The case concerns the cancellation of a Notice of Intent to Award a contract for the privatization of two child support offices by the Virginia Department of Social Services (DSS). Maximus, Inc. and Lockheed Information Management Systems Co. both submitted bids in response to DSS's 1995 request for proposals, with DSS initially favoring Maximus. Lockheed protested this decision, alleging undisclosed conflicts of interest among DSS evaluation panel members, leading to the cancellation of the award.
Maximus subsequently sued Lockheed for tortious interference with its contract expectancy and for conspiracy, asserting that Lockheed and others had conspired to harm Maximus's reputation and business. In the first trial, the court ruled in favor of Lockheed, citing a lack of evidence for malice or egregious conduct, but the ruling was reversed on appeal, establishing that such evidence was not necessary for tortious interference claims.
During the second trial, the jury found in favor of Maximus, awarding $1.5 million for tortious interference and $3 million for conspiracy. The trial court later reduced the damages, determining that the claims were overlapping and limiting Maximus to a single recovery. It denied recovery for bid preparation costs and lost overhead but granted treble damages under Virginia law, resulting in a final judgment of $2,223,372, plus attorneys' fees. Both parties appealed various aspects of the trial court's rulings, which were consolidated for review.
Two contracting officers for DSS, Jane Hollowell and Clifford Crofford, became aware that Lockheed might protest the award of a contract due to potential conflicts of interest involving evaluation committee members. Joseph Crane, Assistant Director, informed Michael Henry, the Division Director, about the impending allegations and suggested that the Notice of Intent to Award could remain valid if the score of one conflicting member was excluded. Henry concurred. Lockheed's Vice President, Harry W. Wiggins, warned Henry that proceeding with the contract award to Maximus would lead to negative repercussions.
Lockheed formally filed its protest on April 25, 1995, including affidavits from Wiggins and other Lockheed employees. The protest asserted that Ernest Lee Williams had been an active job candidate with Lockheed prior to the award notice, and alleged that Carolyn Davis, a former DSS employee, was improperly involved with Maximus during her leave from DSS and had expressed willingness to join Maximus if awarded the contract. Lockheed argued that Williams’ connection to Lockheed was concealed, potentially compromising his objectivity, and claimed that Davis's situation posed greater ethical concerns, suggesting she might have used her committee position for personal gain.
In response to the protest, DSS canceled the Intent to Award and issued a new request for proposals. Testimonies at trial revealed that Williams denied any job application with Lockheed, while Davis acknowledged a brief consulting role with Lockheed approved by DSS. Henry indicated the cancellation was necessary to avoid prolonged legal disputes and public controversy stemming from the protest allegations.
Lockheed contends that the trial court erred in denying its motion for summary judgment, arguing that its statements made during a bid protest were absolutely privileged, even if false or misleading. Alternatively, Lockheed claims entitlement to a defense of lawful justification or qualified privilege, asserting the trial court improperly denied its jury instruction on this defense.
Regarding absolute privilege, Lockheed argues that the statements were made during a quasi-judicial or administrative hearing, which should merit absolute privilege. However, the court disagrees, citing precedent that false or defamatory communications made in a judicial or quasi-judicial proceeding are not actionable if they are relevant to the proceeding. The court notes that absolute privilege applies only when the necessary safeguards of judicial proceedings, such as the ability to issue subpoenas and liability for perjury, are present. In this case, the bid protest procedure lacks these safeguards, as outlined in Code § 11-66(A), which does not afford notice or hearings to other parties, including the successful bidder.
Lockheed further argues that statements in affidavits should be granted absolute privilege based on the Donohoe Construction Co. case, which recognized affidavits as judicial acts. However, the court clarifies that Donohoe involved a mechanic's lien where the affidavit and subsequent suit were inseparable, thus granting them absolute privilege. Since the current context lacks similar judicial proceedings, the court concludes that Lockheed's statements do not qualify for absolute privilege.
The doctrine of absolute privilege does not extend to the execution of affidavits in the context of the protest procedure under Code § 11-66(A), which has been determined not to be a judicial proceeding. Consequently, statements made in Lockheed's protest are not afforded absolute privilege solely because they were presented in affidavits. Additionally, Lockheed's claim for absolute privilege under the Noerr-Pennington doctrine, which protects entities from antitrust liability while petitioning the government, is rejected. The doctrine, rooted in the right to free speech and petition, applies to attempts to influence legislative or executive action and has been recognized in adjudicatory proceedings before administrative agencies. Lockheed's reliance on cases such as Gunderson and Video International to extend this privilege is unpersuasive; while these cases involved petitioning the government, Lockheed did not engage in similar actions. Unlike the scenario in Video International, where a business sought to influence city policy, Lockheed did not petition the Department of Social Services (DSS) for an interpretation of procurement law or to influence government policy. Furthermore, the Gunderson case does not support Lockheed's position, as there was no concession by Maximus regarding the applicability of the Noerr-Pennington doctrine.
Maximus contends that the Noerr-Pennington doctrine, which protects petitioning the government, should not apply to bid protests, regardless of whether the claim involves antitrust laws or common law business torts. It argues that such protests do not represent the type of government petitioning the doctrine was designed to protect. Citing cases like Whitten v. Paddock Pool Builders, Inc., where the First Circuit ruled that the doctrine does not extend to actions that merely influence governmental decisions in competitive bidding contexts, Maximus emphasizes that the doctrine is intended for legislative or policy-making activities, not commercial dealings. Similarly, in F. Buddie Contracting, Inc. v. Seawright, the court denied the application of the doctrine, highlighting the commercial activities exception, which applies when a government entity acts as a market participant. Maximus argues that applying Noerr-Pennington to Lockheed's actions would misinterpret the doctrine’s purpose and extend its immunity beyond intended limits. Additionally, Lockheed claims entitlement to a qualified privilege defense based on legitimate business competition and public interest, but argues that the trial court's refusal of its jury instruction improperly restricted the jury's consideration of this defense.
An affirmative defense of justification or privilege can be applied in claims of intentional interference with a business contract, as established in Maximus v. Lockheed. The five grounds for this defense do not include 'protection of the public interest,' as Lockheed claimed. The jury was instructed that Lockheed's interference with Maximus' business relationship with DSS was purportedly justified by legitimate business competition, with Lockheed bearing the burden of proof. If the jury found that Lockheed's actions constituted legitimate competition, they were to rule in favor of Lockheed on Maximus' tortious interference claim. The trial court correctly denied Jury Instruction I.
Regarding the conspiracy count, Lockheed argued that Maximus could not relitigate this issue because it did not assign error to the trial court's ruling in the first trial. Lockheed contended that the ruling became final, and the trial court erred in denying its summary judgment motion on the conspiracy count. Maximus countered that the trial court did not rule on the conspiracy count in the first trial. However, the trial court had granted Lockheed's motion to strike Maximus' evidence at the first trial, concluding that Maximus failed to demonstrate necessary elements for the tortious interference claim, thus effectively dismissing the case. The order entered by the trial court indicated that the plaintiff would take nothing, which constituted a final appealable order that disposed of the entire case, including the conspiracy count, as Lockheed was the sole defendant in the tortious interference claim and the remaining defendants were associated only with the conspiracy count.
Maximus argues, based on the case Nassif v. Board of Supervisors, that it was not obligated to assign error regarding its conspiracy count and could assert this count upon remand. Maximus cites the principle that, unless restricted by the remand order, the parties start afresh. However, the Nassif case involved the appellee, who was the prevailing party in the first appeal, and the court noted that requiring a prevailing party to assign error on all points to preserve their right to a full trial is unnecessary. This contradicts the law of the case doctrine, which states that unappealed portions of a final judgment cannot be relitigated. Since Maximus was not the prevailing party, it could not relitigate issues not appealed in the first instance. Consequently, the trial court erred by denying Lockheed's motion for summary judgment regarding Maximus' conspiracy count.
In terms of damages, Lockheed challenges several trial court decisions related to Maximus' recovery, particularly focusing on the 'new business rule.' Lockheed claims that Maximus' child support collection venture in response to DSS was a new business, and thus its lost profits evidence should be excluded based on this rule. The 'new business rule' holds that speculative ventures, lacking an established earning record, cannot reliably measure damages. The trial court noted that applying this rule strictly would undermine claims for intentional interference with contract expectancy, as it would allow for unscrupulous actions against new businesses without consequence.
The trial court dismissed the argument that Maximus should be denied damages due to its lack of experience in collecting child support in Virginia, citing Wood v. Pender-Doxey Grocery Company as precedent. In Wood, the court permitted recovery for damages despite difficulties in quantifying them precisely, particularly in cases of intentional wrongdoing, where the burden of proof is less stringent for the injured party. The trial court determined that sufficient evidence existed for a reasonable estimate of Maximus' lost profits. Thus, the new business rule, which typically limits claims by new ventures lacking performance records, was not a barrier in this case. The court affirmed that the existence of prior child support collection experiences by Maximus in other states, combined with the Virginia DSS's evidence, provided adequate specificity for the jury to assess lost profits without mere speculation.
Additionally, Lockheed challenged the qualifications of Maximus' expert witness, Arthur Nerret, who had extensive experience as a certified public accountant and financial officer. Nerret was deemed qualified to estimate potential profits from the DSS contract despite Lockheed's objections regarding his lack of specialized training in lost profit analysis and reliance on others' calculations. The court upheld the admission of Nerret's testimony, indicating that his professional background and responsibilities were sufficient to support his expert opinion.
The trial court determined that Lockheed's challenge to Nerret's testimony pertained to its weight rather than his qualifications as an expert, thus permitting Nerret to provide his opinion on lost profits. The court's discretion in qualifying expert witnesses is upheld unless the record clearly demonstrates a lack of qualification, which was not established in this case.
Lockheed sought to introduce evidence related to events after the cancellation of the initial contract award to Maximus, including subsequent proposals and awards, arguing this was relevant to Maximus's failure to mitigate damages. The trial court ruled this evidence inadmissible, citing the speculative nature of whether Maximus would have succeeded in its protest of the third award and the limitation of Code § 11-66, which only permits protests based on deficiencies in contract awards, not for damage mitigation.
Regarding admissions, Lockheed claimed the trial court erred by allowing Maximus to present contradictory testimony to its earlier admissions concerning evaluation committee member Ernest Lee Williams. Lockheed had served requests for admissions before the first trial, to which Maximus admitted certain facts about Williams. During the first trial, Williams's testimony conflicted with these admissions, but Lockheed did not object, thereby waiving reliance on them. After remand, Lockheed objected when Maximus sought to withdraw these admissions during the second trial, arguing it would face prejudice since they had already referenced the admissions in their opening statement.
The trial court upheld Lockheed's objection to Maximus' attempt to withdraw an admission, indicating that any decision would unfairly prejudice one party. Maximus questioned Williams regarding his interactions with Lockheed, including job applications and perceived interviews, while Lockheed objected to certain questions based on potential contradictions to the admissions. The court evaluated these objections and allowed certain questions, ruling them proper. Additionally, Lockheed was permitted to present admissions No. 41 and No. 42 to the jury, with the trial court explaining the purpose of admissions in streamlining the proof process. The court's discretion in determining contradictions to admissions is acknowledged, and its decisions are upheld unless proven to be an abuse of discretion. It was concluded that the trial court did not err in its determinations or in denying Lockheed's jury instruction regarding Maximus being bound by its admissions, as any error was deemed harmless due to the court's prior explanations. Following the presentation of evidence, Lockheed moved to strike Maximus' evidence, which the trial court denied after consideration. Lockheed's arguments for striking the evidence centered on the absence of established improper conduct and the failure to show that its protest caused the cancellation of Maximus' contract award. The trial court dismissed the first argument, asserting that the evidence, when viewed favorably for Maximus, was sufficient.
Maximus presented sufficient evidence to establish a prima facie case that Lockheed acted improperly regarding Maximus' business tort claim. Lockheed argued that even if a prima facie case was established, their affirmative defense negated Maximus' claims. However, the jury must determine whether Lockheed's evidence was sufficient for its defense, and the trial court correctly denied Lockheed's motion to strike based on this issue.
Regarding proximate cause, Lockheed contended that its protest did not cause the cancellation of the Intent to Award notice to Maximus, attributing the cancellation to DSS' own investigation. Although Lockheed's assertion has some support, evidence exists indicating that Lockheed’s protest influenced the cancellation, including witness testimonies and communications suggesting that the protest's contents prompted DSS' actions. This conflicting evidence presented a jury question on proximate cause, leading the trial court to appropriately deny Lockheed's motion to strike based on this argument.
At trial, the jury ruled in favor of Maximus, awarding approximately $1.5 million for tortious interference, which the trial court later reduced to $741,124, excluding damages for bid preparation costs and certain overhead expenses. Lockheed's claim that the proximate cause instruction was confusing was not considered, as it was not raised during the trial. Maximus appealed the trial court's decision regarding the exclusion of overhead expenses, characterized as fixed costs that could not be attributed to the specific contract in question. The treatment of fixed overhead expenses has been previously addressed in legal precedent.
In *Housing Authority v. Worchester Brothers Co. Inc.*, 257 Va. 382, 514 S.E.2d 147 (1999), the court clarified that home office expenses, or overhead, are necessary costs for a business's overall operation. Unabsorbed overhead refers to those costs that persist even when a contractor is idle due to a breach causing delay. The injured party can recover unabsorbed overhead as damages if they demonstrate an inability to recoup these expenses during the delay and provide reasonable certainty in the amount claimed. In this case, Maximus sought unabsorbed overhead not as actual damages but as lost profit; however, the court determined that Maximus failed to show it was reasonably unable to recoup these costs, as the overhead in question did not arise from the specific contract and would have continued regardless of contract award. Consequently, the trial court was affirmed in denying recovery of overhead. The court affirmed the trial court's judgment imposing liability on Lockheed for intentional interference with a business expectancy and set damages at $741,124. However, the court reversed the trial court's judgment regarding conspiracy claims against Lockheed and the Center, including treble damages and attorneys' fees, and entered final judgment accordingly.
