PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 13-1143

CARNELL CONSTRUCTION CORPORATION,

Plaintiff - Appellant,

v.

DANVILLE REDEVELOPMENT & HOUSING AUTHORITY; BLAINE SQUARE, 

LLC,

Defendants - Appellees.

No. 13-1229

CARNELL CONSTRUCTION CORPORATION

Plaintiff – Appellee,

v.

DANVILLE REDEVELOPMENT & HOUSING AUTHORITY

Defendant – Appellant,

and

BLAINE SQUARE, LLC

Defendant.

No. 13-1239

CARNELL CONSTRUCTION CORPORATION

Plaintiff – Appellee,
2

v.

BLAINE SQUARE, LLC

Defendant – Appellant,

and

DANVILLE REDEVELOPMENT & HOUSING AUTHORITY

Defendant.

Appeal from the United States District Court for the Western 

District of Virginia, at Danville. Glen E. Conrad, Chief 

District Judge. (4:10-cv-00007-GEC)

Argued: December 11, 2013 Decided: March 6, 2014

Before AGEE, KEENAN, and FLOYD, Circuit Judges.

Affirmed in part, vacated in part and remanded, vacated in part 

and final judgment by published opinion. Judge Keenan wrote the 

opinion, in which Judge Agee joined. Judge Floyd wrote a 

separate opinion concurring in part and dissenting in part. 

ARGUED: Rhonda M. Harmon, THE HARMON FIRM LLC, Manakin-Sabot, 

Virginia, for Appellant/Cross-Appellee. John Dickens Eure, 

JOHNSON, AYERS & MATTHEWS, PLC, Roanoke, Virginia; Joseph Ray 

Pope, WILLIAMS MULLEN, Richmond, Virginia, for Appellees/CrossAppellants. ON BRIEF: Lori J. Bentley, Joshua D. Goad, JOHNSON, 

AYERS & MATTHEWS, PLC, Roanoke, Virginia, for Blaine Square, 

LLC. J. Nelson Wilkinson, James V. Meath, WILLIAMS MULLEN, 

Richmond, Virginia, for Danville Redevelopment & Housing 

Authority.
3

BARBARA MILANO KEENAN, Circuit Judge:

In this appeal, we review a judgment entered after a jury 

trial on certain claims of race discrimination, retaliation, and 

breach of contract brought by a “minority-owned” corporation. 

We primarily consider: (1) whether a minority-owned corporation 

has standing to sue for race discrimination under Title VI of 

the Civil Rights Act of 1964 (Title VI); (2) whether the 

district court erred in holding at the summary judgment stage 

that one of the defendants could not be held liable on the 

alleged race discrimination and retaliation (collectively, race 

discrimination) claims; (3) whether the court abused its 

discretion by permitting the use of certain impeachment evidence 

at trial; (4) whether the court erred in deciding certain 

contract issues arising under the Virginia Public Procurement 

Act, Virginia Code §§ 2.2-4300 through 4377; and (5) whether the 

court erred in modifying the jury’s award of contract damages.

Upon our review, we hold that a corporation can acquire a 

racial identity and establish standing to seek a remedy for 

alleged race discrimination under Title VI, but that the 

district court properly dismissed one of the defendants from 

liability on the plaintiff’s race discrimination claims. We 

further conclude that the district court abused its discretion 

in permitting the use of particular impeachment evidence, which 

should have been excluded as unfairly prejudicial under Federal 
4

Rule of Evidence 403. Finally, we agree that the district court 

properly reduced certain damages awarded to the plaintiff on its 

contract claims, but decide that the strict notice requirements 

of the Virginia Public Procurement Act required the court to 

narrow further the scope of recoverable contract damages. 

Accordingly, we affirm the district court’s judgment in part. 

We also vacate the court’s judgment on both the race 

discrimination claims and certain contract damages awarded, and 

remand those aspects of the case for further proceedings. 

I.

A.

This appeal involves work performed by a contractor in 

Danville, Virginia, on the Blaine Square Project (the project), 

a large public housing venture intended to provide subsidized 

rental units to low-income residents of Danville. The project 

was funded in part by a $20 million grant to the Danville 

Redevelopment and Housing Authority (the Housing Authority) from 

the Hope VI Program, an initiative of the United States 

Department of Housing and Urban Development (HUD), which allows 

private investors to contribute capital to public housing 

projects in exchange for tax credits. 

In March 2008, the Housing Authority solicited bids for 

site preparation work (site preparation work, or the work), 
5

which included clearing the construction site for the project, 

grading the land, and installing proper drainage and erosion 

controls. Carnell Construction Corporation (Carnell) submitted 

a bid for the work, proposing a price of $793,541 and 

representing that Carnell was certified as a minority business 

enterprise because its owner is African-American. 

After determining that Carnell was the lowest bidder, the 

Housing Authority entered into a contract with Carnell to

complete the site preparation work (the contract). The contract 

specified a June 2009 completion date, stipulated a total price 

of $793,541, and included a set of enumerated contract 

documents. 

Shortly after executing the contract with Carnell, the 

Housing Authority leased the project site and assigned its 

interest in the contract to Blaine Square, LLC (Blaine) based on 

tax considerations. Blaine is a limited liability company 

managed by a non-profit instrumentality of the Housing 

Authority. Blaine was created to obtain and distribute tax 

credits to private investors. The Housing Authority agreed to 

provide funds from the Hope VI Program to Blaine and, under a 

Development Services Agreement (DSA), Blaine agreed that the 

Housing Authority would continue to provide actual supervision 

of the construction, including the site preparation work. 
6

Carnell began the work on the project in June 2008. 

However, the relationship between Carnell and the Housing 

Authority steadily deteriorated as each party became 

dissatisfied with the other’s performance. The Housing 

Authority attributed expensive delays to Carnell’s allegedly 

unacceptable work, particularly regarding the grading of the 

project site and Carnell’s failure to conduct due diligence 

concerning the contract’s requirements. Carnell, however,

maintained that its work was satisfactory and that delays 

chiefly were attributable to poor planning by the Housing 

Authority, especially with respect to a strategy for completing 

grading work and controlling erosion at the project site. 

Additionally, in December 2008, Carnell’s president, 

Michael Scales, complained about race discrimination to the 

Housing Authority’s Executive Director, Gary Wasson. Scales 

explained his perception that Carnell was “being singled out as 

a minority contractor,” and was “expected . . . to work for 

free” on “excessive” project modifications. At Carnell’s 

request, the parties attempted to mediate their grievances, but 

were unsuccessful in their efforts. 

In May 2009, the Housing Authority advised Carnell that it 

would not extend Carnell’s contract beyond the stipulated 

completion date, and that Carnell would be required to remove 

its equipment and personnel from the project site the following 
7

month regardless whether the work had been completed. Carnell 

left the project site more than two weeks before the June 2009 

completion date, and requested reimbursement for numerous 

instances of unpaid work. The Housing Authority rejected 

Carnell’s request and declared a default under Carnell’s

performance bond. 

Carnell filed a lawsuit against the Housing Authority and 

Blaine (the defendants) based on claims of race discrimination 

and breach of contract.1 The race discrimination claims were 

based on the defendants’ alleged violations of Title VI and 42 

U.S.C. § 1981. As ultimately developed in the litigation, 

Carnell’s race discrimination claims centered on certain 

statements made by the Housing Authority’s Hope VI Program 

Director and Contracting Officer, Cedric Ulbing, as well as 

alleged disparate treatment with respect to contracting 

practices such as “prepayment” for materials, “retainage” of 

progress payments, and approval of change order requests. 

Carnell’s contract claims focused on allegations that Carnell 

was directed to perform work for which it was never paid, and 

 1 Carnell’s original and first amended complaints named only 

the Housing Authority as a defendant. A second amended 

complaint listed Blaine as a defendant, but only with respect to 

Carnell’s breach of contract claims. After the first jury trial

in this case, Carnell filed a third amended complaint alleging 

race discrimination and breach of contract claims against both 

the Housing Authority and Blaine.
8

that Carnell improperly was removed from the project and 

declared in default of its contract obligations. The Housing 

Authority and Blaine filed a counterclaim for breach of contract 

and, at trial, framed Carnell’s lawsuit as an example of 

“occasions when false claims of race discrimination are made in 

order to cover up poor performance, [to] excuse poor 

performance, or to gain an advantage in a contractual 

situation.” 

After a two-week trial, a jury awarded Carnell more than

$3.1 million in damages on the race discrimination claims. The 

jury found in favor of both Carnell and the defendants on their 

respective breach of contract claims, but did not award damages 

on any of the contract claims. However, based on a post-trial 

ruling that certain testimony admitted on behalf of Carnell was 

false, the district court ordered a new trial.2

 

Before the second trial began, the district court awarded 

summary judgment to Blaine on Carnell’s race discrimination 

claims, holding that Blaine could not be held liable for the 

allegedly discriminatory conduct because there was no evidence 

that Blaine directly participated in the conduct alleged or 

controlled the activities of a discriminating party. Following 

 2 Carnell does not argue on appeal that the district court 

erred in vacating the jury award in the first trial and in 

ordering a new trial. 
9

the trial, after the jury was unable to agree on a verdict on 

either the remaining race discrimination claims or the contract 

claims, the district court declared a mistrial and scheduled the 

case for a third trial. 

A recurring issue in the litigation that resurfaced during 

the third trial involved certain impeachment evidence regarding 

the fact that Scales had hired McGuireWoods Consulting LLC 

(McGuireWoods) to “assist Carnell in reputation management and 

media outreach” with respect to Carnell’s race discrimination 

claims against the Housing Authority. The controversy centered 

on an unsigned McGuireWoods document entitled “Assessment and 

Proposal” (the proposal, or the McGuireWoods proposal), which 

set forth goals to “[s]hape the initial story so that it is 

sympathetic to Carnell and critical of [the Housing Authority]” 

and to “[e]xpand on the initial story in Danville to garner 

broader interest in the case in neighboring counties, and 

potentially statewide interest . . . .” Carnell repeatedly 

objected to use of this evidence on the grounds that it was 

irrelevant and unfairly prejudicial. 

During cross-examination of Scales in the third trial, 

counsel for the Housing Authority asked whether Scales had 

“worked to shape and tone the content of this evidence” to “make 

out a race claim” to the jury. Scales denied these suggestions, 

and stated that he had hired McGuireWoods “to tell who we are.”
10

After much discussion, and over Carnell’s repeated 

objections that the proposed impeachment evidence was unfairly 

prejudicial and irrelevant, the district court allowed counsel 

for the Housing Authority to recite the language from the 

proposal quoted above, in an attempt to impeach Scales with the 

allegedly inconsistent statements. However, Scales testified 

that he was unfamiliar with the unsigned document and only 

recalled reviewing a two-page consulting agreement in which he 

agreed to hire McGuireWoods on Carnell’s behalf. Nevertheless, 

during closing argument, counsel for the Housing Authority 

displayed the challenged language from the proposal on a poster 

board that was shown to the jury, and referred to that language 

multiple times in the context of impugning Scales’s credibility 

and the motives underlying Carnell’s lawsuit. 

Ultimately, Carnell did not prevail at the third trial on 

its race discrimination claims. However, the jury found in 

favor of Carnell both on its breach of contract claims and on 

the Housing Authority’s counterclaim for breach of contract. 

The jury awarded Carnell a total of $915,000 on its contract 

claims, allocating $515,000 for the defendants’ failure to pay 

Carnell for extra work and $400,000 for the defendants’ removal 

of Carnell from the project without just cause. The district 

court later issued a post-trial ruling that significantly 

limited the jury’s award of contract damages to a reduced total 
11

of about $215,000, based on the court’s determination that 

Carnell had failed to plead special contract damages, and that 

the Virginia Public Procurement Act, Virginia Code §§ 2.2-4300 

through 4377, restricted the amount by which the parties’ fixedprice, public contract lawfully could be increased.3

 The parties 

timely filed cross-appeals. 

II.

We first address several issues related to Carnell’s race 

discrimination claims. Those issues concern: (1) whether 

Carnell, as a corporate entity, had standing to assert race 

discrimination claims under Title VI; (2) whether the district 

court properly dismissed Blaine at the summary judgment stage 

from liability for the allegedly discriminatory conduct; and (3) 

whether the district court abused its discretion in allowing 

certain impeachment of Scales based on the contents of the 

McGuireWoods proposal. 

A.

 3 This amount reflects a reduced award that includes

$142,557.57 for contract claims relating to unpaid work, after

the district court implemented the Virginia Public Procurement 

Act’s statutory cap, and $72,490.00 for contract claims relating 

to removal from the project without just cause, based on the 

court’s determination that Carnell failed to prove the full 

extent of the general damages that it was awarded on those 

claims. On appeal, Carnell does not challenge the court’s 

reduction of general damages on its unjust removal claims.
12

We begin by considering whether Carnell, as a corporate 

entity, had standing to assert claims of race discrimination and 

retaliation under Title VI. We review this question of law de 

novo. Frank Krasner Enters., Ltd. v. Montgomery Cnty., 401 F.3d 

230, 234 (4th Cir. 2005). 

The standing doctrine, which requires us to consider 

whether a plaintiff is entitled to a decision on the merits of a 

dispute, has both constitutional and prudential dimensions. 

Allen v. Wright, 468 U.S. 737, 751 (1984). The defendants do 

not dispute that Carnell meets the constitutional test of 

standing, namely, that Carnell has alleged that (1) it has 

suffered an actual or threatened injury that is concrete, 

particularized, and not conjectural; (2) the injury is fairly 

traceable to the challenged conduct; and (3) the injury is 

likely to be redressed by a favorable decision. See Lujan v. 

Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); Miller v. 

Brown, 462 F.3d 312, 316 (4th Cir. 2006).

Instead, the defendants assert that Carnell’s Title VI 

claims run afoul of one of the standing doctrine’s judicially 

imposed, prudential limits on federal jurisdiction, which 

requires that “a plaintiff’s grievance must arguably fall within 

the zone of interests protected or regulated by the statutory 

provision . . . invoked in the suit.” Bennett v. Spear, 520 

U.S. 154, 162 (1997). Thus, the relevant standing inquiry 
13

before us is whether Carnell’s claims arguably fall within the 

zone of interests protected by Title VI. See id.

Carnell’s race discrimination claims are based on 42 U.S.C. 

§ 2000d, which provides that “[n]o person in the United States 

shall, on the ground of race, color, or national origin, be 

excluded from participation in, be denied the benefits of, or be 

subjected to discrimination under any program or activity 

receiving Federal financial assistance.” The defendants argue 

that Carnell lacks standing to bring race discrimination claims 

under Title VI because Carnell is not a “person” within the 

meaning of the statute. The defendants maintain that Carnell, a 

corporate entity, lacks a “race, color, or national origin.” 

See id. In support of their position, the defendants primarily 

rely on dictum from the Supreme Court’s decision in Village of 

Arlington Heights v. Metropolitan Housing Development Corp., 429 

U.S. 252, 263 (1977) (Arlington Heights), in which the Court 

stated that a corporation “has no racial identity and cannot be 

the direct target” of race discrimination.

Our Circuit has not addressed this standing issue in any 

published opinion. However, we observe that several other 

federal appellate courts have considered this question, and have 

declined to bar on prudential grounds race discrimination claims 

brought by minority-owned corporations that meet constitutional

standing requirements. Cf. Domino’s Pizza, Inc. v. McDonald, 
14

546 U.S. 470, 473 n.1 (2006) (recognizing that “the Courts of 

Appeals to have considered the issue have concluded that 

corporations may raise [42 U.S.C.] § 1981 claims” for injuries 

due to race discrimination) (citation omitted). Indeed, in 

various statutory contexts, several of our sister circuits have 

concluded that corporations have standing to assert race 

discrimination claims, including claims brought under Title VI. 

See, e.g., Thinket Ink Info. Res., Inc. v. Sun Microsystems, 

Inc., 368 F.3d 1053, 1060 (9th Cir. 2004) (Section 1981 claim); 

Oti Kaga, Inc. v. S.D. Hous. Dev. Auth., 342 F.3d 871, 882 (8th 

Cir. 2003) (Fair Housing Act claims); Guides, Ltd. v. Yarmouth 

Grp. Prop. Mgmt., Inc., 295 F.3d 1065, 1072 (10th Cir. 2002) 

(Sections 1981 and 1982 claims); Gersman v. Group Health Ass’n, 

931 F.2d 1565, 1568 (D.C. Cir. 1991) (Section 1981 claim), 

vacated on other grounds, 502 U.S. 1068 (1992); Triad Assocs., 

Inc. v. Chi. Hous. Auth., 892 F.2d 583, 591 (7th Cir. 1989) 

(Section 1983 claim), abrogated on other grounds, Bd. of Cnty. 

Comm’rs v. Umbehr, 518 U.S. 668 (1996); Hudson Valley Freedom 

Theater, Inc. v. Heimbach, 671 F.2d 702, 706 (2d Cir. 1982) 

(Title VI claim); Des Vergnes v. Seekonk Water Dist., 601 F.2d 

9, 13-14 (1st Cir. 1979) (Section 1981 claim).4

 4 We further observe that the plain language of the statute 

may allow a corporation to have Title VI standing. Title VI 

does not specifically define “person,” but the Dictionary Act 

(Continued)
15

Notably, in the context of a plaintiff asserting a claim 

under Title VI, the Second Circuit observed that it is 

hard to believe that the Supreme Court would deny 

standing to the corporation because it “has no racial 

identity and cannot be the direct target” of the 

discrimination, while at the same time it would be 

obliged to deny standing to the stockholders on the 

sound ground that the injury was suffered by the 

corporation and not by them.

Hudson Valley, 671 F.2d at 706 (quoting Arlington Heights, 429 

U.S. at 263). The Second Circuit thus held that when a 

corporation satisfies constitutional requirements for standing, 

prudential considerations should not prohibit that corporation 

from alleging that a defendant, on racial grounds, has acted to 

obstruct purposes that the corporation was created to 

accomplish. Id.

We are persuaded by the Second Circuit’s reasoning, and 

conclude that the dictum in Arlington Heights does not impede 

our application of the Second Circuit’s analysis. In Arlington 

Heights, the Supreme Court was not required to consider whether 

 

does: “In determining the meaning of any Act of Congress, unless 

the context indicates otherwise,” the word person “include[s] 

corporations.” 1 U.S.C. § 1. Moreover, § 2000d prohibits a 

“person” from being discriminated against “on the ground of 

race, color, or national origin,” not “on the ground of his or 

her race, color, or national origin.” See Hudson Valley, 671 

F.2d at 705 (observing the same); see also Mohamad v. 

Palestinian Auth., 132 S. Ct. 1702, 1707-08 (2012) (observing 

that Congress often uses the word “individual” to mean something 

different from its use of the word “person”).
16

a corporation had standing to assert that it suffered injury 

based on racial discrimination in violation of federal law, 

because one of the other plaintiffs in the case was an AfricanAmerican individual who plainly had demonstrated standing to 

bring the action.5 429 U.S. at 263. Thus, the quoted language 

from Arlington Heights was surplusage unrelated to the Court’s 

determination of the standing issue presented.

We agree with the Ninth Circuit that a minority-owned 

corporation may establish an “imputed racial identity” for 

purposes of demonstrating standing to bring a claim of race 

discrimination under federal law. Thinket Ink, 368 F.3d at 

1059. We hold that a corporation that is minority-owned and has 

been properly certified as such under applicable law can be the 

direct object of discriminatory action and establish standing to 

bring an action based on such discrimination. Accordingly, we 

agree with the conclusions reached by our sister circuits that 

 5 In Arlington Heights, a non-profit real estate developer 

agreed to purchase land in order to build racially-integrated 

housing for residents with low and moderate incomes. 429 U.S. 

at 255-56. When local authorities withheld the necessary 

clearance to rezone the land from a single-family to a multiplefamily housing classification, the developer and several 

African-American individuals filed a lawsuit alleging that their 

refusal to change the classification of the land was racially 

discriminatory. Id. at 258-59. The Supreme Court ultimately 

held that the developer and an individual plaintiff had standing 

to bring the action, but failed to carry their burden of proving 

that discriminatory intent was a motivating factor in the 

rezoning decision. Id. at 263-64, 270. 
17

prudential considerations should not bar review of a claim of 

race discrimination suffered by such a corporation during its 

participation in a program that has received federal funding 

assistance.

Examining the present record, we conclude that Carnell has 

standing to bring its race discrimination claims under Title VI. 

It is undisputed that Carnell properly was certified by the 

Commonwealth of Virginia as a “Small, Women- and Minority-Owned 

Business” because its president and sole shareholder is AfricanAmerican. Carnell publicly represented that it was eligible for 

consideration as a minority business enterprise when it 

contracted to work for the Housing Authority on a public project 

receiving federal funding assistance. Carnell alleged that the 

defendants discriminated against Carnell during its performance 

on the contract based on the minority status of its owner, and 

that Carnell suffered direct injury as a result of that racial 

discrimination. Therefore, we hold that under the facts before 

us, Carnell sufficiently has shown an imputed racial identity 

permitting us to conclude that Carnell’s corporate status does 

not prevent its race discrimination claims from falling within 

the zone of interests protected by Title VI. See Bennett, 520 

U.S. at 162.

Our conclusion is not altered by the defendants’ 

alternative contention that Carnell lacked standing because it 
18

was not an intended beneficiary of Hope VI Program funding. 

Title VI does not require that an injured party be the intended 

beneficiary of federal funds. Instead, Title VI provides that 

no person shall “be excluded from participation in, be denied 

the benefits of, or be subjected to discrimination under any 

program or activity receiving Federal financial assistance” on 

the basis of race. 42 U.S.C. § 2000d. Thus, the determinative 

inquiry in this regard is whether Carnell alleged that it 

suffered injury based on race discrimination and was either 

participating or seeking to participate in a federally funded 

activity, or was the intended beneficiary of those federal 

funds. Cf. Guardians Ass’n v. Civil Serv. Comm’n of N.Y., 463 

U.S. 582, 633 (1983) (“Because Title VI is intended to ensure 

that ‘no person’ is subject to discrimination in federally 

assisted programs, private parties function as third-party 

beneficiaries to these contracts.”); United States v. Harris 

Methodist Fort Worth, 970 F.2d 94, 97 (5th Cir. 1992) 

(concluding that Title VI protects physician staff in hospitals 

that receive federal funding); Soberal-Perez v. Heckler, 717 

F.2d 36, 38 (2d Cir. 1983) (interpreting Title VI to cover 

“situations where federal funding is given to a non-federal 

entity which, in turn, provides financial assistance to the 

ultimate beneficiary”).
19

Carnell plainly has met this test. It is undisputed that 

Carnell submitted a successful bid proposal, entered into a 

federally funded contract with the Housing Authority, and 

performed services under that contract for nearly a year. 

Carnell therefore undoubtedly has participated in the Hope VI 

Program, “a program or activity receiving Federal financial 

assistance.” 42 U.S.C. § 2000d. Accordingly, we hold that 

Carnell’s Title VI claim meets the requirements for prudential 

standing, and we proceed to consider the merits of Carnell’s 

appeal.

B.

Carnell argues that the district court erred in awarding 

summary judgment to Blaine on Carnell’s race discrimination 

claims. The district court held that there was no evidence that 

Blaine engaged in the alleged discriminatory conduct during 

construction of the Project, either by participating directly in 

that conduct or by controlling the conduct of Housing Authority 

representatives under an agency relationship with the Housing 

Authority. 

Carnell contests both these findings on appeal. We review 

the district court’s award of summary judgment de novo, and 

consider the evidence and all inferences fairly drawn from the 

evidence in the light most favorable to Carnell. See Matsushita 

Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-
20

88 (1986); Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1127 

(4th Cir. 1987).

We first address the district court’s determination that 

the record lacked evidence supporting a claim that Blaine 

participated directly in the allegedly discriminatory behavior. 

According to Carnell, the district court’s conclusion was 

erroneous because Blaine “solely . . . controlled” the financing 

for the project and directed that various contested payments be 

withheld from Carnell. 

Carnell’s argument, however, misrepresents the record 

before us. The deposition testimony of Blaine’s corporate 

designee, Owen McCormick, plainly states that Blaine “did not do 

anything directly in furtherance of its obligations under the 

contract,” but was “a passive entity [that] would ensure that 

the checks would be written to [the Housing Authority] for 

purposes of paying the contractors.” Written correspondence in 

the record corroborated that the allegedly discriminatory 

denials of Carnell’s requests for certain payments were made by 

Housing Authority personnel, not by Blaine.

Additionally, as the district court observed, Blaine is a 

limited liability company with “no individual officers or 

employees” acting on its behalf. According to the relevant 

version of Blaine’s “Operating Agreement,” Blaine’s three 

shareholders are corporate entities, including an investor 
21

member, a special member, and the managing member, which is a 

non-profit company led by Housing Authority Executive Director 

Gary Wasson. Moreover, the record fails to establish that Gary 

Wasson acted in any respect on Blaine’s behalf when he engaged 

in allegedly discriminatory acts against Carnell.6

Carnell argues, nevertheless, that Blaine was vicariously 

liable for the discriminatory conduct of Housing Authority 

representatives. Carnell asserts that the DSA designated Blaine 

as the “Owner” of the project with full control over the Housing 

Authority, which merely was an agent obligated to assist Blaine 

in performing Blaine’s contractual obligations. We disagree 

with Carnell’s position.

Both parties agree that Virginia law governs the 

relationship between Blaine and the Housing Authority under the 

DSA. Under Virginia law, control is a necessary component of a 

principal-agent relationship. Cf. Acordia of Va. Ins. Agency, 

Inc. v. Genito Glenn, L.P., 560 S.E.2d 246, 249 (Va. 2002) 

(defining agency as “a fiduciary relationship” based on the 

 6 Carnell argues that Wasson was listed as Blaine’s 

“President” on two documents he signed on Blaine’s behalf, and 

therefore, that Wasson acted on Blaine’s behalf when he 

participated in allegedly discriminatory conduct. However, as 

the district court correctly observed, those documents should 

not be given significant weight because they predated the 

clarification of Blaine’s management structure in the revised 

version of its Operating Agreement. 
22

parties’ consent that one party “shall act on [the other’s] 

behalf and subject to [the other’s] control”).

Even if we assume, without deciding, that vicarious 

liability may be asserted in the context of a Section 1981 

claim,7 Carnell’s argument fails. The plain language of the DSA 

grants the Housing Authority sole responsibility for managing 

construction of the project as an independent contractor. The 

DSA also explicitly forecloses any ability to construe the 

relationship of Blaine and the Housing Authority as that of 

principal and agent, by specifying that the Housing Authority 

was not an agent or employee of Blaine. 

The DSA provides, in relevant part, that “[n]othing herein 

contained shall be construed to constitute any party as the 

agent of another party,” and that “[the Housing Authority] shall 

not at any time be deemed an employee of [Blaine].” Such clear 

expressions of intent in the governing contract persuade us that 

an agency relationship was not established between Blaine and 

the Housing Authority. See, e.g., Causey v. Sewell Cadillac-

 7 Contrary to Carnell’s characterization of the holding in 

General Building Contractors Ass’n v. Pennsylvania, 458 U.S. 

375, 395 (1982), the Supreme Court did not decide in that case 

that the doctrine of respondeat superior applied to Section 1981 

lawsuits. However, a concurring opinion suggested that a 

defendant could be held vicariously liable for the 

discriminatory conduct of another party if the record contained 

evidence that the defendant “maintain[ed] some control over 

[that party’s] activities.” Id. at 404 (O’Connor, J., 

concurring).
23

Chevrolet, Inc., 394 F.3d 285, 290 (5th Cir. 2004) (affirming 

dismissal of a car dealership’s § 1981 claim against an 

automobile manufacturer because relevant documents show that the

dealership is an independent business); Arguello v. Conoco, 

Inc., 207 F.3d 803, 807-08 (5th Cir. 2000) (reasoning that the 

“plain language” of contracts between an energy company and its 

individual gas stations specified that each station was an 

“independent business” and therefore foreclosed an agency 

relationship). Indeed, we discern no evidence in the record to 

suggest that Blaine actually controlled any of the regular 

operations of the Housing Authority.

Accordingly, we conclude that the district court correctly 

determined that Blaine could not be held liable on Carnell’s 

race discrimination claims on either a direct or a vicarious 

basis. We therefore affirm the court’s award of summary 

judgment to Blaine with respect to those claims.

C.

We turn now to consider one of Carnell’s principal 

arguments on appeal, namely, that the district court committed 

reversible error by allowing defense counsel to use certain 

impeachment material in cross-examining Carnell’s president, 

Michael Scales. We review for abuse of discretion the district 

court’s decision to permit counsel to impeach Scales with 

portions of a document that Carnell contends should not have 
24

been allowed for any purpose under the Federal Rules of 

Evidence. See United States v. Grimmond, 137 F.3d 823, 831 (4th 

Cir. 1998).

The document at issue is the unsigned proposal prepared by 

McGuireWoods. As stated above, Scales testified that he did not 

recall viewing the document, which delineated objectives to 

“[s]hape the initial story so that it is sympathetic to Carnell 

and critical of [the Housing Authority],” and to “[e]xpand on 

the initial story in Danville to garner broader interest in the 

case in neighboring counties, and potentially statewide 

interest.” Before questioning Scales concerning this content, 

defense counsel asked Scales whether he was trying to “shape” 

the evidence to “make out a race claim.” Scales denied these 

accusations and later explained that he had sought the 

assistance of media relations consultants from McGuireWoods “to 

tell who we are.” 

Carnell argues that defense counsel’s use of the 

McGuireWoods proposal was unfairly prejudicial under Federal 

Rule of Evidence 403, because the defendants improperly used the 

proposal to attack Scales’s credibility when there was no 

evidence showing that Scales had adopted, or even had read, the 

proposal’s contents. Carnell also asserts that the proposal 

should have been excluded under Federal Rule of Evidence 613(b), 

which limits the admissibility of a witness’s prior inconsistent 
25

statement. In response, the defendants fail to address the Rule 

403 question, and solely argue that their use of the proposal 

constituted proper impeachment by a prior inconsistent 

statement.

We find no merit in the defendants’ argument. Rule 613(b) 

provides that “[e]xtrinsic evidence of a witness’ prior 

inconsistent statement is admissible only if the witness is 

given an opportunity to explain or deny the statement and an 

adverse party is given an opportunity to examine the witness 

about it, or if justice so requires.” The defendants’ argument 

fails at the outset, because even if counsel’s cross-examination 

of Scales about a statement in the proposal constituted 

“[e]xtrinsic evidence” within the meaning of Rule 613(b), the 

defendants did not establish that the contents of the proposal 

qualified as a prior statement of Scales.

For a statement to qualify as a witness’ prior inconsistent 

statement under Rule 613(b), the statement must be one that the 

witness has made or adopted, or to which the witness otherwise 

has subscribed. See United States v. Barile, 286 F.3d 749, 757-

58 (4th Cir. 2002) (indicating that a third party’s statement 

only is admissible under Rule 613(b) if the statement was 

adopted by the witness or otherwise is “reasonably attributable” 

to the witness); see also United States v. Saget, 991 F.2d 702, 

710 (11th Cir. 1993) (“[W]e conclude that a witness may not be 
26

impeached with a third party’s characterization or 

interpretation of a prior oral statement unless the witness has 

subscribed to or otherwise adopted the statement as his own.”). 

The record before us does not contain evidence that the 

substance of the proposal reasonably was attributable to Scales. 

Instead, the record shows that Scales denied any recollection of 

the proposal and stated that he did not sign the document. 

Moreover, the proposal, which was dated February 22, 2010, had 

not been incorporated or referenced in the February 24, 2010 

consulting agreement executed by Scales. Also, when Scales 

signed and returned the consulting agreement to McGuireWoods, he 

did not refer to any proposal in his cover letter. Given these 

undisputed facts, the record lacked any foundation for treating 

the proposal as a prior inconsistent statement attributable to 

Scales. 

We further observe that Rule 613(b) “speaks only to when 

extrinsic proof of a prior inconsistent statement is 

inadmissible; it says nothing about the admissibility of such 

evidence.” United States v. Young, 248 F.3d 260, 268 (4th Cir. 

2001). Because the district court ruled that evidence of the 

proposal could be used for impeachment purposes during crossexamination, we turn to consider Carnell’s argument that the 

district court abused its discretion by failing to exercise its 

gatekeeping authority to exclude the evidence under Rule 403. 
27

See id. (stating that “even if all the foundational elements of 

Rule 613 are met” a district court “may still exercise its 

discretion to exclude” evidence of a prior inconsistent 

statement under Rule 403). In support of its position, Carnell 

contends that the evidence lacked probative value and was 

unfairly prejudicial, particularly in view of the types of 

claims being litigated. We agree with Carnell’s argument. 

Among other things, Rule 403 provides for the exclusion of 

otherwise relevant evidence if the “probative value” of the 

evidence is “substantially outweighed” by “unfair prejudice” 

that will result from its admission. Fed. R. Evid. 403. An 

assessment of probative value under Rule 403 requires more than 

a determination that the evidence is “relevant” to a material 

fact in the case. Rather, the trial court must assess the 

proponent’s need for admission of the evidence in the full 

evidentiary context of the case. Old Chief v. United States, 

519 U.S. 172, 184-85 (1997). 

After evaluating the marginal probative value of the 

proposed evidence, the trial court then must balance the value

of the evidence against the harmful consequences that may result 

from its admission. See United States v. Ham, 998 F.2d 1247, 

1252 (4th Cir. 1993). Foremost among those dangers is the risk 

of “unfair prejudice,” which refers to an undue tendency of 

evidence to influence a jury to make a decision for reasons 
28

unrelated to the probative value of the evidence. United States 

v. Mohr, 318 F.3d 613, 620 (4th Cir. 2003) (internal quotation 

marks and emphasis omitted); Mullen v. Princess Anne Volunteer 

Fire Co., Inc., 853 F.2d 1130, 1134 (4th Cir. 1988); see Old 

Chief, 519 U.S. at 180. Rule 403 provides for the exclusion of 

unfairly prejudicial evidence only when the risk of unfair 

prejudice “substantially” outweighs the probative value. See

Mohr, 318 F.3d at 620.

In applying the Rule 403 analysis to the district court’s 

decision in this case, we consider the evidence in the “light 

most favorable to [the] proponent, maximizing its probative 

value and minimizing its prejudicial effect.” Mullen, 853 F.2d 

at 1135 (citation and internal quotation marks omitted). We 

first examine the probative value of the evidence at issue. 

Notwithstanding the deferential standard of review, we conclude

that any impeachment value of the quoted statements from the 

McGuireWoods proposal was negligible given the lack of 

foundation for those statements.

As we have stated above, no evidence was adduced to show 

that Scales had read, let alone endorsed, the proposal. Indeed, 

after counsel quoted the proposal’s language, Scales protested 

that he was unfamiliar with the proposal and did not subscribe 

to its contents. Moreover, Scales already had testified that he 

had hired McGuireWoods in connection with the litigation to help 
29

tell Carnell’s story to the public. Because the proposal was an 

internal document prepared by McGuireWoods that contained only 

“propose[d]” goals for McGuireWoods’s relationship with Carnell, 

the proposal’s negligible probative value was diminishingly 

small absent any evidence that Scales approved or otherwise 

adopted its contents. 

On the other hand, the danger that unfair prejudice would 

result from allowing counsel to quote from the proposal was 

exceedingly high. In allowing the impeachment, the district 

court lent legitimacy to an unfounded attack on Scales’s

credibility based on a statement that was not his own. Although 

the court earlier had excluded evidence of the proposal from the 

defendants’ case-in-chief, the well-recognized problem remained 

that juries find it difficult to distinguish between impeachment 

and substantive evidence, and that, consequently, “there is a 

significant danger of prejudice where evidence is adduced for 

impeachment purposes that could not be presented directly on the 

merits of the case.” United States v. MacDonald, 688 F.2d 224, 

234 (4th Cir. 1982) (citing United States v. Morlang, 531 F.2d 

183, 190 (4th Cir. 1975)). Under the present circumstances, 

because the impeachment evidence had little or no probative 

value and the danger of unfair prejudice was very great, we 

conclude that the court’s decision to allow the use of this 

impeachment evidence against Scales was an abuse of discretion. 
30

Moreover, we are not persuaded by defendants’ argument that 

any error was harmless because use of this impeachment material 

was merely a “minor episode” in a lengthy trial. See Taylor v. 

Va. Union Univ., 193 F.3d 219, 235 (4th Cir. 1999) (holding that 

the harmless error test “appropriately focuses upon ‘whether the 

error itself had substantial influence’” on the judgment) 

(quoting Kotteakos v. United States, 328 U.S. 750, 765 (1946)), 

abrogated on other grounds, Desert Palace Inc. v. Costa, 539 

U.S. 90 (2003). On the contrary, the defendants’ entire theory 

of the case was that Scales and his subordinates fabricated race 

discrimination claims to conceal poor contractual performance. 

To the extent that the defendants could attribute the contested 

language in the proposal to Scales, the defendants’ theory of 

the case would be significantly bolstered because the document 

revealed a plan to “shape” the credibility of Carnell’s 

discrimination claims. 

Defense counsel ultimately was allowed to impeach Scales 

with the proposal as if it were his own prior inconsistent 

statement. The defendants took full advantage of this windfall 

during closing argument, when counsel referred the jury to a 

poster exhibit displaying the proposal’s language to illustrate 

the defense theory that Carnell’s discrimination claims were 

manufactured, despite the fact that the proposal was never 

formally admitted into evidence. 
31

We find it difficult to envision circumstances more 

unfairly prejudicial and damaging to Carnell’s race 

discrimination claims. We express no opinion, however, whether 

the error so pervaded the proceedings to require remand of 

Carnell’s contract claims, because Carnell represented at oral 

argument in this appeal that Carnell is only asking for a new 

trial on its race discrimination claims based on this 

evidentiary error. Therefore, we vacate the district court’s 

judgment with respect to Carnell’s race discrimination and 

retaliation claims, and proceed to review the remaining issues 

on appeal involving Carnell’s contract claims.

III.

Carnell presents several arguments related to the damages 

awarded on its breach of contract claims. We first consider 

Carnell’s arguments concerning its claims for unpaid work. 

A.

In addressing the amount of damages that could be recovered 

under Carnell’s unpaid work claims, we review certain provisions 

of the Virginia Public Procurement Act (VPPA), Virginia Code

§§ 2.2-4300 through 4377. The VPPA governs public contracts in 

Virginia and was enacted, among other reasons, to ensure “that 

public bodies in the Commonwealth obtain high quality goods and 

services at reasonable cost,” and “that all procurement 
32

procedures be conducted in a fair and impartial manner.” Id.

§ 2.2-4300(C). Here, we consider: (1) whether the record 

contains evidence that Carnell provided sufficient notice of its 

unpaid work claims under the VPPA’s notice requirement; and (2) 

whether the VPPA’s monetary cap on modifications to public 

contracts limits Carnell’s recovery on its contract claims.

1.

The defendants argue that Carnell’s unpaid work claims are 

barred by Carnell’s failure to offer evidence at the third trial 

that Carnell complied with the VPPA’s notice requirement. Under 

the statute, “written notice of the contractor’s intention to 

file a claim shall be given at the time of the occurrence or 

beginning of the work upon which the claim is based.” Id.

§ 2.2-4363(A). At the third trial, unlike in the first two 

trials, Carnell did not offer into evidence a November 2009 

letter notifying the Housing Authority of “claims arising from 

Carnell’s work on the [project].” Instead, Carnell offered into 

evidence an October 2008 letter, which sought reimbursement for 

two particular instances of uncompensated work.8 Carnell argues 

 8 Carnell briefly argues that the Housing Authority’s actual 

knowledge of the unpaid work claims substantially satisfied the 

VPPA’s notice requirement. However, because the Supreme Court 

of Virginia has rejected this position with respect to a similar 

statutory notice requirement, we do not discuss further that 

argument. See Commonwealth v. AMEC Civil, LLC, 699 S.E.2d 499, 

506 (Va. 2010) (“We hold that actual notice cannot satisfy the 

(Continued)
33

that the October 2008 letter independently supplied adequate 

proof of notice under the VPPA. We disagree.

The VPPA’s written notice requirement is a “mandatory, 

procedural requirement[]” that must be met before a court can 

reach the merits of a claim. Dr. William E.S. Flory Small Bus. 

Dev. Ctr., Inc. v. Commonwealth, 541 S.E.2d 915, 919 (Va. 2001). 

Any notice submitted for purposes of satisfying this statutory 

requirement must identify specifically each claim for damages 

and “conspicuously declar[e] that, at least in the contractor’s 

view, a serious legal threshold has been crossed,” and that the 

contractor intends to claim reimbursement for the particular 

damages. Commonwealth v. AMEC Civil, LLC, 677 S.E.2d 633, 641 

(Va. Ct. App. 2009), rev’d in part on other grounds, 699 S.E.2d 

499 (Va. 2010). Although the notice need not exhibit “the 

sophistication of a legal pleading,” the notice must “clearly 

and timely state[] the contractor’s intention to later file an 

administrative claim.” Id.

In its pleadings, Carnell alleged numerous claims for 

unpaid work. In the relevant section of its third amended 

complaint, Carnell requested, among other things, damages for 

cleaning out a sediment pond, removing excess dirt from 

 

written notice requirement in [Virginia] Code § 33.1-386(A), and 

that written notice is required.”) (citation omitted).
34

foundation work and materials left by another contractor, 

performing additional seeding, relocating a fire hydrant, 

implementing various plan revisions, correcting environmental 

deficiencies, incurring additional surveying costs, and 

performing work on sidewalks, ramps, and driveway entrances. 

By contrast, the October 2008 correspondence, on which 

Carnell relies, refers to a very limited class of grievances. 

In the letter, Michael Scales protested that Carnell was not 

compensated for work required “to clean out the sediment pond #3 

located on the north side of the Seeland Road construction site 

for the second time,” and “to enter, remove siltation material, 

and leave the property of Ms. Juanita Edwards.” As “redress,” 

Scales requested reimbursement in the October 2008 letter for 

the referenced work, which he defined as the “efforts of the 

Contractor to get an approved stabilization plan for the north 

side of Seeland Road and the associated removal of the sediment 

from the area located on the north side of [the] Seeland Road 

construction site.” No mention was made in the October 2008 

letter of the litany of other unpaid work claims described in 

Carnell’s third amended complaint.

Under Virginia law, Carnell satisfied its notice 

requirements under the VPPA only with respect to the claims for 

which Carnell specifically requested reimbursement and signified 

an intent to file a claim. See AMEC Civil, 677 S.E.2d at 641. 
35

Therefore, we conclude that Carnell’s October 2008 letter 

supplied the required notice only with respect to expenses 

associated with cleaning out the sediment pond and removing 

sediment from the north side of the specified construction site.9 

Further, with regard to those two aspects of the project, we are 

unable to discern from the record the particular amounts that 

the jury awarded as compensation for that work. Accordingly, we 

vacate the district court’s judgment with respect to Carnell’s 

contract claims for unpaid work, and remand the two contract 

claims referenced in the October 2008 letter to the district 

court for a new trial on those claims on damages only.

2.

We next consider the district court’s decision to reduce 

the amount of damages awarded on the unpaid work claims based on 

the VPPA’s limitation of the amount by which public contracts 

lawfully can be increased. Under the VPPA, 

 9 The defendants claim that these issues were addressed by 

the Housing Authority’s approval of two change orders that 

authorized additional expenditures to rectify the underlying 

problems with the construction site. On the record before us, 

we are unable to ascertain with certainty the amounts and nature 

of the work reimbursed and how they correspond to the amounts 

sought in the October 2008 letter. Nor are we in a position to 

make factual findings on that point. Accordingly, we express no 

opinion on that issue and leave it to the parties to present 

their arguments on partial or full payment for these two 

surviving unpaid work claims to the district court upon remand.
36

[a] public contract may include provisions for 

modification of the contract during performance, but 

no fixed-price contract may be increased by more than 

twenty-five percent of the amount of the contract or 

$50,000, whichever is greater, without the advance 

written approval of . . . the governing body, in the 

case of political subdivisions. In no event may the 

amount of any contract, without adequate 

consideration, be increased for any purpose, 

including, but not limited to, relief of an offeror 

from the consequences of an error in its bid or offer.

Virginia Code § 2.2-4309. Carnell raises three challenges to 

the applicability and constitutionality of the statute, all of 

which lack merit.

First, Carnell asserts that the VPPA does not cap all 

recoveries on contract claims, but solely those in which a 

contractor has increased the contract price excessively without 

providing additional work. Seizing on the part of the statute 

that prohibits any increases to contracts “without adequate 

consideration,” id., Carnell argues that the VPPA should not 

limit increases to Carnell’s contract, which were justified by 

the valuable consideration of additional work performed by 

Carnell.

We disagree with Carnell’s argument. We conclude that on 

its face, the statutory cap plainly applies to all fixed-price 

public contracts and forbids an increase to any such contract 

that exceeds a proportion of the contract’s price. A contrary 

conclusion would permit the absurd result of allowing Carnell to 
37

recover, through a lawsuit, an amount that Carnell could not 

lawfully have obtained through a mutually-agreed modification of 

the contract terms. Cf. Scofield Eng’g Co. v. Danville, 126 

F.2d 942, 947 (4th Cir. 1942) (denying quantum meruit recovery 

on a contract when the contract was forbidden by statute, and 

citing “the absurdity of implying an obligation to do that which 

[the law] forbids”) (citation omitted).

Carnell separately asserts, however, that even if the VPPA 

limits all fixed-price public contracts, Carnell’s contract with 

the Housing Authority was a unit-price contract to which the 

VPPA does not apply. Under the parties’ contract, the Housing 

Authority agreed to pay Carnell “for the performance of the 

Contract, in current funds, subject to additions and deductions 

as provided in the Contract Documents, the sum of $793,541.00.” 

Carnell argues that because the total contract price was 

“subject to additions and deductions,” and because Carnell 

agreed to perform the site preparation work “for the above lump 

sum and unit prices,” this contract language demonstrates that 

the contract was negotiated on a unit-price basis. We disagree.

The district court’s determination that the parties entered 

into a fixed-price contract is well supported by the record. 

Michael Scales represented in the signed, notarized bid form, 

which was incorporated into the contract, that Carnell sought to 

perform the site preparation work “for the firm, fixed price” 
38

specified. Although the contract contained some conditional 

language allowing modifications to the final contract price, 

such a mechanism for negotiating modifications did not transform 

a contract that proposed a “lump sum” payment into a unit-price 

contract. Therefore, we conclude that the parties’ contract was 

a fixed-price contract subject to the modification limits 

imposed by the VPPA. 

Finally, Carnell argues that the VPPA’s statutory cap 

unconstitutionally abrogates the common law in the Commonwealth 

of Virginia, and constitutes an unlawful taking and a due 

process violation under both the Federal and Virginia 

Constitutions. See U.S. Const. amend. V; U.S. Const. amend. 

XIV, § 1; Va. Const. art. I, § 11. In essence, Carnell contends

that the VPPA is unconstitutional because it permits the 

government to obtain the benefit of a contractor’s additional 

labor pursuant to contract modifications without being required 

to pay fully for that additional work. Again, we disagree.

We adopt the district court’s reasons for rejecting 

Carnell’s constitutional challenges under state and federal law. 

In doing so, we agree with the district court that the VPPA only 

affects the remedy available for certain breach of contract 

actions under the common law, not the validity of the underlying 

contractual obligations. See Etheridge v. Med. Ctr. Hosps., 376 

S.E.2d 525, 532 (Va. 1989) (stating that “[o]ne area in which 
39

the General Assembly’s authority has not been forbidden or 

restricted is the common law,” and that “the legislature has the 

power to provide, modify, or repeal a remedy”). Carnell was 

presumed to be aware of statutory limitations on the Housing 

Authority’s power to modify contracts. See American-La France & 

Foamite Indus., Inc. v. Arlington Cnty., 178 S.E. 783, 784 (Va. 

1935) (“All persons dealing with a municipal corporation are 

charged with notice of the limitations upon its power. Those 

limitations may not be exceeded, defeated, evaded, or nullified 

under guise of implying a contract.”) (citation and internal 

quotation marks omitted). Moreover, Carnell had no fundamental 

right, nor “property, in the constitutional sense,” to a 

particular remedy in contract. See Gibbes v. Zimmerman, 290 

U.S. 326, 332 (1993); Etheridge, 376 S.E.2d at 531 (citing Duke 

Power Co. v. Carolina Envt’l Study Grp., 438 U.S. 59, 83-84 

(1978)). Thus, the VPPA provisions at issue are constitutional 

because they reasonably are related to the legitimate government 

purpose of promoting fair procurement procedures by which public 

bodies in Virginia obtain goods and services at a reasonable 

cost. Virginia Code § 2.2-4300(C); see Etheridge, 376 S.E.2d at 

531; see also Duke Power Co., 438 U.S. at 83-84 (holding that 

economic regulations generally are presumed constitutional 

unless the legislature’s judgment is “demonstrably arbitrary or 

irrational”). 
40

Accordingly, we affirm the district court’s application of 

the VPPA in reducing Carnell’s damages on its claims for unpaid 

work. On remand, therefore, when the district court considers 

the proper measure of damages for the two items for which 

Carnell proved it had provided the requisite VPPA notice, the 

court must also ensure that any damages Carnell may be awarded 

do not exceed the VPPA’s statutory cap.

B.

We next address Carnell’s argument that the district court 

erred in limiting the types of damages that Carnell could 

recover on its breach of contract claims for being removed

unjustly from the construction project. After the jury returned 

a verdict awarding Carnell $400,000 on its claims alleging 

unjust removal, the district court allowed Carnell to recover 

certain of those damages, including $12,000 in lost profits from 

not being able to complete the site preparation work and $60,490 

in “retainage” withheld by the defendants, but ruled that 

Carnell insufficiently had pleaded “consequential or special 

damages” accounting for the remainder of the damages award. 

According to the court, such consequential damages included the 

alleged destruction of Carnell’s business, loss of good will, 

and attorneys’ fees and other expenses related to third-party 

claims. On appeal, Carnell argues that the foregoing items were 

not consequential damages under Virginia law, but that, even if 
41

those claimed damages were consequential or special in nature, 

they were pleaded sufficiently in the third amended complaint. 

In Virginia, the issue whether the contested damages are 

direct or consequential damages presents a question of law. See

Roanoke Hosp. Ass’n v. Doyle & Russell, Inc., 214 S.E.2d 155, 

160 (Va. 1975). Under Virginia law, direct damages are those 

that “flow ‘naturally’ from a breach of contract; i.e., those 

that, in the ordinary course of human experience, can be 

expected to result from the breach, and are compensable.” R.K. 

Chevrolet, Inc. v. Hayden, 480 S.E.2d 477, 481 (Va. 1997); see 

also Long v. Abbruzzetti, 487 S.E.2d 217, 220 (Va. 1997) 

(analyzing whether damages were a “direct and necessary 

consequence” of the breach).

By contrast, consequential damages “arise from the 

intervention of ‘special circumstances’ not ordinarily 

predictable and are compensable only if it is determined that 

the special circumstances were within the contemplation of the 

parties to the contract.” R.K. Chevrolet, 480 S.E.2d at 481 

(citation omitted). We agree with the district court that 

because the damages sought by Carnell did not flow directly from 

the defendants’ decision to remove Carnell from the project, 

they were consequential in nature. See, e.g., Atl. Purchasers, 

Inc. v. Aircraft Sales, Inc., 705 F.2d 712, 716 n.4 (4th Cir. 

1983) (barring a claim for attorney’s fees because the party 
42

“failed to state specifically the claim for fees in the 

complaint”). 

Although state law governs our determination of the nature 

of damages sought, the procedural requirements for pleading 

damages are governed by the Federal Rules of Civil Procedure. 

See Hogan v. Wal-Mart Stores, Inc., 167 F.3d 781, 783 (2d Cir. 

1999) (observing that state substantive law applies in 

determining whether the elements of special damages are met, but 

that “[t]he form in which claims for special damages must be 

stated is a procedural question governed by Fed. R. Civ. P. 

9(g)”); see also 5A Charles Alan Wright & Arthur R. Miller, 

Federal Practice & Procedure: Civil 3d § 1311, at 361-62 (2004). 

Federal Rule of Civil Procedure 9(g) requires that “special” 

damages, namely, those that are not the “ordinary result” of the 

conduct alleged, “shall be specifically stated.” Weyerhaeuser 

Co. v. Brantley, 510 F.3d 1256, 1266 (10th Cir. 2007); see also

Avitia v. Metro. Club of Chi., Inc., 49 F.3d 1219, 1226 (7th 

Cir. 1995) (defining special damages as “damages that are 

unusual for the type of claim in question—that are not the 

natural damages associated with such a claim”). The primary 

purpose of Rule 9(g) is one of notice, both to “inform defending 

parties as to the nature of the damages claimed in order to 

avoid surprise; and to inform the court of the substance of the 

complaint.” Great Am. Indem. Co. v. Brown, 307 F.2d 306, 308
43

(5th Cir. 1962). Our conclusion that the damages cited above 

were consequential in that they were “not ordinarily 

predictable,” R.K. Chevrolet, 480 S.E.2d at 481, compels the 

further conclusion that those damages were “unusual for the type 

of claim in question” and, therefore, were special damages 

subject to the heightened pleading requirement of Rule 9(g). 

Avitia, 49 F.3d at 1226.

We agree with the district court that under these 

circumstances, Carnell’s third amended complaint failed to plead 

special damages in connection with its breach of contract 

claims. In particular, we note the contrasting level of detail 

between the relief requested for the alleged breaches of 

contract and that requested for the alleged racial 

discrimination and retaliation. In each of the race 

discrimination and retaliation counts, Carnell specifically 

recited damages for, among other things, “harm to its name and 

reputation, the loss of integrity and good will, . . . , the 

time and expense of defending Carnell’s name and 

reputation, . . . , and other compensatory damages to be proven 

at trial.” By contrast, Carnell’s breach of contract count 

merely prayed for aggregate damages “in an amount to be proven 

at trial but not less than $419,575, plus interest.” 

Carnell argues, nevertheless, that the breach of contract 

count in its third amended complaint incorporated certain 
44

paragraphs from the complaint’s introductory section that 

sufficiently alleged Carnell’s special damages. In the relevant 

sections, Carnell stated that it was damaged by the 

“[d]efendants’ conduct,” by the costs relating to “investigating 

and defending [the defendants’] claims and causes of action,” 

and by “the harm to its name and reputation.” However, 

Carnell’s declaration that it was injured failed to convey 

clearly that Carnell sought special damages with respect to 

those injuries as part of its contract claims. In particular, 

we credit the district court’s statement at the damages hearing 

that “it is beyond dispute that notice for these sums, for these 

costs, for these expenditures, was not given.” Accordingly, we 

affirm the district court’s judgment with respect to Carnell’s 

failure to plead special damages on its claims that it was 

unjustly removed from the project. 

IV.

In summary, we conclude that the district court correctly 

held that Carnell had standing to assert race discrimination 

claims against the Housing Authority, and that Blaine could not 

be held liable for the misconduct alleged in those claims. We 

further hold that the court’s decision to allow defense counsel 

to use the McGuireWoods proposal to impeach Scales was 

reversible error. Therefore, with respect to Carnell’s race 

discrimination and retaliation claims against the Housing 
45

Authority, we vacate the district court’s judgment and remand 

the case for a new trial.

We additionally hold that the district court properly 

restricted Carnell’s recovery on its contract claims by 

concluding that the VPPA limited damages on the claims for 

unpaid work, and that Carnell had failed to plead special

damages on its claims that it was unjustly removed from the 

project. However, we conclude that the VPPA further limited the 

scope of relief available on Carnell’s claims for unpaid work to 

the two claims raised in Carnell’s October 2008 letter. 

Accordingly, with regard to Carnell’s contract claims for unpaid 

work, we vacate the district court’s judgment and remand the 

case for a new trial on damages limited to the two claims raised 

in the October 2008 letter.

AFFIRMED IN PART, 

VACATED IN PART AND REMANDED,

VACATED IN PART AND FINAL JUDGMENT.
46

FLOYD, Circuit Judge, concurring in part and dissenting in part:

I join the majority’s well-reasoned opinion in its entirety 

except as to the three paragraphs of Part II.B pertaining to 

Blaine’s potential liability as a direct discriminatory actor. 

For the reasons that follow, I respectfully dissent on this 

issue and would remand the case for trial, or at a minimum, for 

additional briefing at the summary judgment stage.

As best I can glean from the record, Wasson is an 

individual who wears multiple hats: he is both the President of 

Danville Housing Corporation (DHC), Blaine’s managing member, 

and Executive Director of the Housing Authority. Despite these 

separate corporate designations, Wasson works out of the same 

office (e.g., same physical address, same telephone number, 

etc.) when he acts on behalf of both DHC and the Housing 

Authority. As Blaine’s managing member, DHC—and thus impliedly 

Wasson, in his role as DHC’s President—“ha[s] full, exclusive 

and complete charge of the management of the business of 

[Blaine]” pursuant to Blaine’s amended 2008 Operating Agreement. 

(J.A. 2445.) Additionally, it is undisputed that the Housing 

Authority’s Board of Commissioners is identical to DHC’s Board 

of Directors. In sum, the upper-level management personnel who 

wield decision-making power for both the Housing Authority and 

Blaine (by way of DHC) appear to be concentric, or at a minimum 

exhibit a substantial overlap.
47

As the majority opinion correctly notes, Blaine provides 

funding to the Housing Authority for the Project, and the 

Housing Authority, in turn, distributes those funds to the 

project contractors, including Carnell. Accordingly, pursuant 

to Blaine’s organizational structure and DHC’s ability to act 

unilaterally on Blaine’s behalf,1 distribution of funds to the 

Housing Authority is essentially controlled by DHC. Thus, even 

discounting in their entireties the letters that Wasson 

(allegedly erroneously) signed as Blaine’s President, see ante

at 21 n.6, Wasson appears to nevertheless control Blaine’s (and 

thus the Housing Authority’s, and thus Carnell’s) purse strings 

in a back-door fashion. To wit, in his dual roles as Executive 

Director of the Housing Authority and as President of DHC, 

Wasson is both puppet and puppeteer of the funding operation for 

the project.

Based on the aforementioned relationships, Blaine may be 

liable pursuant to a theory similar to (although perhaps not 

 1 Blaine’s amended Operating Agreement provides as follows:

[T]he Managing Member [DHC] is fully authorized, 

without the requirement of any act or signature of the 

other Members, to take any action of any type and to 

do anything and everything which a managing member of 

a limited liability company organized under the 

Uniform [Limited Liability Company] Act may be 

authorized to take or do thereunder . . . .”

(J.A. 2449 (emphasis added).)
48

exactly the same as) “cat’s paw” (or “rubber-stamp”) liability, 

which “impos[es] liability upon an employer for the 

discriminatory motivations of a supervisor, even though the 

supervisor did not formally take the adverse employment action.” 

Hill v. Lockheed Martin Logistics Mgmt., Inc., 354 F.3d 277, 288 

(4th Cir. 2004); see Smith v. Bray, 681 F.3d 888, 897 n.3 (7th 

Cir. 2012) (“In the law of employment discrimination, the ‘cat’s

paw’ theory can apply when a biased subordinate who lacks 

decision-making power uses the formal decision-maker as a dupe 

in a deliberate scheme to trigger a discriminatory employment 

action.” (citation omitted) (internal quotation marks omitted)).

Here, the cast of characters is as follows: Blaine (via DHC, and 

ultimately, Wasson) as the biased shell entity that lacks 

decision-making power to distribute funds to the project 

contractors, and the Housing Authority as the duped formal 

decision-maker that took the adverse employment actions (at 

least on paper) at Blaine’s behest. Although Carnell did not 

advance this precise theory relating to Blaine’s liability for 

direct discrimination, Carnell did put all of the pieces in 

place to connect these dots—namely, the massive overlap between 

Housing Authority personnel and DHC personnel and the fact that 

Wasson holds positions of authority within each entity. For 

example, in arguing that Blaine should be held directly liable, 

Carnell asserted that “money [for the project] was funneled 
49

through [the Housing Authority], but the funds originated with 

Blaine.” (Carnell Reply Br. at 29.)

In my view, we do not know from the record exactly which 

entity—the Housing Authority or Blaine (by way of DHC)—Wasson 

was acting on behalf of when he took certain actions adverse to 

Carnell, and it is simply too easy for Blaine to look the other 

direction and to rely exclusively upon Wasson’s self-serving 

deposition testimony that he was acting on behalf of the Housing 

Authority “at all times.”2 (E.g., Appellees’ Opening Br. at 32.) 

As the nonmovant in the summary judgment proceedings, it is not 

Carnell’s burden to show that Blaine acted in a discriminatory 

manner and, based on the foregoing relationships, I do not think 

that Blaine has met its own burden of “showing that there is an 

 2 Appellees, in their recitation of the facts in their

Opening/Response brief, state the following:

Under Section 14.2 of the Operating Agreement, 

Blaine’s members granted a limited power of attorney 

to the president of its managing member, DHC, to sign 

the Operating Agreement and certain other legal 

documents. Pursuant to the limited authority granted 

by the power of attorney, DHC’s president, Garry [sic] 

Wasson signed the Operating Agreement. The Operating

Agreement also contemplated [the Housing Authority]’s 

involvement in the Project as the developer, and so 

Wasson signed on behalf of [the Housing Authority] as 

its Executive Director.

(Appellees’ Opening Br. at 7 (emphasis added).) These actions

by Wasson, although facially insignificant, are exemplary of 

Wasson taking off his DHC (i.e., Blaine) hat and putting on his 

Housing Authority hat with little to no appreciation for the 

distinction between his dual roles at each entity.
50

absence of evidence to support [Carnell]’s case.” Kitchen v. 

Upshaw, 286 F.3d 179, 181 (4th Cir. 2002) (explaining the 

burden-shifting framework at summary judgment). To the same 

extent that we hold in this opinion that Carnell has an imputed 

racial identity (and thus standing to sue) based upon its 

president and members, it follows that a defendant company can 

likewise maintain an imputed racial bias based upon its 

membership. Although this analysis requires us to peel back an 

additional layer off of the Blaine onion than off of the Carnell 

onion—i.e., because Blaine has no individual employees or 

officers, we must instead look to the individual employees of 

Blaine’s managing member—all roads ultimately lead back to the 

same individuals, and particularly Gary Wasson. 

Although I do not think that there is sufficient evidence 

before us to reverse the district court’s grant of summary 

judgment to Blaine, I do think that the blurriness of Wasson’s 

multiple roles (and the overlap of other individuals, as well, 

namely the members of DHC’s Board and the Housing Authority’s 

Board, respectively) is an issue for a jury to consider at 

trial, or an issue that, at the least, warrants additional 

briefing and consideration at the summary judgment stage. 

Accordingly, I would vacate the district court’s grant of 

summary judgment to Blaine on Carnell’s theory of direct 
51

liability and respectfully dissent from the majority’s holding 

pertaining to the same.