Hair Club For Men, LLC v. Ehson et al

Filing 113

MEMORANDUM OPINION re: 112 Order. Signed by District Judge Liam O'Grady on 08/31/16. (pmil, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division

Hair Club for Men, LLC,
Plaintiff,
Civil Action No. 1:16-cv-236

V.

Lailuma Ehson and Illusion Day Spa,
LLC,

Defendants.

Memorandum bDinion

This matter comes before the Court onDefendant's Motion for Summary Judgment, Dkt.
No. 74, and Plaintiff's Cross-Motion for Summary Judgment, Dkt. No. 88. For the reasons

outlined below, the Court finds good cause to GRANT in part Plaintiff's Motion and GRANT in
part Defendant's Motion.

L Background.

HairClub is in the business of hair replacement andhairtherapies. HairClub's business

model is based on forming long-term contracts with its customers who receive hairreplacement
services on a regular basis. Many of Hair Club'sclients do not want others to know thatthey are

receiving hair replacement services. Accordingly, Hair Club takes substantial steps to keep its
clients' identities confidential. Hair Club also makes significant investments in obtaining and
retaimng clients. Hair Club hasprovided evidence, in the form of an expert report, that since

July 1,2013, it "has maintained anaverage contract retention rate of 90%." Dkt. 89-1 ^ 27. This
expert alsoasserts thatHairClub's clients remain customers for an extended period of time.

absent interference. Hair Club's male clients stay with Hair Club for an average of 13.5 years

and Hair Club's female clients stay with Hair Club for an average of 4.7 years.

Hair Club has composed a Technical Manual that it uses to train its stylists. This manual
"contains extremely detailed instruction on the procedures for measuring a client's hair loss and
coverage area, designing a template and using facial features and head shape as a guide to

develop the best hair system, and determining where to place highlights and specs of grey." Dkt.
No. 92, at 11. The manual also contains information on what types of adhesive to use, how to

use the adhesives, and the "process of coloring, matching texture, cutting, and styling." Id. at 12.

According to Hair Club's President, Hair Club's techniques were developed over a long time and
at great expense such that "independent development of identical or comparable materials by
competitors of Hair Club would be impossible." Dkt. No. 89-11, at 4.
Hair Club now asserts that one of its former employees. Defendant Lailuma Ehson, has
stolen its hard-earned clients and is using its hair replacement techniques in violation of Virginia
law. Hair Club employed Ehson at its Tysons Comer location from September 28,2011, until
July 24,2015, when Ehson voluntarily resigned. When Hair Club hired Ehson, she did not have

any existmg hair replacement clients. As a condition of her employment, Ehson signed a
Confidentiality, Non-Solicitationand Non-Compete Agreement. This Agreement generally
provided that when Ehson's employmentwith Hair Club ended, Ehson would not engage in the
hair replacement business or become interested in a company that provided such services within

twenty miles of any Hair Club center for a period oftwo years. The Agreement also provided
that Ehson would not solicit Hair Club's customers. Finally, Hair Club's Employee Handbook
prohibits employees from exchanging personal contact information with Hair Club clients.

In October of 2014—^while she was still working at Hair Club—^Ehson opened a salon
called Illusion Day Spa, which was located approximately 15.5 miles from Hair Club's Tysons
Comer location. In April of 2015, Ehson began providing hair replacement services at Illusion.

Ehson contacted at least twenty-seven of Hair Club clients regarding Illusion. Ehson gave these
clients her phone number and told them about her competing business. Ehson convinced twentyfive of Hair Club's clients to leave Hair Club for Illusion. Illusion offered hair replacement

services to these clients for $100, which is as much as 83% lower than Hair Club's prices.
Based on these facts. Hair Club filed a Complaint in this Court on March 7,2016. Hair
Club also sought a Preliminary Injunction, which this Court denied on May 6,2016. Just after

discovery began. Hair Club was permitted to file an amended complaint. In that First Amended
Complaint ("FAC"), Hair Club brought six causes of action against the Defendants:
•

Count I: breach of contract (against Ehson);

•

Count II: misappropriation oftrade secrets and confidential information (against Ehson
and Illusion);

•

Count III: wrongful interference with contract and prospective business advantage
(against Ehson and Illusion);

•

Count IV: tortious interference with contractual relations (against Illusion);

•

Count V: unjust enrichment (against Ehson and Illusion); and

•

Count VI: breach of fiduciary duty (against Ehson).

After conducting discovery, the parties filed cross-motions for summary judgment. Plaintiff
seeks a summary judgment ruling on all but the imjust enrichment claim. Defendants seek a
summary judgment ruling on all counts.
n. Legal Standard
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper

"ifthe pleadings, depositions, answers to interrogatories, and admissions on file, together with
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the affidavits, if any, showthat there is no genuine issue as to anymaterial fact andthatthe
moving partyis entitled to a judgmentas a matterof law." Fed. R. Civ. P. 56(c). As the
Supreme Courthas explained, "this standard provides that the mere existence of some alleged

factual dispute between the parties will not defeat an otherwise properly supported motion for
summaryjudgment; the requirement is that there be no genuine issue of material fact." Anderson

V. LibertyLobby, Inc., 477 U.S. 242,247-48 (1986) (emphasis in original). A dispute over an
issue of materialfact is "genuine" if **the evidence is such that a reasonable jury could return a
verdict for the nonmoving party." Id. at 248. Finally, in making a summaryjudgment

determination, the Courtmust bear in mind that "[a] complete failure of proof concerning an
essential element of the non-movingparty's case necessarily renders all other facts immaterial."
Celotex Corp. v. Catrett, 477 U.S. 317,323 (1986).
A. Count I: Breach of Contract

Count One alleges that Ehson breached the Confidentiality, Non-Solicitation, and Non-

Compete Agreement, which Ehson entered into with Hair Club when her employment began.

The elements of a breach of contract action under Virginia law are: "(1) a legally enforceable
obligation of a defendant to a plaintiff; (2) the defendant's violation or breach ofthat obligation;

and (3) injury or damage to the plaintiff caused by the breach ofobligation." Filak v. George,

267 Va. 612,619,594 S.E.2d 610,614 (2004). Ehson admits that she opened up a competing
business and solicited Hair Clubs clients—^acts which are in clear violation ofthe Agreement.
However, Ehson argues that the Court should conclude that the contract is unenforceable, thus

defeating the breach of contract claim.

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1. Legally Enforceable Obligation

Hair Club asserts thatEhson breached boththe non-compete andnon-solicitation clauses

ofhercontract. This memo will address the validity of each separately. The validity of both of
these clauses is a question of law, sotheCourt resolves this question at thesummary judgment
stage. Brainware, Inc. v. Mahan, 808 F. Supp. 2d 820, 826 (E.D. Va, 2011).
a. Validity ofthe Non-Competition Clause

"[T]he validity of a restrictive covenant is a question of law resolved in light of the
language and circumstancessurroundingthe specific covenant at issue." Brainware, Inc. v.
Mahan, 808 F. Supp. 2d 820, 826 (E.D. Va. 2011). Covenantsthat restrain trade are disfavored

by Virginia courts and ifthey are too restrictive they may not be legally enforceable. Modern
Environments, Inc. v. Stinnett, 263 Va. 491,493 (2002). The validity of an employer-employee
non-competition agreement is determined using a three-part test whichthe employer has the

burden to meet. Id. at 494-95. Theemployer mustshow 'that the restraint [1] is no greater than
necessaryto protect a legitimate business interest, [2] is not imduly harsh or oppressive in

curtailing an employee's abilityto earn a livelihood, and [3] is reasonable in light of sound
publicpolicy." Id. In analyzing these "three interrelated factors" Virginia courts consider "the
restriction in terms of function, geographicscope, and duration." Simmons v. Miller, 261 Va.

561,581,544 S.E.2d 666,678 (2001). "Importantly, courts applying this three-part test must

takethe non-compete provision as written; there is no authority for courts to 'blue pencil' or
otherwise rewrite the contract to eliminate any illegal overbreadth." Lanmark Tech, Inc. v.

Canales, 454F. Supp. 2d 524, 529(E.D. Va. 2006) (quotations andcitations omitted). Thenoncompeteclause at issue here preventsEhson from "engag[ing] in the businessof hair

replacement, on [her] ownaccount, or becom[ing] interest[ed] in suchbusiness, directly or

indirectly, as an individual, partner, stockholder, director, officer, clerk,principal, agent,
employee, or in any other relation or capacity whatsoever

"

i. Whether the restraint is soreater than necessarv to
protect Hair Club's legitimate business interests

As an initial matter, Hair Club has a legitimate interest in protecting its customer contacts
that it has invested significant time and money building. See Eden Hamon & Co. v. Sumitomo

Trust & Banking Co., 914 F.2d 556,562 (4th Cir. 1990). Defendants argue that the non-compete
clause is broader than necessary to protect this interest. Although the non-competeprevents
Ehson firom working for a potential competitor of Hair Club in any capacity, this provision is not
overly broad in light ofthe nature of Hair Club's business.

First, Virginia Courts have acknowledged that access to "confidential information makes

[a] covenant not to compete more reasonable." Brainware, Inc. v. Mohan, 808 F. Supp. 2d 820,
826 (E.D. Va. 2011) (quoting Comprehensive Techs. Int'l, Inc. v. Software Artisans, Inc., 3 F.3d
730,738-39 (4th Cir. 1993) (vacated pursuant to settlement)); see also Lanmark Tech., Inc. v.
Canales, 454 F. Supp. 2d 524, 529 (E.D. Va. 2006) ("[Plaintiff has a legitimate business interest

in imposing a reasonable non-competeclause, namely that such a clause would be necessary to
protect itself firom losing potential work to competitors through employees who leave the
company and then compete against [the Plaintiff] using the business sensitive knowledge and

contacts they acquired as an employee.") (quotations and citations omitted). Ehson had access to
significant proprietary information including clients' specifications. Hair Club's hair replacement
techniques and Hair Club's pricing information.

Second, "non-competition agreements are justified where the employee comes into

personal contact with his employer's customers." Blue Ridge Anesthesia and Critical Care, Inc.
V. Gidick, 239 Va. 369,372-73,389 S.E.2d 467 (1990) (citing Paramount Termite Control v.

Rector, 238 Va. 171,175,380 S.E.2d 922 (1989)). As a stylist, Ehson had frequent and

persistent contact with Hair Club's clients.

Third, Virginia courts have upheld non-competition agreements when 'the prohibited

activity is of the same type as that actually engaged in by the former employer." Home
Paramount Pest Control Companies, Inc. v. Shaffer, 282 Va. 412,416 (2011). For example, in

Blue Ridge Anesthesia, the Supreme Court of Virginia upheld a non-compete that provided as
follows:

Employee agrees that if his employment terminates for any cause after he has
been employed for ninety (90) days, he will not, for a period of three years
thereafter, open or be employed by or act on behalf of any competitor of
Employer which renders the same or similar services as Employer, within any of
the territories serviced by agent of Employer, expressly provided however, that
this covenant does not preclude Employee from working in the medical industry
in some role which would not compete with the business of Employer.

239 Va. at 370-71. The court found it significant that the clause did not prohibit the
former employees, who sold medical equipment for a medical equipment company,

"from working in any capacity for a medical equipment company, or from selling any

type of medical equipment. They are only prohibited 'from working in the medical

industry in some role which would... compete with the business of [the employer]." Id.
at 373. The court noted that "the restriction does not prohibit the former employees from

selling critical care and anesthesia equipment outside their respective former territories or
from selling any other goods and medical equipment within their former territories." Id.

The non-compete at issue here prohibits Ehson from working for or becoming
interested in any company that provides hair replacement services. Because Hair Club
only provides one kind of service, in practice this provision only prohibits Ehson from
working in some role which would compete with Hair Club—^similar to the non-compete

in Blue Ridge Anesthesia. Also similar to Blue Ridge Anesthesia, Ehson canstill provide
other types of hair styling or salon services within 20 miles of a Hair Club location and

she canalso provide hair replacement services outside of those designated areas. Finally,
the non-competeapplies for a shorter amount of time than the restrictive covenant at
issue in Blue Ridge Anesthesia.

In determining whether a non-compete clause is overbroad, Virginia courts look closely
at how the type of competing business is defined. Motion ControlSystems, Inc. v. East, 262 Va.
33,546 S.E.2d 424 (2001). For example, in Motion ControlSystems, the courtconsidered a noncompete clausethat defined a competing business as any company engaged in the "design[ ],
manufacture[ ], [sale] or distribut[ion of] motors, motor drives or motor controls." Id. at 36. The

court found the non-compete was overbroad becausethe employer dealt only with specialized
brushless motors. Id. at 37-38. Again, the non-compete at issue here is limited to hair

replacement services—^a very specific type of serviceand the onlytype of service Hair Club

provides. Unlike in Motion Control Systems, the non-compete does not attempt to sweep in
other ancillary services or businesses that Hair Club does not actually provide.
For the foregoing reasons, the non-competeis not fimctionally overbroad and is not
greater than necessary to serve Hair Club's legitimate interests. The clause is limited to the

business of hair replacement services—^the onlytype of service Hair Clubprovides. Although it
prohibits Ehsonfrom working in any capacity for another hair replacement services company,
this is justified becauseEhson had exposure to Hair Club's proprietary information and clients,

and in lightof the limited duration and geographic scope of the clause. Although, the noncompeteprevents Ehson from providinghair replacement services within 20 miles ofany Hair
Club location—^and there are over 200 of them—^this is justified because Ehson had access to

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Hair Club's Technical Manual and she learned Hair Club's techniques. This restriction prevents
Ehson from setting up shop next to another Hair Club and siphoning their clients byoffering

Hair Club's templates at cheaper prices. See Brainware, 808 F. Supp. 2dat 827 (upholding noncompete thatdidnot contain a geographical limitation where theemployer enjoyed a "global
reach").
ii. Whether the non-compete is undulv harsh or oppressive
in curtailing Ehson's ability to earn a livelihood

Thenon-compete does not harshly or oppressively curtail Ehson's ability to earna living.
As HairClub points out,Illusion DaySpaoffers sixtyotherservices besides hair replacement.
Ehson canearna living providing these otherservices for a period of two years before offering
hair replacement services. In addition, Ehsoncouldhave chosento open Illusion just 4.5 miles
farther awayfrom Hair Club's Tysons Comer locationif she wanted to provide hair replacement
services. This minimal additional distance cannot be characterized as harsh or oppressive.
iii. Whether the non-compete is reasonable in light of sound public policv

Defendants assert that enforcing this contract would offendpublic policy because it

wouldpreventHair Club's clientsfrom choosing the cosmetologist they wouldlike to deal with.
Thus, Defendants essentially arguethat any non-compete restricting a cosmetologist shouldnot

be enforced. Thisargument is not persuasive. In Lifesource Inst. ofFertility & Endocrinology v.
Gianfortoni, 18 Va. Cir. 330 (1989), a Virginia Circuitcourt rejected a similarargimient that "it
is againstpublicpolicyto enforce any restrictive covenants in the case of physicians." If this
argument does not apply to physicians, who provide vital advice and servicesregarding an

individual's health, thenthis argument also shouldnot applyto cosmetologists who provide less
consequential services. In addition, Lifesource also concluded "that it wouldbe against public
policyto allowa personto acceptthe benefits of an agreement but to disregard the terms of the
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agreement when it suits his purpose." Id. at *4. That is exactly what Ehson seeks to do now.
She received benefits fi-om her employment agreement with Hair Club and now seeks to

disregard the terms ofthat agreement. Accordingly, it would actually be against public policy to
not enforce the contract.

iv. Conclusion on Non-Compete Clause

For the reasons discussed above, this Court finds the non-compete clause is valid and

enforceable. As there is no dispute over whether Ehson breached the non-compete clause, the
Court grants summary judgment in favor of Hair Club on this issue.
b. Validity ofthe Non-Solicitation Clause
"Non-solicitation provisions are a species of non-compete agreements, and the same
legal standard of enforceability applies to each." Brainware, Inc. v. Mahan, 808 F. Supp. 2d
820, 828 (E.D. Va. 2011). In analyzing non-solicitation agreements, Virginia state courts, and

this Court, heavily consider whether the "former employee had direct customer contact or
substantial knowledge ofthe employer's confidential information or methods of operation."
Lasership, Inc. v. Watson, 79 Va. Cir. 205,210 (Fairfax 2009); Brainware, 808 F. Supp. 2d at
828. These courts have upheld non-solicitation provisions that "expressly limit[] the restriction
on solicitation only to those clients who were contacted, solicited, or served by [the employee]

while he was employed by [the employer]." Brainware, 808 F. Supp. 2d at 828. In contrast, a
Virginia court has struck down a non-solicitation agreement that prohibited a former employee

fi-om contacting any of the employer's customers that had been invoiced in the year before the
employee lefl; for a period oftwo years because it "impose[d] an unreasonable burden on the
employee to know all the customers invoiced." Lasership, 79 Va. Cir. at 210.

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The clause at issue here prohibits Ehson from soliciting "directly orindirectly... any
business relating to hair replacement from any customer or customers of [Hair Club]." It also
prohibits Ehson from "deal[ing] with, or provid[ing] hair replacement services to, any customers
who have, within two (2)years prior to the cessation of [her] employment, dealt with [Hair
Club]." This clause echoes thenon-solicitation agreement found to be overbroad in Lasership.
As in Lasershipy this clause places a burden on Ehson to know all ofthe customers that have

beeninvoiced by HairClub, at anyHair Club location, in the two years priorto her departure.
This clause is also overly restrictive on tradeand sweeps greater thannecessary to serve
Hair Club's legitimate interests. A ban on solicitingHair Club's customers serves Hair Club's

interest in protecting its customer contacts. However, a ban on "deal[ing] with" anyHairClub
customer prevents Ehson from providing any other type of salon service to a Hair Club customer.

This does not serve Hair Club's interests as these alternative salon services do not compete with
Hair Club.

For all of these reasons, the Courtfinds the non-solicitation clauseinvalid. Accordingly,
the Court grantsDefendant's motionfor summary judgmenton this issue.
B. Count II: Misappropriation of Trade Secrets and Confidential Information

Hair Club's second cause of action alleges that Ehsonand Illusion misappropriated its
trade secrets in violation of Virginia law. "Allegations oftrade-secret misappropriation are
governed by the Virginia Uniform Trade Secrets Act ('VUTSA')." Trident Products & Servs.,

LLC V. CanadianSoiless Wholesale, Ltd, 859 F. Supp. 2d 771,778 (E.D. Va. 2012) afTd, 505 F.
App'x 242 (4th Cir. 2013) (citing Va.Code § 59.1-336). In order to establish trade-secret

misappropriation under the VUTSA, a plaintiffmust prove: "(1) the existence of a *trade secret';

and (2) the 'misappropriation' of that trade secret by the defendant." Id. (citingMicroStrategy,

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Inc. V. LU 268 Va. 249,263,601 S.E.2d 580,588 (Va. 2004)). An alleged trade secret must
"meet all the criteria listed in the statute: (1) independenteconomic value; (2) not known or

readilyascertainable by propermeans; and (3) subjectto reasonable effortsto maintain secrecy."

Id. (citing Va.Code § 59.1-336). "[T]hedetermination whether a trade secretexistsordinarily
presents a question of fact to be determinedby the fact finder from the greater weight of the
evidence." Zz, 268 Va. at 264, 601 S.E.2d at 589.

Hair Club asserts that Defendants have misappropriated three things: (1) its client

information, (2) its hair replacement techniques and strategies, and (3) its pricing structure. The
parties have presented competing characterizations of these purported misappropriations such
that triable issues of fact remain as to whether these classes of information are trade secrets and

whether Ehson misappropriatedthem. Accordingly, summaryjudgment motions for both parties
are denied as to Count II.
C. Count III: Wrongful Interference With Contract and Prospective Business Advantage

Hair Club next asserts a tortious interference with contract claim against Defendants for
interfering in Hair Club's contracts with its clients. A tortious interference of contract claim has

four elements: "(1) the existence of a valid contractual relationshipor business expectancy; (2)
knowledge ofthe relationship or expectancy on the part of the interferor; (3) intentional

interferenceinducing or causing a breach or termination ofthe relationship or expectancy; and
(4) resultant damage to the party whose relationship or expectancy has been disrupted." Chaves

V. Johnson, 230 Va. 112,120,335 S.E.2d 97, 102 (1985). "[W]hen a contract is terminable at

will, a plaintiff, in order to present a prima facie case of tortious interference, must allege and
prove not only an intentional interference that caused the termination ofthe at-will contract, but

also that the defendant employed 'improper methods."' Duggin v. Adams, 234 Va. 221,226-27,

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360 S.E.2d 832, 836 (1987) (quoting Hechler Chevrolet, 230 Va. 396,402 (1985)). InVirginia,

"[m]ethods ofinterference considered improper are those means that are illegal orindependently
tortious, such as violations of statutes, regulations, or recognized common-law rules." Id.

(citations omitted). Virginia courts have also recognized that "[i]mproper methods may include
violence, threats orintimidation, bribery, unfounded litigation, fraud, misrepresentation ordeceit,
defamation, duress, undue influence, misuse of inside or confidential information, or breach of a
fiduciary relationship." Id. (citations omitted).
Defendants do not seemto dispute that Hair Clubhas satisfied the first, secondand fourth
elements it is required to prove to succeed on this claim. Defendants admit that Hair Club
maintains ongoing contracts with its customers. These contracts continue until the client cancels

upon thirty days' notice. Hair Club hasprovided evidence thatit retains thevastmajority of its
clients andthatthe average Hair Club customer remains a customer for 13.5 (men) or 4.7years
(women). Defendants also do notdispute thatthey knew about Hair Club's relationships withits
clients andthatHairClub suffered damage in the form of lostincome andprofits.

Defendants doargue thatthe third element hasnot been satisfied. First, they argue that
Ehson never intentionally interfered withHairClub's relationships withits clients. Ehson admits

thatshe solicited Hair Club's clients. However, Ehson argues that she never intentionally
interfered withHairClub's contracts because she never specifically toldthe clients she solicited

to breach their contracts with Hair Club. This argument is notpersuasive. In soliciting business
from clients for the exact same services Hair Club provides, andproviding those services at a
substantially lower price, Ehson aimed to lurethe clients away from HairClub, evenif shedid
not explicitly tell the clients to leave Hair Club. Ehson also knew this solicitation violated

13

company policy and the terms ofher employment agreement with Hair Club. All ofthese factors
indicate that Ehson intended to interfere with Hair Club's contracts.

Second, Defendants argue that Hair Club has failed to establish causation. In other
words. Defendants argue that Hair Club has failed to show the clients broke their contracts

because of Ehson's actions or that they would have continued to be patrons of Hair Club but for
Ehson's interference. In support ofthis argument, Defendants present the affidavits oftwo
former Hair Club clients who assert that they left Hair Club because they were dissatisfied with
the services and prices, not because ofany interference by Ehson or Illusion. In addition.
Defendants point out that twelve ofthe clients who Hair Club asserts left because of Ehson's
intentional interference had their last day of service with Hair Club prior to the formation of
Illusion Day Spa on October 29,2014.
In response. Hair Club asserts that "given hair Club's objective statistical evidence, there
is a reasonable certainty that, absent Ehson and Illusion's intentional misconduct," Hair Club

would have retained the clients taken by Ehson. However, absent deposition transcripts or
affidavits firom clients stating that they left Hair Club because of Ehson's solicitation, this

remains an open question of fact that should be left for trial and or a damages calculation.
Finally, it does not appear that Defendants contest that Ehson used "improper methods"
to interfere with Hair Club's client contracts. The evidence shows that Ehson used "inside or

confidential information" when soliciting Hair Club clients. See Duggin v. Adams, 234 Va. 221,

226-27,360 S.E.2d 832, 836 (1987). Ehson used her position as a stylist at Hair Club to obtain
the personal contact information of Hair Club's clients—^in clear violation of company policy.
Ehson then used confidential information about the clients to provide a similar, but far less

expensive, service to them. Further, as explained in regard to Count VI, Ehson also breached her

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fiduciary duty to Hair Club when she solicited Hair Club's clients while still employed by Hair
Club. Thus, Hair Club has satisfied the fifth element of this claim.

As explained above, there is one open question of fact in regard to this claim: whether
Hair Club's clients left Hair Club because of Ehson's interference. Because this question is
material to the claim, this Court denies both motions for summary judgment as to Count III.
D. Count IV: Tortious Interference With Contractual Relations

Hair Club next asserts a tortious interference with contract claim against Defendant

Illusion Day Spa for interfering with Ehson's employment contract with Hair Club. In other
words. Hair Club asserts that Illusion tortuously interfered with Hair Club's employment

contract with Ehson by employing her in violation ofthe non-competeclause. As stated in the
previous section, a tortious interference of contract claim has four elements: "(1) the existence of
a valid contractual relationship or business expectancy; (2) knowledge ofthe relationship or
expectancy on the part of the mterferor; (3) mtentional interference inducing or causing a breach

or termination of the relationship or expectancy; and (4) resultant damage to the party whose
relationship or expectancy has been disrupted." Chaves v. Johnson, 230 Va. 112,120,335
S.E.2d 97,102 (1985). When a contract is terminable at will, the Plaintiff must also show that
the defendant employed "improper methods" when interfering with the contract. Duggin v.
Adams, 234 Va. 221,226-27,360 S.E.2d 832, 836 (1987) (quoting Hechler Chevrolet, 230 Va.
396,402(1985)).

Defendants argue in opposition to this claim that there is no valid contractual relationship
between Hair Club and Ehson because the non-compete and non-solicitation clauses are
unenforceable. Defendants also assert that there is no evidence that Ehson breached the

confidentiality provision ofthe contract, which they concede is valid. As discussed above, the

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non-compete clauseis valid andthe severability clause enables the contract to survive a finding
that the non-solicitation clause is invalid. Nevertheless, Plaintiffs tortious interference claim

againstIllusionfails because it misplaces responsibility for the tortious conduct. Ehsonherself
solicited Hair Club's clients before forming Illusion. Ehson then further breached her contract

by forming Illusion. Illusion did not do anything to intentionally interfere withthe employment
contract or to cause Ehson to breach her contract. Therefore,the Court grants summary
judgment on Count IV in favor of the Defendants.
E. Count V: Uniust Enrichment

In Count V, Hair Club alleges Ehson and Illusion have been unjustly enriched. While
Hair Club does not seek summary judgment on this Count the Court must address it because
Defendants do seek summary judgment on this Count.

An unjust enrichment claim under Virgmialaw has three elements: (1) the plaintiffs
conferringof a benefit on the defendant, (2) the defendant's knowledge ofthe conferring ofthe
benefit, and (3) the defendant's acceptance or retention ofthe benefit imder circumstances that

"render it inequitable for the defendant to retainthe benefitwithout payingfor its value."
Microstrategy, Inc. v. Netsolve, Inc., 368 F. Supp. 2d 533,537 (E.D. Va. 2005) (quoting Nossen
V. Hoy, 750 F.Supp. 740, 744-45 (E.D.Va. 1990)). Hair Club asserts that Defendants "unjustly
benefited from using Hair Club's confidential, proprietary informationand trade secrets to
improperly solicit Hair Club's clients and steal business from Hair Club." FAC ^ 67.
First, imder Virginia law, "[u]njust enrichment claims arise 'when there is no contractual

relationship.'" ChristianBroadcastingNetwork, Inc. v. Busch, 2006 WL 2850624 at *8 (Oct. 3,
2006) (quotingInc. v. TyonekNative Corp., 2005 WL 3372872, at *3 (E.D.Va. Dec. 8,

2005)). Here,there was a contractual relationship betweenEhson and Hair Club. An imjust

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enrichment claim, therefore, cannot lie against Ehson. Even if this Court were to conclude that

the non-compete and non-solicitation clausesof the Agreement were invalid,the unjust
enrichment claim still could not succeed against Ehson for two reasons. First, the remainder of
the contract would remain intact, due to the severability clause. Second, even absent the noncompete and non-solicitation clauses, there was still a contractual employer-employee
relationshipbetween Ehson and Hair Club. Ehson may have been enriched by learning Hair
Club's trade secrets and the identities of Hair Club clients, but this enrichment was not unjust

because she "paid" for this enrichmentthrough her employmentwith Hair Club.
Second, Hair Club has not provided evidence, or even asserted that it conferred a benefit

on Illusion. Rather, Hair Club asserts that Ehson gave this information to Illusion. Unjust
enrichment is an equitable theory of recovery "based upon an implied contract to pay the
reasonable value of services rendered." Mongoldv. Woods, 278 Va. 196,677 S.E.2d 288,292
(2009). The Virginia Supreme Court has described the typical unjust enrichment claim as

follows: "Where service is performed by one, at the instance and request of another, and...

nothing is said between the parties as to compensation for such service, the law implies a
contract, that the party who performs the service shall be paid a reasonable compensation

therefor." Id. (quoting In Rea v. Trotter, 61 Va. (26 Gratt.) 585, 592 (1875)). The relationship
between Illusion and Hair Club is far removed from the typical unjust enrichment scenario.
There is no basis on which to imply a contract between Hair Club and Illusion. Further, the only
case Hair Club cites, Buffalo Wings Factory, Inc. v. Mohd, No. 1:07CV612 (JCC), 2008 WL
4642163, at *8 (E.D. Va. Oct. 15,2008) is not applicable. Buffalo Wings does not involve an

unjust enrichment claim. Rather, it held that Virginia law will impute the knowledge of a

director or officer substantially in control of a corporationto that corporation. Id. Even ifthis

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principle could becommuted to apply to anunjust enrichment claim, it still would nothelp Hair
Club. As explained above, theunjust enrichment claim cannot succeed against Ehson; therefore,
it cannot be imputed to Illusion.

For all of thesereasons the Courtgrants summary judgment in favor of the Defendants on
Count V, the unjust enrichment claim.
F. Count VI: Breach of Fiduciary Duty

In Virginia, "[t]heelements of a claunfor breach of fiduciary dutyare (1) a fiduciary

duty, (2)breach, and(3)damages resulting from the breach." Informatics Applications Grp.,
Inc. V. Shkolnikov, 836 F. Supp. 2d 400,424 (E.D. Va. 2011) (citing Carstensen v. Chrisland

Corp., 247 Va. 433,444,442 S.E.2d 660 (Va.l994)). In Williams v. Dominion Technology
Partners, LLC., 265 Va. 280,289 (2003), the Virginia Supreme Court explained its approach to
claimsof breachof a fiduciary duty between employers and employees as follows:

We have long recognized that under the common law an employee, including an
employee-at-will, owes a fiduciary duty of loyalty to his employer during his
employment. See, e.g., Home v. Holley, 167 Va. 234, 241, 188 S.E. 169, 172
(1936). Subsumed within this general duty of loyalty is the more specific duty
that the employee not compete with his employer during his employment. Hilb,
Rogal & Hamilton Co. ofRichmond v. DePew, 247 Va. 240,249,440 S.E.2d 918,
923 (1994). Nonetheless, in the absence of a contract restriction regarding this
duty of loyalty, an employee has the right to make arrangements during his
employment to compete with his employer after resigning his post. The
employee's right in such circumstances is not absolute. Rather, "[t]his right,
based on a policy of free competition, must be balanced with the importance of
the integrity and fairness attaching to the relationship between employer and
employee." Feddeman & Co. v. Langan Assoc., 260 Va. 35, 42, 530 S.E.2d 668,
672 (2000). Thus, "[u]nder certain circumstances, the exercise of the right may
constitute a breach of fiduciary duty.... Whether specific conduct taken prior to
resignation breaches a fiduciary duty requires a caseby caseanalysis." Id.

The Williams Court wenton to explain 'that certain conduct by an employee during the
termof his employment will clearly constitute a breach of the duty of loyalty he owes to
his employer. Principally, an employee must not have 'misappropriated trade secrets,
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misused confidential infonnation, [or] solicited an employer's clients or other employees

priorto termination of employment.'" Id. (quoting Feddeman & Co., 260 Va. at 42,530
S.E.2dat672).

Ehson, as an employee of HairClub, owed a fiduciary duty to HairClub. Ehson
admits that she solicitedHair Club's clientsprior to endingher employment with Hair
Club. This solicitation alone was a breach of Ehson's fiduciary duty. Although Ehson

had a rightto make arrangements for future employment while she wasstill employed by
HairClub, she did not havea rightto solicit Hair Club's clients priorto the termination of

her employment. Finally, Hair Club hasestablished damages as a result of thisbreach.
As stated above. HairClub has presented evidence that it would haveretained at least
90%of the customers stolen by Ehson for 13.5 years (men) or 4.7 years (women). Hair

Club'sexpert report states thatthese lostcontracts were worth $511,090 to Hair Club.
Thiscalculation is subject to adjustment based on evidence adduced by Defendants.
Because HairClub has firmly established all three elements of a breach of fiduciary duty
claim and there is no questionof material fact in regards to this claim, the Courtgrants
summary judgment in favor of Hair Club on Count VI.
IV. Conclusion

For the reasons outlinedabove, the Court finds good causeto GRANT Plaintiff s Motion

as to counts I, as it relates to the non-compete clause, and VI, and GRANT Defendant's Motion

as to counts I, as it relates to the non-solicitation clause, IV andV. The Court also finds good
cause to DENY the motions of bothparties on counts II and III. An appropriate Order will issue.

August^ 2016
Alexandria, VA

/s/
Liam O' Grady
United States District Judge
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