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LOCKHEED INFORMATION MANAGEMENT SERVICES, INC. et al. v. MAXIMUS, INC.



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LOCKHEED INFORMATION
MANAGEMENT SERVICES, INC. et al.

v.

MAXIMUS, INC.


January 14, 2000

Record No. 990500 & Record No. 990499

LOCKHEED INFORMATION MANAGEMENT SYSTEMS
COMPANY, INC., ET AL.

v.

MAXIMUS, INC.

 

MAXIMUS, INC.

v.

LOCKHEED INFORMATION MANAGEMENT SYSTEMS
COMPANY, INC., ET AL.

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND

OPINION BY JUSTICE ELIZABETH B. LACY

Present: All the Justices

Randall G. Johnson, Judge


This is the second appeal arising from the
cancellation of a Notice of Intent to Award a contract to
privatize two child support offices of the Virginia Department of
Social Services (DSS). In 1995, Maximus, Inc. and Lockheed
Information Management Systems Co., Inc. (Lockheed) submitted
bids pursuant to a request for proposals issued by DSS. DSS
issued a Notice of Intent to Award the contract to Maximus.
Pursuant to Code ? 11-66, Lockheed filed a protest to DSS’s
decision. Among the statements in the protest were allegations
that two members of the evaluation panel had undisclosed
conflicts of interest. The Notice of Intent to Award the contract
was subsequently cancelled.

Maximus filed this action alleging that
Lockheed had tortiously interfered with its contract expectancy
and that Lockheed, The Center for The Support of Families, Inc.,
(the Center) and an employee of the Center engaged in a
conspiracy to injure Maximus’ reputation and business in
violation of ?? 18.2-499 and -500.
[1]

The trial court granted Lockheed’s motion to
strike at the close of Maximus’ evidence at the first trial and
entered judgment in favor of the defendants because it found that
there was no showing of malice or other egregious conduct. We
awarded Maximus an appeal and reversed, holding that such
evidence was not required as an element of a claim for tortious
interference with contract expectancy. The case was remanded for
further proceedings. Maximus, Inc. v. Lockheed Inf. Mgmt.
Systems
, 254 Va. 408, 493 S.E.2d 375 (1997).

At the second trial, the jury returned a
verdict in favor of Maximus for $1,500,000 on the tortious
interference with contract expectancy claim, Count I, and for
$3,000,000 on the conspiracy claim, Count II. Following
post-trial motions and briefing, the trial court denied
Lockheed’s motions to strike the evidence and to set aside the
verdict, but reduced the amount of the verdict. The trial court
determined that the damages claimed under both Count I and Count
II were identical, and, accordingly, limited Maximus to a single
damage recovery. The trial court further concluded that Maximus
was not entitled to recover the costs it incurred in preparing
the bid or the amounts assigned as lost overhead. The trial court
then granted Maximus’ motion for treble damages pursuant to
? 18.2-500 and entered judgment in the amount of $2,223,372
in damages plus attorneys’ fees and costs.

Lockheed filed an appeal challenging a number
of rulings by the trial court. Maximus filed an appeal limited to
the trial court’s determination that Maximus could not recover
lost overhead as part of lost profits. We granted both petitions
for appeal and have consolidated the appeals.

FACTS

In November 1994, DSS issued a request for
proposals pursuant to the Virginia Public Procurement Act, Code
?? 11-35 through –80. DSS sought to privatize two
child support enforcement offices in Northern Virginia. Lockheed
and Maximus submitted timely responses. The proposals were
evaluated by a five member committee, including Carolyn W. Davis
and Ernest Lee Williams, employees of DSS. The committee was
chaired by Jane Hollowell, contracts officer for DSS. A Notice of
Intent to Award the contract to Maximus was issued on April 13,
1995.

Shortly thereafter, the two contracting
officers for DSS, Jane Hollowell and Clifford Crofford, learned
that Lockheed might file a protest, based on a number of issues,
including a possible conflict of interest by two of the members
of the evaluation committee. Joseph Crane, Assistant Director for
Program Development and Administration of the Division of Child
Support Enforcement, sent a memorandum to Michael Henry, Director
of the Division, reciting the anticipated allegations and raising
the possibility that the Notice of Intent to Award might have to
be rescinded. Crane suggested, however, that assuming nothing new
came out in the protest, the Notice of Intent to Award could
stand as issued if the score of one of the persons alleged to
have a conflict of interest were removed. Henry agreed with this
recommendation.

Henry also received a telephone call from Harry
W. Wiggins, the Lockheed Vice President in charge of the bid
proposal and a former head of DSS, telling Henry that if DSS
proceeded with awarding the contract to Maximus, things would get
"ugly" or "bloody."

Lockheed filed its protest on April 25, 1995,
accompanied by the affidavits of Wiggins, Robyn Large, a Center
employee and a former DSS and Lockheed employee, and Christy
Leavell, a Lockheed employee. In the protest, Lockheed asserted
that within seven months preceding the posting of the Notice of
Intent to Award, Ernest Lee Williams was an "active
candidate for employment" with Lockheed but was not hired.
Lockheed also stated that Carolyn Davis had been employed by
Maximus while on leave from DSS and that she had been offered
employment with Maximus in Tennessee. The protest also stated
that Maximus asked Davis to submit a resume as a prospective
employee on the bid at issue. Davis complied, and, according to
Lockheed, indicated she would be willing to talk to Maximus if
Maximus received the contract for the Virginia work. The protest
also alleged that Davis called Wiggins seeking employment with
Lockheed at some point after the request for proposals had been
issued.

Based on these allegations, Lockheed argued in
its protest that Williams concealed a material fact regarding his
connection with Lockheed, and that his failure to get the
position could have materially interfered with his objectivity as
a member of the evaluation committee. Lockheed stated that Davis’
situation was "more egregious" than that of Williams,
constituted two violations of the Public Procurement Act, and
affected her ability to render a fair and impartial decision.
Lockheed stated that it was "reluctant to suggest that the
facts and circumstances surrounding Ms. Davis’ participation on
the Evaluation Committee [rose] to the level of
‘corruption.’" Nevertheless, "the seriousness of such
an allegation cannot be trivialized" and "the question
must be asked" whether she used her position on the
evaluation committee "to procure an employment benefit for
herself contrary to her duty and the rights of others."
Lockheed also suggested that because Davis had a better chance of
employment with Maximus than with Lockheed, Davis may have made
some comments at the deliberations which "could have
influenced other committee members in a manner inimical to
Lockheed’s interests." Following receipt of the protest, DSS
cancelled the Intent to Award and sent out a new request for
proposals.

At trial, Williams testified that he had never
applied for employment with Lockheed and had not been an active
candidate for employment within seven months preceding the
request for proposals. Davis testified that in 1992 she had
served as a consultant to Lockheed for one month while she was on
annual leave from DSS. As shown by a letter, dated March 25, 1992
and introduced into evidence, this arrangement was known to, and
approved by, DSS. Davis also testified, among other things, that
she sent out some resumes anticipating that she might be required
to look for a new job because her husband was about to be
transferred.

Finally, Henry testified that he recommended to
the DSS Commissioners that the Notice of Intent to Award should
be cancelled for reasons of expediency, because Lockheed was
going to "tie us up" in proceedings, and "fear of
a public spectacle" resulting from the strong allegations in
the protest.

We begin by addressing the assignments of error
raised by Lockheed in its appeal.

I.

Lockheed Information
Management Systems

Company, Inc., et al. v.
Maximus, Inc.

Record No. 990500

A. PRIVILEGE

Lockheed asserts that the trial court erred in
denying its motion for summary judgment because the statements
made in its protest, even if false and misleading, were
absolutely privileged. Lockheed further argues that even if the
statements were not absolutely privileged, Lockheed was entitled
to an affirmative defense of lawful justification or qualified
privilege and the trial court erred in denying Lockheed’s jury
instruction on that defense. We first consider Lockheed’s
contention regarding the existence of an absolute privilege.

1. Absolute Privilege

a. Judicial Proceeding

Lockheed argues that because the statements at
issue were made in the course of a quasi-judicial or
administrative hearing, they were entitled to an absolute
privilege. We disagree. We have held that false, misleading, or
defamatory communications, even if published with malicious
intent, are not actionable if they are material to, and made in
the course of, a judicial or quasi-judicial proceeding. Penick
v. Ratcliffe
, 149 Va. 618, 636-37, 140 S.E. 664, 670 (1927).
This absolute privilege has been extended to communications made
in administrative hearings so long as the "safeguards that
surround" judicial proceedings are present. Elder v.
Holland
, 208 Va. 15, 22, 155 S.E.2d 369, 374 (1967). Those
safeguards include such things as the power to issue subpoenas,
liability for perjury, and the applicability of the rules of
evidence. Id. The bid protest proceeding in which the
statements complained of in this case were made, however, did not
have the safeguards inherent in a judicial proceeding.

Lockheed’s protest was filed pursuant to
? 11-66(A) which provides the procedure for an unsuccessful
bidder to file a protest to the action of a public body in the
procurement process. The public body or its designated agent must
render a written decision on the protest within ten days of
receiving the protest stating the reasons for the action. That
decision is final unless appealed. Neither notice nor hearing is
afforded any other party or bidder, including the successful
bidder. This procedure contains none of the safeguards identified
in Elder as prerequisites for the application of the
absolute privilege defense.
[2]
While these safeguards may attach in an appeal of the decision,
the absence of the safeguards from the proceeding in which the
statements are made precludes application of the absolute
privilege defense to those statements.

b. Affidavits

Lockheed also argues that it was entitled to an
absolute privilege because the complained of statements were
contained in affidavits. Lockheed asserts that the protection of
absolute privilege was extended to affidavits in Donohoe
Construction Co. Inc. v. Mount Vernon Associates
, 235 Va.
531, 538, 369 S.E.2d 857, 861 (1988), because the Court in that
case described the execution of an affidavit as a "judicial
act." Lockheed misconstrues Donohoe.

Donohoe was a mechanic’s lien case in
which the Court concluded that, because filing the mechanic’s
lien affidavit to perfect the lien is a prerequisite to filing
suit to enforce the lien, the filing of the lien and the suit to
enforce the lien were inseparable. Id. at 539, 369 S.E.2d
861. Therefore, because the filing of the memorandum of lien
affidavit and the suit to enforce the lien constituted a single
judicial proceeding, the contents of the affidavit were entitled
to an absolute privilege. Id. The doctrine of absolute
privilege was not extended to the mere execution of any
affidavit.

In this case, even if affidavits were required
as an integral part of the protest, which they are not, we have
already concluded that the protest procedure under
? 11-66(A) does not qualify as a judicial proceeding. Thus,
Donohoe does not apply to clothe the statements made in
Lockheed’s protest with an absolute privilege because they were
contained in affidavits.

c. Noerr-Pennington Doctrine

Finally, Lockheed argues that it was entitled
to an absolute privilege for its statements under the
"Noerr-Pennington" doctrine. This doctrine is based on United
Mine Workers v. Pennington
, 381 U.S. 657 (1965), and Eastern
Railroad Presidents Conference v. Noerr Motor Freight, Inc.
,
365 U.S. 127 (1961). The doctrine developed because business
entities seeking to influence legislative or executive policy
which would benefit them and injure competitors were charged with
violations of the federal anti-trust laws. Grounded in the
constitutional right to free speech and to petition the
government, the Noerr-Pennington doctrine provides that persons
petitioning the government cannot be charged with violations of
the Sherman Antitrust Act for attempts to influence legislative
or executive action. Pennington, 381 U.S. at 669; Noerr,
365 U.S. at 135. The doctrine also applies to adjudicatory
proceedings before administrative agencies. California Motor
Transport Co. v. Trucking Unlimited
, 404 U.S. 508, 510-11
(1972).

Lockheed asserts that the Noerr-Pennington
Doctrine has been applied to shield conduct from common law
business tort claims as well as from antitrust claims. Citing Gunderson
v. University of Alaska
, 902 P.2d 323 (Alaska 1995), and Video
International Production, Inc. v. Warner-Amex Cable
Communications, Inc.
, 858 F.2d 1075 (5th Cir. 1988), cert.
denied 491 U.S. 906 (1989), Lockheed urges us to extend an
absolute privilege based on the Noerr-Pennington doctrine to its
actions in this case. While both cases cited by Lockheed applied
the Noerr-Pennington doctrine in causes of action for business
torts, we do not find those cases applicable here.

Video International involved the actions
of competing cable television providers and the City of Dallas.
The plaintiff, an unfranchised cable television provider in
Dallas, filed suit against the city and Warner-Amex alleging that
the city, at the urging of Warner-Amex, adopted a certain
interpretation of the city’s cable franchise agreement with
Warner-Amex
[3] and, also at
Warner-Amex’s urging, filed notices of zoning violations against
the plaintiff based on that interpretation. This action,
according to the plaintiff, violated its civil rights and
antitrust laws and, because it adversely impacted the
consummation of the sale of plaintiff to a third party,
tortiously interfered with a business contract. On appeal, the
Fifth Circuit affirmed the district court’s holding that the
Noerr-Pennington doctrine applied to both the antitrust claims
and the business tort claim. 858 F.2d at 1084.

Warner-Amex’s actions seeking a specific
interpretation of an ordinance by the city are closely analogous
to petitioning the government to influence public policy. Thus,
the application of the Noerr-Pennington doctrine to the business
tort claim in Video International was consistent with the
traditional application of the doctrine. Here, however, Lockheed
did not petition DSS for a particular interpretation of the
procurement law or attempt to influence any other governmental
policy. Lockheed’s actions in this case are not analogous to the
"petitioning" of the city by Warner-Amex. Consequently,
an extension of the Noerr-Pennington doctrine based on Video
International
is not warranted in this case.

While the facts of Gunderson parallel
the instant case, Gunderson provides no persuasive
rationale for applying the Noerr-Pennington doctrine in this
case. The Alaska Supreme Court allowed application of the
doctrine to a common law business tort claim based on the
plaintiff’s concession that the doctrine was applicable. No such
concession has been made by Maximus in this case.

Maximus does not assert that the
Noerr-Pennington doctrine can never be applied in common law
business tort cases. Instead, Maximus argues that, regardless of
whether a claim is one for a violation of an antitrust statute or
a common law business tort, the Noerr-Pennington doctrine should
not be applied in actions involving bid protests because such
activity is not the type of petitioning of the government which
the doctrine was intended to protect. Maximus cites a number of
cases in which courts have refused to apply the Noerr-Pennington
doctrine, not based on the cause of action asserted, but because
the activity complained of was not aimed at influencing
governmental policy decisions.

For example, in Whitten v. Paddock Pool
Builders, Inc.
, 424 F.2d 25 (1st Cir. 1970), a contractor
filed suit claiming that the defendant, its competitor, violated
the antitrust laws by certain actions it took in persuading a
public body to use specifications for swimming pools which could
be met only by the defendant. The First Circuit refused to apply
the Noerr-Pennington doctrine to the defendant’s actions holding
that the doctrine is intended to "insur[e] uninhibited
access to government policy makers" and not intended to
apply to instances in which public officials are engaged in
purely commercial dealings. Id. at 32. The Court went on
to conclude that when government officials engage in a
competitive bidding process similar to the type engaged in by
private corporations, no additional First Amendment protections
should be provided. Id. at 33.

Similarly, in F. Buddie Contracting, Inc. v.
Seawright
, 595 F.Supp. 422 (N.D. Ohio 1984), an unsuccessful
bidder sued the successful bidder and others claiming an
antitrust violation. The plaintiff alleged that the defendants
conspired to secure the award of the contract from the public
body even though the successful bidder was not the lowest bidder.
The trial court denied the defendants’ summary judgment motion on
a number of grounds including its conclusion that the activities
of the defendants were not the type of activities protected by
the Noerr-Pennington doctrine. Adopting the "commercial
activities exception" developed by the United States Courts
of Appeals for the First, Fifth, and District of Columbia
Circuits, the court stated:

Noerr-Pennington is concerned with the needs of
a representative democracy in the field of public policy making.
These needs are not at issue in this case, where the parties are
concerned with the award of a competitively bid contract which
only incidentally involves a government body. The basis for the
exception, therefore, does not apply to this case.

Id. at 439. Thus, under the commercial
activities exception, the Noerr-Pennington doctrine does not
apply to cases in which the government entity is acting as a
market participant.

We find the rationale of these cases
persuasive. The Noerr-Pennington doctrine was developed as a
protection for entities petitioning the government in relation to
legislative or policy making matters. The doctrine was not
intended to shield false, misleading, or otherwise improper
conduct by bidders for government contracts, particularly when
the governmental body is acting as a private commercial entity.
The extension of the Noerr-Pennington immunity to Lockheed’s
actions in this case would represent a significant step beyond
the intended boundaries of the doctrine and would contravene the
policy behind the establishment of the doctrine. Accordingly, we
decline Lockheed’s invitation to extend the application of the
Noerr-Pennington doctrine in this case.

2. Qualified Privilege

Lockheed argues that even if it did not have an
absolute privilege, it was entitled to an affirmative defense
similar to a qualified privilege defense on the basis of
"legitimate business competition and protection of the
public interest." Because the trial court refused Lockheed’s
Jury Instruction I, Lockheed contends that the jury was
erroneously limited to considering only legitimate business
competition as the basis for its affirmative defense.
[4]

We have previously acknowledged that an
affirmative defense of justification or privilege applies in a
claim for intentional interference in a business contract. Maximus
v. Lockheed
, 254 Va. at 412-13, 493 S.E.2d at 378. We also
identified the five grounds upon which this affirmative defense
is based, none of which includes "protection of the public
interest" as Lockheed asserts. Id.; Duggin v.
Adams
, 234 Va. 221, 229, 360 S.E.2d 832, 838 (1987); Chavis
v. Johnson
, 230 Va. 112, 121, 335 S.E.2d 97, 103 (1985). The
jury in this case was instructed that

Lockheed claims that its interference with
Maximus’ prospective business relationship with DSS was justified
based upon legitimate business competition. On this issue,
Lockheed has the burden of proof.

If you find by the greater weight of the
evidence that Lockheed’s actions constituted legitimate business
competition with respect to Maximus’ prospective business
relationship with DSS, then you shall return your verdict in
favor of Lockheed on Maximus’ tortious interference claim.

This instruction properly presented Lockheed’s
affirmative defense to the jury. Accordingly, the trial court did
not err in denying Jury Instruction I.

B. CONSPIRACY

Lockheed contends that Maximus was precluded
from relitigating its conspiracy count in the remanded proceeding
because Maximus did not assign error to the trial court’s order
in the first trial as it affected the conspiracy count. Thus, the
trial court’s ruling became final as to the conspiracy count,
and, Lockheed argues, the trial court on remand erred in denying
its motion for summary judgment on this count.

Maximus argues that in the first trial, the
trial court "did not rule at all, much less enter ‘judgment’
for Lockheed on Count II." The judgment in favor of Lockheed
in the first case, according to Maximus, was based on the trial
court’s conclusion that Maximus failed to prove an element of the
tortious interference claim, rather than the conspiracy claim,
and Maximus contends that the language of the trial court’s
judgment order in the first case did not specifically refer to
the conspiracy count. We disagree.

At the close of Maximus’ evidence in the first
trial, the trial court granted Lockheed’s motion to strike the
evidence because it did not show that Lockheed had engaged in
malicious or egregious conduct, elements which the trial court
believed were necessary to sustain a claim of tortious
interference with contract expectancy. Maximus v. Lockheed,
254 Va. at 411, 493 S.E.2d at 376-77. The order entered by the
trial court recited that the "plaintiff shall take nothing
and that judgment be entered in favor of the defendants, plus
costs." In its appeal to this Court, Maximus assigned error
to the trial court’s ruling that malice was an essential element
of the tortious interference. Id., 493 S.E.2d at 377.
Maximus did not address conspiracy or Count II in an assignment
of error.

If the order entered by the trial court
following the first trial did not dispose of the conspiracy
count, it would not have been a final, appealable order. A final
appealable order is one which terminates the action leaving
nothing to be done by the trial court except that which is
necessary to execute the decree. Lee v. Lee, 142 Va. 244,
250, 128 S.E. 524, 526 (1925). An order is not final and
appealable if claims against the defendant remain unresolved. Leggett
v. Caudill
, 247 Va. 130, 133, 439 S.E.2d 350, 351 (1994).
Thus, to be a final appealable order, the order of the trial
court following the first trial of this matter had to dispose of
the entire case, including the conspiracy count.
[5]

The order of the trial court quoted above
entered judgment in favor of the "defendants"
(emphasis added). Lockheed was the sole defendant in Count I,
Tortious Interference. Maximus’ allegations against the remaining
defendants, Robyn Large and the Center, were limited to the
conspiracy count, Count II. The language of the order, therefore,
in entering judgment for all defendants, did dispose of the
conspiracy count and was therefore a final appealable order.
[6]

Finally, Maximus relies on Nassif v. Board
of Supervisors
, 231 Va. 472, 345 S.E.2d 520 (1986), to
support its contention that it was not required to assign error
regarding the conspiracy count and was entitled to assert its
conspiracy count on remand. Specifically, Maximus quotes language
from the opinion that, unless limited by the order of remand,
"the slate is wiped clean, with the result that on remand
the parties begin anew." Id. at 480, 345 S.E.2d at
525. However, in Nassif, the party seeking to "begin
anew" was the appellee in the first appeal. The first appeal
was taken from an order of the trial court sustaining the
appellee’s contention that a tax assessment was erroneous. This
order was based on one of the several arguments raised by the
appellee in support of its position but did not address the
remaining contentions. In this context, the Court in Nassif
stated, "[i]t would serve no useful purpose, we think, to
require a prevailing party to assign error to his failure to win
on all points in order to protect his right to a full and
complete trial should his apparent victory be reversed and the
case remanded." Id. at 480-81, 345 S.E.2d at 525.

The Nassif case, at most, stands for the
proposition that an appellee does not have to assign
cross-error to the failure of the trial court to address
additional arguments in order to reassert those arguments on
remand. It does not, and cannot, stand for the proposition
asserted by Maximus, that an appellant does not have to
assign error to a ruling disposing of a cause of action, and if
the case is remanded, can then relitigate a dispositive ruling
which was not appealed. Such a proposition contradicts the
doctrine of the law of the case which provides that where no
assignment of error or cross-error is taken to a part of a final
judgment, the judgment becomes the law of the case and is not
subject to relitigation. Searles’ Adm’r v. Gordon’s Adm’r,
156 Va. 289, 294-99, 157 S.E. 759, 761-62 (1931).

Maximus was not the prevailing party in the
first appeal and, therefore, under the law of the case, Maximus
was not entitled to relitigate unappealed issues on remand.

For these reasons we conclude that the trial
court erred in denying Lockheed’s motion for summary judgment on
its claim that Maximus’ failure following the first trial to
assign error to the trial court’s judgment relative to its
conspiracy count barred Maximus from litigating that count on
remand.
[7]

C. DAMAGES

Lockheed assigns error to a number of the trial
court’s rulings regarding Maximus’ damage recovery. These
assignments of error involve the application of the "new
business rule," the qualification of Maximus’ expert on lost
profits, and Maximus’ duty to mitigate damages. We consider these
issues in order.

1. New Business Rule

Lockheed argues that Maximus had not previously
engaged in the collection of child support payments in Virginia.
Therefore, the venture proposed by Maximus in its response to
DSS’s request for proposals was a new business for Maximus and
Lockheed asserts that Maximus’ evidence of lost profits should
have been excluded under the "new business rule."

In Mullen v. Brantley, 213 Va. 765, 768,
195 S.E.2d 696, 699-700 (1973), we stated that evidence of the
prior and subsequent earning record of a business can be used to
estimate damages, in the case of an established business with an
established earning capacity. But, where a new business is
involved

the rule is not applicable for the reason that
such a business is a speculative venture, the successful
operation of which depends upon future bargains, the status of
the market, and too many other contingencies to furnish a
safeguard in fixing the measure of damages. (Citations omitted.)

Id. at 768, 195 S.E.2d at 700. This
principle has become known as the "new business rule." Commercial
Business Systems, Inc. v. BellSouth Services, Inc.
, 249 Va.
39, 50, 453 S.E.2d 261, 268 (1995).

The trial court observed that if, as Lockheed
suggests, the new business rule were applied as an absolute bar
to damage recovery in this case, a cause of action for
intentional interference with a contract expectancy would be
meaningless, because "anybody anywhere in Virginia could
lie, cheat, and steal to deprive any new business, or any
existing business that has never operated in Virginia, of a
contract expectancy with complete civil impunity." The trial
court rejected this construction of Virginia law, and, relying on
the principle discussed in Wood v. Pender-Doxey Grocery
Company
, 151 Va. 706, 144 S.E. 635 (1928), concluded that
"the fact that Maximus had never engaged in collecting child
support in Virginia cannot be used to deprive it of
damages."

In Wood, a plaintiff was allowed to
recover damages for breach of contract including lost "good
will" even though, as the appellant argued in that case, the
evidence of the damages was difficult to calculate with
mathematical precision or reasonable certainty. The Court in Wood
allowed recovery, reasoning that in cases involving an
intentional wrong

the degree of proof necessary is much relaxed
in favor of the injured party. Where the wrongdoer creates the
situation that makes proof of the exact amount of damages
difficult, he must realize that in such cases "juries are
allowed to act upon probable and inferential, as well as direct
and positive, proof." Chesapeake & Potomac Tel. Co.
v. Carless
, 127 Va. 5, 102 S.E. 569, 23 A.L.R. 943 (1920).

151 Va. at 713, 144 S.E. at 638. Applying this
rationale, the trial court concluded that Maximus introduced
sufficient evidence upon which "a reasonable estimate of
Maximus’ lost profits could be made."

Based on this record, we cannot say the trial
court erred by refusing to apply the new business rule to strike
Maximus’ evidence on lost profits. While most newly undertaken
ventures may not have the requisite record of performance and
thus come within the "new business rule," that is a
decision to be made by the trial court in the first instance. In
allowing the jury to consider Maximus’ evidence of lost profits
and other damage evidence, the trial court here did not eliminate
the new business rule or the requirement that damages must be
shown with reasonable specificity. The trial court only held
that, in a claim for intentional interference with a business
expectancy, recovery will not be defeated solely because
the business expectancy is not one which is identical in every
detail to the injured party’s previous actual experience. The
trial court concluded that in this case the evidence of previous
child support collection ventures conducted by Maximus in other
jurisdictions and evidence of such collections by the DSS in
Virginia had sufficient specificity to allow "a reasonable
estimate of Maximus’ lost profits." Using this evidence, the
jury was not required to speculate on Maximus’ lost profits.
Accordingly, we will affirm the trial court’s ruling allowing
evidence of Maximus’ lost profits.

2. Qualification of Expert
Witness

Lockheed next argues that even if the new
business rule did not render Maximus’ lost profits evidence
inadmissible, the evidence should not have been admitted because
it required expert testimony and Maximus’ expert was not
qualified to render such expert testimony.

Arthur Nerret, Maximus’ expert, was a certified
public accountant, had worked for a large, international
accounting firm for five years, was a director of finance and
vice-president in private industry for 18 years, and had served
as Maximus’ chief financial officer for four years. His
responsibilities included such tasks as financial reporting,
budgeting, forecasting, cost proposal review, and banking and
insurance matters. He testified that he had reviewed the bid
proposal, and validated the direct costs associated with the
project. In response to Lockheed’s questions, Nerret explained
the method he used to determine the revenue he estimated Maximus
would receive from its contract with DSS.

Lockheed objected to the admission of Nerret as
an expert to give an opinion on Maximus’ potential profit from
its contract with DSS because Nerret had not taken any special
courses on lost profit or damage analysis and did not have
personal involvement in preparing the revenue or cost
information, but instead relied on the calculations of others.
The trial court held that Lockheed’s objection went to the weight
of Nerret’s testimony, not to his qualification as an expert
witness, and allowed Nerret to give his opinion testimony.

Whether a witness is qualified to testify as an
expert is a matter within the sound discretion of the trial court
and the trial court’s decision will not be set aside on appeal
unless the record clearly shows that the witness is unqualified. Tazewell
Oil Co., Inc. v. United Virginia Bank
, 243 Va. 94, 110, 413
S.E.2d 611, 620 (1992). We cannot say that this record clearly
shows that Nerret was not qualified and, therefore, we will
affirm the trial court’s ruling allowing Nerret to testify as an
expert witness on the issue of lost profits.

3. Mitigation of Damages

Lockheed sought to introduce evidence of events
occurring subsequent to cancellation of the initial Notice of
Intent to Award the contract to Maximus. Specifically, Lockheed
wanted placed before the jury the following evidence: the second
request for proposals and award to Lockheed; Maximus’ protest of
the second award; reversal of that award by the appeals
procurement board; a third request for proposals issued by DSS;
the award of the contract to Lockheed pursuant to the third
request; and Maximus’ failure to file a protest to that award.
Lockheed asserts that this evidence was relevant because, even
though Maximus prevailed in having the second award set aside, by
failing to pursue a protest and appeal of the third award,
Maximus made "no attempt in the third procurement to undo
the award to Lockheed in order that it might recapture what was
lost in its contract expectancy."

The trial court was correct in its holding that
this evidence was not admissible to show that Maximus failed to
mitigate its damages. First, whether Maximus would not only have
prevailed in its protest of the third award but also ultimately
would have become the recipient of the contract award is entirely
speculative. Furthermore, ? 11-66 authorizes the filing of
a protest based upon matters relating to alleged deficiencies in
the contract award, not for purposes of mitigating damages.

D. ADMISSIONS

Lockheed asserts that the trial court erred
because it allowed Maximus to introduce testimony that
contradicted its responses to Lockheed’s requests for admission.

Prior to the first trial in 1996, Lockheed
served Maximus with a number of requests for admissions. Two of
those requests, Nos. 41 and 42, which Maximus admitted provide
respectively:

Evaluation committee member Ernest Lee
Williams, within seven months prior to the day the Notice of
Intent to award was posted, was an active candidate for
employment as district manager of the Lockheed IMS project in
Chesapeake, Virginia. Mr. Williams was not selected for the
position.

All evaluation members including Mr. Williams
stated verbally that they were unaware of any situation and/or
relationship with either of the two offerors that could be
perceived as a reason for conflict of interest.

At the first trial, Williams testified that he
was not an active candidate for employment with Lockheed. Even
though his testimony conflicted with these admissions, Lockheed
did not object to the testimony, and therefore any reliance on
the admissions was waived. TransiLift Equipment, Ltd. v.
Cunningham
, 234 Va. 84, 91, 360 S.E.2d 183, 187 (1987).
Following remand of the case, no further discovery was
undertaken.

At the second trial, when Maximus again asked
Williams if he had been an active candidate for employment with
Lockheed within seven months of the Intent to Award, Lockheed
objected based on Maximus’ earlier admission. Maximus moved to
withdraw the admissions pursuant to Rule 4:11(b).
[8]
Lockheed objected to the motion, arguing that it had already
quoted the admission in opening argument and, therefore, it would
be prejudiced if Maximus were allowed to withdraw the admission
at that point.

After discussion with counsel out of the
presence of the jury, the trial court sustained Lockheed’s
objection to Maximus’ withdrawal of the admission, stating that
whatever decision it made one of the parties would be prejudiced.
Maximus then proceeded to ask Williams a number of questions such
as whether he had ever submitted an application to Lockheed,
whether he considered a lunch with a representative of Lockheed
to be a job interview, if he was denied employment with Lockheed,
if he harbored any latent resentment against Lockheed, and
whether he had told anyone he had been to lunch with a Lockheed
representative. The record shows that when Lockheed objected to a
question, the trial court considered whether the question and
answer contradicted the admissions, and overruled objections when
it determined the question was proper. The trial court also
allowed Lockheed to read admissions No. 41 and No. 42 to the
jury. The trial court explained to the jury that the rules of
court allow one party to ask another to admit that certain things
are true, thereby eliminating the need to bring in witnesses to
prove those things.

Decisions on whether testimony contradicts
admissions are committed to the sound discretion of the trial
court and will only be set aside on appeal if those decisions are
shown to be an abuse of discretion. Coe v. Commonwealth,
231 Va. 83, 87, 340 S.E.2d 820, 823 (1986). Based on our review
of the record in this case, we cannot say that the trial court’s
determinations on whether the questions and testimony at issue
contradicted the admissions made by Maximus were an abuse of
discretion. Furthermore, if the denial of Lockheed’s jury
instruction that Maximus was bound by its admissions was error,
such error was harmless in light of the trial court’s instruction
to the jury at the time the admissions were read.

E. MOTION TO STRIKE

Following the close of all the evidence,
Lockheed moved to strike Maximus’ evidence. The trial court took
the matter under advisement and, after further briefing, denied
the motion. Lockheed assigns error to this ruling in two
particulars: (1) the trial court erred in failing to strike the
evidence because the evidence did not establish improper methods
and improper conduct; and (2) the trial court erred in failing to
strike the evidence because the evidence did not establish that
Lockheed’s protest was the proximate cause of the cancellation of
the Notice of Intent to Award the contract to Maximus. We
consider these arguments in order.

1. Improper Conduct

Lockheed’s first argument, that Maximus’
evidence should have been struck because it did not show
intimidation, fraud, defamation, misrepresentation, deceit,
unethical conduct, sharp dealing, overreaching, or unfair
competition, can, in the words of the trial court, be disposed of
quickly. Suffice it to say that, considering the evidence and all
reasonable inferences therefrom in the light most favorable to
the plaintiff Maximus, as we must, Austin v. Shoney’s, Inc.,
254 Va. 134, 138, 486 S.E.2d 285, 287 (1997), Maximus’ evidence
was sufficient to present a prima facie case that Lockheed’s
actions were improper for purposes of Maximus’ business tort
claim.

Lockheed also argues that even if Maximus
established a prima facie case, the evidence was not
"sufficient to overcome Lockheed’s affirmative
defense." As pointed out by Maximus, Lockheed seems to be
arguing that because it presented evidence to support its
affirmative defense, it was entitled to prevail, absent
additional evidence by Maximus. However, whether Lockheed
produced sufficient evidence to prevail on its defense was a
matter for the jury to decide. As the trial court stated,
"the presentation of defendants’ evidence does nothing more
than create a jury issue." Accordingly, there was no error
in the trial court’s denial of the motion to strike on this
basis.

2. Proximate Cause

Lockheed argues that the evidence failed to
show that its protest was the proximate cause of DSS’ decision to
cancel the notice of the Intent to Award the contract to Maximus.
The evidence, according to Lockheed, was that the cancellation
resulted from DSS’ own investigation and not as a result of the
protest.

While there is evidence in the record to
support Lockheed’s assertion, there is also evidence that the
Notice of Intent was cancelled because of the contents of
Lockheed’s protest, as well as Lockheed’s actions surrounding the
filing of the protest. The testimony of Henry and Crane, the call
from Wiggins telling Henry that if the Intent to Award went
forward, things "could get bloody," and Crane’s
memorandum suggesting that the procurement would proceed assuming
there were no more damaging facts in Lockheed’s protest,
represent some of the evidence suggesting that the protest and
its contents were the reasons the Notice of Intent to Award the
contract to Maximus was rescinded.
[9] The evidence was not without conflict and it presented a
jury question on the issue of proximate cause.

Accordingly, the trial court correctly refused
to strike Maximus’ evidence for failure to establish proximate
cause.

II.

Maximus, Inc. v. Lockheed
Information Management

Systems Company, Inc., et al.

Record No. 990499

At trial the jury returned a verdict in favor
of Maximus of approximately $1.5 million dollars on the tortious
interference claim. Following post-trial motions, the trial court
reduced this amount to $741,124, holding that Maximus was not
entitled to recover damages for costs incurred in preparing its
initial bid or certain overhead expenses. Maximus appeals the
trial court’s determination that it was not entitled to recover
the overhead expenses.

The overhead expenses at issue were described
by Nerret, Maximus’ expert, as a "fixed sort of markup on
top of those direct-expenses to absorb company-wide overhead
expenses." Since Maximus did not obtain the contract, Nerret
testified that "those costs had to be absorbed by our other
contracts in the company over this five-year period. And thus
. . . profitability of those other contracts was
reduced by the [amount] those contracts will be absorbing."
Essentially, the overhead was a fixed cost not attributable to
the contract at issue.

We have recently addressed recovery of fixed
overhead in Fairfax County Redevelopment & Housing
Authority v. Worchester Brothers Co., Inc.
, 257 Va. 382, 514
S.E.2d 147 (1999). We held that home office expenses, normally
referred to as overhead, are costs that the business must expend
for the benefit of its enterprise as a whole. Unabsorbed overhead
is that overhead which continues regardless of the business
activity. Thus, a contractor experiences unabsorbed overhead when
idle. When a breach by a party causes a delay to the ability of
the other party to perform, the injured party is entitled to
recover, as damages, unabsorbed overhead expenses. To recover
such damages, the injured party must show that it could not
otherwise recoup its pro rata home office expenses
incurred during the delay and it must prove the amount of these
expenses with reasonable certainty. Id. at 387-88, 514
S.E.2d 150-51.

In this case, the unabsorbed overhead sought by
Maximus was not sought as part of its actual damages but as part
of its lost profit. We need not address this distinction here
because, whether lost overhead is sought as damages or as a
component of lost profit, the plaintiff is required to show that
it was reasonably unable to recoup its overhead costs. Id.
There is no such evidence in this case. Nerret characterized
Maximus’ overhead costs as "unabsorbed" or
"unavoided" because they did not arise from the
contract at issue, and therefore, continued whether or not
Maximus was awarded the contract. Neither Nerret nor any other
witness addressed Maximus’ ability or inability to reasonably
recoup those expenses from another contract which could have been
secured in the place of the contract with DSS.

Accordingly, although the trial court did not
have the benefit of our decision in Fairfax County, we
conclude that it did not err in holding that Maximus was not
entitled to recover its overhead.

III.

Conclusion

In summary, for the reasons stated above, we
will affirm that part of the trial court’s judgment imposing
liability on Lockheed for intentional interference with a
business expectancy and setting damages in the amount of
$741,124. We will reverse that part of the trial court’s judgment
imposing liability on Lockheed and the Center for conspiracy in
violation of ? 18.2-499, and imposing treble damages,
attorneys’ fees and costs pursuant to ? 18.2-500, and enter
final judgment.

 

Record No. 990500 — Affirmed in part,
reversed in part, and final judgment.

Record No. 990499 — Affirmed.

 

 

FOOTNOTES:

[1]The claim against the employee was eventually
non-suited.

[2] Subsection C of ? 11-66
requires notice and hearing prior to a determination that the bid
award was based on fraud, corruption, or a violation of the Act.
However, the provisions of that subsection are not relevant to
our inquiry here because there was no proceeding under that
subsection in connection with Lockheed’s protest.

[3] The zoning ordinances included
the franchise agreement between the city and Warner-Amex which
provided that no cable television provider could use the city’s
streets or operate in the city without a franchise. The city
interpreted "using the city streets" as including
crossing public right of ways or property lines. Video
International Production, Inc. v. Warner-Amex Cable
Communications, Inc.
, 858 F.2d 1075 (5th Cir. 1988), cert.
denied 491 U.S. 906 (1989).

[4] Jury Instruction I provided: "For Count I lawful
justification includes conduct by Lockheed and The Center for
reasons of legitimate business competition or protection of the
public interest."

[5] We have held that an order
disposing of all claims against one defendant may be a final
appealable order even if claims against other defendants
remain. Dalloul v. Agbey, 255 Va. 511, 515 n.2, 499 S.E.2d
279, 282 n.2 (1998). In this case, if the order entered
sustaining Lockheed’s motion to strike in the first trial had
been limited to the tortious interference claim, it would not
have been an appealable order under this rule because it did not
fully dispose of all the claims against Lockheed.

[6] Maximus did not seek
clarification of the trial court’s order.

[7] In light of this holding, we need
not consider Lockheed’s assignments of error relating to the
level of proof required for the conspiracy count and whether
treble damages under ? 8.2-500(a) are mandatory or
discretionary.

[8]Rule 4:11(b) states in part:

Any matter admitted under this Rule is
conclusively established unless the court on motion permits
withdrawal or amendment of the admission . . . the court may
permit withdrawal or amendment when the presentation of the
merits of the action will be subserved thereby and the party who
obtained the admission fails to satisfy the court that withdrawal
or amendment will prejudice him in maintaining his action or
defense on the merits.

[9] Although Lockheed argues that the
proximate cause instruction was confusing, it did not object to
the instruction in the trial court and we do not consider that
argument here. Rule 5:25.

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