Lockheed Information Management Systems Co. v. Maximus, Inc.

Present: All the Justices

LOCKHEED INFORMATION MANAGEMENT
SYSTEMS COMPANY, INC., ET AL.

v. Record No. 990500

MAXIMUS, INC.
OPINION BY JUSTICE ELIZABETH B. LACY
January 14, 2000
MAXIMUS, INC.

v. Record No. 990499

LOCKHEED INFORMATION MANAGEMENT
SYSTEMS COMPANY, INC., ET AL.

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Randall G. Johnson, Judge

This is the second appeal arising from the cancellation

of a Notice of Intent to Award a contract to privatize two

child support offices of the Virginia Department of Social

Services (DSS). In 1995, Maximus, Inc. and Lockheed

Information Management Systems Co., Inc. (Lockheed) submitted

bids pursuant to a request for proposals issued by DSS. DSS

issued a Notice of Intent to Award the contract to Maximus.

Pursuant to Code § 11-66, Lockheed filed a protest to DSS's

decision. Among the statements in the protest were

allegations that two members of the evaluation panel had

undisclosed conflicts of interest. The Notice of Intent to

Award the contract was subsequently cancelled.
 Maximus filed this action alleging that Lockheed had

tortiously interfered with its contract expectancy and that

Lockheed, The Center for The Support of Families, Inc., (the

Center) and an employee of the Center engaged in a conspiracy

to injure Maximus' reputation and business in violation of

§§ 18.2-499 and -500. 1

The trial court granted Lockheed's motion to strike at

the close of Maximus' evidence at the first trial and entered

judgment in favor of the defendants because it found that

there was no showing of malice or other egregious conduct. We

awarded Maximus an appeal and reversed, holding that such

evidence was not required as an element of a claim for

tortious interference with contract expectancy. The case was

remanded for further proceedings. Maximus, Inc. v. Lockheed

Inf. Mgmt. Systems, 254 Va. 408, 493 S.E.2d 375 (1997).

At the second trial, the jury returned a verdict in favor

of Maximus for $1,500,000 on the tortious interference with

contract expectancy claim, Count I, and for $3,000,000 on the

conspiracy claim, Count II. Following post-trial motions and

briefing, the trial court denied Lockheed's motions to strike

the evidence and to set aside the verdict, but reduced the

amount of the verdict. The trial court determined that the

1
The claim against the employee was eventually non-
suited.

2
damages claimed under both Count I and Count II were

identical, and, accordingly, limited Maximus to a single

damage recovery. The trial court further concluded that

Maximus was not entitled to recover the costs it incurred in

preparing the bid or the amounts assigned as lost overhead.

The trial court then granted Maximus' motion for treble

damages pursuant to § 18.2-500 and entered judgment in the

amount of $2,223,372 in damages plus attorneys' fees and

costs.

Lockheed filed an appeal challenging a number of rulings

by the trial court. Maximus filed an appeal limited to the

trial court's determination that Maximus could not recover

lost overhead as part of lost profits. We granted both

petitions for appeal and have consolidated the appeals.

FACTS

In November 1994, DSS issued a request for proposals

pursuant to the Virginia Public Procurement Act, Code §§ 11-35

through –80. DSS sought to privatize two child support

enforcement offices in Northern Virginia. Lockheed and

Maximus submitted timely responses. The proposals were

evaluated by a five member committee, including Carolyn W.

Davis and Ernest Lee Williams, employees of DSS. The

committee was chaired by Jane Hollowell, contracts officer for

3
DSS. A Notice of Intent to Award the contract to Maximus was

issued on April 13, 1995.

Shortly thereafter, the two contracting officers for DSS,

Jane Hollowell and Clifford Crofford, learned that Lockheed

might file a protest, based on a number of issues, including a

possible conflict of interest by two of the members of the

evaluation committee. Joseph Crane, Assistant Director for

Program Development and Administration of the Division of

Child Support Enforcement, sent a memorandum to Michael Henry,

Director of the Division, reciting the anticipated allegations

and raising the possibility that the Notice of Intent to Award

might have to be rescinded. Crane suggested, however, that

assuming nothing new came out in the protest, the Notice of

Intent to Award could stand as issued if the score of one of

the persons alleged to have a conflict of interest were

removed. Henry agreed with this recommendation.

Henry also received a telephone call from Harry W.

Wiggins, the Lockheed Vice President in charge of the bid

proposal and a former head of DSS, telling Henry that if DSS

proceeded with awarding the contract to Maximus, things would

get "ugly" or "bloody."

Lockheed filed its protest on April 25, 1995, accompanied

by the affidavits of Wiggins, Robyn Large, a Center employee

and a former DSS and Lockheed employee, and Christy Leavell, a

4
Lockheed employee. In the protest, Lockheed asserted that

within seven months preceding the posting of the Notice of

Intent to Award, Ernest Lee Williams was an "active candidate

for employment" with Lockheed but was not hired. Lockheed

also stated that Carolyn Davis had been employed by Maximus

while on leave from DSS and that she had been offered

employment with Maximus in Tennessee. The protest also stated

that Maximus asked Davis to submit a resume as a prospective

employee on the bid at issue. Davis complied, and, according

to Lockheed, indicated she would be willing to talk to Maximus

if Maximus received the contract for the Virginia work. The

protest also alleged that Davis called Wiggins seeking

employment with Lockheed at some point after the request for

proposals had been issued.

Based on these allegations, Lockheed argued in its

protest that Williams concealed a material fact regarding his

connection with Lockheed, and that his failure to get the

position could have materially interfered with his objectivity

as a member of the evaluation committee. Lockheed stated that

Davis' situation was "more egregious" than that of Williams,

constituted two violations of the Public Procurement Act, and

affected her ability to render a fair and impartial decision.

Lockheed stated that it was "reluctant to suggest that the

facts and circumstances surrounding Ms. Davis' participation

5
on the Evaluation Committee [rose] to the level of

'corruption.'" Nevertheless, "the seriousness of such an

allegation cannot be trivialized" and "the question must be

asked" whether she used her position on the evaluation

committee "to procure an employment benefit for herself

contrary to her duty and the rights of others." Lockheed also

suggested that because Davis had a better chance of employment

with Maximus than with Lockheed, Davis may have made some

comments at the deliberations which "could have influenced

other committee members in a manner inimical to Lockheed's

interests." Following receipt of the protest, DSS cancelled

the Intent to Award and sent out a new request for proposals.

At trial, Williams testified that he had never applied

for employment with Lockheed and had not been an active

candidate for employment within seven months preceding the

request for proposals. Davis testified that in 1992 she had

served as a consultant to Lockheed for one month while she was

on annual leave from DSS. As shown by a letter, dated March

25, 1992 and introduced into evidence, this arrangement was

known to, and approved by, DSS. Davis also testified, among

other things, that she sent out some resumes anticipating that

she might be required to look for a new job because her

husband was about to be transferred.

6
 Finally, Henry testified that he recommended to the DSS

Commissioners that the Notice of Intent to Award should be

cancelled for reasons of expediency, because Lockheed was

going to "tie us up" in proceedings, and "fear of a public

spectacle" resulting from the strong allegations in the

protest.

We begin by addressing the assignments of error raised by

Lockheed in its appeal.

I.

Lockheed Information Management Systems
Company, Inc., et al. v. Maximus, Inc.
Record No. 990500

A. PRIVILEGE

Lockheed asserts that the trial court erred in denying

its motion for summary judgment because the statements made in

its protest, even if false and misleading, were absolutely

privileged. Lockheed further argues that even if the

statements were not absolutely privileged, Lockheed was

entitled to an affirmative defense of lawful justification or

qualified privilege and the trial court erred in denying

Lockheed's jury instruction on that defense. We first

consider Lockheed's contention regarding the existence of an

absolute privilege.

1. Absolute Privilege

a. Judicial Proceeding

7
 Lockheed argues that because the statements at issue were

made in the course of a quasi-judicial or administrative

hearing, they were entitled to an absolute privilege. We

disagree. We have held that false, misleading, or defamatory

communications, even if published with malicious intent, are

not actionable if they are material to, and made in the course

of, a judicial or quasi-judicial proceeding. Penick v.

Ratcliffe, 149 Va. 618, 636-37, 140 S.E. 664, 670 (1927).

This absolute privilege has been extended to communications

made in administrative hearings so long as the "safeguards

that surround" judicial proceedings are present. Elder v.

Holland, 208 Va. 15, 22, 155 S.E.2d 369, 374 (1967). Those

safeguards include such things as the power to issue

subpoenas, liability for perjury, and the applicability of the

rules of evidence. Id. The bid protest proceeding in which

the statements complained of in this case were made, however,

did not have the safeguards inherent in a judicial proceeding.

Lockheed's protest was filed pursuant to § 11-66(A) which

provides the procedure for an unsuccessful bidder to file a

protest to the action of a public body in the procurement

process. The public body or its designated agent must render

a written decision on the protest within ten days of receiving

the protest stating the reasons for the action. That decision

is final unless appealed. Neither notice nor hearing is

8
afforded any other party or bidder, including the successful

bidder. This procedure contains none of the safeguards

identified in Elder as prerequisites for the application of

the absolute privilege defense. 2 While these safeguards may

attach in an appeal of the decision, the absence of the

safeguards from the proceeding in which the statements are

made precludes application of the absolute privilege defense

to those statements.

b. Affidavits

Lockheed also argues that it was entitled to an absolute

privilege because the complained of statements were contained

in affidavits. Lockheed asserts that the protection of

absolute privilege was extended to affidavits in Donohoe

Construction Co. Inc. v. Mount Vernon Associates, 235 Va. 531,

538, 369 S.E.2d 857, 861 (1988), because the Court in that

case described the execution of an affidavit as a "judicial

act." Lockheed misconstrues Donohoe.

Donohoe was a mechanic's lien case in which the Court

concluded that, because filing the mechanic's lien affidavit

to perfect the lien is a prerequisite to filing suit to

2
Subsection C of § 11-66 requires notice and hearing
prior to a determination that the bid award was based on
fraud, corruption, or a violation of the Act. However, the
provisions of that subsection are not relevant to our inquiry
here because there was no proceeding under that subsection in
connection with Lockheed's protest.

9
enforce the lien, the filing of the lien and the suit to

enforce the lien were inseparable. Id. at 539, 369 S.E.2d

861. Therefore, because the filing of the memorandum of lien

affidavit and the suit to enforce the lien constituted a

single judicial proceeding, the contents of the affidavit were

entitled to an absolute privilege. Id. The doctrine of

absolute privilege was not extended to the mere execution of

any affidavit.

In this case, even if affidavits were required as an

integral part of the protest, which they are not, we have

already concluded that the protest procedure under § 11-66(A)

does not qualify as a judicial proceeding. Thus, Donohoe does

not apply to clothe the statements made in Lockheed's protest

with an absolute privilege because they were contained in

affidavits.

c. Noerr-Pennington Doctrine

Finally, Lockheed argues that it was entitled to an

absolute privilege for its statements under the "Noerr-

Pennington" doctrine. This doctrine is based on United Mine

Workers v. Pennington, 381 U.S. 657 (1965), and Eastern

Railroad Presidents Conference v. Noerr Motor Freight, Inc.,

365 U.S. 127 (1961). The doctrine developed because business

entities seeking to influence legislative or executive policy

which would benefit them and injure competitors were charged

10
with violations of the federal anti-trust laws. Grounded in

the constitutional right to free speech and to petition the

government, the Noerr-Pennington doctrine provides that

persons petitioning the government cannot be charged with

violations of the Sherman Antitrust Act for attempts to

influence legislative or executive action. Pennington, 381

U.S. at 669; Noerr, 365 U.S. at 135. The doctrine also

applies to adjudicatory proceedings before administrative

agencies. California Motor Transport Co. v. Trucking

Unlimited, 404 U.S. 508, 510-11 (1972).

Lockheed asserts that the Noerr-Pennington Doctrine has

been applied to shield conduct from common law business tort

claims as well as from antitrust claims. Citing Gunderson v.

University of Alaska, 902 P.2d 323 (Alaska 1995), and Video

International Production, Inc. v. Warner-Amex Cable

Communications, Inc., 858 F.2d 1075 (5th Cir. 1988), cert.

denied 491 U.S. 906 (1989), Lockheed urges us to extend an

absolute privilege based on the Noerr-Pennington doctrine to

its actions in this case. While both cases cited by Lockheed

applied the Noerr-Pennington doctrine in causes of action for

business torts, we do not find those cases applicable here.

Video International involved the actions of competing

cable television providers and the City of Dallas. The

plaintiff, an unfranchised cable television provider in

11
Dallas, filed suit against the city and Warner-Amex alleging

that the city, at the urging of Warner-Amex, adopted a certain

interpretation of the city's cable franchise agreement with

Warner-Amex 3 and, also at Warner-Amex's urging, filed notices

of zoning violations against the plaintiff based on that

interpretation. This action, according to the plaintiff,

violated its civil rights and antitrust laws and, because it

adversely impacted the consummation of the sale of plaintiff

to a third party, tortiously interfered with a business

contract. On appeal, the Fifth Circuit affirmed the district

court's holding that the Noerr-Pennington doctrine applied to

both the antitrust claims and the business tort claim. 858

F.2d at 1084.

Warner-Amex's actions seeking a specific interpretation

of an ordinance by the city are closely analogous to

petitioning the government to influence public policy. Thus,

the application of the Noerr-Pennington doctrine to the

business tort claim in Video International was consistent with

the traditional application of the doctrine. Here, however,

3
The zoning ordinances included the franchise agreement
between the city and Warner-Amex which provided that no cable
television provider could use the city's streets or operate in
the city without a franchise. The city interpreted "using the
city streets" as including crossing public right of ways or
property lines. Video International Production, Inc. v.
Warner-Amex Cable Communications, Inc., 858 F.2d 1075 (5th
Cir. 1988), cert. denied 491 U.S. 906 (1989).

12
Lockheed did not petition DSS for a particular interpretation

of the procurement law or attempt to influence any other

governmental policy. Lockheed's actions in this case are not

analogous to the "petitioning" of the city by Warner-Amex.

Consequently, an extension of the Noerr-Pennington doctrine

based on Video International is not warranted in this case.

While the facts of Gunderson parallel the instant case,

Gunderson provides no persuasive rationale for applying the

Noerr-Pennington doctrine in this case. The Alaska Supreme

Court allowed application of the doctrine to a common law

business tort claim based on the plaintiff's concession that

the doctrine was applicable. No such concession has been made

by Maximus in this case.

Maximus does not assert that the Noerr-Pennington

doctrine can never be applied in common law business tort

cases. Instead, Maximus argues that, regardless of whether a

claim is one for a violation of an antitrust statute or a

common law business tort, the Noerr-Pennington doctrine should

not be applied in actions involving bid protests because such

activity is not the type of petitioning of the government

which the doctrine was intended to protect. Maximus cites a

number of cases in which courts have refused to apply the

Noerr-Pennington doctrine, not based on the cause of action

13
asserted, but because the activity complained of was not aimed

at influencing governmental policy decisions.

For example, in Whitten v. Paddock Pool Builders, Inc.,

424 F.2d 25 (1st Cir. 1970), a contractor filed suit claiming

that the defendant, its competitor, violated the antitrust

laws by certain actions it took in persuading a public body to

use specifications for swimming pools which could be met only

by the defendant. The First Circuit refused to apply the

Noerr-Pennington doctrine to the defendant's actions holding

that the doctrine is intended to "insur[e] uninhibited access

to government policy makers" and not intended to apply to

instances in which public officials are engaged in purely

commercial dealings. Id. at 32. The Court went on to

conclude that when government officials engage in a

competitive bidding process similar to the type engaged in by

private corporations, no additional First Amendment

protections should be provided. Id. at 33.

Similarly, in F. Buddie Contracting, Inc. v. Seawright,

595 F.Supp. 422 (N.D. Ohio 1984), an unsuccessful bidder sued

the successful bidder and others claiming an antitrust

violation. The plaintiff alleged that the defendants

conspired to secure the award of the contract from the public

body even though the successful bidder was not the lowest

bidder. The trial court denied the defendants' summary

14
judgment motion on a number of grounds including its

conclusion that the activities of the defendants were not the

type of activities protected by the Noerr-Pennington doctrine.

Adopting the "commercial activities exception" developed by

the United States Courts of Appeals for the First, Fifth, and

District of Columbia Circuits, the court stated:

Noerr-Pennington is concerned with the needs of a
representative democracy in the field of public
policy making. These needs are not at issue in
this case, where the parties are concerned with the
award of a competitively bid contract which only
incidentally involves a government body. The basis
for the exception, therefore, does not apply to
this case.

Id. at 439. Thus, under the commercial activities exception,

the Noerr-Pennington doctrine does not apply to cases in which

the government entity is acting as a market participant.

We find the rationale of these cases persuasive. The

Noerr-Pennington doctrine was developed as a protection for

entities petitioning the government in relation to legislative

or policy making matters. The doctrine was not intended to

shield false, misleading, or otherwise improper conduct by

bidders for government contracts, particularly when the

governmental body is acting as a private commercial entity.

The extension of the Noerr-Pennington immunity to Lockheed's

actions in this case would represent a significant step beyond

the intended boundaries of the doctrine and would contravene

15
the policy behind the establishment of the doctrine.

Accordingly, we decline Lockheed's invitation to extend the

application of the Noerr-Pennington doctrine in this case.

2. Qualified Privilege

Lockheed argues that even if it did not have an absolute

privilege, it was entitled to an affirmative defense similar

to a qualified privilege defense on the basis of "legitimate

business competition and protection of the public interest."

Because the trial court refused Lockheed's Jury Instruction I,

Lockheed contends that the jury was erroneously limited to

considering only legitimate business competition as the basis

for its affirmative defense. 4

We have previously acknowledged that an affirmative

defense of justification or privilege applies in a claim for

intentional interference in a business contract. Maximus v.

Lockheed, 254 Va. at 412-13, 493 S.E.2d at 378. We also

identified the five grounds upon which this affirmative

defense is based, none of which includes "protection of the

public interest" as Lockheed asserts. Id.; Duggin v. Adams,

234 Va. 221, 229, 360 S.E.2d 832, 838 (1987); Chavis v.

4
Jury Instruction I provided: "For Count I lawful
justification includes conduct by Lockheed and The Center for
reasons of legitimate business competition or protection of
the public interest."

16
Johnson, 230 Va. 112, 121, 335 S.E.2d 97, 103 (1985). The

jury in this case was instructed that

Lockheed claims that its interference with
Maximus' prospective business relationship with DSS
was justified based upon legitimate business
competition. On this issue, Lockheed has the
burden of proof.
If you find by the greater weight of the
evidence that Lockheed's actions constituted
legitimate business competition with respect to
Maximus' prospective business relationship with
DSS, then you shall return your verdict in favor of
Lockheed on Maximus' tortious interference claim.

This instruction properly presented Lockheed's affirmative

defense to the jury. Accordingly, the trial court did not err

in denying Jury Instruction I.

B. CONSPIRACY

Lockheed contends that Maximus was precluded from

relitigating its conspiracy count in the remanded proceeding

because Maximus did not assign error to the trial court's

order in the first trial as it affected the conspiracy count.

Thus, the trial court's ruling became final as to the

conspiracy count, and, Lockheed argues, the trial court on

remand erred in denying its motion for summary judgment on

this count.

Maximus argues that in the first trial, the trial court

"did not rule at all, much less enter 'judgment' for Lockheed

on Count II." The judgment in favor of Lockheed in the first

case, according to Maximus, was based on the trial court's

17
conclusion that Maximus failed to prove an element of the

tortious interference claim, rather than the conspiracy claim,

and Maximus contends that the language of the trial court's

judgment order in the first case did not specifically refer to

the conspiracy count. We disagree.

At the close of Maximus' evidence in the first trial, the

trial court granted Lockheed's motion to strike the evidence

because it did not show that Lockheed had engaged in malicious

or egregious conduct, elements which the trial court believed

were necessary to sustain a claim of tortious interference

with contract expectancy. Maximus v. Lockheed, 254 Va. at

411, 493 S.E.2d at 376-77. The order entered by the trial

court recited that the "plaintiff shall take nothing and that

judgment be entered in favor of the defendants, plus costs."

In its appeal to this Court, Maximus assigned error to the

trial court's ruling that malice was an essential element of

the tortious interference. Id., 493 S.E.2d at 377. Maximus

did not address conspiracy or Count II in an assignment of

error.

If the order entered by the trial court following the

first trial did not dispose of the conspiracy count, it would

not have been a final, appealable order. A final appealable

order is one which terminates the action leaving nothing to be

done by the trial court except that which is necessary to

18
execute the decree. Lee v. Lee, 142 Va. 244, 250, 128 S.E.

524, 526 (1925). An order is not final and appealable if

claims against the defendant remain unresolved. Leggett v.

Caudill, 247 Va. 130, 133, 439 S.E.2d 350, 351 (1994). Thus,

to be a final appealable order, the order of the trial court

following the first trial of this matter had to dispose of the

entire case, including the conspiracy count. 5

The order of the trial court quoted above entered

judgment in favor of the "defendants" (emphasis added).

Lockheed was the sole defendant in Count I, Tortious

Interference. Maximus' allegations against the remaining

defendants, Robyn Large and the Center, were limited to the

conspiracy count, Count II. The language of the order,

therefore, in entering judgment for all defendants, did

dispose of the conspiracy count and was therefore a final

appealable order. 6

Finally, Maximus relies on Nassif v. Board of

Supervisors, 231 Va. 472, 345 S.E.2d 520 (1986), to support

5
We have held that an order disposing of all claims
against one defendant may be a final appealable order even if
claims against other defendants remain. Dalloul v. Agbey, 255
Va. 511, 515 n.2, 499 S.E.2d 279, 282 n.2 (1998). In this
case, if the order entered sustaining Lockheed's motion to
strike in the first trial had been limited to the tortious
interference claim, it would not have been an appealable order
under this rule because it did not fully dispose of all the
claims against Lockheed.

19
its contention that it was not required to assign error

regarding the conspiracy count and was entitled to assert its

conspiracy count on remand. Specifically, Maximus quotes

language from the opinion that, unless limited by the order of

remand, "the slate is wiped clean, with the result that on

remand the parties begin anew." Id. at 480, 345 S.E.2d at

525. However, in Nassif, the party seeking to "begin anew"

was the appellee in the first appeal. The first appeal was

taken from an order of the trial court sustaining the

appellee's contention that a tax assessment was erroneous.

This order was based on one of the several arguments raised by

the appellee in support of its position but did not address

the remaining contentions. In this context, the Court in

Nassif stated, "[i]t would serve no useful purpose, we think,

to require a prevailing party 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." Id. at 480-81, 345 S.E.2d at 525.

The Nassif case, at most, stands for the proposition that

an appellee does not have to assign cross-error to the failure

of the trial court to address additional arguments in order to

reassert those arguments on remand. It does not, and cannot,

6
Maximus did not seek clarification of the trial court's
order.

20
stand for the proposition asserted by Maximus, that an

appellant does not have to assign error to a ruling disposing

of a cause of action, and if the case is remanded, can then

relitigate a dispositive ruling which was not appealed. Such

a proposition contradicts the doctrine of the law of the case

which provides that where no assignment of error or cross-

error is taken to a part of a final judgment, the judgment

becomes the law of the case and is not subject to

relitigation. Searles' Adm'r v. Gordon's Adm'r, 156 Va. 289,

294-99, 157 S.E. 759, 761-62 (1931).

Maximus was not the prevailing party in the first appeal

and, therefore, under the law of the case, Maximus was not

entitled to relitigate unappealed issues on remand.

For these reasons we conclude that the trial court erred

in denying Lockheed's motion for summary judgment on its claim

that Maximus' failure following the first trial to assign

error to the trial court's judgment relative to its conspiracy

count barred Maximus from litigating that count on remand. 7

C. DAMAGES

Lockheed assigns error to a number of the trial court's

rulings regarding Maximus' damage recovery. These assignments

7
In light of this holding, we need not consider
Lockheed's assignments of error relating to the level of proof
required for the conspiracy count and whether treble damages
under § 8.2-500(a) are mandatory or discretionary.

21
of error involve the application of the "new business rule,"

the qualification of Maximus' expert on lost profits, and

Maximus' duty to mitigate damages. We consider these issues

in order.

1. New Business Rule

Lockheed argues that Maximus had not previously engaged

in the collection of child support payments in Virginia.

Therefore, the venture proposed by Maximus in its response to

DSS's request for proposals was a new business for Maximus and

Lockheed asserts that Maximus' evidence of lost profits should

have been excluded under the "new business rule."

In Mullen v. Brantley, 213 Va. 765, 768, 195 S.E.2d 696,

699-700 (1973), we stated that evidence of the prior and

subsequent earning record of a business can be used to

estimate damages, in the case of an established business with

an established earning capacity. But, where a new business is

involved

the rule is not applicable for the reason that
such a business is a speculative venture, the
successful operation of which depends upon future
bargains, the status of the market, and too many
other contingencies to furnish a safeguard in
fixing the measure of damages. (Citations
omitted.)

Id. at 768, 195 S.E.2d at 700. This principle has become

known as the "new business rule." Commercial Business

22
Systems, Inc. v. BellSouth Services, Inc., 249 Va. 39, 50, 453

S.E.2d 261, 268 (1995).

The trial court observed that if, as Lockheed suggests,

the new business rule were applied as an absolute bar to

damage recovery in this case, a cause of action for

intentional interference with a contract expectancy would be

meaningless, because "anybody anywhere in Virginia could lie,

cheat, and steal to deprive any new business, or any existing

business that has never operated in Virginia, of a contract

expectancy with complete civil impunity." The trial court

rejected this construction of Virginia law, and, relying on

the principle discussed in Wood v. Pender-Doxey Grocery

Company, 151 Va. 706, 144 S.E. 635 (1928), concluded that "the

fact that Maximus had never engaged in collecting child

support in Virginia cannot be used to deprive it of damages."

In Wood, a plaintiff was allowed to recover damages for

breach of contract including lost "good will" even though, as

the appellant argued in that case, the evidence of the damages

was difficult to calculate with mathematical precision or

reasonable certainty. The Court in Wood allowed recovery,

reasoning that in cases involving an intentional wrong

the degree of proof necessary is much relaxed
in favor of the injured party. Where the
wrongdoer creates the situation that makes
proof of the exact amount of damages
difficult, he must realize that in such cases

23
 "juries are allowed to act upon probable and
inferential, as well as direct and positive,
proof." Chesapeake & Potomac Tel. Co. v.
Carless, 127 Va. 5, 102 S.E. 569, 23 A.L.R.
943 (1920).

151 Va. at 713, 144 S.E. at 638. Applying this rationale, the

trial court concluded that Maximus introduced sufficient

evidence upon which "a reasonable estimate of Maximus' lost

profits could be made."

Based on this record, we cannot say the trial court erred

by refusing to apply the new business rule to strike Maximus'

evidence on lost profits. While most newly undertaken

ventures may not have the requisite record of performance and

thus come within the "new business rule," that is a decision

to be made by the trial court in the first instance. In

allowing the jury to consider Maximus' evidence of lost

profits and other damage evidence, the trial court here did

not eliminate the new business rule or the requirement that

damages must be shown with reasonable specificity. The trial

court only held that, in a claim for intentional interference

with a business expectancy, recovery will not be defeated

solely because the business expectancy is not one which is

identical in every detail to the injured party's previous

actual experience. The trial court concluded that in this

case the evidence of previous child support collection

ventures conducted by Maximus in other jurisdictions and

24
evidence of such collections by the DSS in Virginia had

sufficient specificity to allow "a reasonable estimate of

Maximus' lost profits." Using this evidence, the jury was not

required to speculate on Maximus' lost profits. Accordingly,

we will affirm the trial court's ruling allowing evidence of

Maximus' lost profits.

2. Qualification of Expert Witness

Lockheed next argues that even if the new business rule

did not render Maximus' lost profits evidence inadmissible,

the evidence should not have been admitted because it required

expert testimony and Maximus' expert was not qualified to

render such expert testimony.

Arthur Nerret, Maximus' expert, was a certified public

accountant, had worked for a large, international accounting

firm for five years, was a director of finance and vice-

president in private industry for 18 years, and had served as

Maximus' chief financial officer for four years. His

responsibilities included such tasks as financial reporting,

budgeting, forecasting, cost proposal review, and banking and

insurance matters. He testified that he had reviewed the bid

proposal, and validated the direct costs associated with the

project. In response to Lockheed's questions, Nerret

explained the method he used to determine the revenue he

estimated Maximus would receive from its contract with DSS.

25
 Lockheed objected to the admission of Nerret as an expert

to give an opinion on Maximus' potential profit from its

contract with DSS because Nerret had not taken any special

courses on lost profit or damage analysis and did not have

personal involvement in preparing the revenue or cost

information, but instead relied on the calculations of others.

The trial court held that Lockheed's objection went to the

weight of Nerret's testimony, not to his qualification as an

expert witness, and allowed Nerret to give his opinion

testimony.

Whether a witness is qualified to testify as an expert is

a matter within the sound discretion of the trial court and

the trial court's decision will not be set aside on appeal

unless the record clearly shows that the witness is

unqualified. Tazewell Oil Co., Inc. v. United Virginia Bank,

243 Va. 94, 110, 413 S.E.2d 611, 620 (1992). We cannot say

that this record clearly shows that Nerret was not qualified

and, therefore, we will affirm the trial court's ruling

allowing Nerret to testify as an expert witness on the issue

of lost profits.

3. Mitigation of Damages

Lockheed sought to introduce evidence of events occurring

subsequent to cancellation of the initial Notice of Intent to

Award the contract to Maximus. Specifically, Lockheed wanted

26
placed before the jury the following evidence: the second

request for proposals and award to Lockheed; Maximus' protest

of the second award; reversal of that award by the appeals

procurement board; a third request for proposals issued by

DSS; the award of the contract to Lockheed pursuant to the

third request; and Maximus' failure to file a protest to that

award. Lockheed asserts that this evidence was relevant

because, even though Maximus prevailed in having the second

award set aside, by failing to pursue a protest and appeal of

the third award, Maximus made "no attempt in the third

procurement to undo the award to Lockheed in order that it

might recapture what was lost in its contract expectancy."

The trial court was correct in its holding that this

evidence was not admissible to show that Maximus failed to

mitigate its damages. First, whether Maximus would not only

have prevailed in its protest of the third award but also

ultimately would have become the recipient of the contract

award is entirely speculative. Furthermore, § 11-66

authorizes the filing of a protest based upon matters relating

to alleged deficiencies in the contract award, not for

purposes of mitigating damages.

D. ADMISSIONS

27
 Lockheed asserts that the trial court erred because it

allowed Maximus to introduce testimony that contradicted its

responses to Lockheed's requests for admission.

Prior to the first trial in 1996, Lockheed served Maximus

with a number of requests for admissions. Two of those

requests, Nos. 41 and 42, which Maximus admitted provide

respectively:

Evaluation committee member Ernest Lee
Williams, within seven months prior to the day the
Notice of Intent to award was posted, was an active
candidate for employment as district manager of the
Lockheed IMS project in Chesapeake, Virginia. Mr.
Williams was not selected for the position.

All evaluation members including Mr. Williams
stated verbally that they were unaware of any
situation and/or relationship with either of the
two offerors that could be perceived as a reason
for conflict of interest.

At the first trial, Williams testified that he was not an

active candidate for employment with Lockheed. Even though

his testimony conflicted with these admissions, Lockheed did

not object to the testimony, and therefore any reliance on the

admissions was waived. TransiLift Equipment, Ltd. v.

Cunningham, 234 Va. 84, 91, 360 S.E.2d 183, 187 (1987).

Following remand of the case, no further discovery was

undertaken.

At the second trial, when Maximus again asked Williams if

he had been an active candidate for employment with Lockheed

28
within seven months of the Intent to Award, Lockheed objected

based on Maximus' earlier admission. Maximus moved to

withdraw the admissions pursuant to Rule 4:11(b). 8 Lockheed

objected to the motion, arguing that it had already quoted the

admission in opening argument and, therefore, it would be

prejudiced if Maximus were allowed to withdraw the admission

at that point.

After discussion with counsel out of the presence of the

jury, the trial court sustained Lockheed's objection to

Maximus' withdrawal of the admission, stating that whatever

decision it made one of the parties would be prejudiced.

Maximus then proceeded to ask Williams a number of questions

such as whether he had ever submitted an application to

Lockheed, whether he considered a lunch with a representative

of Lockheed to be a job interview, if he was denied employment

with Lockheed, if he harbored any latent resentment against

Lockheed, and whether he had told anyone he had been to lunch

with a Lockheed representative. The record shows that when

8
Rule 4:11(b) states in part:

Any matter admitted under this Rule is conclusively
established unless the court on motion permits
withdrawal or amendment of the admission . . . the
court may permit withdrawal or amendment when the
presentation of the merits of the action will be
subserved thereby and the party who obtained the
admission fails to satisfy the court that

29
Lockheed objected to a question, the trial court considered

whether the question and answer contradicted the admissions,

and overruled objections when it determined the question was

proper. The trial court also allowed Lockheed to read

admissions No. 41 and No. 42 to the jury. The trial court

explained to the jury that the rules of court allow one party

to ask another to admit that certain things are true, thereby

eliminating the need to bring in witnesses to prove those

things.

Decisions on whether testimony contradicts admissions are

committed to the sound discretion of the trial court and will

only be set aside on appeal if those decisions are shown to be

an abuse of discretion. Coe v. Commonwealth, 231 Va. 83, 87,

340 S.E.2d 820, 823 (1986). Based on our review of the record

in this case, we cannot say that the trial court's

determinations on whether the questions and testimony at issue

contradicted the admissions made by Maximus were an abuse of

discretion. Furthermore, if the denial of Lockheed's jury

instruction that Maximus was bound by its admissions was

error, such error was harmless in light of the trial court's

instruction to the jury at the time the admissions were read.

E. MOTION TO STRIKE

withdrawal or amendment will prejudice him in
maintaining his action or defense on the merits.

30
 Following the close of all the evidence, Lockheed moved

to strike Maximus' evidence. The trial court took the matter

under advisement and, after further briefing, denied the

motion. Lockheed assigns error to this ruling in two

particulars: (1) the trial court erred in failing to strike

the evidence because the evidence did not establish improper

methods and improper conduct; and (2) the trial court erred in

failing to strike the evidence because the evidence did not

establish that Lockheed's protest was the proximate cause of

the cancellation of the Notice of Intent to Award the contract

to Maximus. We consider these arguments in order.

1. Improper Conduct

Lockheed's first argument, that Maximus' evidence should

have been struck because it did not show intimidation, fraud,

defamation, misrepresentation, deceit, unethical conduct,

sharp dealing, overreaching, or unfair competition, can, in

the words of the trial court, be disposed of quickly. Suffice

it to say that, considering the evidence and all reasonable

inferences therefrom in the light most favorable to the

plaintiff Maximus, as we must, Austin v. Shoney's, Inc., 254

Va. 134, 138, 486 S.E.2d 285, 287 (1997), Maximus' evidence

was sufficient to present a prima facie case that Lockheed's

actions were improper for purposes of Maximus' business tort

claim.

31
 Lockheed also argues that even if Maximus established a

prima facie case, the evidence was not "sufficient to overcome

Lockheed's affirmative defense." As pointed out by Maximus,

Lockheed seems to be arguing that because it presented

evidence to support its affirmative defense, it was entitled

to prevail, absent additional evidence by Maximus. However,

whether Lockheed produced sufficient evidence to prevail on

its defense was a matter for the jury to decide. As the trial

court stated, "the presentation of defendants' evidence does

nothing more than create a jury issue." Accordingly, there

was no error in the trial court's denial of the motion to

strike on this basis.

2. Proximate Cause

Lockheed argues that the evidence failed to show that its

protest was the proximate cause of DSS' decision to cancel the

notice of the Intent to Award the contract to Maximus. The

evidence, according to Lockheed, was that the cancellation

resulted from DSS' own investigation and not as a result of

the protest.

While there is evidence in the record to support

Lockheed's assertion, there is also evidence that the Notice

of Intent was cancelled because of the contents of Lockheed's

protest, as well as Lockheed's actions surrounding the filing

of the protest. The testimony of Henry and Crane, the call

32
from Wiggins telling Henry that if the Intent to Award went

forward, things "could get bloody," and Crane's memorandum

suggesting that the procurement would proceed assuming there

were no more damaging facts in Lockheed's protest, represent

some of the evidence suggesting that the protest and its

contents were the reasons the Notice of Intent to Award the

contract to Maximus was rescinded. 9 The evidence was not

without conflict and it presented a jury question on the issue

of proximate cause.

Accordingly, the trial court correctly refused to strike

Maximus' evidence for failure to establish proximate cause.

II.

Maximus, Inc. v. Lockheed Information Management
Systems Company, Inc., et al.
Record No. 990499

At trial the jury returned a verdict in favor of Maximus

of approximately $1.5 million dollars on the tortious

interference claim. Following post-trial motions, the trial

court reduced this amount to $741,124, holding that Maximus

was not entitled to recover damages for costs incurred in

preparing its initial bid or certain overhead expenses.

9
Although Lockheed argues that the proximate cause
instruction was confusing, it did not object to the
instruction in the trial court and we do not consider that
argument here. Rule 5:25.

33
Maximus appeals the trial court's determination that it was

not entitled to recover the overhead expenses.

The overhead expenses at issue were described by Nerret,

Maximus' expert, as a "fixed sort of markup on top of those

direct-expenses to absorb company-wide overhead expenses."

Since Maximus did not obtain the contract, Nerret testified

that "those costs had to be absorbed by our other contracts in

the company over this five-year period. And thus . . .

profitability of those other contracts was reduced by the

[amount] those contracts will be absorbing." Essentially, the

overhead was a fixed cost not attributable to the contract at

issue.

We have recently addressed recovery of fixed overhead in

Fairfax County Redevelopment & Housing Authority v. Worchester

Brothers Co., Inc., 257 Va. 382, 514 S.E.2d 147 (1999). We

held that home office expenses, normally referred to as

overhead, are costs that the business must expend for the

benefit of its enterprise as a whole. Unabsorbed overhead is

that overhead which continues regardless of the business

activity. Thus, a contractor experiences unabsorbed overhead

when idle. When a breach by a party causes a delay to the

ability of the other party to perform, the injured party is

entitled to recover, as damages, unabsorbed overhead expenses.

To recover such damages, the injured party must show that it

34
could not otherwise recoup its pro rata home office expenses

incurred during the delay and it must prove the amount of

these expenses with reasonable certainty. Id. at 387-88, 514

S.E.2d 150-51.

In this case, the unabsorbed overhead sought by Maximus

was not sought as part of its actual damages but as part of

its lost profit. We need not address this distinction here

because, whether lost overhead is sought as damages or as a

component of lost profit, the plaintiff is required to show

that it was reasonably unable to recoup its overhead costs.

Id. There is no such evidence in this case. Nerret

characterized Maximus' overhead costs as "unabsorbed" or

"unavoided" because they did not arise from the contract at

issue, and therefore, continued whether or not Maximus was

awarded the contract. Neither Nerret nor any other witness

addressed Maximus' ability or inability to reasonably recoup

those expenses from another contract which could have been

secured in the place of the contract with DSS.

Accordingly, although the trial court did not have the

benefit of our decision in Fairfax County, we conclude that it

did not err in holding that Maximus was not entitled to

recover its overhead.

III.

Conclusion

35
 In summary, for the reasons stated above, we will affirm

that part of the trial court's judgment imposing liability on

Lockheed for intentional interference with a business

expectancy and setting damages in the amount of $741,124. We

will reverse that part of the trial court's judgment imposing

liability on Lockheed and the Center for conspiracy in

violation of § 18.2-499, and imposing treble damages,

attorneys' fees and costs pursuant to § 18.2-500, and enter

final judgment.

Record No. 990500 — Affirmed in part,
reversed in part,
and final judgment.
Record No. 990499 — Affirmed.

36