By Patrick Southern

Today, the Fourth Circuit released an unpublished opinion in the civil case of Jones Lang LaSalle Americas, Inc. v. The Hoffman Family, LLC. The appellate court reversed a decision from the Eastern District of Virginia, where summary judgment had been previously granted to the defendant in this breach of contract claim. While the district court had ruled that an agreement between the parties pertaining to commission to be paid on a real estate deal was unenforceable as a matter of public policy, the Fourth Circuit had a different interpretation of the relevant Virginia law.

The Parties Wanted to Find a Tenant to Lease Hoffman’s Property

Jones Lang LaSalle (“JLL”), the plaintiff in this matter, is a real estate business. Hoffman owns considerable property in Virginia. In 2007, the parties signed an agreement, under which Hoffman retained JLL to act as the exclusive leasing agent for its landholdings in Virginia as Hoffman tried to get the United States government to lease the land. The agreement provided that if JLL’s efforts resulted in the lease of any of the properties in question, JLL would receive a commission equal to two percent of the lease’s base rent.

JLL hired Arthur Turowski, a former member of the U.S. General Services Administration (“GSA”), to advise JLL on matters related to the federal lease procurement process. Turowski was not a licensed Virginia real estate salesperson.

In 2011, the GSA solicited proposals for a lease for a site to house the new headquarters of the National Science Foundation. JLL assisted Hoffman in presenting its property as a candidate, and the GSA selected Hoffman for the lease in 2013. As a result, Hoffman will receive a total base rent of more than $330 million over the 15-year term of the lease.

The parties then began to disagree about the commission; JLL claimed it was owed $6.62 million (two percent of the base rent) while Hoffman asserted it only owed $1 million based on what it claimed were oral agreements reflected in written submissions made to the GSA and elsewhere.

JLL Claimed Hoffman Was In Breach of Contract

JLL ultimately filed an action for breach of contract in 2013, seeking the $6.62 million it claimed it was owed under the agreement between the parties. During discovery, Hoffman learned that Turowski was not a licensed real estate salesperson.

Hoffman moved for summary judgment, arguing that as a matter of public policy, JLL could not recover commission that might have been payable under the agreement because Turowski was critical to JLL’s efforts to lease the property.

The Eastern District of Virginia entered summary judgment in favor of Hoffman. The court concluded Turowski was required to have a real estate salesperson’s license because he was centrally involved in the activities that led to Hoffman’s successful bid for the lease. The court said that there was a public policy which had been declared by Virginia’s courts that such individuals were to be licensed real estate agents.

The Plaintiffs Claimed the District Court Erred On the Public Policy Question

On appeal, JLL argued the district court erred in concluding that a JLL employee involved in the leasing efforts was required to have a Virginia real estate salesperson’s license, and that the consequence of the employee’s failure to be so licensed was a total forfeiture of JLL’s commission.

Essentially, it indicated that the district court was wrong in determining Turowski’s participation in the leasing efforts rendered the agreement between JLL and Hoffman unenforceable on public policy grounds.

The Fourth Circuit Interpreted Relevant Virginia Law Differently than the Eastern District of Virginia

Hoffman did not dispute that the agreement was valid when formed; instead, it argued that JLL performed its obligations in contravention of the Virginia real estate licensing scheme (and, thus, rendered the agreement unenforceable).

But the Fourth Circuit disagreed, saying Hoffman’s position was unsupported in Virginia law. There is no explicit statute or judicial decision the court could point to that would impose a total prohibition of JLL’s commission under Virginia law.

The appellate court did say that Virginia law was clear on two fronts: (1) that a contract made in violation of the real estate licensing statutes is illegal and unenforceable, and (2) that Virginia courts are averse to holding contracts unenforceable on public policy grounds unless their illegality is “clear and certain.” The Fourth Circuit noted that relevant precedent indicates Virginia courts are to be wary of employing public policy concerns to invalidate contracts that were valid when formed.

The Fourth Circuit’s opinion makes clear that its reversal of the summary judgment ruling doesn’t mean that JLL is entitled to the $6.62 million it seeks. Instead, this ruling only clarifies that Turowski’s participation in the leasing efforts did not render the agreement unenforceable as a matter of law. The District Court will receive the case on remand to resolve the remaining issues, including whether the parties agreed to a lesser commission in an oral agreement.

By Dan Menken

Last Thursday, January 8th, in Weidman v. Exxon Mobil Corp., the Fourth Circuit affirmed the district court’s denial of Plaintiff’s motion to remand and also affirmed the dismissal of all but one of his tort claims. Because the dismissal of one of Plaintiff’s claims was reversed, the Circuit Court remanded the case for further proceedings.

Plaintiff Stated Four Claims Based on Employer’s Conduct

In March 2013, Weidman filed suit against his former employer, ExxonMobil, and ten ExxonMobil employees. Plaintiff alleged that the Medical Department of ExxonMobil committed violations of the law by operating illegal pharmacies and illegally stockpiling large quantities of medication. He further alleged that after he reported the violations to ExxonMobil, an employee of the Medical Department initiated a campaign of retaliation against him. After reporting his colleague’s conduct, Plaintiff stated that ExxonMobil conducted a “sham” investigation concluding that Weidman had not been harassed and that the pharmacies were legal. During a second investigation, Plaintiff reported that one of the investigators admitted to him that ExxonMobil had been operating an illegal pharmacies for years.

Plaintiff then alleged that he was required to participate in a performance improvement plan, which lasted for over a year. Plaintiff contended that the purpose of the meetings was not to improve his performance, but to overburden him with the creation of new tasks meant to cause his failure to perform. He stated that during one of these performance meetings on October 24, 2012, he suffered a heart attack which was a direct result of the stress maliciously inflicted upon him. In mid-December 2012, ExxonMobil extended Plaintiff’s performance plan. ExxonMobil subsequently terminated Weidman’s employment at his next meeting in January 2013 for failing to cooperate with the plan.

Weidman then filed suit asserting four causes of action: (1) fraud based on Appellees alleged retaliation against him despite contrary assurance in the employee handbook and the CEO’s yearly videos; (2) intentional infliction of emotional distress; (3) personal injury based on damage to his heart; and (4) wrongful discharge. Defendant removed the case to the Eastern District of Virginia and moved to dismiss the case. Plaintiff moved to remand the case to state court. The district court dismissed all of Plaintiff’s claims and denied his motion to remand.

First Three Claims Fail to State a Claim

The district court denied Plaintiff’s motion to remand based on the “fraudulent joinder” doctrine, despite the fact that Weidman had named three non-diverse defendants in his complaint. The fraudulent joinder doctrine provides that diversity jurisdiction is not automatically defeated by naming non-diverse defendants. The district court may retain jurisdiction if the non-moving party shows that the plaintiff committed outright fraud in pleading jurisdictional facts, or that “there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court.” Mayes v. Rapoport, 198 F.3d 457, 464 (4th Cir. 1999). The Fourth Circuit agreed that Weidman’s claims against the non-diverse defendants had no possibility of succeeding, and thus affirmed the district court’s denial of Weidman’s motion to remand.

The Circuit Court then performed a de novo review of the district court’s dismissal for failure to state a claim. According to Bell Atl. Corp. v. Twombly, a complaint “must contain sufficient facts to state a claim that is plausible on its face.” The Fourth Circuit held that Weidman failed to sufficiently plead his fraud claim by making vague referrals to statements from ExxonMobil’s CEO and members of the Human Resources Department. Moreover, the facts stated in his claim for intentional infliction of emotional distress did not reach the level of “outrageous and intolerable” conduct, and was therefore properly dismissed. The claim for personal injury was also properly dismissed because it only stated a “naked assertion devoid of further factual enhancement,” and thus failed to meet the requirement laid out in Ashcroft v. Iqbal.

Plaintiff Sufficiently Stated Claim For Wrongful Discharge Based on Public Policy

Finally, in regards to Plaintiff’s wrongful discharge claim, Virginia law recognizes three situations in which a litigant may show her discharge violated public policy: (1) where an employer fired an employee for exercising a statutorily created right; (2) when the public policy is “explicitly expressed in the statute and the employee was clearly a member of that class of persons directly entitled to the protection enunciated by the public policy”; and (3) “where the discharge was based on the employee’s refusal to engage in a criminal act.”

Here, the Fourth Circuit reversed the district court’s ruling, stating that Weidman sufficiently stated a claim that he was fired for refusing to engage in a criminal act. Sections 54.1-3310 and 54.1-3435 of the Virginia Code make it unlawful for anyone to practice pharmacy or to engage in wholesale distribution of prescription drugs without a license. Although these sections are not part of Virginia’s criminal code, a violation of these sections lead to criminal penalties. Defendants argue that this claim cannot survive because Weidman failed to cite the statute in his complaint. The Fourth Circuit stated, however, that any deficiency in this regard is merely technical. Therefore, Plaintiff pled sufficient factual detail that he was fired for refusing to participate in “illegal pharmacy distribution activities.”

Case Remanded To Address Wrongful Discharge Claim

Thus, the Fourth Circuit reversed the dismissal of Weidman’s wrongful discharge claim against ExxonMobil and remanded the case for further proceedings.