Present: Carrico, C.J., Compton, Lacy, Hassell, Keenan, and
Kinser, JJ., and Whiting, Senior Justice
MAXIMUS, INC.
v. Record No. 962519 OPINION BY JUSTICE ELIZABETH B. LACY
October 31, 1997
LOCKHEED INFORMATION MANAGEMENT
SYSTEMS COMPANY, INC., ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Randall G. Johnson, Judge
This appeal requires us to determine the elements required
to establish a prima facie case of tortious interference with
contract expectancy in Virginia.
I.
The instant case arose out of a dispute between Maximus,
Inc., (Maximus) and Lockheed Information Management Systems
Company, Inc., (Lockheed) over bids to privatize two child
support enforcement offices in Northern Virginia.
In November 1994, the Virginia Department of Social Services
(DSS) released a Request for Proposals to privatize the two child
support offices pursuant to the Virginia Public Procurement Act,
Code §§ 11-35 through -80. Maximus and Lockheed were the only
two bidders. To evaluate the bids, DSS created a selection panel
composed of five state employees. The panel heard oral
testimony, reviewed and scored the proposals, and issued a Notice
of Intent to Award the contract to Maximus dated April 13, 1995.
On April 25, 1995, pursuant to Code § 11-66, Lockheed filed
a formal protest of DSS's decision to award the contract to
Maximus. In its protest, Lockheed alleged that two members of
the evaluation panel had undisclosed conflicts of interest which
interfered with their objectivity and compromised the integrity
of the evaluation process. 1 State officials conducted an
investigation and canceled the Notice of Intent to Award the
contract to Maximus.
On February 5, 1996, Maximus filed this action against
Lockheed. In its motion for judgment, Maximus alleged that
Lockheed had tortiously interfered with its contract expectancy
with DSS. 2 Maximus claimed that Lockheed knew, or had reason to
know, that the allegations advanced in its formal protest were
false, that the false allegations were intentionally and
selectively presented to create an appearance of impropriety, and
that the protest was calculated to wrongfully interfere with
Maximus' contractual relationship with DSS so that DSS would
award the contract to Lockheed instead. Lockheed filed a
demurrer, asserting in part that it filed its protest pursuant to
a statutory right and was, therefore, entitled to absolute
immunity or privilege based on both the protections afforded
government petitioners established in Eastern Railroad Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and
United Mine Workers of America v. Pennington, 381 U.S. 657
(1965), and the principle that statements made within a judicial
1
In its protest, Lockheed alleged that the panel's
decision was arbitrary and capricious on two other grounds
which are not relevant to this appeal.
2
Maximus also alleged conspiracy, but that claim is not
at issue in this appeal.
2
or quasi-judicial proceeding are protected. However, that
portion of the demurrer was denied by the trial court. 3
Following the conclusion of Maximus' case in chief in the
subsequent jury trial, Lockheed moved to strike the evidence.
The trial court determined that Lockheed had a "qualified
privilege" and that Maximus was therefore required to show malice
or "that the improper conduct is so egregious as to override the
qualified privilege" in order to reach the jury. Concluding that
Maximus had failed to meet this evidentiary burden, the trial
court sustained the motion to strike and entered judgment in
favor of Lockheed.
Maximus filed an appeal claiming that it had presented
sufficient evidence to establish a prima facie case of tortious
interference with contract expectancy, and that the trial court
erred by striking the evidence for failure to show malice as an
element of the cause of action. Because we conclude that the
trial court did not apply the correct standard for determining
whether Maximus had established a prima facie case for tortious
interference with contract expectancy, we will reverse the
judgment of the trial court and remand the case for further
proceedings.
II.
In reaching its decision, the trial court considered the law
3
Lockheed did not assign cross-error to the denial of its
demurrer; therefore, the issues in the demurrer are not before
us.
3
of defamation analogous to the law of interference with business
relationships and applied principles based on that analogy. The
trial court first concluded that Lockheed was entitled to a
"qualified privilege." 4 According to the trial court, the
existence of this privilege required the plaintiff to satisfy a
"different burden," similar to the additional burden of showing
malice placed upon a plaintiff in a defamation action when a
qualified privilege is established. The trial court concluded
that in this case, the "different burden" should be a "showing of
malice or a showing that the improper conduct is so egregious as
to override the qualified privilege."
The trial court's use of the defamation analogy was based
on Chaves v. Johnson, 230 Va. 112, 121, 335 S.E.2d 97, 103
(1985), in which we recognized a similarity between the
affirmative defense of justification or privilege in a tortious
interference with contract suit and the defense of qualified
privilege in a defamation suit. The similarity, however, arises
from the circumstances in which the offending words, or in this
context, the offending conduct, occurs. In certain
circumstances, the interests of society require that the question
of liability be resolved by balancing the rights involved,
acknowledging that this balancing process may shield a party from
liability even though he engaged in the offensive acts. For
4
The record does not reflect the trial court's basis for
this determination on the specific nature of the qualified
privilege.
4
example, in the defamation context, an actor has an absolute
privilege and is not liable for defamatory statements made in the
course of a judicial proceeding. Massey v. Jones, 182 Va. 200,
204, 28 S.E.2d 623, 626 (1944); Penick v. Ratcliffe, 149 Va. 618,
627, 140 S.E. 664, 667 (1927). In the context of causes of
action involving interference with a business relationship,
freedom of action is balanced against protection of the business
relationship involved to determine whether the affirmative
defense of justification or privilege precludes liability for
actions which would otherwise be culpable. Chaves, 230 Va. at
121, 335 S.E.2d at 103.
Liability determinations in both instances involve balancing
of interests; however, this similarity neither suggests nor
demands that the specific requirements for imposition of
liability in one cause of action must be applied to the other
cause of action. Other than acknowledging the similarity, we
have not extended the defamation law construct to business torts
and, for the reasons expressed below, we decline to extend it to
the tortious interference with a contract expectancy cause of
action at issue here.
We have already rejected imposing an additional evidentiary
burden in an action for intentional interference with a contract.
In Chaves, we determined that malice was not an element of the
cause of action and also specifically recognized certain
affirmative defenses of privilege and justification available to
5
defendants. Id. at 120-21, 335 S.E.2d at 102-03. Thus, by
definition Chaves eliminated any requirement that the plaintiff
show malice, even if the defendant establishes an affirmative
defense.
In Duggin v. Adams, 234 Va. 221, 360 S.E.2d 832 (1987), we
considered the elements of a cause of action for interference
with a contract terminable at will. We found that not all
business relationships are entitled to the same level of
protection and concluded that a contract not terminable at will
was entitled to more protection than a contract terminable at
will. Id. at 226, 360 S.E.2d at 836. Reflecting this
distinction, we held that one of the elements of a cause of
action for tortious interference with a contract terminable at
will is that the acts or methods used for the interference must
themselves be "improper." 5 Id. at 226-27, 360 S.E.2d at 836. As
in Chaves, Duggin acknowledged the availability of certain
affirmative defenses. Id. at 229, 360 S.E.2d at 838. Other than
the "improper methods" requirement, no additional elements were
imposed to establish a prima facie case, even when an affirmative
defense was asserted.
Our prior cases, however, have not addressed the level of
protection or the elements of a cause of action attaching to the
business interest at issue in this case, a contract expectancy.
5
Not all jurisdictions follow this approach. See
Restatement (Second) of Torts § 767 cmt. k (1977).
6
The Restatement (Second) of Torts § 766B (1977) describes the
cause of action as follows:
One who intentionally and improperly interferes with
another's prospective contractual relation (except a
contract to marry) is subject to liability to the other for
the pecuniary harm resulting from loss of the benefits of
the relation, whether the interference consists of
(a) inducing or otherwise causing a third person
not to enter into or continue the prospective relation
or
(b) preventing the other from acquiring or
continuing the prospective relation.
The Restatement notes that a contract terminable at will is
"closely analogous" to the business relationship described in
this section because both are based on an interest in a future
relationship with no legal assurance of such future relationship.
Restatement (Second) of Torts § 766 cmt. g (1977). We agree.
The virtual identity of interests and the legal ability to
enforce those interests in a contract terminable at will and a
contract or business expectancy lead to the conclusion that the
level of protection afforded, and the elements of the cause of
action, should also be the same. There is no basis to impose an
additional requirement to differentiate the protection afforded
to a contract terminable at will and to a contract or business
expectancy.
Thus, to establish a prima facie cause of action in this
case, Maximus was required to show that: (1) it had a contract
expectancy; (2) Lockheed knew of the expectancy; (3) Lockheed
intentionally interfered with the expectancy; (4) Lockheed used
improper means or methods to interfere with the expectancy; and
7
(5) Maximus suffered a loss as a result of Lockheed's disruption
of the contract expectancy. Maximus was not required to show
malice or any other egregious conduct.
The trial court stated at the close of Maximus' case in
chief that "if this were the end of the case," there was enough
evidence to submit the issue "whether the conduct of the
defendants was improper" to the jury. While it is not clear
whether this statement referred to the "improper methods" element
of the cause of action or the ultimate issue of liability, either
construction shows that the trial court struck the evidence based
on its belief that Maximus had to produce additional evidence to
establish a prima facie case. Accordingly, the trial court erred
in sustaining Lockheed's motion to strike. 6
Nevertheless, Lockheed argues that its motion to strike was
properly granted because Maximus did not show that Lockheed
engaged in "improper acts," one of the elements of a prima facie
case. Lockheed asserts that to qualify as "improper methods,"
the actions must be illegal or independently tortious, and
Maximus failed to show that it engaged in such acts. We reject
Lockheed's interpretation of "improper methods."
While we have identified actions as improper which were
also independently tortious or illegal, Duggin, 234 Va. at 227-
28, 360 S.E.2d at 836-37, we have also identified actions as
6
In light of this holding, we need not address the trial
court's finding that Lockheed was entitled to a qualified
privilege.
8
improper which are not themselves tortious or illegal, such as
unfair competition or unethical conduct. Id. at 228, 360 S.E.2d
at 837. Nor does the name given the cause of action impart a
requirement of independently tortious acts. "Tortious
interference" means only that the interference was intentional
and improper under the circumstances, not that the "improper
methods" used were inherently illegal or tortious. 7
Moreover, to adopt Lockheed's interpretation of "improper
methods" would either negate the ability of a defendant to use
some of the recognized affirmative defenses or shift the burden
of proving an element of those defenses to the plaintiff. Chaves
referred to the affirmative defense of justification or privilege
based on five grounds discussed in the Restatement (Second) of
Torts §§ 768-72 (1977). Chaves, 230 Va. at 121, 335 S.E.2d at
103. Four of these, including competition, the ground relied on
by Lockheed here, require the defendant to prove that it did not
employ "wrongful means." Restatement (Second) of Torts §§ 768-71
(1977). None of our cases suggest that the affirmative defense
grounds recognized in Chaves are different when raised in an
action for interference with a contract terminable at will or
7
To limit improper methods as suggested by Lockheed
returns the cause of action to its status in the nineteenth
century, when recovery for interference with contract
expectancy required that the conduct utilized by the interferer
be "essentially tortious in nature." That requirement was
eliminated in 1893, when liability for this cause of action was
extended to circumstances where the methods used were not
themselves tortious. Temperton v. Russell [1893] 1 Q.B. 715
(Eng.).
9
with a business or contract expectancy. While plaintiffs in
these actions must show that the methods of interference were
improper, defendants asserting certain affirmative defenses must
prove that those methods were not "wrongful." The plaintiff, of
course, retains the burden of persuasion on the ultimate
question: whether the defendant intentionally and improperly, in
other words tortiously, interfered with the plaintiff's business
relationship causing loss to the plaintiff. See Restatement
(Second) of Torts § 767 (1977); Duggin, 234 Va. at 226-27, 360
S.E.2d at 836.
Accordingly, for the above reasons, we will reverse the
judgment of the trial court and remand the case for further
proceedings consistent with this opinion.
Reversed and remanded.
10
Maximus v. LOCKHEED INFO. MGMT. SYSTEMS
Combined Opinion