The U. S. District Court for the Eastern District of Virginia says a company that hired away a competitor’s employees may be liable for tortious interference. This can occur with an at-will business contract without the need to plead and prove improper methods. As explained by the court in DePuy Synthes Sales, Inc. v. Sky Surgical, Inc., an at-will employment contract will be deemed not terminable at will for the purposes of tortious interference if the contract includes enforceable post-termination duties. In the case of a contract not terminable at will, a plaintiff need not plead and prove improper methods or means to maintain the claim.
Michael Jones and Jacob Schools were employed by DePuy Synthes Sales, Inc. subject to at-will employment contracts that included non-disclosure, non-solicitation and non-competition obligations extending 18 months after the end of the employment relationship. After leaving DePuy and prior to the expiration of the post-employment obligations, both Jones and Schools went to work for DePuy’s competitor, Sky Surgical, Inc. They were employed by Sky “in a manner that directly competed with Plaintiff in the same geographical area where they had previously worked for Plaintiff.” DePuy sued Sky, Jones and Schools and the defendants moved to dismiss Count III (tortious interference with the employment contracts) and Count IV (statutory conspiracy to injure the plaintiff in its trade or business) for failure to state a claim.
Depuy alleged that Sky had knowledge of the employment contracts and the post-employment obligations contained in them. But for this disputed fact – which was taken as true for the purpose of evaluating the motion to dismiss – the pertinent factual allegations were largely uncontested.
Elements of Tortious Interference in Virginia
Under Virginia law, there are four elements to a claim for tortious interference with a contract that is not terminable at will: a valid contractual relationship or expectancy, knowledge of the relationship on the part of the alleged interferer, intentional interference inducing breach, and resulting damage. But Virginia courts require proof of a fifth element - improper means or methods – to support a claim for tortious interference with a contract that is terminable at will.
Sky Surgical defended by arguing that the plaintiff’s real interest was its customer contracts and by interpreting DePuy’s claim as an allegation that Sky had interfered with these contracts. Sky’s theory was that because these customer contracts were terminable at will, Depuy’s claim failed because of the absence of an allegation of improper methods.
The court rejected the first contention as a misstatement of the plaintiff’s claim; Depuy was not arguing that Sky had interfered with the individual agreements between Depuy and its customers, but that Sky had interfered with Jones’s and Schools’s contracts. Moreover, the court found that the obligation to show improper methods does not apply if the employees had continuing, post-employment duties that were still enforceable at the time of the alleged interference. Therefore, the existence of the post-employment obligations rendered the otherwise at-will employment contracts “not terminable at will” during the 18 month window of enforceability. Since Sky was deemed to know of the post-employment obligations (for the purpose of the motion to dismiss), DePuy was not required to plead and prove improper methods. The court denied the motion to dismiss.
An Alternative Theory of Defense?
Sky argued that the court should “look behind Plaintiff’s employment contracts with Jones and Schools to the ‘real interests at stake’” (i.e., the contracts between DePuy and its customers). This strategy relied on a strained theory designed to hook the court on DePuy’s failure to plead improper methods. Perhaps a better litigation strategy for Jones and Schools would have been to argue that the non-competition provision included among the post-employment obligations was unenforceable. Nothing is certain, but non-competes are particularly disfavored by Virginia courts in the current legal climate. Had the former employees knocked out that element of the claim, DePuy’s principal claim against them would have depended on proof that Jones and Schools took and used confidential information or that they solicited DePuy’s clients. Absent such proof, the conspiracy claim may have failed as well. Without full knowledge of the facts, it’s impossible to gauge the relative merit of either line of defense, but recent case law makes it clear that non-competes are a weak reed for a plaintiff to lean on and often provide a fruitful line of defense.