Nolte v. MT TECHNOLOGY ENTERPRISES, LLC

Present: Kinser, C.J., Lemons, Goodwyn, Millette, Mims, and
Powell, JJ., and Koontz, S.J.

BRUCE B. NOLTE, ET AL.

v. Record No. 111490 OPINION BY JUSTICE DONALD W. LEMONS
June 7, 2012
MT TECHNOLOGY ENTERPRISES, LLC

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Margaret P. Spencer, Judge

Among the several issues we address in this appeal are

whether the Circuit Court of the City of Richmond ("trial

court") erred when it held that MT Technology Enterprises, LLC

("MT") satisfied the registration requirements of Code § 13.1-

1057(A) and when it imposed sanctions, pursuant to Rule

4:12(b), against Cristol, LLC ("Cristol"), Bruce Nolte

("Nolte"), Andrew Miller ("Miller"), Koichi Fukuda ("Fukuda"),

and Gregory Koenig ("Koenig").

I. Facts and Proceedings Below

MT is a Delaware entity "that acquires intellectual

property for license and sale and acquires equipment for lease

or sale." MT owns intellectual property rights related to the

development of totally reflecting transmitter film ("TRT"),

"one component of many hundred components that are used in

liquid crystal display[s]" utilized in flat screen televisions,

computers, and cell phones. Ronald Trice ("Trice"), a patent

attorney, and Dr. John Magno ("Magno"), a scientist, formed MT

and held controlling membership interests.
 Trice and Magno also formed Cristol, a Delaware entity, at

approximately the same time they formed MT. Cristol is a

technology development company in the business of developing

high strength fibers. Together, Trice and Magno held a

controlling membership interest in Cristol. Trice was a member

of Cristol's Board of Managers ("Board") and served as the

corporate secretary, and Magno was the Chief Executive Officer

("CEO") and chairman of the Board. Christopher Miller ("C.

Miller"), Nolte, Miller, and Fukuda (together, the "minority

owners") were also members of Cristol's Board.

In April 2008, MT licensed its rights to the TRT diffuser

technology to Laser Energetics, Inc. ("LEI"). Pursuant to the

agreement between MT and LEI, Magno owed duties to LEI for a

period of two years. In August 2008, MT and Cristol executed a

lease agreement. Pursuant to the agreement, MT leased

equipment to Cristol for $3,000 per month.

The relationship between Magno and Trice and the minority

owners began to decline. The minority owners insisted that

Magno resign his position as CEO and from the Board. The

minority owners would not agree to dedicate funding to product

development, so Magno and Trice began looking for outside

funding in the fall of 2008. They also considered selling

Cristol. As a result, the minority owners accused Magno and

Trice of performing "a coup" and trying to "take over" Cristol.

2
 In January 2009, Miller sent an e-mail to the other

minority owners and to Koenig, an employee of Cristol.

Miller's email first discussed Magno's financial situation.

Miller informed the minority owners and Koenig that he spoke

with Magno about an upcoming Board meeting that Magno "should

attend, for the sole purpose of discussing [Magno's] financial

situation and determining what we can do to increase money in

his pocket." Miller's email next discussed Magno's thoughts on

Trice. Miller stated that "[Magno] is not yet willing to cut

the ties with [Trice]," but after an outside patent lawyer

reviews "the quality of [Trice's] work, [I] can take another

round on chiseling away at [Trice's] and [Magno's]

relationship."

A meeting of Cristol's Board was held, as scheduled, on

February 4, 2009. When Magno arrived, Nolte, Koenig, C.

Miller, and Cristol's attorney Charles W. Hundley ("Hundley")

were present and Miller participated by telephone. These

individuals told Magno that Trice was the reason for an

unrelated company's bankruptcy, Trice was going to sue him, and

he should not communicate with Trice. During the meeting,

Trice called Magno on his cell phone, but the individuals at

the meeting did not permit him to answer. Magno was directed

to turn over his electronic mail ("e-mail") password so they

could install an auto-forwarding device on his e-mail and

3
intercept any e-mails from Trice. They threatened to withhold

Magno's paycheck unless he ended all communication with Trice,

and Magno acceded to their demands.

Trice then arrived at the meeting where he was presented

with a memorandum containing "a list of allegations against

[him] followed by a list of demands." The demands included,

among other things, resigning from Cristol's Board and ceasing

all communications with Magno about Cristol.

After the February 2009 meeting, demands continued to be

placed on Magno, which prevented him from fulfilling his duties

to MT and to LEI. Additionally, Cristol stopped making regular

payments to MT on the equipment lease.

In May 2009, Trice told Magno that he was going to file a

lawsuit against Cristol and Cristol's Board. On June 2, 2009,

MT filed a complaint against Cristol, Nolte, Miller, Fukuda,

Koenig, C. Miller, Hundley, and Cherry, Seymour, Hundley &

Baronian, P.C. ("Hundley's firm"). Miller threatened to

withhold Magno's paycheck unless he signed a letter addressed

to MT's counsel requesting that MT drop the lawsuit and an

affidavit supporting Cristol's, Nolte's, Miller's, Fukuda's,

Koenig's, C. Miller's, Hundley's, and Hundley's firm's special

plea in bar. Magno testified that he was required to sign a

letter and an affidavit, neither of which he drafted, in order

to receive his paycheck.

4
 MT subsequently filed an amended complaint in October

2009. Specifically, MT's five-count amended complaint alleged:

Count I - statutory conspiracy against Cristol,
Nolte, Miller, Fukuda, Koenig, C. Miller,
Hundley, and Hundley's firm;

Count II - tortious interference with economic
expectancy in MT technologies against Cristol,
Nolte, Miller, Fukuda, Koenig, C. Miller,
Hundley, and Hundley's firm;

Count III - tortious interference with agreements
between Magno and MT against Cristol, Nolte,
Miller, Fukuda, Koenig, C. Miller, Hundley, and
Hundley's firm;

Count IV - tortious interference with
relationship between Magno and Trice against
Cristol, Nolte, Miller, Fukuda, Koenig, C.
Miller, Hundley, and Hundley's firm; and

Count V - breach of contract and unjust
enrichment against Cristol.

In response, Cristol, Nolte, Miller, Fukuda, Koenig, and C.

Miller jointly filed an answer, and together Hundley and

Hundley's firm filed an answer.

Prior to trial, MT filed motions to compel answers to

interrogatories and the production of documents from Cristol,

Nolte, Miller, Fukuda, Koenig, and C. Miller because they had

not timely responded to MT's discovery requests. MT also filed

motions to compel Hundley and Hundley's firm to respond to

5
discovery requests. The trial court granted MT's motions to

compel in an April 21, 2010 order. 1

Thereafter, in June 2010, MT filed a motion to show cause

and a motion to compel and for sanctions as to Cristol, Nolte,

Miller, Fukuda, Koenig, and C. Miller because they had not

complied with the trial court's April 21, 2010 order. The

trial court concluded that Cristol, Nolte, Miller, Fukuda,

Koenig, and C. Miller failed to fully respond to previously

ordered discovery and ordered them to pay sanctions to

reimburse MT for the costs of filing the motion to show cause.

MT then filed a motion for default judgment against Fukuda

because he did not appear at his deposition and "his counsel

indicated that he refuse[d] to travel from Japan for his

deposition." Cristol, Nolte, Miller, Fukuda, Koenig, and C.

Miller continued to disregard the trial court's orders;

consequently, MT filed a motion for sanctions pursuant to Rule

4:12. The trial court held a hearing on these motions on

September 23, 2010, and in an October 19, 2010 order: (1)

granted MT's motion for sanctions against defendants Cristol,

Nolte, Miller, and Koenig pursuant to Rule 4:12(b)(2)(B); (2)

denied MT's motion for sanctions against C. Miller; and (3)

1
That same day, the trial court entered an order
dismissing the action with prejudice as to Hundley and
Hundley's firm.

6
granted MT's motion for default judgment against Fukuda. 2

Specifically, in its sanctions order, the trial court prohibited

Cristol, Nolte, Miller, and Koenig "from opposing the claims

[MT] alleged within its Amended Complaint or introducing any

evidence at trial in support of any of the defenses they alleged

within their respective Answers to said Amended Complaint" and

granted default judgment against Fukuda. (Emphasis added.)

The case proceeded to a jury against Cristol, Nolte,

Miller, Fukuda, and Koenig (collectively, the "defendants") on

all five counts. The trial court instructed the jury that prior

rulings in this case prevent "the defendants from opposing

[MT's] claims in the amended complaint and [prevent] the

defendants from introducing any evidence at trial." The trial

court interpreted its pre-trial ruling to bar defendants from

cross-examining MT's witnesses.

Thereafter, the jury returned a verdict in favor of MT and

awarded damages as follows:

Cristol, LLC $784,000 in compensatory damages

Koichi Fukuda $700,000 in compensatory damages
and $300,000 in punitive damages

Andrew Miller $700,000 in compensatory damages
and $350,000 in punitive damages

2
On October 29, 2010, ten days after the trial court
entered its sanction order, MT moved to nonsuit defendant C.
Miller, and the trial court entered a nonsuit order as to
defendant C. Miller.

7
 Bruce Nolte $700,000 in compensatory damages
and $350,000 in punitive damages

Gregory Koenig $700,000 in compensatory damages

MT moved to treble the compensatory awards, and the trial court

granted the motion.

The defendants filed a "Motion To Set Aside Verdict And

For New Trial," objecting to: (1) the trial court's imposition

of sanctions against them; (2) the trial court's refusal of

defendants' proffered jury instructions; (3) the trial court's

denial of the defendants' right of cross-examination; and (4)

the trial court's withdrawal of liability issues from the

jury's consideration. The defendants also filed a "Motion For

Judgment Notwithstanding The Verdict," arguing that the

evidence was insufficient to support either a claim of tortious

interference or a claim of statutory conspiracy.

In March 2011, the defendants filed a "Supplemental Motion

For Judgment Notwithstanding The Verdict," alleging that MT

could not maintain the action because it failed to register and

obtain a certificate of authority ("certificate") as required

by Code § 13.1-1057(A) and because MT failed to register, it

had no business expectancies as a matter of law. MT objected,

arguing that the defendants' supplemental motion was untimely

because the trial court ordered that post-verdict motions be

filed by January 5, 2011.

8
 After a post-trial hearing in April 2011, the trial court

denied the defendants' post-trial motions and entered judgment

in favor of MT in the amounts awarded by the jury on May 18,

2011. On May 27, 2011, MT filed a motion to modify the May 18,

2011 order, claiming that "[f]ollowing the announcement of the

jury verdict, [MT] moved the [trial court] to treble the

compensatory damages awarded by the jury consistent with the

business conspiracy statute" and "[t]he [trial court] did so

but the ruling has not been memorialized via written Order."

On June 8, 2011, the trial court entered an order trebling the

compensatory damages without a hearing, which recited that the

defendants did not file a response to MT's motion. The order

recited in part:

The treble damages ordered on the
compensatory awards are:

Cristol, LLC $2,352,000

Koichi Fukuda $2,100,000

Andrew Miller $2,100,000

Bruce Nolte $2,100,000

Gregory Koenig $2,100,000

On July 7, 2011, the defendants filed an objection to the

trial court's trebling of damages, arguing that: (1) the trial

court denied the defendants due process of law because the

order was entered without a hearing and without defendants'

9
input; (2) "only damages arising from a conspiracy claim may be

trebled"; (3) the "jury's verdict did not specify what amount

of damages, if any, were attributable to the conspiracy claim";

and (4) the trial court "engaged in impermissible speculation

in trebling the entire verdict."

The defendants timely filed a petition for appeal, and we

granted the appeal on the following assignments of error:

1. The trial court erroneously allowed MT Technology
Enterprises LLC to maintain this action without a
certificate of authority.

2. The trial court erred when it entered judgment for breach
of a void contract and for tortious interference with
business expectancies that could not exist as a matter of
Virginia law.

3. The trial court abused its discretion in imposing an
excessive sanction in response to a discovery dispute.

4. The trial court erroneously refused to permit the
defendants to cross-examine the plaintiff's witnesses at
trial.

5. The trial court erroneously withdrew the issue of
liability from the jury.

6. The trial court erroneously entered judgment on the jury's
verdict of tortious interference after MT Technology
failed to adduce any evidence that defendants knew that an
employee common to the two firms owed any duties to MT
Technology.

7. The trial court erroneously granted judgment on the
plaintiff's claim of statutory conspiracy.

8. The trial court erroneously trebled the damages awarded in
this case, and erroneously entered an order to that effect
without notice to the defendants, depriving them of due
process.

10
 II. Analysis

A. Standards of Review

The first assignment of error involves issues of statutory

interpretation.

[A]n issue of statutory interpretation is a pure
question of law which we review de novo. When
the language of a statute is unambiguous, we are
bound by the plain meaning of that language.
Furthermore, we must give effect to the
legislature’s intention as expressed by the
language used unless a literal interpretation of
the language would result in a manifest
absurdity. If a statute is subject to more than
one interpretation, we must apply the
interpretation that will carry out the
legislative intent behind the statute.

Conyers v. Martial Arts World of Richmond, Inc., 273 Va. 96,

104, 639 S.E.2d 174, 178 (2007) (citations omitted).

The third and fourth assignments of error involve the

review of a sanction imposed by the trial court, which we

review for an abuse of discretion. Flora v. Shulmister, 262

Va. 215, 220, 546 S.E.2d 427, 429 (2001). We have stated that

[a]n abuse of discretion . . . can occur in three
principal ways: when a relevant factor that
should have been given significant weight is not
considered; when an irrelevant or improper factor
is considered and given significant weight; and
when all proper factors, and no improper ones,
are considered, but the court, in weighing those
factors, commits a clear error of judgment.

Landrum v. Chippenham & Johnston-Willis Hosps., Inc., 282 Va.

346, 352, 717 S.E.2d 134, 137 (2011) (quoting Kern v. TXO Prod.

Corp., 738 F.2d 968, 970 (8th Cir. 1984)).

11
 The sixth and seventh assignments of error challenge the

sufficiency of the evidence. Pursuant to Code § 8.01-680,

"[t]he standard of review for determining the sufficiency of

evidence on appeal is well established. [The reviewing court]

must examine the evidence in the light most favorable to [MT],

the prevailing party at trial," and the trial court's judgment

will not be disturbed "unless it is plainly wrong or without

evidence to support it." Hedrick v. Commonwealth, 257 Va. 328,

340, 513 S.E.2d 634, 641 (1999) (citing Code § 8.01-680 and

other supporting authorities).

B. Code § 13.1-1057

The defendants assert that the "trial court erroneously

allowed MT Technology Enterprises LLC to maintain this action

without a certificate of authority." We disagree.

Code § 13.1-1057(A) states that "[a] foreign limited

liability company transacting business in the Commonwealth may

not maintain any action, suit, or proceeding in any court of

the Commonwealth until it has registered in the Commonwealth."

(Emphasis added.) While we have not yet interpreted at what

point during a lawsuit a foreign LLC must fulfill the

requirements in Code § 13.1-1057(A), we have interpreted a

statute that imposed a registration requirement on a foreign

corporation. See Phlegar v. Virginia Foods, Inc., 188 Va. 747,

749-51, 51 S.E.2d 227, 228-30 (1949). The statute at issue in

12
Phlegar contained language similar to the language in Code

§ 13.1-1057(A). Compare former Code § 4722(1)-3, with Code

§ 13.1-1057(A). The statute construed in Phlegar stated, in

relevant part, "no action shall be maintained in any of the

courts in this State by any such person, firm or corporation

. . . until the certificate required by this act has been

filed." 188 Va. at 750, 51 S.E.2d at 229 (emphasis added).

In Phlegar, the plaintiff commenced her action and,

thereafter, the defendants appeared and filed "pleas of the

general issue" contesting registration. Id. at 748, 51 S.E.2d

at 228. Plaintiff later complied with the registration

requirement. Id. The trial court dismissed the action and, in

so doing, held "it was necessary to comply with the statute

prior to the institution of the suit, and that the subsequent

compliance therewith was not sufficient." Id. We reversed,

concluding that "[i]t is not the right to begin the action, but

the right to maintain it, that is withheld for failure to

comply with its terms. It takes no right away from the

offending party after compliance. When its terms are met, the

barriers theretofore existing are removed." Id. at 751, 51

S.E.2d at 230 (emphasis added). In reaching this conclusion in

Phlegar, we relied in part on our decision in Bain v. Boykin,

180 Va. 259, 23 S.E.2d 127 (1942), where we interpreted former

Code § 4722(1)-3 and held a certificate "filed after the

13
bringing of [an] action and prior to the time of final judgment

was a sufficient compliance with the statute." Id. at 751, 51

S.E.2d at 229.

Here, MT is a foreign LLC subject to the registration

requirements of Code § 13.1-1057(A). The jury returned a

verdict for MT in December 2010, MT obtained a certificate from

the SCC in March 2011, and the trial court entered final

judgment for MT in June 2011. Pursuant to Code § 13.1-1057(A),

MT "may not maintain any action . . . until it has registered

in the Commonwealth." (Emphasis added.) "Maintain" is defined

as "[t]o continue (something)," not to start or commence.

Black's Law Dictionary 1039 (9th ed. 2009). Because MT

obtained a certificate from the State Corporation Commission

before the trial court entered its final order, our prior cases

in similar matters compel us to hold that the trial court did

not err in its interpretation of Code § 13.1-1057(A).

Additionally, the defendants assert that the "trial court

erred when it entered judgment for breach of a void contract

and for tortious interference with business expectancies that

could not exist as a matter of Virginia law."

At oral argument, defendants' counsel stated:

In assignment two, we've asked the court to find
that there was no contract expectancy as a matter
of law because the contract was made illegally,
without the registration.

14
 In response, the Appellee has argued that
there's nothing in the record that establishes
this contract was, in fact, made in Virginia.

I have looked through the short plain statement
of 315 paragraphs in their complaint, and it
appears to me that they're correct.

Because of the defendants' concession at oral argument, we will

not address this assignment of error.

C. The Trial Court's Sanction Order

"Rule 4:12(b) governs discovery abuses and provides for

sanctions against a party who fails to comply with a court's

order to provide or permit discovery. A trial court generally

exercises 'broad discretion' in determining the appropriate

sanction for failure to comply with an order relating to

discovery." Walsh v. Bennett, 260 Va. 171, 175, 530 S.E.2d

904, 907 (2000) (citing Woodbury v. Courtney, 239 Va. 651, 654,

391 S.E.2d 293, 295 (1990)). As a result, we accord deference

to the trial court's decision and will reverse only if the

trial court abused its discretion. Flora, 262 Va. at 220, 546

S.E.2d at 429.

"The determination whether a trial court has abused its

discretion is fact-specific." Walsh, 260 Va. at 175, 530

S.E.2d at 907. Moreover, "[i]n evaluating whether the trial

court abused its discretion, 'we do not substitute our judgment

for that of the trial court. Rather, we consider only whether

the record fairly supports the trial court's action.' " AME

15
Fin. Corp. v. Kiritsis, 281 Va. 384, 393, 707 S.E.2d 820, 824

(2011) (quoting Beck v. Commonwealth, 253 Va. 373, 385, 484

S.E.2d 898, 906 (1997)).

In January 2010, MT filed motions to compel answers to

interrogatories and the production of documents from Cristol,

Nolte, Miller, Fukuda, Koenig, and C. Miller because the

defendants did not timely respond to MT's discovery requests.

The trial court granted MT's motions at a March 12, 2010

hearing, and the ruling was memorialized in an order dated April

21, 2010.

In June 2010, MT filed a motion to show cause and a motion

to compel and for sanctions. The trial court considered these

motions at a June 23, 2010 hearing. In an order dated July 6,

2010, the trial court ordered the defendants to pay MT: (1)

"$1,000 in sanctions to reimburse [MT] for attorney's fees and

costs incurred in filing the Motion to Show Cause and bringing

it to the [trial court] for a hearing"; and (2) "$100 to

reimburse the plaintiff for the attorney's fees and costs

incurred as a result of counsel's inappropriate objections

during the depositions of" C. Miller and Nolte.

In June 2010, MT also filed a motion for default judgment

against Fukuda, and then in September of that year filed a

motion for sanctions against the defendants pursuant to Rule

4:12. In an order dated October 19, 2010, the trial court

16
granted MT's motion for default judgment against Fukuda and

MT's motion for sanctions against Cristol, Nolte, Miller, and

Koenig pursuant to Rule 4:12(b)(2)(B). Specifically, the

relief provided to MT under Rule 4:12(b)(2)(B) precluded

Cristol, Nolte, Miller, and Koenig "from opposing the claims

[MT] alleged within its Amended Complaint or introducing any

evidence at trial in support of any of the defenses they

alleged within their respective Answers to said Amended

Complaint." (Emphasis added.)

Pursuant to Rule 4:12(b)(2),

[i]f a party . . . fails to obey an order to
provide or permit discovery, . . . the court in
which the action is pending may make such orders
in regard to the failure as are just, and among
others the following:

. . . .

(B) An order refusing to allow the disobedient
party to support or oppose designated claims or
defenses, or prohibiting him from introducing
designated matters in evidence.

(C) An order . . . rendering a judgment by
default against the disobedient party[.]

Rule 4:12(b)(2)(B)&(C) (emphasis added). Cristol, Nolte,

Miller, and Koenig repeatedly refused to respond fully to

discovery and comply with the trial court's orders.

Significantly, upon the violation of a court order it was

within the trial court's discretion to impose any specifically

tailored sanctions "as are just" as stated in Rule 4:12(b)(2),

17
which allows a trial court to select from a range of orders

illustrated in this Rule, including the most drastic sanction

of striking a party's case or "rendering a judgment by default

against the disobedient party" as provided in Rule

4:12(b)(2)(C). In this case, the trial court reserved that

more severe sanction for Fukuda, who failed to appear at his

deposition. 3

The trial court's choice of sanction was not impermissible

and, in the circumstances presented in this case, we hold that

the trial court did not abuse its discretion in imposing this

sanction in response to the sanctioned parties' failures to

comply with discovery obligations under the Rules and pursuant

to express orders of the court. However, we must separately

analyze the scope of the sanction.

D. Precluding the Defendants
from Cross-Examining MT's Witnesses

At the beginning of the second day of a two-day jury

trial, in response to a question posed by the jury, the trial

court explained the scope of its October 19, 2010 sanction

order to the attorneys, outside the presence of the jury, as

follows:

3
The record does not reveal that Fukuda was ordered to
appear, which would have justified the entry of default
judgment under Rule 4:12(b)(2)(C) and under Brown v. Black, 260
Va. 305, 310-11, 534 S.E.2d 727, 729-30 (2000). However, this
issue was not raised on appeal and we will not consider it.

18
 [I]t precludes the defendant[s] from introducing
any evidence, which means the evidence the
defendants introduce has to support [MT's]
claims. The order specifically says introducing
any evidence at trial in support of any of the
defenses they allege. It doesn't say defenses as
to liability. It doesn't say defenses as to
damages. It says in support of any of the
defenses they alleged. So it's clear the
defendants' evidence has to support the
plaintiff's amended complaint.

The order also . . . precludes the defendants
from opposing the claims [MT] alleged within its
amended complaint . . . . The order says claims.
So it precludes the defendant[s] from opposing
the claims in the amended complaint, and that
means if we have to go over the amended complaint
and identify everything that's a claim, then
that's what we have to do, but it's clear that
the jury is confused as you can see from the
note, and it's clear that the Court has to
correct any mistakes that the Court made
yesterday in allowing the defendants to oppose
claims plaintiff alleged in the complaint or
introduce any evidence, whether that evidence
came through testimony on cross-examination,
whether that evidence came through witnesses.

The trial court told the parties it would "tell the jury

that there have been prior decisions in this case which

preclude the defendants from opposing the plaintiff's claims in

the amended complaint and will preclude the defendants from

introducing any evidence at trial. A denial is an opposition.

An attack on credibility is an opposition." The trial court

interpreted the sanction it imposed against Cristol, Nolte,

Miller, and Koenig, precluding them "from opposing the claims

[MT] alleged . . . or introducing any evidence at trial in

19
support of any of the defenses," to prohibit cross-examination

of MT's witnesses.

Limiting a party's right to cross-examination as a

sanction for discovery abuses is not without precedent. But,

in the case of a default judgment rendered pursuant to Rule

3:19(c), the defendant is permitted to participate in the

damages hearing by opposing and objecting to the plaintiff's

damages proof, and itself "offer[ing] evidence regarding the

quantum of damages." Here the trial court correctly found that

a lesser sanction than default judgment was warranted.

However, in the particular circumstances of this case, we hold

that it was an abuse of discretion to prohibit cross-

examination and introduction of evidence by defendants in the

damages presentation to the jury. The sanction was too harsh.

E. Withdrawing the Issue of Liability from the Jury

The defendants assert that the "trial court erroneously

withdrew the issue of liability from the jury." At the

beginning of the second day of the jury trial, the trial court,

in discussing MT's burden, stated that "[MT] still has to

establish all of the elements and [MT] still has the burden of

proof." The trial court further stated that "there are five

counts in the complaint and [MT has] to present evidence

sufficient to meet those counts by the requisite burden of

proof and the defendant[s] can argue that [MT] did not meet

20
that burden of proof." The defendants suggested that the trial

court certify an interlocutory appeal pursuant to Code § 8.01-

670.1. The trial court declined the request. At that time,

the trial court had not made a ruling withdrawing the issue of

liability from the jury.

At the conclusion of the evidence, the trial court

informed the attorneys of the instructions it intended to give

and those it did not intend to give to the jury. The

defendants made no objections at this time. The trial court

then called the jury back into the courtroom.

In reading the instructions to the jury, the trial court

stated:

The issues in this case are, number one, the
amount of damages proximately caused from
plaintiff's claim of the individual defendants'
tortious interference with its business
expectancy; number two, the amount of damages
proximately caused from plaintiff's claim of the
individual defendants' tortious interference with
its agreements with John Magno and Laser
Energetics, Incorporated; number three, the
amount of damages proximately caused from
plaintiff's claim of the individual defendants'
tortious interference with its business
expectancy and the relationship between John
Magno and Ronald Trice; number four, the amount
of damages proximately caused from Cristol's
breach of its equipment lease with plaintiff;
number five, the amount of damages proximately
caused from plaintiff's claim of the defendants'
conspiracy to injure plaintiff in its trade,
business, profession or occupation.

21
(Emphasis added.) The defendants did not object to this

instruction.

Moreover, the verdict form did not ask the jury to

consider liability; rather, it only asked the jury to fix the

amount of MT's damages. Specifically, the trial court stated:

The final instruction is the jury verdict
form that must be signed by the foreperson when
the jury has reached a unanimous verdict. It
reads as follows. We, the jury, on the issues
joined, find in favor of the plaintiff against
the following defendants and award damages as
indicated. Cristol, LLC compensatory; Koichi
Fukuda, compensatory blank, punitive blank,
total; Andrew Miller compensatory blank, punitive
blank, total blank; Bruce Nolte compensatory,
punitive, total; Gregory Koenig compensatory,
total. We, on the issues joined find in favor of
the plaintiff. Signed by the foreperson.

Again, the defendants did not object to the trial court's

instruction. The trial court then stated that "the jury is now

ready for closing argument."

After closing arguments and after the jury returned a

verdict for MT, the trial court informed the attorneys of the

timeline for filing post-trial motions. The defendants then

stated, "[w]e'll just note our objections for the record, Your

Honor, and the substance will be in the post-verdict motions."

Significantly, however, the defendants did not object at trial

to the trial court's ruling submitting only the issue of

damages to the jury.

22
 In oral argument before the Court, counsel conceded that

the defendants did not object to the trial court's withdrawal

of liability from the jury's consideration until after the jury

returned its verdict. Nonetheless, defendants maintain that

the assignment of error was preserved because "it was raised at

a time in which the trial court still had the ability to do

something about it."

We have previously stated:

The purpose of Rule 5:25 is to give the
trial court an opportunity to rule on a matter
with knowledge of the substance of a party's
objection, in order to avoid needless mistrials,
reversals, and appeals. Generally, the reasons
for objecting to the grant or refusal of a jury
instruction must be presented to the trial court
before such objection will be considered on
appeal. The objection must be made in the trial
court when the instruction is tendered.

Morgen Indus. v. Vaughan, 252 Va. 60, 67-68, 471 S.E.2d 489,

493 (1996) (internal citations omitted) (emphasis added).

Because the defendants first objected to the trial court

withdrawing the issue of liability from the jury in a "Motion

To Set Aside Verdict And For New Trial" on January 5, 2011,

which was 15 days after the trial court instructed the jury, we

hold that this assignment of error is barred by Rule 5:25

because the defendants did not state their objection to the

trial court's ruling "with reasonable certainty at the time of

the ruling." Rule 5:25.

23
 Because we hold that the trial court abused its discretion

by forbidding cross-examination of witnesses regarding damages,

we will reverse and remand the judgment of the trial court for

further proceedings. Because of the posture of this case, it

is unnecessary to address defendants' assignment of error

regarding trebling of damages for statutory conspiracy.

III. Conclusion

We will reverse the judgment of the trial court in part

and remand the case for further proceedings on damages only.

At such hearing, the issue of damages for statutory conspiracy

and tortious interference shall be tried and the defendants

will be permitted the opportunity to cross-examine witnesses

and introduce evidence addressing the amount of damages to be

recovered by plaintiff. However, because the trial court's

imposition of a Rule 4:12(b)(2)(B) sanction is affirmed, on

remand the defendants may not challenge their liability for

recovery of any damages that are found by the trier of fact on

the claims presented in counts I through V of the amended

complaint.

Affirmed in part,
reversed in part,
and remanded.

JUSTICE POWELL, concurring in part and dissenting in part.

24
 I agree with the majority’s holding that the trial court

abused its discretion in prohibiting the defendants from cross-

examining or introducing evidence regarding the quantum of

damages. While I also recognize that Rule 4:12(b)(2)(B) allows

the trial court to refuse to allow a disobedient party to

support or oppose designated claims or defenses, the Rule must

yield to the right of basic cross-examination. Thus, I write

separately to emphasize the well-established principle that

cross-examination of adverse witnesses is an absolute right.

Although the trial court would allow the defendants to

cross-examine MT’s witnesses, it limited such cross-examination

to only offering evidence in support of MT. In other words, it

refused to allow the defendants to test the prejudice or bias

of any of MT’s witnesses. Clearly, such limitation was

prejudicial to the defendants and their already meager case.

Furthermore, it should be noted that the trial court’s

sanction applied to both aspects of the case, liability and

damages. Although the majority recognizes that the trial

court’s sanctions were a lesser sanction than default judgment

and that the trial court compounded the impact of its sanction

ruling, the majority limits its holding strictly to the issue

of damages. In other words, the majority ignores the fact that

the defendants were not able to cross-examine MT’s witnesses on

the issue of liability. The majority offers Rule 3:19(c)(3) as

25
an example of the fact that cross-examination is allowed “even

in the case of a default judgment.” The majority subsequently

notes that there was no default judgment in this case, but then

inexplicably applies Rule 3:19(c), which only applies to

default judgment, to allow cross-examination on only the issue

of damages. Thus, the majority interprets the same sanction in

two different ways: with regard to liability, as only requiring

MT to present unopposed prima facie evidence; with regard to

damages, as only striking the defendants’ affirmative defenses.

On day two of the trial, the trial court removed the issue

of liability from the jury. In so doing, the trial court

specifically stated:

The plaintiff still has to establish all of the
elements and the plaintiff still has the burden
of proof. Whether it’s preponderance, whether
it’s clear and convincing, the plaintiff
obviously has the burden of proof, and the
defendant can move to strike the plaintiff’s
evidence after the plaintiff presents that
evidence and the Court will rule on the motion
to strike . . . .

. . . .

[T]o the extent there are five counts in the
[complaint] and those counts are statutory
conspiracy, three tortious interference counts
and one breach of contract or unjust enrichment
count, the plaintiff does have to present
evidence sufficient to meet those counts by the
requisite burden of proof and the defendant can
argue that the plaintiff did not meet that
burden of proof.

(Emphasis added).

26
 Clearly, the plaintiff was still required to prove

liability. The fact that the trial court was deciding the

issue of liability is not the same thing as granting default

judgment on the issue of liability.

For two centuries past, the policy of the Anglo-
American system of evidence has been to regard
the necessity of testing by cross-examination as
a vital feature of the law. The belief that no
safeguard for testing the value of human
statements is comparable to that furnished by
cross-examination, and the conviction that no
statement (unless by special exception) should
be used as testimony until it has been probed
and sublimated by that test, has found
increasing strength in lengthening experience.

5 Wigmore on Evidence § 1367, at 32 (James H. Chadbourn ed.,

rev. ed. 1974).

Recognizing the important function cross-examination

serves, the United States Supreme Court has stated that “[i]n

almost every setting where important decisions turn on

questions of fact, due process requires an opportunity to

confront and cross-examine adverse witnesses.” Goldberg v.

Kelly, 397 U.S. 254, 263 (1970). Similarly, this Court has

recognized that “cross-examination on a matter relevant to the

litigation and put in issue by an adversary’s witness during a

judicial investigation is not a privilege but an absolute

right.” Basham v. Terry, 199 Va. 817, 824, 102 S.E.2d 285, 290

(1958) (citations omitted) (emphasis added). “Although the

court has discretion to control the manner and scope of cross-

27
examination[], it is only after the right of cross-examination

has been ‘substantially and fairly exercised’ that the

allowance or disallowance of further cross-examination becomes

discretionary.” Charles E. Friend, The Law of Evidence in

Virginia 112 (6th ed. 2003) (emphasis added). “The

justification for an absolute right is that a rule in the

converse would be prejudicial to the party denied the right of

cross-examination.” Food Lion, Inc. v. Cox, 257 Va. 449, 450,

513 S.E.2d 860, 861 (1999).

This Court has previously explained that where an absolute

right is denied, there can be no exceptions and we must reverse

and remand the judgment below and remand the case for a new

trial on all issues. Id. at 450-51, 513 S.E.2d at 861 (“The

right violated by that ruling is absolute; the adjective

‘absolute’ definitively excludes exceptions.”); see also State

Highway & Transp. Comm’r v. Cantrell, 223 Va. 185, 187, 288

S.E.2d 435, 436 (1982). Furthermore, “[t]he bias of a witness

is always a relevant subject of inquiry when confined to

ascertaining previous relationship, feeling and conduct of the

witness.” Henning v. Thomas, 235 Va. 181, 188, 366 S.E.2d 109,

113 (1988) (quoting Henson v. Commonwealth, 165 Va. 821, 825-

26, 183 S.E. 435, 437 (1936)) (emphasis added). The prejudice

of a witness is a similarly relevant subject of inquiry. Id.

28
(“The bias of a witness, like prejudice and relationship, is

not a collateral matter.” (emphasis omitted)).

It is undisputed that the defendants were denied their

absolute right to cross-examine MT’s witnesses in all aspects

of this case. While I also recognize that the trial court

could have rendered default judgment on the issue of liability

and foregone the presentation of evidence on that issue,

because the trial court did not actually enter default

judgment, its ban on cross-examination was an abuse of

discretion. See Landrum v. Chippenham & Johnston-Willis

Hosps., Inc., 282 Va. 346, 352, 717 S.E.2d 134, 137 (2011).

Accordingly, I would reverse the trial court and remand the

matter for a new trial on both liability and damages.

29