Dunlap v. Cottman Transmission Sys., LLC

• Decision Date: 27 February 2014
• Docket Number: Record No. 131318.
• Court: Virginia Supreme Court
• Parties: James M. DUNLAP v. COTTMAN TRANSMISSION SYSTEMS, LLC, et al.

287 Va. 207

754 S.E.2d 313

James M. DUNLAP

v.COTTMAN TRANSMISSION SYSTEMS, LLC, et al.

Record No. 131318.

Supreme Court of Virginia.

Feb. 27, 2014.

Matthew A. Fitzgerald (John D. Adams; Chadwick M. Welch; McGuireWoods, on briefs), Richmond, for plaintiff-appellant.

James C. Rubinger (Benjamin B. Reed; Plave Koch, on brief), for defendants-appellees.

PRESENT: All the Justices.

Opinion by Chief Justice CYNTHIA D. KINSER.

The United States Court of Appeals for the Fourth Circuit (the Fourth Circuit) entered an order of certification requesting this Court to exercise jurisdiction pursuant to Article VI, Section 1 of the Constitution of Virginia and Rule 5:40, and to answer the following questions of law:

1. May a plaintiff use tortious interference with contract or tortious interference with business expectancy as the predicate unlawful act for a claim under the Virginia business conspiracy statute, Va.Code §§ 18.2–499, 18.2–500?

2. Does a [I] two-year or [II] five-year statute of limitations apply to claims of tortious interference with contract and tortious interference with business expectancy under Va.Code § 8.01–243?

(Roman numeral designators added).

With regard to the first question, we hold that causes of action for tortious inference with contract and tortious interference with business expectancy qualify as the requisite unlawful act to proceed on a business conspiracy claim under Code §§ 18.2–499 and –500 because both claims are predicated on an independent common law duty arising outside of contract. As to the second question, we hold that the five-year statute of limitations in Code § 8.01–243(B) applies because both tortious interference claims involve injury to property rights.

I. RELEVANT FACTS AND PROCEEDINGS ¹

James Dunlap brought an action against Cottman Transmission Systems, LLC, and Todd P. Leff (collectively, Cottman), alleging claims for tortious interference with contract, tortious interference with business expectancy, and business conspiracy in violation of Code §§ 18.2–499 and –500.² The claims arose from franchise agreements between Dunlap and AAMCO Transmissions, Inc., under which Dunlap had operated two AAMCO transmission and repair facilities for more than 30 years. In 2006, a company that already owned a controlling interest in Cottman Transmission Systems, LLC, a competitor of AAMCO, acquired a controlling interest in AAMCO. According to Dunlap, the new owner sought to convert all Cottman Transmission franchises into AAMCO franchises. That decision resulted in some existing AAMCO franchises being closed, including those owned by Dunlap. He alleged that the closing of his AAMCO transmission and repair facilities was brought about by a conspiracy between Cottman and others who stood to benefit from his franchises' closure.

The District Court dismissed the business conspiracy claim pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to allege an unlawful act or an unlawful purpose as required to establish such a claim. Dunlap v. Cottman Transmission Sys. LLC, No. 2:11cv272, slip op. at 1 (E.D.Va. Nov. 7, 2011). It concluded that “[a]ll of the duties involved in this case [arose] out of and the damages flow[ed] from contractual obligations” between Dunlap and AAMCO and that to allow “allegations of ... contractual interference ... to serve as the requisite unlawful act for purposes of the business conspiracy statute would turn what should be contractual claims into a tort.” Id. at 3–4 (citing Station # 2, LLC v. Lynch, 280 Va. 166, 695 S.E.2d 537 (2010)).

The District Court dismissed Dunlap's remaining two tort claims as barred by the two-year statute of limitations in Code § 8.01–248. Id. at 5. The District Court concluded that our decision in Station # 2 abrogated the Court's prior ruling in Worrie v. Boze, 198 Va. 533, 95 S.E.2d 192 (1956), and thus rejected Dunlap's contention that his tortious interference claims constituted an injury to his property, which would be subject to a five-year statute of limitations under Code § 8.01–243(B). Id. at 4–5. The District Court viewed Dunlap's claimed damages as “disappointed economic expectations” and held that such do not constitute an injury to property. Id. at 5 (citing Willard v. Moneta Building Supply, 262 Va. 473, 551 S.E.2d 596 (2001)).

Dunlap appealed to the Fourth Circuit. In its certification order, the Fourth Circuit stated: “the two questions together determine the outcome of this case.” Rule 5:40 requires that a certified question be “determinative” in “any proceeding pending before the certifying court.” We agree that the questions are determinative. The viability of the business conspiracy claim turns on whether the tortious interference claims qualify as the requisite unlawful act. The tortious interference claims are time-barred if subject to a two-year statute of limitations. Accordingly, we accepted the certified questions of law by order entered September 10, 2013.

II. ANALYSIS

We will address each certified question separately.

A. Question # 1

The first certified question asks whether tortious interference with contract and tortious interference with business expectancy qualify as an unlawful act for purposes of a claim under the business conspiracy statutes, Code §§ 18.2–499 and –500. The common law has long recognized actions based on a conspiracy resulting in business-related damages. For instance, in Crump v. Commonwealth, 84 Va. 927, 6 S.E. 620 (1888), we stated that “[a] conspiracy or combination to injure a person in his trade or occupation is indictable.” Id. at 934, 6 S.E. at 624;see also Harris v. Commonwealth, 113 Va. 746, 749, 73 S.E. 561, 562 (1912) (stating that “a conspiracy must be a combination of two or more persons, by some concerted action, to accomplish some criminal or unlawful purpose, or to accomplish some purpose not in itself criminal or unlawful, by criminal or unlawful means”); Reg. v. Druitt, 10 Cox C.C. 592 (1867) (“The public had an interest in the way in which a person disposes of his industry and his capital; and if two or more persons conspired, by threats, intimidation, or molestation to deter or influence him in the way he should employ his industry, his talents, or his capital, they would be guilty of a criminal offence. This was the common law of the land.”).

Years later, in Werth v. Fire Companies' Adjustment Bureau, 160 Va. 845, 171 S.E. 255 (1933), we explained that

[a] conspiracy consists of an unlawful combination of two or more persons to do that which is contrary to law, or to do that which is wrongful and harmful towards another person [and] may be punished criminally by indictment, or civilly by an action on the case in the nature of conspiracy if damage has been occasioned to the person against whom it is directed. It may also consist of an unlawful combination to carry out an object not in itself unlawful by unlawful means.

Id. at 854, 171 S.E. at 258 (internal quotation marks omitted). We further elaborated in Gallop v. Sharp, 179 Va. 335, 19 S.E.2d 84 (1942), that

[t]he gist of the civil action of conspiracy is the damage caused by the acts committed in pursuance of the formed conspiracy and not the mere combination of two or more persons to accomplish an unlawful purpose or use unlawful means. In other words, the basis of the action is the wrong which is done under the conspiracy and which results in damage to the plaintiff. No cause of action exists without the resulting injury, and the damage produced must arise as the effective result of the conspiracy.

Id. at 338, 19 S.E.2d at 86;accord CaterCorp, Inc. v. Catering Concepts, Inc., 246 Va. 22, 28, 431 S.E.2d 277, 281–82 (1993).

In 1964, the General Assembly enacted the predecessors of Code §§ 18.2–499 and –500, the statutes at issue in the first certified question.³ 1964 Acts ch. 623. The provisions of Code § 18.2–500 provide civil relief, including treble damages, for persons “injured in his reputation, trade, business or profession by reason of a violation of § 18.2–499.” In turn, Code § 18.2–499 imposes criminal liability on

[a]ny two or more persons who combine, associate, agree, mutually undertake or concert together for the purpose of (i) willfully and maliciously injuring another in his reputation, trade, business or profession by any means whatever or (ii) willfully and maliciously compelling another to do or perform any act against his will, or preventing or hindering another from doing or performing any lawful act.

To recover in an action under these statutes, a plaintiff must establish: “(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.” Allen Realty Corp. v. Holbert, 227 Va. 441, 449, 318 S.E.2d 592, 596 (1984); accord CaterCorp, 246 Va. at 28, 431 S.E.2d at 282. It is not necessary for a plaintiff to prove that the defendant conspirators acted with actual malice, i.e., ill-will, hatred, or spite directed toward the plaintiff. Commercial Bus. Sys., Inc. v. BellSouth Servs., 249 Va. 39, 47, 453 S.E.2d 261, 266–67 (1995). Rather, a plaintiff must establish by clear and convincing evidence only that the conspirators acted with legal malice, i.e., “intentionally, purposely, and without lawful justification.” Id. at 47, 453 S.E.2d at 267;accord Northern Va. Real Estate v. Martins, 283 Va. 86, 110, 720 S.E.2d 121, 133 (2012); Williams v. Dominion Tech. Partners, L.L.C., 265 Va. 280, 290, 576 S.E.2d 752, 757 (2003); Simmons v. Miller, 261 Va. 561, 578, 544 S.E.2d 666, 677 (2001).

Because there can be no conspiracy to do an act that the law allows, Werth, 160 Va. at 855, 171 S.E. at 259, we have held that “an allegation of conspiracy, whether criminal or civil, must at least allege an unlawful act or an unlawful purpose” to survive demurrer. Hechler Chevrolet, Inc. v. General Motors Corp., 230 Va. 396, 402, 337 S.E.2d 744, 748 (1985).⁴ In other words, actions for common...