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Contracts and Commercial Law

Business Tort Case Moves Forward Against Virginia Company

 AWP, Inc. is engaged in the business of traffic control solutions for road construction sites and emergency situations. AWP alleges that Shawn Watkins, a former employee, began his own traffic control business, Traffic Control Solutions, LLC (TCS) while still working at AWP, and that he misappropriated information he obtained from his position at AWP such as the identity, needs and issues of customers, pricing, and protocols and methodologies for traffic control. AWP deems this information protected trade secrets. Watkins also allegedly solicited four AWP employees to join him at TCS. AWP prepared to sue Watkins but settled prior to litigation, with Watkins agreeing to cease TCS operations, never work with an AWP competitor, and turn over all AWP property. Watkins also signed an affidavit stating that he was instrumental in creating TCS and had access to AWP's trade secrets which he used without permission to underbid AWP on jobs and misappropriate AWP customers.

Instead, AWP sued its competitor Commonwealth Excavating, Inc. and its president, Ira Biggs. AWP claimed that Watkins approached Biggs and offered to sell AWP's trade secrets and equipment for $45,000. Commonwealth allegedly offered to hire the four AWP employees who left for TCS, and it offered Watkins an $85,000 salary which Watkins refused for fear of violating his non-compete agreement. AWP believes that Watkins and Biggs plotted to have Commonwealth take over at least four of AWP's customers, but the complaint does not state whether any of the customers accepted the offer. The complaint contains counts for common law conspiracy, statutory business conspiracy, misappropriation of trade secrets under the Virginia Uniform Trade Secrets Act (VUTSA), tortious interference with contract or business relationships and unjust enrichment. The defendants moved to dismiss.

Under Federal Rule of Civil Procedure 12(b)(6), a plaintiff must show more than a mere possibility that a defendant has acted unlawfully. Rather, a plaintiff must demonstrate enough factual matter which, if accepted as true, states a plausible claim for relief. In ruling on a 12(b)(6) motion, a court will accept factual allegations as true and construe them in the light most favorable to the plaintiff, but threadbare recitations of the elements of a cause of action are not sufficient and must be supported by sufficient facts.

Here, Commonwealth and Biggs argued that the complaint did not state enough facts to support a business conspiracy claim because AWP did not allege that it lost any business as the result of the alleged conspiracy. Defendants also argued that the intra-corporate conspiracy doctrine barred the conspiracy claims; that the VUTSA preempted AWP's claims; and that the complaint failed to state a claim for tortious interference because AWP did not plead a connection between the alleged tortious interference and any resulting loss of business.

The court first addressed the conspiracy claim. To state a claim for business conspiracy, a plaintiff must plead (1) a combination of two or more persons for the purpose of willfully and maliciously injuring plaintiff in his business; and (2) resulting damage to plaintiff. To survive a motion to dismiss, a plaintiff must plead these elements with sufficient particularity, alleging some details of time, place, content, identity and damages. Here, AWP alleged that Watkins, knowing that AWP and Commonwealth were competitors, met with Biggs between Christmas and New Year's Eve for the purpose of transferring TCS's business to Commonwealth. According to the complaint, Biggs and Commonwealth knew that TCS obtained the customers by misappropriating confidential and propriety information and in breach of his non-compete agreement. AWS stated particular dates on which the meetings occurred, and it named the customers that Watkins and Biggs allegedly approached. AWP claimed damages associated with a loss of business, a loss of customers, and injury to its reputation and business goodwill. The court found that these allegations were sufficiently specific to survive a motion to dismiss.

Read the rest of the article at the Virginia Business Litigation Lawyer blog.

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