L-3 COMMUNICATIONS CORPORATION; L-3 APPLIED TECHNOLOGIES, INC. v. SERCO, INC.
No. 18-1423
United States Court of Appeals for the Fourth Circuit
June 10, 2019
PUBLISHED
Argued: March 20, 2019
Decided: June 10, 2019
Before KEENAN and DIAZ, Circuit Judges, and DUNCAN, Senior Circuit Judge.
Affirmed in part, vacated in part, and remanded by published opinion. Judge Keenan wrote the opinion, in which Judge Diaz and Senior Judge Duncan joined.
ARGUED: Joshua Nicholas Drian, MANATT PHELPS & PHILLIPS, LLP, Washington, D.C., for Appellants. John David Wilburn, MCGUIREWOODS LLP, Tysons Corner, Virginia, for Appellee. ON BRIEF: Nigel L. Wilkinson, Andrew Zimmitti, MANATT PHELPS & PHILLIPS, LLP, Washington, D.C.; Steven L. Levitt, Karen L. Weiss, LEVITT LLP, Mineola, New York, for Appellants. Ryan D. Frei, Matthew A. Fitzgerald, Ashley P. Peterson, MCGUIREWOODS LLP, Richmond, Virginia; Amy Miller, Martin J. Amundson, BUCHANAN INGERSOLL & ROONEY PC, Washington, D.C., for Appellee.
This case comes before us for the second time. Plaintiffs L-3 Communications Corporation and L-3 Applied Technologies, Inc. (L-3 ATI) (collectively, the plaintiffs) appeal from the district court‘s award of summary judgment to Serco, Inc. in the plaintiffs’ action alleging numerous claims arising out of a failed business relationship. The plaintiffs contend that Serco conspired with another company, Jaxon Engineering & Maintenance, Inc. (Jaxon), to “rig” a bidding process related to work for the United States Air Force Space Command (the Air Force), thereby interfering with the plaintiffs’ reasonable business expectancy in that work. The plaintiffs assert that Serco‘s conduct amounted to tortious interference with the plaintiffs’ business expectancy, common law conspiracy and statutory business conspiracy under Virginia law, and violations of the Colorado Organized Crime Control Act (COCCA),
Upon our review, we conclude that the district court properly awarded summary judgment to Serco on the claims of tortious interference with business expectancy, because those claims fail as a matter of law. However, for the reasons discussed below, we conclude that the district court erred in awarding summary judgment to Serco with respect to the plaintiffs’ conspiracy
I.
A detailed factual background of this case is included in our prior opinion. L-3 Commc‘ns Corp. v. Serco, Inc., 673 F. App‘x 284, 285-87 (4th Cir. 2016). We restate those facts as necessary here. In 2004, the Air Force awarded an indefinite delivery indefinite quantity contract to Serco (the prime contract). The prime contract required that Serco provide testing and upgrading services to certain Air Force facilities to protect those sites from high altitude electromagnetic pulse (HEMP) events.
Under the prime contract, the Air Force periodically would provide Serco with a statement of work that outlined the requirements for a specific HEMP-related project. If Serco could not complete the work itself, Serco would issue a request for proposal (RFP), which invited certain qualified companies to bid on the identified work as a subcontractor.
A few months after being awarded the prime contract, Serco entered into a subcontract for HEMP-related work (the subcontract) with the Titan Corporation, a predecessor to plaintiff L-3 ATI.2 The subcontract provided, in relevant part, that “[Serco] has no obligation to issue and there is no guaranty to [the plaintiffs] that [they] will receive any work under the terms of this Subcontract.” Instead, the plaintiffs still were required to submit proposals to bid on HEMP-related work, which was issued in the form of individual task orders.
Between December 2004 and June 2009, Serco awarded every task order issued under the prime contract to the plaintiffs or their predecessors. And although Serco was required by the prime contract to select subcontractors on a competitive basis to the maximum extent practicable, the plaintiffs were the only subcontractors that Serco considered for HEMP-related work during this time period.
In July 2009, Serco began to award HEMP-related task orders to another company, Jaxon, which was formed by a longtime L-3 employee. The plaintiffs allege that Jaxon was not qualified to perform this work, and that Serco‘s decision to award HEMP-related work to Jaxon was based on a “fraudulent scheme” between Serco and Jaxon in which Serco actively prevented the plaintiffs from fairly competing for work under the task orders. The plaintiffs allege that Serco facilitated this scheme (1) by encouraging and assisting former L-3 employees, now working for Jaxon, to use the plaintiffs’ confidential information when bidding on HEMP-related projects for Jaxon, and (2) by providing
In June 2015, the plaintiffs initiated the present action. The plaintiffs asserted claims of: (1) tortious interference with the plaintiffs’ business expectancy in HEMP-related task orders from July 2009 to the time of filing (Counts 1-34) (the tortious interference claims); (2) aiding and abetting Jaxon to tortiously interfere with this business expectancy (Counts 35-68) (the aiding and abetting claims); (3) civil conspiracy in violation of Virginia common law, and statutory business conspiracy in violation of
The district court initially dismissed the plaintiffs’ action under
Following extensive discovery on remand, Serco filed a motion for summary judgment, which the district court granted. The court concluded that although the plaintiffs’ tortious interference and aiding and abetting claims were timely, the plaintiffs could not establish a valid business expectancy in any task order because the subcontract expressly disclaimed any expectancy. The court also determined that the plaintiffs could not rely on their past course of dealing to establish a business expectancy, because such course of dealing did not arise independently of the subcontract.
With respect to the plaintiffs’ conspiracy claims, the court held that those claims were time-barred under Virginia‘s five-year statute of limitations, based on the court‘s finding that the plaintiffs initially suffered an injury in 2008 resulting from the alleged conspiracy. Alternatively, the court held that the conspiracy claims failed as a matter of law because the plaintiffs could not establish a valid business expectancy in any task order. The court also concluded that the plaintiffs’ COCCA claims were time-barred. The plaintiffs now appeal.
II.
The plaintiffs contend that the district court erred in granting summary judgment on their (1) tortious interference and aiding and abetting claims; (2) conspiracy claims; and (3) COCCA claims. We consider each set of claims in turn.
We review the district court‘s award of summary judgment de novo. Ray v. Int‘l Paper Co., 909 F.3d 661, 666 (4th Cir. 2018). Summary judgment is appropriate only “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
A.
We first consider the plaintiffs’ tortious interference claims and aiding and abetting
Virginia has long recognized a cause of action for tortious interference with contract rights or business expectancies. See Chaves v. Johnson, 335 S.E.2d 97, 102 (Va. 1985); Glass v. Glass, 321 S.E.2d 69, 76-77 (Va. 1984). These intentional tort claims are predicated on the “common law duty to refrain from interfering with another‘s contractual and business relationships.” Francis Hosp., Inc. v. Read Props., LLC, 820 S.E.2d 607, 610 (Va. 2018) (emphasis added) (quoting Dunlap v. Cottman Transmission Sys., 754 S.E.2d 313, 319 (Va. 2014)). Thus, these torts subject to liability an outsider who induces or causes one of the parties to the business relationship not to perform as reasonably expected. See Chaves, 335 S.E.2d at 102. As recently explained by the Supreme Court of Virginia, “[a]n action for tortious interference with a contract or business expectancy . . . does not lie against parties to the contract, but only lies against those outside the contractual relationship, i.e., strangers to the contract or business expectancy.” Francis Hosp., 820 S.E.2d at 610. Accordingly, only a party outside the contractual or business-expectancy relationship with the plaintiff may be held liable as an interferor. Id.; see also Fox v. Deese, 362 S.E.2d 699, 708 (Va. 1987) (“A person cannot intentionally interfere with his own contract.“).
Under Virginia‘s “third-party rule,” however, a party to a business relationship may be held liable for conspiracy to tortiously interfere with its own business relationship. The third-party rule recognizes “an action for tort in the nature of a conspiracy” against all parties who “unite” to interfere with a business relationship. Worrie v. Boze, 95 S.E.2d 192, 199 (Va. 1956) (emphasis added), abrogated on other grounds by Station #2 v. Lynch, 695 S.E.2d 537 (Va. 2010); see also CaterCorp, Inc. v. Catering Concepts, Inc., 431 S.E.2d 277, 281-82 (Va. 1993) (“The common law recognizes a cause of action against those who conspire to induce the breach of a contract, even when one of the alleged conspirators is a party to the contract.“). Thus, the third-party rule provides a cause of action in conspiracy against one who cannot be held directly liable for tortiously interfering with his own business relationship, but nonetheless encourages or induces an outsider to do so. See Worrie, 95 S.E.2d at 199.
This Virginia case law reveals a careful distinction in the different causes of action that can be asserted against parties allegedly involved in interfering with a business relationship. A stranger to the contractual or business relationship is subject to liability for a claim of tortious interference with a contract or business expectancy, as well as for conspiring to accomplish such interference. See Chaves, 335 S.E.2d at 102; Worrie, 95 S.E.2d at 199. In contrast, a party to the contract or business relationship at issue may be held liable only for the act of conspiracy, when that party combines with an outsider to achieve the alleged interference. See Francis Hosp., 820 S.E.2d at 610-11; CaterCorp, Inc., 431 S.E.2d at 281-82. Virginia‘s courts regularly have adhered to this distinction. See, e.g., Comm. Bus. Sys. v. Halifax Corp., 484 S.E.2d 892, 893-94 (Va. 1997) (involving a plaintiff‘s claims for conspiracy against its contractual
As noted above, the plaintiffs’ tortious interference claims are based on their allegations that Serco directly interfered with the plaintiffs’ business expectancy in HEMP-related task orders. And it is undisputed that Serco, as the prime contractor responsible for issuing such task orders, was a party to those orders. Thus, the plaintiffs’ tortious interference claims against Serco fail as a matter of law, because those claims have been asserted against a party to the contract or expectancy. See Francis Hosp., 820 S.E.2d at 610. Likewise, the plaintiffs’ aiding and abetting claims, which simply repackage the plaintiffs’ tortious interference claims, fail for the same reason.4 We therefore conclude that the district court properly awarded summary judgment in favor of Serco on the plaintiffs’ tortious interference and aiding and abetting claims (Counts 1 through 68).
B.
We next address the plaintiffs’ conspiracy claims. To recover in a civil conspiracy action both under the common law and under
The district court concluded that the plaintiffs’ conspiracy claims were time-barred and, alternatively, that the claims failed because the plaintiffs could not establish a valid business expectancy in any task orders. The plaintiffs challenge both holdings, which we address in turn.
1.
The plaintiffs first argue that the district court erred in concluding that their conspiracy claims are time-barred. The plaintiffs contend that because they were injured by the alleged conspiracy when
To bring a civil action for common law conspiracy or statutory business conspiracy, the plaintiffs were required to show that that they suffered damage “as a result of an act that is itself wrongful or tortious.” Dunlap, 754 S.E.2d at 317. The conspiracy itself is not actionable. Id. Thus, a cause of action for either type of conspiracy does not accrue until the plaintiff suffers an injury sufficient to give rise to the underlying tort claim. See Detrick v. Panalpina, 108 F.3d 529, 543 (4th Cir. 1997). And to prove such an injury, a plaintiff necessarily is required to prove every element of the underlying tort. See Almy v. Grisham, 639 S.E.2d 182, 188-89 (Va. 2007).
The plaintiffs’ various conspiracy claims are predicated on their allegations that Serco and Jaxon conspired to tortiously interfere with the plaintiffs’ business expectancy in HEMP-related task orders. Such allegations of tortious interference require as an element proof of “intentional interference inducing or causing a breach or termination of the relationship or expectancy.” Dunlap, 754 S.E.2d at 316 (emphasis added).
Here, the plaintiffs did not suffer any injury supporting a claim for tortious interference until Serco awarded a HEMP-related task order to Jaxon. Therefore, because the plaintiffs could not plead the essential elements of a tortious interference claim until July 2009, they likewise could not establish a common law or statutory business conspiracy claim against Serco until that date. See Almy, 639 S.E.2d at 189.
We find unpersuasive Serco‘s contention that the plaintiffs were injured by the alleged conspiracy as early as 2007 or 2008, when Serco allegedly reached an agreement with the plaintiffs’ employees to steal the plaintiffs’ confidential information and create Jaxon. Although those actions may have injured the plaintiffs with respect to agreements they had with their former employees, the plaintiffs’ alleged expectancy in HEMP-related task orders was unaffected. Similarly, Serco‘s decision not to solicit a bid from the plaintiffs for a HEMP-related task order in March 2009 did not represent a completed act of interference with the plaintiffs’ expectancy. Until the relevant task orders were awarded, Serco retained the discretion to solicit additional bids or even decline to award the task order to any company.
Accordingly, we conclude that all the plaintiffs’ conspiracy claims did not begin to accrue until July 2009, when the first HEMP-related task order was awarded to Jaxon. Because the plaintiffs initially brought their claims of conspiracy within five years of that time, the district court erred in determining that the plaintiffs’ conspiracy claims were time-barred.
2.
The plaintiffs also challenge the district court‘s alternative holding that, as a matter of law, the plaintiffs failed to establish a valid business expectancy in the HEMP-related task orders. In the plaintiffs’
As we have explained, to hold Serco liable for conspiracy to interfere with the plaintiffs’ business expectancy, the plaintiffs were required to establish that such tortious interference actually occurred. See Dunlap, 754 S.E.2d at 319; Almy, 639 S.E.2d at 188-89. To succeed on a claim of tortious interference, a plaintiff must show “(1) the existence of a valid contractual relationship or business expectancy; (2) the putative interferer‘s knowledge of the relationship or expectancy; (3) an intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resulting damage to the plaintiff.” Priority Auto Grp., Inc. v. Ford Motor Co., 757 F.3d 137, 143 (4th Cir. 2014) (citation omitted) (applying Virginia law). The district court‘s analysis and the parties’ arguments on appeal focus on the first of these elements, whether the plaintiffs could demonstrate a valid business expectancy in the HEMP-related task orders awarded to Jaxon.
To establish a valid business expectancy, a plaintiff must show a “‘probability’ of future economic benefit,” which is a fact-intensive inquiry. Halifax Corp., 484 S.E.2d at 897. A mere “possibility” that a future economic benefit will accrue is insufficient. Id. And although the plaintiff may rely on “any credible evidence” to demonstrate such a probability, the offered proof must meet an objective standard. Id. at 896-97 “[M]ere proof of a plaintiff‘s belief and hope that a business relationship will continue is inadequate to sustain” a claim of tortious interference with a business expectancy. Id. at 897.
In the present case, the plaintiffs rely on their long-standing business relationship with Serco to establish that but for Serco‘s acts assisting Jaxon, there was a reasonable probability the plaintiffs would have been awarded the HEMP-related task orders that Jaxon received. The record shows that between 2004 and June 2009, Serco awarded every HEMP-related task order to the plaintiffs. Additionally, the plaintiffs have offered evidence that they were the only entities that Serco even considered for HEMP-related work before 2009.
In submissions to the Air Force regarding such work, Serco stated that L-3 was
The district court erred in concluding that the plaintiffs could not rely on this course of dealing with Serco because that relationship arose only from the parties’ subcontract. Although the subcontract provided standard terms and conditions that would apply to any future award of task orders, that subcontract did not “govern[] the parties’ relationship” in bidding for and awarding task orders. Each RFP and task order, issued and bid on separately, constituted a new contract between the parties. See Coast Prof‘l, Inv. v. United States, Fin. Mgmt. Sys, Inc., 828 F.3d 1349, 1356 (Fed. Cir. 2016); see also Kingdomware Techs., Inc. v. United States, 136 S. Ct. 1969, 1978 (2016). Thus, the plaintiffs’ expectancy was in the issuance of each new task order, separate and apart from the subcontract. Accordingly, evidence of a course of dealing between the plaintiffs and Serco was relevant to the issue whether the plaintiffs would have realized their expectancy in the new task orders. See Halifax Corp., 484 S.E.2d at 897.
On remand, the fact finder should consider this course of dealing in the context of the parties’ entire contractual relationship, which in the present case included both the task orders and the subcontract. See id. at 896-97 (considering evidence of a plaintiff‘s financial condition, course-of-dealing, and interaction with the defendant to find “any credible evidence” that a future expectancy would be realized). Here, the subcontract expressly stated that Serco had “no obligation to issue and there is no guaranty to [the plaintiffs] that [they] will receive any work under this Subcontract.” The RFP‘s for HEMP-related task orders similarly explained that Serco retained the sole discretion to “make one award, multiple awards, or no award, depending on the best interest of Serco,” and that “Serco is not obligated . . . to enter into [an agreement] or any other arrangement with any offerer.” A fact finder could determine that these disclaimers weighed in some degree against the plaintiffs having a reasonable expectancy in future HEMP-related work.
Also relevant on remand to the question of reasonable business expectancy is the fact that Serco was required by the prime contract to select subcontractors on a competitive basis to the maximum extent practicable. And even when Serco recommended that a certain subcontractor be awarded work under a particular task order, it appears that the Air Force retained the authority to reject that recommendation. Thus, the very nature of the federal government‘s contracting and subcontracting process at issue in this case may make it more difficult as a factual matter for subcontractors, who are bound by the terms of a prime contract with the government, to demonstrate an objective expectation regarding future task orders. See Am. Fed‘n of Labor & Congress of Indus. Orgs. v. Kahn, 618 F.2d 784, 794 (D.C. Cir. 1979)
But it is not our role to weigh the evidence or these competing considerations. See Tolan v. Cotton, 134 S. Ct. 1861, 1868 (2014). Based on the record before us, we conclude that the evidence that the plaintiffs were the sole providers of HEMP-related services to Serco for several years was sufficient to create a dispute of material fact regarding whether the plaintiffs had a valid business expectancy in the task orders awarded to Jaxon. Accordingly, we hold that the district court erred in its alternative ruling awarding summary judgment to Serco on the plaintiffs’ conspiracy claims (Counts 69 and 70).
C.
We next turn to address the plaintiffs’ COCCA claims. The plaintiffs argue that the district court erred in applying a two-year, rather than a five-year, statute of limitations to those claims. We disagree with the plaintiffs’ contention.
The COCCA statute does not include a limitations period. See
A federal court exercising diversity jurisdiction applies the choice of law rules of the forum state. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941). Under Virginia law, statutes of limitations are considered procedural rules governed by the law of the forum state. See Barry v. Donnelly, 781 F.2d 1040, 1042 n.3 (4th Cir. 1986). Therefore, in this case, Virginia law determines both the applicable statute of limitations for the COCCA claims and the time at which those claims accrued under that limitations period. See Brown v. Am. Broad. Co., Inc., 704 F.2d 1296, 1299 (4th Cir. 1983).
Under Virginia law, “every action for damages resulting from fraud shall be brought within two years after the cause of action accrues.”
In this case, we agree with the district court that the plaintiffs’ COCCA claims are based on an alleged “fraudulent scheme” between Serco and Jaxon. The plaintiffs claim that the two companies orchestrated “a complicated and prolonged campaign of fraud and deceit,” and engaged in a “wide-ranging scheme to defraud the [Air Force] and to fraudulently obtain task orders that would have otherwise gone to L-3.” And the predicate acts pleaded in support of the plaintiffs’ COCCA claims are acts of federal mail and wire fraud, in violation of
Nonetheless, the plaintiffs should have been afforded an opportunity to prove whether they suffered any distinct injuries during the applicable two-year period. Under Virginia law, “if the wrongful acts [at issue] are not continuous and occur only at intervals, each occurrence inflicts a new injury and gives rise to a new and separate cause of action.” Am. Physical Therapy Ass‘n v. Fed‘n of State Bds. of Physical Therapy, 628 S.E.2d 928, 929 (Va. 2006) (internal quotation marks and citation omitted).
Here, the plaintiffs have alleged separate acts of mail and wire fraud underlying the COCCA claims related to the award of each task order, some of which occurred in 2012, 2013, and 2014. Accordingly, although we affirm the district court‘s decision holding that a two-year statute of limitations applies to the plaintiffs’ COCCA claims, we remand for the district court to determine as a factual matter the particular limitations period for each of the COCCA claims, and to determine whether the plaintiffs can recover for any independent injuries that may have occurred during those periods.7 See Hampton Roads Sanitation Dist. v. McDonnell, 360 S.E.2d 841, 843-44 (Va. 1987) (recognizing that a plaintiff may only recover for damages sustained during the applicable limitations period).
III.
In sum, we vacate the district court‘s award of summary judgment in favor of Serco with respect to the plaintiffs’ conspiracy claims (Counts 69 and 70) and COCCA claims (Counts 71 through 73), and we affirm the balance of the court‘s judgment. We remand the case for further proceedings consistent with the principles expressed in this opinion.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED