The basic factual background is as follows. In September 2022, Kuog, Inc. executed a confessed judgment note to induce PFF LCC to extend it a line of credit. When the relationship soured, PFF caused judgment to be confessed in the Clerk’s Office of the Fairfax County Circuit Court in the amount of $9,019,551.12. Kuog timely invoked Code § 8.01-433, which permits a judgment debtor to move to set aside or reduce a confessed judgment within 21 days of receiving notice. Under the statute, the debtor must set forth “any ground which would have been an adequate defense or setoff” in an action brought on the underlying debt instrument. If the debtor does so, the confessed judgment is set aside, the case is placed on the trial docket, and the proceedings thereafter follow the ordinary course of civil litigation.

Kuog proffered four grounds of defense: that no event of default had occurred under the loan agreement and promissory note; that it had not received all of the loan proceeds PFF allegedly advanced; that it had already repaid all or a portion of the amounts loaned prior to maturity; and that the alleged debts had not yet matured and were therefore not due and owing. PFF argued that it was insufficient for Kuog to simply recite a list of defenses without offering any factual support. PFF also argued that Kuog was in default on numerous additional grounds and that resistance to the confessed judgment would be futile. Kuog amended its motion to add some detail but PFF maintained that each defense still lacked merit and that none would withstand scrutiny.

Judge McEvoy began by observing that the Supreme Court of Virginia has never defined what constitutes an adequate “ground” of defense under the statute. The closest authority is Catjen, LLC v. Hunter Mill West, L.C., 295 Va. 625 (2018), which stated that the only issue at this stage is whether the debtor’s pleadings assert a “facially adequate” defense or setoff and that the debtor need not prove the merits. But Catjen said little about what facial adequacy entails.

Judge McEvoy evaluated the § 8.01-433 motion within the broader mechanics of Virginia civil procedure. When a debtor files a motion under § 8.01-433, the case is not yet on the trial docket. The parties are not “at issue.” Under Rule 3:2, normal civil cases are initiated by the filing of a complaint, and the parties become at issue only after responsive pleadings are filed. A court may not properly address the factual merits of a case or render a merits-based judgment under Rule 3:20 until that point. Catjen‘s injunction against merits litigation at the § 8.01-433 stage, the court reasoned, is therefore wholly consistent with the mechanics of the trial process: you cannot adjudicate the merits of claims that have not yet been formally pleaded.

The word “ground” in the statute, the court continued, serves the same function it serves elsewhere in Virginia civil procedure: to provide notice. The court drew an analogy to the historical “grounds of defense” (the predecessor to the modern answer) and to the specificity requirement for demurrers under Code § 8.01-273, both of which serve a notice function rather than a merits-testing function. Citing Monahan v. Obici Medical Management Services, 271 Va. 621 (2006), the court observed that the primary purpose of stating grounds of defense has always been to provide the opposing party with reasonable notice so that it is not surprised at trial. Against that backdrop, the court held that Code § 8.01-433 requires only that the debtor articulate an intelligible ground that would constitute a recognized defense if proven. The court need only look at the face of the asserted defense to determine whether it is “adequate.”

The court identified three specific dangers of going further. First, engaging in any merits inquiry at this stage would violate Catjen‘s express holding. Second, the parties are not at issue, so the court lacks authority to render a merits-based disposition. Third, considering evidence would risk converting a § 8.01-433 motion into a summary judgment proceeding at a stage where summary judgment is procedurally unavailable. Absent a stipulation, evidence cannot be considered before the parties are at issue.

PFF pointed out that allowing a debtor to avoid a confession-of-judgment clause by simply reciting a list of defenses defeats the purpose of the confessed-judgment procedure. “That may or may not be true,” wrote the court, adding that the defendant “may lose on summary judgment, it may lose at trial, and its positions may even prove to be sanctionable.” But the procedural mechanisms that lead to those outcomes must be honored, it held. The creditor’s remedy for a meritless defense is not to prevent the case from reaching the trial docket; it is to seek summary judgment or move for sanctions once the case is there.

The facts of Hubbard v. All Maid Up, LLC, are troubling. A franchisee of the MaidPro cleaning service advertised that it ran background and criminal history checks on every staff member before hiring. In February 2021, it hired Xavier Hudspeth, the son of a current employee, without running a background check. Hudspeth had a juvenile record involving theft, firearms, and violence, and was allegedly a gang member. He quit in September 2021. Over the next several weeks, two customers reported to the company that firearms were missing from homes Hudspeth had cleaned. The company did not investigate or notify police. Instead, in January 2022 it rehired Hudspeth, again without a background check, and two days later sent him to clean the Norfolk home of William Moore and Connie Hubbard, longtime customers. Hudspeth entered a room the cleaners were forbidden to enter, and Hubbard caught him leaving it. A handgun later turned up missing. Around the same time, Hudspeth told an associate, Andra Brown, that he had found a home with guns, and the two agreed to rob it.

The company finally ran a background check on January 31, 2022, suspended Hudspeth the next day, and fired him on February 2. On February 28, Hudspeth and Brown went to the residents’ home. Brown shot and killed Moore when he opened the door, then shot Hubbard as she called 911. Hubbard and Moore’s estate sued the franchisee, the franchisor, and others for civil conspiracy, negligence per se, negligence, vicarious liability, and negligent hiring. The franchisee filed pleas in bar based on the undisputed termination date, and the trial court granted them.

On appeal, the plaintiffs conceded that Hudspeth was no longer employed on the day of the shooting. Their theory was that the conspiracy with Brown was formed earlier, while Hudspeth was cleaning the residents’ home on the company’s behalf and casing it for guns. Those acts, they argued, were overt acts in furtherance of the conspiracy committed within the scope of employment. The Court of Appeals rejected the argument by combining two lines of Virginia Supreme Court authority. First, respondeat superior applies only when a master-servant relationship exists “at the time and in respect to the very transaction out of which the injury arose.” (See Manuel v. Cassada, cited above). The employee must have committed the tort while actively engaged in a job-related service, and no such relationship exists once the employee has been terminated.

Second, and decisively, Virginia treats civil conspiracy as a vehicle for liability for an underlying tort, not as an independent wrong. The gist of the action is the damage caused by acts done in furtherance of the conspiracy, not the combination itself. (See Gelber v. Glock, 293 Va. 497, 533 (2017)). The claim lies only where the plaintiff is damaged by an act that is itself tortious, and the predicate act must independently impose liability on the primary wrongdoer. The court noted that a minority of states treat conspiracy as independently actionable, but Virginia is not among them. It followed that the tort, for timing purposes, occurred when the residents were harmed. The court acknowledged that casing the home was wrongful, but it was not the wrongful act that caused the residents’ injuries. Nothing in the complaint alleged that the reconnaissance or the agreement itself damaged anyone. The injuries came from the murder, robbery, and malicious wounding, all of which occurred weeks after Hudspeth’s termination.

The court applied the same reasoning to the negligent hiring and negligent retention claims. Those claims cease to be viable for conduct committed after the employee is no longer employed. Because entering into a conspiracy is not itself a tort, the only conduct for which the residents could recover was the attack, and it fell on the wrong side of the line. The court separately held that the plaintiffs had not pleaded an express undertaking sufficient to create an assumed duty to warn or protect, notwithstanding the company’s background-check advertising, but that holding rests on a different body of law.

The court noted in a footnote that fraud claims may be treated differently: “This holding does not mean an employer could not be vicariously liable for fraud committed by an employee if damage from that fraud is not experienced until after the employee no longer works for the employer. If plaintiffs allege that an injury was proximately caused by representations made by an employee, for example, the timing of the injury alone is not dispositive.” (See Opinion, FN 7). Although the court did not explain the distinction in detail, I surmise the likely reason is that a misrepresentation is itself a wrongful act while the formation of a conspiracy is not.

The dispute grew out of a falling-out between two cousins. Sam Xiang’s family founded C&A Scientific, a wholesaler of scientific and educational supplies, and Xiang brought in his cousin Kenny Yu in 2017 to help rescue the then-struggling company. Yu succeeded in overseeing a substantial increase in gross revenue and he was given a 30% stake under a shareholder agreement that contained a noncompete provision that ended mid-thought. It barred a departing shareholder, for one year after conveying his shares, from being “employed, concerned, or financially interested, either directly or indirectly, in the same or a similar business as that conducted by the Corporation, or compete with the Corporation for a one-year period following the date the departing Shareholder conveys his or her shares if any customers of the same, similar, or competing business.” (Emphasis added). The sentence stopped there.

After the relationship soured, Yu sold his shares back and later formed a competing venture, CoreAmp, Inc. After C&A warned a customer to refrain from conducting business with Yu, Yu and CoreAmp sued for tortious interference, and C&A counterclaimed for breach of the noncompete. At trial, the Fairfax County Circuit Court invalidated the noncompete on two grounds: (1) that the dangling conditional clause rendered it unintelligible, and (2) that it was overbroad in function and geographic scope. C&A appealed.

On appeal, C&A conceded that Virginia does not permit blue-penciling (the practice of deleting offending words from an overbroad covenant to salvage the remainder) but argued that the incomplete clause was a mere scrivener’s error, the remedy for which is simply to delete it, leaving behind “a fully complete non-competition clause with no impact on the parties’ bargain.”

The Court of Appeals rejected the argument. It drew a distinction between blue-penciling, which is governed by legal principles specific to restrictive covenants, and the correction of a scrivener’s error, which is governed by general principles of contract construction. Correcting scrivener’s errors, the court held, is a form of reformation. (See Westgate at Williamsburg Condo. Ass’n v. Philip Richardson Co., 270 Va. 566, 575 (2005) (“The correction of a scrivener’s error is a court-sanctioned action reforming a contract or other document.”)). Reframing the requested relief as typo-deletion rather than blue-penciling therefore did not free C&A from the demanding evidentiary showing that reformation requires.

Reformation to correct a scrivener’s error is available only where the parties’ intention was identical at the time of contracting but the writing failed to capture it. The proponent must prove not merely that a mistake occurred but what correction should be made, by evidence that “leaves no reasonable doubt upon the mind of the court.” (See Temple v. Va. Auto. Mut. Ins. Co., 181 Va. 561, 569 (1943)). The court must be able to say with confidence that it knows what the parties really intended. Because the scrivener’s-error doctrine is a narrow exception to the settled rule that courts may not rewrite agreements or add terms, it is construed narrowly. Here, no such evidence existed. The court observed that the incomplete clause, “if any customers of the same, similar, or competing business”, could have been completed in several materially different ways, each with a different effect on the covenant’s scope. For example, the customers might have been ones who “are customers of the Corporation,” or “were customers of the Corporation,” or “are solicited by the departing Shareholder,” or “are diverted from the Corporation.” On the record below, the court simply could not know which the parties intended. Without that knowledge, the provision could neither be reformed into an intelligible sentence nor pared down by deleting the clause as a scrivener’s error.

Notably, the court declined to resolve whether Virginia law categorically forbids blue-penciling a restrictive covenant. Because C&A disclaimed any reliance on blue-penciling and rested entirely on scrivener’s-error reformation, the court had no occasion to decide the point, and it expressly left open “whether those rulings are correct under Virginia law.” The court also went on to hold, as an independent basis for affirmance, that the covenant was fatally overbroad in function and geographic scope even if the offending clause were excised.

Premier Homes Group had subcontracted with Pinnacle Flooring Solutions to install flooring in three homes Premier was constructing. Each of the three nearly identical subcontracts contained a Section 8(b) providing that if Pinnacle defaulted and failed to cure after notice, Premier could take whatever corrective steps it deemed necessary at Pinnacle’s cost, with Pinnacle liable for that cost plus Premier’s reasonable overhead, profit, and attorney fees. When the relationship broke down, Pinnacle sued for nonpayment, attaching the subcontracts as exhibits to its complaint. Premier counterclaimed, alleging that Pinnacle’s work was defective and below industry standards and requesting that the court award it the attorney fees it incurred in prosecuting the matter. Premier incorporated various paragraphs from the subcontracts into its pleading—including the paragraph authorizing recovery of attorney fees—but did not expressly state a basis for its request for attorney fees.

Pinnacle promptly challenged the fee demand, both in its answer and in a motion to strike, arguing that the counterclaim failed to identify a basis for fees as required by Rule 3:25(b). The parties bifurcated the fee issue and tried the merits, and the trial court entered judgment for Premier on its breach-of-contract counterclaim. In the run-up to the later fee hearing, Premier’s memorandum attached two email threads in which its counsel had twice told Pinnacle’s counsel that the fee request arose from Section 8(b) of the subcontracts. Pinnacle’s counsel responded by agreeing to bifurcation but did not address the basis for the fees. At the hearing, Premier conceded that its counterclaim did not specify the basis for fees in isolation but argued that the incorporated paragraphs and the emails together satisfied the rule. The trial court disagreed and denied fees for noncompliance with Rule 3:25(b). A panel of the Court of Appeals reversed, reasoning that Premier had stated a fee claim and had attached the contract, which put Pinnacle on notice of the single available ground for fees. (The contract language was actually incorporated, not attached, but ultimately this distinction did not make a difference).

The Supreme Court reversed. Reviewing the interpretation of its own rules de novo, the Court began with the text. Rule 3:25(b) requires a party seeking fees to demand them in an authorized pleading and further provides that the demand “must identify the basis upon which the party relies.” Because Virginia adheres to the American Rule, a party seeking fees must point to a contractual or statutory provision authorizing recovery. (See St. John v. Thompson, 299 Va. 431, 434 (2021)). Premier’s demand did neither. It requested the fees incurred in prosecuting the matter but identified no statutory basis and no contractual basis; indeed, it never even mentioned the subcontracts, let alone Section 8(b). Under the plain terms of the rule, a party that fails to make the required demand waives the fee claim unless it obtains leave to amend under Rule 1:8. Premier did neither, effectively waiving its right to fees.

Drawing on Graham v. Community Management Corp., 294 Va. 222 (2017), the Virginia Supreme Court held that Rule 3:25 imposes a pleading obligation rather than a notice obligation. The Court of Appeals had asked whether a reasonable litigant in Pinnacle’s position would have understood that the fee request rested on Section 8(b) and concluded that it would. But that’s the wrong approach. The requirement that a party plead the basis for fees is consistent with the bedrock Virginia principle that no litigant may recover on a right not pled. Additionally, it serves a variety of important functions that a pure notice standard would defeat: it enables trial courts to exercise their case-management authority, it guards against claim duplication, and it preserves jury-trial rights on fee claims. Whether Pinnacle should have known the basis for the request was therefore beside the point. Compliance comes only from affirmatively identifying the basis in the demand, held the Court, and Premier had not done so.

So, if you have a fee-shifting clause in your contract, be sure to invoke it in your pleading. Ask for fees and specify the precise basis upon which you rely in making that request. If you become aware that your fee demand is deficient, move promptly for leave to amend your pleading under Rule 1:8.

The case is Webb’s Truck Leasing Corp. v. CHKD Thrift Stores, LLC, Record No. 0246-25-1 (Va. Ct. App. July 21, 2026). The facts go something like this. CHKD Thrift Stores receives donated goods, sells them, and remits the net proceeds to benefit the Children’s Hospital of the King’s Daughters. For years, CHKD and Webb operated under an oral arrangement in which Webb stored and transported trailers holding CHKD’s excess charitable-donation inventory. Beginning in March 2018, CHKD notified Webb that the arrangement was terminated and demanded return of the donations. Webb neither returned the donations nor allowed CHKD to retrieve them. CHKD reiterated the termination in July 2018, paying Webb’s outstanding invoices of $60,694.76 in an effort to make a “clean break.” Then, in a July 1, 2019 letter, CHKD’s counsel declared that all agreements would conclude on August 31, 2019, enclosed a payment of $73,425 stated to satisfy “any and all obligations,” and warned that CHKD would pay “no additional money” and have “[n]o obligation of any kind” to Webb thereafter. Webb cashed the check and admitted that, as of August 31, 2019, CHKD owed it no debt related to the donations.

At termination, Webb still held 75 trailers of CHKD’s donations. CHKD offered a fixed transportation fee of $165 per trailer for returns within a 60-day window; Webb returned none in that period. Between October 2019 and March 2020, Webb returned roughly 40 of the 75 trailers. During that stretch, CHKD’s former corporate manager sent a December 2019 email saying CHKD was “prepared to pay two months, as discussed, at $7,000 a month flat fee, plus the transportation costs of those deliveries,” and CHKD paid Webb $21,260 in January 2020. CHKD characterized that payment as a “generous gesture” tied to delivery rather than storage. Webb stopped returning donations in March 2020 and still held 35 trailers at trial. The dispute produced two suits tried together: CHKD’s warrant in detinue seeking return of its property, and Webb’s action for breach of contract, quantum meruit, and unjust enrichment premised on an alleged new oral agreement for continued storage and delivery beginning in September 2019. After a bench trial, the circuit court found no post-termination agreement, observing that the testimony on material terms was “all over the place,” and granted CHKD’s warrant in detinue and dismissed Webb’s claims.

On appeal, Webb’s central argument was that once the trial court found no binding post-termination agreement, the law required CHKD to pay reasonable compensation for the storage, delivery, and wind-down services Webb had performed. The Court of Appeals rejected the premise. It reaffirmed that quantum meruit and unjust enrichment do not arise merely because a claimant performed work or incurred costs. Quantum meruit applies when services are performed at another’s request, without agreed terms, such that the law implies a promise to pay their reasonable value. (See Mongold v. Woods, 278 Va. 196, 204 (2009)). Unjust enrichment requires that the plaintiff conferred a benefit the defendant knew of and should reasonably have expected to repay, and that the defendant accepted or retained that benefit without paying its value. (See Schmidt v. Household Fin. Corp., II, 276 Va. 108, 116 (2008)). Under either theory, Webb had to establish more than the value of the services it rendered; it had to show that CHKD requested those services, or accepted and retained a benefit under circumstances making nonpayment unjust.

The trial court’s factual findings foreclosed that showing, and those findings were entitled to the same weight as a jury verdict on appeal. The court found that CHKD had done the opposite of requesting continued services: it terminated the arrangement, paid what it owed, and—as the trial judge put it—had been “screaming from the rooftops since 2018” for the return of its property. CHKD never agreed that Webb could keep storing or delivering the donations on Webb’s terms, or withhold them pending additional payment. The Court of Appeals drew the crucial distinction between a party’s willingness to facilitate the return of its own property and a claimant’s asserted right to keep possessing that property at whatever rate it deems appropriate. Because Webb was obligated to return the donations once the slate was clean, its post-termination deliveries conferred no benefit on CHKD for which the law implies a promise to pay. And to the extent Webb performed delivery services CHKD actually requested, the court was entitled to find them already compensated by the $21,260 payment.

The Court gave equally short shrift to Webb’s reliance on that January 2020 payment as evidence of an implied obligation. The trial court was not required to infer an agreement from it. CHKD called the payment a “generous gesture,” explained that “the whole arrangement was for delivery, not storage,” and tied the amount to the fraction of trailers returned. As the Court observed, the parties’ continued discussion of rates into early 2020 reflected the absence of any agreement rather than an acknowledgment of one—ongoing negotiation being “the antithesis of a meeting of the minds.”

Webb’s reliance on T. Musgrove Construction Co. v. Young, 298 Va. 480 (2020), fared no better. While Musgrove recognizes that equitable principles may require payment for a benefit conferred or retained absent an enforceable contract, it does not compel compensation where the factfinder determines that the defendant neither requested the services nor accepted or retained the asserted benefit.

Finally, the Court held that Webb’s challenges to the exclusion of course-of-dealing evidence, historical rates, an unsigned 2016 contract, and various out-of-court statements did not warrant reversal. This was partly because several arguments were unpreserved under Rule 5A:18, and partly because any error was harmless: the trial court’s ruling turned on its findings that CHKD demanded return of its property and never requested continued services, not on the valuation evidence Webb sought to introduce.

The case arose from a $232,180 landscaping contract between Inviting Structures, Inc., d/b/a State of the Art Landscape (“SOTAL”), and homeowners Margit Royal and Jerry Wolford. SOTAL agreed to build a bluestone terrace, patio, and steps; plant a Japanese garden according to a detailed landscape plan; install lighting; accept delivery of a copper spa tub from the manufacturer and install it on the property; and build a structure to house the spa tub’s mechanics. The homeowners would pay on a draw schedule tied to project milestones: a $60,000 deposit, $60,000 after concrete subslabs were poured, $60,000 after veneer stones were laid, $40,000 after the spa tub was delivered, and $12,180 after planting was completed. The contract also contained a change-order provision requiring that any modifications be in writing and either signed by both parties or approved via email.

Problems surfaced early. In September 2018, Royal noticed that SOTAL’s subcontractor was planting the garden in locations that did not conform to the landscape plan and asked the company to halt work until she returned from a trip out of town. SOTAL complied. In October, SOTAL began pouring concrete subslabs and issued an invoice for the first $60,000 progress payment; the homeowners paid it, though emails exchanged afterward suggested the concrete work was not yet finished. The parties then agreed by email to several additions to the scope of work (e.g., sod installation, rock removal, and additional masonry) with corresponding charges. Over the following months, additional items were added or eliminated by email, including removing the wind chime mount and the structure to house the spa tub mechanics. SOTAL delivered the spa tub to the property in May 2019. The homeowners never made the final two progress payments because they believed the work was incomplete and defective. In August 2019, SOTAL announced it would perform no further work. The homeowners sued for breach of contract; SOTAL counterclaimed for the unpaid balance.

The trial court found that SOTAL committed the first material breach in two ways: by planting the garden out of conformity with the landscape plan in September 2018, and by invoicing for the concrete subslabs before the work was finished in October 2018. Based on those findings, the court dismissed SOTAL’s counterclaim entirely and awarded the homeowners $22,701.92 in damages for defective and incomplete work, while declining to award $131,000 to replace the spa tub.

The Court of Appeals reversed in part. On the planting issue, the court agreed with the trial court’s factual finding that SOTAL had deviated from the contract specifications by installing plants in the wrong locations. But the court held that this breach was not material. The damages attributable to the planting deficiencies were at most $12,471.60 (the total landscaping remediation award), a minor fraction of the $232,180 contract price. And the record showed no bad faith: SOTAL halted planting at Royal’s request and met with her to discuss the issues. Under the Supreme Court of Virginia’s decision in Kirk Reid Co. v. Fine, 205 Va. 778 (1965), even willful departures from contract specifications do not necessarily meet the threshold of bad faith needed to completely bar a contractor’s recovery, and courts should instead permit recovery with an offset against damages awarded to the other side.

On the premature-invoicing issue, the court’s analysis was equally straightforward. The contract contained no provisions governing when an invoice could be issued; it specified only when payment was due. And even assuming the invoice constituted a breach, the homeowners voluntarily paid it without objection and suffered no damages because SOTAL completed the concrete work shortly afterward. That was not the kind of breach that goes to the “root of the contract.”

Turning to the homeowners’ breach, the court found that their failure to make the $40,000 progress payment due upon spa tub delivery was a breach of the contract’s express terms. The contract tied the payment to delivery, not to completion of installation, and the homeowners had rejected a proposed addendum that would have required additional work before payment was due. But this breach, too, fell short of the materiality threshold. The homeowners had paid $192,170 of the $232,180 contract price—substantial performance of their payment obligation. Their failure to pay the remaining balance went only to “a minor part of the consideration,” not to the root of the contract, following the Supreme Court of Virginia’s holding in Neely v. White, 177 Va. 358 (1941). And there was no bad faith: the homeowners genuinely believed the work was incomplete.

The court also addressed the contract’s change-order provision, holding that email exchanges between the parties satisfied the requirement for written approval of scope changes. Because the contract itself authorized approval “via email,” the trial court erred in treating the provision as requiring more formal documentation. The parties’ email agreements on additional work items—sod installation, rock removal, masonry, sod watering, and various credits—were enforceable change orders, and the amounts owed for that work should be included in the offset calculation on remand, the court held.

This opinion demonstrates that before the first-material-breach rule will be applied to bar recovery, courts will look to the magnitude of the breach relative to the contract as a whole and to whether the breaching party acted in bad faith. Where both sides have fallen short of perfect performance (which is quite common), the appropriate remedy is often not to declare a winner and a loser but to let both parties recover on their claims, with damages offset against each other.

The facts of the opinion describe the following scheme. James River Petroleum, a fuel distributor, issued WEX-backed credit cards to commercial customers. Two cardholders used their cards to “buy” goods and services from SS&B Distributor, LLC, an entity owned by Sharon Britt, and from a separate auto dealership Britt also owned. The relationships among the players were close: Britt jointly owned a residence with one of the cardholders, and she lived on the same street as the other. By late 2023, monthly nonfuel charges across James River’s customer base had spiked from a few thousand dollars to roughly half a million, with the two cardholders responsible for approximately 99 percent of those charges. Fuel purchases showed identical gallon counts at identical per-gallon prices across multiple dates (a forensically improbable pattern given that fuel prices fluctuate). The cardholders ultimately defaulted on more than half a million dollars in card balances.

James River sued for breach of contract, fraud, tortious interference, and business conspiracy. The Hanover County Circuit Court ruled for James River across the board. The Court of Appeals affirmed the breach-of-contract and tortious-interference judgments but reversed the fraud and business-conspiracy counts on source-of-duty grounds.

Virginia “consistently adhere[s]” to the source-of-duty rule to “avoid turning every breach of contract into a tort.” (See MCR Federal, LLC v. JB&A, Inc., 294 Va. 446, 458 (2017)). Under the rule, “in order to recover in tort, the duty tortiously or negligently breached must be a common law duty, not one existing between the parties solely by virtue of the contract.” (Id. (quoting Dunn Construction Co. v. Cloney, 278 Va. 260, 267 (2009))). In Tingler v. Graystone Homes, Inc., 298 Va. 63 (2019), the Supreme Court of Virginia identified three factors that guide the analysis: (1) the level of blame, (2) the nature of the relationship between the parties, and (3) the source of the duty allegedly breached.

The first factor recognizes “escalating degrees of blameworthiness.” (Tingler, 298 Va. at 83). The traditional rule is that a claim sounds solely in contract when it is based on “an act of omission or non-feasance which, without proof of a contract to do what was left undone, would not give rise to any cause of action.” (See Richmond Metropolitan Authority v. McDevitt Street Bovis, Inc., 256 Va. 553, 558 (1998)). By contrast, “a tort claim based on an affirmative wrongdoing may not be so limited.” (Tingler, 298 Va. at 84). The plaintiff argued that because fraud amounts to affirmative wrongdoing, the source-of-duty rule did not apply. The Court of Appeals rejected that logic.

The cardholders in Precision had certainly engaged in textbook affirmative wrongdoing by, according to the evidence, using the cards to charge transactions for goods and services that were never provided and by submitting false invoices supporting those charges. The court acknowledged this directly: “there is no question that using the credit cards to buy nonexistent goods and services constituted an affirmative wrongdoing.” This fact, the court explained, merely “leav[es] open the possibility that the source-of-duty rule does not preclude any of the tort claims.” It does not end the inquiry.

What does end the inquiry? The second and third Tingler factors. Having found affirmative wrongdoing, the court turned to whether the wrongdoing “ar[ose] solely out of a contractual relationship.” That inquiry is governed by the second and third Tingler factors. The second factor asks whether the parties owed each other any duties outside the contract; whether a “special relationship” existed that might impose a duty of care “irrespective of the contract.” Here, the cardholders’ relationship to James River was solely contractual. There was no fiduciary tie, no special relationship, no common-law duty operating independently of the cards’ terms of service.

The third factor asks whether the duty allegedly breached arose solely from the contract. Tingler identifies several useful guideposts here: the timing of the misrepresentation, whether the plaintiff alleges fraudulent inducement of a new contract, and the nature of the damages suffered. If the damages alleged in tort are the same as those alleged in contract, courts assume that the contract is the sole source of the duty owed. Here, the damages were identical across counts: the unpaid card balances. The misrepresentations occurred during performance (through invoices and charges submitted under an existing contractual relationship), not in the contract-inducement phase. James River was, according to the court, seeking to establish a tort action based solely on the (admittedly fraudulent) breach of a contractual duty with no corresponding common law duty. The source-of-duty rule therefore barred the fraud and conspiracy counts.

One important qualification deserves mention. Fraudulent inducement is treated differently from mere broken promises. Quoting Harrell v. DeLuca, 97 F.4th 180 (4th Cir. 2024), the court noted that Virginia “distinguishes between a statement that is false when made and a promise that becomes false only when the promisor later fails to keep his word. The former is fraud, the latter is breach of contract.” Had James River pleaded that the cardholders applied for the cards intending never to pay, the fraud claim might have survived. But misrepresentations during performance—however dishonest—remain breaches of contract.

Let’s take a look at Intercoastal Mortgage LLC v. Wampler (Fairfax Cir. Ct. Mar. 30, 2026). Intercoastal Mortgage LLC (“ICM”) is a mortgage company that originates, underwrites, and funds mortgages across 19 states. The individual defendants—a husband, wife, and son who are military veterans and mortgage professionals, along with two support staff members—left their employment at ICM to join a competitor, Primis Mortgage. Some of their customers followed them. ICM sued, relying primarily on two non-solicitation provisions (Sections 3.3 and 4.2) in its Outside Loan Officer Employment Agreement, as well as an employee non-recruitment clause. Judge Manuel A. Capsalis granted the defendants’ plea in bar, holding that the non-solicitation provisions in the plaintiff’s employment agreement were overbroad and unenforceable as a matter of law.

The court analyzed each relevant provision under the familiar three-part test set out in Home Paramount Pest Control Cos. v. Shaffer, 282 Va. 412 (2011), which holds that a restrictive covenant is enforceable only if it (1) is narrowly drawn to protect the employer’s legitimate business interest, (2) is not unduly burdensome on the employee’s ability to earn a living, and (3) is not against public policy. The employer bears the burden of proving all three elements, and any ambiguities are construed against the employer.

Section 3.3 of the agreement required employees to covenant “not to attempt to move any pipeline loan to any other person or entity following the end of employment.” The court was troubled that the phrases “attempt to move” and “pipeline loan” were undefined in the agreement. What exactly did they mean? The employer’s own testimony revealed that even ICM didn’t have a consistent understanding of what they meant. At an evidentiary hearing, ICM’s CEO initially described an “attempt to move” as a form of indirect solicitation, such as asking a builder to call a customer on your behalf so you could avoid contacting them directly. But he later took a much broader position, claiming that even if a former employee merely responded to a customer who reached out on their own initiative, that would constitute an “attempt to move.” Under this interpretation, a departing loan officer who passively accepted an inbound call from a former customer would be in breach of the agreement. The court found this interpretation would require the employee to affirmatively refuse to do business with any customer who sought them out and refer that customer back to ICM, regardless of the customer’s preference.

The term “pipeline loan” fared no better. A defendant testified that the term refers to loans that are under contract, with an executed agreement between buyer and seller. ICM argued for a much broader definition encompassing not only active pipeline loans but also “prospects”—customers who had been preapproved but hadn’t yet gone under contract or might still be shopping for homes. The CEO conceded that in the case of a prospect, “there’s actually no loan at all,” but rather “the potential for there to be a loan.”

The court held that these ambiguities were fatal. Virginia law is clear that when a restrictive covenant is susceptible to two or more differing interpretations, at least one of which is functionally overbroad, the clause is unenforceable. Courts will not choose the narrower reading to rescue the provision. Section 3.3 was also deemed overbroad because it contained no temporal or geographic limitation.

The court found similar problems with Section 4.2(a), which prohibited former employees from soliciting any customer for whom ICM had processed and closed a loan in the prior 12 months. The restriction covered any company customer; it was not limited to customers the departing employee had personally served. The CEO himself acknowledged that it would be “unrealistic” for employees to know about other loan officers’ customers. Virginia courts have consistently disfavored provisions that impose this kind of unknowable compliance obligation on departing employees.

Section 4.2(b), the employee non-recruitment provision, was also struck down because it prohibited recruiting any ICM employee for any type of employment with any person or entity. As the court observed, this would bar a defendant from recruiting an ICM employee to open a restaurant or invest in a startup, activities that have nothing to do with ICM’s mortgage business. The CEO conceded that the provision was intended to prevent employees from taking groups of people to work in the same industry, but the language as written went far beyond that intent. Courts decide enforceability issues based on the contract as written, not on what the employer may have intended.

Public policy issues don’t usually play much of a role in these non-solicitation cases, but they did here. The court was of the view that preserving consumer choice is an important public policy requirement. The court emphasized that restricting customers’ freedom to choose their own mortgage professional does not serve the public interest. This principle appeared in the court’s analysis of all three provisions, but it was most prominent in the Section 3.3 discussion. The court noted the CEO’s concession that there was essentially no scenario in which a former ICM customer could seek out one of the individual defendants at Primis and close a loan without ICM treating it as a violation. If every instance of a customer voluntarily following a loan officer to a new employer constitutes a breach, the customer’s right to choose is effectively eliminated. The agreement was thus both overbroad and against public policy and could not be enforced.

The case is Bala Jain, LLC v. Amit Jain. The plaintiff, Bala Jain, had sued Amit and Monika Jain for statutory business conspiracy as well as other claims. The jury awarded $5,429,608.77 in damages against each of the defendants, without any consideration of tripling that amount. The successful plaintiff then asked the court to triple that amount to over $16M, which it claimed was required by the terms of the statute. The trial court ultimately agreed and tripled the damages, holding it lacked discretion to avoid or reduce them.

The court first looked to prior court decisions to see how the statute had been interpreted. It found two Virginia Supreme Court opinions in which the question had come up, but neither one actually answered the question head-on. It then pulled up another circuit court case–Maximus, Inc. v. Lockheed Info. Mgmt. Sys. Co., 47 Va. Cir. 193 (Richmond Oct. 7, 1998)–in which the trial court judge found that the plain language of the statute required treble damages and did not just permit them.

The Fairfax court agreed with this approach. It noted that there are several other statutes in the Virginia Code dealing with treble damages. Some clearly mandate treble damages whereas other statutes clearly only permit such awards. Therefore, the court concluded, the Virginia legislature is aware of the difference and knows how to write laws that achieve their objective. With the business-conspiracy statute, the legislature could have easily inserted language to give the trial court mere discretion to award treble damages. Instead, the statute says that a plaintiff “may sue therefor and recover three-fold damages.”

The defendants argued that the permissive word “may” in that clause suggests that treble damages are discretionary. Taking the plain-language approach, the court disagreed. The “object of the sentence in the statute is the injured party, not a court,” it wrote. There, it’s the plaintiff who “may” opt to sue. It doesn’t say that a court “may” triple the damages. For that reason, it held that “treble damages are mandatory” and, based on that one simple ruling, promptly added over $10M to the plaintiff’s damages award.

The opinion lays out the following factual background. The Terrace View Subdivision in Forest, Virginia, was developed in 2000. When the subdivision was created, the developer recorded a Declaration of Protective Covenants that authorized (but did not require) the creation of a property owners association. The Declaration gave the developers the right to transfer common areas to Terrace View POA, and stated that the association “shall have the right to establish and collect assessments,” with lot owners deemed to have “agreed to pay same when and as due” by purchasing property in the subdivision.

The developer incorporated Terrace View POA in 2005, but the association remained inactive for nearly a decade. It wasn’t until 2014 that the corporation registered with Virginia’s Common Interest Community Board. Terrace View also adopted bylaws stating that its board of directors had a duty to “fix the amount of the annual assessment against each Lot” and to “cause the Common Property to be maintained.”

In 2022, Terrace View imposed an “Association Fee” on Shekar and Barbara Jannah, who owned multiple lots in the subdivision. The Jannahs refused to pay and filed a declaratory judgment action, arguing that Terrace View was not a valid POA under Virginia law and had no authority to levy assessments. They also sought a declaration that Terrace View could not enforce any restrictive covenants against them. This turned out to be a winning strategy.

The trial court entered summary judgment in the Jannahs’ favor, and the Court of Appeals affirmed. Here’s why:

1. Terrace View Isn’t a Valid POA

Under Virginia law, to qualify as a property owners association under the Virginia Property Owners Association Act, an entity must satisfy a two-prong test established by the Virginia Supreme Court. The association must have both (1) the power to collect assessments; and (2) a corresponding duty to maintain common areas. (See Dogwood Valley Citizens Association v. Winkleman, 267 Va. 7, 14 (2004)). Both requirements must be “expressly stated in a recorded instrument.” The court emphasized that the duty to maintain common areas must be “imposed” on the association. Voluntary assumption of maintenance responsibilities is insufficient. (See Anderson v. Lake Arrowhead Civic Association, 253 Va. 264, 272 (1997)). A duty is only truly “imposed” if it cannot be eliminated simply by amending the association’s bylaws.

Terrace View’s Declaration failed this test. While it gave the association the right to collect assessments, it did not impose any duty to maintain common areas. That duty appeared only in Terrace View’s bylaws, which could be amended at any time by its board of directors. Because the maintenance obligation could be eliminated through a simple bylaw amendment, it wasn’t truly “imposed” within the meaning of the statute.

The court rejected Terrace View’s argument that a 2024 amendment to the POAA had relaxed these requirements. Tracing the legislative history, the court found that the amendment merely clarified that valid POAs could use assessment funds to pay for legal obligations and contractual duties. It did nothing to change what makes an entity a valid POA in the first place. In other words, the amendment addressed what existing POAs can spend money on, not what an organization needs to qualify as a POA.

2. The Declaration’s Assessment Provisions Were Not Enforceable

Terrace View presented an alternative argument: even if Terrace View wasn’t a valid POA, it could still collect assessments based on contract principles. After all, the Declaration stated that lot owners “agreed to pay” assessments “when and as due.” This argument might work in appropriate circumstances, but here, the court rejected it because the assessment provision was too indefinite to constitute an enforceable contractual provision.

Under Virginia law, a contract must be “definite and certain as to its terms and requirements” and must “spell out the essential commitments and agreements.” The court looked to decisions from other jurisdictions and identified a two-part definiteness test for assessment covenants: the covenant must contain ascertainable standards for both (1) the amount of the assessment and (2) the purpose for which assessments will be used.

The Declaration here failed both prongs. It did not specify any amount that could be assessed. It simply said the association would have “the right to establish” assessments, leaving the amount entirely to the association’s discretion. The Declaration also said nothing about what assessment revenues could be used for. Its language shed no light on where or how assessment revenue would be funneled. As the court noted, “declaring that someone ‘shall have the right’ to do something does little to inform contracting parties how they will exercise that right.”

Without standards governing either the amount or purpose of assessments, a reasonable purchaser could not ascertain from the Declaration what financial obligations came with buying a lot in the subdivision. The assessment provision was therefore held void for indefiniteness.