VIRGINIA LAW ON NON-COMPETES MAY BE CHANGING – SOMEWHAT

A friend of mine is one of the top appellate lawyers in the Commonwealth of Virginia. Yes, I am name dropping, but he really is good.

As an appellate lawyer, he takes the decisions from local courts and asks the Supreme Court of Virginia to affirm or change the lower court rulings. It is essentially like asking your Mom for permission to do something, and when she says no, you go ask your Dad hoping his decision will be more favorable and final.

On Tuesday of this week, he and his colleagues at Gentry Locke Rakes & Moore, will travel to Richmond Virginia on a Non-Compete case,  BB&T Insurance Services, Inc. v. Thomas Rutherfoord, Inc., et al. (which was originally decided by the City of Richmond Circuit Court) and essentially ask the Supreme Court of Virginia to uphold the Circuit Court’s ruling.

I support my friend and since I represent employees in non-compete cases, I heartily support his argument in this case.

As the Circuit Court ruling summarizes,

“This action arises from Moore and Donna Perkinson’s decision to voluntarily terminate their employment relationships with BB&T, and their subsequent decision to accept employment with Thomas Rutherfoord, Inc. (“Rutherfoord”), a BB&T competitor. Plaintiff alleges Breach of Fiduciary Duties (“Count I”), Breach of Contract (“Count II”), Tortious Interference with Contract (“Count III”), Tortious Interference with Business Expectancy (“Count IV”), Common Law Conspiracy (“Count V”), Business Conspiracy in [**2] violation of Virginia Code § 18.2-499 (“Count VI”), and Misappropriation of Trade Secrets in violation of the Virginia Uniform Trade Secrets Act (“Count VII” or “VUTSA”). Defendant Moore demurs to Counts I, II, IV, V, VI and VII of the Complaint Defendant Perkinson demure to Counts I through VII of the Complaint. Defendant Rutherfoord demurs to Counts III though VII of the Complaint. All Defendants contend that the Agreement is invalid as a matter of Virginia law.”

Did you get that?
Employees leave, join a competior and get sued – a 7 count complaint which means, a complicated lawsuit is filed alleging they did all sorts of bad and not legal things – like take trade secrets, and business, etc.

The Defendants / Employees, once sued, filed a Demurrer, which basically says – “Hold up Judge. Even if all the nasty stuff they said in their lawsuit is true, as a Matter of Virginia law, the case cannot continue because…”

The Judge agreed with the Defendant Employees – finding (and while my summary is long, it is very short compared to the very detailed Court opinion):

“Court finds that these actions as pled do not sufficiently state a cause of action for a breach of fiduciary duties. For these reasons, Defendants’ demurrers to Count I axe sustained.”

and

“Because the prohibition is not limited to employment that would be in competition with BB&T, it is not narrowly drawn to protect the employer’s legitimate business interest. It is unduly burdensome on Moore’s ability to earn, a living and is offensive to the public policy of the Commonwealth. Therefore, the non-competition restrictions are overbroad an unenforceable.”

and

“There is an issue with the duration of the confidentiality clause. The employee is restricted “…[dj]uring the term of the Employee’s employment with BB&T Insurance and for perpetuity after Employee’s separation of employment with BB&T Insurance.” See Id. (emphasis added). Similar to the example stated in Lasership, the perpetuity restriction prohibits Moore for “the rest of his life.” This causes the clause to be overly broad and not narrowly tailored to protect the legitimate business interest of BB&T. As such, the confidentiality restriction is unenforceable as a matter of law.”

and

Given the Court’s finding concerning the non-competition provisions, the confidentiality provision, and the unequivocal presence of the “blue-pencil” provision, the Court finds that the Agreement between Moore and BB&T is invalid in its entirety. In the absence of a legally enforceable contract between Moore and BB&T, Plaintiff’s claim for a breach of contract (“Count II”) and tortious interference with contract (“Count III”) sue not sufficient to survive demurrer and are dismissed.

and

As to element four, BB&T has failed to sufficiently plead interference by use of improper methods on the part of the Defendants. BB&T claims that Defendants used improper methods “included, but not limited to, Moore’s breach of the Employment Agreement; Moore and Perkinson’s breach of fiduciary duties; Rutherfoord and Perk in son’s tortious interference with the Employment Agreement; Defendants’ unlawful conspiracy to injure BB&T Insurance in its trade or business, and Defendants’ violation of the Virginia Uniform Trade Secrets Act” (Comp P 81).

and

For the reasons stated in part II B of this opinion, the Agreement is invalid and unenforceable as a matter of law, and therefore breach of said contract cannot satisfy the improper means requirement of a tortious interference with business expectancy claim.

and

For the reasons stated in part II A of this opinion, Plaintiff did not sufficiently state a cause of action for a breach of fiduciary duties with  regards to Moore and Perkinson. Therefore, this claim cannot satisfy the improper means requirement of a tortious interference with business expectancy claim.

and

BB&T has failed to state facts sufficient to support a claim of common law conspiracy. Therefore, Defendants’ demurrer as to Count V is sustained.

and

For the reasons stated in part II A of this opinion, Plaintiff did not sufficiently state a cause of action for a breach of fiduciary duties with regards to Moore and Perkinson. Defendant Rutherfoord had no such duties, and Plaintiff has failed to plead facts sufficient to allege that Rutherfoord induced a breach of such duties. Plaintiff has failed to sufficiently plead the element of improper means, and therefore has failed to sufficiently state a claim for violations of the VUTSA. Defendants’ demurrer as to Count VII is sustained.

CONCLUSION: “After considering the record, argument of counsel and the legal memoranda filed by the parties, the Court SUSTAINS Defendants’ demurrers to all seven Counts of Plaintiff’s claim and DISMISSES Counts IT and III.”

TRANSLATION: EMPLOYEES WIN. LAWSUIT IS DISMISSED.

There are a few lessons to be learned from this appeal even before the arguments are heard and the case decided.

1. Appeals take a long time.
This case was argued in December of 2009, and the Court ruled last February. The parties have wait almost 1 year for final resolution of the case. And trust me, no one wanted to pay attorneys for an extra year.

2. When you go to Court, things are never guaranteed until they are decided by the Supreme Ct.
I am sure the employees were thrilled last February. Now they have had 9-10 months to sweat this appeal and live and work in limbo not knowing what the court will do.

3. The law is always changing.
Anything the Supreme Court of Virginia is asked to review a case or an issue, there is the potential that our law will change and how we as attorneys and you as employees approach your employment contracts may need to change as well.

So, I will be in touch and provide updates on the case. Good Luck JAY – many Virginia employees and I will be thinking of you this week.

Lauren Ellerman
Lauren Ellerman

In 2011, Lauren Ellerman was named "Young Lawyer of the Year" by the Roanoke Bar Association for her work in the community. To speak with Lauren about your personal injury case, contact her at lellerman@frithlawfirm.com.