James Dunlap v. Todd Leff

Filing

OPINION/ORDER CERTIFYING QUESTION to state court in Virginia. Originating case number: 2:11-cv-00272-AWA-DEM Copies to all parties and district court. [999177534] [11-2327]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 11-2327

JAMES M. DUNLAP,
Plaintiff - Appellant,
v.
COTTMAN TRANSMISSIONS SYSTEMS, LLC; TODD P. LEFF,
Defendants - Appellees.

Appeal from the United States District Court for the Eastern
District of Virginia, at Norfolk. Arenda Wright Allen, District
Judge. (2:11-cv-00272-AWA-DEM)

Argued:

May 14, 2013

Decided:

August 21, 2013

Before Sandra Day O’CONNOR, Associate Justice (Retired), Supreme
Court of the United States, sitting by designation, and WYNN and
DIAZ, Circuit Judges.

Unpublished
Virginia.

Order

of

Certification

to

the

Supreme

Court

of

ARGUED:
Crystal M. Johnson, UNIVERSITY OF GEORGIA SCHOOL OF
LAW,
Appellate
Litigation
Clinic,
Athens,
Georgia,
for
Appellant. James C. Rubinger, PLAVE KOCH PLC, Reston, Virginia,
for Appellees.
ON BRIEF:
Peter B. Rutledge, Paula Briceno,
Brittany Cambre, UNIVERSITY OF GEORGIA SCHOOL OF LAW, Appellate
Litigation Clinic, Athens, Georgia, for Appellant.
Benjamin B.
Reed, PLAVE KOCH, PLC, Reston, Virginia, for Appellees.

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PER CURIAM:
I.

Questions Certified

The United States Court of Appeals for the Fourth Circuit,
exercising the privilege afforded it by the Supreme Court of
Virginia through its Rule 5:40 to certify questions of law to
the Supreme Court of Virginia when a question of Virginia law is
determinative in a pending action and there is no controlling
Virginia

precedent

Virginia

to

on

exercise

point,
its

requests

discretion

to

the

Supreme

answer

the

Court

of

following

questions:

1.

May a plaintiff use tortious interference with contract or
tortious

interference

predicate

unlawful

act

with
for

business

expectancy

a

under

claim

the

as

the

Virginia

business conspiracy statute, Va. Code §§ 18.2-499, 18.2500?
2.

Does a two-year or 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?

We acknowledge that the Supreme Court of Virginia may restate
these questions.

See Va. Sup. Ct. R. 5:40(d).

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II.

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Nature of the Controversy and Statement of Relevant Facts
AAMCO Transmissions, Inc. is a nationwide transmission and

automobile

repair

franchises.

company

This

case

that

involves

operates

a

dispute

through
between

local

an

AAMCO

franchisee named James Dunlap and various parties related to
AAMCO

and

its

recent

attempt

to

eliminate

certain

local

franchises with overlapping business areas in Virginia.
Dunlap,

the

plaintiff-appellant,

AAMCO franchises for over 30 years.

has

operated

a

pair

of

In 2006, AAMCO was acquired

by an asset-management company that already held a large share
of

Cottman

Transmission

Systems,

LLC,

an

AAMCO

competitor.

Because of the substantial overlap among the businesses – and
the potential for competition among local franchisees – the new
AAMCO owners attempted to convert Cottman franchises to AAMCO
franchises

and

then

close

some

existing

franchises.

found himself among the disfavored franchisees.

Dunlap

See J.A. 5-8,

11-14.
Dunlap fought AAMCO to stay in business, and the parties
eventually

litigated

infringement

and

agreements.

Subject

and

settled

wrongful
to

cross-disputes

termination

conditions

not

of

for

trademark

Dunlap’s

franchise

particularly

relevant

here, this settlement allowed Dunlap to continue to operate his
AAMCO franchises.
tried

to

terminate

Then, as now, Dunlap maintained that AAMCO
his

franchises
3

for

minor

or

trumped

up

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violations of their franchise agreements as a pretext to force
him out of business.

See J.A. 11-14; AAMCO Transmissions, Inc.

v. Dunlap, 2011 WL 3586225 (E.D. Pa. Aug. 16, 2011).

Because

AAMCO was the contracting party, and its duties were resolved in
the prior litigation, Dunlap’s present complaint is not directed
to AAMCO itself.
to

force

him

Instead, Dunlap now asserts that the decision

out

of

business

was

a

conspiracy

for

personal

profit among new AAMCO principal Todd Leff, Cottman Transmission
Systems, and certain of Dunlap’s local competitors who would
benefit from his exit.

J.A. 11-20.

He maintains that AAMCO’s

actions, precipitated by these other parties, caused irreparable
harm to his business by depriving him of marketing benefits that
typically

flow

from

a

franchise

arrangement.

The

present

complaint thus names Leff and Cottman as defendants in an action
for: (1) violation of Virginia’s business conspiracy statute,
(2)

tortious

interference

with

contract,

interference with business expectancy.

and

(3)

tortious

J.A. 4-5, 20-24.

The district court dismissed the business conspiracy count
for failure to allege a valid “unlawful act” as a predicate for
the conspiracy.

It relied on a recent Virginia Supreme Court

decision called Station #2, LLC v. Lynch, 280 Va. 166 (2010),
which held that “a conspiracy merely to breach a contract that
does

not

involve

an

independent

duty

arising

outside

the

contract is insufficient to establish a civil claim under [the
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Virginia

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business

conspiracy

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statute].”

Id.

at

174.

The

district court then found that “[a]ll of the duties involved in
this case arise out of and the damages flow from contractual
obligations” – namely, the franchise agreements between Dunlap
and

AAMCO.

J.A.

43-44.

Accordingly,

the

district

court

concluded that applying the business conspiracy statute in this
case

would

risk

exactly

what

the

Virginia

Supreme

Court

had

tried expressly to avoid: “turning every breach of contract into
an actionable claim for fraud.”
(citation omitted).
district

court

from

Station #2, 280 Va. at 174

In dismissing this claim, it joined another
this

Circuit

that

recently

rejected

a

tortious interference allegation as the predicate for a business
conspiracy count under the rule announced in Station #2.

See

J.A. 43 (discussing Zurich Am. Ins. Co. v. Turbyfill, 2010 WL
4065527 (W.D. Va. Oct. 15, 2010)).
Next, the district court dismissed both of the independent
common-law tort claims as untimely.

Virginia has a five-year

statute of limitations for injuries to property rights, see Va.
Code § 8.01-243(B), but a two-year statute of limitations for
actions

related

to

personal

injuries,

id.

§ 8.01-243(A).

Relying on Willard v. Moneta Bldg. Supply, Inc., 262 Va. 473
(2001), the district court noted that “an allegation of nothing
more than disappointed economic expectations does not amount to
an injury to property” because “the law of contracts provides
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the sole remedy for such a loss.”
Va. at 480).

J.A. 45 (quoting Willard, 262

Having already characterized the common-law tort

claims as flowing from breach of contract for purposes of the
conspiracy count, the district court again relied on Station #2
to classify them as contract (and, thus, personal injury) claims
for purposes of the two-year statute of limitations.
& n.2.

J.A. 44-45

In other words, because the injury in this case went to

Dunlap’s disappointed expectations about how AAMCO would perform
and

the

profitability

of

Dunlap’s

business

–

and

not

to

a

property injury as such – the district court applied the shorter
statute of limitations, and dismissed.
III.

Legal Discussion and Relevant Virginia Case Law
A.

Business Conspiracy Issue

The reason to certify the first issue is straightforward:
The

Virginia

signals

Supreme

obvious

Court’s

skepticism

recent

about

decision

business

in

Station

conspiracy

#2

claims

predicated on contract disputes, but we are unable to ascertain
with certainty how far that skepticism extends.
On the one hand, Station #2 clearly represents an important
change in Virginia’s business conspiracy law, and we agree with
the district court that this case raises concerns of the kind
addressed there.
least

partly

In Station #2, the Virginia Supreme Court at

rejected

its

established

case

law

making

it

actionable to “conspire[] to procure the breach of a contract.”
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See 280 Va. at 174 (rejecting Chaves v. Johnson, 230 Va. 112
(1985), and Worrie v. Boze, 198 Va. 533 (1956)).

The Court

noted that, while it had previously approved such claims, it was
now “of opinion that a conspiracy merely to breach a contract
that does not involve an independent duty arising outside the
contract

is

claim.”

insufficient

Id.

(emphasis

to

establish

added).

The

a

civil

Court

[conspiracy]

warned

against

allowing mere contract disputes to be transformed into claims of
fraud and conspiracy.

Id.

And the standard that it announced

appears to ask whether the duty that has been violated “aris[es]
outside the contract,” id. – a standard one might think unmet by
garden-variety claims of tortious interference with contract or
with the business expectations that contract law protects.
On the other hand, there are plausible reasons to limit
Station #2’s holding to actual breach of contract claims, and to
distinguish
expectancy.

tortious

interferences

with

contract

or

business

As Dunlap points out, see Appellant’s Br. 15-16,

the duty not to interfere with the agreements of others arises
as a common-law corollary of the contract, not from the contract
itself.

Indeed,

it

cannot

arise

from

the

contract

itself

because the duty is one that falls upon third parties, not the
parties to the agreement.

According to Dunlap, this distinction

is sufficient to place the violated duty “outside the contract”
for purposes of Station #2.
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Whether (and when) this is a meaningful distinction is, we
think, a question that is best posed to the Virginia Supreme
Court,

for

it

involves

interpretation

of

its

important questions of state law and policy.

duty

to

avoid

contractual

and

To begin, Station

#2 does not definitively settle the question:
the

precedents

interference

It is true that
does

not

flow

directly from a party’s contractual agreements, but it is also
true that the ultimate duty that is breached is contractual, and
the set of harms redressed flows entirely from the contract.

In

other words, Station #2 poses a question of how to conceptualize
tortious

interference

for

statute’s

unlawful

requirement,

act

the

purpose
but

of

the

does

not

conspiracy
answer

it.

Moreover, in typical cases alleging tortious interference the
challenged

conduct

will

–

as

here

–

involve

discussions

and

negotiations among one contracting party and potential business
partners about the possibility of breaching the old contract and
starting a new relationship.

Whether to view such negotiations

as “conspiratorial” is an important question of state policy:
Doing so elevates the sanctity of contract, but perhaps too far.
A state court could easily conclude that it is adequate, and
more likely to encourage efficient business decisions, to give
the

harmed

party

only

the

benefit

of

its

contractual

expectations through a simple breach of contract action against
its counter-party.

Cf. Station #2, 280 Va. at 174 (expressing
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about

“turning

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every

breach

of

contract

into

an

actionable claim for fraud”) (citation omitted).
Moreover, especially in light of these policy concerns, it
may be that the right answer involves finer distinctions of the
kind that the Virginia Supreme Court is better fit to make.

For

example, it is possible that tortious interference claims should
sometimes

constitute

“unlawful

acts”

for

purposes

of

the

business conspiracy statute, but only in exceptional cases.

Cf.

Advanced Marine Enters., Inc. v. PRC Inc., 256 Va. 106, 117-18
(1998)

(allowing

interference,
“outrageous”

conspiracy

before
conduct

Station
such

breaching employees).

claim

predicated

on

#2,

a

theft

as

in

case

of

corporate

tortious
involving
files

by

The extent to which Station #2 preserves

any such claim is unclear, however, and so we think it best to
seek a definitive answer from the Virginia Supreme Court.
B.
The

reason

to

straightforward:

Statute of Limitations Issue
certify

the

second

question

is

even

more

The question which statute of limitations to

apply to tortious interference claims is a pure legal issue that
has not been settled by the Virginia Supreme Court.

Virginia

applies a two-year statute of limitations to claims regarding
personal

injuries

and

a

five-year

statute

claims regarding injuries to property.
Va. at 478.

of

limitations

to

See, e.g., Willard, 262

But that distinction can be hard to draw, and the
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Virginia Supreme Court has previously disagreed with how this
Circuit

has

attempted

to

articulate

it.

See

id.

at

479

(rejecting the test applied in Brown v. Am. Broad. Co., 704 F.2d
1296, 1303-04 (4th Cir. 1983)).

As with the previous issue, we

believe that this question at bottom concerns an ambiguity in
the

Virginia

Supreme

Court’s

recent

precedent

that

is

best

resolved by that Court.
Indeed, the Virginia Supreme Court’s decision in Willard
can be read to support either side in this case.

Willard held

that

of

an

infringement

on

the

dissenters’

rights

corporate

shareholders was an injury to property interests for purposes of
the five-year statute of limitations.
it

made

clear

that

“conduct

.

.

Id. at 481.
.

directed

In so doing,

at

[another’s]

property, . . . constitutes an injury to property,” for purposes
of

the

limitation

indirect.

Id.

emphasized

that

at

periods
480

whether

(citation

“disappointed

the

injury

is

omitted).

economic

direct

But

expectations

or

it

also

do[]

not

amount to an injury to property” because “the law of contracts
provides
plausibly
property

the

sole

argues
(that

remedy

that
is,

the

his

for

such

conduct

a

loss.”

here

was

directed

The

district

franchises).

Id.

Dunlap
at

his

court,

however, plausibly viewed the injuries as flowing from Dunlap’s
disappointed expectations about those franchises’ profitability
had AAMCO continued to perform under its contracts.
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previous

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issue,

it

is

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possible

to

conceptualize

tortious

interference as being fundamentally a part of the protections
for business expectations provided by the “law of contracts,”
id.,

or

rights

as

a

that

protection

sounds

most

for

contractually

fundamentally

in

secured

the

law

property
of

torts.

Accordingly, it may be wise judicial policy to impose the same
limitations period for tortious interference as for the breach
of

contract

Especially
Virginia

that

given

Supreme

it
our
Court

ultimately
decision
on

the

addresses,

to

seek

first

or

the

issue

it

may

guidance
in

this

not.

of

the

case,

we

prefer to ask that Court to settle this related issue as well.
In sum, we find ourselves unable to predict with confidence
how

the

Virginia

discussed above.

Supreme

Court

would

rule

on

the

questions

As a result, we respectfully request that the

Virginia Supreme Court answer our certified questions.
IV.
We

Certified Questions Determine This Proceeding

also

note,

briefly,

that

determine the outcome of this case.

the

two

questions

together

If the district court’s two

holdings regarding tortious interference are correct as a matter
of Virginia law, we would affirm.

If either is incorrect, we

would reverse and remand for further proceedings because these
were

the

sole

rationales

adopted

dismissing the case.

11

by

the

district

court

in

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V.

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The Parties and Their Counsel
A.

The Plaintiff–Appellant is James Dunlap.

Counsel for the

Plaintiff–Appellant is:

Peter B. Rutledge
Paula Briceno
Brittany Cambre
Crystal M. Johnson
University of Georgia School of Law
Appellate Litigation Clinic
100 Herty Drive,
Athens, GA 30602
[phone] (Telephone)
[phone] (Facsimile)
B.
The

Defendants–Appellees

Transmission Systems, LLC.

are

Todd

P.

Leff

and

Cottman

Counsel for the Defendants–Appellees

is:

James C. Rubinger
Benjamin B. Reed
Plave Koch PLC
12355 Sunrise Valley Drive,
Suite 230
Reston, VA 20191
[phone] (Telephone)
[phone] (Facsimile)

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VI. Conclusion
Pursuant

to

the

privilege

made

available

by

Virginia

Supreme Court Rule 5:40, we respectfully:

1) Certify the questions stated in Part I of this Order of
Certification to the Supreme Court of Virginia for resolution;

2) Order the Clerk of this Court to forward to the Supreme Court
of Virginia, under the official seal of this Court, a copy of
this

Order

of

Certification,

together

with

the

original

or

copies of the record before this Court to the extent requested
by the Supreme Court of Virginia; and

3) Order that any request for all or part of the record be
fulfilled by the Clerk of this Court simply upon notification
from the Clerk of the Supreme Court of Virginia.

QUESTIONS CERTIFIED
FOR THE COURT
/s/ James A. Wynn, Jr.
Circuit Judge

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