.

The case had been brought by former Inmate Services Counsel Robert Currie. Currie, an African-American male, alleged that he was racially discriminated against in 2009, when: (1) a watermelon was left on his desk by an African-American co-worker; (2) a Caucasian deputy made the statement “[t]here goes the neighborhood” on several occasions when Currie approached him; and (3) a Latino supply assistant referred to Currie as “boy” when addressing him.

Currie filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC), claiming that he was discriminated against and was placed on probation in 2009 in retaliation for the fact that his lawyer had written to the Sherriff’s Office after the watermelon incident. The EEOC issued a Notice of Right to Sue in 2011. Two months later, Currie was terminated by Sheriff Arthur, allegedly as a result of an investigation that found that Currie violated policy, made false statements, treated an inmate unprofessionally, and retaliated against inmates.

April 23, 2012

Lawyers Argue Contacting Advertisers Is Tortious Interference

by Lee E. Berlik

Not everyone was happy when KIBZ 104.1 FM (The Blaze) replaced its rock format with new programming. One unhappy listener tried contacting the radio station to express his displeasure but had trouble reaching a live person. So he took his complaints to the station’s advertisers. He succeeded in getting a response, but it came in the form of a cease-and-desist letter from the station’s lawyers, accusing him of defamation and of tortiously interfering with the station’s contractual relationships.

Three Eagles Communications, a Colorado-based company, had rearranged its programming for a Lincoln, Nebraska radio station, The Blaze. It brought in a show from the Omaha market, replacing or rearranging other programming to do so. The new show included political, pop culture and off-color commentary. Many listeners objected to the changes and banded together to boycott the show. They established a Facebook page, started a petition, published a list of those who advertised with the show, and included information on how to contact members of Three Eagles management. They also held a public event, sent emails and letters to Three Eagles management, and sent emails to advertisers with The Blaze. Some stated Three Eagles was not a local operation.

Ted Pool was among those who opposed the changes. He sent emails to some Blaze advertisers objecting to the changes, attributing them to regional and out-of-state decisions, and encouraged the email recipients to sign the petition. He urged the recipients to contact Three Eagles to ask if the company would continue “jeopardizing YOUR advertising dollars by being associated with” the new show.

April 17, 2012

Summary Judgment Reversed Due to Ambiguity in Contract

by Lee E. Berlik

Swiftships Shipbuilders and its defense contract procurement consultant, Lion Associates, are currently in a dispute over a $181 million contract awarded to Swiftships by the United States Navy. In February 2009, Swiftships, which specializes in military vessels, submitted a capability summary to the Naval Sea Systems Command (NAVSEA) in response to a Navy announcement seeking coastal patrol boats to supply to the Iraqi government. After not receiving a response in two months, Swiftships hired Lion Associates to provide marketing and promotion services to attract potential Swiftships clients. In exchange, Swiftships would pay Lion Associates $7,500 a month for 12 months and “3% of each new contract obtained by Lion.” Swiftships later revised the contract so that the 3% commission was limited to “each new contract brought to Swift[ships], which was obtained by Lion.” In the meantime, Admiral Lyons, the CEO, President, and sole member of Lion Associates, worked on procuring the Navy contract for Swiftships by assuring a high-ranking NAVSEA admiral that Swiftships could manage the entire job by itself. The contract was awarded to Swiftships a few months after the singing of the revised contract between Lion Associates and Swiftships, but Swiftships refused to pay Lion Associates the 3% commission on the Navy contract because it did not think that Lion Associates had brought the Navy contract to Swiftships.

Lion Associates sued for breach of contract and unjust enrichment. It argued that it was entitled to a little over $6 million in compensatory damages because the 3% payment provision applied to any contract that Swiftships was unable to obtain without Lion Associates assistance. The Eastern District of Virginia granted summary judgment in favor of Swiftships on both claims, but the United States Fourth Circuit Court of Appeals remanded the case after finding that the contract was ambiguous and that evidence should have been considered to determine its meaning and whether it was breached.

In a breach of contract claim, a court must determine if contractual provisions have been violated by looking at the actual language of the document. If the contract language is ambiguous, the trier of fact can look to extrinsic parol evidence to determine the parties’ intent as to certain provisions. However, resort to extrinsic evidence is limited to situations where language is “susceptible to more than one reasonable construction,” when considered in the context of the contract as a whole.

April 10, 2012

Copyright Infringement Claim Against Builder Dismissed

by Lee E. Berlik

Although it is true that architects are entitled to copyright protection, a complaint alleging infringement of a copyright must contain sufficient factual allegations for the court to infer that the defendant is liable, or the case will be dismissed. This is what happened recently in Home Design Services, Inc. v. Schoch Building Corporation, in which the United States District Court for the Eastern District of Virginia dismissed the plaintiff’s threadbare complaint for failure to allege facts sufficient to support a copyright infringement claim.

Home Design Services (“HDS”) owned several architectural copyrights and filed suit against Schoch Building Corporation (“SBC”), a custom home builder, under the Federal Copyright Act alleging that SBC infringed its copyrights. To establish copyright infringement, a plaintiff must plead (1) ownership of a valid copyright and (2) that defendant copied the protected work. HDS submitted its copyright registration certificates which created the presumption of copyright validity and ownership. However, it failed to state facts alleging that SBC copied the protected work.

A plaintiff may establish copying by showing (1) that defendant had access to the copyrighted work and (2) that substantial similarity exists between the protected work and the allegedly infringing work. A plaintiff can show access by direct evidence arch drawing.jpg that the defendant had the opportunity to view the protected works or by showing that the works are so strikingly similar that there is no reasonable probability that they were independently created.

April 2, 2012

Kevin Costner Denies Breach of Contract with Sculpture Artist

by Lee E. Berlik

Actor Kevin Costner is in the middle of a contract dispute in South Dakota over the placement of 17 buffalo and Lakota warrior sculptures that he had commissioned from artist Peggy Detmers. The sculptures were originally intended for Costner’s proposed resort The Dunbar, but the resort itself was never built and the sculptures were later installed as the centerpiece of a visitor attraction on an adjoining property, dubbed “Tatanka.” Detmers claims she never authorized Costner to install the sculptures at the new location and sued him for breach of contract.

At issue is a contractual provision that stipulates, “if The Dunbar is not built within ten (10) years [of the year 2000] or the sculptures are not agreeably displayed elsewhere, I [Costner] will give you [Detmers] 50% of the profits from the sale of the . . . sculptures after I have recouped all my costs incurred in the creation of the sculptures and any such sale.”

The trial court found in favor of Costner, finding that the sculptures were “agreeably displayed elsewhere.” First, the sculptures were placed “elsewhere” because any place that is not The Dunbar satisfied this contractual provision. Furthermore, the sculptures were found to have been “agreeably displayed” at the alternative location because Detmers had been involved and informed during the location and design process and even spoke at Tatanka’s grand opening. As a result, she could not have reasonably thought that The Dunbar would still be built at some further time in the future.

March 27, 2012

Former Virginia Attorney Enjoined from Frivolous Litigation

by Lee E. Berlik

When former attorney Ann Marie Miller had a bone to pick with Jennifer Ann Kelley, Miller used her knowledge of the legal system to represent herself in numerous suits of questionable merit against Kelley, according to Judge Wilson of the Western District of Virginia. In Miller v. Kelley, the court held that although it could not award Kelley attorney’s fees nor impose Rule 11 sanctions, it could enjoin Miller from filing any future frivolous pro se lawsuits in its district against Kelley.

After the court dismissed Miller’s state-law libel claim for failure to prosecute, Kelley sought attorney’s fees under 28 U.S.C. § 1927, sanctions under Federal Rule of Civil Procedure 11, and an order enjoining Miller from filing future suits against Kelley without prior judicial leave. The court found that it could not award fees because 28 U.S.C. § 1927 does not apply to pro se litigants, and it refused to impose sanctions because the “safe harbor” provisions of Rule 11 preclude the filing of any Rule 11 motion after the conclusion of a case. However, the court issued an injunction prohibiting Miller from filing future pro se actions against Kelley, relying on the All Writs Act, 28 U.S.C. § 1651(a) (2006) and four factors set forth by the Fourth Circuit.

The All Writs Act authorizes the sparing use of pre-filing injunctions when a litigant repeatedly files frivolous suits. The Fourth Circuit has set forth factors to evaluate in determining whether a pre-filing injunction is warranted: 1) the party’s history of litigation, in particular whether she has filed vexatious, harassing, or duplicative lawsuits; 2) whether the party filed her cases on a good faith basis or only to harass; 3) the extent of the burden on the courts and other parties resulting from the party’s filings; and 4) the adequacy of alternative sanctions.

March 18, 2012

Virginia Tortious Interference Law More Permissive than Georgia

by Lee E. Berlik

In Virginia, to state a claim for tortious interference with contractual relationships, a plaintiff generally must allege (1) the existence of a valid contractual relationship or business expectancy; (2) knowledge of the relationship or expectancy on the part of the interferor; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted. A person must be a stranger to a contract to tortiously interfere with it; one cannot interfere with his own contract. Some states take this “stranger” requirement further, holding that a plaintiff can sue a defendant for tortious interference only if the defendant is a stranger to both the contract and the underlying business relationship giving rise to the contract.

In those states adhering to the so-called Stranger Doctrine, third-party beneficiaries are not considered strangers to the contract even though they are not parties to it. If a defendant has a legitimate interest in either the contract or a party to the contract, the defendant is not considered a stranger. In Georgia, for example, there can be no tortious interference claim where the plaintiff and defendant were parties to “a comprehensive interwoven set of contracts.” A recent unpublished opinion from the 11th Circuit shows how restrictive this rule can be.

In GT Software, Inc. v. webMethods, Inc., GT Software brought a tortious interference claim against webMethods after webMethods instructed Action Motivation, Inc., to withhold sales leads gathered by GT at Integration World, a convention hosted by webMethods in November 2006. GT had issued a news release that webMethods believed contained certain inaccuracies about one of its partner companies, so webMethods removed GT’s representatives from the convention and instructed TBA Global, the company it had hired to run the convention, to ensure that GT did not receive any of the sales leads that GT had collected during the convention using scanners provided by Action Motivation.

March 7, 2012

Trademark Infringement Action Filed Against Urban Outfitters

by Lee E. Berlik

The Navajo Nation has sued retailer Urban Outfitters and its subsidiaries for trademark infringement, trademark dilution, and related claims. In the suit, filed in the District of New Mexico, the tribe seeks monetary damages and an injunction against using the “Navajo” and “Navaho” names in connection with marketing goods that compete directly with Navajo Nation’s products.

According to the Complaint, Urban Outfitters has been using “Navajo” and “Navaho” on a line of clothing and accessories that competes directly with products offered by Navajo Nation. One of the tribe’s most valuable assets is its NAVAJO trademark which it has used to market such products for a century and a half. That trademark has been registered for over sixty years. The Complaint alleges that through its retail stores, online stores and catalog, Urban Outfitters has sold over twenty “Navajo” products, using geometric patterns similar to ones the Navajo Nation has created over the years, ranging from earrings and tunics to undergarments and liquor flasks. The Navajo Nation takes particular exception to the marketing of flasks bearing the tribe’s name, mark and design, because the sale and consumption of alcohol is prohibited on the Navajo reservation.

Navajo Nation asserts that Urban Outfitters’ actions are “designed to convey to consumers a false association or affiliation with the Navajo Nation, and to unfairly trade off of the fame, reputation, and goodwill of the Navajo Nation’s name and trademarks.” Lawyers for the tribe argue that consumers are being led to believe that Urban Outfitters has contracted with the tribe to sell its products under one of its registered trademark names but that, in fact, Urban Outfitters has no license or sponsorship relationship with the tribe that would permit the company and its subsidiaries to use any of these trademarks. The trademark case includes claims that Urban Outfitters has been diluting the NAVAJO mark’s distinctiveness (dilution by blurring) and harming the mark’s reputation (dilution by tarnishment). The tribe also asserts the company has violated the Indian Arts and Crafts Act by displaying and marketing the products so as to suggest they are authentic Indian-made products.

February 21, 2012

Noncompete Covenants and Covenants Restricting Land Tested By Different Standards

by Lee E. Berlik

Under Virginia law, covenants restricting the free use of land are not favored and must be strictly construed. Restrictive covenants that are unreasonably broad will not be enforced. There is a growing body of case law in Virginia governing noncompete covenants in employment contracts, but does that body of law apply to restrictive covenants in deeds? Earlier this month, the Fourth Circuit answered that question in the negative.

BP Products v. Stanley involved an appeal from the Eastern District of Virginia by BP Products North America, which had lost its motion for summary judgment against Charles V. Stanley and his business, Telegraph Petroleum Properties. BP had sued Stanley and his company to enforce a restrictive covenant in a deed, but the district court found that the restriction was overbroad and unenforceable. The Court of Appeals disagreed and reversed, finding that when analyzed under the appropriate test, the challenged prohibition was too inconsequential to invalidate the entire covenant.

Stanley leased a service station from BP in Alexandria, Virginia, subject to an agreement containing a restriction against selling fuel that was not BP-branded. Following a disagreement regarding the price of the fuel, Stanley stopped selling BP-branded fuel and started selling AmeriGO fuel, prompting the lawsuit. BP Pump.jpg

January 29, 2012

Arbitrating Arbitrability

by Lee E. Berlik

Arbitrability–whether a contract creates a duty for the parties to arbitrate (rather than litigate) a particular grievance–is ordinarily a question of law to be decided by the court. Virginia, however, adheres to a public policy favoring freedom to contract. If two sophisticated businesses reach a deal providing that any arbitrability issues shall be resolved by binding arbitration rather than decided by a court, Virginia courts will enforce that agreement as written and defer to the arbitrator on questions of arbitrability.

An example is found in the recent case of Systems Research and Applications Corporation v. Rohde & Schwarz Federal System, Inc. SRA, a government contractor for the United States Agency for International Development (USAID), hired Rohde & Schwarz as a subcontractor for a project involving telecommunication services equipment in Lebanon. R&S did not complete its performance by the contract deadline and SRA refused to pay its invoices. SRA took the position that the dispute was a “Government Contract Dispute” which, under the terms of the subcontract, could not be submitted to arbitration. R&S disagreed and initiated arbitration proceedings. SRA responded with a declaratory judgment action and a motion to stay the arbitration. The court denied the motion to stay and dismissed the case.

The court found that parties may provide by contract that all matters will be subject to arbitration, including questions of arbitrabilty. However, because allowing an arbitrator to decide issues of arbitrability is contrary to the general rule, “courts should not assume that the parties agree to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.”

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