Iron Vine Sec. v. Cygnacom Sols.

Decision Date12 May 2022
Docket Number18-CV-462,18-CV-697,18-CV-493
PartiesIron Vine Security, LLC and Second Factor, Inc., Appellants/Cross-Appellees, v. Cygnacom Solutions, Inc., Appellee/Cross-Appellant.
CourtCourt of Appeals of Columbia District

Iron Vine Security, LLC and Second Factor, Inc., Appellants/Cross-Appellees,
v.

Cygnacom Solutions, Inc., Appellee/Cross-Appellant.

Nos. 18-CV-462, 18-CV-493, 18-CV-697

Court of Appeals of The District of Columbia

May 12, 2022


Argued June 17, 2020

Appeals from the Superior Court of the District of Columbia (CAB-855-16) (Hon. Marisa J. Demeo, Motions Judge; Hon. Hiram Puig-Lugo, Trial Judge)

Terrell N. Roberts, III for appellant/cross-appellee Iron Vine Security, LLC.

Barry Coburn, with whom Kimberly Jandrain and Marc Eisenstein were on the brief, for appellant/cross-appellee Second Factor, Inc.

Robert J. Wagman, Jr., with whom David M. Hibey was on the brief, for appellee/cross-appellant Cygnacom Solutions, Inc.

Before Blackburne-Rigsby, Chief Judge, Glickman, Associate Judge, and Epstein, Associate Judge of the Superior Court. [*]

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GLICKMAN, ASSOCIATE JUDGE

Following a jury trial in Superior Court on claims for breach of contract, tortious interference with business relations, and conspiracy to commit such tortious interference, appellee/cross-appellant Cygnacom Solutions, Inc. (Cygnacom) obtained a judgment for compensatory and punitive damages against appellants/cross-appellees Iron Vine Security, LLC (Iron Vine) and Second Factor, Inc. (Second Factor).

In their appeals, Iron Vine and Second Factor raise multiple claims of error. Both appellants contend they were entitled to judgment as a matter of law because the evidence adduced at trial was insufficient in a number of respects to support the judgments entered against them. Iron Vine further argues that the contractual provisions underlying Cygnacom's causes of action - a provision in Iron Vine's contract with Cygnacom prohibiting either party from soliciting the other party's employees, and a provision in Cygnacom's employment contracts restricting its employees from leaving to work for certain of its competitors - were unenforceable as a matter of law. And Second Factor argues that lost profit damages awarded against it on Cygnacom's claim of tortious interference must be vacated because they are duplicative of lost profit damages awarded against Iron Vine on Cygnacom's claims of breach of contract and tortious interference.

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In its cross-appeal, Cygnacom claims the trial judge erred in dismissing its statutory business conspiracy claim under Virginia law[1] on choice-of-law grounds.

We conclude that nearly all of Iron Vine and Second Factor's claims of error are waived, because Iron Vine and Second Factor either failed to raise them in the trial court at all, or failed to argue them in a post-verdict motion for judgment as a matter of law pursuant to Super. Ct. Civ. R. 50(b). Of the claims that are reviewable, we find meritorious only Second Factor's contention that Cygnacom is not entitled to a double recovery of lost profits damages on its breach of contract claim against Iron Vine and its tortious interference claim against Second Factor. As for the cross-appeal, we conclude that the trial court erred in dismissing Cygnacom's Virginia business conspiracy claim. Accordingly, we remand the case to the trial court for further proceedings consistent with this opinion with regard to the damage award and Cygnacom's Virginia business conspiracy claim, and otherwise affirm the judgment in Cygnacom's favor.

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I. Factual Background

The controversy in this case revolves around a small but lucrative part of a large United States Department of State contract awarded in 2011 for a period of ten years to Science Applications International Corporation (SAIC). Known as the "Vanguard Contract," this contract consolidated many of the State Department's information technology support needs under one umbrella. In 2011, SAIC subcontracted (also for ten years) some services within the Vanguard Contract's scope to Iron Vine, a Virginia corporation that provides a range of information technology services. SAIC requested that Iron Vine subcontract a portion of that work, involving Public Key Infrastructure (PKI) services, to Cygnacom, which is also a Virginia corporation having its principal place of business in Virginia. Accordingly, in September 2011, Iron Vine and Cygnacom entered into a Master Subcontract Agreement, which we will refer to in this opinion as "the Vanguard Subcontract." Under the Vanguard Subcontract, Cygnacom provided PKI services, utilizing its own employees, pursuant to a separate Statement of Work executed by Cygnacom and Iron Vine. The Vanguard Subcontract was to be automatically renewed each February so long as a Statement of Work remained in effect, unless Iron Vine provided notice to Cygnacom that it did not elect to renew the subcontract.

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Cygnacom devoted nine of its employees to its performance under the Vanguard Subcontract. In the negotiation of the parties' working relationship under that subcontract, Cygnacom sought assurance that Iron Vine would not use the opportunity to hire away its employees. Iron Vine agreed to provide such assurance as long as it was mutual. So in Section 9.13 of the Vanguard Subcontract, its "Non-Solicitation Provision," Iron Vine and Cygnacom agreed that unless they "obtained the prior written approval of the other Party," they would not "offer employment to or in any other way directly or indirectly induce any employee of the other Party to terminate his or her employment with the other Party." The provision was "enforceable throughout the performance of the [Vanguard Subcontract]" and was to "survive for twelve (12) months after its termination for any reason."

Cygnacom also had contracts with its employees. These contracts included "Non-Competition Provisions" in which the employees agreed that during their "employment and for a period of one (1) year following [their] termination," they would not "compete against [Cygnacom] by accepting employment with, acting as a consultant to . . . or otherwise providing or agreeing to provide services to or on behalf of any person, employer or other entity that" was either "actively competing against [Cygnacom] for a government procurement" or had "competed against Cygnacom for a government procurement within the last six (6) months."

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Raymond Shanley was one of the Cygnacom employees assigned to the Vanguard Subcontract. In 2013, Shanley formed appellant Second Factor, a Virginia corporation, while he still was employed by Cygnacom. Shanley then left Cygnacom's employ in 2014 and, with Cygnacom's consent, Second Factor entered into a subcontract with Iron Vine whereby Shanley continued to provide PKI services to the State Department.

Iron Vine and Cygnacom worked under their subcontract arrangement without incident until 2015. But around that time, SAIC began to have concerns regarding Cygnacom's performance. Iron Vine and Second Factor maintain that SAIC's concerns were legitimate and ultimately led SAIC to ask Iron Vine not to renew its subcontract with Cygnacom and to replace Cygnacom with a different subcontractor. Cygnacom contends Iron Vine fed SAIC misinformation about its performance and fed SAIC's concerns in order to make it easier to oust Cygnacom from the Vanguard project.

Regardless of the validity of SAIC's concerns about Cygnacom, it is undisputed that by December 2015, Iron Vine had begun to make plans to replace Cygnacom on the Vanguard Subcontract. That month, Iron Vine's president, William Geimer, met with Shanley to discuss whether Second Factor could be that

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replacement. A December 8, 2015 email memorialized an agreement between Iron Vine and Second Factor to form a new Vanguard "team" to be managed by Shanley. The email identified Cygnacom employees working on the Vanguard Subcontract whom Geimer and Shanley hoped to hire to continue doing that same work for their companies, notwithstanding their knowledge of the restrictions in the Non-Solicitation Provision and the Non-Competition Provision. On the same day, Geimer asked Shanley to "help map" position descriptions for the new roles "with the person currently in the slot" at Cygnacom.

On December 15, 2015, Geimer informed Cygnacom's president that Iron Vine was not renewing the Vanguard Subcontract, meaning Cygnacom's involvement with the project would end on February 8, 2016. Iron Vine and Second Factor posted job descriptions matching those of the Cygnacom employees on the same day. Within three days, Iron Vine offered employment to a Cygnacom employee, Warren Wilbur. Shanley and Second Factor also offered jobs to Cygnacom employees before the Vanguard Subcontract terminated, and Shanley communicated with Iron Vine regarding those offers. Together, the two companies ultimately hired six Cygnacom employees who had worked on the Vanguard Subcontract, with five going to Second Factor and Mr. Wilbur going to Iron Vine. All six resigned from Cygnacom on the same day, January 25, 2016. After the

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Vanguard Subcontract ended, Iron Vine and Second Factor assumed control of PKI services to the State Department. They still were providing those services at the time of trial in 2018.

II. Procedural History

In February 2016, Cygnacom sued Iron Vine, Second Factor, and Shanley personally (collectively, "the defendants"). Its complaint, as amended the following month, asserted multiple claims of breach of contract against Iron Vine and Shanley; a claim for breach of the duty of good faith and fair dealing against Iron Vine alone; and claims against all three defendants of tortious interference with Cygnacom's business relationships with its employees, common law civil conspiracy (to commit tortious interference), violation of the Virginia business conspiracy statute, and misappropriation of trade secrets. The claims centered on the defendants' alleged breaches of, or interference with, the Non-Solicitation Provision in the Vanguard Subcontract and the Non-Competition Provision in Cygnacom's contracts with its...

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