Title: Virginia Power v. Westmoreland-LG&E Partners
Citation: N/A
Docket Number: 990489
State: Virginia
Issuer: Virginia Supreme Court
Date: March 3, 2000

Present:  Carrico, C.J., Compton,1 Lacy, Hassell, Keenan, 
Koontz, and Kinser, JJ. 
 
VIRGINIA ELECTRIC AND POWER COMPANY 
 
 
 
 
v.  Record No. 990489     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
March 3, 2000 
WESTMORELAND-LG&E PARTNERS 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
Theodore J. Markow, Judge 
 
 
The dispositive issue in this appeal is whether the trial 
court correctly limited parol evidence to the intent of the 
parties when executing a 1989 contract. 
 
In 1988, Virginia Electric and Power Company (Virginia 
Power) issued a request for proposals seeking independent 
power producers who would supply electric power to Virginia 
Power.  One responding company was Beckley Cogeneration 
Company (Beckley), a Delaware limited partnership.  On January 
24, 1989, Virginia Power and Beckley entered into a contract 
under which Beckley agreed to build a waste-coal burning plant 
in West Virginia and sell the electricity produced from that 
plant to Virginia Power pursuant to the terms of the contract.  
Beckley, however, abandoned the project and the partnership 
was dissolved. 
Westmoreland Energy, Inc., an affiliate of one of 
Beckley's former general partners, along with another company, 
                     
1 Justice Compton participated in the hearing and decision 
of this case prior to the effective date of his retirement on 
sought to continue the project by building the power plant in 
North Carolina, rather than in West Virginia, and using 
pulverized coal rather than waste coal to produce the 
electricity.  A general partnership, Westmoreland-LG&E 
Partners (WLP), was created to undertake the revised project.2  
A contract between Virginia Power and WLP was executed in 
March 1990, reflecting these changes in the project.  Another 
contract between WLP and Virginia Power was executed in 
November 1991, following WLP's request for amendments to the 
1990 contract.  The 1991 contract remains in effect. 
 
In 1994, WLP filed a motion for judgment against Virginia 
Power, alleging breach of the 1991 contract and seeking 
recovery of payments allegedly due WLP under that contract. 
The trial court held that the contract provisions in issue 
were unambiguous and entered summary judgment in favor of 
Virginia Power.  On appeal, this Court determined that the 
contract provisions were ambiguous and, therefore, the trial 
court erred in refusing to allow parol evidence to ascertain 
the intent of the parties.  The matter was remanded for 
further proceedings.  Westmoreland-LG&E Partners v. Virginia 
Power, 254 Va. 1, 486 S.E.2d 289 (1997)(Westmoreland I). 
                                                                
February 2, 2000. 
2 The partnership consisted of Westmoreland-Roanoke 
Valley, L.P. and Hadson Valley, L.P. 
 
2
 
Prior to trial on remand, WLP filed a motion seeking a 
determination that the parties' intent regarding the ambiguous 
provisions be determined as of the execution of the 1989 
contract.  WLP argued that this determination was required by 
the decision in Westmoreland I.  The trial court agreed and 
excluded parol evidence offered by Virginia Power concerning 
the parties' intent at the time of the 1990 and 1991 
contracts.  
Following a hearing, the trial court adopted the 
interpretation of the disputed provisions advanced by WLP and 
entered judgment in favor of WLP for approximately $19 million 
plus interest.  We awarded Virginia Power an appeal.  Because 
we conclude that the decision in Westmoreland I did not limit 
consideration of the parties' intent regarding the disputed 
sections to the intent existing in 1989, the judgment of the 
trial court will be reversed and the case remanded for further 
proceedings. 
 
The trial court's holding that the 1989 contract was the 
operative document for purposes of the parties' intent was 
based on the use of the 1989 contract in Westmoreland I to 
determine whether the provisions in issue were ambiguous.  The 
trial court concluded that the opinion in Westmoreland I 
"seems to say that what we're looking to determine is the 
 
3
intent of the parties in the negotiation and execution of the 
1989 document." 
The issue in Westmoreland I, however, was whether the 
trial court's holding that the provisions at issue were 
unambiguous was correct.  In reviewing that decision, it made 
no difference whether the 1989, 1990, or 1991 contract was 
considered, because the language of the relevant provisions 
was the same in all three contracts.  Westmoreland I, 254 Va. 
at 4 n. 1, 486 S.E.2d at 291 n. 1.  The reference to the 1989 
contract, therefore, was not material to the question of 
ambiguity under consideration in Westmoreland I.   
 
Furthermore, in considering another issue raised in that 
appeal, Westmoreland I referred to "§ 1.20," for the 
definition of "Forced Outage Day," which is a reference to the 
1991 contract.  Westmoreland I, 254 Va. at 5-6, 486 S.E.2d at 
291-92.  In the 1989 contract, that definition was contained 
in § 1.21. 
More importantly, nothing in Westmoreland I directed or 
limited consideration on remand to the 1989 contract.  The 
order remanding the case likewise did not restrict the 
proceedings on remand to the 1989 contract.  As explained in 
Nassif v. Board of Supervisors of Fairfax County, 231 Va. 472, 
481, 345 S.E.2d 520, 525 (1986), "[w]hen we limit issues on 
remand we do so with words of limitation or restriction."  In 
 
4
the absence of such limitations or restriction, the trial 
court was not limited to consideration of the 1989 contract on 
remand. 
WLP asserts, however, that the trial court's conclusion 
was correct for other reasons.  WLP asserts that, because it 
was a "constant" to all the contracts through affiliates and 
related partnerships and through its representative Charles 
Brown, consideration of the 1989 contract formation was 
proper.  WLP also argues that the 1991 contract was merely a 
reenactment and amendment of the prior contracts.  Therefore, 
WLP concludes, because the terms of the disputed provisions 
remained unchanged throughout, parol evidence was properly 
restricted to the parties' intent as to the meaning of those 
terms in 1989 when they were initially adopted. 
The trial court did not address these arguments because, 
as we have indicated, its decision was based solely on the 
restriction it believed was mandated by Westmoreland I.  
Furthermore, although Virginia Power disagrees with WLP's 
assertions and maintains that the 1991 contract was a novation 
of the prior contracts and not a reenactment of them, it does 
not seek to restrict parol evidence of the parties' intent to 
the 1991 contract.  The error of the trial court, according to 
Virginia Power, was that it did not allow admission of 
 
5
evidence relevant to the parties' intent in 1991 in addition 
to, not as a substitute for, evidence of that intent in 1989.  
WLP sought recovery for a breach of the 1991 contract.  
Even though the disputed provisions in the 1991 contract have 
language identical to that in the 1989 contract, identical 
provisions in successive contracts may or may not carry the 
same meaning in each instance.  See Galloway Corp. v. S.B. 
Ballard Constr., 250 Va. 493, 502-06, 464 S.E.2d 349, 355-57 
(1995).  This is particularly true under the circumstances of 
this case, where the provisions themselves are ambiguous and 
the project at issue changed in material respects.  Therefore, 
we conclude that the trial court erroneously limited parol 
evidence to the parties' intent at the time of the 1989 
contact.  
 
WLP also asserts that Virginia Power should be estopped 
from seeking to introduce evidence of the intent of the 1991 
contract.  WLP's position in this regard is that, in 
Westmoreland I, Virginia Power relied on events surrounding 
the execution of the 1989 contract in arguing that evidence of 
trade custom and usage was inadmissible to inform the meaning 
of the provisions at issue.  Therefore, according to WLP, in 
this proceeding Virginia Power should not be allowed to seek 
admission of evidence relating to any contract other than the 
1989 contract.   
 
6
WLP's argument overlooks the fact that in Westmoreland I, 
Virginia Power contended that the contract provisions were 
unambiguous and under those circumstances any meaning based on 
trade custom and usage attached in 1989 and remained 
unchanged.  Virginia Power, however, did not prevail in its 
contention that the provisions were unambiguous and on remand 
was required to treat the provisions as ambiguous and thus 
subject to clarification by parol evidence of the parties' 
intent.  Virginia Power's assertion on remand that evidence of 
the parties intent in 1991, as well as in 1989, should be 
admitted does not conflict with its earlier position that any 
unambiguous meaning of the provisions based on trade, custom, 
or usage arose in 1989.  Therefore, we reject WLP's estoppel 
arguments. 
In light of our conclusion that the trial court erred in 
limiting parol evidence of intent to the parties' intent in 
executing the 1989 contract, we will remand the case for 
further proceedings consistent with this opinion.  
Accordingly, we need not address the assignments of error and 
cross-error regarding Virginia Power's proffer of evidence and 
the trial court's interpretation of the disputed provisions.  
However, we will address Virginia Power's assertion that the 
trial court erred in holding that a draft letter was protected 
by the attorney-client privilege and, therefore, was not 
 
7
subject to discovery by Virginia Power, because the issue is 
likely to arise on remand.
The letter in question was prepared in December 1990, by 
James S. Brown, then Chief Financial Officer of Westmoreland 
Energy, to memorialize a conversation he had with John Mable 
of Virginia Power regarding Mable's understanding of Virginia 
Power's liability for capacity payments on days determined to 
be forced outage days.3  At that time, Brown and his 
counterpart at Hadson Power Systems, Lawrence Sawyer Folks, 
were preparing a financial prospectus of the cogeneration 
project for use in obtaining financing.  Prior to sending the 
letter to Mable, Brown sent the letter to Folks.  Folks 
apparently sent the letter to Charles Schwenck, in-house 
counsel to Hadson Power Systems.4  Brown testified that, when 
he wrote the letter, he intended to seek legal advice both on 
its content and whether it should be sent.  Schwenck conferred 
with Brown regarding the letter and it was discussed at a 
meeting of Brown, Folks, Schwenck, and Charles Brown, an 
official with Westmoreland Energy.  The draft letter was never 
sent to Mable.   
                     
 
 
3 The draft letter was reviewed by the trial court in 
camera and submitted under seal to this Court. 
4 The trial court stated in its opinion letter that Folks 
sent the letter to Schwenck, although the record also supports 
 
8
 
The attorney-client privilege does not attach to a 
document merely because a client delivers it to his attorney.  
However, the privilege does attach to a document prepared with 
the purpose of being sent to counsel for legal advice.  
Robertson v. Commonwealth, 181 Va. 520, 539-40, 25 S.E.2d 352, 
360 (1943).  The party seeking to assert the attorney-client 
privilege bears the burden of persuasion on the issue.  
Commonwealth v. Edwards, 235 Va. 499, 509, 370 S.E.2d 296, 301 
(1988).  
Although Brown testified that he drafted the letter with 
the intent of getting legal advice, Virginia Power asserts 
that the Brown letter was not entitled to the attorney-client 
privilege because it does not qualify as a document prepared 
for the purpose of obtaining legal advice.  Virginia Power 
apparently considers the privilege applicable only to a 
document which by its own terms conveys a request for legal 
advice.  Such an application of the privilege requirement is 
too narrow. 
The privilege attaches to a document even if the document 
does not contain, or is not accompanied by, a written request 
for legal advice, if the proponent of the privilege sustains 
its burden of proof to show that the document was prepared 
                                                                
the conclusion that Brown sent a copy of the letter to the 
attorney. 
 
9
with the intention of securing legal advice on its contents.  
Robertson, 181 Va. at 540, 25 S.E.2d at 360.  As we have said, 
the record in this case contains the testimony of Brown that 
when he drafted the letter he intended to get legal advice on 
its content and on whether he should deliver it to Mable. 
Virginia Power also argues that any privilege that may 
have attached to the draft letter was waived when the draft 
letter was sent to Folks and to in-house counsel for Hadson 
Power Systems.  We disagree.  
Communications between officers and employees of the same 
entity relayed to corporate counsel for the purpose of 
obtaining legal advice are entitled to the attorney-client 
privilege.  Owens-Corning Fiberglas Corp. v. Watson, 243 Va. 
128, 141, 413 S.E.2d 630, 638 (1992)(citing Upjohn Co. v. 
United States, 449 U.S. 383 (1981)).  Under the circumstances 
of this case, the relationship of Folks, Brown, and Schwenck 
is tantamount to that of employees of the same entity for 
purposes of the application of the privilege.  WLP is the 
entity asserting the privilege.  Folks and Brown are employed 
by parent corporations of the WLP partnership.5  Both Folks and 
Brown sought to secure legal advice regarding the letter.  The 
                     
5 Folks' direct employer, Hadson Power Systems, owns 
Hadson Power, Inc., which in turn owns Hadson Roanoke Valley 
L.P.  Brown's direct employer, Westmoreland Energy, Inc., owns 
 
10
Brown letter was prepared in connection with the business of 
WLP and, as the trial court acknowledged, "the respective 
companies were partners on the project sharing a common 
concern."  
Finally, Virginia Power argues that it is only seeking 
factual material, the contents of the letter, not the advice 
counsel gave to Brown and Folks concerning the letter.  
However, the substance of the letter in this case constitutes 
the very matter for which legal advice was sought.  There is 
no "factual material" apart from the substance of the letter 
itself.  
The record in this case does not support Virginia Power's 
assertion that the draft letter was "created, exchanged or 
discussed" outside of the attorney-client relationship. 
Rather, the record shows that the letter was created, 
exchanged and discussed within the perimeters of WLP, the 
party seeking to assert the privilege, with the expectation 
that legal advice would be secured prior to finalization and 
transmission of the letter.  Considering this record, we 
conclude that the trial court did not err in its conclusion 
that WLP met its burden of producing evidence to show that the 
draft letter was entitled to the protection of the attorney-
                                                                
90% of Westmoreland-Roanoke Valley, L.P., which along with 
Hadson Roanoke Valley, L.P., comprise WLP. 
 
11
client privilege and not subject to discovery by Virginia 
Power. 
For the reasons stated, we will reverse the judgment of 
the trial court and remand the case for further proceedings 
consistent with this opinion.  
Reversed and remanded.
 
12