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.

Monday, January 26, 2009

Split of Opinion in Virginia Federal Courts Over Independent Personal Stake Exception to Intra-corporate Conspiracy Claims

A recent decision by Judge Mark S. Davis of the United States District Court for the Eastern District of Virginia has set up a clash between judges in that district over whether Virginia recognizes the “independent personal stake” exception to the intra-corporate immunity or intra-corporate conspiracy doctrine. It has long been understood in Virginia that because a corporation acts only through its agents, officers and employees, a conspiracy between a corporation and its agents, acting within the scope of their employment, is a legal impossibility. Griffin v. Electrolux Corp., 454 F. Supp. 29, 32 (E.D.Va. 1979). This principle, known as the intra-corporate immunity or intra-corporate conspiracy doctrine, has a recognized exception: if the agent, employee or officer has an “independent personal stake” in the conspiracy, then a conspiracy with the corporation may exist.

In December, Judge Davis in White v. Potocska, 2008 U.S. Dist. LEXIS 102204 (E.D.Va. December 3, 2008) refused to recognize the personal stake exception on the basis that the Supreme Court of Virginia had never recognized it. He drew support for his conclusion from two cases, Phoenix Renovation Corp. v. Rodriguez, 461 F. Supp.2d 411, 429 (E.D. Va. 2006) and Little Professor Book Co. v. Reston N. Point Village Ltd. Pshp., 41 Va. Cir. 73, 79 (Fairfax County 1996), an opinion by now federal district judge, Gerald Bruce Lee. Judge James C. Cacheris was the author of the Phoenix Renovation Corp. opinion. In 2007, however, Judge Cacheris reversed the view he expressed in Phoenix Renovation Corp. and recognized the “independent personal stake” exception in Buffalo Wings Factory, Inc. v. Mohd, 2007 U. S. Dist. LEXIS 91324 (E.D. Va. December 12, 2007). He reaffirmed that view in The Flexible Benefits Council v. Feltman, 2008 U.S. Dist. LEXIS 46626 (E.D.Va. June 16, 2008).

Judge Davis did not mention either the Buffalo Wings Factory, Inc. or Feltman decisions in his opinion in White. Neither did he acknowledge the long line of Fourth Circuit cases that have recognized the personal stake exception, Greenville Publishing Co. v. Daily Reflector, 496 F.2d 391 (4th Cir. 1974); Buschi v.Kirven, 775 F.2d 1240 (4th Cir. 1985); Detrick v. Panaplina, 108 F.3d 529 (4th Cir. 1997); and American Chiropractic v. Trigon Healthcare, 367 F.3d 212 (4th Cir. 2004) or that a decision from the Western District of Virginia had followed the Fourth Circuit position on the issue. Selman v. American Sports Underwriters, Inc., 697 F. Supp. 225 (W.D. Va. 1988). All of those cases, with the exception of Greenville Publishing Co. originated in Virginia.

While there are several other Virginia Circuit Court opinions that have not recognized the “personal stake exception”, Softwise, Inc. v. Goodrich, 63 Va. Cir. 576 (Roanoke, January 28, 2004): Ashcon Int’l, Inc. v. Westmore Shopping Ctr. Assoc., 42 Va. Cir. 427 (Fairfax County, June 19, 1997) both recognize that the Virginia Supreme Court has been silent on the issue. And, in both cases, the courts found that, even had it been recognized, the plaintiffs had not alleged sufficient facts to implicate the exception.

It is unclear at this point how this divergence of views will be resolved in the federal courts, or whether the Virginia Supreme Court will ultimately address the issue. Meanwhile, the personal stake exception remains a very important doctrine in the unfair business practices arena. Where it is recognized, injured parties have a strong tool available to use in protecting their business interests by being able to pursue conspiracy claims.


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