Three Bad Acts Do Not a Conspiracy Make

The U.S. District Court for the Western District of Virginia, in Schlegel v. Bank of America, rejected a Virginia business conspiracy claim because "but for" allegations are insufficient to prove a conspiracy. In Schlegel, the plaintiff alleged that one of Bank of America's senior vice presidents, Charles H. Hill Ewald ("Ewald"), wrongfully allowed a former director, Christopher C. Grieb ("Grieb"), of a closely-held corporation, Piedmont Building & Development Corporation ("Piedmont"), to withdraw money from the corporate accounts and deposit the funds into Grieb's personal account. See http://www.vawd.uscourts.gov/OPINIONS/MOON/3.07CV00022SCHLEGELV.BANKOFAMERICA(GRANTINGDMTD).PDF

When informed of the improper withdrawal, Bank of America froze Grieb's personal account. About four months later, Hill contacted Piedmont's former corporate attorney, Ralph Eugene Maine, Jr. ("Maine"), who was also Grieb's personal attorney, to inquire about the propriety of the withdrawal.

Schlegel brought a Virginia statutory business conspiracy claim against Bank of America, alleging that Ewald's request from Maine was unlawful, the bank acted improperly, and Maine acted unlawfully in responding to Ewald's request. The court granted Bank of America's motion to dismiss, finding that Schlegel failed to allege a concerted action between the bank, bank officials, and Maine.

The court first set forth the meaning of "concerted action" as contained in Sec. 18.2-499, requiring proof that someone "'combined, associated, agreed, mutually undertook, or concerted together' with someone else in the injurious conduct." "This means that a plaintiff must prove that the defendants combined together to effect a preconceived plan and unity of design and purpose."

The court dismissed the conspiracy claim because the plaintiff "essentially bases his conclusion that there must have been a conspiracy on a 'but for' argument: 'Ewald would have been unable to continue the freeze of funds had Maine not provided him with the information he did, and Maine individually has no way of effecting bank policy in his client's (Grieb's) favor. Thus it became a mutual undertaking because it had to, neither alone able to achieve the result desired, which they did when their efforts were combined.'" "In other words, plaintiff argues that but for Ewald's actions and Maine's actions, he would not have been injured."

In rejecting the plaintiff's argument, the court reasoned: "But to read a 'but for' test of 'conspiracy' and 'concerted action' into Virginia's civil conspiracy statute would mean that two people acting independently would be civilly liable any time their independent acts resulted in a harm to a person's reputation, trade, business or profession, regardless of whether the two people actually came to an agreement (whether explicit or implicit) regarding the purpose of their actions. Such a reading would be far too expansive."

"[P]laintiff here has merely alleged that Ewald independently acted improperly, Maine independently acted improperly, and the Bank officials independently acted improperly, all to plaintiff's detriment. Ergo, he says, those three must have acted in concert. Plaintiff simply has not alleged any facts that would allow the court to infer that Maine and the Bank acted together. His claim must therefore be dismissed."

This opinion reinforces the point that not every collection of bad acts give rise to a business conspiracy claim. And, courts closely examine the allegations to determine whether to even allow plaintiff discovery to investigate the facts.

For a discussion of the elements of a Virginia statutory business conspiracy claim see http://unfairbusinesspractices.blogspot.com/2008/01/elements-of-business-conspiracy.html#links