An apartment-complex owner that failed to pay a $4,400 buyout fee to a temporary agency eventually paid $52,200 to settle the agency’s breach-of-contract and business-conspiracy claim.
The temp agency had placed an employee to manage the apartment complex. At some point, the owner hired away the employee without informing the temp agency or paying the $4,400 buyout fee included in the parties’ noncompetition agreement.
According to the agency’s attorney, the temp agency’s attempts to negotiate a settlement in the case were rebuffed until shortly before trial. Shortly before trial, however, the apartment-complex owner agreed to settle the case.
“When you have noncompete agreements, they’re there to allow you to protect your business interests,” said Arlington attorney James V. Irving. “They became at risk by violating that agreement.”
The case is Inter-Site Management Inc. v. Associated Realty Corporation and Thomas. There is no written opinion, but a Verdict & Settlement report on the case was published in the Dec. 30 issue of Virginia Lawyers Weekly.
The plaintiff places temporary employees to manage property for its clients. Placements typically include provisions allowing clients to hire away the plaintiff’s employees for a fee.
In November 1999, one of the plaintiff’s employees was placed to manage the defendant’s Fairfax apartment complex for an indefinite period. At some point after the plaintiff’s employee went to work for the defendant, the employee called the plaintiff and said that he was moving to North Carolina.
According to Irving, the defendant never called the plaintiff to ask for a replacement for the employee. And when the plaintiff contacted the defendant to see if it could replace the employee, the employee himself answered the phone.
During discovery, Irving said, the plaintiff learned that the defendant had hired away another of the plaintiff’s employees.
Initially, the plaintiff demanded $7,000 from the defendant. However, said Irving, “They stonewalled settlement entirely.”
From November 2001 to June 2002, the plaintiff pressed the defendant to negotiate a settlement. By late summer 2002, the plaintiff had incurred what Irving described as “substantial” attorneys’ fees.
Subsequently, the defendant moved to request a settlement conference.
“We resisted that because we felt it could have been resolved beforehand,” Irving said.
With trial set for Oct. 22, 2002, however, the parties tried to settle the case on Oct. 1.
Initially, said Irving, “They wanted to pay us a token amount.” However, the defendant came “way up” in October.
“I think it has to be true that they regarded the risk at trial as being extreme,” he said, noting the “powerful weapon” presented by the possibility of trebled damages under Virginia’s business conspiracy statute.
During the settlement negotiation, Irving argued that “we had an arrangement with [the defendant] that gave us an expectation of a certain profit.”
The defendant’s position “was that we really had no expectation of how long this guy was going to work there,” he said.
The defendant’s lawyer, Bart Valid of Washington, D.C., could not be reached for comment.
In Irving’s view, the disparity between the $4,400 buyout provision and the $52,200 settlement by the apartment-complex owner was unusually high.
“The expectation would be to take something less and get the attorneys’ fees settled,” he said.
“It’s very unusual that a property owner would … decide to take a combative approach and be unwilling to assume its obligation,” added Irving.
A judge awarded a default judgment of $60,000, trebled by statute, against the employee. However, Irving said, “He’s gone. We don’t know where he is.”