Title: 21st Century Sys. v. Perot Sys. Gov't Servs., Inc.
Citation: N/A
Docket Number: 110114
State: Virginia
Issuer: Virginia Supreme Court
Date: June 7, 2012

Present:  All the Justices 
 
21ST CENTURY SYSTEMS, INC., ET AL. 
 
 
 
 
 
 
 
 OPINION BY 
v.  Record No. 110114 
 
JUSTICE DONALD W. LEMONS 
 
 
 
 
 
 
 
June 7, 2012 
 
PEROT SYSTEMS GOVERNMENT SERVICES, INC. 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Leslie M. Alden, Judge 
Among the several issues we address in this appeal is 
whether the Circuit Court of Fairfax County ("trial court") 
erred when, upon a jury's verdict, it awarded Perot Systems 
Government Services, Inc. ("Perot") damages for lost goodwill  
and other theories against 21st Century Systems, Inc. 
("21CSI"), James C. Ballard ("Ballard"), Charles L. Hopkins, 
III ("Hopkins"), Charles S. Dellinger ("Dellinger"), and Joseph 
Fallone ("Fallone") (collectively, the "Defendants"). 
I. Facts and Proceedings Below 
 
In August 2009, Perot filed an amended complaint in the 
trial court against the Defendants.1  Specifically, Perot's ten-
count complaint alleged:  
                     
 
1 Perot filed its original complaint in June 2009 and, in 
addition to those named above, the original complaint named 
Gerald F. Hesch ("Hesch"), Patrona Corporation ("Patrona"), and 
Joseph C. Novak ("Novak") as defendants.  Perot subsequently 
sought and was granted a nonsuit as to Hesch.  The amended 
complaint also named Patrona and Novak as defendants; however, 
Perot subsequently stipulated, and the trial court ordered, 
that the claims against these two defendants be dismissed with 
prejudice. 
2 
 
Count I  - breach of fiduciary duty against  
 
 
Dellinger and Fallone;  
 
Count II  - aiding and abetting breach of  
 
 
 
fiduciary duty against 21CSI, Ballard,  
 
 
Hopkins, Patrona, and Novak;  
 
Count III - breach of non-disclosure agreement  
 
 
against Dellinger and Fallone;  
 
Count IV  - breach of non-competition and non- 
 
 
solicitation agreements against  
 
 
 
Fallone;  
 
Count V  - tortious interference with contract  
 
 
against 21CSI, Ballard, Hopkins,   
 
 
Patrona, and Novak;  
 
Count VI  - violations of the Virginia Computer  
 
 
Crimes Act, Code § 18.2-152.1 et seq.,  
 
 
against Dellinger and Fallone;  
 
Count VII - violation of Virginia's Conspiracy  
 
 
Act, Code § 18.2-499 et seq., against  
 
 
the Defendants;  
 
Count VIII - common law conspiracy to injure  
 
 
against the Defendants;  
 
Count IX  - violation of Virginia's Uniform Trade 
 
 
Secret Act, Code § 59.1-336 et seq.,  
 
 
against the Defendants; and  
 
Count X  - conversion against the Defendants.   
 
Perot alleged that the Defendants, including the 
individual defendants, all of whom were former Perot employees, 
conspired for the purpose of "willful[ly] and malicious[ly] 
attempt[ing] to destroy [Perot] and steal away tens of millions 
of dollars a year of [Perot] business by unfairly and 
improperly using [Perot's] confidential and proprietary 
3 
 
information" so that 21CSI could establish itself in the United 
States Navy consulting business.  Among other things, Perot 
sought damages to compensate for the loss of revenue and 
profits associated with the business misappropriated by the 
Defendants, damages to compensate for a forensic investigation 
to determine the extent to which Perot's confidential files and 
trade secrets had been compromised, and damages for the loss of 
goodwill.  Specifically, Perot sought $10 million in 
"compensatory, incidental and other actual damages" on all ten 
counts, with that figure being trebled to $30 million on 
Perot's statutory business conspiracy claim (Count VII), and 
$350,000 in punitive damages against the Defendants on all but 
Counts VI and VII.2 
Prior to trial, the Defendants moved to strike the 
testimony of Perot's designated expert, Michael A. Smigocki 
("Smigocki"), arguing that "Smigocki's opinions concern matters 
within the ordinary knowledge of the jury and therefore do not 
assist the jury's understanding of the facts, and the rest are 
admittedly so speculative and uncertain that the amount [of 
damages] cannot be proved with a reasonable degree of 
certainty."  Significantly, Perot and its parent corporation, 
Perot Systems Corp. ("PSC"), had been sold to Dell, Inc. 
                     
2 Perot also sought an award of pre-judgment interest on 
all ten counts, as well as an award of $3 million in attorneys' 
fees and costs on Counts VI, VII, and IX. 
4 
 
("Dell") in the fall of 2009, shortly before Smigocki was 
called upon to analyze Perot's value and goodwill and several 
months after Perot filed suit in this case.  In support of 
their motion to strike Smigocki's testimony, the Defendants 
argued that "Smigocki admitted that he does not know whether 
Dell . . . considered the alleged conduct in its goodwill 
calculation at the time it purchased [Perot (several] months 
after the suit was filed)."  Accordingly, the Defendants 
argued, Smigocki's opinions "are by definition the types of 
speculative and uncertain damages opinions that Virginia law 
and public policy preclude."  The trial court denied the 
Defendants' motion. 
At trial, Smigocki, a certified public accountant and 
certified valuation analyst, testified for Perot as an expert 
witness in the fields of "lost profit calculations and goodwill 
valuation, particularly in the government contracting 
industry."  Smigocki testified that, of the several types of 
economic damage suffered by Perot as a result of the 
Defendants' actions, the largest amount of damages results from 
lost goodwill.  Smigocki defined goodwill as "the difference 
between the fair market value of the company, minus the fair 
market value of its identifiable assets." 
Smigocki testified that the starting point for developing 
a goodwill calculation is to determine the fair market value of 
5 
 
a company.  Smigocki further testified that in conducting the 
market value method, in which comparable sales of publicly 
traded companies are used to approximate the value of a 
particular company, he would typically look for sales of 
companies comparable to Perot.  He stated that was not required 
in this case, however, because PSC had actually been sold to 
Dell, establishing an actual value of the company and 
eliminating the need to approximate its value based upon 
comparable sales. 
Accordingly, to estimate the goodwill lost as a result of 
the Defendants' actions, Smigocki examined the actual sale of 
PSC to Dell in the fall of 2009.  Smigocki subtracted the value 
of PSC's assets, $1.551 billion, from its sales price, $3.878 
billion, to determine the goodwill associated with its sale.  
Smigocki concluded that PSC's total goodwill was $2.327 
billion.  Smigocki then determined that, of that $2.327 billion 
in total goodwill, Dell had assigned about $1.6 billion in 
goodwill to Perot.  All of these figures were reported by Dell 
in publically available sworn statements submitted to the 
Securities and Exchange Commission.  
Smigocki then "spread that goodwill over the contracts of 
[Perot]," by taking Perot's total annualized revenue, $627 
million, and developing "a ratio of that number against the 
total goodwill number of [$]1.6 billion."  Taking Perot's $1.6 
6 
 
billion total goodwill, Smigocki concluded that, "for every 
dollar of revenue that [Perot] had," his calculation 
demonstrated "that there was $2.57 of goodwill." 
Smigocki testified that, based upon the departed 
employees' billing rates, Perot lost approximately $1.45 
million in revenue "that had gone over to 21CSI as a result of 
these individuals leaving."  Multiplying this lost revenue by 
the 2.57 ratio described above, Smigocki valued Perot's lost 
goodwill at $3,742,843.  Smigocki also testified that Perot 
suffered $64,598 in lost profits as a result of the individual 
defendants' departure, based upon the revenues that the former 
employee's labor would have generated.  However, he testified 
that these damages were included in his estimate of lost 
goodwill. 
The Defendants again moved to strike Smigocki's testimony 
at the close of Perot's case-in-chief and at the close of all 
the evidence, incorporating all of their previous arguments, 
and arguing that Smigocki's opinion regarding Perot's goodwill 
was "founded on assumptions that have an insufficient factual 
basis."  The trial court denied the Defendants' motions. 
Bruce G. Dubinsky ("Dubinsky"), a certified public 
accountant and certified valuation analyst, testified briefly 
for the Defendants at trial as an expert "in commercial 
damages, business valuations, and general accounting matters 
7 
 
for corporations."  Dubinsky's testimony was offered to 
demonstrate that Smigocki's opinions regarding damages, 
particularly lost goodwill damages, are "highly speculative, 
flawed and unreliable."  The Defendants sought to elicit 
testimony from Dubinsky related to: (1) the "discounted cash 
flow method" of valuing goodwill; (2) the problem with 
Smigocki's "attempt to try to quantify the loss of goodwill 
related to a customer relationship"; (3) certain "allowable 
costs"; and (4) an "expected productive hours calculation" 
relating to certain of Smigocki's damages testimony.  Perot 
objected to such testimony, however, citing John Crane, Inc. v. 
Jones, 274 Va. 581, 591-92, 650 S.E.2d 851, 856 (2007), and 
arguing that Dubinsky's pretrial expert report did not disclose 
any opinion as to these various topics.  The trial court 
sustained Perot's objections. 
The jury returned a verdict in favor of Perot on all 
claims, and awarded Perot:  
Count I  - $217,800 in compensatory damages and  
 
 
$217,800 in punitive damages against  
 
 
both Dellinger and Fallone;  
 
Count II  - $64,598 in compensatory damages and  
 
 
$64,598 in punitive damages against  
 
 
21CSI, and $32,299 in compensatory  
 
 
damages and $32,299 in punitive damages 
 
 
against both Ballard and Hopkins;  
 
Count III - $217,800 in compensatory damages  
 
 
against both Dellinger and Fallone;  
 
8 
 
Count IV  - $16,916 in compensatory damages   
 
 
against Fallone;  
 
Count V  - $64,598 in compensatory damages and  
 
 
$64,598 in punitive damages against  
 
 
21CSI, and $32,299 in compensatory  
 
 
damages and $32,299 in punitive damages 
 
 
against both Ballard and Hopkins;  
 
Count VI  - $217,800 in compensatory damages and  
 
 
$217,800 in punitive damages against  
 
 
both Dellinger and Fallone;  
 
Count VII - $4,113,845 in compensatory damages,  
 
 
trebled to $12,341,535, against the  
 
 
Defendants;  
 
Count VIII - $4,113,845 in compensatory damages  
 
 
and $12,341,535 in punitive damages  
 
 
against the Defendants;  
 
Count IX  - $4,113,845 in compensatory damages  
 
 
and $4,113,845 in punitive damages  
 
 
against 21CSI, and $1,028,461 in   
 
 
compensatory damages and $1,028,461 in  
 
 
punitive damages against each of the  
 
 
individual defendants; and  
 
Count X  - $12,920 in compensatory damages and  
 
 
$25,840 in punitive damages against  
 
 
each of the Defendants.  
 
Following the jury's verdict, the Defendants moved to "Set 
Aside the Verdicts and Strike the Counts or, in the 
alternative, for Mistrial or Remitt[it]ur," arguing that Perot 
"failed to prove its damages by using a proper method or 
factual foundation," the "jury's verdict form calculations show 
duplicative recovery," and the "duplicative damages must be 
eliminated, goodwill damages struck, and [certain other] 
damages reduced such that they reflect damages actually 
9 
 
incurred by Perot as a result of Defendants' conduct."  The 
trial court denied the Defendants' motion to set aside the 
verdict but it granted the Defendants' motion for remittitur, 
in part, and struck the duplicative awards of damages by the 
jury. 
The trial court awarded Perot: (1) $16,916 on Perot's 
breach of non-competition and non-solicitation agreements claim 
(Count IV) against Fallone; (2) $4,113,845 in compensatory 
damages (consisting of $3,742,843 in lost goodwill damages and 
$371,002 in computer forensics damages), trebled to 
$12,341,535, jointly and severally, against the Defendants on 
Perot's statutory business conspiracy claim (Count VII); and 
(3) $350,000 in punitive damages against each of the defendants 
on Perot's trade secrets claim (Count IX).  The trial court 
also awarded Perot $547,541.27 in attorneys' fees in connection 
with Perot's statutory business conspiracy claim (Count VII), 
and $861,336.29 in attorneys' fees in connection with Perot's 
trade secrets claim (Count IX). 
The Defendants timely filed their notice of appeal, and we 
granted an appeal on the following assignments of error:   
1. 
The trial court committed error when it abused its 
discretion and permitted Plaintiff's expert witness 
to give opinion testimony based on a model of 
goodwill damages that was unprecedented in Virginia 
and that was unsupported by the evidence. 
 
10 
 
2. 
The trial court committed error when it abused its 
discretion and it failed to permit Defendants' expert 
to present rebuttal testimony on the model of 
goodwill damages that was unprecedented in Virginia 
and that was unsupported by the evidence. 
 
3. 
The trial court committed error when it failed to set 
aside the damages based upon the model of goodwill 
damages that was unprecedented in Virginia and that 
was unsupported by the evidence, even if viewed in 
the light most favorable to Plaintiff. 
 
4.  The trial court committed error when it failed to set 
aside the jury verdict awarding duplicative trebled 
and punitive damages. 
 
5.  The trial court committed error when it failed to set 
aside damages that were costs of litigation. 
 
II. Analysis 
A. Standard of Review 
 
"Generally, [this Court] review[s] a trial court's 
decision to admit or exclude evidence using an abuse of 
discretion standard and, on appeal, will not disturb a trial 
court's decision to admit evidence absent a finding of abuse of 
that discretion."  Avent v. Commonwealth, 279 Va. 175, 197, 688 
S.E.2d 244, 256 (2010) (quoting John Crane, Inc., 274 Va. at 
590, 650 S.E.2d at 855).  Additionally, "[w]here the trial 
court has declined to strike the plaintiff's evidence or to set 
aside a jury verdict, the standard of appellate review in 
Virginia requires this Court to consider whether the evidence 
presented, taken in the light most favorable to the plaintiff, 
was sufficient to support the jury verdict in favor of the 
11 
 
plaintiff."  Sunrise Continuing Care, LLC v. Wright, 277 Va. 
148, 154, 671 S.E.2d 132, 135 (2009) (quoting Bitar v. Rahman, 
272 Va. 130, 141, 630 S.E.2d 319, 325-26 (2006)). 
A trial court is authorized to set aside a 
jury verdict only if it is plainly wrong or 
without credible evidence to support it.  This 
authority is explicit and narrowly defined.  
 
Trial court judges must accord the jury 
verdict the utmost deference.  If there is a 
conflict in the testimony on a material point, or 
if reasonable people could differ in their 
conclusions of fact to be drawn from the 
evidence, or if the conclusion is dependent on 
the weight to be given to the testimony, the 
trial court may not substitute its conclusion for 
that of the jury merely because the judge 
disagrees with the result.  
 
 
. . . In reviewing the evidence, we will 
accord the recipient of the verdict the 
benefit of all substantial conflicts of evidence, 
and all fair inferences that may be drawn from 
the evidence.  
 
Bussey v. E.S.C. Rests., Inc., 270 Va. 531, 534-35, 620 S.E.2d 
764, 766 (2005) (citations omitted). 
B. "Goodwill" Damages and Sufficiency of Evidence of Damages 
 
On appeal, the Defendants argue that the trial court erred 
both when it allowed Smigocki "to give opinion testimony based 
on a model of goodwill damages that was unprecedented in 
Virginia and that was unsupported by the evidence" and when it 
"fail[ed] to strike Mr. Smigocki's goodwill damages and damages 
calculations because such calculations were clearly unable to 
support the jury's verdict." 
12 
 
 
To the contrary, Perot argues that "Smigocki's calculation 
of lost goodwill damages mirrored that upheld by this Court in 
Advanced Marine [Enters. v. PRC Inc., 256 Va. 106, 501 S.E.2d 
148 (1998)]."  Accordingly, Perot argues that, in light of our 
opinion in Advanced Marine, the trial court properly admitted 
Smigocki's testimony regarding lost goodwill damages and 
properly refused "to strike the evidence concerning Perot's 
damages in the form of lost goodwill."  We disagree with Perot. 
 
Any entity injured as the result of a conspiracy to injure 
its business may recover the damages sustained because of that 
conspiracy.  See Code § 18.2-500.  Damages for loss of goodwill 
may be recovered if proven.  We have previously stated that 
goodwill "is one of those intangible assets of an established 
business difficult to describe and impossible of valuing with 
mathematical precision, but . . . of very real existence and of 
substantial value."  Wood v. Pender-Doxey Grocery Co., 151 Va. 
706, 712, 144 S.E. 635, 637 (1928).  Significantly, however, we 
have also recognized that, "[i]t is obvious that its value in a 
given case, would be of no great assistance in assessing it in 
other cases where the facts and circumstances were dissimilar."  
Id. 
 
In affirming an award of damages for lost goodwill as the 
result of a conspiracy to damage a business, we have recognized 
that "the market value approach [is] a frequently-used method 
13 
 
for computing goodwill damages [and goodwill] is based on the 
difference between the price a business would sell for and the 
value of its non-goodwill assets."  Advanced Marine, 256 Va. at 
120, 127, 501 S.E.2d at 156, 160.  In Advanced Marine, the 
plaintiff's expert witness testified that the plaintiff company 
suffered lost goodwill damages as a result of the departure of 
its employees to the defendant company and defined "goodwill as 
the excess of the sales price of a business over the fair 
market value of the business' identifiable assets."  Id. at 
114, 501 S.E.2d at 153.  The facts of this case are 
distinguishable, however, from those in Advanced Marine and, 
accordingly, our decision in Advanced Marine is not controlling 
here. 
 
In Advanced Marine, the plaintiff company announced it 
would be sold to another company sixteen days before the 
relevant employees resigned.  Id. at 111, 113, 501 S.E.2d at 
151-52.  Advanced Marine made secret job offers to every member 
of the plaintiff company’s marine engineering department, 
coordinated their simultaneous immediate resignations, and had 
those employees transfer confidential and proprietary 
information in an attempt to secure all marine engineering 
business done by the plaintiff company.  See id.  The record 
further demonstrated that the sale of the plaintiff company was 
completed between the time when the employees resigned and the 
14 
 
time when the chancellor decided that case.  See id. at 121, 
501 S.E.2d at 157 (stating that "the record shows that the 
price for the sale of [the plaintiff company] did not change 
after the departure of the [relevant] employees").  However, 
unlike this case, the expert witness in Advanced Marine did not 
look to the sale of the plaintiff company to determine its lost 
goodwill damages; rather, the expert witness analogized the 
improperly taken business to the sale of that business and 
"utilized a variation of [the market value] approach by 
determining the value of goodwill associated with comparable 
sales [of businesses] and adjusting [those] figure[s] to 
approximate [the plaintiff company's] lost goodwill caused by 
the departure of the [relevant] employees."  Id. at 120, 501 
S.E.2d at 156.   
 
Specifically, "[t]o estimate the lost goodwill associated 
with the departure of the [plaintiff company's employees, the 
expert witness] examined two sales of comparable businesses."  
Id. at 114, 501 S.E.2d at 153.  The expert witness then 
"subtracted the value of each 'comparable company's' assets 
from its sales price to determine the goodwill associated with 
each comparable sale."  Id.  To adjust the loss of goodwill in 
the comparable sales to account for the differing numbers of 
employees involved, the expert witness then "apportioned the 
estimated goodwill figure for each of the two comparable 
15 
 
businesses among the total number of employees involved in each 
transaction."3  Id. at 115, 501 S.E.2d at 153.  "This 
calculation yielded a ratio or percentage that [the expert 
witness] applied to calculate the goodwill lost by [the 
defendant company's] acquisition of the [plaintiff company's] 
employees."  Id. 
 
Relying upon the comparable prior sale of part of the 
plaintiff's own business and another comparable sale as an 
appropriate and accurate measure of the plaintiff company's 
lost goodwill, the chancellor accepted the plaintiff's expert 
witness' methodology for calculation of goodwill damages and 
awarded the plaintiff damages.  Id. at 120-21, 501 S.E.2d at 
156-57.  The defendant company in Advanced Marine argued that 
the chancellor "failed to consider that . . . the price for the 
sale of [the plaintiff company] did not change after the 
departure of the [relevant] employees."  Id. at 120, 501 S.E.2d 
at 156.  Significantly, however, we affirmed the award of lost 
goodwill damages stating that, "[a]lthough the record shows 
that the price for the sale of [the plaintiff company] did not 
change after the departure of the [relevant] employees, [the 
expert witness] emphasized that the departing group [of 
employees] had goodwill value for purposes of maintaining the 
                     
3 The methodology used was not objected to, although the 
opposing party objected to the expert’s calculations. 
16 
 
customer relationships necessary for contract retention."  Id. 
at 121, 127, 501 S.E.2d at 157, 160 (emphasis added).  Smigocki 
provided no such testimony in this case.  (App. 365-405, 646-
47; 6/17/10 T. 1059-1127.) 
 
Additionally, unlike the expert in Advanced Marine, who 
determined the value of the plaintiff company's lost goodwill 
by  considering the comparable sale of part of the plaintiff's 
own business, 256 Va. at 114-15, 120, 501 S.E.2d at 153, 156, 
Smigocki looked directly to PSC's subsequent sale price and the 
value of its identifiable assets to determine Perot's goodwill 
lost as a result of the conspiracy.  Specifically, Smigocki 
valuated Perot's goodwill by using figures reported by Dell to 
the SEC following its purchase of PSC, namely: (1) the actual 
sale price of PSC to Dell, $3.878 billion, which sale occurred 
during the pendency of this litigation and several months after 
Dellinger and Fallone left Perot; (2) the value of PSC's 
identifiable assets, $1.551 billion; and (3) Dell's valuation 
of the goodwill attributable to Perot as PSC's public sector, 
$1.613 billion. 
Because Smigocki and, by extension, Perot relied on PSC's 
actual subsequent sale to Dell, rather than a comparable sale, 
Perot was required to demonstrate that its sale price to Dell 
reflected an actual loss of goodwill as a result of the 
conspiracy.  It failed to do so. 
17 
 
 
The evidence at trial demonstrated that Dellinger left 
Perot on June 5, 2009, and Fallone left Perot on June 10, 2009.  
Further evidence demonstrated that Dell's purchase of PSC and 
Perot was completed in November of 2009.  Significantly, 
however, Perot introduced no evidence at trial demonstrating a 
diminution in value of either PSC's fair market value or 
identifiable assets during the relevant time period.  Nor did 
Perot introduce any evidence demonstrating that the sale price 
of PSC to Dell was affected, negatively or otherwise, by the 
Defendants' actions in this case.  As a result, Perot 
introduced no evidence demonstrating a diminution in value of 
its goodwill. 
 
To the contrary, the evidence introduced at trial 
demonstrated that Dell purchased PSC at a significant premium 
several months after the Defendants' alleged wrongful conduct.  
Specifically, Smigocki testified that PSC was a publicly traded 
company "selling for about $17, $18 a share at the time" Dell 
purchased PSC, and that Dell purchased PSC for "$30 a share.  
It was about a 68 percent premium that had been paid over and 
above what the general marketplace was saying was the value of 
the company."  Perot introduced no evidence at trial explaining 
how or why Dell decided upon that particular premium.  In fact, 
Smigocki admitted at trial that he had asked to see Dell's 
analysis concerning the allegations in this case because that 
18 
 
analysis would provide Dell's perspective on "why . . . there 
[was] such a premium that was paid for Perot," but that Dell 
did not make that analysis available to him.  Accordingly, 
without any evidence demonstrating that the departing employees 
had goodwill value with regard to the customer relationships 
necessary to retain contracts and that PSC's actual sale price 
to Dell was affected in any way by the Defendants' actions in 
this case, Perot cannot demonstrate that it actually lost any 
goodwill. 
 
We hold that Perot's evidence, which lacked comparable 
sales information, was insufficient, as a matter of law, to 
support an award of lost goodwill damages because of the 
conspiracy, and we hold that the trial court: (1) abused its 
discretion when it denied the defense motions to strike 
Smigocki's testimony regarding his theory of lost goodwill 
damages; and (2) erred when it refused to set aside the award 
of damages relating to Perot's lost goodwill. 
C. Punitive and Treble Damages 
 
The Defendants argue that the awards entered in favor of 
Perot for trebled and punitive damages "represent an 
impermissible double recovery" because, in Virginia, "trebled 
damages are punitive."  We disagree. 
 
We have previously held that a trial court may award both 
punitive and treble damages when the awards are "based on 
19 
 
separate claims involving different legal duties and injuries."  
Advanced Marine, 256 Va. at 124-25, 501 S.E.2d at 159.  
Awarding punitive and treble damages in such circumstances 
would not be duplicative.  See id. 
 
In this case, the awards of punitive and treble damages 
were based on separate claims involving different legal duties 
and injuries.  Specifically, the trial court stated:   
I conclude that the jury determined that all five 
defendants were liable for the elements of the 
claim under the trade secret[s] act claim [Count 
IX] and the [business] conspiracy claim [Count 
VII].  And while the plaintiff can recover the 
compensatory damages only once, the plaintiff is 
entitled to treble those damages under the 
[business] conspiracy claim and to recover 
punitive damages under the trade secret claim to 
a maximum of the cap. 
 
(Emphasis added.)  Accordingly, the trial court found that 
Perot was "entitled to $12,341,535 against each of the 
defendants, which is the statutory conspiracy award having been 
trebled . . . and then $350,000 in punitive damages against 
each of the defendants." 
 
To prevail in its business conspiracy claim, Perot was 
required to prove that two or more persons "combine[d], 
associate[d], agree[d], mutually undert[ook] or concert[ed] 
together for the purpose of . . . willfully and maliciously 
injuring another in his reputation, trade, business or 
profession by any means whatever."  Code § 18.2-499(A).  In 
20 
 
contrast, Perot's claim asserting violation of Virginia's 
Uniform Trade Secret Act does not require such proof and 
relates solely to the misappropriation of trade secrets.  See 
Code § 59.1-336 et seq.  Accordingly, we hold that the award of 
both punitive and treble damages in favor of Perot does not 
constitute an impermissible double recovery. 
 
We have previously observed that "[i]t is well-established 
that 'an award of compensatory damages . . . is an 
indispensable predicate for an award of punitive damages, 
except in actions for libel and slander.' " Syed v. ZH Techs., 
Inc., 280 Va. 58, 74-75, 694 S.E.2d 625, 634 (2010) (quoting 
Gasque v. Mooers Motor Car Co., 227 Va. 154, 159, 313 S.E.2d 
384, 388 (1984)).  While the trial court struck the jury's 
award of compensatory damages related to Perot's trade secrets 
claim, it did not do so because such damages were unjustified.  
Rather, the trial court struck those damages as duplicative of 
other damages awards.  Accordingly, the trial court's award of 
punitive damages in connection with Perot's trade secrets claim 
was not improper. 
D. Computer Forensics Damages 
 
The Defendants argue that Perot was not entitled to 
recover as damages fees it paid to Stroz Friedberg, LLC ("Stroz 
Friedberg"), a computer forensics firm, to conduct a forensics 
investigation because such fees were "costs Perot incurred 
21 
 
litigating this case."  Accordingly, the Defendants argue that 
"[t]he trial court committed error when it failed to set aside 
damages that were costs of litigation."  We disagree. 
 
At trial, Perot's president, Eugene V. Carrick 
("Carrick"), testified that the almost simultaneous departures 
of a number of Perot executives was "[v]ery much out of the 
ordinary," and, as a result, Carrick "asked [his] team to just 
make sure that we're not going to lose any proprietary 
information."  It was subsequently discovered that certain 
individuals, including defendants Dellinger and Fallone, were 
"exporting or taking large numbers of files off of [Perot's] 
system and copying them off on to other devices."  Carrick 
specifically testified that because of the discoveries that "a 
number of key people," including defendants Dellinger and 
Fallone, "were taking a lot of information and it was happening 
right after the day of the resign[ations]" and because Perot 
employee e-mails revealed that employees were "working together 
and corroborating" to leave Perot, Perot hired Stroz Friedberg 
to help Perot "figure out what exactly [was] going on." 
Shannon Perkins ("Perkins"), a computer forensic examiner 
for Stroz Friedberg, testified for Perot as an expert in 
computer forensic analysis.  Specifically, Perkins testified 
that Dellinger copied thousands of files from his desktop 
computer at Perot to external hard drives and that numerous 
22 
 
files with names matching the files from the desktop computer 
at Perot were later found to have been copied to his computer 
at 21CSI shortly after leaving Perot's employ.  Perkins further 
testified that, just as Dellinger had done, Fallone copied 
hundreds of files from his computer at Perot to an external 
drive. 
 
In addition to the testimony described above, the trial 
court admitted into evidence Stroz Friedberg's highly detailed 
invoices, totaling $371,002, related to the computer forensics 
investigation it conducted on Perot's behalf.  Significantly, 
the Defendants did not object to the admission of Stroz 
Friedberg's invoices into evidence when they were offered.  The 
Defendants argued to the trial court that the fees paid to 
Stroz Friedberg were costs of litigation as opposed to damages 
after the case had been submitted to the jury. 
 
Moreover, the Defendants offered no evidence that would 
allow the jury to appropriately discount or apportion the 
damages related to computer forensics in the Defendants' favor; 
rather, the Defendants merely elicited testimony upon cross-
examination that Stroz Friedberg "provided services in 
connection with this litigation," that "that work was located 
in the [invoices admitted into evidence]," and that Perot did 
not "separate those amounts in [their] calculations."  "In the 
absence of such evidence, the [jury] as the trier of fact would 
23 
 
have been required to resort to speculation and conjecture in 
order to find that [Perot's computer forensics damages 
calculation] was not the appropriate remedy."  Nichols Constr. 
Corp. v. Virginia Mach. Tool Co., 276 Va. 81, 91, 661 S.E.2d 
467, 473 (2008) (affirming an award where the defendant failed 
to provide the fact finder with the evidence necessary to 
calculate a discount in its favor).  The question of damages 
was submitted to the jury upon proper instructions, which are 
not challenged in this appeal, and the jury decided what 
damages to award Perot. 
 
Accordingly, we hold that the evidence at trial was 
sufficient to demonstrate that the Defendants' actions caused 
Perot to initiate the computer forensics investigation and that 
the trial court did not err when it refused to set aside the 
jury's award of $371,002 in computer forensics damages in favor 
of Perot. 
III. Conclusion 
We hold that: (1) the trial court abused its discretion 
when it denied the defense motions to strike Smigocki's 
testimony regarding lost goodwill damages and, accordingly, the 
trial court erred when it refused to set aside the jury's award 
of lost goodwill damages based upon Smigocki's testimony; (2) 
the trial court did not err when it refused to set aside the 
jury's award of both punitive and treble damages in favor of 
24 
 
Perot; and (3) the trial court did not err when it refused to 
set aside the jury's award of computer forensics damages. 
As recited above, the jury awarded Perot damages for each 
of the ten counts Perot alleged in its complaint, and the trial 
court subsequently struck the jury's awards of damages for all 
but Counts IV, VII, and IX.  The trial court also struck the 
jury's award of compensatory damages related to Perot's trade 
secrets claim (Count IX) but awarded Perot $350,000 in punitive 
damages against each of the defendants on that claim.  Counts 
I, II, III, IV, V, VI, VIII, and X are not the subject of an 
assignment of error and are not before us on appeal. 
Accordingly, with regard to Count VII, Perot's statutory 
business conspiracy claim, we will reverse the trial court's 
award of $3,742,843 in lost goodwill damages, trebled to 
$11,228,529, and affirm the trial court's award of $371,002 in 
computer forensics damages, trebled to $1,113,006, jointly and 
severally against the Defendants. 
With regard to Count IX, Perot's trade secrets claim, we 
will affirm the trial court's award of $350,000 in punitive 
damages against each of the defendants. 
Additionally, the trial court awarded Perot $547,541.27 in 
attorneys' fees in connection with Perot's statutory business 
conspiracy claim (Count VII), jointly and severally against the 
Defendants, predicated upon an award of $12,341,535 
25 
 
representing lost goodwill and computer forensics damages.  
However, because that award has been extensively modified, we 
will remand to the trial court for a reconsideration of the 
award of attorneys' fees relating to Perot's statutory business 
conspiracy claim, consistent with this opinion.4    
Accordingly, we will affirm in part and reverse in part 
the judgment of the trial court, and we will remand for further 
proceedings and for entry of a final judgment order consistent 
with this opinion. 
 
 
 
 
 
 
 
 
 
Affirmed in part, 
 
 
 
 
 
 
 
 
 
reversed in part, 
 
 
 
 
 
 
 
 
 
and remanded. 
                     
4 The trial court also awarded Perot $861,336.29 in 
attorneys' fees in connection with Perot's trade secrets claim 
(Count IX); however, because the awards related to Perot's 
trade secrets claim have not been modified, and because the 
Defendants did not assign error to the trial court's awards of 
attorneys' fees, the award of attorneys' fees relating to 
Perot's trade secrets claim will stand. 
 
 
JUSTICE McCLANAHAN, concurring in part and dissenting in part, 
in which JUSTICE POWELL joins in part. 
 
 
This case is not distinguishable from Advanced Marine 
Enters., Inc. v. PRC Inc., 256 Va. 106, 501 S.E.2d 148 (1998), 
as precedent for Smigocki's calculation of Perot's damages in 
the form of diminished goodwill.  The majority disapproves of 
Smigocki's calculation because he relied on Perot's actual sale 
to Dell for his goodwill number rather than comparable sales; 
and, therefore, the majority requires a higher standard of 
proof for Perot to establish its damages.   
 
To the extent Dell's post-injury assessment of Perot's 
goodwill ($1.6 billion) does not, in fact, account for the lost 
gross revenue wrongfully caused by the defendants, that number 
would appropriately reflect a pre-injury goodwill baseline 
figure for calculating the diminution of that figure resulting 
from defendants' wrongful acts - just like the comparable sales 
figure used in Advanced Marine.  Alternatively, to the extent 
Dell's post-injury goodwill figure reflects Perot's diminished 
goodwill resulting from defendants' actions, then Smigocki's 
calculation of diminished goodwill simply underestimated the 
damage to Perot's goodwill caused by the defendants.*  Either 
                     
 
* That is to say, under this scenario, Smigocki's multiplier of 
2.57 ($1.6 billion in goodwill divided by $627 million in total 
annualized revenue) for determining Perot's lost goodwill (2.57 
27 
 
way, Perot's diminished goodwill was not overstated by 
Smigocki.  Thus, whether or not Dell accounted for that damage 
in determining the value it placed on Perot's post-injury 
goodwill was not a material consideration for the trial court 
in its decision to allow Smigocki's expert testimony.   
 
For these reasons, the trial court did not err when it 
denied the defendants' motion to strike Smigocki's testimony 
and refused to set aside the jury's award of damages relating 
to Perot's diminished goodwill.  In holding to the contrary, 
the majority has assumed the role of finder of fact and expert 
to justify its reversal of these rulings. 
 
Because I would affirm the trial court's decision to allow 
Smigocki to testify as he did, I would address defendants' 
argument that the trial court abused its discretion when it 
limited the testimony of Dubinsky, defendants' expert witness 
offered as rebuttal to Smigocki's testimony.  In doing so, I 
would affirm the trial court in preventing Dubinsky from 
offering testimony related to the four topics at issue in this 
evidentiary dispute.  Based on our holding in John Crane, Inc. 
v. Jones, 274 Va. 581, 591-93, 650 S.E.2d 851, 856-57 (2007), 
and its progeny, the trial court did not abuse its discretion 
                                                                 
multiplied by $1.45 million in lost revenue) could have been 
larger, thus increasing the amount of Perot's lost goodwill 
damages, had the larger pre-injury goodwill figure been used as his 
baseline number (i.e., the numerator) for his calculation. 
28 
 
when it excluded Dubinsky's testimony as to those four topics 
on the ground that defendants' disclosure of his opinions 
through his expert report, pursuant to Rule 4:1, was 
insufficient as to those topics. 
 
For the remaining issues on appeal regarding the awards of 
punitive and trebled damages, and computer forensics damages, 
in favor of Perot, I concur with the holdings of the majority. 
 
 
JUSTICE POWELL, concurring in part and dissenting in part. 
 
I disagree with the majority’s analysis and result as to 
the sufficiency of PSC’s evidence of goodwill damages.  
Therefore, I respectfully dissent from the majority decision as 
it relates to the first three assignments of error.  Regarding 
the remaining assignments of error, however, I join with the 
majority. 
 
The majority decides as a matter of law that PSC’s 
evidence was insufficient to support an award of lost goodwill 
damages “[b]ecause Smigocki and, by extension, Perot relied on 
PSC's actual subsequent sale to Dell, rather than a comparable 
sale.”  The majority concludes that in this circumstance “Perot 
was required to demonstrate that its sale price to Dell 
reflected an actual loss of goodwill as a result of the 
conspiracy.”  When one considers the intangible nature of 
goodwill, the impossibility of this standard becomes readily 
29 
 
apparent.  See Wood v. Pender-Doxey Grocery Co., 151 Va. 706, 
712, 144 S.E. 635, 637 (1928) (describing goodwill as “one of 
those intangible assets of an established business difficult to 
describe and impossible of valuing with mathematical precision, 
but . . . of very real existence and of substantial value”).  
In support of its holding, the majority contends that PSC did 
not introduce any evidence “demonstrating a diminution in value 
of either PSC’s fair market value or identifiable assets during 
the relevant time period.”  Alternatively, the majority asserts 
that Perot failed to “introduce any evidence demonstrating that 
the sale price of PSC to Dell was affected, negatively or 
otherwise, by the Defendants’ actions in this case.”  Looking 
at the basic facts of this case, however, demonstrates the 
error in the majority’s analysis. 
 
It is undisputed that Dell purchased PSC for $3.878 
billion.  Approximately six months before the sale was 
completed, the Defendants left Perot.  There is evidence that 
when the Defendants left they took approximately $1.45 million 
in revenue with them to 21CSI.1  This, in turn, amounted to a 
loss of approximately $3,742,843 in goodwill, based on the 
revenue to goodwill ratio offered by Smigocki.  Thus, in order 
                     
1 It is further worth noting that the loss of the six 
employees who went to work for 21CSI at that time was a 
“specific loss of an identifiable asset,” especially when the 
revenue generated by those employees is considered. 
 
30 
 
to reach the conclusion that PSC failed to demonstrate any 
diminution in value or loss of identifiable assets, the 
majority necessarily ignores this clearly demonstrated loss of 
revenue and goodwill. 
 
Similarly, the only logical inference to which this loss 
of revenue and goodwill leads is that the sale price of PSC was 
negatively affected.  To hold otherwise would, in effect, mean 
that PSC failed to prove that Dell did not pay for something it 
knew it would not receive.  “In reviewing the evidence, we will 
accord the recipient of the verdict the benefit of all 
substantial conflicts of evidence, and all fair inferences that 
may be drawn from the evidence.”  Bussey v. E.S.C. Rests., 
Inc., 270 Va. 531, 535, 620 S.E.2d 764, 766 (2005).  As the 
only rational inference is that Dell paid only for what it knew 
it would receive, PSC clearly proved that the sale price of PSC 
to Dell was negatively affected, at least to some degree, by 
the Defendants’ actions. 
 
Moreover, I do not believe that the facts in the present 
case are as distinguishable from those presented in Advanced 
Marine Enters. v. PRC Inc., 256 Va. 106, 501 S.E.2d 148 (1998), 
as the majority contends.  It is important to note that, with 
the exception of the fact that Advanced Marine involved the 
approximate goodwill values of comparable companies, the expert 
in that case used the exact same methodology to approximate the 
31 
 
goodwill values as Smigocki used in the present case.  In 
Advanced Marine the expert “subtracted the value of each 
‘comparable company’s’ assets from its sales price to determine 
the goodwill.”  Id. at 114, 501 S.E.2d at 153.2  Here, the same 
formula was used, only, instead of using the value of a 
comparable company, the actual value of PSC’s assets ($1.551 
billion) were subtracted from its actual sale price ($3.878 
billion) to approximate the goodwill value of the entire 
company ($2.327 billion).  The only significant difference 
between the present case and Advanced Marine is the fact that, 
because Perot was only a part of PSC, the entire goodwill value 
could not be allocated to Perot alone.  However, as Smigocki 
explained, Dell allocated the amount of goodwill to the various 
subsidiaries of PSC, including Perot.  In its 10-K report, a 
publically available, sworn statement submitted to the 
Securities and Exchange Commission, Dell allocated $1.613 
billion to Perot (as the “Public” operating part of PSC).  
Thus, aside from relying on Dell’s allocation of the total 
goodwill, there is no difference between the methodology used 
to determine goodwill in Advanced Marine and the methodology 
used and accepted by the trial court to determine the goodwill 
of Perot in the present case. 
                     
2 Indeed, this Court endorsed this formula as “a 
frequently-used method for computing goodwill damages.”  
Advanced Marine, 256 Va. at 120, 501 S.E.2d at 156. 
32 
 
 
The only other notable difference between this case and 
Advanced Marine is that the expert witness in Advanced Marine 
apportioned the goodwill among the total number of employees 
involved (i.e. he determined the amount of goodwill per 
employee).  In the present case, Smigocki apportioned Perot's 
goodwill based on revenue (i.e. he determined the amount of 
goodwill per dollar of revenue).  Smigocki explained that this 
was a more accurate measure of the potential loss of goodwill 
due to the nature of this case.3  We have previously recognized 
that, due to its intangible nature, the value of goodwill in 
one case “would be of no great assistance in assessing [its 
value] in other cases where the facts and circumstances were 
dissimilar.”  Wood, 151 Va. at 712, 144 S.E. at 637.  Along 
these same lines, it is only logical that slight differences in 
the methodology are to be expected based on the facts of each 
case. 
 
Based on the foregoing, and in light of our decision in 
Advanced Marine, I do not believe that PSC’s evidence, 
including Smigocki's testimony regarding lost goodwill damages, 
was insufficient, as a matter of law, to support an award of 
                     
3 Smigocki’s methodology is not obviously flawed.  
Therefore it was up to the Defendants to provide the fact-
finder or judge, as gatekeeper, with enough evidence to find 
that the use of revenue was irrelevant or otherwise flawed.  
Having failed to offer such evidence at trial, either through 
cross-examination or its own expert, the Defendants cannot now 
attack the validity of Smigocki’s approach. 
33 
 
lost goodwill damages.  Accordingly, I would hold that the 
trial court did not abuse its discretion when it allowed 
Smigocki to testify regarding lost goodwill damages and did not 
err when it refused to set aside the award of damages relating 
to Perot's lost goodwill.4  
                     
4 As a result of its decision regarding goodwill damages, 
the majority does not address the Defendants’ second assignment 
of error.  I agree with Justice McClanahan’s analysis of that 
issue.  Accordingly, I would also affirm the trial court’s 
decision to exclude the Defendants’ expert on goodwill damages.