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Hair Club For Men, LLC v. Ehson

United States District Court, E.D. Virginia, Alexandria Division

August 31, 2016

Hair Club for Men, LLC, Plaintiff,
v.
Lailuma Ehson and Illusion Day Spa, LLC, Defendants.

          MEMORANDUM OPINION

          Liam O'Grady United States District Judge.

         This matter comes before the Court on Defendant's Motion for Summary Judgment, Dkt. No. 74, and Plaintiffs Cross-Motion for Summary Judgment, Dkt. No. 88. For the reasons outlined below, the Court finds good cause to GRANT in part Plaintiffs Motion and GRANT in part Defendant's Motion.

         I. Background.

         Hair Club is in the business of hair replacement and hair therapies. Hair Club's business model is based on forming long-term contracts with its customers who receive hair replacement services on a regular basis. Many of Hair Club's clients do not want others to know that they are receiving hair replacement services. Accordingly, Hair Club takes substantial steps to keep its clients' identities confidential. Hair Club also makes significant investments in obtaining and retaining clients. Hair Club has provided evidence, in the form of an expert report, that since July 1, 2013, it "has maintained an average contract retention rate of 90%." Dkt. 89-1 ¶ 27. This expert also asserts that Hair Club's clients remain customers for an extended period of time, absent interference. Hair Club's male clients stay with Hair Club for an average of 13.5 years and Hair Club's female clients stay with Hair Club for an average of 4.7 years.

         Hair Club has composed a Technical Manual that it uses to train its stylists. This manual "contains extremely detailed instruction on the procedures for measuring a client's hair loss and coverage area, designing a template and using facial features and head shape as a guide to develop the best hair system, and determining where to place highlights and specs of grey." Dkt. No. 92, at 11. The manual also contains information on what types of adhesive to use, how to use the adhesives, and the "process of coloring, matching texture, cutting, and styling." Id. at 12. According to Hair Club's President, Hair Club's techniques were developed over a long time and at great expense such that "independent development of identical or comparable materials by competitors of Hair Club would be impossible." Dkt. No. 89-11, at 4.

         Hair Club now asserts that one of its former employees, Defendant Lailuma Ehson, has stolen its hard-earned clients and is using its hair replacement techniques in violation of Virginia law. Hair Club employed Ehson at its Tysons Corner location from September 28, 2011, until July 24, 2015, when Ehson voluntarily resigned. When Hair Club hired Ehson, she did not have any existing hair replacement clients. As a condition of her employment, Ehson signed a Confidentiality, Non-Solicitation and Non-Compete Agreement. This Agreement generally provided that when Ehson's employment with Hair Club ended, Ehson would not engage in the hair replacement business or become interested in a company that provided such services within twenty miles of any Hair Club center for a period of two years. The Agreement also provided that Ehson would not solicit Hair Club's customers. Finally, Hair Club's Employee Handbook prohibits employees from exchanging personal contact information with Hair Club clients.

         In October of 2014-while she was still working at Hair Club-Ehson opened a salon called Illusion Day Spa, which was located approximately 15.5 miles from Hair Club's Tysons Corner location. In April of 2015, Ehson began providing hair replacement services at Illusion. Ehson contacted at least twenty-seven of Hair Club clients regarding Illusion. Ehson gave these clients her phone number and told them about her competing business. Ehson convinced twenty-five of Hair Club's clients to leave Hair Club for Illusion. Illusion offered hair replacement services to these clients for $100, which is as much as 83% lower than Hair Club's prices.

         Based on these facts, Hair Club filed a Complaint in this Court on March 7, 2016. Hair Club also sought a Preliminary Injunction, which this Court denied on May 6, 2016. Just after discovery began, Hair Club was permitted to file an amended complaint. In that First Amended Complaint ("FAC"), Hair Club brought six causes of action against the Defendants:

• Count I: breach of contract (against Ehson);
• Count II: misappropriation of trade secrets and confidential information (against Ehson and Illusion);
• Count III: wrongful interference with contract and prospective business advantage (against Ehson and Illusion);
• Count IV: tortious interference with contractual relations (against Illusion);
• Count V: unjust enrichment (against Ehson and Illusion); and
• Count VI: breach of fiduciary duty (against Ehson).

         After conducting discovery, the parties filed cross-motions for summary judgment. Plaintiff seeks a summary judgment ruling on all but the unjust enrichment claim. Defendants seek a summary judgment ruling on all counts.

         II. Legal Standard

         Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). As the Supreme Court has explained, 'this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original). A dispute over an issue of material fact is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248. Finally, in making a summary judgment determination, the Court must bear in mind that "[a] complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

         A. Count I: Breach of Contract

         Count One alleges that Ehson breached the Confidentiality, Non-Solicitation, and Non-Compete Agreement, which Ehson entered into with Hair Club when her employment began. The elements of a breach of contract action under Virginia law are: "(1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation." Filak v. George, 267 Va. 612, 619, 594 S.E.2d 610, 614 (2004). Ehson admits that she opened up a competing business and solicited Hair Clubs clients-acts which are in clear violation of the Agreement. However, Ehson argues that the Court should conclude that the contract is unenforceable, thus defeating the breach of contract claim.

         1. Legally Enforceable Obligation

         Hair Club asserts that Ehson breached both the non-compete and non-solicitation clauses of her contract. This memo will address the validity of each separately. The validity of both of these clauses is a question of law, so the Court resolves this question at the summary ...


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