Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—4th Cir.: Two business conspiracy statute questions certified to Virginia top court by Fourth Circuit, (Aug 23, 2013)

By Edward L. Puzzo, J.D.

Two questions on predicate unlawful acts under the state business conspiracy statute have been certified to the Virginia Supreme Court by the Fourth Circuit U.S. Court of Appeals in Richmond, Virginia (Dunlap v. Cottman Transmissions Systems, August 21, 2013, Per curiam). James Dunlap, an AAMCO Transmissions, Inc. franchisee, became involved in a legal dispute with the franchisor after it attempted to terminate Dunlap's franchise agreements. After a settlement which allowed Dunlap to continue operating the franchises, Dunlap then alleged that Cottman Transmission Systems, a former competitor of AAMCO now owned by the same asset management company, and others had engaged in tortious interference with contract and violated Virginia's business conspiracy statute in an attempt to force him out of business.

The lower court dismissed the business conspiracy claim, rejecting tortious interference as the predicate for a business conspiracy claim, citing a rule established by the Virginia Supreme Court in Station #2, LLC v. Lynch, 280 Va. 166 (2010). The Virginia court in that case indicated that a conspiracy to merely breach a contract, which did not involve an independent duty arising outside of contract, was insufficient to establish a business conspiracy claim.

Predicate unlawful acts. The appellate court noted that the Virginia Supreme Court had signaled an obvious skepticism about business conspiracy claims predicated on contract disputes, warning against allowing mere contract disputes to be transformed into claims of fraud and conspiracy. However, there were plausible reasons to limit the Station #2 holding to actual breach of contract claims, as distinguished from tortious interference with contract or business expectancy. Station #2 posed the question of how to conceptualize tortious interference for the purpose of the conspiracy statute’s unlawful act requirement, but did not answer it, the appellate court stated.

In order to establish how far skepticism should extend under state law regarding the predicate unlawful acts required for the business conspiracy statute, the appellate court certified the following question for the Virginia Supreme Court:

"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?"

Limitations period. Virginia had a five-year statute of limitations for injuries to property rights, but a two-year statute of limitations for actions related to personal injuries. The lower court had applied the shorter limitation period to Dunlap's tort claims and dismissed the claims as untimely.

It may be wise judicial policy to impose the same limitations period for tortious interference as for the breach of contract that it ultimately addresses, or it may not, the appellate court stated. Since this issue is related to the first certified question, the appellate court also certified the following question for the Virginia Supreme Court:

"Does a two-year or five-year statute of limitations apply to claims of tortious interference with contract and tortious interference with business expectancy?"

The unpublished case is Civil Action No. 11-2327.

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

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

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