Virginia Courts Dismiss Claimes of Civil Conspiracy Against Parent Companies and Their Wholly-Owned Subsidaries
In 2010, the Supreme Court of the United States squarely held that “a parent corporation and its wholly owned subsidiary are incapable of conspiring with each other.” Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2211 (2010) (citing Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984)). Most courts have not faced the issue of whether this holding extends beyond the antitrust realm to bar civil conspiracy claims against parents and wholly-owned subsidiaries in other statutory and common-law contexts. Two recent decisions from the United States District Court for the Eastern District of Virginia, Richmond Division and the Circuit Court of the City of Roanoke recently clarified this issue.
The United States District Court for the Eastern District of Virginia, Richmond Division
In Scott & Stringfellow, LLC v. AIG Commer. Equip. Fin., Inc., Civil Action No.
3:10cv825, 2011 U.S. Dist. LEXIS 38554, at *17 (E.D. Va. Apr. 8, 2011) (Hudson, J.), the plaintiff asserted that the defendant subsidiary and its parent corporation conspired for the purpose of breaching a contract between the plaintiff
and the wholly-owned subsidiary. The plaintiff pled a claim of statutory conspiracy under Virginia law against the subsidiary defendant. In response, the defendant moved to dismiss the conspiracy claim on the grounds
that a wholly-owned subsidiary and its parent corporation could not conspire with one another under Virginia law. In dismissing the conspiracy claim as a matter of law, the court held: “[I]n the absence of any
other Supreme Court or Fourth Circuit holding to the contrary, this Court agrees with the other federal district courts in Virginia that have held a parent corporation to be unable to legally conspire with its wholly owned subsidiary
for the purposes of violating §§ 18.2-499 and 500.” Id. at *17.
The Circuit Court of the City of Roanoke
In Burchett v. Carilion Clinic, et al., CL09001529-00 (Roanoke 2011) (Weckstein, J.), the plaintiff alleged that the defendant medical
clinic, as well as certain of its wholly-owned subsidiaries and employees, had conspired to promulgate an internal plan to prevent patients from being referred to specialists that were employed outside of the clinic system, in breach
of the applicable standard of care. The defendants moved to dismiss the claim on the basis of the intracorporate immunity doctrine, which holds that a corporation cannot conspire with itself as a matter of law. In April
2010, the court sustained the defendants’ demurrer without leave to amend, holding that such a claim was a legal impossibility under Virginia law.
Troutman Sanders regularly represents corporate clients in business litigation in federal and state courts, including with respect to business torts, such as civil and statutory conspiracy claims. Troutman Sanders will continue to monitor this evolving line of authority, both in Virginia and nationwide.