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.
ITility is a government contractor specializing in program management, systems engineering, enterprise services, system testing services, education and training, and administrative support. Staffing Resource Group (“SRG”) is a staffing firm that helps businesses like ITility compete on government contracts by providing them with skilled resources. In December 2018, the United States Special Operations Command (“SOCOM”) issued a solicitation seeking a contractor to provide geospatial engineering, modeling and simulation engineering, and IT engineering support services. Bidders were required to submit in their respective proposals the resumes of key personnel that they were proposing, as well as signed letters of intent from each such individual.
ITility and SRG decided to work together to submit a competitive proposal in response to the solicitation. They entered into a Teaming Agreement in which SRG agreed to provide recruiting services and to submit resumes of potential candidates and certifications as required by the solicitation to be included in the technical volume of ITility’s proposal. In January 2019, SRG’s Vice President of Government Services (a Mr. Hire, if you can believe it) provided ITility with several potential candidates, including Sean Hord and Zackary Shifflett. ITility decided to use them, so it asked SRG to obtain and provide signed letters of intent from both candidates. SRG complied. Or so it seemed.
The complaint alleges that SRG actually forged both Hord’s and Shifflett’s signatures and had not actually received permission from either candidate to be included in ITility’s proposal to SOCOM. ITility ended up winning the contract award, but once it was revealed that SRG had supplied ITility with candidates who had not agreed to participate in the proposal and had forged their signatures, SOCOM vacated the award and canceled the entire solicitation.
ITility was not too pleased about losing the contract and filed a lawsuit against SRG and Mr. Hire for (among other things) tortious interference with business expectancy. After all, all elements of the claim appeared to be satisfied: (1) ITility had a valid business expectancy of an award of the SOCOM contract; (2) SRG knew of that expectancy; (3) SRG intentionally interfered with that expectancy by forging signatures and identifying personnel who had not agreed to participate, eventually resulting in the termination of the expectancy; (4) SRG’s interference was through “improper methods” and (5) ITility suffered damage as a result. But there’s a big BUT: SRG was part of the expectancy itself.
SRG moved to dismiss the tortious interference count because it was not a stranger to the business expectancy. The court agreed and dismissed the claim. “SRG had a cognizable interest in the business expectancy with SOCOM through the solicitation proposal prepared by plaintiff. In this regard, the Teaming Agreement outlines the benefits that SRG expected if plaintiff secured the prime contract with SOCOM,” the court wrote. “SRG was not in a competitive relationship with plaintiff, nor was SRG a disinterested third party to the expectancy.” For these reasons, the court found that SRG was a party to the business expectancy and therefore could not be held liable for tortious interference as a matter of law.