eNotes: Liability – July 2022 – Washington, DC

SIGNIFICANT CASE SUMMARIES

DC CASE SUMMARY

Iron Vine Security, LLC, et al., v. Cygnacom Solutions, Inc.
District of Colombia Court of Appeals
2022 D.C. App. LEXIS 153

Decided: May 22, 2022

A plaintiff in DC may pursue numerous possible avenues of relief simultaneously but may be compensated for a single harm only once.

Background

In September 2011, Iron Vine and Cygnacom entered into a Subcontract Agreement to provide information technology services to the United States Department of State. Under the Subcontract, Cygnacom provided information technology services, utilizing its own employees, pursuant to a separate Statement of Work executed by Cygnacom and Iron Vine. In the negotiation of the parties’ working relationship under that subcontract, Cygnacom sought assurance that Iron Vine would not use the opportunity to hire away its employees, resulting in a Non-Solicitation Provision. Iron Vine and Cygnacom worked under their subcontract arrangement without incident until 2015, when Iron Vine began to make plans to replace Cygnacom on the Subcontract. On December 15, 2015, Cygnacom’s president was informed that Iron Vine was not renewing the Subcontract.

Iron Vine entered into a new subcontract agreement with Second Factor, a new corporation formed by a former Cygnacom employee. The two companies ultimately hired six Cygnacom employees who had worked on the Subcontract. All six resigned from Cygnacom on the same day, January 25, 2016. In February 2016, Cygnacom sued Iron Vine and Second Factor, for breach of contract, breach of the duty of good faith and fair dealing against Iron Vine, and claims against all three defendants of tortious interference with Cygnacom’s business relationships with its employees. At trial, Cygnacom obtained a judgment for compensatory and punitive damages against Iron Vine and Second Factor. In their appeal, Iron Vine argued the Non-Solicitation Provision was unenforceable, and Second Factor argued that that lost profit damages awarded against it on Cygnacom’s claim of tortious interference must be vacated because they are duplicative of lost profit damages awarded against Iron Vine.

Holding

The District of Colombia Court of Appeals held that the Trial Court did not err in concluding that the Non-Solicitation Provision was enforceable, and the jury’s breach of contract verdict stands. However, the Court remanded the case to the Trial Court to revise its judgment to ensure that Cygnacom does not receive compensatory damages in excess of the amount already awarded for its lost profit damages on the breach of contract and the conspiracy counts, as it could not receive overlapping compensation for the same harm.

Questions about this case can be directed to Nicholas Schaufelberger at (202) 945-9502 or nschaufelberger@tthlaw.com.