4th Circuit Vacates Tortious Interference Judgment
The Fourth Circuit Court of Appeals recently reversed a large judgment in favor of a computer security solutions company headquartered in Virginia, which involved a claim of tortious interference with a business expectancy.
The dispute began between Worldwide Investigations & Research, Inc. (Worldwide) and BNX Systems Corporation (BNX) over the intellectual property rights to software BNX developed under a contract with Worldwide. While a Florida case over the issue was pending, BNX filed for bankruptcy protection in the Eastern District of Virginia, Alexandria Division and sought to liquidate its assets. Worldwide objected to the sale of assets that it claimed ownership over; however, such claim was rejected by the Bankruptcy Court.
Shortly thereafter, Worldwide filed a complaint seeking a determination of the ownership rights to some of BNX’s assets, and a separate objection to BNX’s motion to sell its assets. Moreover, the president of Worldwide asserted in a letter to the U.S. Department of Commerce that the sale would violate export restrictions. The latter action resulted in a government inquiry and caused a delay in the sale process.
As a result of Worldwide’s actions and court filings, BNX asserted a claim against it for abuse of process and tortious interference with business expectancy. In its counterclaim, BNX argued that Worldwide intentionally interfered with the sale of its assets by filing false claims. Most importantly, it claimed that Worldwide and its president filed false claims in order to delay the sale process in hopes that Worldwide would be able to purchase the assets at a reduced price. The bankruptcy court ruled in favor of BNX, awarding it over $300,000 in damages.
However, the Appeals Court vacated the entire award. The Court determined that BNX failed to prove the existence of a business expectancy – noting that a business expectancy must be “based upon something that is a concrete move in that direction.” BNX’s argument that it had a business expectancy in having an auction process free from the effects of improper filings was rejected by the Court.
Given the interests of competing companies in today’s marketplace, it is not surprising that tortious interference claims are routinely seen in courts. As this case illustrates, claims for tortious interference with business expectancy will be dismissed where the plaintiff merely alleges, in general terms, that a defendant has interfered with potential business opportunities. Virginia courts have also held that the following also do not satisfy this standard: sales to unidentified potential buyers; retroactive promotions; and continuing to do or remaining in business.
Proposed EEOC Rule on ADEA Defenses
A proposed rule introduced by the Equal Employment Opportunity Commission (EEOC) on February 18, 2010, if adopted, will provide guidance and meaning to the “reasonable factors other than age” defense in the federal Age Discrimination in Employment Act (ADEA).
The ADEA, unlike Title VII, states that it is not unlawful for an employer to take an action “otherwise prohibited” by the statute against an employee where “the differentiation is based on reasonable factors other than age” (RFOA). The Supreme Court interpreted this provision in Smith v. City of Jackson and Meacham v. Knolls Atomic Power Laboratory, which involved disparate impact discrimination claims.
The Supreme Court in Smith held that employees bringing claims under the ADEA can rely on the disparate impact theory, and thus, proof of age-motivation is not required. The Smith decision also stated that employers can defend such a case based on a reasonable factor other than age; however, the Court did not provide which party had the burden of persuasion on this issue. Subsequently, in Meacham, the Supreme Court held that the employer - not the employee - has the burden of proving the RFOA defense.
The EEOC’s proposed rule seeks to provide guidance on what constitutes “reasonable factors other than age” consistent with the decisions in Smith and Meacham. It’s non-exhaustive list of relevant factors to be considered in determining whether an employment practice is reasonable are as follows:
-- Whether the employment practice and the manner of its implementation are common business practices;
-- The extent to which the factor is related to the employer’s stated business goal;
-- The extent to which the employer took steps to define the factor accurately and to apply the factor fairly and accurately (e.g., training, guidance, instruction of managers);
-- The extent to which the employer took steps to assess the adverse impact of its employment practice on older workers;
-- The severity of the harm to individuals within the protected age group, in terms of both the degree of injury and the numbers of persons adversely affected, and the extent to which the employer took preventive or corrective steps to minimize the severity of the harm, in light of the burden of undertaking such steps; and
-- Whether other options were available and the reasons the employer selected the option it did.
It is important to note that this standard is lower than Title VII’s business-necessity test but higher than the Equal Pay Act’s “any other factor” test.
The EEOC is accepting public comment on the proposed rule until April 19, 2010.
Ad Damnum Clauses in Virginia - Plaintiff's Cap on the Recovery Amount
The Virginia Supreme Court issued an order recently, reaffirming the rule that ad damnum clauses set the cap on the amount a plaintiff can recover in Virginia state courts. An ad damnum clause is part of the initial complaint which provides the amount in dollars that the plaintiff asks the court to award. States laws differ on whether the requested amount sets an absolute limit on the amount of damages recoverable in a case, but Virginia law is clear that it is.
Virginia Supreme Court rules require a plaintiff to inform the defendant of the true nature of a claim, which is a fundamental principle of due process. Virginia courts interpreting this rule have consistently held that in addition to describing the claim against a defendant, defendants are entitled to notice of the size and amount of the claim. This requirement is contrary to Federal practice, which does mandate that a complaint quantify the monetary damages sought. Under federal procedure, the court must award the full relief to which a plaintiff is entitled, regardless of the amount, if any, set forth in the complaint.
May a plaintiff increase the requested damages amount? Yes, a court may allow for an increase if later circumstances warrant it, but a plaintiff must promptly seek an amendment. A plaintiff will not be permitted to increase the damages post-verdict.
In deciding whether to grant the amendment of a pleading to increase the amount sought in the ad damnum clause a trial court considers whether the defendant will be prejudiced by allowing the amendment and whether such prejudice will affect the defendant’s ability to have a fair trial. In addition, the court considers the plaintiff’s right to be compensated fully for any damages caused by the defendant’s acts or omissions. This decision rests within the discretion of the circuit court and appeal review is limited.
The above rules may be somewhat burdensome to a plaintiff. But, on the flip side, the ad damnum clause is crucial to the defendant in order for it to formulate trial strategy and assess risks in defending the litigation.
Stay Connected with H. Scott Johnson Jr.
Stay Connected with Angela H. France
Stay Connected with Malik Cutlar