Don't Miss
Home / Fulltext Opinions / Supreme Court of Virginia / MAXIMUS, INC. v. LOCKHEED INFORMATION MANAGEMENT SYSTEMS COMPANY, INC., ET AL.

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


MAXIMUS, INC.

v.

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


October 31, 1997

Record No. 962519

MAXIMUS, INC.

v.

LOCKHEED INFORMATION MANAGEMENT

SYSTEMS COMPANY, INC., ET AL.

OPINION BY JUSTICE ELIZABETH B. LACY

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND

Randall G. Johnson, Judge

Present: Carrico, C.J., Compton, Lacy, Hassell, Keenan, and
Kinser, JJ., and Whiting, Senior Justice


This appeal requires us to determine the elements required to
establish a prima facie case of tortious interference with
contract expectancy in Virginia.

I.

The instant case arose out of a dispute between Maximus, Inc.,
(Maximus) and Lockheed Information Management Systems Company,
Inc., (Lockheed) over bids to privatize two child support
enforcement offices in Northern Virginia.

In November 1994, the Virginia Department of Social Services
(DSS) released a Request for Proposals to privatize the two child
support offices pursuant to the Virginia Public Procurement Act,
Code ?? 11-35 through -80. Maximus and Lockheed were the
only two bidders. To evaluate the bids, DSS created a selection
panel composed of five state employees. The panel heard oral
testimony, reviewed and scored the proposals, and issued a Notice
of Intent to Award the contract to Maximus dated April 13, 1995.

On April 25, 1995, pursuant to Code ? 11-66, Lockheed
filed a formal protest of DSS’s decision to award the contract to
Maximus. In its protest, Lockheed alleged that two members of the
evaluation panel had undisclosed conflicts of interest which
interfered with their objectivity and compromised the integrity
of the evaluation process. [1] State officials conducted an
investigation and canceled the Notice of Intent to Award the
contract to Maximus.

On February 5, 1996, Maximus filed this action against
Lockheed. In its motion for judgment, Maximus alleged that
Lockheed had tortiously interfered with its contract expectancy
with DSS.[2] Maximus claimed that Lockheed
knew, or had reason to know, that the allegations advanced in its
formal protest were false, that the false allegations were
intentionally and selectively presented to create an appearance
of impropriety, and that the protest was calculated to wrongfully
interfere with Maximus’ contractual relationship with DSS so that
DSS would award the contract to Lockheed instead. Lockheed filed
a demurrer, asserting in part that it filed its protest pursuant
to a statutory right and was, therefore, entitled to absolute
immunity or privilege based on both the protections afforded
government petitioners established in Eastern Railroad
Presidents Conference v. Noerr Motor Freight, Inc.
, 365 U.S.
127 (1961), and United Mine Workers of America v. Pennington,
381 U.S. 657 (1965), and the principle that statements made
within a judicial or quasi-judicial proceeding are protected.
However, that portion of the demurrer was denied by the trial
court. [3]

Following the conclusion of Maximus’ case in chief in the
subsequent jury trial, Lockheed moved to strike the evidence. The
trial court determined that Lockheed had a "qualified
privilege" and that Maximus was therefore required to show
malice or "that the improper conduct is so egregious as to
override the qualified privilege" in order to reach the
jury. Concluding that Maximus had failed to meet this evidentiary
burden, the trial court sustained the motion to strike and
entered judgment in favor of Lockheed.

Maximus filed an appeal claiming that it had presented
sufficient evidence to establish a prima facie case of tortious
interference with contract expectancy, and that the trial court
erred by striking the evidence for failure to show malice as an
element of the cause of action. Because we conclude that the
trial court did not apply the correct standard for determining
whether Maximus had established a prima facie case for tortious
interference with contract expectancy, we will reverse the
judgment of the trial court and remand the case for further
proceedings.

II.

In reaching its decision, the trial court considered the law
of defamation analogous to the law of interference with business
relationships and applied principles based on that analogy. The
trial court first concluded that Lockheed was entitled to a
"qualified privilege."[4]

According to the trial court, the existence of this privilege
required the plaintiff to satisfy a "different burden,"
similar to the additional burden of showing malice placed upon a
plaintiff in a defamation action when a qualified privilege is
established. The trial court concluded that in this case, the
"different burden" should be a "showing of malice
or a showing that the improper conduct is so egregious as to
override the qualified privilege."

The trial court’s use of the defamation analogy was based on Chaves
v. Johnson
, 230 Va. 112, 121, 335 S.E.2d 97, 103 (1985), in
which we recognized a similarity between the affirmative defense
of justification or privilege in a tortious interference with
contract suit and the defense of qualified privilege in a
defamation suit. The similarity, however, arises from the
circumstances in which the offending words, or in this context,
the offending conduct, occurs. In certain circumstances, the
interests of society require that the question of liability be
resolved by balancing the rights involved, acknowledging that
this balancing process may shield a party from liability even
though he engaged in the offensive acts. For example, in the
defamation context, an actor has an absolute privilege and is not
liable for defamatory statements made in the course of a judicial
proceeding. Massey v. Jones, 182 Va. 200, 204, 28 S.E.2d
623, 626 (1944); Penick v. Ratcliffe, 149 Va. 618, 627,
140 S.E. 664, 667 (1927). In the context of causes of action
involving interference with a business relationship, freedom of
action is balanced against protection of the business
relationship involved to determine whether the affirmative
defense of justification or privilege precludes liability for
actions which would otherwise be culpable. Chaves, 230 Va.
at 121, 335 S.E.2d at 103.

Liability determinations in both instances involve balancing
of interests; however, this similarity neither suggests nor
demands that the specific requirements for imposition of
liability in one cause of action must be applied to the other
cause of action. Other than acknowledging the similarity, we have
not extended the defamation law construct to business torts and,
for the reasons expressed below, we decline to extend it to the
tortious interference with a contract expectancy cause of action
at issue here.

We have already rejected imposing an additional evidentiary
burden in an action for intentional interference with a contract.
In Chaves, we determined that malice was not an element of
the cause of action and also specifically recognized certain
affirmative defenses of privilege and justification available to
defendants. Id. at 120-21, 335 S.E.2d at 102-03. Thus, by
definition Chaves eliminated any requirement that the
plaintiff show malice, even if the defendant establishes an
affirmative defense.

In Duggin v. Adams, 234 Va. 221, 360 S.E.2d 832 (1987),
we considered the elements of a cause of action for interference
with a contract terminable at will. We found that not all
business relationships are entitled to the same level of
protection and concluded that a contract not terminable at will
was entitled to more protection than a contract terminable at
will. Id. at 226, 360 S.E.2d at 836. Reflecting this
distinction, we held that one of the elements of a cause of
action for tortious interference with a contract terminable at
will is that the acts or methods used for the interference must
themselves be "improper." [5] Id. at 226-27, 360
S.E.2d at 836. As in Chaves, Duggin acknowledged
the availability of certain affirmative defenses. Id. at
229, 360 S.E.2d at 838. Other than the "improper
methods" requirement, no additional elements were imposed to
establish a prima facie case, even when an affirmative defense
was asserted.

Our prior cases, however, have not addressed the level of
protection or the elements of a cause of action attaching to the
business interest at issue in this case, a contract expectancy.
The Restatement (Second) of Torts ? 766B (1977) describes
the cause of action as follows:

One who intentionally and improperly interferes with
another’s prospective contractual relation (except a
contract to marry) is subject to liability to the other
for the pecuniary harm resulting from loss of the
benefits of the relation, whether the interference
consists of

(a) inducing or otherwise causing a third person not
to enter into or continue the prospective relation or

(b) preventing the other from acquiring or continuing
the prospective relation.

 

The Restatement notes that a contract terminable at will is
"closely analogous" to the business relationship
described in this section because both are based on an interest
in a future relationship with no legal assurance of such future
relationship. Restatement (Second) of Torts ? 766 cmt. g
(1977). We agree.

The virtual identity of interests and the legal ability to
enforce those interests in a contract terminable at will and a
contract or business expectancy lead to the conclusion that the
level of protection afforded, and the elements of the cause of
action, should also be the same. There is no basis to impose an
additional requirement to differentiate the protection afforded
to a contract terminable at will and to a contract or business
expectancy.

Thus, to establish a prima facie cause of action in this case,
Maximus was required to show that: (1) it had a contract
expectancy; (2) Lockheed knew of the expectancy; (3) Lockheed
intentionally interfered with the expectancy; (4) Lockheed used
improper means or methods to interfere with the expectancy; and
(5) Maximus suffered a loss as a result of Lockheed’s disruption
of the contract expectancy. Maximus was not required to show
malice or any other egregious conduct.

The trial court stated at the close of Maximus’ case in chief
that "if this were the end of the case," there was
enough evidence to submit the issue "whether the conduct of
the defendants was improper" to the jury. While it is not
clear whether this statement referred to the "improper
methods" element of the cause of action or the ultimate
issue of liability, either construction shows that the trial
court struck the evidence based on its belief that Maximus had to
produce additional evidence to establish a prima facie case.
Accordingly, the trial court erred in sustaining Lockheed’s
motion to strike. [6]

Nevertheless, Lockheed argues that its motion to strike was
properly granted because Maximus did not show that Lockheed
engaged in "improper acts," one of the elements of a
prima facie case. Lockheed asserts that to qualify as
"improper methods," the actions must be illegal or
independently tortious, and Maximus failed to show that it
engaged in such acts. We reject Lockheed’s interpretation of
"improper methods."

While we have identified actions as improper which were also
independently tortious or illegal, Duggin, 234 Va. at
227-28, 360 S.E.2d at 836-37, we have also identified actions as
improper which are not themselves tortious or illegal, such as
unfair competition or unethical conduct. Id. at 228, 360
S.E.2d at 837. Nor does the name given the cause of action impart
a requirement of independently tortious acts. "Tortious
interference" means only that the interference was
intentional and improper under the circumstances, not that the
"improper methods" used were inherently illegal or
tortious. [7]

Moreover, to adopt Lockheed’s interpretation of "improper
methods" would either negate the ability of a defendant to
use some of the recognized affirmative defenses or shift the
burden of proving an element of those defenses to the plaintiff. Chaves
referred to the affirmative defense of justification or privilege
based on five grounds discussed in the Restatement (Second) of
Torts ?? 768-72 (1977). Chaves, 230 Va. at 121, 335
S.E.2d at 103. Four of these, including competition, the ground
relied on by Lockheed here, require the defendant to prove that
it did not employ "wrongful means." Restatement
(Second) of Torts ?? 768-71 (1977). None of our cases
suggest that the affirmative defense grounds recognized in Chaves
are different when raised in an action for interference with a
contract terminable at will or with a business or contract
expectancy. While plaintiffs in these actions must show that the
methods of interference were improper, defendants asserting
certain affirmative defenses must prove that those methods were
not "wrongful." The plaintiff, of course, retains the
burden of persuasion on the ultimate question: whether the
defendant intentionally and improperly, in other words
tortiously, interfered with the plaintiff’s business relationship
causing loss to the plaintiff. See Restatement (Second) of
Torts ? 767 (1977); Duggin, 234 Va. at 226-27, 360
S.E.2d at 836.

Accordingly, for the above reasons, we will reverse the
judgment of the trial court and remand the case for further
proceedings consistent with this opinion.

Reversed and remanded.

 

FOOTNOTES:

[1] In its protest, Lockheed
alleged that the panel’s decision was arbitrary and capricious on
two other grounds which are not relevant to this appeal.

[2] Maximus also alleged
conspiracy, but that claim is not at issue in this appeal.

[3] Lockheed did not assign
cross-error to the denial of its demurrer; therefore, the issues
in the demurrer are not before us.

[4] The record does not reflect the
trial court’s basis for this determination on the specific nature
of the qualified privilege.

[5] Not all jurisdictions follow
this approach. See Restatement (Second) of Torts
? 767 cmt. k (1977).

[6] In light of this holding, we
need not address the trial court’s finding that Lockheed was
entitled to a qualified privilege.

[7] To limit improper methods as
suggested by Lockheed returns the cause of action to its status
in the nineteenth century, when recovery for interference with
contract expectancy required that the conduct utilized by the
interferer be "essentially tortious in nature." That
requirement was eliminated in 1893, when liability for this cause
of action was extended to circumstances where the methods used
were not themselves tortious. Temperton v. Russell [1893] 1 Q.B. 715 (Eng.).

Scroll To Top