United States District Court, W.D. Virginia, Lynchburg Division
K. MOON UNITED STATES DISTRICT JUDGE.
Norman K. Moon The parties in this case entered into a
contract related to the renovation of a Kroger store. R.W.
Smith Company (“RWS”) was the general contractor
on the project, while Richard Rosenthal was the President of
a plumbing subcontractor called M.E.P. Mechanical, Inc.
(“MEP”). MEP employed subcontractors to provide
labor for the Kroger project, but several of them did not get
paid on time for their work. The essence of the dispute is
which party bears responsibility for the non-payment of the
before the Court is a counterclaim by Rosenthal against RWS.
Rosenthal claims that RWS falsely told the labor
subcontractors that MEP had been paid fully for the
subcontractors' work, thus leading the labor
subcontractors to blame MEP rather than RWS for their lack of
payment. Based on these facts, Rosenthal asserts claims for:
(1) statutory business conspiracy, (2) common law business
conspiracy, (3) defamation, (4) tortuous interference with a
business expectancy, and (5) punitive damages. RWS has filed
a motion to dismiss each of these counterclaims.
the parties requested a hearing on this matter, the Court
concludes that the parties' positions have been
adequately conveyed in their briefings. In accordance with
Local Rule 11(c) and Federal Rule of Civil Procedure 78(b),
the Court will decide RWS's motion without a hearing.
RWS's motion to dismiss Rosenthal's counterclaim will
be granted in part and denied in part. The Court will grant
RWS's motion as to the conspiracy and tortious
interference claims. Rosenthal's conspiracy claims fail
because a conspiracy cannot exist between agents working
within a single corporate entity. Rosenthal's tortious
interference claim will be dismissed because Rosenthal does
not have any individual business expectancy with regard to
any of the subcontractors at issue in this case. Punitive
damages in the counterclaim are a remedy rather than a
separate claim, and need not be addressed at the
motion-to-dismiss stage. Finally, Rosenthal's defamation
claim is adequately pled because he has alleged a sufficient
nexus between himself and MEP such that he can bring suit for
allegedly defamatory statements about MEP's conduct.
Facts as Alleged
entered into a subcontract purchase order agreement
(“the Contract”) with MEP for plumbing work on
the Kroger project in Midlothian, Virginia. (Dkt. 31
¶¶ 1, 2). Richard Rosenthal is the principal
shareholder and president of MEP. (Id. ¶ 3).
The Contract contained provisions allowing for change orders
to amend the scope of the work and compensation.
(Id. ¶ 4). MEP did not have sufficient labor to
fulfill the work expectations of RWS, so it subcontracted for
additional labor. (Id. ¶¶ 6, 7). RWS
authorized change orders allowing MEP to employ this
additional subcontract labor in order to meet RWS's work
expectations. (Id. ¶ 7).
RWS assured MEP that it would continue to authorize and pay
change orders to enable MEP to employ additional labor, RWS
ceased payment for subcontract labor on April 21, 2016.
(Id. ¶¶ 10-12). From that date until June
2016, MEP continued to employ subcontract labor and requested
that RWS authorize and pay for such labor via change orders.
(Id. ¶¶ 13-14). In late June 2016, MEP
could no longer afford to employ the subcontract labor for
RWS at the Kroger project, and moved personnel to other
projects. (Id. ¶ 18). As a result, RWS informed
MEP that it would hire a replacement plumbing contractor to
complete the project if MEP did not resume work pursuant to
RWS's expectations. (Id. ¶ 19). MEP resumed
work, but RWS nonetheless hired a replacement plumbing
contractor. (Id. ¶¶ 20-21). The presence
of the replacement plumbing contractor forced MEP to stop
work on the Kroger project. (Id. ¶ 22). MEP
continued to request compensation for the subcontract labor
it employed from April through June 2016, but RWS refused to
provide payment. (Id. ¶¶ 23-24).
this souring of relations, Rosenthal alleges that RWS began
to speak ill of MEP to MEP's subcontractors.
(Id. ¶ 25). This “campaign to
defame” is evidenced by several communications.
(Id.). First, one of MEP's subcontractors,
Kenneth Douglas of Tradesmen International, sent an email to
RWS employee Kevin Jenny on May 13, 2016, stating:
I am going to let my credit manager know of what is going on
today and let you know the next step she wants to take. I am
learning that this is not the first time that this has
happened with Rick [Rosenthal] and also not the first company
he has owned where the same pattern has been repeated.
(Id. ¶ 26). On May 17, he sent a follow up
Kevin, We were supposed to meet Rick this morning to get
payment and he is no where to be found. We have reached out
to him and cannot get in touch with him. This needs to be
resolved ASAP. What can you do to help before we take this
(Id. ¶ 27).
second communication occurred on July 11, 2016, when Richard
Buleza of Construction Labor Contractors (“CLC”)
sent an email to Rosenthal that read as follows:
Good Morning Rick, Please give my office a call today in
order to let me know when I can meet you to pick a ck for the
past due amount. We have been told by Jamie Bates that
you have already been paid for our invoices. You are now
$6, 410.25 over 61 days and $12, 309 past 31 days. This
amount is way over your credit limit of $5, 000 and we really
[need] to get this paid timely . . .
(Id. ¶ 28 (emphasis in counterclaim)). Jamie
Bates is an employee of RWS. (Id. ¶29).
believed the allegations in the CLC letter regarding the fact
that RWS fully paid MEP were the product of false
representations by RWS to CLC. (Id. ¶¶
30-31). Thus, Rosenthal sent a certified letter to RWS on
July 13th which stated:
It has been brought to my attention that RW Smith Company is
falsely making accusations that payment has been made in full
to M.E.P. Mechanical, Inc. Under no circumstances is that
statement true. I have taken serious notice of these
completely false and scandalous accusations that render a
distorted and fictional travesty of facts about M.E.P.
Mechanical with the malicious purpose to defame and disgrace
M.E.P. Mechanical, Inc. These false accusations are to stop
immediately and any further allegations will no longer be
tolerated. If RW Smith continues to make these remarks
further legal action will be taken.
(Id. ¶ 32). Kevin Jenny responded on behalf of
Please note that we have not stated that MEP Mechanical has
been paid in full. What we have said is that MEP has been
paid for the periods in which the labor from the labor
vendors were utilized. Therfore [sic] the payment of the
labor invoices ...