LOCKHEED INFO. MGMT. SYS. v. Maximus, Inc.

• Decision Date: 14 January 2000
• Docket Number: Record No. 990499.,Record No. 990500
• Citation: 524 S.E.2d 420,259 Va. 92
• Court: Virginia Supreme Court
• Parties: LOCKHEED INFORMATION MANAGEMENT SYSTEMS COMPANY, INC., et al. v. MAXIMUS, INC. Maximus, Inc. v. Lockheed Information Management Systems Company, Inc., et al.

524 S.E.2d 420

259 Va. 92

LOCKHEED INFORMATION MANAGEMENT SYSTEMS COMPANY, INC., et al. v. MAXIMUS, INC.

Maximus, Inc. v. Lockheed Information Management Systems Company, Inc., et al.

Record Nos. 990500, 990499.

Supreme Court of Virginia.

January 14, 2000.

Richard L. Locke; Kenneth W. Thorson (A. Linwood Holton; Mezzullo & McCandlish, on briefs), Richmond, for appellants (Record No. 990500).

Stephen E. Baril (Walter H. Ryland; Williams, Mullen, Clark & Dobbins, on brief), Richmond, for appellee (Record No. 990500).

Stephen E. Baril (Walter H. Ryland; Williams, Mullen, Clark & Dobbins, on briefs), Richmond, for appellant (Record No. 990499).

Richard L. Locke (A. Linwood Holton; Kenneth W. Thorson; Mezzullo & McCandlish, on brief), Richmond, for appellees (Record No. 990499).

Present: All the Justices.

LACY, Justice.

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 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 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 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 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.

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

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...