Petr Bocek v. JGA Associates, LLC
Filing
UNPUBLISHED AUTHORED OPINION filed. Originating case number: 1:11-cv-00546-CMH-JFA Copies to all parties and the district court/agency. [999163788].. [12-1590]
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1590
PETR BOCEK, M.D., PHD,
Plaintiff − Appellant,
v.
JGA ASSOCIATES,
INC.,
LLC;
JOSEPH
P.
AMATO;
A2
MEDICAL
GROUP,
Defendants – Appellees,
and
ALLERGY CARE CENTERS, VIRGINIA, INC.,
Defendant,
v.
LENKA BOCEK,
Movant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.
Claude M. Hilton, Senior
District Judge. (1:11-cv-00546-CMH-JFA)
Argued:
March 19, 2013
Decided:
August 1, 2013
Before TRAXLER, Chief Judge, and WILKINSON and NIEMEYER, Circuit
Judges.
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Affirmed in part, reversed in part, and remanded by unpublished
opinion. Chief Judge Traxler wrote the opinion, in which Judge
Niemeyer concurred in part and concurred in the judgment. Judge
Niemeyer wrote a separate opinion concurring in part and
concurring in the judgment.
Judge Wilkinson wrote a separate
opinion concurring in part and dissenting in part.
ARGUED: S. Micah Salb, LIPPMAN, SEMSKER & SALB, PLLC, Bethesda,
Maryland, for Appellant.
David Edward Sher, SHER, CUMMINGS &
ELLIS, Arlington, Virginia; Brian Christopher Athey, WEBSTER
BOOK, LLP, Alexandria, Virginia, for Appellees. ON BRIEF: Mary
E. Kuntz, Ph.D., Judah Katz, Jeff J. Kim, LIPPMAN, SEMSKER &
SALB, PLLC, Bethesda, Maryland, for Appellant.
Mark D.
Cummings, SHER, CUMMINGS & ELLIS, Arlington, Virginia, for
Appellees JGA Associates, LLC, and Joseph P. Amato.
Unpublished opinions are not binding precedent in this circuit.
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TRAXLER, Chief Judge:
Petr Bocek brought this action against business consultant
Joseph Amato and two companies associated with Amato after the
defendants purchased a medical practice for themselves rather
than for Bocek.
The district court granted summary judgment in
favor of the defendants, and Bocek appeals.
We affirm in part,
reverse in part, and remand for further proceedings.
I.
Plaintiff Petr Bocek is a medical doctor specializing in
the
treatment
manager
and
of
sole
allergies.
member
of
Defendant
defendant
Joseph
JGA
Amato
is
Associates,
the
LLC,
a
business consulting firm.
Bocek contacted Amato seeking assistance with the formation
and
financing
November
10,
of
2010,
a
new
the
allergy
medical
entered
parties
care
into
practice.
a
On
contract
(the
“Consulting Agreement”) through which JGA agreed “to review and
report
on
the
feasibility
of
the
proposed
allergy
medicine
practice and prepare a business proposal for funding a start-up
medical
practice”
and
“render
such
other
services
agreed upon by the Client and the Consultant.”
as
J.A. 64.
may
be
Under
the terms of the Agreement, JGA would be compensated through
“development fees” (hourly billing for consulting services) and
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a “completion fee” of two percent of the face amount of any
business loan arranged by JGA.
A few days after signing the Consulting Agreement, Bocek
asked Amato about the feasibility of buying an existing medical
practice rather than starting a new practice.
Bocek told Amato
that Allergy Care Centers (“ACC”), where Bocek had previously
worked, was being offered for sale by the administrator of the
estate (the “Estate”) of ACC’s owner, who had died two years
earlier.
Amato
responded
positively,
explaining
that
“[t]he
acquisition of an existing operating practice is always more
attractive if the price and the historic financial performance
make sense.”
buying
starting
ACC,
a
J.A. 68.
there
new
After Bocek raised the possibility of
were
no
practice;
further
the
discussions
relationship
about
between
Bocek
Bocek
and
Amato focused exclusively on acquiring ACC’s assets.
Bocek
told
Amato
that
his
acquisition
of
ACC
might
be
complicated because he had been fired from ACC and was in the
process
of
negotiating
a
severance
package,
and
Bocek
asked
Amato to pursue the purchase of ACC without revealing Bocek’s
identity
as
the
buyer.
To
keep
Bocek’s
name
out
of
the
negotiations, Amato and Bocek ultimately settled on a “straw
purchase” approach by which JGA (or an alternate holding company
set up by Amato) would buy ACC and transfer it to Bocek after
closing.
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Emails show that by the end of December 2010, the parties
were in general agreement on the overall structure and ultimate
goal of the deal – ownership of the practice by Bocek – and what
needed to be done to move forward with the transaction.
There
was, however, no agreement as to the structure or mechanics of
the transfer from JGA to Bocek.
For example, in a December 23
email, Amato told Bocek that while there were still open issues,
Amato
“intend[ed]
to
move
forward”
with
the
purchase
of
“based on a few specific parameters,” including:
1. That our firm (or an alternate holding
company) intends to initially purchase the practice
with the direct intention of selling the practice (or
the holding company) to you.
2. That you will commit to work with our firm
during the due diligence process with the sole
intention of becoming the eventual owner of ACC. The
timing of the change in ownership would be automatic
and agreed to by our firm and yourself before we
execute the Purchase Agreement. The transfer of
ownership to you will depend on your ability to fund
the purchase of the practice from our firm and how
quickly “we” are able to secure third-party financing
for you to buy the practice from our firm; or if
third-party financing is not immediately available,
our firm would hold a seller-held note until such time
that conventional funding can take out our note. The
bottom line is that we would intend on transferring
ownership to you as soon as all parties agree we can,
that is after our firm’s purchase of the practice from
the estate.
. . .
4. That you commit to buying the practice and/or
running the practice (as owner or lead physician, your
choice) under contract with the new company as a
condition of us purchasing ACC. There may be a reason
5
ACC
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you do not want to own the practice immediately after
our purchase of the firm; if so, we need to understand
specifically what you want and we need to be sure that
if we purchase the practice, day one you will be the
company's lead physician (either as the owner or key
employee).
You will need to understand that we will
not go through with the purchase of ACC if you are not
a direct part of our exit strategy.
J.A. 75.
An email sent by Amato a few days later, after Bocek
had passed along questions from his attorney about the purchase,
reconfirmed the basic plan:
We are not purchasing the business on the behalf of an
undisclosed
purchaser;
JGA
“is”
purchasing
the
business.
Our intentions with the business after the
deal is consummated will not be a concern for the
Seller; we will be sure that nothing precludes us from
selling the business once we have purchased [it]. . .
.
But please understand our only intention once we
own the business would be to sell the business to you;
and as I said before I do not think the estate could
care less.
J.A. 81 (emphasis added).
On January 22, 2011, Amato sent Bocek an invoice for his
services.
and
The invoice reflected Bocek’s prior payment of $3,800
sought
an
additional
$4,574.40
“for
expanded
hours
and
third-party costs associated with the project development and
acquisition negotiations for the purchase of the Allergy Care
Center business operation on behalf of JGA Associates and Dr.
Petr Bocek.”
J.A. 1048.
On February 3, Amato sent the Estate a Letter of Intent
(“LOI”)
through
which
“JGA
Associates,
LLC,
or
offered to purchase ACC’s assets for $1,000,000.
6
its
assigns”
J.A. 102.
The
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LOI obligated the parties to negotiate in good faith, but the
LOI was otherwise not binding; until the execution of a mutually
agreeable asset purchase agreement, either side could walk away
from the transaction without penalty.
The Estate accepted the
offer and returned an executed copy of the LOI to Amato late in
the afternoon on February 8, 2011.
Earlier that same day (February 8), Amato had visited one
of the ACC offices to meet with Margaret Crook, ACC’s practice
manager.
During the meeting, Crook told Amato that Bocek had
been fired after he sexually harassed employees and used another
doctor’s prescription pad to forge prescriptions for himself.
This was the first Amato had heard of these issues; Bocek had
told Amato that he had been fired, but he never provided any
details
about
what
happened,
and
Amato
never
asked.
After
meeting with Crook, Amato stalled and put off Bocek’s various
inquiries until he could verify what he had learned.
On
February
15,
the
Estate
filed
a
petition
in
a
Pennsylvania “Orphan’s Court” seeking approval for the sale of
ACC.
Bocek was then unaware that the sale was moving forward --
Amato had not informed Bocek that he submitted the LOI to the
Estate on February 3 or that the LOI had been accepted.
On
confirmed
February
Crook’s
17,
2011,
after
information,
Amato
reviewing
sent
a
documents
letter
that
notifying
Bocek of his intent to terminate their contractual relationship
7
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in
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10
days,
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in
Agreement.
accordance
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with
the
terms
of
the
Consulting
Amato explained the termination in general terms,
stating
that
apparent
.
during
.
.
the
that
due
diligence
your
process,
involvement
transaction would . . . sour the deal.
in
“it
any
became
potential
It also became evident
that we could not move forward with your participation in any
potential
transaction
without
repercussions thereafter.”
the
possibility
of
J.A. 118.
Counsel for Bocek responded on February 22.
things,
counsel
noted
serious
that
Amato,
as
Bocek’s
Among other
agent,
had
a
continuing duty of loyalty to Bocek and that Amato would be
breaching his contractual and fiduciary duties “if [he] were to
turn the acquisition of ACC into a deal which is of benefit to
[him].” J.A. 1084.
At the time of this letter, counsel was
unaware of evidence showing that Amato did not take his duty of
loyalty
seriously.
For
example,
while
Bocek
was
under
the
impression that JGA would buy ACC and then sell it to Bocek at
cost, Amato and potential investors were emailing each other
about
the
possibility
of
buying
ACC
for
$1
immediately flipping it to Bocek for $2 million.
22.
of
million
and
See J.A. 1021-
In addition, Amato repeatedly told Bocek that when a letter
intent
was
submitted
to
the
Estate,
the
purchase
price
offered would be $1.2 million, even though Amato had already
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submitted
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multiple
draft
million to the Estate.
On
March
2,
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LOIs
with
a
purchase
price
of
$1
company,
A2
See J.A. 1059-68.
2011,
Amato
incorporated
a
new
Medical Group, Inc., to serve as the purchaser of ACC’s assets.
JGA at some point assigned its interests in the transaction to
A2, 1 and the Estate and A2 executed an asset purchase agreement
on May 13, 2011.
Ten days later, the Orphan’s Court approved
the sale of ACC to “JGA Associates, LLC and its assigns in
accordance with the purchase amount and terms set forth in the
May 13, 2011 Asset Purchase Agreement.”
closed on June 22, 2011.
J.A. 1129.
The sale
At no time between the February 17
termination of the Consulting Agreement and the closing of the
sale did Bocek make an offer to purchase ACC.
After
unsuccessfully
seeking
an
injunction
to
prohibit
Amato and JGA from buying ACC, Bocek filed an amended complaint
1
No written assignment appears in the record, but emails
from Amato and his partner in A2 make it clear enough for
summary-judgment purposes that an assignment was effectuated in
a way that was acceptable to the parties. See J.A. 899 (March 8
email from Amato informing Estate that his corporate attorney
and his partner will “have the assignment document prepared that
will tie the transaction together”); id. (March 8 email to
Estate from Amato’s partner stating that the attorney will “get
me the assignment document to transfer the purchase from JGA to
A2 Medical Group, Inc. since that will be the formal acquisition
company”);
see
also
Amato
deposition,
J.A.
1102
(“JGA
eventually, as the Estate knew, was going to assign the purchase
to someone. A2 medical was eventually established as the entity
that would receive that assignment with the permission of the
Estate.”).
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asserting four causes of action against Amato, JGA, and A2:
fraudulent
fiduciary
conveyance
duties;
and
(3)
constructive
breach
of
trust;
contract;
fiduciary duties as joint venturers.
and
(1)
(2)
breach
of
(4)
breach
of
The district court granted
summary judgment in favor of the defendants and dismissed the
case.
Bocek
sufficient
to
appeals,
preclude
arguing
summary
that
he
judgment
as
presented
to
evidence
each
cause
of
action.
II.
Summary judgment is appropriate “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.”
Civ. P. 56(a).
Fed. R.
“We review a district court's decision to grant
summary judgment de novo, applying the same legal standards as
the
district
inferences
court
and
therefrom
nonmoving party.”
in
viewing
the
all
light
facts
most
and
reasonable
favorable
to
the
T-Mobile Northeast LLC v. City Council of
Newport News, 674 F.3d 380, 384-85 (4th Cir. 2012) (internal
quotation marks omitted).
A.
We begin with Count III, the breach of contract claim.
The
amended complaint set out the relevant terms of the Consulting
Agreement, including the portion through which JGA agreed to
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“render such other services as may be agreed upon by the Client
and the Consultant.”
J.A. 26, 55.
Bocek also alleged that he
and JGA “agreed that JGA would purchase ACC’s assets as a ‘straw
purchaser’ and immediately transfer ownership thereof to Bocek.”
J.A.
55.
Bocek
alleged
that
JGA
breached
the
Consulting
Agreement by, inter alia, using information learned from Bocek
for JGA’s own benefit, and that JGA breached the contract by
entering into the LOI and transferring its rights to A2, “thus
ensuring that Bocek could not . . . acquire ACC’s assets.”
J.A.
55.
The district court granted summary judgment in favor of
the defendants.
In the district court’s view, Bocek was not
claiming that JGA breached the Consulting Agreement, see J.A.
1207 n.1, but was only alleging that JGA breached a separate,
oral agreement for the straw purchase and immediate re-transfer
of
ACC
(the
understanding
“Straw
of
the
Purchase
Agreement”).
claim,
the
court
then
And
with
rejected
that
it,
explaining that “there is no evidence that the oral contract
allegedly breached ever validly existed due to the absence of a
meeting of the minds on the issue of Dr. Bocek’s entitlement to
rights in [ACC] subsequent to the execution of the Consulting
Agreement.”
J.A.
1207.
The
defendants
approach
the
issue
similarly, contending on appeal that Bocek’s breach of contract
claim is premised not on the Consulting Agreement, but on “the
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untenable and unsupported notion that he had an oral agreement
with JGA to purchase a $1 million medical practice even though
there is no evidence that he and JGA ever agreed on any of the
material terms necessary to purchase [ACC].”
Brief of Appellee
at 43.
While the Amended Complaint included allegations about the
Straw Purchase Agreement, it also very clearly alleged breaches
of the Consulting Agreement. 2
On appeal, however, Bocek focuses
on the Straw Purchase Agreement, not the Consulting Agreement.
Bocek does not identify the district court’s misreading of his
breach of contract claim as an issue on appeal, see Brief of
Appellant at 2, nor does he argue in the substantive portions of
his brief that the defendants’ actions amounted to breaches of
the
Consulting
throughout
his
Agreement.
brief
that
To
the
the
contrary,
services
Bocek
performed
by
states
JGA
in
connection with the ACC acquisition were not performed under the
Consulting Agreement but were instead performed under the Straw
2
See J.A. 26, ¶ 45 (referring to November 2010 Consulting
Agreement as “the Agreement”); J.A. 55, ¶ 305 (“JGA agreed, per
the terms of the Agreement, to ‘render such other services as
may be agreed upon by the Client and the Consultant from time to
time.”); id., ¶ 309 (“JGA breached the Agreement by utilizing
information learned from Bocek . . . to fully analyze the
desirability of purchasing ACC’s assets for JGA’s benefit and
not for the benefit of JGA’s client, Bocek.”); id., ¶ 310 (“JGA
breached the Agreement by . . . .”); id., ¶ 311 (“JGA further
breached the Agreement by . . . .”).
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Purchase Agreement. 3
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Because Bocek’s position on appeal is that
the defendants’ ACC-related actions breached the Straw Purchase
Agreement, not the Consulting Agreement, we are constrained to
conclude
that
Bocek
has
waived
any
breach
of
contract
premised on a breach of the Consulting Agreement.
claim
See, e.g.,
West Va. CWP Fund v. Stacy, 671 F.3d 378, 389 (4th Cir. 2011)
(arguments not raised in opening brief are waived).
The question, then, is whether a breach of contract claim
based on the putative Straw Purchase Agreement is viable.
See
Progressive Constr. Co. v. Thumm, 161 S.E.2d 687, 691 (Va. 1968)
(To be binding and enforceable, a contract “must identify the
subject
matter
agreements
with
and
spell
respect
out
the
thereto.”).
essential
Bocek
commitments
argues
that
and
the
evidence in the record shows a meeting of the minds on all
material terms of the Straw Purchase Agreement -- the identity
of the parties, the nature of the work to be performed, the
3
See, e.g., Brief of Appellant at 38-39 (“The acquisition
of ACC was not envisioned by the Parties in the making of the
[Consulting] Agreement and so the terms of that Agreement do not
extend to the acquisition of an existing practice.”); id. at 42
n.15 (“[T]he [Consulting] Agreement cannot be read to govern the
acquisition of ACC because there is no evidence in the record of
any agreement between the parties to expand the scope of work.
Furthermore, the work necessary for the ACC acquisition was the
subject of a separate agreement in which the Parties addressed,
inter alia, JGA’s compensation for those services and its role
as straw purchaser.”); id. at 45 n.17 (“The agreement for JGA’s
assistance to acquire ACC was clearly not envisioned . . . or
done pursuant to the [Consulting] Agreement.”).
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duration of the agreement, and the compensation to be paid.
See
Reid v. Boyle, 527 S.E.2d 137, 145 (Va. 2000) (listing essential
terms of a contract for services).
According to Bocek, the
district
on
court
improperly
focused
the
asset
purchase
agreement that the parties intended to enter into after JGA’s
straw purchase of ACC rather than the Straw Purchase Agreement.
In Bocek’s view, the mechanics of the transfer from JGA to Bocek
is not a material term of the ACC acquisition deal, and the
absence
of
agreement
over
enforcement of the contract.
those
details
does
not
preclude
We disagree.
The record shows that the parties were considering a number
of ways to structure the transfer, including: (1) Bocek being
made a minority partner in the entity actually purchasing ACC;
(2)
Bocek
running
the
practice
under
contract
with
the
purchasing entity; (3) Bocek obtaining a loan to cover the full
purchase
price,
which
would
permit
the
transfer
to
Bocek
immediately after the ACC purchase was completed; and (4) JGA or
Amato holding the note for the purchase price and Bocek repaying
with the proceeds of the allergy practice, with the expectation
that Bocek could re-finance with an institutional lender and pay
off the loan within 18-24 months.
The ultimate transfer of ACC
from JGA to Bocek was the whole point of the ACC transaction,
and the various ways contemplated by the parties to accomplish
that transfer have widely varying costs and consequences.
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these circumstances, it is difficult to describe the structure
and terms of that transfer as anything but essential to the
purported contract.
And because the transfer from JGA to Bocek
is an essential term, an agreement to agree in the future is not
sufficient.
819
(Va.
See Allen v. Aetna Cas. & Sur. Co., 281 S.E.2d 818,
1981)
settlement,
agreement
to
Contracts
§
(per
without
curiam)
specifying
negotiate
4:29
(“[A]n
(4th
at
a
more,
later
ed.)
(“[I]f
agreement
constitutes
date.”);
an
to
1
make
only
Williston
essential
element
a
an
on
is
reserved for the future agreement of both parties, as a general
rule, the promise can give rise to no legal obligation until
such future agreement.”).
The parties “must assent to the same thing in the same
sense, and their minds must meet as to all the terms,” and those
terms “must be sufficiently definite to enable a court to give
it an exact meaning, and must obligate the contracting parties
to matters definitely ascertained or ascertainable.”
Smith v.
Farrell, 98 S.E.2d 3, 7 (Va. 1957); see Restatement (Second) of
Contracts
§
33(2)
(contract
terms
must
be
certain
enough
to
provide “a basis for determining the existence of a breach and
for giving an appropriate remedy”).
In this case, the parties
never agreed on the structure of the transfer from JGA to Bocek,
an essential part of the deal, and the Straw Purchase Agreement
is therefore not enforceable.
See R. K. Chevrolet, Inc. v.
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Hayden, 480 S.E.2d 477, 480 (Va. 1997) (“A contract will be
enforced
if
its
obligations
are
reasonably
certain.”).
And
because the Straw Purchase Agreement is now the sole basis for
Bocek’s breach of contract claim, the district court properly
granted
summary
judgment
in
favor
of
the
defendants
on
that
count.
B.
We turn next to the breach of fiduciary duty claim.
Amended
Complaint,
Bocek
alleged
that
Amato
and
In his
JGA,
as
his
agents, owed him various fiduciary duties, including a duty of
loyalty.
Bocek
alleged
that
he
brought
the
ACC
business
opportunity to JGA during the existence of the agency relation,
and
that
JGA
was
acting
on
behalf
of
Bocek
when
it
began
negotiating with the Estate and conducting due diligence.
Bocek
alleged that the defendants breached their fiduciary duties by,
inter
alia,
using
information
obtained
on
Bocek’s
behalf
to
pursue the acquisition of ACC for themselves, refusing to return
the due diligence materials to him, and, of course, buying ACC
for their own benefit rather than for Bocek’s benefit.
The evidence in the record is more than sufficient, for
summary-judgment
purposes,
to
support
the
factual
allegations
outlined above, and there is little question that, under the
general law of agency, the conduct Bocek alleges is a clear
breach of fiduciary duty.
Agents are fiduciaries and owe their
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principals a strict duty of loyalty.
See Restatement (Third) of
Agency § 8.01 (“An agent has a fiduciary duty to act loyally for
the principal’s benefit in all matters connected with the agency
relationship.”).
An
agent
breaches
his
fiduciary
duties
by
purchasing for himself property that he was to purchase for his
principal.
See Rowland v. Kable, 6 S.E.2d 633, 642 (Va. 1940)
(“One who is entrusted with the business of another cannot be
allowed to make that business an object of interest to himself.
. . . The rule applies alike to agents, partners, guardians,
executors and administrators . . . .”); Horne v. Holley, 188
S.E. 169, 172 (Va. 1936) (“It is well settled that where one
person
sustains
a
fiduciary
relation
to
another
he
cannot
acquire an interest in the subject matter of the relationship
adverse to such other party.”).
An agent likewise breaches his
fiduciary duty by using confidential information belonging to
the
principal
for
the
agent’s
own
benefit.
See
Restatement
(Third) of Agency § 8.05(2) (“An agent has a duty . . . not to
use or communicate confidential information of the principal for
the agent’s own purposes or those of a third party.”).
The district court nonetheless granted summary judgment for
the defendants, concluding that Bocek could seek recovery for
those
breaches
of
fiduciary
contract cause of action.
duty
only
through
a
breach
of
Noting that a claim for breach of
fiduciary duty can sound in contract or tort, see Augusta Mut.
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Ins. Co. v. Mason, 645 S.E.2d 290, 293 (Va. 2007), the district
court held that the fiduciary duties at issue in this case arose
from the Consulting Agreement, not independently of it.
The
court therefore concluded that “the recovery in tort Dr. Bocek
seeks is proscribed as a matter of law,” J.A. 1204, and that the
defendants were entitled to summary judgment on Count II.
See
Augusta Mutual, 645 S.E.2d at 293 (where single act can support
a claim for breach of contract and a claim breach of a duty
arising
in
tort,
“in
order
to
recover
in
tort,
the
duty
tortiously or negligently breached must be a common law duty,
not one existing between the parties solely by virtue of the
contract” (internal quotation marks omitted)); see also Station
#2, LLC v. Lynch, 695 S.E.2d 537, 540 (Va. 2010) (“[A]n omission
or non-performance of a duty may sound both in contract and in
tort,
but
only
where
the
omission
or
non-performance
of
the
contractual duty also violates a common law duty.”).
Many of Bocek’s challenges to this ruling are unpersuasive,
as they appear to rest on a misapprehension of the principles
underlying
the
legal
rule
applied
in
Augusta
Mutual.
Nevertheless, we find ourselves in agreement with Bocek that the
timing
of
the
breach
of
duty
in
this
case
makes
the
rule
inapplicable.
As the decision in Augusta Mutual demonstrates, Virginia
courts vigilantly police the border between tort and contract
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law so as “[t]o avoid turning every breach of contract into a
tort.”
Augusta
Mutual,
recovery
in
is
tort
645
S.E.2d
permitted
in
at
293.
cases
Nonetheless,
where
the
tort
committed after the termination of the parties’ contract.
was
See
Condominium Servs., Inc. v. First Owners’ Ass’n, 709 S.E.2d 163,
171 (Va. 2011) (rejecting defendant’s assertion that plaintiff
could not proceed on tort claim and breach of contract claim:
“Because the Management Agreement had terminated [when the tort
was
committed],
independent,
CSI’s
willful
alleged
tort
of
acts
did
conversion,
constitute
separate
the
from
the
contract.” (internal quotation marks omitted)); cf. Today Homes,
Inc.
v.
Williams,
liability
for
634
breach
S.E.2d
of
737,
744
fiduciary
(Va.
duty
2006)
(agent’s
continues
after
termination of the agency relationship only for “transactions
completed after termination of the officer’s association with
the corporation, but which began during the existence of the
relationship or that were founded on information gained during
the relationship” (internal quotation marks omitted)).
The agency relation terminated on February 27, 2011, ten
days
after
Amato
gave
Bocek
the
notice
required
under
the
Consulting Agreement, well before the breaches of fiduciary duty
alleged
ended
in
this
before
fiduciary
case.
the
duty
torts
claims
Because
were
are
the
contractual
committed,
therefore
19
relationship
Bocek’s
breach
of
independent
of
the
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Consulting Agreement, and Bocek is entitled to proceed on and
recover for those claims in tort. 4
S.E.2d
at
171.
Accordingly,
See Condominium Servs., 709
the
district
court
erred
by
granting summary judgment against the breach of fiduciary duty
claim asserted in Count II of the amended complaint.
C.
We turn now to Bocek’s fraudulent conveyance claim.
Under
Virginia law,
[e]very gift, conveyance, assignment or transfer of .
. . any estate, real or personal, . . . with intent to
delay, hinder or defraud creditors, purchasers or
other persons of or from what they are or may be
lawfully entitled to shall, as to such creditors,
purchasers or other persons, their representatives or
assigns, be void.
Va.
Code
judgment
Ann.
§
against
55-80.
the
The
claim
district
because
court
Bocek
granted
could
not
summary
show
a
conveyance of ACC assets by JGA:
Plaintiff
cannot
establish
the
existence
of
a
conveyance by JGA because JGA never owned [ACC’s]
assets to convey them. [ACC] did not bind itself when
it executed the Letter of Intent with JGA, nor did JGA
bind itself to acquire the assets.
The Letter of
Intent served to permit JGA or its assigns to purchase
[ACC’s] assets.
In the end, A2 purchased the assets
4
Our determination that Bocek waived his right to proceed
on any breach of contract based on the Consulting Agreement has
no bearing on the breach of fiduciary duty claim.
Bocek’s
failure to argue on appeal that the defendants breached the
Consulting Agreement amounted to a waiver of that claim, but it
cannot be viewed as a waiver of facts alleged in the complaint
and separate theories argued below and pursued on appeal.
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of [ACC] directly from the Estate. JGA never acquired
[ACC’s] assets, and therefore JGA never had any legal
right or entitlement to those assets. Having no legal
interest in [ACC], JGA could not legally have conveyed
or assigned any rights to the assets of [ACC].
J.A. 1200.
As
Bocek
points
out,
however,
his
fraudulent
conveyance
claim is not based on JGA’s conveyance of ACC’s assets to A2,
but on JGA’s conveyance of its right to purchase ACC’s assets.
See J.A. 49, ¶¶ 253-54.
ownership
rather
than
While the district court’s focus on
the
right
to
purchase
was
arguably
erroneous in light of the allegations in the Amended Complaint,
we find no error in the court’s ultimate disposition of Bocek’s
fraudulent conveyance claim.
The
purpose
of
the
fraudulent
conveyance
statute
is
to
protect creditors from a debtor’s efforts to shield his property
from being used to satisfy his debts.
585
S.E.2d
533,
535
(Va.
2003)
See Buchanan v. Buchanan,
(“The
essence
of
fraudulent
conveyance . . . is the diminution of the debtor’s estate to the
detriment of the creditor’s right of realization.”
quotation marks omitted)).
(internal
As Bocek recognizes, see Brief of
Appellant at 26 n.7, a conveyance diminishes the debtor’s estate
and works to the detriment of creditors, however, only if the
property
conveyed
has
value.
See,
e.g.,
37
Am.
Jur.
2d,
Fraudulent Conveyances & Transfers § 72 (“If nothing of value is
transferred when property is transferred . . ., then there is
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nothing to avoid and recover and no fraudulent conveyance.”); 37
C.J.S. Fraudulent Conveyances § 9 (“A transfer of property of
little or no value will generally not be treated as fraudulent
as against creditors. . . .”); see also Balzer & Assocs., Inc.
v.
The
Lakes
(allowing
on
360,
fraudulent
Inc.,
463
S.E.2d
453,
conveyance
claim
to
456
(Va.
proceed
1995)
where
creditor’s evidence “support[ed] the reasonable inference of the
property having value at or above the established level of the
encumbrances upon it”).
In this case, however, there simply is
no evidence in the record showing that the property conveyed had
value.
The JGA-to-A2 assignment is the only relevant conveyance,
and the property conveyed by that assignment was, in Bocek’s
words, JGA’s “right to acquire ACC.”
Brief of Appellant at 26.
At the time of the assignment, 5 however, the only rights JGA had
were those arising under the LOI accepted by the Estate.
And as
previously noted, the LOI was not binding – neither JGA nor the
Estate had any obligation under the LOI to proceed with the sale
unless and until they agreed on the terms of the asset purchase
agreement.
The
LOI,
therefore,
5
was
nothing
more
than
an
The precise date of the assignment cannot be determined
from the record.
Nonetheless, because the asset purchase
agreement required by the LOI was executed by A2 rather than
JGA, the assignment must have taken place sometime before the
purchase agreement was signed on May 13, 2011.
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unenforceable agreement to negotiate, see Allen, 281 S.E.2d at
819, not an option contract, as Bocek insists.
See, e.g., Hart
v. Hart, 544 S.E.2d 366, 373 (Va. 2001) (“An option is merely a
continuing offer to sell, irrevocable during the option period.”
(internal quotation marks omitted)). 6
Because the LOI was not binding and enforceable, it gave
JGA no enforceable rights to purchase ACC.
And because Bocek
can point to no evidence showing that these unenforceable rights
had value, the district court properly rejected the fraudulent
conveyance claim.
D.
Finally, we turn to the joint venture claim.
“A joint
venture is established by contract, express or implied, where
two
or
more
persons
jointly
undertake
a
specific
business
enterprise for profit, with each to share in the profits or
losses and each to have a voice in the control and management.”
Ortiz
v.
Barrett,
278
S.E.2d
833,
840
(Va.
1981).
“Coadventurers stand in a fiduciary relation to each other, and
within the scope of the enterprise they are bound by the same
standards of good conduct and square dealing as are required
6
To the extent that Bocek argues that the Pennsylvania
court’s approval of the sale gave value to JGA’s right to buy
ACC, the court approval came after JGA assigned its interests to
A2. There simply is no evidence showing that JGA’s “right” had
value when assigned.
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between partners.”
Pg: 24 of 35
Jones v. Galleher & Co., 47 S.E.2d 333, 337
(Va. 1948).
Bocek argues (in the alternative to Counts II and III) that
if no principal-agent relationship existed between him and Amato
(through JGA), then the relationship was one of joint venturers,
and
that
benefit
the
defendants’
violated
disagree.
the
acquisition
fiduciary
of
duties
ACC
they
for
owed
their
Bocek.
own
We
As we have previously discussed, the parties never
reached agreement on how the transfer of ACC’s assets from JGA
to Bocek would be structured, and there simply is no evidence
showing
that
operate
the
ACC
profits
and
having
business.
therefore
Bocek
and
Amato
offices
a
ever
together,
say
in
reached
with
granted
to
sharing
in
the
and
management
summary
agreement
each
control
of
the
See Ortiz, 278 S.E.2d at 840.
properly
an
judgment
The district court
in
favor
of
the
defendants on the joint venture claim.
III.
Accordingly, for the foregoing reasons, we hereby affirm
the district court’s grant of summary judgment in favor of the
defendants on Bocek’s breach of contract, fraudulent conveyance,
and
joint
venture
claims.
We
24
reverse
the
grant
of
summary
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judgment on the claim for breach of fiduciary duty and remand
for further proceedings on that claim.
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED
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NIEMEYER, Circuit Judge, concurring in part and concurring in
the judgment:
I would allow the breach of fiduciary claim to proceed to
trial, and therefore I concur in the result reached in Part
II(B) of Chief Judge Traxler’s opinion.
so,
however,
differs
somewhat
from
My reasoning for doing
that
relied
on
by
Judge
Traxler.
Bocek retained JGA Associates as his agent to assist him in
forming a new medical practice or in rendering other services,
as
the
parties
agreed.
Pursuant
to
their
“Consulting
Agreement,” JGA became actively involved in Bocek’s effort to
purchase an existing medical practice that he had learned was
for sale, Allergy Care Centers, and JGA’s services thereafter
related solely to purchasing Allergy Care Centers.
JGA was paid
for these services as provided in the Consulting Agreement.
During
connection
the
with
course
the
of
providing
purchase
of
services
Allergy
Care
to
Bocek
Centers,
in
JGA
wrongfully began planning to acquire Allergy Care Centers for
itself, and to that end, it terminated the Consulting Agreement
with
Bocek
and
thereafter,
through
an
affiliated
entity,
acquired Allergy Care Centers.
In my judgment, these facts, if ultimately proved, give
rise
to
a
classic
claim
for
breach
of
the
duty
of
loyalty
inherent in the agency agreement that existed between Bocek and
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JGA.
See
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Restatement
Pg: 27 of 35
(Third)
of
Agency
§
8.01.
An
agent
clearly breaches this duty of loyalty by purchasing for itself
property that it was purchasing for its principal.
See, e.g.,
Rowland v. Kable, 6 S.E.2d 633, 642 (Va. 1940); Horne v. Holley,
188 S.E. 169, 172 (Va. 1936).
The fact that JGA terminated the agency agreement before
taking advantage of the opportunity that came to it while it was
an agent provides no defense.
came
upon
the
opportunity
The viable claim remains that JGA
to
purchase
Allergy
Care
Centers
during the course of its work for Bocek in assisting him to
purchase that practice and, in order to seize that opportunity
for itself, terminated the agency relationship.
be
a
buffoon
simply
by
if
it
ending
allowed
the
JGA
agency
to
take
The law would
Bocek’s
relationship
and
opportunity
proceeding
thereafter in furtherance of its own interest.
It
contracts
is
well-established
even
after
the
that
contracts
various
have
duties
ended.
survive
Surely,
an
attorney could not breach a duty of loyalty or confidentiality
to a client after the lawyer had completed his service to the
client.
665,
671
See Reese v. Va. Int'l Terminals, Inc., 894 F. Supp. 2d
(E.D.
Va.
2012)
(explaining
that
Rule
1.9
of
the
Virginia Rules of Professional Conduct governs a lawyer’s duty
of loyalty to former clients).
Similarly, an agent’s fiduciary
obligations do not disappear when the agency relationship ends.
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See, e.g., Today Homes, Inc. v. Williams, 634 S.E.2d 737, 744
(Va. 2006) (stating that fiduciary obligations continue “after
termination of the officer’s association with the corporation”
for
transactions
that
“began
during
the
existence
of
the
relationship or that were founded on information gained during
the relationship” (internal quotation marks omitted)).
I therefore join in the judgment to reverse the dismissal
of the breach of fiduciary duty claim and to remand that claim
for trial on the merits.
I also concur in the other portions of
Chief Judge Traxler’s opinion, as well as the judgment.
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WILKINSON, Circuit Judge, concurring and dissenting:
Breach of contract is not a tort. Virginia law makes clear
that a plaintiff may not recover in tort for breach of a duty
that exists solely by virtue of a contract. See Augusta Mut.
Ins.
Co.
v.
Mason,
645
S.E.2d
290,
293
(Va.
2007).
Here,
appellant Petr Bocek entered into a contract (the “Consulting
Agreement”)
with
agreement,
JGA’s
appellee
JGA
president,
Associates
appellee
(“JGA”).
Joseph
Amato,
Under
that
agreed
to
provide Bocek with business consulting services in connection
with the development and purchase of an allergy care practice. 1
The relationship between Bocek and Amato later soured, and Bocek
commenced
this
litigation
alleging,
inter
alia,
that
Amato
breached his fiduciary duty by misappropriating a confidential
business opportunity that he learned about from Bocek in the
course of the consulting relationship. However, because Amato’s
duty
to
Bocek
arose
solely
from
the
Consulting
Agreement,
I
cannot conclude that Bocek is entitled to recover in tort for
the alleged breach. And because Bocek has expressly argued on
appeal
that
Amato’s
actions
did
1
not
violate
the
Consulting
Since Amato is the only relevant officer of JGA for
purposes of this appeal, I shall use “Amato” to refer to
appellees Amato and JGA collectively.
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Agreement, I cannot conclude that Bocek is entitled to recover
for breach of contract. I therefore respectfully dissent. 2
I.
As
the
lead
opinion
acknowledges,
a
plaintiff
may
not
recover in tort for breach of a duty that arises solely from a
contract. See Augusta, 645 S.E.2d at 293; see also Lead Op. at
18. The aim of this general rule is “[t]o avoid turning every
breach of contract into a tort.” Augusta, 645 S.E.2d at 293.
Here, the duty that Amato allegedly breached arose solely from
the Consulting Agreement, thus barring recovery in tort.
A.
The gravamen of Bocek’s tort claim is that Amato “breached
his
fiduciary
duties
to
Bocek
by
lying
to
Bocek
about
the
contemplated purchase price of ACC’s assets,” “failing to inform
Bocek about material aspects of his dealings with [ACC],” and
“using to [his own] advantage information [he] gained from Bocek
in the course of [the] agency by pursuing ACC’s assets for [his]
own financial gain.” J.A. 51-52. However, as a review of the
Consulting Agreement reveals, these allegations actually speak
to a breach of two contractual duties imposed on Amato.
2
I concur in the lead opinion’s disposition of Bocek’s
other claims.
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Pursuant to that contract, Amato agreed to “make a diligent
effort to review and report on the feasibility of the proposed
allergy medicine practice” and “render such other services as
may be agreed upon by the Client and the Consultant from time to
time.”
J.A.
64.
As
relevant
here,
the
Consulting
Agreement
imposed two specific duties on Amato: (1) a duty to “update
[Bocek] on an ongoing and regular basis as to the [Amato’s]
progress
in
fulfilling
services
contemplated”;
[his]
and
obligations
(2)
a
duty
and
to
performing
“not
use
any
the
of
[Bocek’s] [i]nformation for [Amato’s] own account.” J.A. 64-65.
But for the Consulting Agreement, the two parties would not have
had any relationship whatsoever and, thus, Amato would not have
had the two aforementioned duties to Bocek.
Notwithstanding Bocek’s labeling of his tort claim as such,
the duties Amato allegedly breached arose solely by virtue of
the contract, and any recovery by Bocek for Amato’s actions is
therefore limited to a contract claim. See Augusta, 645 S.E.2d
at 293. While tort law exists to “provide[] redress . . . for
the
violation
of
certain
common
law
and
statutory
duties
involving the safety of persons and property, which are imposed
to protect the broad interests of society,” Filak v. George, 594
S.E.2d 610, 613 (Va. 2004), those “broad interests of society”
are not at issue here because Amato and Bocek came together ex
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ante and bargained for certain terms that were to govern their
relationship.
B.
The
lead
opinion
argues
that
although
Amato
had
a
contractual duty not to profit from Bocek’s information while
the
Consulting
Agreement
was
still
in
effect,
that
duty
terminated with the contract. However, given Amato’s ability to
unilaterally abrogate the Consulting Agreement while providing
only
10
misusing
days
notice,
Bocek’s
this
contractual
information
survived
duty
the
to
refrain
termination.
from
Under
Virginia law, a contract must be given a construction consistent
with
“the
intention
of
the
parties
as
disclosed
by
the
instrument in light of the surrounding circumstances.” Columbia
Realty Venture, LLC v. Dong Dang, 83 Va. Cir. 258, 261 (2011)
(quoting Kirschbaum
v.
Blair,
34
S.E.
895,
897
(Va.
1900)).
Although the Consulting Agreement does not explicitly indicate
that
Amato’s
duty
not
survived
the
contract’s
intended
such
survival.
contrary
conclusion.
to
contract,
he
would
profit
from
termination,
Consider
Amato’s
If
have
the
duty
been
able
Bocek’s
the
information
parties
consequences
plainly
of
the
terminated
with
the
to
valuable,
obtain
confidential information from his unsuspecting client and then
use that information to his own advantage whenever he chose to
do
so.
Such
a
scheme
would
32
eviscerate
the
very
contract
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provision barring Amato from using his client’s information in
the first place.
The sole case that the lead opinion cites in its support,
Condominium Services Inc. v. First Owners’ Ass’n, 709 S.E.2d 163
(Va. 2011), only underscores the difficulty with its position.
The test used by the Virginia Supreme Court for the tort of
conversion
requires
that
“the
duty
tortiously
or
negligently
breached must be a common law duty, not one existing between the
parties solely by virtue of the contract.”
Id. at 171 (internal
quotation marks omitted). See also Restatement (Second) of Torts
§ 222A (“Conversion is an intentional exercise of dominion or
control over a chattel” of another). The conversion in that case
existed irrespective of contract. It arose from the freestanding
duty of any citizen to respect the lawful property rights of
another. Here, as discussed above, the breach of duty was one
both
established
Unlike
in
and
Condominium
stemming
exclusively
Services,
in
this
from
case,
the
contract.
there
was
no
“independent, willful tort . . . separate from the contract.”
Id. (internal quotation marks omitted).
Finally, the lead opinion holds that Bocek can advance his
breach of fiduciary duty claims in tort because Amato terminated
the Consulting Agreement “well before the breaches of fiduciary
duty alleged in this case.” Lead Op. at 19. As noted above, it
is my view that the contract’s requirement that Amato not profit
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information
provided
by
Pg: 34 of 35
Bocek
survived
the
termination.
Furthermore, the lead opinion acknowledges that Amato had begun,
before
he
terminated
the
contract,
to
use
information
he
acquired from Bocek to contemplate the sale of ACC for his own
gain and that of his associates. See Lead Op. 8-9; J.A. 1021-22.
Although Amato did not purchase ACC until after the contract was
terminated, Bocek provided him with important information while
the
parties
Williams,
634
termination
after
were
under
contract.
S.E.2d
737,
744
continues
only
for
termination
of
the
Cf.
(Va.
those
officer's
Today
2006)
Homes,
Inc.
(“Liability
v.
post-
transactions
completed
association
with
the
corporation, but which . . . were founded on information gained
during
the
relationship”
(internal
quotation
marks
omitted)).
Amato’s breach of fiduciary duty arose from information gained
during and as a result of the contract. Bocek’s remedy should
lie in contract.
II.
The parties’ sole relationship arose from the contract. The
contract set the framework of that relationship. The contract
established the duties these parties owed to one another. The
contract afforded Amato the access to information he misused.
The alleged wrongdoing is only wrong because it stemmed from
that
contractual
understanding.
34
Bocek
cannot
circumvent
the
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origins of the relationship by declining to argue the relevant
contract claim on appeal and opting instead to press what may
seem
a
tort.
more
This
lucrative
blurs
the
claim
line
and
more
Virginia
open-ended
law
has
long
recovery
in
labored
to
maintain. I would affirm in toto and respectfully dissent. 3
3
Inasmuch as there is no single majority approach, I have
confined this dissent to Chief Judge Traxler’s lead opinion. As
to my friend’s concurring opinion, to the extent that it can be
read to advocate a free standing agency-based breach of
fiduciary duty tort to every contract violation, that view is of
further distance than the Chief Judge’s asserted temporal
limitation from my own.
35
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