Iron Vine Security, LLC v. Cygnacom Solutions, Inc.

• Court: District of Columbia Court of Appeals
• Decided: May 12, 2022
• Docket: 18-CV-462, 18-CV-493 & 18-CV-697
• Status: Published

Opinion

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DISTRICT OF COLUMBIA COURT OF APPEALS

Nos. 18-CV-462, 18-CV-493, & 18-CV-697

IRON VINE SECURITY, LLC AND SECOND FACTOR, INC., APPELLANTS/CROSS-APPELLEES,

V.

CYGNACOM SOLUTIONS, INC., APPELLEE/CROSS-APPELLANT.

Appeals from the Superior Court of the District of Columbia (CAB-855-16)

(Hon. Marisa J. Demeo, Motions Judge; Hon. Hiram Puig-Lugo, Trial Judge)

(Argued June 17, 2020 Decided May 12, 2022)

Terrell N. Roberts, III for appellant/cross-appellee Iron Vine Security, LLC.

Barry Coburn, with whom Kimberly Jandrain and Marc Eisenstein were on the brief, for appellant/cross-appellee Second Factor, Inc.

Robert J. Wagman, Jr., with whom David M. Hibey was on the brief, for appellee/cross-appellant Cygnacom Solutions, Inc.

Before BLACKBURNE-RIGSBY, Chief Judge, GLICKMAN, Associate Judge, and EPSTEIN, Associate Judge of the Superior Court. *

* Sitting by designation pursuant to D.C. Code § 11-707(a) (2012 Repl.). 2

GLICKMAN, Associate Judge: Following a jury trial in Superior Court on

claims for breach of contract, tortious interference with business relations, and

conspiracy to commit such tortious interference, appellee/cross-appellant Cygnacom

Solutions, Inc. (Cygnacom) obtained a judgment for compensatory and punitive

damages against appellants/cross-appellees Iron Vine Security, LLC (Iron Vine) and

Second Factor, Inc. (Second Factor).

In their appeals, Iron Vine and Second Factor raise multiple claims of error.

Both appellants contend they were entitled to judgment as a matter of law because

the evidence adduced at trial was insufficient in a number of respects to support the

judgments entered against them. Iron Vine further argues that the contractual

provisions underlying Cygnacom’s causes of action — a provision in Iron Vine’s

contract with Cygnacom prohibiting either party from soliciting the other party’s

employees, and a provision in Cygnacom’s employment contracts restricting its

employees from leaving to work for certain of its competitors — were unenforceable

as a matter of law. And Second Factor argues that lost profit damages awarded

against it on Cygnacom’s claim of tortious interference must be vacated because

they are duplicative of lost profit damages awarded against Iron Vine on

Cygnacom’s claims of breach of contract and tortious interference. 3

In its cross-appeal, Cygnacom claims the trial judge erred in dismissing its

statutory business conspiracy claim under Virginia law 1 on choice-of-law grounds.

We conclude that nearly all of Iron Vine and Second Factor’s claims of error

are waived, because Iron Vine and Second Factor either failed to raise them in the

trial court at all, or failed to argue them in a post-verdict motion for judgment as a

matter of law pursuant to Super. Ct. Civ. R. 50(b). Of the claims that are reviewable,

we find meritorious only Second Factor’s contention that Cygnacom is not entitled

to a double recovery of lost profits damages on its breach of contract claim against

Iron Vine and its tortious interference claim against Second Factor. As for the cross-

appeal, we conclude that the trial court erred in dismissing Cygnacom’s Virginia

business conspiracy claim. Accordingly, we remand the case to the trial court for

further proceedings consistent with this opinion with regard to the damage award

and Cygnacom’s Virginia business conspiracy claim, and otherwise affirm the

judgment in Cygnacom’s favor.

1 Va. Code Ann. §§ 18.2-499–500 (prohibiting combinations to injure others in their reputation, trade, business or profession, and providing for treble damages and other civil relief). 4

I. Factual Background

The controversy in this case revolves around a small but lucrative part of a

large United States Department of State contract awarded in 2011 for a period of ten

years to Science Applications International Corporation (SAIC). Known as the

“Vanguard Contract,” this contract consolidated many of the State Department’s

information technology support needs under one umbrella. In 2011, SAIC

subcontracted (also for ten years) some services within the Vanguard Contract’s

scope to Iron Vine, a Virginia corporation that provides a range of information

technology services. SAIC requested that Iron Vine subcontract a portion of that

work, involving Public Key Infrastructure (PKI) services, to Cygnacom, which is

also a Virginia corporation having its principal place of business in Virginia.

Accordingly, in September 2011, Iron Vine and Cygnacom entered into a Master

Subcontract Agreement, which we will refer to in this opinion as “the Vanguard

Subcontract.” Under the Vanguard Subcontract, Cygnacom provided PKI services,

utilizing its own employees, pursuant to a separate Statement of Work executed by

Cygnacom and Iron Vine. The Vanguard Subcontract was to be automatically

renewed each February so long as a Statement of Work remained in effect, unless

Iron Vine provided notice to Cygnacom that it did not elect to renew the subcontract. 5

Cygnacom devoted nine of its employees to its performance under the

Vanguard Subcontract. In the negotiation of the parties’ working relationship under

that subcontract, Cygnacom sought assurance that Iron Vine would not use the

opportunity to hire away its employees. Iron Vine agreed to provide such assurance

as long as it was mutual. So in Section 9.13 of the Vanguard Subcontract, its “Non-

Solicitation Provision,” Iron Vine and Cygnacom agreed that unless they “obtained

the prior written approval of the other Party,” they would not “offer employment to

or in any other way directly or indirectly induce any employee of the other Party to

terminate his or her employment with the other Party.” The provision was

“enforceable throughout the performance of the [Vanguard Subcontract]” and was

to “survive for twelve (12) months after its termination for any reason.”

Cygnacom also had contracts with its employees. These contracts included

“Non-Competition Provisions” in which the employees agreed that during their

“employment and for a period of one (1) year following [their] termination,” they

would not “compete against [Cygnacom] by accepting employment with, acting as

a consultant to . . . or otherwise providing or agreeing to provide services to or on

behalf of any person, employer or other entity that” was either “actively competing

against [Cygnacom] for a government procurement” or had “competed against

Cygnacom for a government procurement within the last six (6) months.” 6

Raymond Shanley was one of the Cygnacom employees assigned to the

Vanguard Subcontract. In 2013, Shanley formed appellant Second Factor, a Virginia

corporation, while he still was employed by Cygnacom. Shanley then left

Cygnacom’s employ in 2014 and, with Cygnacom’s consent, Second Factor entered

into a subcontract with Iron Vine whereby Shanley continued to provide PKI

services to the State Department.

Iron Vine and Cygnacom worked under their subcontract arrangement without

incident until 2015. But around that time, SAIC began to have concerns regarding

Cygnacom’s performance. Iron Vine and Second Factor maintain that SAIC’s

concerns were legitimate and ultimately led SAIC to ask Iron Vine not to renew its

subcontract with Cygnacom and to replace Cygnacom with a different subcontractor.

Cygnacom contends Iron Vine fed SAIC misinformation about its performance and

fed SAIC’s concerns in order to make it easier to oust Cygnacom from the Vanguard

project.

Regardless of the validity of SAIC’s concerns about Cygnacom, it is

undisputed that by December 2015, Iron Vine had begun to make plans to replace

Cygnacom on the Vanguard Subcontract. That month, Iron Vine’s president,

William Geimer, met with Shanley to discuss whether Second Factor could be that 7

replacement. A December 8, 2015 email memorialized an agreement between Iron

Vine and Second Factor to form a new Vanguard “team” to be managed by Shanley.

The email identified Cygnacom employees working on the Vanguard Subcontract

whom Geimer and Shanley hoped to hire to continue doing that same work for their

companies, notwithstanding their knowledge of the restrictions in the Non-

Solicitation Provision and the Non-Competition Provision. On the same day,

Geimer asked Shanley to “help map” position descriptions for the new roles “with

the person currently in the slot” at Cygnacom.

On December 15, 2015, Geimer informed Cygnacom’s president that Iron

Vine was not renewing the Vanguard Subcontract, meaning Cygnacom’s

involvement with the project would end on February 8, 2016. Iron Vine and Second

Factor posted job descriptions matching those of the Cygnacom employees on the

same day. Within three days, Iron Vine offered employment to a Cygnacom

employee, Warren Wilbur. Shanley and Second Factor also offered jobs to

Cygnacom employees before the Vanguard Subcontract terminated, and Shanley

communicated with Iron Vine regarding those offers. Together, the two companies

ultimately hired six Cygnacom employees who had worked on the Vanguard

Subcontract, with five going to Second Factor and Mr. Wilbur going to Iron Vine.

All six resigned from Cygnacom on the same day, January 25, 2016. After the 8

Vanguard Subcontract ended, Iron Vine and Second Factor assumed control of PKI

services to the State Department. They still were providing those services at the time

of trial in 2018.

II. Procedural History

In February 2016, Cygnacom sued Iron Vine, Second Factor, and Shanley

personally (collectively, “the defendants”). Its complaint, as amended the following

month, asserted multiple claims of breach of contract against Iron Vine and Shanley;

a claim for breach of the duty of good faith and fair dealing against Iron Vine alone;

and claims against all three defendants of tortious interference with Cygnacom’s

business relationships with its employees, common law civil conspiracy (to commit

tortious interference), violation of the Virginia business conspiracy statute, and

misappropriation of trade secrets. The claims centered on the defendants’ alleged

breaches of, or interference with, the Non-Solicitation Provision in the Vanguard

Subcontract and the Non-Competition Provision in Cygnacom’s contracts with its

employees.

The defendants moved to dismiss Cygnacom’s claims, with Iron Vine

arguing, inter alia, that the Non-Solicitation Provision of the Vanguard Subcontract

was unenforceable. All parties later cross-filed for summary judgment. The 9

Superior Court resolved these motions in a single order that dismissed the claim

alleging breach of the duty of good faith and fair dealing, granted summary judgment

to Shanley on two of the breach of contract claims against him, and denied the

motions in all other respects. The parties proceeded to trial on breach of contract

claims against Iron Vine, 2 and the tortious interference, common law conspiracy,

and statutory conspiracy counts against all defendants. 3

Cygnacom’s theory at trial was that after Shanley obtained the subcontract

with Iron Vine, he and Iron Vine began plotting to poach the Cygnacom employees

working on the Vanguard Subcontract in order to terminate that agreement and split

the PKI services, and the profits therefrom, between Second Factor and Iron Vine.

Cygnacom argued that by directly or indirectly (through Second Factor) offering

employment to its employees, Iron Vine violated the Non-Solicitation Provision of

the Vanguard Subcontract, and that all defendants conspired to and did tortiously

2 Cygnacom brought three separate breach of contract counts against Iron Vine, alleging three separate breaches of the Non-Solicitation Provision: (1) directly offering employment to a Cygnacom employee; (2) indirectly offering employment to a Cygnacom employee; and (3) indirectly inducing a Cygnacom employee to terminate their employment with Cygnacom. These counts, however, were not presented separately to the jury at trial. The verdict form asked only whether the jury found Iron Vine to have breached the Vanguard Subcontract and did not ask them to specify the manner in which Iron Vine breached it. 3 Cygnacom voluntarily dismissed all other claims prior to trial. 10

interfere with the employment contracts of the six Cygnacom employees who left

the company. Cygnacom claimed these actions proximately caused it to lose five

years of future profits on the Vanguard Subcontract, on the premise that, if Iron Vine

and Second Factor had not hired away its employees, Iron Vine would not have

terminated the Vanguard Subcontract and Cygnacom would have continued to earn

profits under it until 2021 (when Iron Vine’s subcontract with SAIC was slated to

end).

The defendants argued that Iron Vine’s nonrenewal of the Vanguard

Subcontract was the result of SAIC’s dissatisfaction with Cygnacom’s performance,

that this would have occurred regardless of whether Iron Vine and Second Factor

hired Cygnacom’s employees, and hence that their actions in hiring those employees

were not the proximate cause of any of Cygnacom’s lost profits. On that theory,

Iron Vine moved for judgment as a matter of law on the breach of contract claims at

the close of Cygnacom’s case and again at the close of all evidence. Making

essentially the identical argument that none of their actions proximately caused

Cygnacom’s damages and that the claimed damages were “speculative[]” and

“unreliabl[e],” all defendants moved for judgment as a matter of law on Cygnacom’s

other causes of action as well at the close of Cygnacom’s case and again before the

case was submitted to the jury. The trial judge denied all of these motions. 11

At the close of evidence, the defendants also moved to dismiss the count

charging violation of the Virginia business conspiracy statute on choice-of-law

grounds. They argued that any conspiracy Cygnacom had alleged at trial took place

primarily in the District of Columbia and necessitated the application of District

rather than Virginia law. (There is no comparable statutory cause of action for

conspiracy in the District.) The trial judge granted the motion, and the Virginia

statutory claim was not submitted to the jury.

The jury returned a verdict on March 16, 2018 in favor of Cygnacom, finding

Iron Vine liable for breach of contract, Iron Vine and Second Factor (but not

Shanley) each liable for tortious interference, and all three defendants liable for a

common law civil conspiracy to tortiously interfere with Cygnacom’s business. On

both the breach of contract and conspiracy counts, the jury awarded Cygnacom

compensatory damages totaling $1,012,011. (Based on the evidence, this figure

represented three years of lost profits under the Vanguard Subcontract.) On the

tortious interference count, the jury separately awarded compensatory damages of

$168,668.59 against Iron Vine, and the same amount against Second Factor. (The

sum of those two awards, $337,337.18, equaled Cygnacom’s claimed lost profits for

one year.) In addition to compensatory damages, the jury assessed punitive damages 12

in the amounts of $450,000 against Iron Vine and $150,000 against Second Factor.

(The jury did not award punitive damages against Shanley.)

In a post-verdict hearing held on April 12, 2018, the parties agreed that the

compensatory damages awarded to Cygnacom for conspiracy were duplicative of

those awarded for breach of contract. The judge therefore entered judgment for

Cygnacom only on its breach of contract and tortious interference claims, and only

against Iron Vine and Second Factor (as the jury had found Shanley individually

liable only on the conspiracy count).

III. Discussion

A. Claims Challenging the Sufficiency of the Evidence

Iron Vine and Second Factor ask us to direct the trial court to enter judgment

as a matter of law or award them a new trial because the evidence at trial was

insufficient to show that (1) their conduct proximately caused Cygnacom’s lost

profit damages; (2) the lost profit damages were reasonably certain; (3) Cygnacom,

Second Factor, and Iron Vine were “competitors” such that hiring Cygnacom

employees constituted tortious interference (i.e. caused the employees to violate

their contracts with Cygnacom); (4) Iron Vine and Second Factor “wrongfully”

interfered with the Cygnacom employees’ contracts; and (5) punitive damages were 13

warranted. We hold that none of those challenges is preserved for our review,

because Iron Vine and Second Factor failed to make all but the first two of them in

a Civil Rule 50(a) motion for judgment as a matter of law, and did not renew, per

Civil Rule 50(b), any sufficiency challenge post-trial.

In a civil jury trial, the court may, under Rule 50(a), grant a motion for

judgment as a matter of law against a party who “has been fully heard on an issue”

where “the court finds that a reasonable jury would not have a legally sufficient

evidentiary basis to find for the party on that issue[.]” 4 Such a motion “may be made

at any time before the case is submitted to the jury,” 5 and it must assert “specific

claims of evidentiary insufficiency.” 6 A party who omits from its motion a particular

evidentiary ground is precluded from later raising that theory in a renewed motion

for judgment as a matter of law after the verdict or in an appeal. 7

4 Super. Ct. Civ. R. 50(a)(1). 5 Id. R. 50(a)(2). 6 NCRIC, Inc. v. Columbia Hosp. for Women Med. Ctr., Inc., 957 A.2d 890, 904 (D.C. 2008); see also Super. Ct. Civ. R. 50(a)(2)(“The motion must specify the judgment sought and the law and facts that entitle the movant to the judgment.”). 7 See NCRIC, 957 A.2d at 904, 906 (“The failure to assert a particular sufficiency challenge in a Rule 50(a) motion precludes consideration of that challenged on appeal. . . . [N]ew grounds may not be asserted in the post-verdict motion”); see also Howard Univ. v. Best, 547 A.2d 144, 147 (D.C. 1988). 14

The Rule 50(a) motion primarily serves to “call the attention of the opposing

party to the alleged deficiency in the evidence at a point in the trial where that party

may cure the defect.” 8 The Rule allows the court to enter judgment as a matter of

law, but does not require it to do so. 9 “To the contrary, the [trial] courts are, if

anything, encouraged to submit the case to the jury rather than granting such

motions[,]” in order to avoid the need for an entire new trial when the appellate court

determines that the motion was granted in error. 10

Thus, if the Rule 50(a) motion is not granted, “the court is considered to have

submitted the action to the jury subject to the court’s later deciding the legal

questions raised by the motion.” 11 A subsequent post-trial renewal of that motion

pursuant to Civil Rule 50(b) is essential to allow the trial judge, “who saw and heard

8 NCRIC, 957 A.2d at 904 (quoting Best, 547 A.2d at 148). 9 See Super. Ct. R. 50(a) (“If . . . the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party . . . the court may . . . grant a motion for judgment as a matter of law[.]” (emphasis added)). 10 Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 405–06 (2006). We construe Civil Rule 50 “in light of the meaning” of Federal Rule of Civil Procedure 50, as the two rules are “substantially identical.” Wash. Inv. Partners of Del., LLC v. Sec. House, K.S.C.C., 28 A.3d 566, 580 n.18 (D.C. 2011). 11 Super. Ct. Civ. R. 50(b). The motion for judgment as a matter of law may be renewed no later than 28 days after the entry of judgment. Id. The renewed motion may include an alternative or joint request for a new trial under Super. Ct. Civ. R. 59. Id. 15

the witnesses and who has the feel of the case which no appellate printed transcript

can impart,” to review in the first instance the sufficiency of the evidence as a matter

of law. 12 The failure of a party to make a timely post-verdict Rule 50(b) motion

renewing its claims that the evidence at trial was legally insufficient constitutes a

waiver of those claims and leaves this court “without power to direct the trial court

to enter judgment contrary to the one it had permitted to stand.” 13 We do not require

parties to reassert their claims with “technical precision” 14 or even in a written

motion; “oral motions, in which a party specifically invokes the rule, or perhaps even

colloquy with the court, fulfill the requirements of Rule 50 in some instances.” 15 But

12 Unitherm, 546 U.S. at 395 (quoting Cone v. W. Va. Pulp & Paper Co., 330 U.S. 212, 216 (1947)); see also Ortiz v. Jordan, 562 U.S. 180, 189 (2011) (stating that “[a]bsent . . . a [Rule 50(b)] motion, we have repeatedly held, an appellate court is powerless to review the sufficiency of evidence after trial”) (emphasis added and internal quotation marks omitted). 13 Wash. Inv. Partners, 28 A.3d at 580 & n.18 (quoting Unitherm, 546 U.S. at 400-01) (alterations omitted; emphasis added); see also Vuitch v. Furr, 482 A.2d 811, 813 n.2 (D.C. 1984). Nor, as the Supreme Court held in Unitherm, 546 U.S. at 402, may the appellate court grant a new trial in the absence of a post-trial request for one. Appellants argue that an exception to the waiver occasioned by the failure to renew a Rule 50(a) motion after trial may be made in cases of plain error. This was the position of the dissent in Unitherm, see id. at 407–08, but the Court rejected it, and we must do likewise. 14 Best, 547 A.2d at 148. 15 Belk, Inc. v. Meyer Corp., 679 F.3d 146, 156 (4th Cir. 2012). 16

at a minimum, there must be “substantial compliance” with Rule 50. 16 The party

must, in substance, “specify the judgment sought and the law and facts that entitle

the movant to the judgment.” 17

Of the sufficiency challenges Iron Vine and Second Factor present on appeal,

only those addressing the proximate causation and the certainty of Cygnacom’s

claimed damages (lost profits) were raised in a Rule 50(a) motion. The challenges

not included in Iron Vine’s and Second Factor’s Rule 50(a) motions are

unreviewable for that reason. 18 But even the challenges raised by Rule 50(a) motion

during trial are not reviewable unless Iron Vine and Second Factor renewed them

after the jury’s verdict in compliance with Rule 50(b), and Cygnacom argues they

did not do so. Iron Vine and Second Factor respond that though they did not

explicitly invoke Rule 50 in any written post-trial motion or at the post-verdict

hearing, it was clear at the post-verdict hearing that they were seeking to renew all

of the sufficiency arguments they had made during the trial, but the judge refused to

16 Martinez Moll v. Levitt & Sons of P.R., Inc., 583 F.2d 565, 569 (1st Cir. 1978). 17 Super. Ct. Civ. R. 50(a)(2). 18 See NCRIC, 957 A.2d at 905. 17

entertain any further motions and thereby dissuaded them from filing a Rule 50(b)

motion.

We are not persuaded by this excuse for not filing a Rule 50(b) motion for two

reasons. First, the record of the post-verdict hearing does not support it; Iron Vine

and Second Factor did not convey an intention to renew any of their prior sufficiency

arguments at that hearing. Rather, they raised new issues relating to the jury’s

awards of damages and a possible double recovery for Cygnacom. Specifically, Iron

Vine and Second Factor objected that the damages awarded on the civil conspiracy

count could not exceed the damages awarded on the tortious interference count, and

that the tortious interference award overlapped with the breach of contract award.

The trial judge took a dim view of these claims, perceiving them as an attempt to re-

litigate a verdict form to which the parties had agreed, and stated:

[F]rankly it seems to me that both sides are trying to get a second bite at the apple[. 19] . . . The case concluded, the jury rendered a verdict. We’re not going back there again[,] . . . regarding the jury verdict form that . . . nobody had a problem with. . . . This is a matter for the Court of Appeals to resolve. There’s a verdict, appeal it.

19 The reference to “both sides” appears to reflect the fact that, earlier in the hearing, Cygnacom had asked the judge to reconsider the dismissal of the Virginia business conspiracy count. The judge denied that request. 18

Iron Vine and Second Factor then continued to urge the need to address the double

recovery issue and requested that they be permitted to brief it. The court denied their

request.

In the course of the post-verdict hearing, Iron Vine and Second Factor did not

mention or allude to any of the sufficiency issues they had raised in their Rule 50(a)

motions. They “failed to even summarily state that [they were] renewing the

preverdict motion for judgment as a matter of law.” 20 We therefore cannot agree

that they substantially complied with Rule 50(b). 21

Second, the trial judge’s rejection at the post-verdict hearing of the parties’

arguments and request to brief them did not relieve trial counsel of the responsibility

to preserve their clients’ sufficiency claims. There is no “futility” exception in Rule

50. 22 Even if the judge had made it very clear he would deny any Rule 50(b) motion

20 Belk, 679 F.3d at 159. 21 See id. (refusing to consider appellant’s sufficiency challenges where counsel’s post-verdict colloquy with the trial judge focused on different issues). 22 See, e.g., Image Tech. Servs. v. Eastman Kodak Co., 125 F.3d 1195, 1212 (9th Cir. 1997) (rejecting argument that “a party need not move for judgment as a matter of law when such a motion would be futile”); Williams v. King, 460 P.3d 303, 309 (Ariz. Ct. App. 2020) (“Defendants assert that their mid-trial Rule 50(a) motion was sufficient, essentially arguing that a post-verdict motion for new trial was futile. But a mid-trial motion under Rule 50(a) will not preserve our jurisdiction unless 19

made to him (which he did not), we agree with the Fourth Circuit that “Rule 50(b)

inherently accommodates such potential deterrents to filing, providing counsel with

a period of time in which, detached from the pressures of trial, to reflect and to

carefully consider whether to file a motion for judgment as a matter of law without

obtaining the judge’s permission to file.” 23

B. Enforceability of the Non-Solicitation and Non-Competition Provisions

Iron Vine contends that the breach of contract and tortious interference

verdicts cannot stand because the contractual provisions relevant to those claims —

the Non-Solicitation Provision between Iron Vine and Cygnacom (which the jury

found Iron Vine to have breached) and the Non-Competition Provision in the

Cygnacom employees’ contracts (with which the jury found Iron Vine and Second

followed by a post-verdict Rule 50(b) motion. And Defendants offer no authority for a futility exception.”) (internal citations and quotation marks omitted)). 23 Belk, 679 F.3d at 159 (rejecting argument that failure to submit a Rule 50(b) motion should be excused where judge “did not want to hear any additional argument on the sufficiency of the evidence”). 20

Factor to have interfered) — are unenforceable under Virginia law. 24 These are

questions of law, as to which our review is de novo. 25

1. Non-Solicitation Provision

As Iron Vine challenged the enforceability of the Non-Solicitation Provision

in its motions to dismiss and for summary judgment, it has preserved the issue for

appeal. 26 The Non-Solicitation Provision is a restraint on trade, enforceable under

Virginia law only if the party seeking its enforcement, Cygnacom, can show that it

24 Virginia law applies to the interpretation of both agreements, per their plain language. 25 See, e.g., Young v. District of Columbia Dep't of Emp’t Servs., 241 A.3d 826, 829 (D.C. 2020). 26 See Taylor v. Wash. Hosp. Ctr., 407 A.2d 585, 590–91 (D.C. 1979) (litigants “disappointed by rulings of the court which are adverse to [their] case” are “free to and should proceed to trial as limited by the court’s . . . rulings, and if not successful at trial challenge those rulings on appeal”). It does not matter that Iron Vine did not raise this issue in a Rule 50 motion. The requirements of Rule 50 apply to challenges to the sufficiency of the evidence; the Rule “does not govern pure questions of law” such as those of contract interpretation and enforceability. Hines v. City of Columbus, 676 Fed. App’x 546, 550 (6th Cir. 2017); Belk, 679 F.3d at 161 (“The rule is not concerned with ‘pure’ questions of law that are detached from the evidence, not within the domain of the jury, and only ever properly ruled upon by the judge.”); Landes Const. Co. v. Royal Bank of Can., 833 F.2d 1365, 1370 (9th Cir. 1987) (“As long as a party properly raises an issue of law” in the trial court “it need not include the issue in a motion for a directed verdict in order to preserve the question on appeal.”). 21

is “[1] narrowly drawn to protect the employer’s legitimate business interest, [2] not

unduly burdensome on the employee’s ability to earn a living, and [3] not against

public policy.” 27 In evaluating these factors, the Virginia Supreme Court considers

the “function, scope, and duration of the restriction,” and assesses the factors

“together rather than as distinct inquiries.” 28 The restriction “must be evaluated on

its own merits, balancing the provisions of the contract with the circumstances of the

businesses and employees involved.” 29

Cygnacom contends that the Non-Solicitation Provision is narrowly drawn to

protect its “ability to maintain professional personnel in its employ[.]” 30 The

Virginia Supreme Court has recognized the validity of this interest, holding that

when one employer provides services to another on a contractual basis in the form

of providing staff, it risks becoming an “involuntary and unpaid employment

agency” for the other party if it is not able to, for a limited duration, restrain that

27 Preferred Sys. Solutions, Inc. v. GP Consulting, LLC, 732 S.E.2d 676, 681 (Va. 2012). 28 Id. 29 Omniplex World Servs. Corp. v. U.S. Investigations Servs., Inc., 618 S.E.2d 340, 342 (Va. 2005). 30 Therapy Servs., Inc. v. Crystal City Nursing Ctr., Inc., 389 S.E.2d 710, 711–12 (Va. 1990). 22

party from hiring its employees. 31 Cygnacom asked for the Non-Solicitation

Provision in order to avoid exactly the risk that the Virginia Supreme Court

identified and that the jury found materialized in this case — after entering into a

subcontractor relationship with Iron Vine, in which Iron Vine was in a position to

learn the value and skills of Cygnacom’s employees, Iron Vine undertook (in

association with Second Factor) to hire away those employees. In addition, the Non-

Solicitation Provision was limited to the length of the parties’ relationship, plus one

year after its termination. Virginia courts have sanctioned identical duration periods

in other non-solicitation agreements as “narrowly drawn.” 32

Whether the Non-Solicitation Provision was sufficiently limited in scope is a

closer question. Iron Vine argues that while the intent of the provision was to

prevent the parties from poaching each other’s employees, its language swept more

broadly, extending to scenarios that did not protect Cygnacom’s asserted interests.

To support that contention, Iron Vine focuses on the clause barring each party from

“directly or indirectly induc[ing] any employee of the other Party to terminate his or

31 Id. at 712 (upholding a non-solicitation agreement between a nursing center and a provider of rehabilitative therapists where the agreement prohibited the nursing center from hiring the provider-employed therapists contracted to work at the center). 32 Preferred, 732 S.E.2d at 681. 23

her employment with the other Party.” It argues that this clause is overbroad, citing

the Virginia Circuit Court decision in ManTech Int’l Corp. v. Analex Corp. 33 In that

case, ManTech’s contract with its employees similarly provided that “[d]uring the

period of employment and for a period of six months thereafter, the Employee shall

not directly or indirectly solicit or induce any employees of ManTech to leave the

employ of ManTech.” 34 The court held this provision “unenforceable per se”

because it was not limited to situations “where one employee convinces another

employee to take a job with a competitor,” but also appeared to cover “other

imaginable scenarios, includ[ing], but [] not limited to, those circumstances in which

one employee convinces another to retire early, join the military, or move to another

state.” 35

While we recognize that the language at issue is susceptible to such a

criticism, at least in the abstract, we are not persuaded that this alone makes the

provision before us per se unenforceable under Virginia law. As noted above, and

as the ManTech court reiterated, “[e]ach non-compete agreement must be evaluated

on its own merits, balancing the provisions of the contract with the circumstances of

33 75 Va. Cir. 354 (2008). 34 Id. 35 Id. at 356. 24

the businesses and employees involved.” 36 Circumstances present in this case that

differ from those in ManTech satisfy us that the Non-Solicitation Provision is

sufficiently limited in scope and its language was reasonably necessary to

accomplish the parties’ valid interests.

First, the agreement containing the Non-Solicitation Provision is not one

between an employer and an employee, as was the case in ManTech, such that we

might be concerned that an employee could innocently give a coworker advice to

leave the company (e.g., retire early, join the military, relocate to another state) and

run afoul of the provision. We deal instead with two corporations “who stood upon

equal footing” and well understood that the agreement was meant to preserve each

party’s employment of its Vanguard Subcontract staff without fear of interference

by the other party. 37 And because the provision only binds the companies, it does

not constrain the behavior of their respective employees or those employees’ “ability

to earn a living.” 38

36 Id. at 355; see Omniplex, 618 S.E.2d at 342. 37 See Foti v. Cook, 263 S.E.2d 430, 433 (Va. 1980) (holding that the “respective positions” of the parties are relevant to whether a non-competition or non-solicitation agreement is “unreasonably harsh and oppressive”). 38 See Preferred, 732 S.E.2d at 681. 25

Second, the Non-Solicitation Provision was made mutual at Iron Vine’s

request, signaling that Iron Vine itself thought the provision useful and appropriate

for its limited duration. 39

Third, the Non-Solicitation Provision in this case allowed for one party to

“obtain[] prior written approval” of the other if it wished to “offer employment to or

. . . directly or indirectly induce any employee of the other Party” to leave his or her

employer. Iron Vine’s ability to seek permission from Cygnacom to hire its

employees or inform them about other opportunities significantly narrows, in our

view, the reach of the provision, and shows that it was not concerned with (and

would not be construed as applying to) innocent and transparent suggestions that an

employee seek other opportunities.

Accordingly, we conclude that the trial court did not err in concluding that the

Non-Solicitation Provision was enforceable under Virginia law, and the jury’s

breach of contract verdict stands. 40

39 The non-solicitation agreement in ManTech, on the other hand, applied only to one party, the employee. 40 Our resolution of this claim in Cygnacom’s favor makes it unnecessary to address Iron Vine’s argument that if we were to vacate the breach of contract award, we should remand the case for a “redetermination” of the judge’s award of attorneys’ fees to Cygnacom. The Vanguard Subcontract provided for “reasonable attorneys’ 26

2. Non-Competition Provision

Iron Vine’s challenge to the Non-Competition Provision in Cygnacom’s

employment agreements comes to us in a significantly disadvantaged posture for

purposes of appellate review. That is because Iron Vine did not argue to the trial

court that the Non-Competition Provision was unenforceable as a matter of law. “It

is fundamental that arguments not raised in the trial court are not usually considered

on appeal.” 41 We will “deviate[] from this principle only in exceptional situations

and when necessary to prevent a clear miscarriage of justice apparent from the

record.” 42 In other words, the strictures of review only for plain error apply — the

burden is on Iron Vine to show not only (1) that the court erred, but also (2) that the

error was obvious or plain, (3) that the error affected Iron Vine’s substantial rights,

and (4) that the error “resulted in a miscarriage of justice or seriously affected the

fairness and integrity of the trial. 43

fees, costs, and expenses” to a party who prevailed in an action to enforce the terms of the contract. 41 Thornton v. Norwest Bank of Minn., 860 A.2d 838, 842 (D.C. 2004). 42 Id. (quoting Williams v. Gerstenfeld, 514 A.2d 1172, 1177 (D.C. 1986)). 43 See, e.g., Jordan v. Jordan, 14 A.3d 1136, 1153 (D.C. 2011). 27

Iron Vine cannot prevail under this demanding standard. As we explained in

our discussion of the Non-Solicitation Provision, a contractual non-competition

provision in an employment contract is enforceable under Virginia law if it is

narrowly drawn to protect the employer’s legitimate business interest, does not

unduly burden the employee’s ability to earn a living, and does not contravene public

policy. Virginia courts determine whether a particular contractual provision satisfies

these requirements by applying a three-factor balancing test that is dependent on

context and the circumstances of the parties who entered into the agreement. 44 On

the record before us, we cannot say that the Non-Competition Provision at issue

before us obviously fails to meet Virginia’s requirements; the provision is limited in

duration and bars Cygnacom employees from taking employment with only a narrow

category of businesses, namely, only those “actively competing against [Cygnacom]

for a government procurement” or that had “competed against Cygnacom for a

government procurement within the last six (6) months.” The restrictions appear

narrowly designed to protect Cygnacom’s legitimate business interest without

unduly burdening its employees’ ability to earn a living or offending public policy.

Moreover, it is not obvious that application of Virginia’s nuanced and fact-based

balancing test would undermine that conclusion. Where neither Iron Vine nor any

44 Assurance Data, Inc. v. Malyevac, 747 S.E.2d 804, 808 (Va. 2013); Preferred, 732 S.E.2d at 681; Omniplex, 618 S.E.2d at 342. 28

other party made such a claim or even raised the issue, the trial judge cannot be

faulted for failing to determine on behalf of Iron Vine that the Non-Competition

Provision violated Virginia law. The judge did not plainly err “by failing, sua

sponte, to intercede in the case with theories or contentions not presented by the

parties.” 45

C. Double Recovery Issues

The jury found Iron Vine liable to Cygnacom for breach of contract and all

the defendants liable for conspiracy to commit tortious interference. Its

compensatory damage award on each of those counts was $1,012,011. On the

tortious interference count, however, the jury awarded Cygnacom compensatory

damages of $168,668.59 against Iron Vine and $168,668.59 against Second Factor.

In the post-verdict hearing, Iron Vine and Second Factor argued that (1) the

conspiracy claim was derivative of the tortious interference claim, and the

conspiracy (compensatory) damages award therefore could not exceed the tortious

interference damages award; and (2) the compensatory damages awarded for tortious

interference were duplicative because they compensated Cygnacom for the same

harm as the damages awarded on the other claims, namely lost profits on the

45 Baxter v. United States, 640 A.2d 714, 717–18 (D.C. 1994). 29

Vanguard Subcontract. Cygnacom ultimately agreed that the conspiracy award

compensated for the same lost profit damages as the award for breach of contract,

but argued that the tortious interference award compensated for a different and

additional harm — the loss of business opportunities that Cygnacom’s employees

would have worked on had they not quit and found employment with Iron Vine and

Second Factor. The trial judge agreed with Cygnacom’s argument.

On appeal, Second Factor repeats the argument that the tortious interference

award of compensatory damages is duplicative of the breach of contract award, and

hence should not be added to it, because Cygnacom presented no evidence

supporting a damages theory of lost business opportunities at trial; it had one theory,

lost profits on the Vanguard work, for which the breach of contract award fully

compensates it. It is well-settled and undisputed that while a plaintiff may “pursue

numerous possible avenues of relief simultaneously and may obtain several

judgments against different persons for the same obligation or liability,” the plaintiff

may be compensated for a single harm only once. 46

46 Saunders v. Hudgens, 184 A.3d 345, 350 (D.C. 2018) (quoting 47 AM. JUR. 2D Judgments § 769); see also Dyer v. William S. Bergman & Assocs., Inc., 657 A.2d 1132, 1141 (D.C. 1995) (“[I]n the absence of punitive damages, a plaintiff can recover no more than the loss actually suffered.” (quoting Kassman v. American Univ., 546 F.2d 1029, 1033 (D.C. Cir. 1976)); RESTATEMENT (SECOND) OF JUDGMENTS § 50, cmt. d (1982). 30

Accordingly, Cygnacom is entitled to recover compensatory damages above

the amount of its lost profit damages only if the additional sum represents

compensation for a harm distinct from its lost profits. Although Cygnacom

maintains that its tortious interference damages award was not for lost profits on the

Vanguard Subcontract, but for “lost business opportunities” unrelated to the

Vanguard work, we are not persuaded. The record is quite clear that Cygnacom

pursued a single theory of damages for all of its claims — the loss of five years’ of

future profits on the Vanguard Subcontract.

Cygnacom presented one employee, Ella Schwartz, to testify to the

company’s damages at trial. Schwartz testified that the company had earned

$337,337.18 from work under the Vanguard Subcontract in 2015, the last year in

which the subcontract was in effect. Had the company earned identical profits for

the next five years, until 2021, it would have made another $1,686,000 on the

Vanguard Subcontract. Schwartz briefly mentioned that Cygnacom spent “a great

deal of money” to replace its lost employees, but those costs were not introduced

into evidence, and Cygnacom’s CEO later expressly denied that the company was

seeking to recover those expenses as damages. And while Schwartz testified that

when the employees resigned, Cygnacom was “actively bidding” on new work for 31

them, no evidence of what that work entailed or how much it was worth was

introduced.

Thereafter, in closing argument, Cygnacom told the jury it was “only seeking

damages that were directly earned from Iron Vine performing the remainder of the

contract” without Cygnacom, and that $1,686,000 over five years was a

“conservative” but “reasonable” estimate of those damages. Cygnacom disclaimed

any request to be compensated for the cost of replacing employees or “losing

potential contract revenues on other contracts.” Its counsel then assured the jury

that,

if you think we’re entitled to the same damage for different conduct . . . please put the numbers down on both places on the jury verdict form. We won’t get double counted, we’ll clean that up on the back.

Where the jurors heard this single theory of damages, we can only conclude

that the $337,337.18 they assessed against Iron Vine and Second Factor together for

the tortious interference claim represents a finding that the interference caused one

year’s worth of lost profits to Cygnacom under the Vanguard Subcontract. But the

jury’s breach of contract award against Iron Vine for breach of contract, based on

identical conduct, compensates Cygnacom for the equivalent of three years of lost

Vanguard profits, $1,012,001. It is impossible to tell from the awards themselves 32

whether the year of lost profits awarded for the tortious interference claim represents

a finding by the jury that together, Iron Vine’s and Second Factor’s interference and

Iron Vine’s separate breach caused Cygnacom to lose a total of four years of profits

under the subcontract, as opposed to a finding that those actions caused only three

years of lost profits, only one of which was attributable to the actual loss of the

employees. Cygnacom compounded this problem, in our view, by explicitly telling

the jury to assess damages in multiple places on the verdict form and assuring them

that the parties would “clean [] up” any double recovery later. 47

However, Cygnacom’s concession that the jury’s civil conspiracy award

compensates for the same harm as the breach of contract award (the two awards were

in the same amount) confirms that the tortious interference award is also based on

the same harm. Civil conspiracy is not an independent tort; rather it is “a means for

establishing vicarious liability for [an] underlying tort.” 48 In this case, tortious

47 Cf. Woodward & Lothrop v. Hillary, 598 A.2d 1142, 1148 (D.C. 1991) (though compensatory damages award for § 1983 claim was possibly duplicative of damages assessed against the defendants for other torts, judge’s clear instructions that the jury was to only award damages which, in the aggregate, compensated the plaintiff for injuries actually suffered from each tort, mitigated the risk of double recovery such that the jury’s award could stand). 48 Griva v. Davison, 637 A.2d 830, 848 (D.C. 1994). In order to state a claim for civil conspiracy, a plaintiff must show “an injury caused by an unlawful overt 33

interference with the Cygnacom employees’ contracts was the underlying tort that

Cygnacom proved up to the jury in order to state its civil conspiracy claim, yet on

appeal, Cygnacom contends that the two claims are unrelated and that the conspiracy

to commit tortious interference caused it to lose profits on the Vanguard Subcontract

while the tortious interference itself caused a different harm. This is not logically

sound.

Accordingly, we direct the trial court on remand to revise its judgment to

ensure that Cygnacom does not receive compensatory damages in excess of the

amount, $1,012,001, awarded for its lost profit damages on the breach of contract

and the conspiracy counts.49

D. The Virginia Business Conspiracy Claim

We come now to Cygnacom’s cross-appeal.

act” (i.e. tortious conduct), along with “an agreement between two or more persons” to participate in that act, in furtherance of a common scheme or plan. Id. 49 We leave it to the trial court to engineer this, but we note that it may involve setting aside the award against Second Factor on the tortious interference count and entering judgment declaring Iron Vine and Second Factor liable, jointly and severally, for the amount awarded on the conspiracy count, since only Iron Vine was found liable on the breach of contract count. 34

1. Background — The Trial Court’s Ruling

Claiming that at least some of Shanley’s, Second Factor’s, and Iron Vine’s

actions in furtherance of a conspiracy to hire its employees took place in Virginia,

Cygnacom’s complaint alleged a violation of Virginia’s business conspiracy statute,

Va. Code §§ 18.2-499–18.2-500. To recover under this statute, a plaintiff must

establish “(1) a combination of two or more persons for the purpose of willfully and

maliciously injuring plaintiff in his business, and (2) resulting damage to plaintiff.” 50

On the final day of trial, after both parties had rested, the defendants orally

moved to dismiss the Virginia business conspiracy count, arguing, for the first time,

that any conspiracy Cygnacom could prove had taken place in the District, not in

Virginia, and thus the Virginia statute could not apply to Cygnacom’s conspiracy

claims. The defendants provided the court with two cases, both from the United

States District Court for the District of Columbia, in which the trial court dismissed

Virginia business conspiracy claims after concluding that choice-of-law

considerations weighed in favor of applying District, rather than Virginia, law. 51

50 Dunlap v. Cottman Transmission Sys., LLC, 754 S.E.2d 313, 317 (Va. 2014) (quoting Allen Realty Corp. v. Holbert, 318 S.E.2d 592, 596 (Va. 1984)). 51 See Guttenberg v. Emery, 41 F. Supp. 3d 61 (D.D.C. 2014); B&H Nat’l Place, Inc. v. Beresford, 850 F. Supp. 2d 251 (D.D.C. 2012). 35

Cygnacom objected both on the merits and to the timing of the motion. The

judge agreed that the motion was “problematic in terms of the timing,” but after

hearing the parties’ arguments on the merits and taking a brief recess to consider the

cases provided by the defendants, the judge determined that he could and would

resolve the issue. The judge stated that resolution of the choice-of-law dispute

required consideration of four factors: “Number 1: The place where the injury

occurred; Number 2: The place where the conduct causing the injury occurred;

Number 3: The domicile, residence, nationality, place of incorporation, and place of

the business of the parties; and Number 4: The place where the relationship, if any,

between the parties is centered.” The judge concluded that these factors favored a

finding that the District had the greater interest in having its law apply to “protect[]

entities doing business in the District,” because Cygnacom’s injury occurred in the

District; the relationship of the parties was centered in the District; and conduct

underlying the conspiracy occurred in both states — though, as the judge noted, all

businesses involved were incorporated in Virginia. The judge therefore dismissed

the Virginia business conspiracy count.

On appeal, Cygnacom challenges that dismissal in two respects. First, it

argues that Iron Vine and Second Factor waived any choice-of-law issue by failing

to raise it at least in their pretrial statements (if not also in their answers to the 36

complaint) and that the judge abused his discretion by essentially modifying the

pretrial order pursuant to Civil Rule 16(g)(2) and considering a new legal issue after

all the evidence was in. Second, Cygnacom argues that the judge’s choice-of-law

analysis was in error.

2. Civil Rule 16

Civil Rule 16 includes several provisions that are intended to encourage

parties to raise and resolve dispositive issues before trial and to “remove cases from

the realm of surprise.” 52 Notably, the Rule includes deadlines for dispositive

motions, motions in limine, and the joint pretrial statement, which frames the issues

for trial. 53 By the time the trial court issues the pretrial order, in which “insofar as

possible, the court . . . resolves all pending disputes,” 54 the parties will have had

ample opportunity to raise issues of law that are for the judge, not the jury, to resolve,

52 Taylor v. Wash. Hosp. Ctr., 407 A.2d 585, 592 (D.C. 1979); see also Daniels v. Beeks, 532 A.2d 125, 128 (D.C. 1987). 53 See Super. Ct. Civ. R. 16(b)(5)(F) (scheduling order will “specify a date by which dispositive motions will be decided”), R. 16(d) (“any motion in limine, motion to bifurcate, or other motion respecting the conduct of the trial” must be filed “three weeks prior to the pretrial conference”), R. 16(e)(1) (joint pretrial statement is due “one week prior to the pretrial conference”). 54 Id. R.16(g)(1). 37

including choice-of-law issues. Because these pretrial procedures enable the parties

to identify and narrow the issues for trial, the pretrial order, once entered, “controls

the course of the action unless the court modifies it.” 55

Nonetheless, Rule 16 recognizes that the “pretrial order may be modified at

the discretion of the court for good cause.” 56 In determining whether a trial court

abused its discretion in allowing a party to modify a pretrial statement or raise a new

issue after the pretrial order is set, three factors are particularly relevant: first, and

most importantly, “whether the opposing party was surprised or would have been

prejudiced by the requested change;” second, whether the issue involves evidence

“newly discovered” after the pretrial conference; and third, the timing of the

request. 57 We treat “less favorably” those motions made “on the day of trial or on

the eve of trial.” 58

55 Id.; see also Taylor, 407 A.2d at 592 (parties “generally are bound by the pretrial order”). 56 Super. Ct. Civ. R. 16(g)(2). 57 Daniels, 532 A.2d at 128. 58 Id. at 129. 38

While the third factor obviously weighed against consideration of the

belatedly raised motion to dismiss, we think the remaining factors show the judge’s

decision to consider the motion on its merits was supported by substantial

reasoning. 59 Cygnacom’s only claim of prejudice is that it did not have an

opportunity to read the authorities cited to the judge in support of dismissing the

claim or to “research other authorities to formulate its own arguments.” The record,

however, shows that the judge recessed to read the cases (giving Cygnacom time to

do so as well), that he heard a thorough argument on the issue, and that Cygnacom’s

counsel presented a clear and cogent defense to the motion on its merits. The

defendants also plausibly claimed that the facts underlying the motion only became

clear as the evidence at trial came in and showed that any conspiracy alleged by

Cygnacom took place in and was focused on work within the District. The accuracy

of this claim of “newly discovered” evidence is so closely linked to the choice-of-

law issue itself (in that it involved a factual assessment based on the evidence of the

place where the injury occurred, the parties’ principal places of business, etc.), that

the more practical course for the judge, where no apparent prejudice to Cygnacom

existed, was to consider the motion to dismiss on its merits. We will continue to do

the same on appeal.

59 See Briggs v. Israel Baptist Church, 933 A.2d 301, 303–04 (D.C. 2007) (citing Johnson v. United States, 398 A.2d 354, 364–65 (D.C.1979)). 39

3. Choice of Law

We review choice-of-law questions de novo; in a tort case, applying a

“governmental interests” analysis. 60 We will “appl[y] another state’s law when []

its interest in the litigation is substantial, and [] application of District of Columbia

law would frustrate the clearly articulated public policy of that state.” 61 In order to

“facilitate” this analysis, we consider four factors enumerated in the RESTATEMENT

(SECOND) OF CONFLICT OF LAWS § 145: “a) the place where the injury occurred; b)

the place where the conduct causing the injury occurred; c) the domicile, residence,

nationality, place of incorporation and place of business of the parties; and d) the

place where the relationship is centered.” 62 If, after a “qualitative weighing” of these

factors, 63 we find that “the policy of one jurisdiction would be advanced by the

application of its law, and the policy of the other jurisdiction would not be advanced

60 District of Columbia v. Coleman, 667 A.2d 811, 816 (D.C. 1995). 61 Herbert v. District of Columbia, 808 A.2d 776, 779 (D.C. 2002) (internal quotation marks omitted). 62 Id.; see also Drs. Groover, Christie & Merritt, P.C. v. Burke, 917 A.2d 1110, 1117 (D.C. 2007) (“The Restatement factors help to identify the jurisdiction with the ‘most significant relationship to the dispute,’ that presumptively being the jurisdiction whose policy would be more advanced by application of its law.” (quoting Hercules & Co. v. Shama Rest. Corp., 566 A.2d 31, 41 & n.18 (D.C. 1989)). 63 Jones v. Clinch, 73 A.3d 80, 83 (D.C. 2013) (internal quotation marks omitted). 40

by the application of its law, a false conflict appears and the law of the interested

jurisdiction prevails.” 64 Consideration of the Restatement factors in this case

persuades us that Virginia, not the District, is the jurisdiction with a substantial

interest in Cygnacom’s conspiracy claim. 65

The first and third Restatement factors weigh heavily in our analysis. All

three corporations involved in this appeal are incorporated in Virginia, and

Cygnacom’s headquarters and principal place of business are in Virginia. The

Restatement advises that the plaintiff’s principal place of business is the “most

important contact for determining the state of the applicable law” where a tort causes

primarily a “financial injury.” 66 That is the situation here, because Cygnacom’s

64 Coleman, 667 A.2d at 816 (alterations and internal quotation marks omitted). 65 This case is thus factually distinguishable from the cases on which Iron Vine and Second Factor relied at trial, in which an analysis of the Restatement factors showed that the District had the greater interest in the controversies at issue. See Guttenberg, 41 F. Supp. 3d at 71–72 (District law applied and precluded the application of the Virginia business conspiracy statute where the case involved a “D.C. injury resulting from conduct mostly occurring in Virginia; plaintiffs [who] reside and do business in D.C.; defendants [who] reside in Virginia and do business in D.C. . . . ; and [a] relationship between the parties . . . centered in D.C.”); B&H Nat’l Place, 850 F. Supp. 2d at 262 n.19 (Va. Code § 18.2-499 did not apply to case where “the essence of the alleged harm,” the opening of a restaurant franchise in violation of a contract, occurred in the District). 66 Id., cmt. f. 41

injury, lost profits, is pecuniary. Pecuniary harm to a plaintiff “will normally be felt

most severely at the plaintiff’s headquarters or principal place of business.” 67

Second, although the conduct causing Cygnacom’s injury occurred both in the

District and in Virginia, much that was consequential took place in Virginia.

Shanley testified at trial that Second Factor made its hiring decisions from Shanley’s

home address in Virginia, and that the December 2015 agreement between Iron Vine

and Second Factor to take over the PKI services then being performed by Cygnacom

was signed in Virginia and is governed by Virginia law. That much of the unlawful

conduct took place in Virginia is significant in our analysis. The purpose of Va.

Code §§ 18.2-499–18.2-500 is to protect the financial interests of persons and

corporations doing business in the state by “provid[ing] a remedy for wrongful

conduct directed towards one’s business[.]” 68 Section 18.2-500 “explicitly allows

an award of treble damages on proof of the cause of action provided under [Va.]

Code § 18.2-499,” 69 reflecting a Virginia policy to heavily punish conspiracies to

67 RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145, cmt. f (1971); see also Guttenberg, 41 F. Supp. 3d at 71 (effects of the defendants’ disparagement of the plaintiffs’ business were felt in the District, the business’s principal location). 68 Picture Lake Campground, Inc. v. Holiday Inns, Inc., 497 F. Supp. 858, 863–64 (E.D. Va. 1980). 69 Advanced Marine Enters., Inc. v. PRC Inc., 501 S.E.2d 148, 158 (Va. 1998). 42

injure businesses, a policy which the District, a jurisdiction without a statutory cause

of action for conspiracy, does not have. Where “the primary purpose of the tort rule

involved is to deter or punish misconduct . . . the state where the conduct took place

may be the state of dominant interest and thus that of most significant relationship.” 70

Third, the trial court’s conclusion that the “relationship between the parties . .

. is centered in the District” reflected the fact that the State Department work under

the Vanguard Subcontract was being performed, at the time of the conspiracy,

primarily in the District. But Cygnacom points out that there was evidence the future

situs of that work was expected to change; Shanley acknowledged at trial that the

PKI services performed by the Cygnacom employees were slated to move to

Virginia in 2016. The parties’ relationship, therefore, was not statically centered in

one jurisdiction, and does not demonstrate that the District had the more significant

interest in this dispute. Rather, the evidence indicates that the bulk of the lost profits

that Cygnacom was awarded were attributable to work that was to be performed in

Virginia, from which Cygnacom was excluded by the alleged business conspiracy.

In sum, the application of District law here would preclude a Virginia

statutory action designed to protect the interests of Virginia businesses and punish

70 RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145, cmt. c (1971). 43

persons who unlawfully conspire to injure a business or trade, in a case involving

three Virginia corporations, subcontract and employment agreements governed by

Virginia law, conspiratorial activity in Virginia, and a financial injury felt entirely

in Virginia and attributable in large part to lost Virginia business. Given all those

circumstances, we conclude that Virginia law must be applied to Cygnacom’s

conspiracy claim. Thus, we reverse the dismissal of Cygnacom’s Virginia business

conspiracy claim and remand the case for such further proceedings on that count as

may be appropriate. 71

IV. Conclusion

For the foregoing reasons, we reverse the trial court’s dismissal of

Cygnacom’s Virginia business conspiracy claim and remand the case with

instructions that the trial court (1) conduct further proceedings on that claim; and (2)

revise the judgment as explained herein to avoid double recovery of compensatory

damages (while protecting Cygnacom’s right to obtain a full recovery from the

71 The parties can address on remand whether a trial on liability under the Virginia treble damages statute is required in light of the jury’s verdict on the civil conspiracy claim and its award of punitive damages, whether compensatory damages under the Virginia statutory claim are any different from those awarded by the jury under the D.C. claim, whether any fact finding is necessary with respect to trebling of compensatory damages under the Virginia statute, and whether Cygnacom is entitled to additional attorney fees under Va. Stat. Ann. § 18.2-500(A). 44

defendants of the lost profits damages that the jury awarded). In all other respects,

we affirm the judgment of the Superior Court.