Tortious interference claim advances

A staffing company’s tortious interference claim against a competitor that allegedly engaged in “sharp dealing” when it persuaded two employees to breach their former employer’s valid restrictive covenants has survived a motion to dismiss.

U.S. District Judge Robert E. Payne knocked back each of the rival recruiting firm’s arguments, saying the staffing company met all elements to sustain its claim.

The decision from the Eastern District at Richmond is Apex Systems LLC v. Beacon Hill Staffing Group LLC (VLW 021-3-544).

Background

Apex and Beacon Hill are staffing companies. Madison N. Merriam worked in Apex’s Falls Church office for 23 months before she resigned. According to the opinion, she was persuaded to leave Apex and join Beacon Hill’s Washington, D.C., office.

Samantha Scott’s hiring followed a similar pattern. She worked for Apex’s Tampa office and, as with Merriam, she was also convinced to leave Apex and join Beacon Hill.

Merriam and Scott had what Apex contends to be valid restrictive covenants preventing them from being employed to do the same kind of work for a competitor within 50 miles within the 18-month period immediately following the end of their employment with Apex.

Those contracts also contained further restrictions on the employee’s ability to recruit Apex employees for jobs at other companies.

Their contracts included forum selection clauses and an arbitration clause saying that disputes for non-injunctive relief must be pursued through arbitration rather than litigation.

The arbitration clauses, however, include an exception for a party seeking injunctive relief.

‘Predatory’ strategy

Apex claimed Beacon Hill recruited and hired Merriam and Scott “knowing that they were bound by valid and enforceable restrictive covenant agreements.” It characterized Beacon Hill’s recruiting approach as “predatory,” with the company “aggressively recruiting top performers from rival companies, and, in doing so, ignoring the valid restrictive covenants applicable to those performers.”

Apex said Beacon Hill’s hiring strategy is to “poach first, ask forgiveness later,” and alleged that Beacon Hill uses a “strategy of dilatory motions practice that hinders competitors from enforcing valid restrictive covenants.”

Arguments

Apex claimed Beacon Hill tortiously interfered with its employment contracts by persuading its employees to take jobs with Beacon Hill that breached legitimate restrictive covenants.

Beacon Hill moved to have the case dismissed for lack of personal jurisdiction and for failure to state a claim.

Merriam and Scott filed a joint motion to dismiss Apex’s claims against them, arguing the court has no jurisdiction since the dispute was governed by an arbitration clause in their Apex employment contracts.

Long-arm statute

Beacon Hill relied on subsection (A)(1) in Virginia’s long-arm statute, which gives jurisdiction over a person “as to a cause of action arising from the person’s (1) Transacting any business in the commonwealth ….”

But Payne said the contractual clause at issue restricts Merriam’s employment, the terms of which prohibit her from working for a competitor in a similar capacity within a designated geographic area.

“[I]f Merriam, after taking a position at Beacon Hill, began working with some client in northern Virginia, that work appears to be in breach of the noncompete agreement in Merriam’s Apex contract whether or not the client is a client of Apex’s and whether or not Beacon Hill had that client as a client before Merriam joined,” Payne wrote. “There is, then, little doubt that the events at issue in this case, as alleged in the Complaint and as presented by the record so far, satisfy subsection (1) of Virginia’s long-arm statute.”

Beacon Hill also ignored another applicable subsection of the long-arm statute. Payne said it was “clear that Apex’s alleged facts and the materials that subsequently emerged from jurisdictional discovery” satisfied subsection (4)’s requirements — “that the event: (i) causes tortious injury; (ii) in Virginia; (iii) by an act or omission outside Virginia; (iv) by a party that regularly does business in Virginia.”

In fact, Beacon Hill’s statutory argument only addresses one section of the long-arm statute, “failing even to show that that section does not apply, and it ignores the section that most clearly applies to this case,” Payne pointed out.

Noncompete terms

Payne said Beacon Hill’s arguments challenging the validity of every noncompete term in Merriam and Scott’s employment contracts were, “without exception, very weak, to put it charitably.”

The company’s contention that the 50-mile territorial limitation was ambiguous and overbroad was “extraordinarily strained,” according to Payne.

“Beacon Hill first argues that the provision ‘is ambiguous because it can be read to prohibit employment within 50 miles of any Apex office, which includes the employee’s home office,’” the judge wrote. “It beggars belief that Beacon Hill makes this argument.”

As for the nondisclosure term, Payne said this was “the most groundless of Beacon Hill’s objections to the Apex contract’s terms.” The judge had little patience with Beacon Hill’s “egregiously cherry-picked” quotations from the Apex contract’s definition of confidential information.

“The very same paragraph explicitly states that the restriction is limited to information that is (1) not generally known outside the company and (2) which employees learn in the course of their employment and (3) which would be beneficial to competitors,” Payne wrote. “Beacon Hill’s argument is thus, essentially, that the contractual term is invalid because it admits of an unreasonable application — which purported application is expressly denied in the very paragraph being cited.”

Improper methods

Beacon Hill’s argument that Apex “does not allege that Beacon Hill induced or caused a breach of any specific provision of either [employee’s] agreement, much less used improper means to do so” was a bit confusing, according to Payne.

“Apex points to case law establishing that use of improper methods is not an element of a tortious interference claim where, as here, the allegedly tortious acts concern clauses (the noncompete provisions) that are not terminable at will,” he said. “Even were this not the case, Beacon Hill’s claim would be hard to credit at this stage of the litigation because Apex has certainly alleged a number of ways in which Beacon Hill engaged in sharp dealing.”

Damages

Payne also knocked back Beacon Hill’s argument that Apex did not show evidence of having suffered tangible damages, saying Beacon Hill put forth “vanishingly little in the way of authority to support this demanding standard for what a plaintiff needs to show to satisfy the injury element of this cause of action at the pleading stage.”