Company accuses salesman of promoting competing products by wife’s business
By Peter Vieth
BridgeTower Media Newswires
RICHMOND, VA -- A defense often raised in federal litigation could have added vitality in a state courtroom under a judge’s ruling last month.
While a Roanoke circuit judge acknowledged the potential viability of the “intracorporate immunity doctrine” in a Virginia civil conspiracy action, he held the defense fell short in the early stages of a lawsuit alleging business harm from an unfaithful employee.
Judge Onzlee Ware acknowledged the immunity doctrine has never been expressly endorsed by the Supreme Court of Virginia, but he said the court recognized its underlying logic in a 1987 case. Ruling on the defendants’ demurrer, Ware rejected the defense but said the defendants may yet be entitled to immunity to the conspiracy claim.
Ware’s decision came in a July 9, 2021, order in Valley Boiler & Mechanical Inc. v. Wilson.
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Deceit alleged
Valley Boiler of Roanoke claims former sales representative Scott Wilson undermined the company’s success for more than a year by promoting competing products sold by his wife’s business.
Represented by Paul G. Beers of Roanoke, Valley Boiler filed suit March 24 demanding $600,000 in compensatory and punitive damages. The company alleges breach of fiduciary duty, business interference and statutory conspiracy against Wilson, his wife and daughter and the wife’s Westover Sales and Equipment LLC, or WISE.
Valley depicts Wilson acting as a de facto representative of WISE, working as a sales rep for WISE “while traveling on a Valley Boiler expense account in a Valley Boiler vehicle to make sales calls on Valley Boiler customers and prospects.”
The defendants admit that Wilson had acted as a representative of WISE, but they deny that he secretly competed with Valley Boiler.
Valley’s conspiracy claim carries an added threat. Count Three of the lawsuit alleges business conspiracy in violation of Virginia Code § 18.2-499, opening the door to recovery of both treble damages and attorneys’ fees.
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It takes two to conspire
The defendants, represented by Melvin E. Williams of Roanoke, sought to counter the conspiracy claim with the intracorporate immunity doctrine. The defendants pointed to language from federal courts in Virginia:
“Because it takes two to form a conspiracy, and a corporation can act only through its agents, officers, and employees, a ‘conspiracy’ between a corporation and agents of the corporation acting within the scope of their employment is a legal impossibility.’”
The defendants pointed to two places in Valley Boiler’s complaint where Wilson was described as a “representative” of WISE, his wife’s LLC. Legally, he could not conspire with fellow agents, representatives and employees of WISE, the defendants argued.
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Allegations insufficient
The defendants were reading too much into the word “representative,” Valley Boiler responded.
“The complaint does not suggest Wilson acted under WISE’s supervision or control or that WISE determined the routes Wilson travelled,” Beers wrote in a May 3 brief.
Ware agreed, concluding it was “vital” to the immunity defense to cite allegations that Wilson acted as an agent or employee, not merely an independent contractor.
“Nowhere does Plaintiff allege Defendant Scott Wilson was Defendant Westover’s agent or employee; neither would it be a reasonable factual inference to find that the term ‘representative’ is equivalent to agent or employee,” Ware wrote. “The Court instead finds that the nature of Defendant Scott Wilson’s professional relationship with Defendant Westover is a question of fact for the jury.”
But Ware rejected Valley Boiler’s contention that the immunity defense was unavailable under Virginia law.
“The Court ... notes that while the intracorporate immunity doctrine has never been explicitly recognized by the Virginia Supreme Court, the underlying logic of the immunity has been recognized.”
Ware cited Fox v. Deese, 234 Va. 412 (1987), holding that – if city employees were acting within the scope of their employment – there could not be a conspiracy between them and the city. Thus, Ware concluded it was “possible” the defendants could be protected by the immunity doctrine.
Williams – counsel for the defendants – said he was not surprised that Ware overruled his demurrer.
“I don’t think the complaint had sufficient allegations to show that Scott Wilson was an employee or agent of Westover. I expect to find facts to allow the application of the immunity defense,” Williams said Aug. 11.
Williams said he planned to ask Ware to reconsider that part of his order that overruled a plea in bar as well as the demurrer based on the intracorporate immunity doctrine. The plea in bar would allow for an evidentiary hearing, he said.
Reston attorney Lee E. Berlik, who has written on the intracorporate immunity doctrine and who reviewed documents in the case, was more emphatic than the judge about the availability of the defense.
“I think it’s pretty clear that the intracorporate immunity doctrine does apply in Virginia state courts. In the Fox v. Deese decision cited by Judge Ware, the Virginia Supreme Court adopted the doctrine in full, just without identifying it as such.
Countless trial courts have applied it in their rulings as well,” Berlik said in an Aug. 11 email. Berlik was not involved in the Valley Boiler case.
Berlik noted some authority for the proposition that – for purposes of the intracorporate immunity doctrine – even independent contractors might be deemed part of the same entity that hired them.
He pointed to Cvent Inc. v. Eventbrite Inc., 739 F. Supp. 2d 927, 939 (E.D. Va. 2010), which held, “If a corporation delegates a task to an individual (including an independent contractor) to serve corporate purposes, the individual acts with the same general objective as the corporation, and the corporation retains ultimate decisionmaking authority, then the individual and the corporation are for all intents and purposes the same entity. Under such circumstances, the individual and the corporation logically cannot conspire with one another.”
