Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—4th Cir.: AAMCO franchisee’s tort claims against franchisor revived, (Jun 26, 2014)

By Linda O’Brien, J.D., LL.M.

In light of the Virginia Supreme Court’s responses to certified questions, the U.S. Court of Appeals in Richmond revived an AAMCO transmission repair franchisee’s statutory business conspiracy and common law tortious interference claims against the franchisor. Thus, the federal district court’s order of dismissal was reversed and remanded, in an unpublished decision (Dunlap v. Cottman Transmissions Systems, LLC, June 24, 2014, Per Curiam).

James Dunlap operated two AAMCO transmissions franchises in Virginia for many years. After AAMCO attempted to terminate the franchise agreements, a settlement was reached that allowed Dunlap to continue to operate the franchises. Dunlap filed suit against Cottman Transmissions Systems, a former competitor of AAMCO now owned by the same asset management company, alleging that Cottman and others had wrongfully attempted to force him out of business. Dunlap asserted claims for tortious interference with contract, tortious interference with business expectancy, and violations of Virginia’s business conspiracy statute.

The federal district court in Norfolk, Virginia dismissed the business conspiracy claim, rejecting tortious interference as the predicate for a business conspiracy claim. The district court also dismissed the tort claims as untimely because the statute for limitations for personal injury was two years. On appeal, the Fourth Circuit certified two questions on predicate unlawful acts under the state business conspiracy statute to the Virginia Supreme Court, since the district court decision turned on an interpretation of state law.

Tortious interference with contract. The Fourth Circuit found that Dunlap could 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. The state supreme court had determined that tortious interference with contract or tortious interference with business expectancy claims were intentional torts predicated on a common law duty. Since the duty did not arise from the contract itself and instead were corollary to the contract, both causes of action qualified as the requisite unlawful act to proceed on a business conspiracy claim.

Statute of limitations. The Fourth Circuit also found that the five-year statute of limitations for injury to property rights applied to claims of tortious interference with contract and tortious interference with business expectancy. The Virginia Supreme Court had determined that tortious interference with contract or tortious interference with business expectancy causes of action alleged injury to property, since such interference was directed at the right of performance of a contract and to reap the benefits from the contract and other business relationships. Thus, the five-year statute of limitations applied instead of the two-year statute of limitations for personal injury.

Intracorporate immunity doctrine. Finally, the intracorporate immunity doctrine did not apply to Dunlap’s statutory business conspiracy claim, the federal appeals court ruled. The doctrine holds that a corporation cannot conspire with its officers, subsidiaries, or affiliates. Dunlap alleged that Cottman, its president, and other local competitors conspired to injure his business. His allegations brought the claim outside the scope of the doctrine since the local competitors lacked the requisite relationship to AMMCO, Cottman and its president, the court concluded.

The case is No. 11-2327.

Attorneys: Crystal M. Johnson of the University of Georgia School of Law for James M. Dunlap. James C. Rubinger and Benjamin B. Reed (Plave Koch PLC) for Cottman Transmissions Systems, LLC.

Companies: Cottman Transmissions Systems, LLC; AAMCO Transmissions, Inc.

Cases: FranchisingDistribution MarylandNews NorthCarolinaNews SouthCarolinaNews VirginiaNews WestVirginiaNews