Title: Lockheed Information Mgmt. Syst. v. Maximus Inc.

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  All the Justices
 
LOCKHEED INFORMATION MANAGEMENT 
SYSTEMS COMPANY, INC., ET AL. 
 
 
v.  Record No. 990500 
 
MAXIMUS, INC. 
OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
 
 
 
 
January 14, 2000 
MAXIMUS, INC. 
 
v.  Record No. 990499 
 
LOCKHEED INFORMATION MANAGEMENT 
SYSTEMS COMPANY, INC., ET AL. 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
Randall G. Johnson, Judge 
 
 
This is the second appeal arising from the cancellation 
of a Notice of Intent to Award a contract to privatize two 
child support offices of the Virginia Department of Social 
Services (DSS).  In 1995, Maximus, Inc. and Lockheed 
Information Management Systems Co., Inc. (Lockheed) submitted 
bids pursuant to a request for proposals issued by DSS.  DSS 
issued a Notice of Intent to Award the contract to Maximus.  
Pursuant to Code § 11-66, Lockheed filed a protest to DSS's 
decision.  Among the statements in the protest were 
allegations that two members of the evaluation panel had 
undisclosed conflicts of interest.  The Notice of Intent to 
Award the contract was subsequently cancelled. 
 
Maximus filed this action alleging that Lockheed had 
tortiously interfered with its contract expectancy and that 
Lockheed, The Center for The Support of Families, Inc., (the 
Center) and an employee of the Center engaged in a conspiracy 
to injure Maximus' reputation and business in violation of 
§§ 18.2-499 and -500.1  
 
The trial court granted Lockheed's motion to strike at 
the close of Maximus' evidence at the first trial and entered 
judgment in favor of the defendants because it found that 
there was no showing of malice or other egregious conduct.  We 
awarded Maximus an appeal and reversed, holding that such 
evidence was not required as an element of a claim for 
tortious interference with contract expectancy.  The case was 
remanded for further proceedings.  Maximus, Inc. v. Lockheed 
Inf. Mgmt. Systems, 254 Va. 408, 493 S.E.2d 375 (1997). 
 
At the second trial, the jury returned a verdict in favor 
of Maximus for $1,500,000 on the tortious interference with 
contract expectancy claim, Count I, and for $3,000,000 on the 
conspiracy claim, Count II.  Following post-trial motions and 
briefing, the trial court denied Lockheed's motions to strike 
the evidence and to set aside the verdict, but reduced the 
amount of the verdict.  The trial court determined that the 
                                                          
 
1 The claim against the employee was eventually non-
suited. 
 
2
damages claimed under both Count I and Count II were 
identical, and, accordingly, limited Maximus to a single 
damage recovery.  The trial court further concluded that 
Maximus was not entitled to recover the costs it incurred in 
preparing the bid or the amounts assigned as lost overhead.  
The trial court then granted Maximus' motion for treble 
damages pursuant to § 18.2-500 and entered judgment in the 
amount of $2,223,372 in damages plus attorneys' fees and 
costs.  
 
Lockheed filed an appeal challenging a number of rulings 
by the trial court.  Maximus filed an appeal limited to the 
trial court's determination that Maximus could not recover 
lost overhead as part of lost profits.  We granted both 
petitions for appeal and have consolidated the appeals. 
FACTS
 
In November 1994, DSS issued a request for proposals 
pursuant to the Virginia Public Procurement Act, Code §§ 11-35 
through –80.  DSS sought to privatize two child support 
enforcement offices in Northern Virginia.  Lockheed and 
Maximus submitted timely responses.  The proposals were 
evaluated by a five member committee, including Carolyn W. 
Davis and Ernest Lee Williams, employees of DSS.  The 
committee was chaired by Jane Hollowell, contracts officer for 
 
3
DSS.  A Notice of Intent to Award the contract to Maximus was 
issued on April 13, 1995. 
 
Shortly thereafter, the two contracting officers for DSS, 
Jane Hollowell and Clifford Crofford, learned that Lockheed 
might file a protest, based on a number of issues, including a 
possible conflict of interest by two of the members of the 
evaluation committee.  Joseph Crane, Assistant Director for 
Program Development and Administration of the Division of 
Child Support Enforcement, sent a memorandum to Michael Henry, 
Director of the Division, reciting the anticipated allegations 
and raising the possibility that the Notice of Intent to Award 
might have to be rescinded.  Crane suggested, however, that 
assuming nothing new came out in the protest, the Notice of 
Intent to Award could stand as issued if the score of one of 
the persons alleged to have a conflict of interest were 
removed.  Henry agreed with this recommendation.  
 
Henry also received a telephone call from Harry W. 
Wiggins, the Lockheed Vice President in charge of the bid 
proposal and a former head of DSS, telling Henry that if DSS 
proceeded with awarding the contract to Maximus, things would 
get "ugly" or "bloody." 
 
Lockheed filed its protest on April 25, 1995, accompanied 
by the affidavits of Wiggins, Robyn Large, a Center employee 
and a former DSS and Lockheed employee, and Christy Leavell, a 
 
4
Lockheed employee.  In the protest, Lockheed asserted that 
within seven months preceding the posting of the Notice of 
Intent to Award, Ernest Lee Williams was an "active candidate 
for employment" with Lockheed but was not hired.  Lockheed 
also stated that Carolyn Davis had been employed by Maximus 
while on leave from DSS and that she had been offered 
employment with Maximus in Tennessee.  The protest also stated 
that Maximus asked Davis to submit a resume as a prospective 
employee on the bid at issue.  Davis complied, and, according 
to Lockheed, indicated she would be willing to talk to Maximus 
if Maximus received the contract for the Virginia work.  The 
protest also alleged that Davis called Wiggins seeking 
employment with Lockheed at some point after the request for 
proposals had been issued. 
 
Based on these allegations, Lockheed argued in its 
protest that Williams concealed a material fact regarding his 
connection with Lockheed, and that his failure to get the 
position could have materially interfered with his objectivity 
as a member of the evaluation committee.  Lockheed stated that 
Davis' situation was "more egregious" than that of Williams, 
constituted two violations of the Public Procurement Act, and 
affected her ability to render a fair and impartial decision.  
Lockheed stated that it was "reluctant to suggest that the 
facts and circumstances surrounding Ms. Davis' participation 
 
5
on the Evaluation Committee [rose] to the level of 
'corruption.'"  Nevertheless, "the seriousness of such an 
allegation cannot be trivialized" and "the question must be 
asked" whether she used her position on the evaluation 
committee "to procure an employment benefit for herself 
contrary to her duty and the rights of others."  Lockheed also 
suggested that because Davis had a better chance of employment 
with Maximus than with Lockheed, Davis may have made some 
comments at the deliberations which "could have influenced 
other committee members in a manner inimical to Lockheed's 
interests."  Following receipt of the protest, DSS cancelled 
the Intent to Award and sent out a new request for proposals. 
 
At trial, Williams testified that he had never applied 
for employment with Lockheed and had not been an active 
candidate for employment within seven months preceding the 
request for proposals.  Davis testified that in 1992 she had 
served as a consultant to Lockheed for one month while she was 
on annual leave from DSS.  As shown by a letter, dated March 
25, 1992 and introduced into evidence, this arrangement was 
known to, and approved by, DSS.  Davis also testified, among 
other things, that she sent out some resumes anticipating that 
she might be required to look for a new job because her 
husband was about to be transferred.  
 
6
 
Finally, Henry testified that he recommended to the DSS 
Commissioners that the Notice of Intent to Award should be 
cancelled for reasons of expediency, because Lockheed was 
going to "tie us up" in proceedings, and "fear of a public 
spectacle" resulting from the strong allegations in the 
protest.  
 
We begin by addressing the assignments of error raised by 
Lockheed in its appeal. 
I. 
 
Lockheed Information Management Systems 
 Company, Inc., et al. v. Maximus, Inc.
Record No. 990500 
 
A.  PRIVILEGE 
 
Lockheed asserts that the trial court erred in denying 
its motion for summary judgment because the statements made in 
its protest, even if false and misleading, were absolutely 
privileged.  Lockheed further argues that even if the 
statements were not absolutely privileged, Lockheed was 
entitled to an affirmative defense of lawful justification or 
qualified privilege and the trial court erred in denying 
Lockheed's jury instruction on that defense.  We first 
consider Lockheed's contention regarding the existence of an 
absolute privilege. 
1.  Absolute Privilege 
a.  Judicial Proceeding 
 
7
 
Lockheed argues that because the statements at issue were 
made in the course of a quasi-judicial or administrative 
hearing, they were entitled to an absolute privilege.  We 
disagree.  We have held that false, misleading, or defamatory 
communications, even if published with malicious intent, are 
not actionable if they are material to, and made in the course 
of, a judicial or quasi-judicial proceeding.  Penick v. 
Ratcliffe, 149 Va. 618, 636-37, 140 S.E. 664, 670 (1927).  
This absolute privilege has been extended to communications 
made in administrative hearings so long as the "safeguards 
that surround" judicial proceedings are present.  Elder v. 
Holland, 208 Va. 15, 22, 155 S.E.2d 369, 374 (1967).  Those 
safeguards include such things as the power to issue 
subpoenas, liability for perjury, and the applicability of the 
rules of evidence.  Id.  The bid protest proceeding in which 
the statements complained of in this case were made, however, 
did not have the safeguards inherent in a judicial proceeding. 
 
Lockheed's protest was filed pursuant to § 11-66(A) which 
provides the procedure for an unsuccessful bidder to file a 
protest to the action of a public body in the procurement 
process.  The public body or its designated agent must render 
a written decision on the protest within ten days of receiving 
the protest stating the reasons for the action.  That decision 
is final unless appealed.  Neither notice nor hearing is 
 
8
afforded any other party or bidder, including the successful 
bidder.  This procedure contains none of the safeguards 
identified in Elder as prerequisites for the application of 
the absolute privilege defense.2  While these safeguards may 
attach in an appeal of the decision, the absence of the 
safeguards from the proceeding in which the statements are 
made precludes application of the absolute privilege defense 
to those statements.  
b.  Affidavits 
 
Lockheed also argues that it was entitled to an absolute 
privilege because the complained of statements were contained 
in affidavits.  Lockheed asserts that the protection of 
absolute privilege was extended to affidavits in Donohoe 
Construction Co. Inc. v. Mount Vernon Associates, 235 Va. 531, 
538, 369 S.E.2d 857, 861 (1988), because the Court in that 
case described the execution of an affidavit as a "judicial 
act."  Lockheed misconstrues Donohoe. 
Donohoe was a mechanic's lien case in which the Court 
concluded that, because filing the mechanic's lien affidavit 
to perfect the lien is a prerequisite to filing suit to 
                                                          
 
2 Subsection C of § 11-66 requires notice and hearing 
prior to a determination that the bid award was based on 
fraud, corruption, or a violation of the Act.  However, the 
provisions of that subsection are not relevant to our inquiry 
here because there was no proceeding under that subsection in 
connection with Lockheed's protest. 
 
9
enforce the lien, the filing of the lien and the suit to 
enforce the lien were inseparable.  Id. at 539, 369 S.E.2d 
861.  Therefore, because the filing of the memorandum of lien 
affidavit and the suit to enforce the lien constituted a 
single judicial proceeding, the contents of the affidavit were 
entitled to an absolute privilege.  Id.  The doctrine of 
absolute privilege was not extended to the mere execution of 
any affidavit. 
 
In this case, even if affidavits were required as an 
integral part of the protest, which they are not, we have 
already concluded that the protest procedure under § 11-66(A) 
does not qualify as a judicial proceeding.  Thus, Donohoe does 
not apply to clothe the statements made in Lockheed's protest 
with an absolute privilege because they were contained in 
affidavits. 
c.  Noerr-Pennington Doctrine 
 
Finally, Lockheed argues that it was entitled to an 
absolute privilege for its statements under the "Noerr-
Pennington" doctrine.  This doctrine is based on United Mine 
Workers v. Pennington, 381 U.S. 657 (1965), and Eastern 
Railroad Presidents Conference v. Noerr Motor Freight, Inc., 
365 U.S. 127 (1961).  The doctrine developed because business 
entities seeking to influence legislative or executive policy 
which would benefit them and injure competitors were charged 
 
10
with violations of the federal anti-trust laws.  Grounded in 
the constitutional right to free speech and to petition the 
government, the Noerr-Pennington doctrine provides that 
persons petitioning the government cannot be charged with 
violations of the Sherman Antitrust Act for attempts to 
influence legislative or executive action.  Pennington, 381 
U.S. at 669; Noerr, 365 U.S. at 135.  The doctrine also 
applies to adjudicatory proceedings before administrative 
agencies.  California Motor Transport Co. v. Trucking 
Unlimited, 404 U.S. 508, 510-11 (1972). 
 
Lockheed asserts that the Noerr-Pennington Doctrine has 
been applied to shield conduct from common law business tort 
claims as well as from antitrust claims.  Citing Gunderson v. 
University of Alaska, 902 P.2d 323 (Alaska 1995), and Video 
International Production, Inc. v. Warner-Amex Cable 
Communications, Inc., 858 F.2d 1075 (5th Cir. 1988), cert. 
denied 491 U.S. 906 (1989), Lockheed urges us to extend an 
absolute privilege based on the Noerr-Pennington doctrine to 
its actions in this case.  While both cases cited by Lockheed 
applied the Noerr-Pennington doctrine in causes of action for 
business torts, we do not find those cases applicable here. 
Video International involved the actions of competing 
cable television providers and the City of Dallas.  The 
plaintiff, an unfranchised cable television provider in 
 
11
Dallas, filed suit against the city and Warner-Amex alleging 
that the city, at the urging of Warner-Amex, adopted a certain 
interpretation of the city's cable franchise agreement with 
Warner-Amex3 and, also at Warner-Amex's urging, filed notices 
of zoning violations against the plaintiff based on that 
interpretation.  This action, according to the plaintiff, 
violated its civil rights and antitrust laws and, because it 
adversely impacted the consummation of the sale of plaintiff 
to a third party, tortiously interfered with a business 
contract.  On appeal, the Fifth Circuit affirmed the district 
court's holding that the Noerr-Pennington doctrine applied to 
both the antitrust claims and the business tort claim.  858 
F.2d at 1084. 
Warner-Amex's actions seeking a specific interpretation 
of an ordinance by the city are closely analogous to 
petitioning the government to influence public policy.  Thus, 
the application of the Noerr-Pennington doctrine to the 
business tort claim in Video International was consistent with 
the traditional application of the doctrine.  Here, however, 
                                                          
 
3 The zoning ordinances included the franchise agreement 
between the city and Warner-Amex which provided that no cable 
television provider could use the city's streets or operate in 
the city without a franchise.  The city interpreted "using the 
city streets" as including crossing public right of ways or 
property lines.  Video International Production, Inc. v. 
Warner-Amex Cable Communications, Inc., 858 F.2d 1075 (5th 
Cir. 1988), cert. denied 491 U.S. 906 (1989). 
 
12
Lockheed did not petition DSS for a particular interpretation 
of the procurement law or attempt to influence any other 
governmental policy.  Lockheed's actions in this case are not 
analogous to the "petitioning" of the city by Warner-Amex.  
Consequently, an extension of the Noerr-Pennington doctrine 
based on Video International is not warranted in this case. 
While the facts of Gunderson parallel the instant case, 
Gunderson provides no persuasive rationale for applying the 
Noerr-Pennington doctrine in this case.  The Alaska Supreme 
Court allowed application of the doctrine to a common law 
business tort claim based on the plaintiff's concession that 
the doctrine was applicable.  No such concession has been made 
by Maximus in this case. 
 
Maximus does not assert that the Noerr-Pennington 
doctrine can never be applied in common law business tort 
cases.  Instead, Maximus argues that, regardless of whether a 
claim is one for a violation of an antitrust statute or a 
common law business tort, the Noerr-Pennington doctrine should 
not be applied in actions involving bid protests because such 
activity is not the type of petitioning of the government 
which the doctrine was intended to protect.  Maximus cites a 
number of cases in which courts have refused to apply the 
Noerr-Pennington doctrine, not based on the cause of action 
 
13
asserted, but because the activity complained of was not aimed 
at influencing governmental policy decisions. 
For example, in Whitten v. Paddock Pool Builders, Inc., 
424 F.2d 25 (1st Cir. 1970), a contractor filed suit claiming 
that the defendant, its competitor, violated the antitrust 
laws by certain actions it took in persuading a public body to 
use specifications for swimming pools which could be met only 
by the defendant.  The First Circuit refused to apply the 
Noerr-Pennington doctrine to the defendant's actions holding 
that the doctrine is intended to "insur[e] uninhibited access 
to government policy makers" and not intended to apply to 
instances in which public officials are engaged in purely 
commercial dealings.  Id. at 32.  The Court went on to 
conclude that when government officials engage in a 
competitive bidding process similar to the type engaged in by 
private corporations, no additional First Amendment 
protections should be provided.  Id. at 33. 
Similarly, in F. Buddie Contracting, Inc. v. Seawright, 
595 F.Supp. 422 (N.D. Ohio 1984), an unsuccessful bidder sued 
the successful bidder and others claiming an antitrust 
violation.  The plaintiff alleged that the defendants 
conspired to secure the award of the contract from the public 
body even though the successful bidder was not the lowest 
bidder.  The trial court denied the defendants' summary 
 
14
judgment motion on a number of grounds including its 
conclusion that the activities of the defendants were not the 
type of activities protected by the Noerr-Pennington doctrine.  
Adopting the "commercial activities exception" developed by 
the United States Courts of Appeals for the First, Fifth, and 
District of Columbia Circuits, the court stated: 
Noerr-Pennington is concerned with the needs of a 
representative democracy in the field of public 
policy making.  These needs are not at issue in 
this case, where the parties are concerned with the 
award of a competitively bid contract which only 
incidentally involves a government body.  The basis 
for the exception, therefore, does not apply to 
this case. 
 
Id. at 439.  Thus, under the commercial activities exception, 
the Noerr-Pennington doctrine does not apply to cases in which 
the government entity is acting as a market participant. 
 
We find the rationale of these cases persuasive.  The 
Noerr-Pennington doctrine was developed as a protection for 
entities petitioning the government in relation to legislative 
or policy making matters.  The doctrine was not intended to 
shield false, misleading, or otherwise improper conduct by 
bidders for government contracts, particularly when the 
governmental body is acting as a private commercial entity.  
The extension of the Noerr-Pennington immunity to Lockheed's 
actions in this case would represent a significant step beyond 
the intended boundaries of the doctrine and would contravene 
 
15
the policy behind the establishment of the doctrine.  
Accordingly, we decline Lockheed's invitation to extend the 
application of the Noerr-Pennington doctrine in this case. 
2.  Qualified Privilege 
Lockheed argues that even if it did not have an absolute 
privilege, it was entitled to an affirmative defense similar 
to a qualified privilege defense on the basis of "legitimate 
business competition and protection of the public interest."  
Because the trial court refused Lockheed's Jury Instruction I, 
Lockheed contends that the jury was erroneously limited to 
considering only legitimate business competition as the basis 
for its affirmative defense.4
We have previously acknowledged that an affirmative 
defense of justification or privilege applies in a claim for 
intentional interference in a business contract.  Maximus v. 
Lockheed, 254 Va. at 412-13, 493 S.E.2d at 378.  We also 
identified the five grounds upon which this affirmative 
defense is based, none of which includes "protection of the 
public interest" as Lockheed asserts.  Id.; Duggin v. Adams, 
234 Va. 221, 229, 360 S.E.2d 832, 838 (1987); Chavis v. 
                                                          
 
4 Jury Instruction I provided:  "For Count I lawful 
justification includes conduct by Lockheed and The Center for 
reasons of legitimate business competition or protection of 
the public interest." 
 
16
Johnson, 230 Va. 112, 121, 335 S.E.2d 97, 103 (1985).  The 
jury in this case was instructed that  
 
Lockheed claims that its interference with 
Maximus' prospective business relationship with DSS 
was justified based upon legitimate business 
competition.  On this issue, Lockheed has the 
burden of proof. 
 
If you find by the greater weight of the 
evidence that Lockheed's actions constituted 
legitimate business competition with respect to 
Maximus' prospective business relationship with 
DSS, then you shall return your verdict in favor of 
Lockheed on Maximus' tortious interference claim. 
 
This instruction properly presented Lockheed's affirmative 
defense to the jury.  Accordingly, the trial court did not err 
in denying Jury Instruction I. 
B.  CONSPIRACY 
Lockheed contends that Maximus was precluded from 
relitigating its conspiracy count in the remanded proceeding 
because Maximus did not assign error to the trial court's 
order in the first trial as it affected the conspiracy count.  
Thus, the trial court's ruling became final as to the 
conspiracy count, and, Lockheed argues, the trial court on 
remand erred in denying its motion for summary judgment on 
this count. 
Maximus argues that in the first trial, the trial court 
"did not rule at all, much less enter 'judgment' for Lockheed 
on Count II."  The judgment in favor of Lockheed in the first 
case, according to Maximus, was based on the trial court's 
 
17
conclusion that Maximus failed to prove an element of the 
tortious interference claim, rather than the conspiracy claim, 
and Maximus contends that the language of the trial court's 
judgment order in the first case did not specifically refer to 
the conspiracy count.  We disagree. 
At the close of Maximus' evidence in the first trial, the 
trial court granted Lockheed's motion to strike the evidence 
because it did not show that Lockheed had engaged in malicious 
or egregious conduct, elements which the trial court believed 
were necessary to sustain a claim of tortious interference 
with contract expectancy.  Maximus v. Lockheed, 254 Va. at 
411, 493 S.E.2d at 376-77.  The order entered by the trial 
court recited that the "plaintiff shall take nothing and that 
judgment be entered in favor of the defendants, plus costs."  
In its appeal to this Court, Maximus assigned error to the 
trial court's ruling that malice was an essential element of 
the tortious interference.  Id., 493 S.E.2d at 377.  Maximus 
did not address conspiracy or Count II in an assignment of 
error. 
If the order entered by the trial court following the 
first trial did not dispose of the conspiracy count, it would 
not have been a final, appealable order.  A final appealable 
order is one which terminates the action leaving nothing to be 
done by the trial court except that which is necessary to 
 
18
execute the decree.  Lee v. Lee, 142 Va. 244, 250, 128 S.E. 
524, 526 (1925).  An order is not final and appealable if 
claims against the defendant remain unresolved.  Leggett v. 
Caudill, 247 Va. 130, 133, 439 S.E.2d 350, 351 (1994).  Thus, 
to be a final appealable order, the order of the trial court 
following the first trial of this matter had to dispose of the 
entire case, including the conspiracy count.5  
 
The order of the trial court quoted above entered 
judgment in favor of the "defendants" (emphasis added).  
Lockheed was the sole defendant in Count I, Tortious 
Interference.  Maximus' allegations against the remaining 
defendants, Robyn Large and the Center, were limited to the 
conspiracy count, Count II.  The language of the order, 
therefore, in entering judgment for all defendants, did 
dispose of the conspiracy count and was therefore a final 
appealable order.6
 
Finally, Maximus relies on Nassif v. Board of 
Supervisors, 231 Va. 472, 345 S.E.2d 520 (1986), to support 
                                                          
 
5 We have held that an order disposing of all claims 
against one defendant may be a final appealable order even if 
claims against other defendants remain.  Dalloul v. Agbey, 255 
Va. 511, 515 n.2, 499 S.E.2d 279, 282 n.2 (1998).  In this 
case, if the order entered sustaining Lockheed's motion to 
strike in the first trial had been limited to the tortious 
interference claim, it would not have been an appealable order 
under this rule because it did not fully dispose of all the 
claims against Lockheed. 
 
19
its contention that it was not required to assign error 
regarding the conspiracy count and was entitled to assert its 
conspiracy count on remand.  Specifically, Maximus quotes 
language from the opinion that, unless limited by the order of 
remand, "the slate is wiped clean, with the result that on 
remand the parties begin anew."  Id. at 480, 345 S.E.2d at 
525.  However, in Nassif, the party seeking to "begin anew" 
was the appellee in the first appeal.  The first appeal was 
taken from an order of the trial court sustaining the 
appellee's contention that a tax assessment was erroneous.  
This order was based on one of the several arguments raised by 
the appellee in support of its position but did not address 
the remaining contentions.  In this context, the Court in 
Nassif stated, "[i]t would serve no useful purpose, we think, 
to require a prevailing party to assign error to his failure 
to win on all points in order to protect his right to a full 
and complete trial should his apparent victory be reversed and 
the case remanded."  Id. at 480-81, 345 S.E.2d at 525. 
The Nassif case, at most, stands for the proposition that 
an appellee does not have to assign cross-error to the failure 
of the trial court to address additional arguments in order to 
reassert those arguments on remand.  It does not, and cannot, 
                                                                                                                                                                                     
6 Maximus did not seek clarification of the trial court's 
order. 
 
20
stand for the proposition asserted by Maximus, that an 
appellant does not have to assign error to a ruling disposing 
of a cause of action, and if the case is remanded, can then 
relitigate a dispositive ruling which was not appealed.  Such 
a proposition contradicts the doctrine of the law of the case 
which provides that where no assignment of error or cross-
error is taken to a part of a final judgment, the judgment 
becomes the law of the case and is not subject to 
relitigation.  Searles' Adm'r v. Gordon's Adm'r, 156 Va. 289, 
294-99, 157 S.E. 759, 761-62 (1931). 
Maximus was not the prevailing party in the first appeal 
and, therefore, under the law of the case, Maximus was not 
entitled to relitigate unappealed issues on remand. 
For these reasons we conclude that the trial court erred 
in denying Lockheed's motion for summary judgment on its claim 
that Maximus' failure following the first trial to assign 
error to the trial court's judgment relative to its conspiracy 
count barred Maximus from litigating that count on remand.7
C.  DAMAGES 
 
Lockheed assigns error to a number of the trial court's  
rulings regarding Maximus' damage recovery.  These assignments 
                                                          
 
7 In light of this holding, we need not consider 
Lockheed's assignments of error relating to the level of proof 
required for the conspiracy count and whether treble damages 
under § 8.2-500(a) are mandatory or discretionary. 
 
21
of error involve the application of the "new business rule," 
the qualification of Maximus' expert on lost profits, and 
Maximus' duty to mitigate damages.  We consider these issues 
in order. 
1.  New Business Rule 
 
Lockheed argues that Maximus had not previously engaged 
in the collection of child support payments in Virginia. 
Therefore, the venture proposed by Maximus in its response to 
DSS's request for proposals was a new business for Maximus and 
Lockheed asserts that Maximus' evidence of lost profits should 
have been excluded under the "new business rule." 
In Mullen v. Brantley, 213 Va. 765, 768, 195 S.E.2d 696, 
699-700 (1973), we stated that evidence of the prior and 
subsequent earning record of a business can be used to 
estimate damages, in the case of an established business with 
an established earning capacity.  But, where a new business is 
involved 
the rule is not applicable for the reason that 
such a business is a speculative venture, the 
successful operation of which depends upon future 
bargains, the status of the market, and too many 
other contingencies to furnish a safeguard in 
fixing the measure of damages.  (Citations 
omitted.)  
 
Id. at 768, 195 S.E.2d at 700.  This principle has become 
known as the "new business rule."  Commercial Business 
 
22
Systems, Inc. v. BellSouth Services, Inc., 249 Va. 39, 50, 453 
S.E.2d 261, 268 (1995).  
The trial court observed that if, as Lockheed suggests, 
the new business rule were applied as an absolute bar to 
damage recovery in this case, a cause of action for 
intentional interference with a contract expectancy would be 
meaningless, because "anybody anywhere in Virginia could lie, 
cheat, and steal to deprive any new business, or any existing 
business that has never operated in Virginia, of a contract 
expectancy with complete civil impunity."  The trial court 
rejected this construction of Virginia law, and, relying on 
the principle discussed in Wood v. Pender-Doxey Grocery 
Company, 151 Va. 706, 144 S.E. 635 (1928), concluded that "the 
fact that Maximus had never engaged in collecting child 
support in Virginia cannot be used to deprive it of damages." 
In Wood, a plaintiff was allowed to recover damages for 
breach of contract including lost "good will" even though, as 
the appellant argued in that case, the evidence of the damages 
was difficult to calculate with mathematical precision or 
reasonable certainty.  The Court in Wood allowed recovery, 
reasoning that in cases involving an intentional wrong  
the degree of proof necessary is much relaxed 
in favor of the injured party.  Where the 
wrongdoer creates the situation that makes 
proof of the exact amount of damages 
difficult, he must realize that in such cases 
 
23
"juries are allowed to act upon probable and 
inferential, as well as direct and positive, 
proof."  Chesapeake & Potomac Tel. Co. v. 
Carless, 127 Va. 5, 102 S.E. 569, 23 A.L.R. 
943 (1920). 
 
151 Va. at 713, 144 S.E. at 638.  Applying this rationale, the 
trial court concluded that Maximus introduced sufficient 
evidence upon which "a reasonable estimate of Maximus' lost 
profits could be made." 
Based on this record, we cannot say the trial court erred 
by refusing to apply the new business rule to strike Maximus' 
evidence on lost profits.  While most newly undertaken 
ventures may not have the requisite record of performance and 
thus come within the "new business rule," that is a decision 
to be made by the trial court in the first instance.  In 
allowing the jury to consider Maximus' evidence of lost 
profits and other damage evidence, the trial court here did 
not eliminate the new business rule or the requirement that 
damages must be shown with reasonable specificity.  The trial 
court only held that, in a claim for intentional interference 
with a business expectancy, recovery will not be defeated 
solely because the business expectancy is not one which is 
identical in every detail to the injured party's previous 
actual experience.  The trial court concluded that in this 
case the evidence of previous child support collection 
ventures conducted by Maximus in other jurisdictions and 
 
24
evidence of such collections by the DSS in Virginia had 
sufficient specificity to allow "a reasonable estimate of 
Maximus' lost profits."  Using this evidence, the jury was not 
required to speculate on Maximus' lost profits.  Accordingly, 
we will affirm the trial court's ruling allowing evidence of 
Maximus' lost profits.  
2.  Qualification of Expert Witness 
 
Lockheed next argues that even if the new business rule 
did not render Maximus' lost profits evidence inadmissible, 
the evidence should not have been admitted because it required 
expert testimony and Maximus' expert was not qualified to 
render such expert testimony. 
 
Arthur Nerret, Maximus' expert, was a certified public 
accountant, had worked for a large, international accounting 
firm for five years, was a director of finance and vice-
president in private industry for 18 years, and had served as 
Maximus' chief financial officer for four years.  His 
responsibilities included such tasks as financial reporting, 
budgeting, forecasting, cost proposal review, and banking and 
insurance matters.  He testified that he had reviewed the bid 
proposal, and validated the direct costs associated with the 
project.  In response to Lockheed's questions, Nerret 
explained the method he used to determine the revenue he 
estimated Maximus would receive from its contract with DSS. 
 
25
 
Lockheed objected to the admission of Nerret as an expert 
to give an opinion on Maximus' potential profit from its 
contract with DSS because Nerret had not taken any special 
courses on lost profit or damage analysis and did not have 
personal involvement in preparing the revenue or cost 
information, but instead relied on the calculations of others.  
The trial court held that Lockheed's objection went to the 
weight of Nerret's testimony, not to his qualification as an 
expert witness, and allowed Nerret to give his opinion 
testimony. 
 
Whether a witness is qualified to testify as an expert is 
a matter within the sound discretion of the trial court and 
the trial court's decision will not be set aside on appeal 
unless the record clearly shows that the witness is 
unqualified.  Tazewell Oil Co., Inc. v. United Virginia Bank, 
243 Va. 94, 110, 413 S.E.2d 611, 620 (1992).  We cannot say 
that this record clearly shows that Nerret was not qualified 
and, therefore, we will affirm the trial court's ruling 
allowing Nerret to testify as an expert witness on the issue 
of lost profits. 
3.  Mitigation of Damages 
 
Lockheed sought to introduce evidence of events occurring 
subsequent to cancellation of the initial Notice of Intent to 
Award the contract to Maximus.  Specifically, Lockheed wanted 
 
26
placed before the jury the following evidence:  the second 
request for proposals and award to Lockheed; Maximus' protest 
of the second award; reversal of that award by the appeals 
procurement board; a third request for proposals issued by 
DSS; the award of the contract to Lockheed pursuant to the 
third request; and Maximus' failure to file a protest to that 
award.  Lockheed asserts that this evidence was relevant 
because, even though Maximus prevailed in having the second 
award set aside, by failing to pursue a protest and appeal of 
the third award, Maximus made "no attempt in the third 
procurement to undo the award to Lockheed in order that it 
might recapture what was lost in its contract expectancy." 
 
The trial court was correct in its holding that this 
evidence was not admissible to show that Maximus failed to 
mitigate its damages.  First, whether Maximus would not only 
have prevailed in its protest of the third award but also 
ultimately would have become the recipient of the contract 
award is entirely speculative.  Furthermore, § 11-66 
authorizes the filing of a protest based upon matters relating 
to alleged deficiencies in the contract award, not for 
purposes of mitigating damages. 
D.  ADMISSIONS 
 
27
Lockheed asserts that the trial court erred because it 
allowed Maximus to introduce testimony that contradicted its 
responses to Lockheed's requests for admission.  
Prior to the first trial in 1996, Lockheed served Maximus 
with a number of requests for admissions.  Two of those 
requests, Nos. 41 and 42, which Maximus admitted provide 
respectively: 
 
Evaluation committee member Ernest Lee 
Williams, within seven months prior to the day the 
Notice of Intent to award was posted, was an active 
candidate for employment as district manager of the 
Lockheed IMS project in Chesapeake, Virginia.  Mr. 
Williams was not selected for the position. 
 
 
All evaluation members including Mr. Williams 
stated verbally that they were unaware of any 
situation and/or relationship with either of the 
two offerors that could be perceived as a reason 
for conflict of interest. 
 
At the first trial, Williams testified that he was not an 
active candidate for employment with Lockheed.  Even though 
his testimony conflicted with these admissions, Lockheed did 
not object to the testimony, and therefore any reliance on the 
admissions was waived.  TransiLift Equipment, Ltd. v. 
Cunningham, 234 Va. 84, 91, 360 S.E.2d 183, 187 (1987).  
Following remand of the case, no further discovery was 
undertaken. 
At the second trial, when Maximus again asked Williams if 
he had been an active candidate for employment with Lockheed 
 
28
within seven months of the Intent to Award, Lockheed objected 
based on Maximus' earlier admission.  Maximus moved to 
withdraw the admissions pursuant to Rule 4:11(b).8  Lockheed 
objected to the motion, arguing that it had already quoted the 
admission in opening argument and, therefore, it would be 
prejudiced if Maximus were allowed to withdraw the admission 
at that point. 
After discussion with counsel out of the presence of the 
jury, the trial court sustained Lockheed's objection to 
Maximus' withdrawal of the admission, stating that whatever 
decision it made one of the parties would be prejudiced.  
Maximus then proceeded to ask Williams a number of questions 
such as whether he had ever submitted an application to 
Lockheed, whether he considered a lunch with a representative 
of Lockheed to be a job interview, if he was denied employment 
with Lockheed, if he harbored any latent resentment against 
Lockheed, and whether he had told anyone he had been to lunch 
with a Lockheed representative.  The record shows that when 
                                                          
 
8 Rule 4:11(b) states in part: 
 
Any matter admitted under this Rule is conclusively 
established unless the court on motion permits 
withdrawal or amendment of the admission . . . the 
court may permit withdrawal or amendment when the 
presentation of the merits of the action will be 
subserved thereby and the party who obtained the 
admission fails to satisfy the court that 
 
29
Lockheed objected to a question, the trial court considered 
whether the question and answer contradicted the admissions, 
and overruled objections when it determined the question was 
proper.  The trial court also allowed Lockheed to read 
admissions No. 41 and No. 42 to the jury.  The trial court 
explained to the jury that the rules of court allow one party 
to ask another to admit that certain things are true, thereby 
eliminating the need to bring in witnesses to prove those 
things. 
Decisions on whether testimony contradicts admissions are 
committed to the sound discretion of the trial court and will 
only be set aside on appeal if those decisions are shown to be 
an abuse of discretion.  Coe v. Commonwealth, 231 Va. 83, 87, 
340 S.E.2d 820, 823 (1986).  Based on our review of the record 
in this case, we cannot say that the trial court's 
determinations on whether the questions and testimony at issue 
contradicted the admissions made by Maximus were an abuse of 
discretion.  Furthermore, if the denial of Lockheed's jury 
instruction that Maximus was bound by its admissions was 
error, such error was harmless in light of the trial court's 
instruction to the jury at the time the admissions were read. 
E.  MOTION TO STRIKE  
                                                                                                                                                                                     
withdrawal or amendment will prejudice him in 
maintaining his action or defense on the merits. 
 
30
 
Following the close of all the evidence, Lockheed moved 
to strike Maximus' evidence.  The trial court took the matter 
under advisement and, after further briefing, denied the 
motion.  Lockheed assigns error to this ruling in two 
particulars:  (1) the trial court erred in failing to strike 
the evidence because the evidence did not establish improper 
methods and improper conduct; and (2) the trial court erred in 
failing to strike the evidence because the evidence did not 
establish that Lockheed's protest was the proximate cause of 
the cancellation of the Notice of Intent to Award the contract 
to Maximus.  We consider these arguments in order. 
1.  Improper Conduct 
Lockheed's first argument, that Maximus' evidence should 
have been struck because it did not show intimidation, fraud, 
defamation, misrepresentation, deceit, unethical conduct, 
sharp dealing, overreaching, or unfair competition, can, in 
the words of the trial court, be disposed of quickly.  Suffice 
it to say that, considering the evidence and all reasonable 
inferences therefrom in the light most favorable to the 
plaintiff Maximus, as we must, Austin v. Shoney's, Inc., 254 
Va. 134, 138, 486 S.E.2d 285, 287 (1997), Maximus' evidence 
was sufficient to present a prima facie case that Lockheed's 
actions were improper for purposes of Maximus' business tort 
claim.  
 
31
Lockheed also argues that even if Maximus established a 
prima facie case, the evidence was not "sufficient to overcome 
Lockheed's affirmative defense."  As pointed out by Maximus, 
Lockheed seems to be arguing that because it presented 
evidence to support its affirmative defense, it was entitled 
to prevail, absent additional evidence by Maximus.  However, 
whether Lockheed produced sufficient evidence to prevail on 
its defense was a matter for the jury to decide.  As the trial 
court stated, "the presentation of defendants' evidence does 
nothing more than create a jury issue."  Accordingly, there 
was no error in the trial court's denial of the motion to 
strike on this basis. 
2.  Proximate Cause 
Lockheed argues that the evidence failed to show that its 
protest was the proximate cause of DSS' decision to cancel the 
notice of the Intent to Award the contract to Maximus.  The 
evidence, according to Lockheed, was that the cancellation 
resulted from DSS' own investigation and not as a result of 
the protest. 
While there is evidence in the record to support 
Lockheed's assertion, there is also evidence that the Notice 
of Intent was cancelled because of the contents of Lockheed's 
protest, as well as Lockheed's actions surrounding the filing 
of the protest.  The testimony of Henry and Crane, the call 
 
32
from Wiggins telling Henry that if the Intent to Award went 
forward, things "could get bloody," and Crane's memorandum 
suggesting that the procurement would proceed assuming there 
were no more damaging facts in Lockheed's protest, represent 
some of the evidence suggesting that the protest and its 
contents were the reasons the Notice of Intent to Award the 
contract to Maximus was rescinded.9  The evidence was not 
without conflict and it presented a jury question on the issue 
of proximate cause. 
Accordingly, the trial court correctly refused to strike 
Maximus' evidence for failure to establish proximate cause. 
II. 
 
Maximus, Inc. v. Lockheed Information Management 
 Systems Company, Inc., et al. 
Record No. 990499 
 
At trial the jury returned a verdict in favor of Maximus 
of approximately $1.5 million dollars on the tortious 
interference claim.  Following post-trial motions, the trial 
court reduced this amount to $741,124, holding that Maximus 
was not entitled to recover damages for costs incurred in 
preparing its initial bid or certain overhead expenses.  
                                                          
 
9 Although Lockheed argues that the proximate cause 
instruction was confusing, it did not object to the 
instruction in the trial court and we do not consider that 
argument here.  Rule 5:25. 
 
33
Maximus appeals the trial court's determination that it was 
not entitled to recover the overhead expenses. 
The overhead expenses at issue were described by Nerret, 
Maximus' expert, as a "fixed sort of markup on top of those 
direct-expenses to absorb company-wide overhead expenses."  
Since Maximus did not obtain the contract, Nerret testified 
that "those costs had to be absorbed by our other contracts in 
the company over this five-year period.  And thus . . . 
profitability of those other contracts was reduced by the 
[amount] those contracts will be absorbing."  Essentially, the 
overhead was a fixed cost not attributable to the contract at 
issue. 
We have recently addressed recovery of fixed overhead in 
Fairfax County Redevelopment & Housing Authority v. Worchester 
Brothers Co., Inc., 257 Va. 382, 514 S.E.2d 147 (1999).  We 
held that home office expenses, normally referred to as 
overhead, are costs that the business must expend for the 
benefit of its enterprise as a whole.  Unabsorbed overhead is 
that overhead which continues regardless of the business 
activity.  Thus, a contractor experiences unabsorbed overhead 
when idle.  When a breach by a party causes a delay to the 
ability of the other party to perform, the injured party is 
entitled to recover, as damages, unabsorbed overhead expenses.  
To recover such damages, the injured party must show that it 
 
34
could not otherwise recoup its pro rata home office expenses 
incurred during the delay and it must prove the amount of 
these expenses with reasonable certainty.  Id. at 387-88, 514 
S.E.2d 150-51. 
In this case, the unabsorbed overhead sought by Maximus 
was not sought as part of its actual damages but as part of 
its lost profit.  We need not address this distinction here 
because, whether lost overhead is sought as damages or as a 
component of lost profit, the plaintiff is required to show 
that it was reasonably unable to recoup its overhead costs.  
Id.  There is no such evidence in this case.  Nerret 
characterized Maximus' overhead costs as "unabsorbed" or 
"unavoided" because they did not arise from the contract at 
issue, and therefore, continued whether or not Maximus was 
awarded the contract.  Neither Nerret nor any other witness 
addressed Maximus' ability or inability to reasonably recoup 
those expenses from another contract which could have been 
secured in the place of the contract with DSS. 
 
Accordingly, although the trial court did not have the 
benefit of our decision in Fairfax County, we conclude that it 
did not err in holding that Maximus was not entitled to 
recover its overhead. 
III. 
Conclusion
 
35
 
In summary, for the reasons stated above, we will affirm 
that part of the trial court's judgment imposing liability on 
Lockheed for intentional interference with a business 
expectancy and setting damages in the amount of $741,124.  We 
will reverse that part of the trial court's judgment imposing 
liability on Lockheed and the Center for conspiracy in 
violation of § 18.2-499, and imposing treble damages, 
attorneys' fees and costs pursuant to § 18.2-500, and enter 
final judgment. 
Record No. 990500  —  Affirmed in part, 
reversed in part, 
 and final judgment. 
 Record No. 990499  —  Affirmed.
 
 
36