Virginia Business Litigation Lawyer Blog

Burger King Manager Says He Was Fired For Having HIV

Sat, 12 May 2012 09:21:54 -0500

Many people don't realize that the Americans with Disabilities Act (ADA) protects not only employees with substantial hearing, visual, or mental impairments, but also those with HIV or AIDS. The ADA prohibits discrimination against "qualified individuals with disabilities." Any physical or mental impairment that substantially limits one or more major life activities can qualify as a disability, and HIV disease is such an impairment.

Earlier this month in Norfolk, former Burger King manager Christopher Peña filed a discrimination suit against Burger King for allegedly terminating him upon learning he was HIV positive. Burger King says he was fired for poor performance. The complaint seeks compensatory damages for lost past and future wages, benefits, and emotional distress. It also seeks punitive damages, costs and attorney fees, reinstatement, and an injunction precluding further violations of the ADA.

Peña joined Burger King in 2004 and became a district manager, responsible for nine restaurants. When he learned he was HIV positive, he debated whether to tell the company but decided he should do so in case he reacted to his medications and had to miss work. He claims he had no disciplinary actions against him prior to disclosing his HIV status to a supervisor in June 2011. But shortly after the disclosure, one of his restaurants failed an audit, other restaurants within his management experienced service problems, and he dismissed an employee for stealing money. The company terminated his employment in September 2011.

Peña claims other managers in the company had similar problems but were not subjected to the disciplinary action he received. He asserts that he performed well and that Burger King created a record of poor performance as a pretext for terminating him once the company learned of his HIV status.

Pretextual terminations are not new. Employers who fear higher health insurance or accommodation costs have terminated HIV positive employees. And though HIV is not on the Centers for Disease Control and Prevention list of infectious and communicable diseases transmissible through food handling, some in the restaurant business still harbor fears regarding HIV.

Dissolving a Partnership for Frustration of Purpose

Mon, 07 May 2012 07:21:37 -0500

Under Virginia law, a partner can apply for dissolution of a partnership under Virginia Code § 50-73.117(5) upon grounds that: (a) The economic purpose of the partnership is likely to be unreasonably frustrated; (b) Another partner has engaged in conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with that partner; or (c) It is not otherwise reasonably practicable to carry on the partnership business in conformity with the partnership agreement. The Virginia Supreme Court recently had the opportunity to consider for the first time dissolution under the first and third prongs and found dissolution to be proper on the facts before it.

In 1978, Charles Russell set up trusts for the benefit of his daughter, Nina, and her two children, Robert and Isham. Nina and her brother, Eddie, were named co-trustees of the trusts. Charles also created Russell Realty Associates, a partnership, to invest in various properties, including real estate, with Charles, Eddie (individually) and Eddie and Nina as co-trustees holding the partnership interests. The partnership agreement provided that all partners would manage the business but, "in the event of any disagreement between them the decision of Edward Russell shall be controlling." The agreement further gave Eddie authority, "by his sole act, to borrow, execute, and deliver instrument[s], including any deed or lease, on behalf of the partnership." Under the agreement, partners did not have the right to withdraw from the partnership but partners could be added if all partners agreed.

After several years, Eddie was running the company and held half the partnership interests individually and the other half, with Nina, as co-trustee for Nina and her two sons. Though Eddie had authority to act for the partnership, he tried to resolve the many disagreements he and Nina had, some of which cost the partnership. At his death, Charles left more properties to Eddie and Nina as tenants in common. The siblings had to hire lawyers to resolve their disagreements over those properties and a mediator remained involved long term.

In 2003, the siblings began discussions on distribution, whether Rob would become a partner, and whether the partnership should become a limited liability company (LLC). Again, they retained counsel. Eddie tried to negotiate resolutions but Nina was unresponsive and delayed decisions. In response, Eddie refused to agree to add Rob as a partner. Nina then insisted on being included in all aspects of the business' management, interfered in business actions and accused Eddie of breaching his fiduciary duty because he didn't convert the partnership to a LLC.

When Nina and Rob's efforts thwarted lucrative land deals, Eddie filed suit to dissolve the partnership, claiming they had frustrated the partnership's economic purpose and rendered the partnership's management not "reasonably practicable." Nina filed an intervenor complaint alleging Eddie had breached his fiduciary obligations, seeking equitable accountings and declaratory relief on her sons' rights to distributions, and attempting to have Eddie removed as co-trustee. The Chesapeake Circuit Court granted dissolution of the partnership and rejected Nina's claims. Nina appealed.

The Virginia Supreme Court applied the strict standard for judicial dissolution it had applied to a LLC in an earlier case which required deferring to the partnership agreement and only permitting dissolution where the circumstances fit specific statutory conditions. The Court rejected Nina's argument that comments to the Revised Uniform Partnership Act (RUPA) required a showing of poor financial performance for the 'economic purpose' test, the first prong, to apply. Neither § 50-73.117(5) nor the RUPA requires financial failure to meet the 'economic purpose' prong for dissolution. Moreover, the partners' expectations were not limited to economic success. The partners also expected to be able to conduct the business efficiently and productively to maximize returns. Instead, the constant disagreements, delays, working at cross purposes and acrimony cost the partnership in unnecessary higher costs and lost lucrative deals. Finding sufficient evidence in the record to support the lower court's ruling, the Court affirmed the ruling, paving the way for the dissolution.

Virginia Court Denies Judgment on the Pleadings in Domain Name Dispute

Wed, 02 May 2012 06:12:39 -0500

As noted previously on this blog, the Anticybersquatting Consumer Protection Act ("ACPA") permits litigation to be filed against an infringing domain name itself, not just against the owner of the domain name. Which entity should file responsive pleadings in such a case, the domain name or its owner? In Sauikit LLC v. Cydia.com, the Eastern District of Virginia opined that form should not prevail over substance.

Saurikit brought an action against the domain name cydia.com alleging violations of the ACPA. Defendant's Answer stated that Cykon Technology ("Cykon") owned the domain name, but the defendant's attorney signed the answer "Counsel for Cydia.com" instead of "Counsel for Cykon." Saurikit moved for judgment on the pleadings, arguing that there was no answer on file by a claimant since the property rather than the owner of the property filed the Answer.

A successful judgment on the pleadings requires the moving party to demonstrate that no issues of material fact exist and that it is entitled to judgment as a matter of law. In deciding a motion for a judgment on the pleadings, courts view the facts in the light most favorable to the non-moving party.

Saurikit relied on Caesars World, Inc. v. Caesars-Palace.com, in which the court found that the Answer should have been filed on behalf of the claimant seeking to assert an interest in the domain name rather than on behalf of the domain name itself. In Caesars World, the defendant was refusing to identify the sponsor of the litigation and was not participating in discovery. The court was concerned about its ability to determine the interests of persons relative to the domain name and therefore rejected the Answer, reasoning that as an inanimate object, the domain name could not hire attorneys to file an answer.

The court in Saurikit distinguished Caesars World. Here, Cykon had argued its ownership interest in the domain name and had engaged Saurikit in discovery and settlement negotiations. The face of the pleadings made clear that Cykon was the owner of the domain name and was a claimant in the case. Additionally, earlier pleadings in the case noted that Cykon was owner of the domain name and had engaged counsel to represent its interests in the matter. In previous motions, the court had recognized Cykon as the claimant in the case. For these reasons, the court found Cykon's answer sufficient and denied Saurikit's motion for judgment on the pleadings.

Arlington Sheriff's Office Wins Summary Judgment in Title VII Case

Mon, 30 Apr 2012 06:14:56 -0500

A former employee of the Arlington County Sheriff's Office failed to produce sufficient evidence of race discrimination to survive summary judgment. Such was the determination of Judge O'Grady of the Eastern District of Virginia, who entered summary judgment in favor of Arlington Sheriff Beth Arthur.

The case had been brought by former Inmate Services Counsel Robert Currie. Currie, an African-American male, alleged that he was racially discriminated against in 2009, when: (1) a watermelon was left on his desk by an African-American co-worker; (2) a Caucasian deputy made the statement "[t]here goes the neighborhood" on several occasions when Currie approached him; and (3) a Latino supply assistant referred to Currie as "boy" when addressing him.

Currie filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC), claiming that he was discriminated against and was placed on probation in 2009 in retaliation for the fact that his lawyer had written to the Sherriff's Office after the watermelon incident. The EEOC issued a Notice of Right to Sue in 2011. Two months later, Currie was terminated by Sheriff Arthur, allegedly as a result of an investigation that found that Currie violated policy, made false statements, treated an inmate unprofessionally, and retaliated against inmates.

To survive summary judgment, a plaintiff claiming hostile work environment based on race discrimination must show the existence of harassment that was (1) unwelcome; (2) based on race; (3) sufficiently severe or pervasive to alter the terms of employment and create an abusive atmosphere; and (4) imputable on some factual basis to his employer. A Title VII claim also arises where a plaintiff can demonstrate that he was retaliated against by his employer, by showing a causal link between an adverse employment action taken against him and a protected activity in which he engaged. A defendant can rebut a presumption of retaliation if she had a non-retaliatory reason for the adverse employment action.

The court found that Mr. Currie failed to prove his case, as the court was unconvinced that any of the three events were racially motivated. The watermelon incident involved three other African-Americans, the deputy's statement was not racial on its face, and the Latino supply assistant greeted all co-workers as "boy." Moreover, even if these incidents could be interpreted as racially based, any perceived discrimination would not be imputed to Arthur because all three incidents were investigated and stopped. Finally, because the events took place a few times over the course of only five months, the harassment would not be deemed to be sufficiently pervasive.

Lawyers Argue Contacting Advertisers Is Tortious Interference

Mon, 23 Apr 2012 11:09:48 -0500

Not everyone was happy when KIBZ 104.1 FM (The Blaze) replaced its rock format with new programming. One unhappy listener tried contacting the radio station to express his displeasure but had trouble reaching a live person. So he took his complaints to the station's advertisers. He succeeded in getting a response, but it came in the form of a cease-and-desist letter from the station's lawyers, accusing him of defamation and of tortiously interfering with the station's contractual relationships.

Three Eagles Communications, a Colorado-based company, had rearranged its programming for a Lincoln, Nebraska radio station, The Blaze. It brought in a show from the Omaha market, replacing or rearranging other programming to do so. The new show included political, pop culture and off-color commentary. Many listeners objected to the changes and banded together to boycott the show. They established a Facebook page, started a petition, published a list of those who advertised with the show, and included information on how to contact members of Three Eagles management. They also held a public event, sent emails and letters to Three Eagles management, and sent emails to advertisers with The Blaze. Some stated Three Eagles was not a local operation.

Ted Pool was among those who opposed the changes. He sent emails to some Blaze advertisers objecting to the changes, attributing them to regional and out-of-state decisions, and encouraged the email recipients to sign the petition. He urged the recipients to contact Three Eagles to ask if the company would continue "jeopardizing YOUR advertising dollars by being associated with" the new show.

A law firm representing Three Eagles sent Pool and two others "cease and desist" letters, telling them to stop contacting advertisers and stop claiming Three Eagles was not a local company. It said characterizing Three Eagles as a non-local company was defamatory because "several local employees are involved in Three Eagles' operation, management and even ownership." The letter also indicated Three Eagles could sue for tortious interference with a business relationship or expectancy if it suffered actual damages, and included three case sites relating to such claims. The CEO of Three Eagles has been quoted as saying, "They're interfering with an opportunity to make money, and we think that's tortious interference."

Nebraska law mirrors Virginia law on the elements of tortious interference: a plaintiff must prove (1) the existence of a valid business relationship or expectancy, (2) knowledge by the interferer of the relationship or expectancy, (3) an unjustified intentional act of interference on the part of the interferer, (4) proof that the interference caused the harm sustained, and (5) damage to the party whose relationship or expectancy was disrupted.

If Three Eagles follows through on its threat, the case would hinge on the last three elements. It would need to show that one or more advertisers actually pulled their ads from the station and that they did so as a result of Mr. Pool's actions. In addition, there could be no liability absent "unjustified" conduct. In reaching this determination, the court would examine such factors as motive, the social interest in protecting certain freedoms, and the proximity or remoteness of the defendants' conduct and the termination of the advertising.

Summary Judgment Reversed Due to Ambiguity in Contract

Tue, 17 Apr 2012 08:16:09 -0500

Swiftships Shipbuilders and its defense contract procurement consultant, Lion Associates, are currently in a dispute over a $181 million contract awarded to Swiftships by the United States Navy. In February 2009, Swiftships, which specializes in military vessels, submitted a capability summary to the Naval Sea Systems Command (NAVSEA) in response to a Navy announcement seeking coastal patrol boats to supply to the Iraqi government. After not receiving a response in two months, Swiftships hired Lion Associates to provide marketing and promotion services to attract potential Swiftships clients. In exchange, Swiftships would pay Lion Associates $7,500 a month for 12 months and "3% of each new contract obtained by Lion." Swiftships later revised the contract so that the 3% commission was limited to "each new contract brought to Swift[ships], which was obtained by Lion." In the meantime, Admiral Lyons, the CEO, President, and sole member of Lion Associates, worked on procuring the Navy contract for Swiftships by assuring a high-ranking NAVSEA admiral that Swiftships could manage the entire job by itself. The contract was awarded to Swiftships a few months after the singing of the revised contract between Lion Associates and Swiftships, but Swiftships refused to pay Lion Associates the 3% commission on the Navy contract because it did not think that Lion Associates had brought the Navy contract to Swiftships.

Lion Associates sued for breach of contract and unjust enrichment. It argued that it was entitled to a little over $6 million in compensatory damages because the 3% payment provision applied to any contract that Swiftships was unable to obtain without Lion Associates assistance. The Eastern District of Virginia granted summary judgment in favor of Swiftships on both claims, but the United States Fourth Circuit Court of Appeals remanded the case after finding that the contract was ambiguous and that evidence should have been considered to determine its meaning and whether it was breached.

In a breach of contract claim, a court must determine if contractual provisions have been violated by looking at the actual language of the document. If the contract language is ambiguous, the trier of fact can look to extrinsic parol evidence to determine the parties' intent as to certain provisions. However, resort to extrinsic evidence is limited to situations where language is "susceptible to more than one reasonable construction," when considered in the context of the contract as a whole.

The Fourth Circuit remanded the case for further proceedings to determine whether there was a breach of contract because it found the 3% compensation clause to be "patently ambiguous." A reasonable interpretation of the 3% provision could yield two different understandings: (1) Lion Associates must actually identify a contract opportunity to earn 3% on that contract or (2) Lion Associates merely had to help Swiftships enter into new contracts to which it could not have been a part on its own in order to earn the 3% commission. Given this ambiguity in meaning, the Fourth Circuit remanded the case to have the trier of fact evaluate extrinsic evidence and determine whether the parties intended to allow Lion Associates to collect its 3% on the Navy contract.

The Fourth Circuit did uphold the rejection of the unjust enrichment claim, however, because Lion Associates held an express contractual right to payment for the services rendered. Unjust enrichment claims are limited to situations where a contractual right to payment does not exist and a plaintiff is forced to claim that there was a breach of "an implied contract to pay the reasonable value of services rendered."

Copyright Infringement Claim Against Builder Dismissed

Tue, 10 Apr 2012 15:24:58 -0500

Although it is true that architects are entitled to copyright protection, a complaint alleging infringement of a copyright must contain sufficient factual allegations for the court to infer that the defendant is liable, or the case will be dismissed. This is what happened recently in Home Design Services, Inc. v. Schoch Building Corporation, in which the United States District Court for the Eastern District of Virginia dismissed the plaintiff's threadbare complaint for failure to allege facts sufficient to support a copyright infringement claim.

Home Design Services ("HDS") owned several architectural copyrights and filed suit against Schoch Building Corporation ("SBC"), a custom home builder, under the Federal Copyright Act alleging that SBC infringed its copyrights. To establish copyright infringement, a plaintiff must plead (1) ownership of a valid copyright and (2) that defendant copied the protected work. HDS submitted its copyright registration certificates which created the presumption of copyright validity and ownership. However, it failed to state facts alleging that SBC copied the protected work.

A plaintiff may establish copying by showing (1) that defendant had access to the copyrighted work and (2) that substantial similarity exists between the protected work and the allegedly infringing work. A plaintiff can show access by direct evidence that the defendant had the opportunity to view the protected works or by showing that the works are so strikingly similar that there is no reasonable probability that they were independently created.

HDS did not allege that SBC had actual access to its copyrighted plans. HDS also failed to allege that the works were strikingly similar and in fact failed to provide any information about the allegedly infringing homes. The court found that HDS did not address access at all and that the complaint could not stand since it failed to allege an essential element of an infringement claim.

Reading the complaint in the light most favorable to HDS, the court went on to examine whether HDS adequately alleged "substantial similarity." Since HDS provided no information about the allegedly infringing work, the court had no knowledge of what homes SBC built, where they were located or what they looked like and therefore could not compare the works and assess "substantial similarity." HDS's threadbare and factually devoid assertions that the homes SBC built were copied largely or were exact duplicates of HDS's copyrighted designs were insufficient to satisfy pleading requirements. HDS contended that SBC could "figure out why they are being sued." The court noted that a defendant has no such burden.

The court allowed HDS to file an amended complaint. In the amended complaint, HDS alleges that it displays its architectural designs on the Internet and in publications including its own magazine, Home Design. These publications include color renderings of HDS's architectural designs, floor plans and photographs of its homes. In an apparent attempt to show access, HDS claims that SBC received Home Design and that SBC bought catalogs and a CD-ROM from HDS which allowed SBC to view HDS's architectural designs. HDS also includes the homes' addresses to provide the court with some information about the allegedly infringing works.

Kevin Costner Denies Breach of Contract with Sculpture Artist

Mon, 02 Apr 2012 08:34:26 -0500

Actor Kevin Costner is in the middle of a contract dispute in South Dakota over the placement of 17 buffalo and Lakota warrior sculptures that he had commissioned from artist Peggy Detmers. The sculptures were originally intended for Costner's proposed resort The Dunbar, but the resort itself was never built and the sculptures were later installed as the centerpiece of a visitor attraction on an adjoining property, dubbed "Tatanka." Detmers claims she never authorized Costner to install the sculptures at the new location and sued him for breach of contract.

At issue is a contractual provision that stipulates, "if The Dunbar is not built within ten (10) years [of the year 2000] or the sculptures are not agreeably displayed elsewhere, I [Costner] will give you [Detmers] 50% of the profits from the sale of the . . . sculptures after I have recouped all my costs incurred in the creation of the sculptures and any such sale."

The trial court found in favor of Costner, finding that the sculptures were "agreeably displayed elsewhere." First, the sculptures were placed "elsewhere" because any place that is not The Dunbar satisfied this contractual provision. Furthermore, the sculptures were found to have been "agreeably displayed" at the alternative location because Detmers had been involved and informed during the location and design process and even spoke at Tatanka's grand opening. As a result, she could not have reasonably thought that The Dunbar would still be built at some further time in the future.

The matter is presently before the South Dakota Supreme Court, which recently heard oral arguments on three issues: (1) whether the sculptures were actually displayed "elsewhere;" (2) whether Detmers agreed to display the sculptures at Tatanka in the absence of a promise from Costner that The Dunbar would be built by 2010; and (3) whether construing the term "elsewhere" literally would create an absurd result. Detmers argued that, given that Tatanka is on the same ground as the proposed resort, she reasonably thought that The Dunbar would still be built after Tatanka was opened and that she never agreed to having the sculptures placed specifically at Tatanka itself. Costner's lawyers responded that Costner would not have personally invested $6 million into Tatanka if Detmers had not agreed to installing the sculptures there.

Former Virginia Attorney Enjoined from Frivolous Litigation

Tue, 27 Mar 2012 11:50:43 -0500

When former attorney Ann Marie Miller had a bone to pick with Jennifer Ann Kelley, Miller used her knowledge of the legal system to represent herself in numerous suits of questionable merit against Kelley, according to Judge Wilson of the Western District of Virginia. In Miller v. Kelley, the court held that although it could not award Kelley attorney's fees nor impose Rule 11 sanctions, it could enjoin Miller from filing any future frivolous pro se lawsuits in its district against Kelley.

After the court dismissed Miller's state-law libel claim for failure to prosecute, Kelley sought attorney's fees under 28 U.S.C. § 1927, sanctions under Federal Rule of Civil Procedure 11, and an order enjoining Miller from filing future suits against Kelley without prior judicial leave. The court found that it could not award fees because 28 U.S.C. § 1927 does not apply to pro se litigants, and it refused to impose sanctions because the "safe harbor" provisions of Rule 11 preclude the filing of any Rule 11 motion after the conclusion of a case. However, the court issued an injunction prohibiting Miller from filing future pro se actions against Kelley, relying on the All Writs Act, 28 U.S.C. § 1651(a) (2006) and four factors set forth by the Fourth Circuit.

The All Writs Act authorizes the sparing use of pre-filing injunctions when a litigant repeatedly files frivolous suits. The Fourth Circuit has set forth factors to evaluate in determining whether a pre-filing injunction is warranted: 1) the party's history of litigation, in particular whether she has filed vexatious, harassing, or duplicative lawsuits; 2) whether the party filed her cases on a good faith basis or only to harass; 3) the extent of the burden on the courts and other parties resulting from the party's filings; and 4) the adequacy of alternative sanctions.

An examination of these factors warranted a narrowly drawn pre-filing injunction. First, Miller had a history of filing harassing suits against Kelley in a multitude of forums. Second, Miller used the litigation to level insults rather than make legal arguments, calling Kelley a "fat, stupid woman with bad teeth and ugly hair," her son an "obnoxious, illiterate braggart," and her daughter a "preteen with a beer gut." She failed to successfully prosecute even one of her claims. Third, Miller forced courts to expend resources addressing her filings, and Kelley was required to defend herself against numerous meritless claims. Fourth, alternative sanctions were inadequate as § 1927 and Rule 11 did not apply. The court's inherent power to sanction Miller would be ineffective given that Miller had filed two bankruptcy proceedings. Miller threatened future litigation against Kelley, and the court determined that no sanction short of a pre-filing injunction would deter her. The court, therefore, entered an injunction prohibiting Miller from filing future pro se actions against Kelley.

Virginia Tortious Interference Law More Permissive than Georgia

Sun, 18 Mar 2012 10:11:23 -0500

In Virginia, to state a claim for tortious interference with contractual relationships, a plaintiff generally must allege (1) the existence of a valid contractual relationship or business expectancy; (2) knowledge of the relationship or expectancy on the part of the interferor; (3) intentional 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. A person must be a stranger to a contract to tortiously interfere with it; one cannot interfere with his own contract. Some states take this "stranger" requirement further, holding that a plaintiff can sue a defendant for tortious interference only if the defendant is a stranger to both the contract and the underlying business relationship giving rise to the contract.

In those states adhering to the so-called Stranger Doctrine, third-party beneficiaries are not considered strangers to the contract even though they are not parties to it. If a defendant has a legitimate interest in either the contract or a party to the contract, the defendant is not considered a stranger. In Georgia, for example, there can be no tortious interference claim where the plaintiff and defendant were parties to "a comprehensive interwoven set of contracts." A recent unpublished opinion from the 11th Circuit shows how restrictive this rule can be.

In GT Software, Inc. v. webMethods, Inc., GT Software brought a tortious interference claim against webMethods after webMethods instructed Action Motivation, Inc., to withhold sales leads gathered by GT at Integration World, a convention hosted by webMethods in November 2006. GT had issued a news release that webMethods believed contained certain inaccuracies about one of its partner companies, so webMethods removed GT's representatives from the convention and instructed TBA Global, the company it had hired to run the convention, to ensure that GT did not receive any of the sales leads that GT had collected during the convention using scanners provided by Action Motivation.

webMethods was not a party to the contract between GT and Action Motivation, so in Virginia, this could be a viable claim. What the 11th Circuit found significant, however, was that all the parties were all involved in various contractual relationships relating to the Integration World event: webMethods had hired TBA Global, LLC to run the convention; TBA hired Action Motivation to provide scanners that could store the name and business information of convention attendees; Action Motivation entered into a contract with GT to provide this sales-lead service; and GT contracted with webMethods to rent a booth at the convention. The court held that given these interwoven contracts and facts, webMethods was not a stranger to the business relationship giving rise to and underpinning the contract between GT and Action Motivation. Therefore, under Georgia law, there could be no tortious interference claim.

webMethods had failed to make this argument during the trial, however, so the 11th Circuit affirmed the judgment entered against it.

Trademark Infringement Action Filed Against Urban Outfitters

Wed, 07 Mar 2012 11:33:56 -0500

The Navajo Nation has sued retailer Urban Outfitters and its subsidiaries for trademark infringement, trademark dilution, and related claims. In the suit, filed in the District of New Mexico, the tribe seeks monetary damages and an injunction against using the "Navajo" and "Navaho" names in connection with marketing goods that compete directly with Navajo Nation's products.

According to the Complaint, Urban Outfitters has been using "Navajo" and "Navaho" on a line of clothing and accessories that competes directly with products offered by Navajo Nation. One of the tribe's most valuable assets is its NAVAJO trademark which it has used to market such products for a century and a half. That trademark has been registered for over sixty years. The Complaint alleges that through its retail stores, online stores and catalog, Urban Outfitters has sold over twenty "Navajo" products, using geometric patterns similar to ones the Navajo Nation has created over the years, ranging from earrings and tunics to undergarments and liquor flasks. The Navajo Nation takes particular exception to the marketing of flasks bearing the tribe's name, mark and design, because the sale and consumption of alcohol is prohibited on the Navajo reservation.

Navajo Nation asserts that Urban Outfitters' actions are "designed to convey to consumers a false association or affiliation with the Navajo Nation, and to unfairly trade off of the fame, reputation, and goodwill of the Navajo Nation's name and trademarks." Lawyers for the tribe argue that consumers are being led to believe that Urban Outfitters has contracted with the tribe to sell its products under one of its registered trademark names but that, in fact, Urban Outfitters has no license or sponsorship relationship with the tribe that would permit the company and its subsidiaries to use any of these trademarks. The trademark case includes claims that Urban Outfitters has been diluting the NAVAJO mark's distinctiveness (dilution by blurring) and harming the mark's reputation (dilution by tarnishment). The tribe also asserts the company has violated the Indian Arts and Crafts Act by displaying and marketing the products so as to suggest they are authentic Indian-made products.

When Navajo Nation became aware of the infringement, it sent a cease-and-desist letter to the corporation and the company removed the products from its website. But Navajo Nation filed the lawsuit anyway because it says Urban Outfitters continued to sell many of the products through its retail stores and on at least one of its subsidiary website outlets.

It's hard to ignore the fact that--if the allegations of the Complaint are true--this wouldn't be the first time property has been taken from the Navajo Nation. If the Navajo Nation owns this intellectual property, jurors are likely to be sympathetic to their fight to protect it. Expect Urban Outfitters to settle this case before it ever gets to trial.

Noncompete Covenants and Covenants Restricting Land Tested By Different Standards

Tue, 21 Feb 2012 09:47:22 -0500

Under Virginia law, covenants restricting the free use of land are not favored and must be strictly construed. Restrictive covenants that are unreasonably broad will not be enforced. There is a growing body of case law in Virginia governing noncompete covenants in employment contracts, but does that body of law apply to restrictive covenants in deeds? Earlier this month, the Fourth Circuit answered that question in the negative.

BP Products v. Stanley involved an appeal from the Eastern District of Virginia by BP Products North America, which had lost its motion for summary judgment against Charles V. Stanley and his business, Telegraph Petroleum Properties. BP had sued Stanley and his company to enforce a restrictive covenant in a deed, but the district court found that the restriction was overbroad and unenforceable. The Court of Appeals disagreed and reversed, finding that when analyzed under the appropriate test, the challenged prohibition was too inconsequential to invalidate the entire covenant.

Stanley leased a service station from BP in Alexandria, Virginia, subject to an agreement containing a restriction against selling fuel that was not BP-branded. Following a disagreement regarding the price of the fuel, Stanley stopped selling BP-branded fuel and started selling AmeriGO fuel, prompting the lawsuit.

The court held that covenants restricting land use, as opposed to employment opportunities, are valid "where the restraint is limited and there is a valuable consideration to support it," so long as "the restraint imposed is reasonable as between the parties and not injurious to the public by reason of its effect upon trade." The court further held that a restraint is reasonable if it "only affords a fair protection to the interests of the party in favor of whom it is given, and is not so large as to interfere with the interests of the public." This standard, the court clarified, is less strict than the standard by which non-competition agreements in employment contexts are judged.

Arbitrating Arbitrability

Sun, 29 Jan 2012 17:18:08 -0500

Arbitrability--whether a contract creates a duty for the parties to arbitrate (rather than litigate) a particular grievance--is ordinarily a question of law to be decided by the court. Virginia, however, adheres to a public policy favoring freedom to contract. If two sophisticated businesses reach a deal providing that any arbitrability issues shall be resolved by binding arbitration rather than decided by a court, Virginia courts will enforce that agreement as written and defer to the arbitrator on questions of arbitrability.

An example is found in the recent case of Systems Research and Applications Corporation v. Rohde & Schwarz Federal System, Inc. SRA, a government contractor for the United States Agency for International Development (USAID), hired Rohde & Schwarz as a subcontractor for a project involving telecommunication services equipment in Lebanon. R&S did not complete its performance by the contract deadline and SRA refused to pay its invoices. SRA took the position that the dispute was a "Government Contract Dispute" which, under the terms of the subcontract, could not be submitted to arbitration. R&S disagreed and initiated arbitration proceedings. SRA responded with a declaratory judgment action and a motion to stay the arbitration. The court denied the motion to stay and dismissed the case.

The court found that parties may provide by contract that all matters will be subject to arbitration, including questions of arbitrabilty. However, because allowing an arbitrator to decide issues of arbitrability is contrary to the general rule, "courts should not assume that the parties agree to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so."

R&S argued that the parties agreed to arbitrate all issues and pointed to a provision in the contract that incorporated the rules of the American Arbitration Association. SRA responded that the arbitration clause in question only covered particular types of claims. The court took the position that the arbitrator's authority to decide questions of arbitrability should not turn on whether the arbitration clause is narrow or broad. The court concluded that "the incorporation of the AAA Rules in the Subcontract's arbitration clause, and the waiver provision drafted by the SRA which by its terms bars this action, together constitute clear and unmistakable evidence that the parties intended for the issue of arbitrability to be decided by the arbitrator."

Copyright Co-Owner Not Indispensable Party in Lawsuit Over YouTube Video

Wed, 18 Jan 2012 18:58:48 -0500

"Grandma Got Run Over by a Reindeer" is one of the most popular holiday songs around and is played on radio stations across the country every Christmas season. It is also now the subject of contentious copyright litigation after a federal judge ruled recently that litigation over an allegedly unauthorized YouTube video containing audio of the song can continue despite the absence of a co-owner of the copyright.

Elmo Shropshire owns the copyright to the song along with Patsy Trigg d/b/a Kris Publishing. The copyright was registered with the U.S. Copyright Office on December 27, 1979. The defendant posted a video on YouTube--which has since been removed due to the pending litigation--which combined Christmas-related pictures with audio of a Canadian musical group, "The Irish Rovers," singing the Grandma song. Shropshire contacted the poster and requested that he either pay the licensing fee or immediately remove the video. The poster refused.

Shropshire filed a copyright infringement suit in federal court, but his first (amended) complaint was dismissed because, among other reasons, Shropshire did not name Trigg or Kris Publishing in the lawsuit. The court gave him permission to amend, however, and the second time around, Shropshire named Kris Publishing as a defendant, but Kris Published settled out and was promptly dismissed. The defendant then filed a motion to dismiss, claiming that Patsy Trigg d/b/a Kris Publishing was a necessary and indispensable party and thus the suit could not go forward without her. The Court disagreed.

In order to determine whether a party is "necessary" to the case under Federal Rule of Civil Procedure 19, the court held, courts must follow a three-pronged analysis. "First, the Court must determine whether an absent nonparty should be 'required to be joined if feasible' under Rule 19(a). . . .The Court 'must determine whether the absent party has a legally protected interest in the suit,' and if so, whether 'that interest will be impaired or impeded by the suit.'" Next, the Court has to make a determination about the feasibility of joining the absent party. The third and final step occurs only if joining the party is not feasible. In that case, the court must determine "whether in equity and good conscience, the action should proceed among the existing parties or should be dismissed."

The court ultimately found that Kris Publishing was not an "indispensable party" and allowed the suit to continue in its absence. The purpose of the joinder rule had already been satisfied by joining it to the case, despite the fact that it was later dismissed upon settlement.

Fairfax Court Finds Mere Reference to By-Laws Insufficient to Incorporate Into Contract

Sat, 07 Jan 2012 09:23:12 -0500

In Virginia, employment is presumed to be at-will, but that presumption can be rebutted with evidence that the employment is for a specific period of time or that it can be terminated only for just cause. Virginia law says that contracts are to be construed as written and if the terms of the contract are clear, then those terms are to be given their plain meaning. A separate writing that is referenced in a written contract is construed as part of that agreement only if it is referred to with specificity and there is some expression of an intent to incorporate its terms into the agreement. As explained in a recent opinion by Judge Bruce D. White of Fairfax, "in order to incorporate the provisions of another document into the employment contract, the plain language of the employment contract must clearly reference and incorporate the terms of the document being incorporated."

Johnson v. Versar was a lawsuit brought by William Johnson, Alexis Kayanan and Davy Jon Daniels against their former employer Versar, a government contractor based in Springfield, Virginia, for alleged breach of their employment contracts. They claimed that their employment was not at-will but was for a definite term. They based their argument on the fact that they received certain documents upon accepting employment that referenced Versar's by-laws, which provided that officers "may be removed" by a majority vote of the board of directors. Because a resolution was never passed, they claimed that they were terminated in violation of their employment agreements.

Judge White sustained Versar's demurrer with prejudice and dismissed the case. The Court found that the plaintiffs were at-will employees because the by-laws were not specifically and intentionally incorporated into the employment agreement. None of the offer letters referenced the by-laws, and the accompanying documents that did reference the by-laws did not indicate any intent to incorporate their terms as part of the employment agreement.

The Court went on to say that even if the by-laws were incorporated into the employment contract, the language of the by-laws was not strong enough to overcome the plaintiffs' at-will status. The by-laws only provided for how an officer "may" be removed. The use of that permissive word indicates that the possibilities for removal were not intended to be exhaustive. The by-laws did not provide that the employees could be removed only for just cause or that their employment was for a definite term, so their employment was deemed to be at-will.