Title: Decipher Inc. v. iTRiBE Inc.
Citation: N/A
Docket Number: 002873
State: Virginia
Issuer: Virginia Supreme Court
Date: November 2, 2001

Present:  All the Justices 
 
DECIPHER, INC. 
 
v.  Record No. 002873     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
November 2, 2001 
iTRiBE, INC. 
 
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK 
Leonard B. Sachs, Judge Designate 
 
 
This is an appeal of the trial court's holding that 
Decipher, Inc. (Decipher) failed to carry its burden of proof 
in its breach of contract counterclaim against iTRiBE, Inc. 
(iTRiBE).  Because we conclude that there was no reversible 
error in the judgment complained of, we will affirm the 
judgment of the trial court. 
 
iTRiBE is in the business of providing access to the 
Internet as a "tier 2" provider.  A tier 2 provider does not 
have direct access to the Internet and must contract with an 
upstream entity having such access, a "tier 1" provider, to 
complete the link to the Internet.  The amount of Internet 
access available is measured in terms of megabytes of 
bandwidth.  Prior to February 1997, iTRiBE had only a three 
megabyte (Mb) Internet connection with its tier 1 provider to 
service all its customers, including Decipher, which 
contracted for 1.5 Mb of connectivity through iTRiBE. 
 
In February 1997, Decipher and iTRiBE executed a new 
five-year contract under which iTRiBE agreed to provide 
Decipher 5 Mb of bandwidth for Decipher's connection to the 
Internet.  The contract also provided that iTRiBE would 
"install a DS3 for this."  A DS3 is a specific type of 
connection that can provide from 3 Mb to a maximum of 49 Mb of 
bandwidth connectivity depending on its configuration.  
iTRiBE, however, achieved its connection with a tier 1 
provider through a different type of connector and did not 
install a DS3.  iTRiBE contracted with Digex, a tier 1 
provider, for a 10 Mb bandwidth connection to the Internet. 
 
In June 1998, Decipher decided to change its Internet 
connection and contract directly with a tier 1 provider.  In 
August 1998, Decipher signed a three-year contract with MCI 
Telecommunications Corporation for a 6 Mb bandwidth Internet 
connection.  In December 1998, Decipher informed iTRiBE by 
letter that it was canceling its February 1997 contract with 
iTRiBE.  After describing Decipher's growth since entering the 
contract, the letter stated that "connectivity once suitable . 
. . no longer provides . . . the solution [needed] . . . to 
continue to . . . expand."  As to iTRiBE's performance, the 
letter stated "[i]n the past we have experienced repeated 
outages, poor performance due to shared media as well as slow 
throughput once connected to Digex." 
 
iTRiBE sued Decipher for breach of contract when Decipher 
refused to pay the liquidated damages specified in the 
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contract.  In response, Decipher filed a grounds of defense 
and counterclaim asserting that iTRiBE had breached the 
contract because it had not provided Decipher with the 5 Mb of 
Internet connectivity required by the contract.  Following an 
ore tenus hearing, the trial court issued an opinion letter 
holding that "Decipher has failed to prove that they did not 
receive the 5 Mb that they bargained for."  The trial court 
subsequently entered judgment in favor of iTRiBE on its breach 
of contract claim and against Decipher on its breach of 
contract counterclaim. 
I. 
 
On appeal, Decipher raises three assignments of error.  
First, Decipher asserts that the trial court's judgment 
allowing iTRiBE to recover for breach of contract was based on 
the erroneous finding that a Decipher witness "conceded" that 
iTRiBE's failure to install a DS3 was not a breach of a 
material condition of the contract.  There is nothing in the 
opinion letter to support Decipher's contention that the trial 
court concluded that Decipher conceded the issue of 
materiality. 
 
The failure of iTRiBE to install a DS3 was a breach of 
the contract terms; however, if this breach did not go to the 
"root of the contract," the contract condition was not 
material and the breach of that condition would not preclude 
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iTRiBE from enforcing the contract.  Horton v. Horton, 254 Va. 
111, 115, 487 S.E.2d 200, 203 (1997).  Neither the trial 
court's order nor opinion letter specifically addressed 
whether installation of a DS3 was a material provision of the 
contract.  However, because the trial court entered judgment 
in favor of iTRiBE, the trial court necessarily concluded that 
the provision was not a material provision and, therefore, 
that the failure to install the DS3 did not preclude recovery 
by iTRiBE. 
 
In its opinion letter, the trial court stated that, as a 
matter of fact, the contract was "understood" by the parties' 
representatives who negotiated it "in the context of the 
requirements" of each party.  The parties agreed that iTRiBE 
would have to increase its upstream connectivity in order to 
meet Decipher's 5 Mb requirements.  The parties to the 
contract also knew that iTRiBE had other customers.  But, as 
the trial court noted in its opinion letter, Decipher's 
representative never "in [his] wildest dreams" thought 
Decipher "would require 45 Mb," the customary bandwidth 
implied by the term DS3, according to industry standards.  
These findings support the conclusion that the parties 
considered the root of the contract to be the provision of 5 
Mb of Internet connectivity and thus the specific installation 
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of a DS3 with a 45 Mb capacity was not a material element of 
the contract. 
 
In light of the evidence presented regarding the nature 
of the contract between iTRiBE and Decipher, the statement of 
Decipher's representative, recited by the trial court in its 
opinion letter, does not support Decipher's contention that 
the trial court found that its representative "conceded" that 
iTRiBE's failure to install a DS3 was not a material element 
of the contract.  Instead, it is clear the trial court's 
conclusion was based on a finding that the evidence as a whole 
showed that the requirement to install a DS3 was not a 
material condition of the contract. 
 
Accordingly, we reject Decipher's assertion that the 
trial court based its holding on a finding that Decipher's 
representative conceded that iTRiBE's failure to install a DS3 
was a breach of a material condition of the contract. 
II. 
 
In its second assignment of error, Decipher asserts that 
the trial court erred as a matter of law "by holding that 
Decipher breached its contract with iTRiBE . . . by not 
performing specific tests on its and iTRiBE's computer 
hardware prior to terminating its contract with iTRiBE."  Once 
again, neither the trial court's opinion letter nor its order 
recites such a holding. 
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To sustain its counterclaim, Decipher had to produce 
evidence sufficient to establish that it did not receive 5 Mb 
of bandwidth from iTRiBE.  There is no direct evidence in the 
record by way of reports, testimony, or other similar 
documentation to support Decipher's claim.  Rather, Decipher's 
proof, as emphasized by its counsel at oral argument, was 
completely circumstantial. 
 
To support its theory that it did not receive the 
requisite bandwidth connectivity from iTRiBE, Decipher 
introduced evidence that iTRiBE's router did not have the 
capacity to provide Decipher's 5 Mb and that iTRiBE had 
"oversold" its 10 Mb connectivity capacity with Digex.  iTRiBE 
introduced controverting expert testimony regarding the 
capacity and operation of its router.  iTRiBE also presented 
evidence that the total amount of Internet connectivity it 
sold has no impact on iTRiBE's operations unless the evidence 
showed that the amount of connectivity sold was greater than 
the amount of connectivity in use at any one time.  
Furthermore, iTRiBE argued that neither of Decipher's claims 
established that Decipher did not receive its 5 Mb of 
bandwidth connectivity from iTRiBE. 
 
In considering Decipher's evidence in support of its 
claims, the trial court stated in its opinion letter: 
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I further find as a fact Decipher has failed to 
prove that they did not receive the 5 Mb that they 
bargained for.  One of Decipher's witnesses 
conceded that there was software available at a 
cost of approximately $500.00 which Decipher could 
have installed to constantly monitor the drawdowns 
that they were receiving at any given time or in 
the alternative they could have contracted with 
Bell Atlantic to hire engineers and metering 
equipment for not more than $2,000.00 to accomplish 
the same purpose. 
 
Neither this statement nor anything else in the opinion letter 
supports the proposition advanced by Decipher that the trial 
court considered the failure to test equipment prior to 
termination a breach of contract.  Rather, the failure to test 
was one of the reasons Decipher was unable to produce evidence 
to show that iTRiBE failed to provide 5 Mb bandwidth.  The 
trial court concluded that Decipher did not meet its burden of 
proof because "all of the defendant's evidence was 
hypothetical evidence." 
 
Accordingly, we reject Decipher's claim that the trial 
court held that Decipher breached the contract because it did 
not perform equipment tests prior to terminating the contract. 
III. 
 
Finally, Decipher complains that the trial judge erred in 
allowing one of its witnesses to testify on cross-examination 
regarding reports received by iTRiBE from Digex.  While we 
conclude that the trial court erred in ruling that certain 
testimony would be admitted under the business records 
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exception to the hearsay rule, we hold that the error was 
harmless. 
 
Digex provided iTRiBE with periodic reports reflecting 
the amount of bandwidth iTRiBE used on Digex's system.  
However, only one report, covering the period of June 29, 1997 
through July 5, 1997, was produced at trial.  One of 
Decipher's witnesses, a former iTRiBE employee, testified on 
cross-examination that the produced report showed that all 
iTRiBE's customers including Decipher consumed less than 25 
percent of iTRiBE's 10 Mb connection during that period.*  When 
the former employee was asked whether any of the unproduced 
reports through October 1997 indicated that iTRiBE had used 5 
Mb of bandwidth, Decipher objected on the basis of hearsay.  
The trial court overruled the objection, stating that the 
unproduced reports were "regular course of business under the 
exception rule."  This was error. 
 
The hearsay exception does not generally cover items 
received by a business.  See, e.g., Frank Shop, Inc. v. Crown 
Central Petroleum, 261 Va. 169, 176, 540 S.E.2d 897, 901 
(2001); Ford Motor Company v. Phelps, 239 Va. 272, 276, 389 
S.E.2d 454, 457 (1990)("[T]he rule deals with records made, 
and not merely kept, in the regular course of business.").  
8 
 
Hence the unproduced reports would not, on the foundation 
presented here, have been admissible even if tendered as 
exhibits.  In this case, however, the unproduced reports were 
not offered as exhibits at trial.  Instead, the witness was 
invited to recount the substance of their contents.  
Generally, the hearsay rule precludes a witness from quoting 
from, or summarizing the contents of, even admissible records 
until they have been received in evidence.  Hence, the hearsay 
objection made by Decipher to this question should have been 
sustained. 
 
The trial court's error, however, was harmless:  after 
the ruling, the witness never characterized the contents of 
the unproduced reports.  The remaining cross-examination 
related to the effect of bandwidth usage information on the 
decision to seek greater Internet access.  "The hearsay rule 
does not operate to exclude evidence of a statement, request, 
or message offered for the mere purpose of explaining or 
throwing light on the conduct of the person to whom it was 
made."  Fuller v. Commonwealth, 201 Va. 724, 729, 113 S.E.2d 
667, 670 (1960).  Therefore, even though the trial court 
improperly overruled Decipher's objection to the initial 
                                                                
* This report was not admitted in evidence and the 
propriety of testimony regarding the report is not at issue in 
this appeal. 
9 
 
question, that ruling did not result in inadmissible hearsay 
evidence and, therefore, was harmless. 
 
Furthermore, "[a] plaintiff in error must always show, 
not only error in the rulings of the trial court, but also 
error of a substantial nature."  Breeding v. Johnson, 208 Va. 
652, 659, 159 S.E.2d 836, 842 (1968).  Nothing in the record 
indicates that the trial judge relied upon the testimony 
regarding these unproduced reports in reaching its decision, 
even according to Decipher's view of the case.  Indeed, 
Decipher states without qualification that the trial judge's 
decision was based "on two grounds."  First, that a Decipher 
representative "conceded" that the failure to purchase a DS3 
was not a material breach of the contract and, second, that 
Decipher should have conducted equipment tests prior to 
terminating its contract with iTRiBE.  As discussed above, 
neither of these alleged holdings was, in fact, the basis for 
the finding of the trial court. Therefore, Decipher cannot 
claim it was prejudiced by admission of evidence which 
Decipher itself does not contend was the basis for any holding 
of the trial court. 
 
Accordingly, for the reasons stated, the judgment of the 
trial court will be affirmed. 
Affirmed. 
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