The Virginia Business Litigation Blog

September 27, 2019

Tortious Interference with Anticipated Future Contract

Virginia does recognize a legal cause of action for improper interference with an anticipated business contract. The tort is known as “tortious interference with business expectancy,” “tortious interference with future economic benefit,” “tortious interference with prospective economic advantage,” or some variant of that phrase. It’s what you sue for when your business is about to close on a big deal but then the whole thing is called off as the result of some form of meddling by a third party. You’re not suing for breach of contract at this point because there is no contract. Instead, you’re suing for the loss of an anticipated future economic benefit. For the claim to be valid, however, there must be reason to believe that you would have closed on the deal were in not for the defendant’s unlawful conduct. There is no claim for interference with a contract you merely hoped to enter into, or for interference with a mere possibility of some economic benefit.

Tortious interference with business expectancy requires proof of the following elements: (1) the existence of a business relationship or expectancy, with a probability (not just possibility) of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship or expectancy; (3) a reasonable certainty that absent defendant’s intentional misconduct, plaintiff would have continued in the relationship or realized the expectancy; and (4) damages to the plaintiff.

August 10, 2019

Tell the Jury About Your Plea in Bar Now, or Later

by Lee E. Berlik

If you get sued in Virginia on a claim your lawyer tells you is likely barred by the statute of limitations, you can raise the defense by way of a so-called “plea in bar.” A plea in bar is a pleading that presents a single set of facts that, if proven true, would bar the plaintiff’s claim from going forward. For example, if you can prove that the plaintiff’s claim arose earlier than the maximum amount of time permitted under the applicable statute of limitations, you may choose to file a plea in bar at the outset of the case to ask the court to dismiss it for that reason. Are you required to make this request at the outset of the case? No. If for some strategic reason you’d rather keep the defense in your back pocket to tell the jury about at trial, you can do that.

The issue came up recently in Ferguson Enterprises, Inc. v. F.H. Furr Plumbing, Heating and Air Conditioning, Inc., or as I like to refer to it, “Furr v. Ferguson.” Furr sued Ferguson in Prince William County on claims arising out of an alleged fraudulent-pricing scheme. Ferguson, a distributor of Trane-branded HVAC systems, had negotiated a pricing structure with Trane that allowed it to charge customers like Furr a discounted price and then receive a rebate or “claim back” from Trane. Furr entered into a contract with Ferguson back in 1995, but eventually came to believe that Ferguson was charging Furr a price above the discounted rate authorized by Trane. Furr sued in 2013 for fraud, unjust enrichment, breach of contract, and other claims.

July 9, 2019

Business Conspiracy Claims Survive Under Third-Party Rule

by Lee E. Berlik

Not long ago, Serco, Inc., won summary judgment on various claims asserted against it by L-3 Communications Corp. and L-3 Applied Technologies, Inc., including claims for statutory business conspiracy, common law conspiracy, and tortious interference with business expectancy. On appeal to the Fourth Circuit, however, the court found that the district court erred in granting summary judgment on the conspiracy claims and sent the case back to the Eastern District of Virginia for further proceedings.

The dispute centered around rights to a lucrative government contract. In 2004, the Air Force awarded a prime contract to Serco that called for testing and upgrading services to protect certain Air Force sites from “high altitude electromagnetic pulse” (“HEMP“) events. The Air Force would periodically issue work orders for various projects, and if Serco could not complete the work itself, it could issue a request for proposals (“RFP”) to invite subcontractors to bid on the work.

May 18, 2019

When Preemption Leads to Unanticipated Removal

by Lee E. Berlik

When you sue someone, you sometimes have a choice between filing in state court or federal court, and courts will generally defer to your preferred forum. In appropriate circumstances, however, a defendant can remove the case from state court to federal court. Under the current removal statute, 28 U.S.C. § 1441, removal is permitted by the defendant in any civil action brought in a state court of which the district courts of the United States have original jurisdiction. For those wishing to keep their cases in state court, care must be taken to ensure there are no grounds for federal-court jurisdiction. Some cases get removed to federal court before the plaintiff ever sees it coming.

The preemption doctrine can lead to such a result. Under this doctrine, a defendant may remove a cause of action that otherwise appears to lack federal question jurisdiction by asserting that federal law preempts the state law claim. This is because, under the Supremacy Clause of the Constitution, when state law and federal law conflict, federal law displaces (or preempts) state law.

April 21, 2019

To Dispute Enforceability of Noncompete, File Plea in Bar

by Lee E. Berlik

When the Virginia Supreme Court decided Assurance Data v. Malyevac a few years ago, most employment lawyers speculated that although Virginia law no longer permitted most non-compete cases to be disposed of summarily on demurrer, a procedural mechanism known as the “plea in bar” could still be used by defendants intent on challenging the enforceability of their noncompete agreements. Assurance Data held that “restraints on competition are neither enforceable nor unenforceable in a factual vacuum” and that evidence is ordinarily required to perform the analysis. Unlike demurrers, pleas in bar allow for the presentation of evidence, so it would seem that the plea in bar would be an appropriate way to dispute a noncompete. A new decision from the Circuit Court of Fairfax County agrees with this approach.

March 15, 2019

Under SCA, Cloud-Based Emails Remain in “Electronic Storage” Even After They’ve Been Read

by Lee E. Berlik

The Stored Communications Act (“SCA”) establishes a criminal offense for whoever “intentionally accesses without authorization a facility through which an electronic communication service is provided” or “intentionally exceeds an authorization to access that facility,” and by doing so “obtains, alters, or prevents authorized access to a wire or electronic communication while it is in electronic storage in such system.” 18 U.S.C. § 2701(a). The SCA also creates a civil cause of action, in which the plaintiff may obtain damages plus reasonable attorneys’ fees and other costs. 18 U.S.C. § 2707(b).

Federal district courts around the country have reached inconsistent conclusions when grappling with the issue of whether a particular communication is in “electronic storage” at the time it is accessed. The SCA defines electronic storage as “(A) any temporary, intermediate storage of a wire or electronic communication incidental to the electronic transmission thereof; and (B) any storage of such communication by an electronic communication service for purposes of backup protection of such communication.” 18 U.S.C. § 2510(17). Some courts have interpreted subsection (A) as applying only to “unopened” communications, reasoning that the “temporary, intermediate” language contemplates the interception of a communication before it reaches its intended recipient. Others, like Hoofnagle v. Smyth-Wythe Airport Comm’n, No. 1:15CV00008 (W.D. Va. May 24, 2016), found no reason to draw a distinction between “opened” and “unopened” communications for purposes of evaluating SCA liability. Similar disagreement exists with respect to subsection (B), where courts reached different conclusions about the relevance of whether it is the Internet Service Provider or user for whose benefit a backup copy of an email is made. Earlier this month, the Fourth Circuit weighed in on both issues for the first time.

February 20, 2019

So You Think You’re Going to Recover Attorneys’ Fees?

by Lee E. Berlik

Virginia courts are not fond of awarding attorneys’ fees in litigation, even to the prevailing party. The general rule in this country is that litigants are responsible for their own attorneys’ fees unless a contract or statute says otherwise. Even if you win a case, you still have to pay your lawyer and can’t force the losing party to reimburse you. Even if a statute authorizes recovery of legal fees, the judge will have discretion to determine the amount. Most statutes that allow recovery of legal fees only allow recovery of a “reasonable” amount, so if the judge feels that no amount of fees would be reasonable to assess against the other side, then no fees will be awarded. Let’s check out a recent case from Fairfax County.

Robert M. Swahn, Jr. v. Nouman Hussain was a dispute between neighbors. Before addressing the issue of whether one of the parties could recover legal fees as the “prevailing party” in the litigation, the court characterized the case (in the very first sentence of the opinion) as one in which “everyone loses.” You know you’re not getting an award of attorneys’ fees when the judge calls you a loser.

January 13, 2019

Non-Compete Clause Satisfies Janitor Test, Held Enforceable

by Lee E. Berlik

The best way to predict whether a particular noncompete clause will be deemed enforceable in a Virginia court is to read about how similar clauses have been treated by those same courts. No two cases are exactly alike, but non-compete agreements tend to incorporate similar language (mostly for the reason that lawyers don’t like to re-invent the wheel and do a lot of cutting and pasting from prior agreements when drafting such contracts for their clients). Back in November 2017, I wrote about O’Sullivan Films v. Neaves, in which the court held that it would be premature to rule on the enforceability of a noncompete clause without hearing evidence. Since then, the parties presented evidence to the court and the court reached a decision, so I thought it would be a good time to revisit the case here on the blog.

In its latest opinion, the court (the Western District of Virginia, Harrisonburg Division) doesn’t make any new law, but its ruling can serve as a guide to how courts are likely to interpret and apply in the future noncompetes using language similar to the language at issue in the O’Sullivan Films case. Here’s what the noncompete in that case said:

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December 4, 2018

Only Strangers to a Contract Can Interfere with It.

by Lee E. Berlik

You can’t interfere with your own contract. A contract is a bargained-for exchange that may entitle you to certain benefits, like money, products, or services. If you do not realize the benefit of your bargain because the other party does not honor the agreement, you may be entitled to sue for breach of contract. What you probably cannot do, if all we’re talking about is disappointed economic expectations resulting from the failure of one party to fulfill his end of the bargain, is sue for tortious interference with contract. From the moment tortious interference became recognized as a cause of action in Virginia in 1985, the claim has been available only against strangers to the contract at issue. In other words, if the person causing the interference is a party to the contract, the appropriate claim for the plaintiff to bring is for breach of contract and not tortious interference.

Under Virginia law, a claim for tortious interference consists of the following four elements:

the existence of a valid contractual relationship or business expectancy;
knowledge of the relationship or expectancy on the part of the interferor;
intentional interference inducing or causing a breach or termination of the relationship or expectancy; and
resultant damage to the party whose relationship or expectancy has been disrupted.

(See Schaecher v. Bouffault, 290 Va. 83 (2015)). In the 1985 case of Chaves v. Johnson, the Virginia Supreme Court explained that these elements can only be asserted against someone outside the contractual relationship:

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October 15, 2018

Are Attorneys’ Fees Clauses Enforceable?

by Lee E. Berlik

When you enter into a contract with a business, it’s not uncommon for the contract to contain a clause requiring you to be responsible for reimbursing the business for the legal fees it incurs should it need to bring a lawsuit against you for amounts you owe under the contract. Typically, such attorneys’ fees clauses are buried in lengthy form contracts presented on a take-it-or-leave-it basis by large companies to their consumers, who can choose between signing the contract and receiving niceties like cable TV and Internet service, or refusing to sign and being denied those things.

This strikes a lot of people as unfair. If contracts are supposed to be bargained-for agreements, why should consumers be required to sign whatever pre-printed, boilerplate legaleze is foisted upon them by large corporations in order to receive necessary services? Are there any limits to what companies can force their customers to “agree” to? Contracts requiring the “little guy” to pay the attorneys’ fees incurred by the much larger party are particularly concerning considering the high cost of legal services; consumers usually struggle to afford their own attorneys–requiring them to also pay the other side’s legal team often makes litigation a financially ruinous proposition.

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