The Virginia Business Litigation Blog

September 10, 2021

Bare Legal Conclusions Insufficient to Satisfy Notice Pleading Requirements

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)).

July 20, 2021

Professor’s Trade Secrets Claim Against EVMS Allowed to Proceed

by Lee E. Berlik

According to the allegations of a complaint filed by Amy H. Tang, a professor of microbiology and molecular cell biology, against the Eastern Virginia Medical School (“EVMS”), EVMS misappropriated her trade secrets and discriminated against her due to her Chinese ethnicity. She sued the school for violations of both the Defend Trade Secrets Act and the Virginia Uniform Trade Secrets Act, plus a host of other claims. EVMS was successful in getting some of the claims dismissed, but the court ruled that Professor Tang had sufficiently alleged all the requisite elements of a trade secrets case to survive the school’s motion to dismiss.

Tang’s allegations were essentially as follows. EVMS employs Tang as a Professor of Cancer Biology. She had developed certain treatments related to the exploitation and use of ethylenediaminetetraacetic acid for anti-NFkB, anti-inflammatory, and antiseptic treatments, which she disclosed to EVMS in an invention disclosure. Tang claimed these treatments were entitled to trade secret protection considering she had taken measures to keep the information secret (including securing all data electronically and requiring staff to leave data locked within the lab facilities and password-protected computer systems) and that the information had independent economic value.

June 19, 2021

Violation of Corporate Opportunity Doctrine Held Actionable

by Lee E. Berlik

The fiduciary duty owed by corporate officers and directors includes an obligation not to usurp a corporate business opportunity for personal gain but to allow that opportunity to be enjoyed by the corporation, to which it is said to belong. (See Feddeman & Co. v. Langan Assocs., P.C., 260 Va. 35, 46 n.1 (2000)). As fiduciaries, officers and directors have a duty of loyalty that requires them to act in the best interests of the corporation at all times. A breach of fiduciary duty may arise if a corporate officer becomes personally interested in an opportunity of legitimate interest to his employer. Conflicts of interest must be avoided and all corporate opportunities must be presented to the corporation before the officer takes it for himself or offers it to others. If a corporate officer violates this so-called “corporate opportunity doctrine,” the corporation may sue for damages.

Technically, a violation of the corporate opportunity doctrine is a breach of fiduciary duty, but according to a recent opinion from the Western District of Virginia, it doesn’t really matter what you call it; it’s a tort, for which monetary damages can be recovered.

April 24, 2021

Emotional Distress Doesn’t Always Require Corroboration

by Lee E. Berlik

Emotional distress claims are tricky because they are so easily faked. Anyone can assert that they suffered unbearable pain and suffering as the result of a defendant’s wrongful act, regardless of the degree of humiliation actually felt. It’s kind of hard to disprove another person’s subjective emotions. The Fourth Circuit has criticized emotional-distress cases for being “easily susceptible to fictitious and trivial claims” and has warned that awards of emotional-distress damages can be set aside when based solely on the plaintiff’s own conclusory, unsupported, subjective assertions. (See Hetzel v. County of Prince William, 89 F.3d 169, 171-72 (4th Cir. 1996); Price v. City of Charlotte, 93 F.3d 1241, 1250 (4th Cir. 1996)). In Virginia state court, however, the Virginia Supreme Court has clarified that corroborating evidence of emotional injury is not a prerequisite for obtaining such damages. And emotional-distress damages can be substantial.

Not every claim allows for the recovery of emotional-distress damages. In fact, as a general rule, emotional-distress damages are not recoverable absent accompanying physical harm or wanton and willful conduct. (See Fairfax Hosp. By & Through INOVA Health Sys. Hosps., Inc. v. Curtis, 254 Va. 437, 445–46 (1997)). An exception to this rule is where a cause of action exists independently of the emotional distress, such as when compensatory damages are expressly permitted by statute. (See Sea-Land Serv., Inc. v. O’Neal, 224 Va. 343, 354 (1982) (“[W]e have approved the recovery of damages for humiliation, embarrassment, and similar harm to feelings, although unaccompanied by actual physical injury, where a cause of action existed independently of such harm.”) Earlier this month, the Supreme Court of Virginia dealt with such a case and held that emotional distress damages were recoverable even in the absence of monetary damages or physical injuries.

March 13, 2021

Forum Non Conveniens Is About Fairness to Everyone (Not Just You)

by Lee E. Berlik

If you get sued in an inconvenient, far-away forum and want the court to consider moving the case to a court closer to home–and you want to flex your Latin proficiency–file a motion for “forum non conveniens.” This common law doctrine allows a court to dismiss or transfer a case, even one filed properly in a permissible venue, if an alternative forum is available and would be more convenient to the parties and witnesses. The doctrine is codified at 28 U.S.C. § 1404 (applicable in federal court) and Va. Code § 8.01-265 (applicable in state court). When bringing such a motion, however, keep in mind that the court is going to want to look at the totality of the circumstances and not just what’s most convenient to the moving party.

A party seeking to dismiss a case for forum non conveniens must show that an alternative forum is (1) available; (2) adequate; and (3) more convenient in light of the public and private interests involved. (See Jiali Tang v. Synutra Int’l, Inc., 656 F.3d 242, 248 (4th Cir. 2011)). The party seeking dismissal or transfer has the burden of persuading the trial court that considerations of convenience, fairness, and judicial economy warrant invoking forum non conveniens. (See Galustian v. Peter, 591 F.3d 724, 731 (4th Cir. 2010); Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 432 (2007)). In examining the convenience of parties and the interests of justice, courts will typically consider one or more of the following factors:

the plaintiff’s choice of forum;
the state that is most familiar with the governing law;
the location where agreements were negotiated and executed;
the parties’ contacts with the forum;
the contacts relating to plaintiff’s cause of action in the chosen forum;
the cost of litigation in the competing forums;
the location of witnesses;
the availability of compulsory process to compel attendance of unwilling non-party witnesses;
the ease of access to sources of proof; and
the existence of a valid forum-selection clause in a contract between the parties.

February 2, 2021

Severance and Bifurcation

by Lee E. Berlik

In both federal and state court, the rules give the court discretion to order a case to be divided into two or more parts, each to be tried separately. See Va. Code 8.01-272 (“The court, in its discretion, may order a separate trial for any claim”); Fed. R. Civ. P. 42 (“the court may order a separate trial of one or more separate issues, claims, crossclaims, counterclaims, or third-party claims”). The term “bifurcation” normally refers to the separation of certain issues in the case, while “severance” normally refers to the removal of claims or parties. When issues are bifurcated, the issues typically remain part of the same case; they are just tried separately. For example, when a party has a claim that allows for the recovery of reasonable attorneys’ fees, the decision might be made to bifurcate the attorneys’ fees issue so that the main issues in the case don’t get muddied by lengthy arguments about the reasonableness of attorneys’ fees. If the court orders the fee issue to be tried separately, the issue would still be decided as part of the same case, resulting in a single judgment. Severance, on the other hand, normally involves severing a claim from the lawsuit such that any separate trial on the severed action would be independent of the original action.

Fed. R. Civ. P. 42 permits a court to order severance “[f]or convenience, to avoid prejudice, or to expedite and economize” trial. Relevant considerations include (1) whether the issues are significantly different from one another in the two cases; (2) whether the severable issues require different witnesses and documentary proof; (3) any prejudice to the non-moving party if the motion is granted; and (4) any prejudice to the moving party if the motion is denied. (See Chmura Economics & Analytics, LLC v. Lombardo, Civ. Action 3:19cv813 (E.D. Va. Dec. 18, 2020)). Similarly, bifurcation of issues in state court “is a matter for the trial court’s discretion and requires consideration of whether any party would be prejudiced by granting or not granting such request, as well as the impact on judicial resources, expense, and unnecessary delay.” (Allstate Ins. Co. v. Wade, 265 Va. 383, 393 (2003)).

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.

September 15, 2020

Federal Courts May Consider Hearsay Evidence at Preliminary Injunction Hearings

by Lee E. Berlik

Under Federal Rule of Evidence 802, hearsay evidence is generally not admissible in court. In preliminary injunction proceedings, however, the rules of evidence don’t necessarily apply. Here in the Fourth Circuit, courts relax evidentiary rules when faced with motions for preliminary injunctive relief, mostly due to practical considerations such as the exigent nature of the proceeding and the unavailability of a detailed factual record at the very outset of the case. There is some disagreement among federal circuit courts on this issue, but here in Virginia, “district courts may look to, and indeed in appropriate circumstances rely on, hearsay or other inadmissible evidence when deciding whether a preliminary injunction is warranted.” (See G.G. ex rel. Grimm v. Gloucester Cty. Sch. Bd., 822 F.3d 709, 725 (4th Cir. 2016), vacated on other grounds, 137 S. Ct. 1239 (2017)). Failure to consider hearsay evidence at preliminary injunction proceedings may even be deemed an abuse of discretion.

Relying on hearsay evidence is exactly what the district court did when it granted the plaintiff’s motion for a temporary restraining order and/or preliminary injunction in the case of Edward D. Jones & Co. v. Samuel (Ed) Clyburn, Jr., a non-solicitation case filed in the Roanoke Division of the Western District of Virginia. Here’s what happened, according to the facts recited in the opinion:

August 16, 2020

Spoliation of Evidence Can Result in Dismissal or Default

by Lee E. Berlik

When specific and identifiable litigation becomes reasonably foreseeable, those likely to be involved in the litigation and with awareness of their likely involvement have a duty to preserve potentially relevant evidence. Failure of such a party to take reasonable steps to preserve the evidence–or intentional alteration, concealment, or destruction of evidence–is known as “spoliation of evidence” (often misspelled as “spoilation of evidence,” which is not a thing) and can result in severe sanctions if other litigants are prejudiced by their inability to use the missing evidence at trial. (See Va. Code § 8.01-379.2:1) Typically, the court will instruct the jury that it may (or must) presume that the evidence–had it been preserved–would have been unfavorable to the party who failed to preserve it. Sometimes, however, in particularly egregious circumstances, the court can dismiss the action (if the plaintiff is guilty of spoliation) or enter a default judgment (if spoliation was committed by the defendant).

Case in point: QueTel Corp. v. Hisham Abbas, No. 18-2334 (4th Cir. (Va.) July 16, 2020). QueTel brought this action against Hisham Abbas, Shorouk Mansour, and Finalcover, LLC, for misappropriation of trade secrets, copyright infringement, and other claims. The gist of the lawsuit was that Abbas–a former QueTel employee–allegedly stole source code from QueTel’s copyrighted software (TraQ Suite 6) and used it in a competing product (CaseGuard). QueTel sent the defendants a cease-and-desist letter in which it demanded that they:

cease infringing on QueTel’s intellectual property including the source code underlying the TraQ Suite 6 software;
cease all advertising, promotion, and sale of the CaseGuard software;
provide an accounting of all sales of the CascGuard software made to date; and
allow QueTel to copy and inspect a complete copy of all versions of the CaseGuard source code as well as any computers that Abbas used during the period from January l, 2014 to the present.

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