Title: VEPCO v. Norfolk Southern Ry. Co.

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  Hassell, C.J., Koontz, Kinser, Lemons, and Millette, 
JJ., and Russell and Lacy, S.JJ. 
 
VIRGINIA ELECTRIC 
 AND POWER COMPANY, ET AL. 
OPINION BY SENIOR JUSTICE 
v.  Record No. 081294  
        ELIZABETH B. LACY 
 
 
 
        September 18, 2009 
NORFOLK SOUTHERN RAILWAY COMPANY 
 
FROM THE CIRCUIT COURT OF HALIFAX COUNTY 
William R. Shelton, Judge Designate 
 
This appeal arises from a contract dispute between a 
railway company and two utility companies over periodic cost 
adjustments of rates charged by the railway company for 
transportation of coal to an electricity generating facility in 
Halifax County.  The principal issue we consider is whether the 
circuit court correctly determined that the contract in question 
was unambiguous in requiring the application of a specific rail 
cost adjustment factor for calculating quarterly adjustments to 
the coal transportation rates.  We also consider whether the 
circuit court erred in striking certain affirmative defenses 
raised by the utilities to the railway company’s claim for 
breach of the contract and subsequently entering a judgment of 
more than $77 million plus interest in favor of the railway 
company. 
BACKGROUND 
The essential facts are not in dispute.  On April 5, 1989, 
Old Dominion Electric Cooperative (“ODEC”) entered into a 
contract with Norfolk and Western Railway Company, the 
predecessor in interest to Norfolk Southern Railway Company 
(“Norfolk Southern”), for the regular transportation of coal to 
an electricity generating facility ODEC was constructing in 
Clover, Virginia.  ODEC subsequently sold an undivided one-half 
interest in the Clover facility to Virginia Electric and Power 
Company (“VEPCO”).1 
The contract, which was styled as a “Coal Transportation 
Agreement” (“CTA”), addressed the transportation rates for coal 
deliveries to the Clover facility in Article 25, which provided 
in relevant part: 
Unless specified otherwise, all rates and charges 
in this Agreement shall be subject to adjustment in 
accordance with this Article.  Rate adjustments shall 
be based upon the ICC generated RCAF.  During the term 
of this Agreement, should the RCAF described in this 
Agreement . . . be modified or changed other than 
renormalizing, a new factor which closely tracks the 
RCAF shall be agreed to by the Parties. 
 
. . . . 
 
The amount of each such adjustment shall be 
determined according to the applicable procedures 
prescribed by the ICC in Ex Parte No. 290 (Sub. No. 2) 
and published in Title 49 C.F.R., Part 1102, Section 
1102.1 and Interstate Commerce Act, Section 10707, as 
may be amended, incorporated herein by reference. 
                     
1 There is no dispute that VEPCO and Norfolk Southern are 
the real parties in interest in this contract dispute.  
Accordingly, we will refer hereafter to ODEC and VEPCO where 
context permits as “the utilities” and the contracting railway 
company as “Norfolk Southern.” 
 
 
2
The CTA defines the term “RCAF” as the Rail Cost Adjustment 
Factor, as “prescribed by the ICC in Ex Parte No. 290.”2  The 
ICC-generated RCAF refers to an index for coal transportation 
rates first established pursuant to Section 203 of the Staggers 
Rail Act of 1980.  See former 49 U.S.C. § 10707a(a)(2)(B) 
(1980).  In general, the purpose of the index was to create a 
calculation methodology by which rail freight delivery rates in 
long-term contracts could be adjusted for evolving costs and, 
where required to be applied, such rates would be protected from 
challenge as to their reasonableness.  Railroad Cost Recovery 
Procedures–Productivity Adjustment, Ex Parte No. 290 (Sub. No. 
4), 5 I.C.C.2d 434 (1989). 
Accordingly, the ICC initiated regulatory proceedings 
designated “Ex Parte No. 290 (Sub. No. 2)” in which it developed 
first an interim, and later a final, RCAF index.  See Railroad 
Cost Recovery Procedures, Ex Parte No. 290 (Sub. No. 2), 1 
I.C.C.2d 207 (1984) (establishing the final index); Railroad 
Cost Recovery Procedures, Ex Parte No. 290 (Sub. No. 2), 364 
I.C.C. 841 (1981) (creating the interim index).  The RCAF index 
established in Ex Parte No. 290 (Sub. No. 2) did not use rail 
                     
2 The parties agree that when the United States Congress 
abolished the ICC in 1995, the function of calculating and 
publishing RCAF indices was transferred to the Surface 
Transportation Board.  See Pub. L. No. 104-88 § 102, 109 Stat. 
803, 822-29 (1995), codified in part at 49 U.S.C. §§ 10101 et 
seq. 
 
3
productivity as an element of the calculation used for 
determining the adjustment factor for rail rates.  See Railroad 
Cost Recovery Procedures–Productivity Adjustment, Ex Parte No. 
290 (Sub. No. 4), 5 I.C.C.2d 434 (noting that in the original 
rail cost adjustment factor the Commission “considered, but 
rejected, proposals to . . . recogniz[e] the impact of improved 
productivity on the cost of rail outputs”).  This version of 
RCAF became known as the Rail Cost Adjustment Factor-Unadjusted 
(“RCAF–U”). 
On March 22, 1989, the ICC adopted a modified RCAF index 
that was based on RCAF-U, but further adjusted that index by 
accounting for improvements in rail productivity.  Railroad Cost 
Recovery Procedures–Productivity Adjustment, Ex Parte No. 290 
(Sub. No. 4), 5 I.C.C.2d 434.  This cost adjustment factor 
became known as the Rail Cost Adjustment Factor-Adjusted (“RCAF-
A”).  RCAF-A was created in a separate sub-docket of Ex Parte 
No. 290 from RCAF-U, and modifications to RCAF-U continued 
independently from the calculation of RCAF-A.  See, e.g., 
Railroad Cost Recovery Procedures, Ex Parte No. 290 (Sub. No. 
2), 6 I.C.C.2d 956 (1990) (adopting change in materials and 
supplies component of RCAF-U); see also Edison Electric Inst. v. 
ICC, 969 F.2d 1221, 1222, 1230 (D.C. Cir. 1992) (holding that, 
although the Act neither prohibited nor required a productivity 
adjustment, the ICC was statutorily authorized and properly 
 
4
exercised its discretion to prospectively improve RCAF by a 
productivity adjustment). 
Although RCAF-A is presently the only index permitted to be 
used in regulated rail transportation contracts that must apply 
a rate adjustment factor, Congress requires the Surface 
Transportation Board, the successor to the ICC, to continue to 
publish both the RCAF-U and RCAF-A indices, recognizing that 
there are contracts remaining in force that use RCAF-U and 
parties to unregulated contracts may continue to use RCAF-U as 
the basis for rate adjustment provisions if they choose to do 
so.  See 49 U.S.C. § 10708 (2006); see also Burlington N. R.R. 
Co. v. Nebraska Pub. Power Dist., 931 F. Supp. 1470, 1476 (D. 
Neb. 1996) (noting that “[t]he ICC has remained neutral about 
whether particular [unregulated] contracts required the use of 
RCAF(U) or RCAF(A)”). 
In the present case, the parties agree that at the time the 
CTA was executed, they were free to select either RCAF-U or 
RCAF-A to adjust the rates to be charged under the CTA.  It is 
also not disputed that because of the differences in the method 
of calculating the two indices, use of RCAF-U for adjusting coal 
transportation rates under the CTA would result over time in 
significantly higher amounts being owed by the utilities to 
Norfolk Southern than would be owed under rates adjusted by 
RCAF-A. 
 
5
On June 29, 1989, William B. Bales, Norfolk Southern’s Vice 
President for Coal and Ore Traffic, sent a memorandum to ODEC 
detailing the quarterly rate adjustment for transportation of 
coal under the CTA.  In each subsequent quarter thereafter 
through the third quarter of 2003, Bales or another Norfolk 
Southern executive prepared and transmitted to ODEC a similar 
memo detailing the adjusted coal transportation rates for the 
Clover facility for the upcoming quarter.  Although none of the 
memoranda indicated specifically whether the adjustment factor 
being used to determine the rates was RCAF-U or RCAF-A, 
beginning with the fourth quarter of 1991, Bales referred in his 
cover memo to the contract providing for “an adjustment of 50% 
of the adjusted RCAF” as the basis for determining the coal 
transportation rates for the Clover facility.  (Emphasis added.) 
In September 1993, VEPCO and Norfolk Southern held 
negotiations in an effort to form a separate contract for 
transportation of coal to the Clover facility.  Among other 
matters, VEPCO and Norfolk Southern specifically discussed 
changing the rate adjustment factor under the CTA to “75% of the 
Unadjusted RCAF.”  Despite these negotiations, no new contract 
was agreed upon, and all coal subsequently transported to the 
Clover facility by Norfolk Southern remained subject to the 
provisions of the CTA, and all adjustments to the coal 
 
6
transportation rates under the CTA before December 1, 2003 were 
made using RCAF-A to calculate the quarterly change in the rate. 
In a letter dated October 17, 2003 which summarized 
communications made in a meeting on October 14, 2003, Thomas E. 
Rappold, Norfolk Southern’s Assistant Vice President for Utility 
and Industrial Coal Marketing, advised Jeff Dowhan, the Coal 
Contracts Manager for Dominion Resources, Inc., the parent 
company of VEPCO, that Norfolk Southern intended to begin making 
quarterly adjustments to the coal transportation rates under the 
CTA using RCAF-U, and that all deliveries beginning on December 
1, 2003 would be subject to these higher rates.  In that letter, 
Rappold “acknowledged that, when RCAF-A was first introduced, 
[Norfolk Southern] applied this index for what was intended to 
be the short-term benefit of [the] Clover [facility].”  Rappold 
maintained, however, that the CTA “contract language specifies 
use of RCAF-U,” and that “due to [Norfolk Southern’s] attention 
to other matters, the benefit of RCAF-A was extended to [the 
utilities] far longer than anticipated” resulting in an 
“extraordinary windfall” to the utilities. 
The utilities rejected Norfolk Southern’s assertion that 
RCAF-U could be used to adjust transportation rates under the 
CTA and this litigation ensued.  
PROCEEDINGS 
 
7
On November 26, 2003, the utilities filed in the circuit 
court a bill of complaint seeking a declaratory judgment that 
the CTA unambiguously specified use of “the Contract ratio” as 
the rail cost adjustment factor and sought specific performance 
of the contract for future transportation of coal to the Clover 
facility applying rates adjusted by “the Contract ratio.”  The 
utilities argued that the “Contract ratio” referred to in the 
Bill of Complaint was RCAF-A.   The Bill of Complaint, however, 
did not state that the CTA required the use of RCAF-A; rather, 
it stated that the CTA contained a “Contract ratio” that was to 
be applied.  The utilities alleged that the representations made 
by Norfolk Southern at the October 14, 2003 meeting constituted 
an anticipatory breach of the CTA and that using RCAF-U to 
adjust the future coal transportation rates “would wrongfully 
inflate [the utilities’] rates by hundreds of millions of 
dollars.” 
Norfolk Southern filed a demurrer to the bill of complaint, 
asserting that the utilities had failed to state a claim upon 
which relief may be granted because the CTA was unambiguous in 
requiring the utilities to pay for the transportation of coal to 
the Clover facility in accord with the application of RCAF-U in 
the quarterly adjustment of coal transportation rates.  Norfolk 
Southern also filed an answer and cross-bill seeking a 
declaratory judgment and specific performance of the CTA using 
 
8
RCAF-U to adjust the future coal transportation rates.3  Norfolk 
Southern also sought damages for breach of contract “for all 
amounts underpaid by [the utilities] since December 1, 2003” and 
“interest on all such amounts.” 
Following a hearing, limited to the issue of determining 
whether the CTA specified the use of RCAF-U or RCAF-A as the 
rate adjustment factor, the circuit court issued an opinion 
letter dated December 22, 2004.  In that opinion letter the 
court found that “the language of [the CTA] is clear and 
unambiguous” and that Article 25 “refers to the unadjusted Rail 
Cost Adjustment Factor.”  The court further opined that it was 
“not convinced that a latent ambiguity exists, or that the RCAF-
A is an amendment to the RCAF-U as contemplated by the 
contract.”  An order embodying this ruling and granting Norfolk 
Southern’s demurrer was entered nunc pro tunc March 9, 2005. 
In an order entered February 11, 2005, the circuit court 
denied the utilities’ motion for leave to amend their bill of 
                     
3The pleading was styled as an “answer and counterclaim,” 
but the style was subsequently amended to “answer and cross-
bill” to reflect that the action had been brought on the equity 
side of the court’s docket.  This action was brought before we 
amended our rules, effective January 1, 2006, effectively 
abolishing the division of trial court dockets into legal and 
equity proceedings by providing that any civil suit, which 
includes legal and equitable causes of action, is commenced by 
filing a “complaint” and claims made in responsive pleadings are 
either “counterclaims,” if against the original plaintiff, or 
“cross-claims,” if against a co-defendant.  See Rules 3:1, 3:2, 
3:9 and 3:10. 
 
9
complaint.  The court found “that the proposed amendment would 
accomplish nothing more than provide [an] opportunity [to the 
utilities] for reargument of questions already decided and that 
the proposed amendment seeks determination of disputed issues 
rather than an adjudication of the parties’ rights and is 
therefore an inappropriate use of declaratory judgment.”  
However, the court granted the utilities leave to file an 
amended answer to Norfolk Southern’s cross-bill, so long as the 
amended answer did not allege “that [the CTA] is ambiguous, or 
that the CTA provides for the use of RCAF-A, those issues having 
been decided by this court.” 
The utilities filed an amended answer to the cross-bill in 
which they made extensive allegations regarding the parties’ 
dealings both before and after the execution of the CTA.  Based 
on these allegations, the utilities contended that Norfolk 
Southern was estopped from asserting the application of RCAF-U, 
that Norfolk Southern had implicitly accepted a modification or 
novation of the CTA requiring the use of RCAF-A, and that 
Norfolk Southern’s actions in this regard constituted fraud in 
the inducement.  The amended answer also reasserted that Norfolk 
Southern’s claims were barred by the doctrines of laches and 
waiver and, in whole or in part, by the statute of limitations. 
Norfolk Southern filed a motion to strike various 
allegations relating to actions occurring prior to the execution 
 
10
of the CTA and allegations that Norfolk Southern had agreed to 
the use of RCAF-A as the rate adjustment schedule under the 
agreement.  Norfolk Southern contended that these factual 
allegations were contrary to the circuit court’s determination 
that the CTA was not ambiguous with regard to the specification 
of RCAF-U as the applicable rate adjustment factor.  Thus, 
Norfolk Southern asserted that these allegations and the 
affirmative defenses of novation, modification, fraud in the 
inducement, waiver and estoppel were barred by the doctrine of 
judicial estoppel.  Norfolk Southern also contended that even if 
these defenses were not barred by judicial estoppel, the 
allegations of the amended answer were insufficient to establish 
these defenses as well as the defense of the statute of 
limitations. 
 
The utilities responded to Norfolk Southern’s motion to 
strike their factual allegations relating to pre-contract events 
by asserting that it was “facially absurd” to conclude that the 
circuit court’s determination that the CTA was unambiguous in 
requiring application of RCAF-U to coal transportation rate 
adjustments at the time of its execution barred the utilities 
from pleading allegations germane to its affirmative defenses.  
The utilities next contended that judicial estoppel did not 
apply because the record did not reflect that the court relied 
on the assertion that the CTA had not been amended in reaching 
 
11
its conclusion that RCAF-U was the specified rate adjustment 
factor.  Moreover, they contended that judicial estoppel only 
bars a party from changing its position after having 
successfully prevailed under the prior position in the same or 
prior proceedings, whereas here, the position maintained by the 
utilities under their bill of complaint had failed.  The 
utilities also asserted that their amended answer contained only 
pleading in the alternative, and “there is no contradiction 
between an allegation that a contract was not formally amended 
and an allegation that it was modified for consideration, by 
estoppel, or by waiver.”  Finally, in response to Norfolk 
Southern’s motion to strike the affirmative defenses on 
alternate grounds, the utilities asserted that they “more than 
sufficiently pled facts which create a jury question” and 
therefore Norfolk Southern’s alternative motion to strike should 
be denied. 
On November 1, 2005, following additional briefing and oral 
argument by the parties, the circuit court entered a decree in 
which it stated that, in construing Article 25 of the CTA, it 
had relied on the factual assertions in the bill of complaint 
that the CTA contained the rate adjustment schedule and that 
schedule had not been amended.  The court also held that the 
amended answer now alleged that the terms of the CTA “were 
amended after all, whether through theories of estoppel, 
 
12
modification, novation, fraud in the inducement, or waiver.”  
Thus, the court held that the utilities were judicially estopped 
from taking inconsistent positions in their amended answer from 
those originally asserted in their bill of complaint and struck 
the affirmative defenses of estoppel, modification, novation, 
fraud in the inducement and waiver.  The court also granted 
Norfolk Southern’s motion to strike certain factual allegations 
from the amended answer.4  The circuit court also found that the 
grounds stated in Norfolk Southern’s alternative motion to 
strike the utilities’ affirmative defenses provided an 
independent basis to support the court’s judgment.  The court 
rejected the statute of limitations defense because Norfolk 
Southern did not seek damages for any underpayment before 
December 1, 2003.  Finally, the court concluded that the 
equitable defense of laches would not apply to the legal claim 
for breach of contract and that, in any case, the utilities had 
not shown any actual harm caused by Norfolk Southern’s delay in 
enforcing its rights under the contract. 
Following entry of the November 1, 2005 decree, the 
utilities and Norfolk Southern continued to dispute the proper 
calculation of the rates for coal transportation to the Clover 
facility.  On July 7, 2006, Norfolk Southern filed a motion 
requesting that the circuit court declare that, based on its 
                     
 
13
4 The utilities have not appealed this ruling. 
previous orders, the calculation of the rate to be imposed be 
based on RCAF-U applied from the inception of the CTA. 
The utilities, in a memorandum opposing Norfolk Southern’s 
motion, contended that the issue was not and could not be 
resolved under the court’s prior rulings, that the adjustment of 
the rates be based on an application of RCAF-U to the rate, as 
previously adjusted by RCAF-A, in effect in the quarter prior to 
the December 1, 2003, and requested the matter be set for trial. 
The circuit court rejected the utilities’ position and 
entered an order granting Norfolk Southern’s motion.  The court 
directed the utilities to “calculat[e] the rates paid under the 
[CTA] as if the RCAF had been properly applied from the [CTA’s] 
inception.”  The utilities were further ordered to pay the 
arrearage from December 1, 2003 along “with interest at the rate 
provided by the [CTA],” and to pay for all future deliveries of 
coal to the Clover facility in accord with the court’s 
determination that RCAF-U applied to the rates to be charged 
from the inception of the CTA.5 
On June 11, 2007, the utilities filed a motion to vacate 
the September 1, 2006 order, while on June 27, 2007, Norfolk 
Southern filed a motion to schedule a status conference to 
                     
5 The utilities noted an appeal from this order.  This Court 
dismissed the appeal without prejudice, finding that there was 
not yet a final, appealable order in the case.  VEPCO v. Norfolk 
Southern Railway Co., Record No. 062501 (May 11, 2007) (order). 
 
14
resolve all pending matters and to enter a final judgment.  The 
parties filed memoranda supporting their respective positions as 
to whether the judgment, as expressed in the circuit court’s 
prior orders, should be confirmed by a final judgment, or if the 
court should set aside its prior determinations and set the 
matter for trial.  Ultimately, the parties agreed to file a 
joint submission to the court setting out the matters they 
agreed had been resolved and those issues that the utilities 
contended remained in dispute. 
On April 17, 2008, the circuit court entered a final order 
and decree concluding the proceedings on the cross-bill.  In 
that order, the court, without express comment, denied the 
utilities’ motion for setting aside the prior determinations of 
the court.  In accord with the stipulations of the parties, the 
court entered judgment for Norfolk Southern in the amount of 
$77,708,000 for underpayment of coal delivery rates between 
December 1, 2003 and November 30, 2007, along with pre-judgment 
interest of $8,476,222.44 based on the short term prime rate 
published by J.P. Morgan Bank as provided for in the CTA.  The 
court also imposed post-judgment interest based on the then 
applicable statutory rate of 7.5%.  This appeal followed. 
DISCUSSION 
We awarded the utilities an appeal from the circuit court’s 
judgment based upon eight separate assignments of error.  The 
 
15
first two assignments of error address the circuit court’s 
rulings regarding the interpretation and ambiguity of the 
contact.  In its third assignment of error the utilities contend 
that the circuit court erred in striking its affirmative 
defenses and denying its motion to file an amended bill of 
complaint.  The remaining assignments of error address the 
court’s actions enforcing those rulings and the entry of the 
judgment with interest against the utilities.  We begin with a 
discussion of the first two assignments of error relating to 
contract interpretation. 
1.  Contract Interpretation 
The utilities’ first assignment of error challenges the 
circuit court’s ruling that Article 25 of the CTA specifies that 
RCAF-U, rather than the RCAF-A, is to be used as the rate 
adjustment factor for transportation of coal to the Clover 
facility.  In the second assignment of error, the utilities 
contend that if Article 25 of the CTA does specify RCAF-U as the 
coal transportation rate adjustment factor, then the court erred 
in ruling that there is not a latent ambiguity in that article 
that would permit the utilities to present parol evidence that 
the parties had intended a different meaning of the rate 
adjustment factor under the CTA.  
In considering the issues raised by the first two 
assignments of error, we are guided by the well-settled 
 
16
principle that “[t]he interpretation of a contract presents a 
question of law subject to de novo review.”  PMA Capital 
Insurance Co. v. US Airways, Inc., 271 Va. 352, 357-58, 626 
S.E.2d 369, 372 (2006).  Moreover, it is equally settled that 
the primary focus in considering disputed contractual language 
is for the court to determine the parties’ intention, which 
should be ascertained, whenever possible, from the language the 
parties employed in the contract.  Flippo v. CSC Assocs. III, 
L.L.C., 262 Va. 48, 64, 547 S.E.2d 216, 226 (2001); Langman v. 
Alumni Ass’n of the Univ. of Va., 247 Va. 491, 498-99, 442 
S.E.2d 669, 674 (1994). 
The utilities first contend that the circuit court erred in 
failing to find that Article 25 of the CTA unambiguously 
specifies that RCAF-U is to be used as the coal transportation 
rate adjustment factor.  This is so, they contend, because the 
definition of RCAF in the CTA makes clear that the parties 
understood that there was only one official rate adjustment 
factor designated by the ICC for coal transportation contracts 
and, at the time of the execution of the CTA, that was RCAF-A.  
They point to the language of Article 25 that incorporates into 
the CTA “the applicable procedures described by the ICC in Ex 
Parte No. 290 (Sub. No. 2) and published in Title 49 C.F.R., 
Part 1102, Section 1102.1 and Interstate Commerce Act, Section 
10707, as may be amended,” contending, as they did in the 
 
17
circuit court, that RCAF-A was created by an amendment of the 
ICC regulations and superseded RCAF-U.  (Emphasis added.)  The 
utilities concede that under the ICC, and subsequently the 
Surface Transportation Board, RCAF-U continues to be calculated 
and published, but they contend that this is done only because 
RCAF-U is a component of RCAF-A and to accommodate contracts 
that were executed before RCAF-A became the official rate 
adjustment factor.  We disagree. 
The circuit court correctly determined that the language of 
Article 25 expressly and unambiguously incorporates into the CTA 
“the applicable procedures prescribed by the ICC in Ex Parte No. 
290 (Sub. No. 2) and published in Title 49 C.F.R., Part 1102, 
Section 1102.1 and Interstate Commerce Act, Section 10707.”  
There can be no question that the RCAF-U index is the basis of 
the “applicable procedures” for determining adjustments to rail 
freight delivery rates “described by the ICC in Ex Parte No. 290 
(Sub. No. 2),” which is the only index described in the reports 
of those regulatory proceedings.  To the extent that the term 
“as may be amended” can be applied to the entire clause, it is 
nonetheless clear that this would refer to an amendment of the 
procedures for calculating and applying RCAF-U under Ex Parte 
No. 290 (Sub. No. 2). 
It is equally clear that had the parties intended for the 
CTA to incorporate RCAF-A, they could have specified the 
 
18
applicable index as being that “prescribed by the ICC in Ex 
Parte No. 290 (Sub. No. 4),” which established the procedure for 
calculating and applying the RCAF-A index.  Creation of RCAF-A 
had been under consideration by the ICC for some time and that 
the regulations for its calculation and application had been 
promulgated before the CTA was executed, albeit only by a matter 
of weeks.  Thus, had ODEC and Norfolk Southern intended for the 
CTA to specify the use of RCAF-A, they could have done so 
expressly and without the need of any reference to the 
regulatory process that plainly prescribes RCAF-U.  Accordingly, 
we hold that the circuit court did not err in finding that 
Article 25 of the CTA unambiguously specifies RCAF-U as the rate 
adjustment factor for transportation of coal to the Clover 
facility. 
The utilities next contend that if Article 25 of the CTA 
must be construed as requiring the use of RCAF-U, the circuit 
court nonetheless erred in failing to find that there was a 
latent ambiguity in the CTA.  They contend that the existence of 
the latent ambiguity is established by the fact that RCAF-A 
rather than RCAF-U was used as the rate adjustment factor for 
the first fourteen years of the contract, and that this course 
of dealing between the parties reflects their true intent. 
An ambiguity exists when the contract’s language is of 
doubtful import, is susceptible of being understood in more than 
 
19
one way or of having more than one meaning, or refers to two or 
more things at the same time.  Tuomala v. Regent Univ., 252 Va. 
368, 374, 477 S.E.2d 501, 505 (1996); Galloway Corp. v. S.B. 
Ballard Constr., 250 Va. 493, 502, 464 S.E.2d 349, 355 (1995).  
Normally, an ambiguity in a contact is “patent,” that is, the 
language of the contract itself reveals that it can be 
interpreted in more than one way.  A latent ambiguity exists 
where language “while appearing perfectly clear at the time the 
contract[] [is] formed, because of subsequently discovered or 
developed facts, may reasonably be interpreted in either of two 
ways.”  Galloway, 250 Va. at 503, 464 S.E.2d at 355; Zehler v. 
E.L. Bruce Co., Inc., 208 Va. 796, 799 n.5, 160 S.E.2d 786, 789 
n.5 (1968). 
Quoting from footnote 5 in Zehler, the utilities contend 
that “[i]f two RCAFs exist, the term ‘RCAF’ would be ‘a term 
which, upon application to external objects, is found to fit two 
or more of them equally.’”  Thus, they contend that the circuit 
court should have found that there was a latent ambiguity in the 
CTA and looked to the parties’ subsequent dealings to determine 
that, regardless of the apparent meaning of the language of 
Article 25, the parties’ intention at the time of the execution 
of the CTA was to use RCAF-A as the rate adjustment factor.  
This is so, they maintain, because “the construction placed upon 
the ambiguous term by the parties is practically conclusive.” 
 
20
The difficulty with the utilities’ position on this issue 
is that it necessarily presumes that at the time of the CTA’s 
execution, the parties were unaware that there was a distinction 
between RCAF-U and RCAF-A based on an erroneous belief that 
RCAF-A had superseded RCAF-U as “the RCAF.”  The parties’ 
subsequent dealings, however, demonstrate that this was not the 
case.  The utilities focus solely on those portions of the 
parties’ subsequent dealings with regard to the CTA that show 
Norfolk Southern actually used RCAF-A to adjust the rates for 
coal transportation to the Clover facility until late 2003.  
However, it is equally clear, especially from the September 1993 
negotiations between VEPCO and Norfolk Southern, that the 
parties knew that RCAF-U was available as to rate adjustment 
factors for calculating adjustments to the coal transportation 
rates under the CTA. 
The mere fact that RCAF-A was used to calculate the rate 
adjustments for transportation of coal to the Clover facility 
for an extended period of time is insufficient to establish that 
Article 25, which plainly refers to RCAF-U as the rate 
adjustment factor, must have resulted from a mutual 
misunderstanding of the parties as to the import of that 
language.  Norfolk Southern’s assertion that it applied RCAF-A 
in making rate adjustments for transportation of coal to the 
Clover facility initially through forbearance and subsequently 
 
21
by lack of diligence is contrary to the utilities’ position that 
the parties intended for Article 25 of the CTA to specify RCAF-A 
as the rate adjustment factor.  The mere fact that the parties 
disagree about the meaning of the CTA’s terms is not evidence 
that the CTA language is ambiguous.  Pocahontas Mining Ltd. 
Liab. Co. v. Jewell Ridge Coal Corp., 263 Va. 169, 173, 556 
S.E.2d 796, 771 (2002); Galloway, 250 Va. at 502, 464 S.E.2d at 
354.  
For these reasons, we hold that the circuit court did not 
err in failing to find that the CTA contained a latent ambiguity 
and in holding that the CTA unambiguously specifies RCAF-U as 
the coal transportation rate adjustment factor for the Clover 
facility. 
2.  Judicial Estoppel 
 
In their third assignment of error, the utilities claim 
that the circuit court erred in striking certain affirmative 
defenses on the basis of judicial estoppel and also claim that 
the alternative reasons given for striking those defenses were 
error.  We begin with the circuit court’s ruling that the 
affirmative defenses of waiver and estoppel are barred by 
judicial estoppel.6 
                     
6 The affirmative defenses of novation, modification, fraud 
in the inducement, estoppel and waiver were struck on the basis 
of judicial estoppel.  However, in this appeal the utilities 
 
22
 
The doctrine of judicial estoppel prevents a party from 
assuming successive positions in the course of a suit or series 
of suits with regard to the same fact or set of facts if those 
facts are inconsistent or mutually contradictory.  Bentley 
Funding Group, L.L.C. v. SK&R Group, L.L.C., 269 Va. 315, 325, 
609 S.E.2d 49, 53-54 (2005).  The purpose of the doctrine is to 
protect the integrity of the judicial process.  Parson v. 
Carroll, 272 Va. 560, 564, 636 S.E.2d 452, 454 (2006).  While 
this doctrine is widely recognized, it is an equitable doctrine, 
not amenable to an “exhaustive formula” for determining its 
applicability.  Bentley Funding Group, 269 Va. at 325-26, 609 
S.E.2d at 54 (quoting New Hampshire v. Maine, 532 U.S. 742, 751 
(2001)). 
 
In considering this doctrine we have identified certain 
conditions as prerequisites for its application.  The 
inconsistent or contradictory assertions must be assertions of 
fact, not law, Bentley Funding Group, 269 Va. at 326, 609 S.E.2d 
at 54 (quoting Lowry v. Stovall, 92 F.3d 219, 224 (4th Cir. 
1996)), the parties must be the same if the inconsistent 
positions involve different proceedings, Lofton Ridge, LLC v. 
Norfolk S. Ry. Co., 268 Va. 377, 382, 601 S.E.2d 648, 651 
(2004), and the prior inconsistent position must have been 
                                                                  
address only the affirmative defenses of estoppel and waiver.  
Accordingly, we limit our review to those two defenses. 
 
23
relied upon by the court or prior court in rendering its 
decision.  See Bentley Funding Group, 269 Va. at 327, 609 S.E.2d 
at 54-55. 
The inconsistent positions in this case stem from the 
circuit court’s ruling on the utilities’ bill of complaint for a 
declaratory judgment interpreting provisions of the CTA.  In 
that proceeding the utilities alleged that the CTA was the 
contract agreed upon by the parties, that the contract contained 
the contractually agreed upon rate adjustment ratio for the 
transportation of coal to the Clover Facility, and that the 
parties had never amended the contract to change the rate 
adjustment ratio from that contained in the contract.  The 
circuit court relied on these factual assertions and held that 
the parties had agreed to be bound by the terms contained in the 
CTA and that those terms had not been amended.  The circuit 
court held that the CTA required the use of the RCAF-U rate 
adjustment ratio.  That was a legal conclusion that differs from 
the position advocated by the utilities.  Nevertheless, the 
circuit court’s reliance on the utilities’ factual assertions in 
reaching this decision is beyond question. 
In the affirmative defenses in their amended answer to 
Norfolk Southern’s cross-bill, the utilities pled that “[t]he 
parties agreed to use the RCAF-A under the Agreement” and that 
Norfolk Southern “ratified the parties’ agreement to use the 
 
24
RCAF–A under the Agreement.”  The circuit court held that these 
assertions of an amendment to the CTA were inconsistent with or 
contrary to the assertion previously made that the CTA had not 
been amended.  
The utilities argue that the assertion that the CTA had not 
been amended was not an assertion of fact but an assertion of 
law and the amended answer only contained “alternative legal 
theories.”7  However under our case law, the issue of contract 
amendment is a finding of fact, not of law.8  See Reid v. Boyle, 
259 Va. 356, 368, 527 S.E.2d 137, 144 (2000)(whether contract 
was amended reviewed applying the clear error standard.)  
Therefore, the allegations asserting that the CTA was amended 
are factual assertions inconsistent with the factual assertions 
made by the utilities in their bill of complaint. 
The utilities next argue, citing Bentley Funding Group, 
that judicial estoppel should not have been applied because 
judicial estoppel requires “a successful judgment in favor of 
the non-moving party on any such positions of fact” and the 
utilities “did not prevail . . . on their purportedly 
                     
7 The utilities abandoned the argument made in the circuit 
court that their allegation that the CTA had not been amended 
meant only that the CTA had not been amended in writing. 
8 The utilities attempt to distinguish their pleading from 
an “amendment” of a contract by using words such as “alter” or 
“modify.”  These semantic differences do not change the nature 
of the action alleged which is nothing more or less than an 
amendment of the contract. 
 
25
inconsistent prior position.”  However neither Bentley Funding 
Group nor any other case has required that the non-moving party 
secure a favorable judgment based on the prior inconsistent 
position as a prerequisite for the application of judicial 
estoppel.  Rather, our cases only require that the court relied 
upon the prior inconsistent position in rendering a prior 
judgment or ruling.9  In Bentley Funding Group the circuit court 
found that judicial estoppel should be applied to the 
defendant’s claim that he owned certain escrow accounts because 
the defendant had not listed those accounts as an asset in a 
prior bankruptcy proceeding.  269 Va. at 323, 609 S.E.2d at 52.  
In reversing the circuit court’s application of judicial 
estoppel, this Court’s inquiry was directed to whether the prior 
factual position reflecting non-ownership of the escrow accounts 
was relied upon by the bankruptcy court in rendering the 
decision approving a contract for the purchase of property.  See 
id. at 327-29, 609 S.E.2d at 54-55.  The Court made no mention 
or inquiry regarding whether the non-moving party received a 
favorable judgment based on the prior inconsistent position. 
The utilities’ assertion that application of the doctrine 
requires that the non-moving party must obtain a “successful 
judgment” based on the inconsistent position apparently stems 
                     
9 As stated above, the doctrine can be applied in the course 
of a single action or a series of actions. 
 
26
from certain language used in the Bentley Funding Group opinion 
to describe the elements and rationale for the application of 
judicial estoppel.  In this portion of the opinion, the Court in 
Bentley Funding Group quoted the following passage from New 
Hampshire v. Maine, 532 U.S. 742, 750-51 (2001): 
Courts regularly inquire whether the party has 
succeeded in persuading a court to accept that party’s 
earlier position, so that judicial acceptance of an 
inconsistent position in a later proceeding would 
create the perception that either the first or the 
second court was misled.  Absent success in a prior 
proceeding, a party’s later inconsistent position 
introduces no risk of inconsistent court 
determinations, and thus poses little threat to 
judicial integrity. 
 
Bentley Funding Group, 269 Va. at 327, 609 S.E.2d at 54-55.  
Although this passage uses the phrase “success in a prior 
proceeding,” the context shows that the phrase refers to the 
prior sentence which addresses the persuasion of the court to 
accept the nonmoving party’s earlier position.10  The Court in 
Bentley Funding Group then went on to say that “[w]ithout the 
requirement that the prior court accepted the earlier 
inconsistent position, facts not material or relevant in the 
prior proceeding could be asserted as a bar to a party’s cause 
                     
10 The statement from New Hampshire v. Maine was also quoted 
in Matthews v. Matthews, 277 Va. 522, 529, 675 S.E.2d 157, 161 
(2009), in the context of reciting the elements of judicial 
estoppel.  The doctrine was not applied in that case because the 
alleged prior inconsistent position was one of law, not fact.  
Id. at 530, 675 S.E.2d at 161. 
 
27
of action in a later proceeding.”  Id. at 327, 609 S.E.2d at 55 
(emphasis added).  Nothing in Bentley Funding Group states or 
implies that the non-moving party must have succeeded in 
obtaining a favorable judgment based on the prior inconsistent 
factual position.  
Based on our prior consideration of judicial estoppel, we 
conclude that application of the doctrine requires only that the 
prior inconsistent factual position must have been relied upon 
by the court in reaching its decision.  In this case, the 
circuit court, as reflected in its order, relied on the 
utilities’ position that the CTA was binding on the parties and 
had not been amended.  Therefore that element of judicial 
estoppel has been met. 
Finally, the utilities, citing Lofton Ridge, 268 Va. at 
382, 601 S.E.2d at 651, argue that judicial estoppel should not 
be applied because Norfolk Southern prevailed in its 
interpretation of the CTA and therefore was not prejudiced by 
the prior inconsistent position.  The utilities’ reliance on 
Lofton Ridge for the proposition that prejudice is a 
prerequisite for the application of judicial estoppel is 
misplaced.  “Prejudice” is mentioned only three times in the 
opinion in discussing judicial estoppel.  The word first appears 
in a parenthetical description of another case cited to support 
the statement that judicial estoppel may bar a litigant from 
 
28
taking inconsistent actions within a single proceeding.  Id. at 
381-82, 601 S.E.2d at 650-51.  The second use of the word 
“prejudice” is found in a statement discussing inconsistent 
legal theories,11 and the third appears in a recitation of the 
appellant’s reasons for asserting that judicial estoppel was 
improperly applied in that case.  Id. at 382, 601 S.E.2d at 651.  
The Court’s holding that the doctrine was improperly applied in 
Lofton Ridge was based on the lack of identity of parties, not 
the lack of prejudice.  Id. at 383, 601 S.E.2d at 651-52.  In 
sum, Lofton Ridge does not incorporate prejudice as a condition 
for the application of judicial estoppel. 
The doctrine of judicial estoppel, as stated above, is a 
doctrine addressing the integrity of the court and its decrees, 
preventing litigants from “playing fast and loose” with court 
rules and litigation strategy.  Wilroy v. Halbleib, 214 Va. 442, 
445, 201 S.E.2d 598, 601 (1974) (quoting Rohanna v. Vazzana, 196 
Va. 549, 553, 84 S.E.2d 440, 442 (1954)).  It is not a doctrine 
primarily directed to the interests of the litigants.  
Nevertheless it is an equitable doctrine and the United States 
Supreme Court in New Hampshire v. Maine identified prejudice as 
                     
11 “However, ‘[a] person who has taken an erroneous position 
on a question of law is ordinarily not estopped from later 
taking the correct position, provided his adversary has suffered 
no harm or prejudice by reason of the change.’ ”  Lofton Ridge, 
268 Va. at 382, 601 S.E.2d at 651 (quoting The Pittston Co. v. 
 
29
a “third consideration” that can be used in determining whether 
the doctrine should be applied.  532 U.S. at 751 (considering 
“whether the party seeking to assert an inconsistent position 
would derive an unfair advantage or impose an unfair detriment 
on the opposing party if not estopped”).  The Supreme Court did 
not, however, consider this factor, along with others, as 
establishing “inflexible prerequisites or an exhaustive formula 
for determining the applicability of judicial estoppel.”  Id.  
Thus, neither this Court nor the United States Supreme Court has 
made a showing of prejudice a prerequisite to the application of 
judicial estoppel.  Nevertheless, in this case the circuit court 
found that Norfolk Southern would suffer an unfair detriment if 
the inconsistent position was advanced because it would incur 
the expense and delay of relitigating the meaning of the CTA, 
which the circuit court had already determined in Norfolk 
Southern’s favor. 
For these reasons, we conclude that the circuit court did 
not err in striking the utilities’ affirmative defenses because 
the elements of judicial estoppel were established in this case.  
Based on this holding, we also reject the utilities’ challenge 
to the circuit court’s order entering a protective order with 
                                                                  
O’Hara, 191 Va. 886, 904, 63 S.E.2d 34, 43 (1951))(emphasis 
added). 
 
30
regard to any discovery on communications prior to the execution 
of the CTA or alleged amendments subsequent to its execution. 
In light of this holding we need not address the circuit 
court’s alternative grounds for striking the defenses of waiver 
and estoppel.12  We turn now to the circuit court’s ruling 
striking the utilities affirmative defense of the statute of 
limitations. 
3.  Statute of Limitations 
The utilities contend that the circuit court erred in 
striking their assertion of a plea in bar of the statute of 
limitations.  The utilities advance two separate theories for 
the application of the statute of limitations to this case.  
First, they contend that because the CTA was not a divisible 
contract, the circuit court should have found that the first 
breach of the CTA occurred in 1989 when Norfolk Southern first 
used the RCAF-A to adjust the coal transportation rate and, 
                     
12 The utilities did not argue below and do not assert here 
that, even if the application of judicial estoppel is correct, 
the affirmative defenses of estoppel and waiver nevertheless 
remain viable.  Therefore, the issue of whether these 
affirmative defenses remain viable even after the utilities are 
precluded from relying on the inconsistent position asserted in 
those defenses has not been preserved or raised in this appeal 
and is not before us for review.  Furthermore, the utilities did 
not assign error to the trial court’s ruling striking from the 
amended answer certain factual allegations upon which the 
utilities’ waiver and estoppel defenses are based.  Therefore, 
those factual allegations, which are recited in the dissent, 
cannot be considered in resolving the utilities’ legal arguments 
regarding estoppel and waiver. 
 
31
thus, Norfolk Southern’s breach of contract action is barred as 
untimely under Code § 8.01-246(2), the applicable five year 
statute of limitations.  We disagree. 
Even accepting the utilities’ premise that the CTA is an 
indivisible contract, it is self-evident that as Norfolk 
Southern was responsible for calculating the quarterly 
adjustments to the coal transportation rates, its application of 
RCAF-A to that calculation prior to December 1, 2003, whether 
through forbearance or error, would not constitute a breach of 
the CTA by either Norfolk Southern or the utilities.  Moreover, 
Norfolk Southern has consistently acknowledged that it is 
entitled to seek damages for underpayment only from December 1, 
2003, the date on which it first made the demand that the 
utilities begin paying for the transported coal applying the 
RCAF-U rate.  It is only by virtue of the utilities’ failure to 
accede to that demand that an actionable breach of the CTA could 
have occurred.  Thus, we hold that the circuit court did not err 
in rejecting the utilities’ assertions that the statute of 
limitations barred Norfolk Southern’s breach of contract claim 
entirely.13 
                     
13In light of our disposition of the various issues on this 
appeal, we need not address the utilities’ further contention 
that the statute of limitations would bar Norfolk Southern from 
retroactively applying RCAF-U to adjust the coal transportation 
rates from the inception of the CTA even if Norfolk Southern has 
not waived its ability to do so.  
 
32
4.  Amended Bill of Complaint 
The utilities assert that the circuit court erred in 
refusing to allow the utilities to file an amended bill of 
complaint following the circuit court’s ruling on Norfolk 
Southern’s demurrer.  The utilities argue that in the proposed 
amended bill of complaint they pled “additional facts and 
theories regarding new matters not contained in the original 
Bill of Complaint.”  Specifically, the utilities argued that 
they “alleged new facts to establish estoppel, waiver, and other 
theories” in support of their claims and that none of these 
facts or theories were raised in the original bill of complaint.  
According to the utilities, the circuit court abused its 
discretion in denying the utilities leave to amend because the 
utilities were entitled to pursue them “as independent claims to 
insure that their rights were fully and finally declared, rather 
than be relegated to the status of cross-bill defendants.”  
Concluding, the utilities aver that absent any prejudice to 
Norfolk Southern, and absent any finding that the new theories 
were legally deficient, the circuit court abused its discretion 
in denying leave to amend. 
 
After reviewing the proposed amended bill of complaint, the 
circuit court concluded that it “would accomplish nothing more 
than provide opportunity for reargument of questions already 
decided.”  The circuit court also concluded that the proposed 
 
33
amendment was not an appropriate use of the declaratory judgment 
mechanism because it sought determination of disputed issues 
rather than adjudication of the parties’ rights. 
The new factual allegations and legal theories in the 
proposed amended bill of complaint were essentially identical to 
those contained in the amended answer to the cross-claim.  Many 
of the new factual allegations related to Norfolk Southern’s 
actions which the utilities asserted modified the terms of the 
agreement, an issue already decided as noted by the circuit 
court.  Claims of estoppel, modification, novation, and fraud in 
the inducement contained in the proposed amended complaint are, 
as noted by the circuit court, not determinations of rights, and 
thus are not appropriate for a declaratory judgment proceeding.  
Accordingly, the circuit court did not abuse its discretion in 
denying the utilities’ motion to file an amended bill of 
complaint. 
5.  Calculation of Damages 
Assignments of Error Nos. 4, 5, and 6 are based on 
essentially one issue: the circuit court’s conclusion that 
Norfolk Southern was entitled to calculate the damages it 
claimed – underpayments by the utilities since December 1, 2003 
– by applying the RCAF-U rate adjustment schedule from the 
inception of the agreement in 1989.  Utilizing the RCAF-U rate 
adjustment schedule as ordered by the circuit court resulted in 
 
34
underpayments of $77,708,000, as stipulated by the parties.  
Utilizing the RCAF-U rate to adjust the rates beginning in 
December 1, 2003 results in under payments of $3,816,000, 
according to the utilities.14 
In July 2006, Norfolk Southern filed a motion for further 
relief and enforcement of orders, asserting that the circuit 
court’s prior orders granting Norfolk Southern’s demurrer to the 
utilities’ bill of complaint, holding that the CTA required the 
application of the RCAF-U rate adjustment schedule, denying the 
utilities’ motion to file an amended bill of complaint, and 
striking the utilities’ affirmative defenses left “nothing to be 
done in the case except to superintend ministerially” the 
circuit court’s orders.  Norfolk Southern sought an order 
compelling the utilities to make the payments due Norfolk 
Southern “from December 1, 2003 forward in accordance with the 
rate adjustments provided by the [CTA].”  The utilities opposed 
this motion arguing that the circuit court’s prior orders did 
not resolve the measure of Norfolk Southern’s claimed damages, 
specifically how the RCAF-U should be used in calculating those 
damages.  The utilities relied on the prospective nature of the 
non-waiver provision and Paragraph 25 of the CTA.  Paragraph 25 
                     
14 The parties presented a stipulation to the court 
regarding the damage calculation based on application of RCAF-U 
from the inception of the contract and the utilities proffered 
 
35
provides that the rate per ton shall be set for each calendar 
quarter by adjusting the previous quarter’s rates.  The 
utilities argued that the RCAF-U rate schedule should have been 
utilized for determining underpayments beginning with rates 
existing in the calendar quarter prior to December 1, 2003, the 
date Norfolk Southern chose to assert the application of the 
RCAF-U rate schedule. 
The circuit court, by order entered September 1, 2006, 
agreed with Norfolk Southern and ordered that the RCAF-U rate 
adjustment schedule be utilized to calculate the underpaid 
amounts from December 1, 2003 as if the RCAF-U schedule had been 
used since the inception of the CTA.  In appealing this ruling, 
the utilities claim the circuit court erred in allowing Norfolk 
Southern to apply the RCAF-U schedule from the inception of the 
CTA in determining its damages, in refusing to vacate its 
September 1, 2006 order, and in refusing to allow certain 
discovery and submission of evidence. 
We find that the circuit court’s order was erroneous.  The 
court’s prior orders did not address the amount of damages to 
which Norfolk Southern was entitled under its cross-claim and 
did not address the manner in which those damages should be 
calculated.  Only when the manner of calculating damages is 
                                                                  
the evidence regarding the amount of damages resulting from 
applying RCAF-U from December 1, 2003. 
 
36
determined would further action be merely the ministerial 
superintending of the calculation. 
The manner in which the underpayments should be calculated 
is, under the CTA, a matter of contract interpretation.  As the 
utilities assert, two provisions of the CTA are relevant to this 
determination.  Paragraph 25 provides in part that the specific 
rates contained in the agreement “shall be retained or adjusted 
up or down on a quarterly basis.”  The adjustments are to be 
made on the first day of each quarter.  This provision requires 
adjustment of rates every quarter.  In this case, the rates were 
adjusted every quarter, applying the RCAF-A adjustment ratio.  
Thus, the contract term requiring rate adjustment every quarter 
was satisfied. 
The second provision, Paragraph 5, is a non-waiver 
provision.  That provision provides that the “failure of either 
Party to demand strict performance of any or all of the terms of 
this Agreement . . . shall not be construed as a waiver or 
relinquishment of that Party’s right to assert or rely upon any 
such right in the future.”  This section allows a contracting 
party to forego application of a term of the agreement but 
assert the term and demand compliance with it in the future.  
Therefore, the provisions of the CTA specifically allowed 
Norfolk Southern to accept an adjustment rate other than RCAF-U 
and then require the use of the contract specified rate, RCAF-U, 
 
37
for future rate adjustments.  The CTA does not, however, permit 
readjusting an already completed rate adjustment when a party 
later seeks to enforce a right which it did not previously 
enforce.  To the contrary, the contract terms preclude 
retroactive enforcement of a previously unclaimed right. 
For these reasons, we will reverse the decision of the 
circuit court requiring the application of RCAF-U to the CTA 
from its inception in determining the amount of underpayment to 
which Norfolk Southern is entitled and order that RCAF-U be 
applied beginning December 1, 2003, in determining the amount of 
underpayment to which Norfolk Southern is entitled. 
6.  Interest 
In their last assignments of error the utilities challenge 
the circuit court’s orders imposing pre- and post- judgment 
interest.  They argue that they should not be required to pay 
pre-judgment interest because Norfolk Southern did not make a 
specific claim for unpaid amounts until December 2007 or 
otherwise present invoices showing any underpayment.  The 
utilities also argue that pre-judgment interest is only 
authorized under the CTA if the utilities are late in paying.  
Because Norfolk Southern never presented invoices for the 
amounts now claimed until the “eve of trial,” the utilities 
contend that their payments could not have been late. 
 
38
The utilities argue that post-judgment interest should not 
have been imposed because Paragraph 30 of the CTA provides that 
interest is payable if a party fails to comply with the contract 
by delaying payment.  They also assert that the contract sets 
the interest rate as the Chase Manhattan Bank short-term prime 
rate in effect the first day after payment was due until the day 
the delay is cured.  The utilities claim that Norfolk Southern 
provided no evidence as to the requisite Chase Manhattan rate 
and therefore post-judgment interest should not be 7.5% but the 
6.0% rate specified in Code § 6.1-330.54. 
The award of pre-judgment interest is a matter of judicial 
discretion.  See Code § 8.01-382; Upper Occoquan Sewage Auth. v. 
Blake Constr. Co., 275 Va. 41, 63-64, 655 S.E.2d 10, 23 (2008); 
City of Richmond v. Blaylock, 247 Va. 250, 253, 440 S.E.2d 598, 
599 (1994).  Under the circumstances of this case, we cannot 
conclude that the circuit court abused its discretion in the 
pre- and post- judgment interest rates awarded.  Furthermore, 
with regard to post-judgment interest, the utilities 
acknowledged the Chase Manhattan rate in the stipulations it 
presented to the circuit court.  While the amount of interest 
would vary from that stated in the order in light of our 
conclusion regarding the basis for calculating damages, 
nevertheless, we affirm the circuit court’s imposition of pre- 
and post- judgment interest rates.  
 
39
CONCLUSION 
 
To summarize, we will affirm the judgment of the circuit 
court holding that the CTA is unambiguous and requires the use 
of RCAF-U rate adjustment schedule; striking the affirmative 
defenses of waiver and estoppel because they are barred by the 
doctrine of judicial estoppel; striking the affirmative defense 
of the statute of limitations; and denying the utilities’ motion 
to file an amended bill of complaint.  We reverse the circuit 
court’s ruling regarding the calculation of damages and hold 
that the damages to which Norfolk Southern is entitled shall be 
calculated by applying the RCAF-U adjustment rate beginning 
December 1, 2003.  Finally, we will affirm the circuit court’s 
decision to impose pre- and post-judgment interest.  
Accordingly, we will remand the matter to the circuit court for 
further proceedings consistent with this opinion. 
Affirmed in part,  
reversed in part, 
 
 
   and remanded. 
 
JUSTICE KOONTZ, with whom CHIEF JUSTICE HASSELL and JUSTICE 
MILLETTE join, concurring in part and dissenting in part. 
 
I respectfully dissent.  Article I, Section 11 of the 
Constitution of Virginia provides, in pertinent part:  “That in 
controversies respecting property, and in suits between man and 
man, trial by jury is preferable to any other, and ought to be 
held sacred.”  Today, in my view, a majority of this Court 
 
40
effectively permits a circuit court to deny a party to a 
contract dispute the right to a trial by jury on the merits of 
that party’s assertion of the affirmative defenses of equitable 
estoppel and waiver.  I cannot join a decision that results in 
the denial of such a fundamental right based upon what I believe 
to be the inappropriate application by the circuit court of the 
equitable doctrine of judicial estoppel in the factual and 
procedural context of this case. 
The pertinent procedural facts from which the issue arises 
are undisputed and may be fairly distilled to the following 
summary.  The utilities initially filed in the circuit court a 
bill of complaint against Norfolk Southern seeking a declaratory 
judgment that the parties’ contract regarding the transportation 
of coal to the utilities’ electricity generating facility in 
Clover, Virginia required the application of the Rail Cost 
Adjustment Factor – Adjusted (“RCAF-A”) for calculating 
quarterly adjustments to the coal transportation rates.  At the 
time this contract was executed, the parties had been free to 
select either RCAF-A or the Rail Cost Adjustment Factor – 
Unadjusted (“RCAF-U”); the latter rate factor would result in a 
higher rate for the transportation of coal.  The utilities 
maintained in the bill of complaint that the rate factor to be 
applied under the contract was RCAF-A and that the contract had 
not been amended to provide for the application of any other 
 
41
rate factor.  Norfolk Southern filed a demurrer to the bill of 
complaint asserting that the contract unambiguously required the 
application of RCAF-U.  The circuit court granted the demurrer. 
Norfolk Southern also filed a cross-bill seeking specific 
performance of the contract using RCAF-U to adjust the future 
coal transportation rates under the contract and damages for 
breach of contract for all amounts allegedly underpaid by the 
utilities resulting from the application of RCAF-A rather than 
RCAF-U.  The utilities filed an amended answer to the cross-bill 
asserting, among other things, that Norfolk Southern’s breach of 
contract claims were barred by equitable estoppel and/or waiver.  
The circuit court held that the utilities were judicially 
estopped from taking “inconsistent positions” in their amended 
answer from those originally asserted in their bill of complaint 
and, accordingly, struck the utilities’ affirmative defenses of 
equitable estoppel and waiver. 
The majority now concludes that “the circuit court did not 
err in striking the utilities’ affirmative defenses [of 
equitable estoppel and waiver] because the elements of judicial 
estoppel were established in this case.”  In reaching that 
conclusion, the principal focus of the majority’s analysis is 
that the circuit court relied upon the utilities’ position that 
the parties’ contract had not been amended and, thus, that the 
 
42
utilities had asserted inconsistent factual positions in their 
bill of complaint and their amended answer. 
In my view, when these pleadings are considered in context 
there is no inconsistency in the assertions made by the 
utilities so as to support the application of judicial estoppel 
in this case.  It is simply not inconsistent to assert, on the 
one hand, that the contract required the application of RCAF-A 
and had not been amended and, on the other hand, to assert that 
under the facts of the case Norfolk Southern is nevertheless 
estopped from relying upon the application of RCAF-U and/or has 
waived the application of RCAF-U in favor of the application of 
RCAF-A.  In short, even though the utilities erroneously 
maintained in their bill of complaint that the parties’ contract 
required the application of RCAF-A rather than RCAF-U, their 
affirmative defenses of estoppel and waiver addressed an 
entirely different legal issue which was whether Norfolk 
Southern could recover damages based on the application of RCAF-
U after the utilities had paid and Norfolk Southern had accepted 
payments under the contract derived from the application of 
RCAF-A for fourteen years.  Clearly, in the absence of judicial 
estoppel, the utilities had a right to submit the merits of 
those defenses to a jury for resolution. 
“ ‘[J]udicial estoppel forbids parties from assuming 
successive positions in the course of a suit, or series of 
 
43
suits, in reference to the same fact or state of facts, which 
are inconsistent with each other, or mutually contradictory.’”  
Bentley Funding Group, L.L.C. v. SK&R Group, L.L.C., 269 Va. 
315, 325, 609 S.E.2d 49, 53-54, (2005) (quoting Lofton Ridge, 
LLC v. Norfolk S. Ry. Co., 268 Va. 377, 380-81, 601 S.E.2d 648, 
650 (2004)); see also Matthews v. Matthews, 277 Va. 522, 529, 
675 S.E.2d 157, 160 (2009) (same).  “The fundamental element of 
judicial estoppel is that ‘the party sought to be estopped must 
be seeking to adopt a position that is inconsistent with a 
stance taken in a prior litigation.  And the position sought to 
be estopped must be one of fact rather than law or legal 
theory.’ ”  Bentley Funding Group, 269 Va. at 326, 608 S.E.2d at 
54 (quoting Lowery v. Stovall, 92 F.3d 219, 224 (4th Cir. 
1996)); accord Lofton Ridge, 268 Va. at 382, 601 S.E.2d at 651. 
I agree, as noted by the majority here in citing Wilroy v. 
Halbleib, 214 Va. 442, 445, 201 S.E.2d 598, 601 (1974), that 
“[t]he doctrine of judicial estoppel . . . is a doctrine 
addressing the integrity of the court and its decrees, 
preventing litigants from ‘playing fast and loose’ with court 
rules and litigation strategy.”  The record in the present case, 
however, does not support a conclusion that the utilities were 
engaged in such conduct by asserting their affirmative defenses.  
Certainly in view of the facts as stated in their amended 
 
44
answer, the assertion of these defenses was not facially 
frivolous. 
In Peerless Insurance Co. v. County of Fairfax, 274 Va. 
236, 246, 645 S.E.2d 478, 484 (2007), we recently stressed that 
the fundamental element of judicial estoppel is that the party 
sought to be estopped is seeking to adopt a factual position 
inconsistent with a stance it took in the course of a particular 
suit.  Judicial estoppel does not apply to a position of law or 
legal theory.  Bentley Funding Group, 269 Va. at 326, 608 S.E.2d 
at 54.  Here, the utilities were not seeking to adopt an 
inconsistent factual position by the assertion of their 
affirmative defenses to Norfolk Southern’s breach of contract 
claims.  Rather, the utilities were maintaining that the fact 
the utilities paid and Norfolk Southern accepted payments based 
on RCAF-A rates for fourteen years supported the legal theory of 
their defenses.  If proven, this course of dealing between the 
parties is a matter entirely independent from the dispute over 
the interpretation of the contract language and, therefore, was 
properly asserted by the utilities as an alternate legal theory 
to that asserted in their bill of complaint. 
Moreover, the record does not support the circuit court’s 
conclusion, with which the majority apparently agrees, that 
Norfolk Southern would suffer an unfair detriment if the 
utilities were permitted to submit their affirmative defenses 
 
45
for resolution on their merits to a jury because Norfolk 
Southern would incur the expense and delay of relitigating the 
meaning of the parties’ contract.  In my view, this conclusion 
misses the point.  The utilities have never been afforded the 
opportunity to have their defenses to Norfolk Southern’s breach 
of contract claim resolved on the merits by a trial by a jury. 
Because the circuit court denied the utilities the 
opportunity to develop a factual record by the introduction of 
evidence, the question then becomes whether the amended answer 
to the cross-bill adequately pled the affirmative defenses of 
equitable estoppel and/or waiver.  “[A] party seeking to invoke 
the doctrine of estoppel must prove by clear, precise, and 
unequivocal evidence the following elements:  (1) A material 
fact was falsely represented or concealed; (2) The 
representation or concealment was made with knowledge of the 
facts; (3) The party to whom the representation was made was 
ignorant of the truth of the matter; (4) The representation was 
made with the intention that the other party should act upon it; 
(5) The other party was induced to act upon it; and (6) The 
party claiming estoppel was misled to his injury.”  Boykins 
Narrow Fabrics Corp. v. Weldon Roofing & Sheet Metal, Inc., 221 
Va. 81, 86, 266 S.E.2d 887, 890 (1980). 
In the allegations supporting their affirmative defense of 
equitable estoppel, the utilities alleged, among other things, 
 
46
that the utilities were induced to locate the Clover facility 
where it could be serviced by Norfolk Southern, rather than by 
another railway company with which the utilities were also 
negotiating for coal transportation, based on an alleged 
representation by Norfolk Southern that RCAF-A would be used as 
the rate adjustment factor permanently, rather than as a 
temporary accommodation as Norfolk Southern later maintained.  
Similarly, the utilities alleged that VEPCO agreed to acquire 
its interest in the Clover facility based on express 
representations by Norfolk Southern that RACF-A would be the 
permanent rate adjustment factor.  The utilities alleged that 
the Clover facility was constructed at considerable expense and 
in reliance on these representations.  Furthermore, the 
utilities alleged that Norfolk Southern’s actions and 
representations over the next fourteen years were consistent 
with these representations. 
The circuit court ruled that the allegations in the amended 
answer were not sufficient to support the claim of equitable 
estoppel because the utilities’ reliance on any statements by 
Norfolk Southern, in light of the unambiguous specification of 
RCAF-U as the coal transportation rate adjustment factor 
contained in the parties’ contract, would be “wholly 
unreasonable.”  I disagree.  Even when a contract is 
unambiguous, a party nevertheless may be misled by the 
 
47
deliberate misrepresentations of another as to the intended 
application of its terms and be induced to enter into the 
contract or make other changes in position as a result of those 
misrepresentations.  Though ultimately unsuccessful, the 
utilities’ claim in this case that the contract specified RCAF-A 
and not RCAF-U as the rate adjustment factor was not frivolous 
and, as alleged in their amended answer, their reliance on 
statements and actions by Norfolk Southern that supported that 
view would not be unreasonable.  If the utilities can establish 
that their misapprehension of the contract’s specification for 
the rate adjustment factor was in fact the result of deliberate 
misrepresentations by Norfolk Southern, then they could 
establish the necessary elements of equitable estoppel.  
Accordingly, I would hold that the circuit court erred in 
striking the utilities’ affirmative defense of equitable 
estoppel. 
Similarly, the circuit court’s determination that the 
contract’s “non-waiver” provision∗ barred the utilities from 
asserting that Norfolk Southern had waived its right to apply 
RCAF-U as the rate adjustment factor erroneously short circuited 
                     
∗ Article 5 of the contract provides that:  “The failure of 
either Party to demand strict performance of any or all of the 
terms of this Agreement, or to exercise any or all rights 
conferred in this Agreement, shall not be construed as a waiver 
or relinquishment of that Party’s right to assert or rely upon 
any such right in the future.” 
 
48
the fact finding process.  The utilities contend that a party to 
a contract may, expressly or by its conduct, waive any provision 
of the contract, including a “non-waiver” provision, and that 
they sufficiently alleged that Norfolk Southern, by its 
representations, actions, and course of dealing had done so with 
regard to its right under the contract to apply the RCAF-U rate 
adjustment factor. 
As counterintuitive as the assertion initially may appear, 
it is a correct statement of the law.  Generally, a party to a 
contract may waive any right conferred by the contract.  Because 
the right is to the benefit of the party, the right may be 
waived by the party either expressly or impliedly by conduct, 
acts, or course of dealing inconsistent with the conferred 
right.  When it is clearly established that the party charged 
with relinquishment of a right conferred by the contract had 
knowledge of the right and intended to waive it, the waiver will 
be enforced.  Roenke v. Virginia Farm Bureau Mut. Ins. Co., 209 
Va. 128, 135, 161 S.E.2d 704, 709 (1968); Woodmen of the World 
Life Ins. Soc. v. Grant, 185 Va. 288, 299, 38 S.E.2d 450, 454 
(1946).  Thus, a party may waive a non-waiver provision of a 
contract such as the one contained in the contract in this case. 
The utilities’ allegations that Norfolk Southern waived its 
right to apply RCAF-U as the rate adjustment factor entirely or 
to apply it retroactively to the calculation of the rate 
 
49
beginning in December 2003, necessarily included the assertion 
that Norfolk Southern did so with the intention of waiving both 
that right and the right to assert the non-waiver provision of 
the contract.  While this may be difficult for the utilities to 
establish to the satisfaction of the trier of fact after a full 
development of the record, the allegations in their amended 
answer to the cross-bill are sufficient to permit the utilities 
the opportunity to do so.  Accordingly, I would hold that the 
circuit court erred in striking the utilities’ assertion of the 
affirmative defense of waiver. 
For these reasons, I would reverse the judgment of the 
circuit court applying the doctrine of judicial estoppel and 
striking the utilities’ affirmative defenses of equitable 
estoppel and waiver.  I would remand the case to the circuit 
court to permit the utilities the opportunity, as requested in 
their amended answer, to have the merits of those defenses 
determined in a trial by jury.  In all other respects, excepting 
that a finding of estoppel or waiver would bar any recovery by 
Norfolk Southern, I concur with the majority opinion on the 
issues presented and for the reasons stated. 
 
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