L-3 Communs. Corp. v. Serco, Inc., 926 F.3d 85 (4th Cir. 2019)
In 2004, the United States Air Force Space Command (“Air Force”) awarded Serco, Inc. (“Serco”) an indefinite delivery indefinite quantity contract (the “Prime Contract”). The Prime Contract required Serco to provide testing and upgrading services to certain Air Force facilities to protect those sites from high altitude electromagnetic pulse (“HEMP”) events. Under the Prime Contract, the Air Force would periodically provide Serco with a statement of work that outlined the requirements for a specific HEMP-related project. If Serco could not complete the work itself, Serco would issue a request for proposal (“RFP”). Serco entered into a subcontract for HEMP-related work (the “Subcontract”) with Titan Corporation, a predecessor to L-3 Applied Technologies, Inc. (“L-3 ATI”). The Subcontract stated that Serco was not required to issue any work to L-3 ATI and that L-3 ATI was still required to bid on HEMP-related work. Between 2004 and 2009, Serco awarded
every task order under the Prime Contract to L-3 ATI. In July of 2009, Serco began awarding HEMP-related task orders to Jaxon Engineering & Maintenance, Inc. (“Jaxon”), formed by a former L-3 ATI employee. Between July 2009 and November 2014, the plaintiffs, L-3 ATI and L-3 Communications Corporation (“L-3 Com” and collectively with L-3 ATI, “L-3”), alleged that Serco awarded 32 HEMP-related task orders to Jaxon, 11 HEMP-related task orders to L-3 ATI, and 13 HEMP-related task orders to other contractors.
In June of 2015, L-3 initiated the present action asserting: (i) tortious interference with L-3’s business expectancy in HEMP-related task orders from July of 2009 to the time of filing (“Tortious Interference Claim”); (ii) aiding and abetting Jaxon in tortuously interfering with L-3’s business expectancy (“Aiding and Abetting Claim”); (iii) civil conspiracy in violation of Virginia’s common law (“Civil Conspiracy Claim”); and (iv) violations of Colorado Organized Crime Control Act (“COCCA Claim”). The district court initially dismissed L-3’s action based on lack of standing, but the Fourth Circuit Court of Appeals reversed and remanded the case. Following discovery, Serco filed a motion for summary judgment, which the district court granted. As to L-3’s Tortious Interference Claim and Aiding and Abetting Claim, the district court held that L-3 could not establish a valid business expectancy in any task order because the Subcontract expressly disclaimed any expectancy and that L-3 could not rely on past course of dealings because the dealings did not arise independently from the Subcontract. The district court also held that L-3’s Conspiracy Claim was time barred under Virginia’s 5 year statute of limitations since L-3 initially suffered an injury from the alleged conspiracy in 2008. Alternatively, the district court held that L-3’s Conspiracy Claim failed as a matter of law because L-3 could not establish a valid business expectancy in any task order. Finally, the district court held that L-3’s COCCA claims were time barred. L-3 appealed.
The Fourth Circuit Court of Appeals upheld the district court’s award of summary judgment to Serco on L-3’s Tortious Interference Claim and Aiding and Abetting Claim because the claims failed as a matter of law, but reversed the district court’s award of summary judgment to Serco on L-3’s Conspiracy Claim and COCCA Claim. Virginia recognizes a cause of action for tortious interference with contract rights or business expectancies, but only a party outside the contractual or business-expectancy relationship with the plaintiff may be held liable as an interferor. Under Virginia’s “third-party rule,” however, a party to a business relationship may be held liable for conspiracy to tortuously interfere with its own business relationship. L-3’s Tortious Interference Claim and Aiding and Abetting Claim are based on allegations that Serco directly interfered with L-3’s business expectancy in HEMP-related task orders issued by Serco. As such, L-3’s Tortious Interference Claim and Aiding and Abetting Claim fail as a matter of law because they were asserted against a party to the contract. To recover in a civil conspiracy action, the plaintiff must establish that at least one member of the conspiracy, in agreement with another member, committed an act that was itself wrongful or tortious, and that such act damaged the plaintiff. A cause of action for conspiracy does not accrue until the plaintiff suffers an injury sufficient to give rise to the underlying tort claim. Here, L-3’s Conspiracy Claim was not time barred because L-3 could not establish the essential elements of its Conspiracy Claim until July 2009, when Serco first began awarding HEMP-related task orders to Jaxon. To establish a valid business expectancy, a plaintiff must show a probability of future economic benefit, which is a fact intensive inquiry. The district court erred in concluding that L-3 could not rely on its course of dealing with Serco because evidence of their course of dealing was relevant to whether L-3 could have realized its expectancy in new task orders, which created a dispute of material fact regarding L-3’s valid business expectancy in the task orders awarded to Jaxon. Next, the Fourth Circuit Court of Appeals turned to L-3’s COCCA Claim, which is not discussed in this case digest as it deals solely with Colorado law.