The Virginia Business Litigation Blog

May 23, 2017

How To Sue for Fraud in Virginia

Actual fraud is defined in Virginia as a misrepresentation of a material fact, made knowingly and intentionally, with the intent to mislead another person, when the person to whom the misrepresentation was made reasonably relies on that misrepresentation and suffers damages as a result. In other words, you commit fraud when you lie to someone for the purpose of tricking that person into doing something (or refraining from doing something), and the person believes you and falls for it. The misrepresentation does not need to be expressed in words; it can be communicated through nonverbal conduct. Sometimes even silent non-communication can amount to “fraud by omission.” If you know that remaining silent would cause someone to reasonably (but erroneously) infer certain facts and you intentionally fail to speak up, that could be actionable as fraud. If the misrepresentation causes the recipient to do something he would not have done had he not heard the lie, he is said to have relied on the misrepresentation.

If you don’t want your fraud lawsuit to get dismissed at the outset, be sure to allege in the complaint that the misrepresentation was made concerning a present or past fact. A common mistake is to confuse fraudulent misrepresentations with broken promises. You can sometimes sue for a broken promise, but a broken promise is not fraud because a promise is an undertaking to take some action in the future. Assuming you’re not psychic or clairvoyant (which is an assumption the judge is going to make, I assure you), you don’t know what the future holds, so you can’t “misrepresent” the future. If you say you will do something in the future but then you don’t actually do it, you have broken a promise and perhaps breached a contract; you haven’t committed fraud.

April 22, 2017

Accessing Former Employer’s Google Account May Violate CFAA

by Lee E. Berlik

Suppose your employer asks you to create a Google account for the company. So you do. You set up everything yourself: Google Drive, Google+, Gmail–the works. You even set the password to your dog’s name. All of Google’s terms and conditions are accepted by you personally when creating the account. You proceed to use the account on behalf of the company, using Google Drive to store hundreds of company documents. Then you leave your job. Is the Google account yours? You created it, so are you free to make whatever use of the account you wish? Can you delete it?

Marcelo Cuellar thought so, but he was wrong. According to papers filed in Estes Forwarding Worldwide v. Cuellar in the Eastern District of Virginia, here are the facts. Cuellar joined Estes Forwarding Worldwide (“EFW”)–a transportation logistics company–in 2010. EFW has developed trade secrets relating to the best transportation solutions for various types of shipments, including information about type of freight, freight dimensions, routing decisions, vendor selection, and so on. It keeps this information in spreadsheets and other electronic documents.

March 9, 2017

Hypothetical Overbreadth May Invalidate Noncompete

by Lee E. Berlik

The “janitor test” isn’t the only hypothetical scenario that, when applied to a non-compete agreement governed by Virginia law, can render the contract unenforceable. In NVR, Inc. v. David Nelson, the federal court in Alexandria imagined a number of hypothetical situations when struggling to interpret an ambiguous geographic limitation in a noncompete agreement. When some of those hypotheticals resulted in an unreasonable restriction, the court decided the noncompete was overly broad and therefore unenforceable.

Noncompete agreements are disfavored in Virginia because they restrain free trade. For this reason, if such an agreement is ambiguous, it will be construed in favor of the employee. Before a court will enforce the agreement, the employer will have to demonstrate that the restraint is no greater than necessary to protect a legitimate business interest; that it is not unduly harsh or oppressive in curtailing the employee’s ability to earn a livelihood; and that the terms are reasonable in light of sound public policy. Courts examine reasonableness primarily by looking at three factors: function (i.e., the activity being restricted), geographic scope (the area in which the restriction applies), and duration.

February 6, 2017

Public Disclosure of Discovery

by Lee E. Berlik

If you look up “deposition” on YouTube, you’ll likely find over 200,000 videos to choose from. Many include graphics and commentary that the uploader added after the deposition was taken, usually with the aim of mocking the witness being deposed. The purpose of the discovery process is to require witnesses and corporations in possession of information potentially relevant to a case to divulge information to the requesting party for the purpose of assisting in the preparation of a litigated dispute for trial. Depositions are a specific form of discovery designed to allow litigants to obtain sworn testimony from witnesses in advance of the trial date and to get that testimony in a video format suitable for presenting to a jury. With the soaring popularity of video-sharing social-media sites, the temptation can be great to humiliate your opponent in litigation by posting embarrassing video depositions (or other discovery responses) on Facebook or YouTube, either during the pendency of the litigation or after it has ended. Is this permissible in Virginia?

There are authorities coming out on both sides of this question. On the one hand, “pretrial depositions and interrogatories are not public components of a civil trial.” (See Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33 (1984)). Thus, while the public generally has a common law right of access to court orders and legal proceedings, information collected through discovery is not a matter of public record to which that right extends. In other words, regardless how entertaining it might be to watch a celebrity make a fool of himself at a deposition, it’s really nobody’s business outside of the confines of the court proceeding. On the other hand, dissemination of pretrial discovery materials by the receiving party is not automatically prohibited absent a protective order.

January 7, 2017

Remedies for a Broken Engagement or Marriage

by Lee E. Berlik

So your fiancée broke off your engagement because she fell in love with your best friend and decided she likes him better. On top of that, she won’t return the $20,000 engagement ring you bought her. So the marriage is off, your finances are in shambles, and your (former) best friend is at least partially to blame because he asked your former fiancée on a date when he knew she was already engaged. What legal rights do you have?

Engagements are normally a happy and exciting time for the couple, but not all engagements result in marriage. Circumstances change, sparks fade, and life intervenes. Breakups are never easy, but introducing valuable personal property into the mix complicates things further. Only the most vindictive and bitter ex-boyfriends and girlfriends would demand the return of small gifts exchanged during a relationship, but attitudes change significantly when a $20,000 or $50,000 diamond is at stake. Who gets the ring if the engagement is called off? And what liability does the best friend have for seducing your fiancée?

December 19, 2016

Fraud by Hindsight Insufficient to State Claim

by Lee E. Berlik

To sue a business for fraud in Virginia, a plaintiff must allege (and eventually prove) (1) a false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party misled, and (6) resulting damage to the party misled. When a business breaches a contract, it is not necessarily indicative of fraud. Broken promises are covered by the law of contracts rather than the law of fraud. Some courts have recognized, however, that if a corporation, at the time of making a contractually-enforceable promise, had no intention of ever actually making good on that promise, an aggrieved party could sue for fraud on the theory that the defendant impliedly misrepresented its true intentions.

This does not mean that a plaintiff can convert any ordinary breach-of-contract case into a fraud case. It would be all to easy to simply claim, any time a contract with your company is breached, and with the benefit of hindsight, that the party breaching the contract must have never had any intention of ever performing it. Under Rule 9(b), fraud claims must be pled with particularity so that well-meaning defendants who are unable to perform contractual obligations don’t suffer undue harm to their reputations or have to defend against frivolous lawsuits. To file a fraud complaint on the mere assumption that a breaching party must have committed fraud based solely on its lack of performance is inviting the court to dismiss the case for failure to state a claim.

November 8, 2016

How to Win Millions of Dollars in Court

by Lee E. Berlik

If you or your business needs to bring a lawsuit, it’s natural to wonder whether you may be entitled to recover millions of dollars. You read about celebrities winning $115 million against magazines who published unauthorized photos, or you hear about women winning millions of dollars against fast-food chains after spilling hot coffee into their laps. Litigation sounds wonderful, doesn’t it? Short of winning the lottery, how else can someone obtain so much money is so short a time with such a small amount of effort? Well, the people you hear about who have won enormous monetary awards in court (at least those that have been upheld on appeal) generally have one thing in common: they suffered an enormous amount of harm as a result of something truly devastating that was done to them, causing them severe pain, extreme emotional distress, or vast economic hardship. In other words, those winning huge jury verdicts tend to be those who have suffered the most pain. You don’t necessarily want to be that person.

The legal term we use when referring to financial awards obtained in court is “damages,” of which there are essentially two types, compensatory and punitive. Compensatory damages are those designed to compensate a plaintiff for the loss or injury actually suffered as a result of the defendant’s conduct. It includes things like damage to property, personal injuries, physical pain, lost economic expectations, and emotional suffering. Compensatory damages are not supposed to give the plaintiff a windfall, make him rich, or punish the defendant. Rather, they are designed simply to make the plaintiff “whole,” to the extent that can be accomplished. They are designed to put the plaintiff roughly in the same position he was in before the wrong was committed.

October 10, 2016

Noncompete Restriction Against Owning Stock Not Necessarily Unenforceable

by Lee E. Berlik

When the Virginia Supreme Court decided Home Paramount Pest Control Companies v. Justin Shaffer five years ago, it stressed the importance of the “function” consideration in analyzing the enforceability of non-compete agreements. To be enforceable, the court held, a noncompete agreement should not purport to restrict the employee from engaging in activities having nothing to do with the tasks performed for the former employer. The court found particularly troublesome the fact that the noncompete at issue in the Home Paramount case barred the former employee from “engaging even indirectly…in the pest control business, even as a passive stockholder of a publicly traded international conglomerate with a pest control subsidiary.” What legitimate business interest would an employer have in preventing its former employees from owning stock in its competitors if the employee was not actually engaging in competitive activities? The court couldn’t identity any, so it held the noncompete was overly broad and therefore unenforceable. Since Home Paramount was decided, noncompete agreements containing restrictions against owning stock are being scrutinized more carefully. But a case decided by the Eastern District of Virginia a few weeks ago shows that such noncompete agreements will not necessarily be declared unenforceable.

The case was between Hair Club for Men, LLC, and its former employee, Lailuma Ehson, and her new company, Illusion Day Spa, LLC. Hair Club is in the business of hair replacement and hair therapies. Ehson worked at its Tysons Corner location from 2011 until 2015. When she took the job, she signed a “Confidentiality, Non-Solicitation and Non-Compete Agreement.” The noncompete clause prevented Ehson from engaging in the business of hair replacement or becoming interested in such business, directly or indirectly, “as an individual, partner, stockholder, director, officer, clerk, principal, agent, employee, or in any other relation or capacity whatsoever…”

September 11, 2016

How Some Independent Contractors May Be Able to Escape Their Noncompete Restrictions

by Lee E. Berlik

In Virginia, independent contractors can be held to noncompete agreements to the same extent as regular employees. But beware. A Fairfax County Circuit Court judge decided last month that all bets are off if the “independent contractor” should really have been classified as an employee. Although the Virginia Supreme Court has not yet spoken on the subject, Judge John M. Tran crafted a lengthy, well-reasoned opinion in Reading and Language Learning Center v. Sturgill holding that misclassifying employees as independent contractors violates Virginia public policy and is grounds for voiding the contract–including its noncompete and nonsolicitation provisions–even if the misclassification is unintentional. In other words, reasoned Judge Tran, independent contractors will only be bound by noncompete agreements if they have been properly classified as independent contractors.

Reading and Language Learning Center (“RLLC”) is a speech therapy practice that provides services to people with speech, language, or reading disorders. In 2014, Charlotte Sturgill was a recent graduate of a master’s program in speech-language pathology. To obtain her license and certification, Sturgill was required to complete a supervised clinical fellowship, which she arranged to do with RLLC. RLLC hired her with an agreement titled “Agreement between Private Practitioner and Independent Practitioner” which classified Sturgill as an independent contractor and contained the following non-compete clause:

RLLC and the Consultant agree not to employ any contracted employee or contract with any current client of the Other for a period of two (2) years after the expiration of the contract between RLLC and the Consultant.

August 9, 2016

Fairfax Circuit Court Procedure for Motions Day

by Lee E. Berlik

Suppose you find yourself involved in litigation in Fairfax County, Virginia, and you want the court to take some kind of action. Perhaps you want the judge to order the plaintiff to attach a copy of the contract to the complaint. Maybe it’s a libel case and you want to ask to court to dismiss the case for failing to plead the requisite elements of defamation. Or maybe the statute of limitations has passed and you want the court to dismiss the case for that reason. If you want the court to do something, you need to file a motion. And the procedures for bringing that motion to the attention of the court differ from county to county.

This article deals with the local rules in Fairfax County only. (Technically, they’re not “rules,” but “guidelines.”) Procedures in neighboring jurisdictions like Loudoun County, Prince William County, and Alexandria differ slightly but share most of the basic framework. If there is sufficient interest among the subscribers to this blog, I may cover those jurisdictions in future posts. This is also not a tutorial about how to draft persuasive motions. Rather, it is intended as a guide to the procedural considerations in bringing your motion before the court. Of course, if you are an out-of-state attorney representing a client with a pending case in Fairfax County, your best best is to retain and work with local counsel.

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