HALIFAX CORPORATION, ET AL.
April 18, 1997
Record No. 960754
COMMERCIAL BUSINESS SYSTEMS, INC.
HALIFAX CORPORATION, ET AL.
Theodore J. Markow, Judge Designate
Present: All the Justices
OPINION BY JUSTICE A. CHRISTIAN COMPTON
FROM THE CIRCUIT COURT OF CHESTERFIELD COUNTY
This is the final chapter in litigation that has continued most
of this decade. The moving party in the controversy is a
disgruntled player in the rough-and-tumble world comprising the
The main players in this dispute are: Commercial Business
Systems, Inc. (CBS), a business located in Chesterfield County
that engaged in the repair, maintenance, and refurbishing of
computer and data processing equipment; BellSouth Services,
Incorporated, a business located in Birmingham, Alabama, that was
created to perform selected staff and planning functions for
Southern Bell and South Central Bell Telephone Companies and to
consolidate services that can be managed most effectively through
a central organization; Halifax Corporation, formerly Halifax
Engineering, Inc., a Virginia corporation located in Alexandria
that engaged in business similar to that of CBS; and Jerry H.
Waldrop, an Alabama resident who had been employed by BellSouth
in its Birmingham office as a contract officer responsible for
negotiating contracts with vendors and selecting vendors to
repair telephone and computer equipment for BellSouth.
In 1990, CBS filed a motion for judgment against BellSouth
seeking recovery of lost profits and punitive damages for alleged
statutory conspiracy to injure CBS in its trade or business, in
violation of Code ‘ 18.2-499; common law conspiracy to
injure CBS’s business; and tort liability imputed to BellSouth
under the doctrine of respondeat superior as a result of the
activities of Waldrop. CBS claimed that Waldrop awarded a
contract to CBS’s competitor, Halifax, in exchange for commercial
Following discovery, the trial court granted BellSouth’s
motion for summary judgment and denied CBS’s motion for partial
summary judgment. CBS contended that, as a matter of law, Waldrop
acted within the scope of his employment with BellSouth when he
engaged in improper conduct.
On appeal, this Court reversed the trial court’s judgment and
remanded the case for further proceedings. Commercial Business
Systems v. BellSouth Services, Inc., 249 Va. 39, 453
S.E.2d 261 (1995). The record in that appeal was comprised of the
pleadings, including memoranda and exhibits accompanying the
summary judgment motions, "selected" responses to
requests for admission, and "excerpts" from deposition
testimony of a number of witnesses.
In that appeal (hereinafter, the BellSouth case), we
held that a jury issue was presented on the question whether
Waldrop acted within the scope of his employment when he
committed the wrongful acts, and thus the trial court erred in
granting summary judgment in favor of BellSouth on CBS’s tort
liability claim. Id. at 46, 453 S.E.2d at 266. We also
held that the trial court erred in granting summary judgment on
CBS’s claims of statutory conspiracy, common law conspiracy, and
Upon remand, the BellSouth case was consolidated with
another action that had been filed by CBS. Prior to the BellSouth
appeal and after the trial court had ruled on the summary
judgment motions in favor of BellSouth, CBS nonsuited other
defendants in that case. Then, CBS refiled an action against some
of the parties who had been defendants at the pleading stage of
the BellSouth case. After the cases were joined upon
remand, CBS filed a consolidated motion for judgment against
defendants BellSouth, Halifax, Waldrop, and Clifford J. McGuire,
who had been Halifax’s southeastern regional manager.
The consolidated cases were tried to a jury during eight days
in October 1995. The issues submitted to the jury were CBS’s
claims against all defendants of statutory conspiracy, common law
conspiracy, and conspiracy to tortiously interfere with a
prospective business relationship. Also submitted was CBS’s claim
against Halifax and McGuire of wrongful interference with a
prospective business relationship.
The jury found in favor of all defendants on the statutory and
common law conspiracy claims. The jury found in favor of
BellSouth and Halifax, and against Waldrop and McGuire, on the
claim of conspiracy to tortiously interfere with a prospective
business relationship. The jury found against Halifax and McGuire
on the claim of wrongful interference with a prospective business
relationship. The jury awarded CBS compensatory damages of
$435,177 plus prejudgment interest.
Subsequently, the trial court entered judgment on the verdict
in favor of BellSouth. Later, the court set aside the verdict
against Halifax, McGuire, and Waldrop and entered judgment in
their favor, from which CBS appeals. The judgment in favor of
BellSouth has become final. Waldrop, who appeared pro se
throughout the proceedings, has not appeared on appeal.
The dispositive issue on appeal is whether CBS presented
evidence sufficient to raise a jury question on its claim that
Halifax and/or McGuire (hereinafter, Halifax) wrongfully
interfered with CBS’s prospective business relationship with
BellSouth in connection with a contract that CBS had with
BellSouth that expired July 28, 1987.
When the verdict of a jury has been set aside by the trial
court, the verdict is not entitled to the same weight upon
appellate review as one that has received the trial court’s
approval. But in considering the facts under these circumstances,
the appellate court will accord the plaintiff benefit of all
substantial conflicts in the evidence and all reasonable
inferences that may be drawn from the evidence. Kelly v. Virginia
Elec. and Power Co., 238 Va. 32, 34, 381 S.E.2d 219, 220
Before we summarize the evidence, we shall dispose of a
contention made by CBS that somehow Halifax is bound in the
present appeal by factual conclusions stated by this Court in the
former appeal in the BellSouth case to which Halifax was
not a party. At various times on brief and during oral argument
of the appeal, CBS has packaged this contention in terms of
"controlling precedent" or "stare decisis" or
"persuasive," although not "the law of the
case" or "res judicata." Whatever may be the
actual basis of this contention, we reject it.
Of course, under the doctrine of stare decisis, the principles
of law as applicable to the state of facts in the BellSouth
case will be adhered to, and will apply in later cases where the
facts are substantially the same, even though the parties are
different. See Selected Risks Ins. Co. v. Dean,
233 Va. 260, 265, 355 S.E.2d 579, 581 (1987). But adherence to
that principle relating to conclusions of law does not mean that
conclusions of fact based on a summary judgment record have any
binding effect whatsoever, in the context of appellate review,
upon factual findings arising from a jury trial where the parties
in the two cases are different and where, unlike the summary
judgment proceeding, the facts were fully developed.
Indeed, a reason underlying our Rule 3:18, providing that
summary judgment "shall not be entered if any material fact
is genuinely in dispute," is to assure that parties’ rights
are determined upon a full development of the facts, not just
upon pleadings and "selected" "excerpts" from
discovery materials. Thus, it would be illogical to hold, in this
context, that appellate conclusions of fact in a summary judgment
appeal have any controlling effect upon facts later developed in
the case during a jury trial. See Carper v. Norfolk
& W. R. Co., 95 Va. 43, 45, 27 S.E. 813, 813 (1897) (upon
remand for trial de novo, new decision required
upon second appellate review if facts change).
The material facts presented during the jury trial essentially
are undisputed. CBS was founded by Gary Ewell Lacey as a sole
proprietorship "around 1981" to repair, refurbish, and
sell telecommunications equipment. Incorporated in 1984, CBS
"would approach companies," including telephone
companies, "and see if they needed communications equipment
either purchased or refurbished or repaired." Lacey
contacted BellSouth seeking to obtain a contract for the repair
of Digital Equipment Corporation (DEC) "writer
printers" known as "TP1000s," which were
manufactured for and extensively used by telephone companies.
Lacey dealt with William B. Jordan, a BellSouth employee whose
duties involved writing "contracts for the repair of movable
telecommunications equipment." Jordan also was responsible
for "contract administration," that is, his "job
was to assure that the contract was being met by both the vendor
and the company."
In 1985, CBS submitted a bid of $691,060 and was awarded
Contract No. 85073 for "The Repair/Refurbishment and
Conversion of TP1000 Teleprinters" for "the two year
period July 29, 1985 thru July 28, 1987." The contract did
not "grant [CBS] an exclusive privilege to repair all
products of the type described" and provided that BellSouth
"may contract with others for the repair of comparable
products and services." The contract also provided for
termination by either party upon 60 days notice "without any
charge or liability whatsoever."
CBS commenced performing under the contract and "had an
excellent working relationship" with Jordan, who solely
administered the contract. In November 1986, because the
"contract was coming up for renewal," Lacey contacted
Jordan and advised him that CBS "would like to start the
process to renew the contract with BellSouth." According to
Lacey, when Jordan was asked "what he thought [CBS’s] chances of renewal were," Jordan responded, "that’s not
going to be a problem . . . you guys are one of the
best vendors that we have . . . . You’re doing
your work, performing like you’re supposed to and you [are] also
In February 1987, Jordan changed job responsibilities and
ceased being the administrator of the contract. Jordan’s duties
with reference to the contract were assumed by Waldrop. Waldrop
also became BellSouth’s contracting officer responsible for
negotiating equipment repair contracts with vendors upon
expiration of such contracts.
In early 1987, CBS unsuccessfully attempted by both telephone
and letter to reach Waldrop to discuss renewal and expansion of
its contract. Finally, Waldrop responded by telephone. When Lacey
"tried to talk to him about renewal," Waldrop
"suggested" that CBS was "having very serious
financial trouble" and that CBS was "having warranty
problems with equipment being returned back not being repaired
satisfactorily." CBS undertook an investigation of Waldrop’s
charges and concluded that Waldrop’s information was
"totally unfounded." On June 4, 1987, CBS advised
Waldrop by letter of this finding.
On June 15, 1987, Waldrop wrote Lacey expressing appreciation
for CBS’s "recent letter" and the "information
regarding your current financial status and the recent problems
your company has encountered." Waldrop wrote: "I hope
you can continue to make your comeback."
"However," the letter continued, "as I
discussed with you over the telephone, our plans are not to renew
the contract with your company at this time. BellSouth Services
strives to offer our clients the best in quality and service that
the `market’ has to bear. This can be achieved by opening that
market to other qualified vendors and encouraging competition for
the services we desire." BellSouth, through Waldrop, refused
to allow CBS to bid "or even be part of the
competition" for a new contract, and the expired contract
was not renewed.
In the meantime, during 1985-86, McGuire, as Halifax’s
"southeastern regional manager," was "supposed to
drum up business" for his employer. At that time, McGuire
began "seeking business with BellSouth through Jerry
Waldrop." This effort was successful, and Halifax started
"doing work" for BellSouth "that involved some
printer repairs." Later, in "middle ’86," Halifax
"began doing some additional work for BellSouth," which
included "TP1000 work."
In June 1987, Halifax submitted a written proposal to
BellSouth "seeking to do the TP1000 work." Prior to
that time, Halifax was receiving TP1000 printers from BellSouth
for repair without any written contract. McGuire, called by CBS
as an adverse witness, testified he had no knowledge of CBS’s
existence in June 1987.
In June, July, and August of 1987, Halifax began getting
"more and more" TP1000s from BellSouth for repair.
Subsequently, BellSouth awarded Halifax a written contract for
"The Repair/Refurbishment of DEC Printers, Keyboards and
Terminals" for the term "January 1, 1988 through
December 31, 1989."
In July 1989, following negotiations between McGuire and
Waldrop, Halifax’s contract was amended by a written agreement,
which extended the term of the initial agreement six months to
June 30, 1990. This amendment allowed Halifax "to get a
higher price" for the work it was performing.
During the period when Halifax was dealing with Waldrop,
Halifax began obtaining various items and services directly from
companies in which Waldrop had a personal interest. For example,
an owner’s manual, which Halifax had to purchase from the
equipment manufacturer, accompanied each repaired TP1000. Halifax
began saving some of the cost of the manuals by purchasing them
directly from a company named Entracom, which was owned by
Waldrop. He had manuals privately copied in Birmingham, and
Entracom sold the reproduced manuals to Halifax at a large markup
over the copying cost.
In addition, Halifax had an agreement with Waldrop that
Entracom would perform "all the shipping" of repaired
items for Halifax and that Halifax would purchase all its
"supplies" from Entracom. During the period
October-December 1987, "boxes" and "pallets"
containing items repaired by Halifax were being shipped by a
company named MedSouth, Incorporated, in rented trucks. The
trucks were driven by either Waldrop or one of his relatives.
Waldrop’s brother was executive vice-president and general
manager of MedSouth. Later, the shipping was performed by
Entracom using leased trucks driven by Waldrop family members.
The family members were compensated for their services to
MedSouth and Entracom.
Also, Halifax paid Entracom $6,000 per month in 1988 as rent
for office and warehouse space in Birmingham. Entracom paid $620
per month to lease the space.
In 1989, Waldrop was discharged because he had been involved
in conflicts of interest while employed by BellSouth. In a
response to a CBS request for admission, BellSouth admitted that
the "windfall profit from Entracom’s sale of supplies to
Halifax was a kickback or bribe" to Waldrop for contract
amendments and "was intended to induce him to send more
business to Halifax." The trial court instructed the jury
that this admission was binding on BellSouth only and was not to
be considered as evidence against Halifax or Waldrop.
The analysis must begin with the question whether CBS
presented any credible evidence that would permit a jury to find,
without speculating, that Halifax committed the tort of wrongful
interference with prospective business or economic advantage. For
without proof of the underlying tort, there can be no conspiracy
to commit the tort.
In Glass v. Glass, 228 Va. 39, 51, 321 S.E.2d
69, 76-77 (1984), this Court recognized such a tort. We
summarized the elements of the cause of action as follows:
"(1) the existence of a business relationship or expectancy,
with a probability of future economic benefit to plaintiff; (2)
defendant’s knowledge of the relationship or expectancy; (3) a
reasonable certainty that absent defendant’s intentional
misconduct, plaintiff would have continued in the relationship or
realized the expectancy; and (4) damage to plaintiff." Id.
at 51-52, 321 S.E.2d at 77.
The foregoing elements were embodied in Instruction No. 27 in
the present case, given without objection by any party. The trial
court told the jury that CBS had the burden to prove by a
preponderance of the evidence that: "(1) there was a
business relationship or expectancy between CBS and BellSouth
Services, with a reasonable probability of future economic
benefit to CBS; (2) Halifax and/or McGuire knew about this
business expectancy or relationship; (3) in the absence of
Halifax and/or McGuire’s intentional misconduct, it is reasonably
certain that CBS would have continued in the relationship or
realized the expectancy; and (4) such misconduct proximately
caused damage to CBS."
In a written opinion granting the motion to set the verdict
aside, the trial court assumed without deciding that there was a
business expectancy between CBS and BellSouth, that there was
intentional misconduct, and that CBS sustained damages. The court
ruled that there was evidence from which the jury could have
found Halifax and McGuire knew of the existence of CBS and that
CBS had a contract with BellSouth for the repair of TP1000
printers. But the court also ruled there was no evidence Halifax
"had any knowledge of any expectancy that the contract would
continue, for how long, or that it was subject to renewal or that
Halifax was in any way prevented from competing with CBS for that
business because of the CBS expectancy."
Importantly, the trial court also concluded the evidence
failed to establish the first element of the cause of action,
namely, that CBS had a reasonable probability the contract would
be renewed, or the third element, namely, that it was reasonably
certain "CBS would have realized the expectancy but for the
misconduct of Waldrop and Halifax/McGuire." Thus, we shall
focus on those two elements.
Initially, we shall comment on several obvious principles that
apply to the tort of wrongful interference with a prospective
business or economic advantage. First, proof of the existence of
the first and third elements of the tort must meet an objective
test; proof of subjective expectations will not suffice. In other
words, mere proof of a plaintiff’s belief and hope that a
business relationship will continue is inadequate to sustain the
cause of action.
Second, the proof must establish a "probability" of
future economic benefit to a plaintiff. Proof of a
"possibility" that such benefit will accrue is
We have searched this voluminous record, which includes a
2,998-page appendix, in an effort to find credible evidence upon
which a jury could properly base a finding that, at the time the
contract was about to expire, CBS had a reasonable probability
the contract would be renewed or CBS would have realized any such
expectancy but for the misconduct of Halifax. The record is
utterly devoid of such evidence.
It is true that CBS was encouraged by Jordan’s November 1986
comments about the prospects for renewal. Subjectively, during
the period when the contract was about to expire, CBS’s
principals thought CBS was performing well under the contract and
they had a subjective expectation that it would be renewed.
However, CBS failed to present credible evidence that either
Jordan, if he had continued to administer the contract, or
Waldrop, when he took over as contract administrator, would
probably have renewed the contract.
During his deposition testimony presented as part of CBS’s
case, Jordan stated it would be "hard to say at this
juncture" whether he would have continued to do business
with CBS if he had remained contract administrator. This
testimony was consistent with Jordan’s live testimony when called
later in the trial as BellSouth’s witness. Jordan stated he never
told Lacey that "CBS could expect to be renewed."
Jordan was replaced by Waldrop in February 1987. The evidence
is uncontradicted that Waldrop was the BellSouth employee who
would decide whether CBS would continue in a relationship with
BellSouth after the July 1987 expiration of the TP1000 contract.
The undisputed evidence showed that under no circumstances, and
for reasons totally unrelated to any intent to profit on his own,
would Waldrop have renewed the contract.
CBS was experiencing problems that made it a tarnished
participant in the competition among many vendors for BellSouth’s
work. For example, while the contract was in effect, CBS’s
"costs got kind of out of hand" and it "had some
cash flow problems," according to the testimony of Thomas
Michael Clayton, CBS’s president at the time of trial. CBS’s
outside accountants reported to it on February 27, 1987 that
"the corporation incurred a net loss of $264,810 during the
year ended October 31, 1986 and, as of that date, the
corporation’s current liabilities exceeded its current assets by
$173,471 and its total liabilities exceeded its total assets by
$106,918." According to the accountant, "These factors
indicate that the corporation may be unable to continue in
existence." CBS failed to report this information to
BellSouth. Also, CBS failed to submit monthly reports regularly
about its "accountability," as required by the
In early 1987, CBS closed an office in Columbia, South
Carolina, and consolidated its operations in the Richmond area in
an effort to cut costs. This removed its presence and "depot
location" from near the Florida-Alabama area; BellSouth did
not want its equipment "setting up there in Virginia"
for repair because it was "trying to get vendors that were
close" to Birmingham. During this period, CBS was unable to
make federal tax payments in a timely fashion.
BellSouth was aware of all these circumstances, which played a
part in the decision not to renew. And, during this period
BellSouth was doing business with another vendor, Halifax, a
prerogative BellSouth could exercise under the terms of the
nonexclusive CBS-BellSouth contract.
Finally, contrary to CBS’s contention, there was no credible
evidence of any BellSouth "standard practice" or
"preference" for continuing to work with incumbent
vendors. CBS’s contention is based on a portion of the testimony
of Christopher Jones, a Halifax executive called by CBS as an
adverse witness. Jones was asked by CBS’s attorney whether
Waldrop "once" told him "that once you get working
with BellSouth if you do a good job you have a contract with us
forever." Jones answered, "I recall seeing that."
When asked whether Waldrop "said it to you," Jones
responded, "I don’t recall. I recall hearing it, I don’t
recall who he said it to . . . I recall hearing it, I
don’t know who said it." Testimony about a comment from an
unidentified source regarding an unidentified time period is
insufficient to establish a corporate policy of renewing
In sum, we hold CBS established merely a subjective belief or
hope that the business relationship would continue and merely a
possibility that future economic benefit would accrue to it. And,
conflicts of interest existing in the BellSouth-Halifax
relationship cannot be converted into a business expectancy for
Thus, it follows that the trial court did not err in setting
aside the verdict in favor of CBS for its failure to prove the
cause of action. This conclusion makes it unnecessary to address
the remaining issues in the appeal.
Therefore, the judgment from which the appeal was awarded will