Kirin Brewery of America, LLC v. Virginia Imports, Ltd.

                             COURT OF APPEALS OF VIRGINIA

Present: Judges Kelsey, Petty and Senior Judge Fitzpatrick
Argued at Alexandria, Virginia

VIRGINIA IMPORTS, LTD.

v.     Record No. 2400-06-4

KIRIN BREWERY OF AMERICA, LLC AND
VIRGINIA ALCOHOLIC BEVERAGE
 CONTROL BOARD                                                        OPINION BY
                                                                JUDGE D. ARTHUR KELSEY
KIRIN BREWERY OF AMERICA, LLC                                      SEPTEMBER 18, 2007

v.     Record No. 2464-06-4

VIRGINIA IMPORTS, LTD. AND
 VIRGINIA ALCOHOLIC BEVERAGE
 CONTROL BOARD


                   FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
                              Jane Marum Roush, Judge

               Walter A. Marston, Jr. (Kevin R. McNally; Reed Smith LLP, on
               briefs), for Virginia Imports, Ltd.

               Warwick R. Furr, II (Thomas M. Brownell; Holland & Knight LLP,
               on briefs), for Kirin Brewery of America, LLC.

               Carla R. Collins, Assistant Attorney General (Robert F. McDonnell,
               Attorney General; Francis S. Ferguson, Deputy Attorney General, on
               brief), for the Virginia Alcoholic Beverage Control Board.


       These consolidated appeals arise out of a franchisor-franchisee dispute governed by the

Beer Franchise Act, Code §§ 4.1-500 to 4.1-517. Like most other franchise statutes, the Beer

Franchise Act grants franchisees legal rights beyond those consensually conferred by the

franchise agreement. Among those statutory rights is a prohibition on breweries “unilaterally”

terminating the agreement without proper “notice” under Code § 4.1-506 and “good cause”

under Code § 4.1-505. Disputes over the notice and good cause requirements are resolved, at

least in the first instance, by the Virginia Alcoholic Beverage Control Board. Appeals of the
ABC Board’s rulings proceed under the Administrative Process Act, Code § 2.2-4000 et seq.,

first to the circuit court and then to the appellate courts.

        This particular dispute has run its full course once already. In Virginia Imports, Ltd. v.

Kirin Brewery of America, LLC, 41 Va. App. 806, 589 S.E.2d 470 (2003) (Virginia Imports I),

we reversed in part and remanded the circuit court’s ruling which, in turn, had reversed the ABC

Board’s ruling. On remand from Virginia Imports I, the circuit court referred the continuing

dispute to the ABC Board for further proceedings consistent with our opinion. The ABC Board

rendered another decision; both sides appealed the ABC Board’s decision to the circuit court;

and both sides have appealed the circuit court’s decision to us.

        We now affirm.

                                                   I.

        Kirin Brewery of America, LLC had a distributor agreement with Virginia Imports,

Limited, a Virginia beer wholesaler, for over twenty years. Kirin notified Virginia Imports in

1999 of its intent to terminate the agreement because Virginia Imports allegedly had failed to

comply with Kirin’s policy of beer freshness, improperly sold Kirin beer outside the contractual

sales territory, and exhibited substandard sales and service performance. As required by the Beer

Franchise Act, Kirin sent a copy of the termination notice to the ABC Board. See Code

§ 4.1-506(A). According to statute, the notice had to be given at least 90 days prior to Kirin’s

“intended” termination. Id.

        The Beer Franchise Act allowed the wholesaler-franchisee, Virginia Imports, to render

the brewery’s termination notice “void and without legal effect” by curing the conditions

supporting the notice and by giving a written response to the termination notice letter within 60

days with a copy of the response letter mailed to the ABC Board. See Code § 4.1-506(B).

Virginia Imports sent Kirin its response letter a day after the expiration of the 60-day deadline


                                                  -2-
but neglected to send a copy to the ABC Board. Kirin, however, requested a hearing seeking a

determination from the ABC Board that it had good cause to terminate the agreement.

       The Secretary of the ABC Board, unaware that Virginia Imports had responded (albeit a

day late) to Kirin’s termination notice, wrote Kirin a letter. “Our records indicate,” the Secretary

advised Kirin, that “your company gave notice to Virginia Imports, Ltd., of your intent to

terminate your agreement” with Virginia Imports. “More than ninety days have now passed

since that notice, and we have received neither a notice from the wholesaler that it has taken

action to rectify the conditions constituting the reason for the termination, nor a request for a

hearing on the issue of reasonable cause.” As a consequence, the Secretary concluded, the

agreement “was effectively terminated” ninety days after Kirin’s termination notice. The

Secretary ended his letter with the assurance that “Kirin is free to appoint other distributors” in

place of Virginia Imports.

       The day after receiving the Secretary’s letter, Kirin entered into a new franchise

agreement with another distributor. Kirin did not notify the ABC Board of Virginia Imports’s

response letter. Nor was Virginia Imports informed of its mistake in not sending a copy of its

response letter to the ABC Board.

       After receiving the Secretary’s letter, Virginia Imports requested reinstatement of the

distributor agreement based upon the mistake. The ABC Board refused to reinstate the franchise

but held nonetheless that no good cause justified Kirin’s termination of the agreement. Based on

that finding, the ABC Board ordered Kirin to compensate Virginia Imports for the value of the

terminated agreement. See Code § 4.1-508(A) (authorizing monetary remedies in addition to

reinstatement). Finding Kirin to have acted in “bad faith,” the ABC Board also ordered Kirin to

pay Virginia Imports’s attorney fees. See Code § 4.1-509.




                                                -3-
       Kirin appealed to the circuit court pursuant to the Virginia Administrative Process Act,

Code § 2.2-4026. In a cascading series of alternative rulings, the circuit court held first that the

ABC Board had no authority to decide the case. It lacked authority because Virginia Imports

failed to mail its response letter to the ABC Board within 60 days or to request a hearing within

90 days as the notice statute required. That procedural default, the circuit court held, precluded

the ABC Board from adjudicating any aspect of the dispute.

       “Even if the Board were authorized to adjudicate the matter,” the circuit court further

held, it “erred in determining that Kirin terminated the agreement.” Kirin Brewery of Am., LLC

v. Va. Imps, Ltd., 60 Va. Cir. 151, 157-58 (Fairfax County 2002) (emphasis added). The

franchise was “terminated by operation of law,” id., the court stated, just as the Secretary’s letter

implied. “Kirin itself did not terminate or cancel its agreement with Virginia Imports,” id., the

court concluded.

       “Even if Kirin had terminated” the agreement, the circuit court again held in the

alternative, the administrative record did not support the ABC Board’s determination that no

good cause existed to terminate the agreement. Id. at 158 (emphasis added). The court found

that the ABC Board’s decision focused only on one good-cause allegation (the stale-beer

complaint) and ignored the other grounds Kirin asserted in its notice of termination.

       Finally, the circuit court rejected the ABC Board’s award of attorney fees. The record,

the court stated, could not support the conclusion that Kirin acted in bad faith because Kirin

merely relied on the Secretary’s letter, which correctly spoke of the distributor agreement being

“effectively terminated” as a matter of law. Kirin’s reliance on the Secretary’s letter, the court

reasoned, could not be characterized as bad faith.

       Virginia Imports appealed. A panel of this Court held that Virginia Imports’s “failure to

mail a copy of its cure notice to the ABC Board under Code § 4.1-506(B) or request a hearing


                                                -4-
under Code § 4.1-506(D)” created no jurisdictional defect divesting the ABC Board of

jurisdiction. Virginia Imports I, 41 Va. App. at 826, 589 S.E.2d at 480. The panel agreed with

the circuit court that the ABC Board erred by addressing only one of Kirin’s purported causes for

termination (the stale-beer allegation). The panel concluded, however, that the proper remedy

was for the circuit court to remand the case back to the ABC Board for consideration of the other

good-cause grounds asserted by Kirin. Id. at 831-32, 589 S.E.2d at 482-83. Finally, on the issue

of attorney fees, the panel affirmed the circuit court’s holding that Kirin did not act in bad faith

in terminating the distributor agreement.

       The panel’s ruling briefly addressed the circuit court’s alternative holding that Kirin

never terminated the agreement because it was extinguished by operation of law. The subject,

however, came up only in the portion of the opinion addressing the ABC Board’s authority to

examine Kirin’s good-cause reasons for issuing its termination notice. As the panel noted:

               Kirin argues the circuit court correctly held that, because Virginia
               Imports failed to comply with the mailing requirement of Code
               § 4.1-506(B) or request a hearing under Code § 4.1-506(D), the
               distributorship agreement between Kirin and Virginia Imports
               ended by operation of law ninety days after Kirin sent its August 3,
               1999 termination letter to Virginia Imports. Thus, Kirin argues,
               the ABC Board did not have authority to hold hearings and render
               a decision in this case.

Virginia Imports I, 41 Va. App. at 820, 589 S.E.2d at 477 (emphasis added).

       Rejecting this thesis, the panel overturned the circuit court’s principal holding that the

ABC Board lacked authority to adjudicate the good-cause issue and ordered the ABC Board on

remand to examine the good-cause grounds asserted by Kirin that had not been previously ruled

upon in the administrative process. The panel opinion defines the scope of the remand this way:

               Accordingly, we . . . remand this matter to the circuit court for
               remand to the ABC Board with instructions to consider, upon the
               existing evidentiary record, all of the deficiencies asserted by Kirin
               in its August 3, 1999 letter, except the deficiency already
               addressed and ruled upon relating to Kirin’s freshness policy, and

                                                 -5-
               to determine with respect to each of those previously unaddressed
               deficiencies whether Kirin satisfied its burden of proving it had
               good cause to terminate the subject distributorship agreement.

Virginia Imports I, 41 Va. App. at 831-32, 589 S.E.2d at 482-83 (emphasis added). The

conclusion of the opinion repeated the limited scope of the remand: “In sum, we . . . remand the

case to the circuit court for remand to the ABC Board for further proceedings consistent with this

opinion.” Id. at 834-35, 589 S.E.2d at 484. Similarly, the mandate stated that “this matter is

remanded to the trial court for remand to the ABC Board for further proceedings consistent with

the views expressed in the written opinion of this Court.” (Emphasis added.)

       Seeking an en banc as well as a panel rehearing, Kirin asserted the panel overlooked the

operation-of-law termination point. Because it could be liable only for unilaterally terminating

the agreement (and not for being a mere bystander to a termination by operation of law), Kirin

claimed the panel’s decision ordered a futile evidentiary remand. “Because Kirin did not

terminate the agreement,” Kirin argued, “regardless of cause, there is nothing for the ABC Board

to adjudicate.” Kirin’s Pet. for Reh’g at 4-5 (No. 2751-02-4). Both the en banc Court and the

panel declined to rehear the appeal. 1

       About the same time as the panel decision and the denial of Kirin’s rehearing request, the

United States District Court for the Eastern District of Virginia issued a ruling in a fraud suit

filed by Virginia Imports against Kirin arising out of the same distributor termination episode.

See Virginia Imps, Inc. v. Kirin Brewery of Am. LLC, 296 F. Supp. 2d 691 (E.D. Va. 2003).

The district court granted summary judgment to Kirin, finding the applicable statute of

limitations barred Virginia Imports’s fraud allegations.



       1
         In Virginia Imports I, Kirin’s appellate brief couched the termination by operation of
law argument as a rationale for why the ABC Board had no authority to hear the case — not as
an alternative holding which, by itself, mooted all other issues. The panel answered the
argument exactly as Kirin presented it on brief.

                                                -6-
       On remand to the circuit court, Kirin objected to any further remand to the ABC Board,

claiming the circuit court’s prior ruling (that Kirin did not unilaterally terminate) survived the

appellate panel’s decision. That undisturbed circuit court ruling, Kirin contended, mooted every

issue in the case and rendered any further remand illusory. As Kirin put it to the circuit court:

“Because Kirin did not terminate the agreement (regardless of whether it had ‘good cause’ to do

so), there is nothing for the ABC Board to adjudicate. In fact, it is precluded from doing so by

law of the case, and any decision to the contrary would be reversible error.” Kirin’s Mot. to

Dismiss/Plea in Bar Br. at 10. Kirin’s argument, in other words, was that the law-of-the-case

doctrine has the anomalous effect of requiring the circuit court to disobey the panel’s mandate in

Virginia Imports I.

       Kirin also argued the federal district court’s summary judgment order barred any further

litigation over the entire dispute. The fraud claim and the statutory action under the Beer

Franchise Act, Kirin claimed, were essentially the same. Asserting claim preclusion principles

of res judicata, Kirin contended the federal district court’s statute-of-limitations ruling barred

both the circuit court and the ABC Board from exercising any further jurisdiction.

       The circuit court nonetheless remanded the case to the ABC Board for further

proceedings as directed by the Virginia Imports I mandate. On remand, the ABC Board

reviewed Kirin’s evidence of good cause and found (as it had already with respect to the stale-

beer allegation) none of it convincing. The ABC Board, however, refused to address the

question of bad faith and thus declined to make an award of attorney fees — reasoning that

Virginia Imports I had ended any further inquiry into that issue. On appeal to the circuit court,

the ABC Board’s decision was upheld despite Kirin’s continued assertion that the case should

have never been remanded to the ABC Board in the first place.




                                                -7-
       Kirin now appeals the circuit court’s decision affirming the ABC Board’s finding that

Kirin did not have good cause to terminate the distributor agreement. Virginia Imports appeals

the circuit court’s decision affirming the ABC Board’s refusal to award attorney fees against

Kirin for bad faith. We consolidated both appeals for purposes of oral argument and decision.

                                                  II.

               A. KIRIN’S APPEAL OF NO-GOOD-CAUSE-TERMINATION HOLDING

       Kirin challenges the circuit court’s affirmance of the ABC Board’s finding that Kirin

terminated the agreement without good cause. For three reasons, Kirin argues, we should

reverse this finding:

       (i)       The circuit court was right all along — Kirin did not unilaterally terminate
                 the agreement; that happened by operation of law. Because Virginia
                 Imports I did not address this issue, the law-of-the-case doctrine required
                 the circuit court to either disobey the remand mandate or, failing that, to
                 reverse the ABC Board for deciding the case against Kirin on remand.

       (ii)      The Beer Franchise Act, Code § 4.1-517(B), implies in law a
                 “reasonableness” qualification on “every term and provision” of the
                 distributor agreement. The ABC Board’s decision, affirmed by the circuit
                 court, violated this provision.

       (iii)     Under claim preclusion principles of res judicata, the federal district
                 court’s summary judgment in the fraud action barred any remand
                 proceedings before the ABC Board and precludes any award against Kirin
                 under the Beer Franchise Act.

We find no legal merit in any of these arguments.

       (i) Unilateral Termination & Law of the Case

       Kirin’s first argument employs this tiered syllogism: The circuit court previously held

(as one of its three alternative holdings) that Kirin did not unilaterally terminate the distributor

agreement — that happened by operation of law. Virginia Imports did not appeal that specific

issue, choosing instead only to contest the circuit court’s other two holdings. Virginia Imports I

thus never ruled on the point, making the circuit court’s ruling binding law of the case. Thus, the



                                                 -8-
ultimate conclusion: Because Kirin did not unilaterally terminate the distributor agreement, it

does not matter whether Kirin had good cause to do something it never did. 2

       The problem with Kirin’s argument is that, if true, it proves too much. If law of the case

precludes us from doing anything other than reversing the circuit court and entering final

judgment in Kirin’s favor, then, for exactly the same reason, it would have precluded Virginia

Imports I from issuing a wholly meaningless mandate requiring the ABC Board to further

examine Kirin’s allegations of good cause. To be sure, if Kirin were right, Virginia Imports I

would have stated that the whole termination dispute is simply beside the point because the

circuit court held Kirin never terminated the distributor agreement and Virginia Imports never

challenged that holding.

       For the same reason, if the law-of-the-case doctrine precluded the circuit court from

remanding the case to the ABC Board (as Kirin argued below), then the circuit court would have

had no option but to disobey our mandate — an appellate order specifically directing the circuit

court to remand the case to the ABC Board. Circuit courts have no such authority. “A trial court

has no discretion to disregard our lawful mandate. When a case is remanded to a trial court from

an appellate court, the refusal of the trial court to follow the appellate court mandate constitutes

reversible error.” Rowe v. Rowe, 33 Va. App. 250, 258, 532 S.E.2d 908, 912 (2000). 3

       The mandate rule, itself an application of the law-of-the-case doctrine, forecloses further

litigation of “issues expressly or impliedly decided by the appellate court.” United States v. Bell,

5 F.3d 64, 66 (4th Cir. 1993). Even read in the most critical light, Virginia Imports I at least

“impliedly decided,” id., against Kirin on its termination-by-operation-of-law argument and

       2
         We agree with Kirin as to the proper interpretation of the circuit court’s alternative
holding. See supra at 4. It was not, as the circuit court later described it, a mere dictum taken
out of context by Kirin.
       3
         We acknowledge exceptions exist to this rule. See generally Invention Submission
Corp. v. Dudas, 413 F.3d 411, 414-15 (4th Cir. 2005). None apply in this case, however.

                                                -9-
similarly rejected the circuit court’s alternative holding on this ground. The law-of-the-case

doctrine, especially its mandate rule iteration, defeats rather than supports Kirin’s position.

       For similar reasons, we do not read the text of Virginia Imports I to be as indifferent to

Kirin’s termination-by-operation-of-law argument as Kirin asserts. It is true, we admit, that

Virginia Imports I did not include a separate section in its analysis devoted solely to the circuit

court’s alternative holding that Kirin did not terminate the agreement. It is untrue, however, that

Virginia Imports I wholly ignored the issue. As previously noted, the panel opinion addressed

Kirin’s argument as one of the grounds supporting Kirin’s conclusion (accepted by the circuit

court and adopted as its principal holding) that the ABC Board had no authority to address the

termination dispute in the first place. The panel opinion necessarily rejected Kirin’s assertion

that it had not terminated the agreement by reversing the circuit court on this point and ordering

the court to remand the case to the ABC Board for further consideration of Kirin’s good-cause

allegations.

       It strikes us as perfectly understandable that Virginia Imports I would summarily reject

(even if it did not more directly address) Kirin’s assertion that “the ABC Board (not Kirin)

effected the termination of the distribution agreement between Kirin and Virginia Imports.”

Kirin’s Opening Br. at 2 (No. 2464-06-4). The ABC Board does not terminate agreements; it

merely approves or disapproves terminations initiated by breweries. See generally 5 Gladys

Glickman, Franchising § 4(C) (2007) (stating the Virginia ABC Board “has the responsibility of

determining whether the termination provision of the statute has been violated”). Nor does the

Beer Franchise Act terminate agreements by operation of law. Nothing in the statute suggests

that distributor agreements automatically terminate of their own accord. The statute merely

authorizes breweries to terminate if they can satisfy certain conditions. If the ABC Board

Secretary’s letter could be fairly understood to suggest otherwise, it was simply mistaken.


                                                - 10 -
       Kirin “unilaterally” terminated the distributor agreement, as that term is used in Code

§ 4.1-505, when it issued a termination notice and later (after receiving the Secretary’s letter)

treated the distributor agreement as a nullity. In the context of the Beer Franchise Act, the word

“unilateral” simply means the act of one — as opposed to both — of the contracting parties. The

term excludes bilateral terminations because they represent the consensual action of each of the

contracting parties, thus mooting any need for an elaborate administrative process to protect the

franchisee’s right to object to terminations lacking good cause. 4

       (ii) The Implied Contractual Duty of Reasonableness

       Kirin’s second argument claims the ABC Board’s decision violates “the statutory

requirement of ‘reasonableness.’” Kirin’s Opening Br. at 22 (No. 2464-06-4). We agree the

Beer Franchise Act rests upon the animating prop of reasonableness, both as a discrete

requirement for each contractual term, Code § 4.1-517(B), and as a limitation on any damage

award, Code § 4.1-508. Indeed, the good cause requirement for termination is itself an

adaptation of objective principles of reasonableness. See generally United States v. Myers, 294

F.3d 203, 206 (1st Cir. 2002) (noting good cause “depends on objective reasonableness”); see

also Umbarger v. Virginia Employment Comm’n, 12 Va. App. 431, 435, 404 S.E.2d 380, 383

(1991) (holding that courts “must first apply an objective standard to the reasonableness” of an

employee’s actions in order to assay “good cause”).


       4
          We are unpersuaded by Kirin’s citation to Roman v. Dep’t of Corrections, 808 A.2d 304
(Pa. Commw. Ct. 2002), and Miller v. Hedlund, 813 F.2d 1344 (9th Cir. 1987). Roman
recognized that a party required by statute to do a certain act cannot be said to “unilaterally”
have done it. See Roman, 808 A.2d at 310. We fail to see the relevance of that point here.
Neither the Beer Franchise Act nor the ABC Board Secretary’s letter required Kirin to terminate
the distributor agreement. At no point did Kirin lose the legal capacity to withdraw its
termination notice or to continue its contractual relationship with Virginia Imports. Miller
provides even less support for Kirin’s assertion, as it recognized that a party could be “compelled
to comply unilaterally.” Miller, 813 F.2d at 1350-51 (contrasting “unilateral” versus “concerted”
activity under antitrust law). We need not accept or reject the reasoning of either case, however,
because the Beer Franchise Act does not codify any notion of compulsory termination.

                                               - 11 -
        Kirin reasons that, because Virginia Imports I found Kirin did not act in bad faith and

thus could not be punished with an award of attorney fees, by that same logic Kirin cannot be

found to have terminated the distributor agreement without good cause. To us, this argument

does not follow. Code § 4.1-509 authorizes an award of attorney fees against a party that “has

acted in bad faith” in violating any provision of the Beer Franchise Act. One such provision is

the termination provision, which requires that the party terminating the agreement do so only for

“good cause” under Code § 4.1-505. Bad faith means more than merely the absence of good

cause. A franchisor can rely on a bad cause for terminating an agreement but still act in good

faith. Virginia Imports I adopted just that conclusion when it held Kirin’s reliance on the ABC

Board’s letter precluded a finding of bad faith but nonetheless remanded the case for further

review of Kirin’s allegations of good cause in its termination notice.

        (iii) Res Judicata — Claim Preclusion

        Finally, we need not examine Kirin’s res judicata argument in any detail. 5 A sufficient

reason, dispositive in itself, is that the federal district court had no subject-matter jurisdiction to

adjudicate the Beer Franchise Act statutory claim. 6 That claim can only be asserted before the

ABC Board with further adjudicatory review reserved solely for the state courts under the

Virginia Administrative Process Act. Unlike issue preclusion, a topic Kirin does not raise on

        5
          The point should be distinguished from the “primary jurisdiction” doctrine, which
authorizes a court to defer to certain agency adjudications. See The Country Vintner, Inc. v.
Louis Latour, Inc., 272 Va. 402, 411, 634 S.E.2d 745, 750 (2006). That doctrine has no
application to this appeal.
        6
          Under settled principles, the “effect of a final decree is not only to conclude the parties
as to every question actually raised and decided, but as to every claim which properly belonged
to the subject of litigation and which the parties, by the exercise of reasonable diligence, might
have raised at the time.” Smith v. Holland, 124 Va. 663, 666, 98 S.E. 676, 676 (1919) (emphasis
added). This could-have-litigated-should-have-litigated principle applies to the narrow “same
evidence” test employed by Davis v. Marshall Homes, Inc., 265 Va. 159, 166, 576 S.E.2d 504,
507 (2003), and to the broader transactional approach adopted by Rule 1:6 (promulgated to
supersede the holding in Davis, Kent Sinclair, Guide to Virginia Law & Equity Reform and
Other Landmark Changes § 11.01 et seq., at 245 (2006)).

                                                 - 12 -
appeal, claim preclusion can never apply when the ostensibly barred claim falls outside the

subject-matter jurisdiction of the tribunal and thus could not have been adjudicated in the prior

action. See Lloyd v. Am. Motor Inns, Inc., 231 Va. 269, 271, 343 S.E.2d 68, 69 (1986); see

generally Restatement (Second) of Judgments § 26(1)(c) (1982).

       In sum, we find no merit in the three arguments advanced by Kirin against the circuit

court’s decision to affirm the ABC Board’s finding that Kirin terminated the distributor

agreement without good cause.

                B. VIRGINIA IMPORTS’S APPEAL OF BAD-FAITH HOLDING

       Virginia Imports asserts on appeal that the ABC Board and the circuit court both

mistakenly ruled that Virginia Imports I precluded any further litigation over Kirin’s alleged bad

faith and thus unfairly precluded Virginia Imports from renewing its request for an award of

attorney fees. Though Virginia Imports I affirmed the circuit court’s reversal of the ABC

Board’s prior bad faith finding, Virginia Imports argues, the panel also remanded the case for

further factfinding on good cause. As a consequence, Virginia Import reasons, the panel

likewise contemplated within its mandate that the ABC Board would revisit the issue of bad faith

on any ground found to be insufficient good cause for termination on remand.

       Virginia Imports’s argument is the inverse of the point made earlier by Kirin, when it

argued that the panel’s conclusion that Kirin did not act in bad faith necessarily meant it

terminated the agreement with good cause. Once again, we see the concepts as related but

analytically distinct. Virginia Imports I held Kirin did not act in bad faith and thus could not be

liable for attorney fees. The affirmance was unqualified. It did not figure into the panel’s

remand instructions or its mandate. The only way the bad-faith topic could be considered an

open issue is if it could be viewed as necessarily implied in the panel’s remand of the good-cause




                                               - 13 -
issue. We find no such implication and, thus, affirm the interpretation of Virginia Imports I

made by the ABC Board and circuit court.

       Virginia Imports finds our reasoning inconsistent with Virginia Power v. Westmoreland-

LG&E Partners, 259 Va. 319, 323, 526 S.E.2d 750, 753 (2000), which states: “As explained in

Nassif v. Bd. of Supervisors of Fairfax County, 231 Va. 472, 481, 345 S.E.2d 520, 525 (1986),

‘[w]hen we limit issues on remand we do so with words of limitation or restriction.’” We see no

such inconsistency. The scope-of-remand principle noted in Nassif applies only when an

appellant prevails on one point (thereby succeeding in obtaining an appellate reversal and

remand on this point) and the appellee seeks to raise on remand alternative reasons (never ruled

on by the trial court) for a judgment in his favor. In such cases:

               Unless we say otherwise, the slate is wiped clean, with the result
               that on remand the parties begin anew. It would serve no useful
               purpose, we think, to require a prevailing party [the appellee] to
               assign error to his failure to win on all points in order to protect his
               right to a full and complete trial should his apparent victory be
               reversed and the case remanded.

Nassif, 231 Va. at 480-81, 345 S.E.2d at 525.

       Put another way, the Nassif principle has no application where the appellant loses on a

particular point in circuit court and the appellate court affirms the circuit court on that point,

incidentally reversing in part on some other point — which is what happened here. Virginia

Imports I stated that it “[a]ffirmed, in part, and reversed and remanded, in part.” 41 Va. App. at

835, 589 S.E.2d at 484. We affirmed without qualification “the circuit court’s ruling that the

record does not contain substantial evidence to support the ABC Board’s finding that Kirin acted

in bad faith” in terminating the agreement. Id. at 834, 589 S.E.2d at 484. The part of the case

reversed and remanded was accompanied by “instructions to consider, upon the existing

evidentiary record,” the previously unaddressed good-cause allegations. Id. at 831-32, 589

S.E.2d at 482. Having limited our reverse-and-remand mandate to this discrete topic, we left

                                                 - 14 -
open no opportunity for the litigants to continue litigating issues on which the circuit court had

been unqualifiedly affirmed.

                                                III.

       The circuit court did not err in affirming the ABC Board’s final decision in this case.

Neither Kirin nor Virginia Imports has presented any legally viable reason for holding otherwise.



                                                                                          Affirmed.




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