Protorae Law
Mike Holm | LeClairRyan | UBP Team

Unfair Business Practices



This blog focuses on unfair business and trade practices such as business conspiracy, breach of fiduciary duty, misappropriation of trade secrets and other proprietary information, fraud, tortious interference with contracts and other unfair business practices that are not neatly defined. Since we are located in Tysons Corner, Virginia, many of the cases discussed will come from Virginia, Maryland and the District of Columbia courts. We hope the reader finds this blog instructive.

Friday, January 4, 2008

The Rough-and-Tumble Business World

Laws are designed to control, but not displace, the competitive marketplace. Correspondingly, most loss economic opportunities do not provide the losing party with a legal remedy. Take, for example, the Virginia Supreme Court’s ruling in Williams v. Dominion Technology Partners, L.L.C. http://www.courts.state.va.us/opinions/opnscvtx/1020392.txt. Williams involved a three-tiered employee placement arrangement whereby Donald Williams was placed at Stihl, Inc. by his employer, Dominion Technology Partners, L.L.C., which paid Williams $80/hour and billed his services at $115/hour to a third company, ACSYS Information Technology, Inc. ACSYS, in turn, contracted directly with Stihl for Williams' services at a rate of $165/hour. While performing the contract, Williams discovered that his employer, Dominion, was making a profit of $35 per hour from his services. He then approached ACSYS about leaving Dominion and working directly for them on the Stihl contract for a pay raise, thereby eliminating Dominion's middle-man role. After Williams gave Dominion a 30-day notice, ACSYS hired him as its employee and kept him on the Stihl contract for a $35/hour raise.

Dominion sued Williams alleging a breach of fiduciary duty, interference with business relationships, and statutory business conspiracy. Interestingly, Dominion did not name ACSYS as defendant even though it alleged ACSYS was Williams co-conspirator. The case went to trial, and the jury returned a verdict against Williams on all three counts. The judge trebled the damages and awarded attorneys' fees under the Virginia business conspiracy statute, Virginia Code § 18.2-500 http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+18.2-500.

The Virginia Supreme Court reversed on all three counts. The court stated that the "dispositive question to be resolved on all three counts of liability is whether [Williams'] conduct . . . was sufficient to constitute a breach of Williams' fiduciary duty of loyalty to [his employer]." The court found that "Williams had the right to make the necessary arrangements to resign from his employment . . . in such a way as to take advantage of a higher level of compensation . . . so long as these arrangements were not disloyal or unfair to [his employer]."

Williams was not disloyal to his employer, according to the court, because he resigned in a manner to permit his employer to comply with its contractual obligations. In addition, the court stressed that Dominion, as the employer, could have readily protected itself if it had required Williams to sign a noncompete agreement preventing him from remaining at Stihl through another employer. As the court put it: "courts must be mindful that the fact that particular conduct of an employee caused harm to his employer does not establish that the conduct breached any duty to the employer. This is so because the law will not provide relief to every 'disgruntled employer in the rough-and-tumble world comprising the competitive marketplace,' especially where, through more prudent business practices, the harm complained of could easily have been avoided."

As in Peace v. Conway, 246 Va. 278, 435 S.E.2d 133 (1993) (unavailable via internet), discussed in our first blog entry, courts do not want to become backseat business managers and provide protections that could—and should—have been secured by the complaining party by contract before it sustained a loss. In areas where subcontracting is integral to the business landscape, such as the Washington D.C. metropolitan region, companies need to be especially vigilant to contractually protect their business opportunities.

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