Case Information
*1 PRESENT: All the Justices
JAMES M. DUNLAP
OPINION BY v. Record No. 131318 CHIEF JUSTICE CYNTHIA D. KINSER
FEBRUARY 27, 2014 COTTMAN TRANSMISSION SYSTEMS,
LLC, ET AL.
UPON QUESTIONS OF LAW
CERTIFIED BY THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
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 *2 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 *3 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,
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,
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
*5
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,
Years later, in Werth v. Fire Companies' Adjustment Bureau,
[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 *6 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,
[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,
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 *7 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,
Because there can be no conspiracy to do an act that the
law allows, Werth,
To determine whether tortious interference with contract
and tortious interference with business expectancy qualify as
the requisite "unlawful act" for purposes of the business
conspiracy statutes, we must examine the nature of those causes
of action. We recognized a cause of action for tortious
interference with contract rights in Chaves v. Johnson, 230 Va.
112,
In Station #2, we addressed whether a conspiracy merely to
breach a contract qualifies as the required unlawful act for a
claim under Code §§ 18.2-499 and -500.
On appeal, we affirmed the trial court's judgment
sustaining a demurrer to the statutory business conspiracy
claim. Id. at 176,
In reaching this conclusion, we emphasized that the
plaintiff's agreement with the defendants did not "implicate
[any] statutory or independent common law duties" and thus a
conspiracy merely to breach that agreement was insufficient to
state a claim under the business conspiracy statutes. Id. at
175,
As we discussed in Station #2, the only duties at issue in
a breach of contract claim are those arising solely from the
contract itself; therefore, a breach of contract "does not,
without more, create a basis for recovery in tort." 280 Va. at
174,
Accordingly, we hold that tortious interference with
contract and tortious interference with business expectancy each
constitute the requisite "unlawful act" to proceed on a business
conspiracy claim under Code §§ 18.2-499 and -500. See Bray &
Gillespie Mgmt. LLC v. Lexington Ins. Co.,
relationships."); Avery v. Rossford Ohio Transp. Dist., 762 N.E.2d 388, 395 (Ohio Ct. App. 2001) ("[T]he underlying unlawful act must be a tort.").
B. Question #2
The second question asks whether a two-year or five-year
statute of limitations applies to claims of tortious
interference with contract and tortious interference with
business expectancy. Under Code § 8.01-243(A), an action for
personal injuries is subject to a two-year statute of
limitations, while under Code § 8.01-243(B) an action for injury
to property is subject to a five-year statute of limitations.
The dispositive issue is whether tortious interference with
*16
contract and tortious interference with business expectancy
allege injury to property. See Willard,
We have held that "the right to performance of a contract
and the right to reap profits therefrom are property rights
which are entitled to protection in the courts." Worrie, 198
Va. at 536,
As Cottman notes, determination of the applicable statute
of limitations in Worrie depended on whether the alleged cause
of action for conspiracy to breach a contract was of the nature
to survive the death of the plaintiff.
That analysis centered on the plaintiffs' claim that "their
business or estate, their property" in an employment contract
with a dancing instructor was destroyed by the defendants'
conspiracy to induce breach of the employment contract and to
solicit the plaintiffs' customers, depriving the plaintiffs of
business. Worrie,
As already discussed, one of the elements of a claim for
tortious interference with either a contract or business
expectancy requires intentional interference inducing or causing
a breach or termination of the contractual relationship or
business expectancy. Chaves,
Therefore, we hold that the five-year statute of limitations in Code § 8.01-243(B) applies to both tortious interference with contract and tortious interference with business expectancy.
III. CONCLUSION
In summary, we hold that both tortious interference with contract and tortious interference with business expectancy qualify as an unlawful act for purposes of a business conspiracy claim under Code §§ 18.2-499 and -500. We also hold that the five-year statute of limitations in Code § 8.01-243(B) applies *21 to causes of action for tortious interference with contract and tortious interference with business expectancy.
Certified question 1 answered in the affirmative. Certified question 2, alternative II answered in the affirmative.
Notes
[1] The pertinent facts are undisputed and are taken primarily from the certification order in Dunlap v. Cottman Transmission Systems, LLC, No. 11-2327 (4th Cir. Aug. 21, 2013).
[2] Dunlap filed the action in the Circuit Court for the City of Chesapeake, but Cottman subsequently removed it to the United States District Court for the Eastern District of Virginia, Norfolk Division (the District Court), under 28 U.S.C. §§ 1332 and 1441(a).
[3] The conspiracy statute was originally codified in 1962 as
part of the Commonwealth's antitrust laws. See Former Code §
59.21.1 (Cum. Supp. 1962) (superseded). The General Assembly
moved the statute to the criminal code with much greater
sanctions in 1964. See Former Code § 18.1-74.1:1 (Cum. Supp.
1975)(superseded), as enacted by 1964 Acts ch. 623); see also
Andrews v. Ring,
[4] The term "unlawful act" is defined as "[c]onduct that is not authorized by law; a violation of a civil or criminal law." Black's Law Dictionary 1678 (9th ed. 2009).
[5] "Methods of interference considered improper are those
means that are illegal or independently tortious, such as
violations of statutes, regulations, or recognized common-law
rules." Duggin v. Adams,
[6] The second certified question asks only about the two-year
and five-year statutes of limitations in Code § 8.01-243.
Cottman, however, argues that the applicable statute of
limitations is the catchall two-year provision in Code § 8.01-
248. As the statute's plain language indicates, it applies only
to "[e]very personal action . . . for which no limitation is
otherwise prescribed." In determining whether Code § 8.01-248
applies, we analyze the nature of the cause of action at issue.
Parker-Smith v. Sto Corp.,
[7] Likewise, that portion of the decision in Worrie is not affected by the Court's subsequent decision in Station #2.
