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, February 10, 2017

Tortious Interference with Contract or Business Expectancy May Serve as Predicate Acts for Alleged Violation of the Virginia Business Conspiracy Statute, According to the Virginia Supreme Court. Such Claims Carry a 5 Year Statute of Limitations.

For over 30 years, James Dunlap operated two AAMCO franchises in tidewater Virginia.  In 2006 a company that owned a controlling interest in Cottman Transmissions, a competitor, acquired a controlling interest in AAMCO.  The new owner wanted to convert all Cottman centers into ones displaying the AAMCO  banner.  To do so, however, certain AAMCO centers had to close.  Those slated for closure included both of Dunlap’s centers. 
Dunlap filed suit against Cottman Transmission Systems, LLC, its former President, Todd Leff, who became President of AAMCO after the acquisition, and two local Cottman dealers alleging unfair business practices in the form of claims for tortious interference with contract and business expectancy and a violation of the Virginia business conspiracy statute, Va. Code, §18.2- 499 and 500.
The case was originally filed in a Virginia state court, but was removed to the Eastern District of Virginia.  On Cottman’s motion to dismiss, the district court held that (1) tortious interference with contract and business expectancy could not serve as predicate acts to support a claim for violation of the Virginia business conspiracy statute; and (2) the statute of limitations for tortious interference with contract and business expectancy was two years under Virginia law, thus barring Dunlap’s claims.
Dunlap appealed to the Fourth Circuit Court of Appeals which certified two questions of law to the Virginia Supreme Court.  Those issues were:
  1. May a plaintiff use tortious interference with contract or tortious interference with business expectancy as the predicate unlawful act for a claim under the Virginia business conspiracy statute, Va. Code §18.2-499 and 18.2-500; and
  2. Does a two-year or five-year statute of limitations apply to claims of tortious interference with contract and tortious interference with business expectancy under Va. Code § 8.01.-243?
    The issues were matters of first impression in Virginia.
    The Virginia Supreme Court’s well-reasoned opinion appears at Dunlap v. CottmanTransmission Systems, LLC, 287 Va.207, 754 S.E.2d 313 (2014). 
    Question 1 turned on the proper interpretation of the Supreme Court’s decision in Station # 2, LLC v, Lynch.  280 Va. 166, 695 S.E.2d 537 (2010) upon which the district court relied in dismissing the case.  In Station # 2, the Court held that a “conspiracy merely to breach a contract that does not involve an independent duty arising outside the contract is insufficient to establish a civil claim under § 18.2-500.”  Id at 174, 695 S.E.2d at 541.(italics in original)  That is, the analysis is dependent upon the source of the duty violated. 
    In Dunlap, the Supreme Court noted that “both tortious interference with contract and tortious interference with business expectancy are intentional torts predicated on the common law duty to refrain from interfering with another’s contractual and business relationships.  That duty does not arise from the contract itself but is, instead, a common law corollary of the contract. [citation omitted]  The duty arises outside the contract even though the intentional interference must induce or cause a breach or termination of the contractual relationship or business expectancy.”  Id. at 219, 754 S.E.2d at 319.  Accordingly, the Court held that those intentional torts could serve as a basis for a conspiracy claim under the statute.
    Question 2 involved a determination of whether claims for tortious interference with contract or business expectancy allege personal injuries or injuries to property.  Personal injury claims must be brought within two years, while those alleging injuries to property are covered by a five year statute of limitations.  The Court noted that Virginia had long held that the right to performance of a contract and the right to reap its profits are property interests.  Id. at 220, 754 S.E.2d at 320.  Consequently, the acts supporting tortious interference with contract or business expectancy are directed toward and injure property rights.  Therefore, the Court held the five-year statute of limitations applies to such claims.  Va. Code § 8.01-243(B).
    Based upon the Supreme Court’s answers to the certified questions, the Fourth Circuit vacated the district judge’s judgment and remanded the case for further proceedings.  Dunlap v. Cottman Transmissions Systems, LLC, 576 Fed. Appx.225 (2014).


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