Updates

EDVA Judge dismisses case against parent company after finding parent was not “Alter Ego” of Virginia subsidiary

Posted on January 28, 2016
Posted in Cases, Updates

Piercing corporate structures remains tough in Virginia, even if only to show jurisdiction. In a discrimination case brought by an employee of a Virginia-based subsidiary against his employer, its controlling mid-level subsidiary, and the Indiana parent company of both, Judge Conrad of the Western District of Virginia granted the parent company’s motion to dismiss for lack of personal jurisdiction, finding that (1) the nonresident parent had no direct contacts with Virginia and (2) the jurisdictional contacts of the subsidiaries could not be imputed to the parent. Bennett v. OmniSource Corp., No. 7:14-cv-309 (W.D. Va. Nov. 4, 2015). The Court specifically found that plaintiff failed to satisfy the standard in the Fourth Circuit to show that either the lower-level or mid-level subsidiary was the parent’s “alter ego.” Plaintiff, a sorter in a metal processing facility, did not offer any evidence to rebut affidavits from the parent company indicating that it has no direct contacts with Virginia. Instead, plaintiff argued that the mid-level subsidiary’s contacts with Virginia could be imputed to the parent because the companies share corporate officers and work facilities in Indiana, and because the parent provided guarantees to certain vendors. Under Virginia case law, the Court found such evidence insufficient to show that the parent exercised extraordinary control over the subsidiary, or that the parent was a separate entity in name only. The lesson? Proving alter ego status is fact intensive in Virginia, and merely sharing corporate officers and work facilities may not be enough without other indicators of control.…

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Virginia Federal court allows jury in trademark case even where demand came 5 months too late

Posted on January 28, 2016
Posted in Updates

In a Lanham Act case involving pharmaceutical products, Judge Conrad of the Western District of Virginia granted plaintiff’s motion for a jury trial, even though it was made only four months before trial and outside the time prescribed by Rule 38. In Concordia Pharm. Inc. v. Method Pharm. LLC, No. 3:14-cv-16 (W.D. Va. Nov. 4, 2015), exercising discretion under Rule 39(b), the Court found that the Fourth Circuit’s four-factor test had been met: the issues were not so complex that a jury would be incapable of understanding them; granting the motion would not significantly prejudice the defendants; the timing of the motion did not warrant denial since there were still seven weeks to conduct discovery and defendants failed to show how trial preparation would be effected; and a jury trial would not burden the Court’s docket substantially more than a bench trial. The lesson? The standard for granting a party’s untimely jury demand is relatively low in the Fourth Circuit, despite the explicit waiver language in Rule 38.…

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Disappointed that PTAB declined inter partes patent review? Tough, EDVA Judge rules

Posted on January 28, 2016
Posted in Updates

The Patent and Trademark Board’s decision on whether to grant inter partes review cannot be challenged in court. In Medtronic, Inc. v. Lee, 1:15-cv-946 (E.D. Va. Jan. 21, 2016), after the PTAB terminated an inter partes review seeking to determine the validity of two patents, the petitioner appealed the decision to federal court. But Judge Lee of the Eastern District of Virginia granted defendant’s motion to dismiss, holding that the court lacked subject-matter jurisdiction to hear the appeal because § 314 of the America Invents Act (AIA) precludes judicial review. The case began with a patent infringement suit against Cardiocom, LLC, which prompted Cardiocom to file a petition for an inter partes review. Medtronic acquired Cardiocom while the petition was pending, and after the PTAB declined to grant Cardiocom’s petition, Medtronic filed its own petition to review the very same patents. The PTAB initially granted Medtronic’s petition, but after further discovery and briefing, determined that Cardiocom should have been named as a real party in interest in Medtronic’s petition and terminated the inter partes review proceedings. Medtronic challenged the PTAB’s decision in federal court under the Administrative Procedure Act, claiming that 5 U.S.C. § 704 allows judicial review of an agency action when no other adequate remedy exists. But the district court held that, while the AIA evinces a strong presumption of judicial reviewability, that presumption is rebutted when a statutory provision explicitly precludes such review. Here, § 314 of the AIA expressly provides that the PTAB’s decision whether to institute inter partes review “shall be final and nonappealable.” The district court further held that it makes no differences whether the PTAB makes its decision at the outset of a request for inter partes review or, as in this case, after previously instituting review proceedings. The lesson? While the AIA allows appeals of final decisions on the merits by the PTAB, it bars review of PTAB determinations at the decision-to-institute stage.…

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Date of Mailing Doesn’t Save Payment Bond Claim

Posted on December 17, 2015
Posted in Updates

In a case of first impression in Virginia, the circuit court in Norfolk confirmed that the date of mailing is meaningless to satisfy notice requirements on a state law payment bond claim. The date that matters is the one on which the general contractor receives the notice. Under the Little Miller Act in Virginia, a supplier or subcontractor who asserts a payment bond claim must give “written notice” to the general contractor within 90 days of the last day of work for which payment is sought. Failure to do so bars the claim. In R. T. Atkinson v. Archer Western Construction, the supplier mailed notice of its claim before the 90-day deadline, but the general contractor received it two days after the deadline. Citing similar federal precedent, the state court held that notice is not “given” until the general contractor receives it, so a payment bond claim that is only mailed before the deadline is ineffective. The lesson? Don’t wait until the last minute to assert your bond claim. You just might lose it all. © Crenshaw, Ware & Martin, P.L.C.   This information is educational only; it is not legal advice. CWM attorneys represented the general contractor and surety in the case.…

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Court Orders Arbitration of Patent License Dispute

Posted on December 17, 2015
Posted in Updates

Virginia federal courts still err in favor of arbitration in business cases, even where parties take measures to avoid it. In University of Virginia Patent Foundation v. DynaVox, where a patent licensee refused to pay royalties on grounds that its products were not covered by the patent, a Virginia federal court held that the dispute must be arbitrated, notwithstanding that the parties excluded from their arbitration clause all controversies concerning the “scope of the patent.” The case involved eye-tracking technology that the UVA Patent Foundation licensed to a predecessor of DynaVox. DynaVox introduced a line of eye-tracking technologies that the Foundation claimed fell within the definition of “Licensed Product.” When the Foundation initiated arbitration, DynaVox denied that it made, used or sold any products covered by the patent. Citing this denial, the Foundation filed a Complaint in Virginia federal court, arguing that DynaVox had put the “scope of the patent” at issue. The federal court rejected the argument, holding that the breadth of the arbitration clause, coupled with strong federal policyfavoring arbitration, required it to stay the case. The lesson? Be as precise as possible if you plan to carve out claims from an arbitration clause, particularly in Virginia. © Crenshaw, Ware & Martin, PLC.   This information is educational only; it is not legal advice.…

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WATCH OUT – Virginia tightens policy on contractor licenses as of July 1, 2015

Posted on July 1, 2015
Posted in Updates

Be careful of your contractor licenses and worker classifications in Virginia. Under a new policy effective July 1, 2015, where VOSH has reasonable cause to believe workers are being misclassified on a Virginia construction project (usually as independent contractors), VOSH may require each contractor to provide proof of its own DPOR license and the DPOR license of any of its subcontractors.  If a violation is found, VOSH will make a written referral to DPOR for both the unlicensed subcontractor and the general contractor.  The policy specifically states that penalty reductions for “size” and “good faith” will not be afforded to the employer. VOSH Policy Effective July 1, 2015, where VOSH has reasonable cause to believe that worker misclassification has occurred in a VOSH case, the following actions will normally be taken: In the event that citations and penalties are proposed for the employer, penalty reductions for size and good faith will NOT be afforded to the employer. In construction multi-employer worksite situations, each contractor (e.g., general contractors, prime subcontractors and lower tier subcontractors) will be asked to provide proof of their Department of Professional and Occupational Regulation (DPOR) contractor's license AND for proof of the DPOR license for any of its' subcontractors. When it is determined that a construction employer has contracted with an unlicensed subcontractor, VOSH will make a written referral to DPOR for the contractor and its unlicensed subcontractor (DPOR sanctions for contracting with unlicensed subcontractors may include fines, probationary terms, suspension or license revocation). In cases where the contract value for the specific subcontractor's job is less than $1,000.00, VOSH will make a written referral to the Virginia Employment Commission (VEC) and/or the Virginia Workers' Compensation Commission (VWCC) for potential audits of the employer's employment practices. There may be instances where referrals will be made for contract values over $1,000.00 as well.…

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New statute has power to nullify lien waivers in Virginia

Posted on July 1, 2015
Posted in Updates

Effective July 1, 2015, any provision of a construction contract or lien waiver that “waives or diminishes” the payment bond or mechanic’s lien rights of a subcontractor, lower-tier subcontractor or material supplier before services are rendered is “null and void” in Virginia.  The new language in Va. Code § 11-4.1:1 and Va. Code § 43-3 represents a sharp turn from previous Virginia law on payment bonds and mechanic’s liens, which expressly allowed such waivers “at any time.” So what is the takeaway for suppliers, contractors, owners and sureties on construction projects in Virginia?  Read your contracts closely in light of the new law.  You may have more leverage than you think, or you may be giving away leverage by failing to update your documents.…

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Contractor’s failure to provide project accounting leads to criminal conviction under Va. Code § 43-13

Posted on June 11, 2015
Posted in Updates

Violation of Va. Code § 43-13 leads to criminal, not civil, liability. Under § 43-13, when a contractor receives money from an owner to pay subcontractors, he cannot use the money for any other purpose. In Holloway v. Commonwealth, owners paid a contractor $422,000 towards a new home, but after five suppliers and subcontractors went unpaid, the owners filed a complaint with the Department of Professional and Occupational Regulation. DPOR found that the contractor incurred only $286,000 in direct costs, after which the contractor was prosecuted. At trial he contested the $286,000 figure, but was unable to provide an accounting to show the nature of his expenditures and payments. That failure, the court said, created a presumption that the money was used improperly. Because the contractor could not rebut the presumption, he was convicted of larceny and the conviction was upheld on appeal.…

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Western District of Virginia narrowly construes Virginia’s anti-indemnification statute

Posted on June 11, 2015
Posted in Updates

Rental companies may now rest easier in indemnity cases in Virginia.  In RSC Equipment Rental v. Cincinnati Ins. Co., the Western District of Virginia denied a general contractor’s motion to dismiss where the contractor sought to avoid indemnifying a forklift supplier by invalidating its indemnity clause.  Under Va. Code § 11-4.1, a party in a contract “relating to construction” cannot require indemnity against injuries or damages caused solely by its own negligence.  The general contractor argued that the forklift supplier’s rental agreement did exactly that, rendering its entire indemnity clause void.  Narrowly interpreting the statute, the federal court rejected the argument, holding that a forklift rental agreement is not a contract “relating to construction,” and therefore § 11-4.1 does not apply.…

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Email evidence supports time extension, defeats general contractor’s delay claim

Posted on June 11, 2015
Posted in Updates

Don’t delete a good email. In United States ex rel. Engineered Services v. T.H.R. Enterprises, a subcontractor defeated a general contractor’s delay claim and won its entire contract balance using email evidence to establish an extended completion date.  The Eastern District of Virginia federal court held that the subcontract completion date was extended to the same date as the prime contract where (i) a change order stated that the date was “TBD” and (ii) the general contractor later sent an email identifying the subcontract completion date as the same as the prime contract date. The court also held that the prime contract completion date “flowed down” as a result of language in the subcontract.…

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