Commercial Business Systems, Inc. v. Bellsouth Services, Inc.

• Citation: 249 Va. 39,453 S.E.2d 261
• Decision Date: 13 January 1995
• Docket Number: No. 940121,940121
• Parties: COMMERCIAL BUSINESS SYSTEMS, INC. v. BELLSOUTH SERVICES, INC. Record
• Court: Virginia Supreme Court

Page 261

453 S.E.2d 261

249 Va. 39

COMMERCIAL BUSINESS SYSTEMS, INC. v. BELLSOUTH SERVICES, INC.

Record No. 940121.

Supreme Court of Virginia.

Jan. 13, 1995.

H. Kenneth Kudon, Paul T. Gallagher, Washington, DC (Christine A. Nykiel, Richard L. Locke, Richmond, Jackson & Campbell, Washington, DC, Mezzullo & McCandlish, Richmond, on briefs), for appellant.

Douglas W. Davis, Richmond (Cynthia S. Cecil, Hunton & Williams, on brief), for appellee.

Present: CARRICO, C.J., COMPTON, STEPHENSON, WHITING, LACY, and KEENAN, JJ., and COCHRAN, Retired Justice.

STEPHENSON, Justice.

In this appeal, we determine whether the trial court erred in granting summary judgment in favor of the defendant, resulting in the rejection of the plaintiff's claims of statutory and common law conspiracy and of respondeat superior.

I

Commercial Business Systems, Inc. (CBS) filed a motion for judgment against BellSouth Services, Inc. (BellSouth) after BellSouth's employee, Jerry H. Waldrop, awarded a contract to CBS's competitor, Halifax Engineering, Inc. (Halifax), in exchange for commercial bribes. CBS asserted three claims: (1) a statutory conspiracy to injure CBS in its trade or business, in violation of Code § 18.2-499; (2) a common law conspiracy to injure CBS's business; and (3) tort liability imputed to BellSouth under the doctrine of respondeat superior. CBS sought to recover lost profits and punitive damages.

Following extensive discovery, BellSouth moved for summary judgment on all three of CBS's claims. In response, CBS filed a cross-motion for partial summary judgment, asserting that, as a matter of law, Waldrop had acted within the scope of his employment with BellSouth when he engaged in improper conduct. The trial court granted summary judgment in favor of BellSouth, and we awarded CBS an appeal.

II

Summary judgment shall not be granted if any material fact is genuinely in dispute. Rule 3:18. In considering a motion for summary judgment, a court must adopt those inferences from the facts that are most favorable to the nonmoving party, unless the inferences be strained, forced, or contrary to reason. Carson v. LeBlanc, 245 Va. 135, 139-40, 427 S.E.2d 189, 192 (1993).

BellSouth was created to perform "selected staff and planning functions" for Southern Bell and SouthCentral Bell Telephone Companies, including contracting for the repair and refurbishment of computer equipment. In July 1985, BellSouth awarded CBS a two-year contract to repair Digital Equipment Corporation (DEC) equipment. The contract commenced on July 29, 1985, and provided that either party could cancel upon 60 days' written notice. The contract also permitted BellSouth to send equipment covered by the contract to other repair vendors.

William Jordan, a BellSouth employee, had negotiated the contract with CBS and had administered the contract for 18 months. Jordan was satisfied with CBS's performance and told CBS that it could "reasonably expect" renewal of the contract. BellSouth preferred to renew contracts with incumbent vendors "unless documentation of non-performance [was] present."

By early 1987, Waldrop had replaced Jordan as BellSouth's contract negotiator and administrator and had begun to administer CBS's contract. Previously, Waldrop had negotiated and administered a small, two-year contract with Halifax for the repair of Mannesmann Tally equipment. That contract had commenced on January 1, 1986, and Halifax's performance under the contract had been unsatisfactory. Halifax had lost some of BellSouth's equipment and had not met BellSouth's turnaround time requirements. Nonetheless, in late 1986, Waldrop began contract discussions with Halifax for the repair of DEC equipment.

In early 1987, CBS attempted to discuss with Waldrop the renewal of its contract with BellSouth. CBS repeatedly telephoned Waldrop, but Waldrop failed to respond to the calls. In the meantime, Waldrop contacted Wayne Berry, a former CBS official, to ask Berry to become a consultant to an unidentified BellSouth vendor who was having difficulty repairing DEC equipment. According to Berry, when he asked Waldrop about CBS's status, Waldrop indicated that he was "working on" a reason not to renew CBS's contract. Referring to CBS, Waldrop told Berry that he was "not through doing what I got to do." Although Waldrop had never previously administered any contract with CBS, he told Berry that, if he, instead of Jordan, had been in charge, CBS never would have obtained the contract to repair DEC equipment. Later, Waldrop identified Halifax as the vendor to whom he had previously referred as having difficulty.

In May 1987, Waldrop told CBS's chief executive officer that he was concerned about "warranty problems" and CBS's "financial problems." The substance of Waldrop's statements, however, was false.

Then, on June 15, 1987, Waldrop wrote CBS that its contract would not be renewed in order to offer BellSouth's clients the "best in quality and service" by "opening that market to other qualified vendors and encouraging competition." By July 1987, BellSouth had begun shipping DEC equipment to Halifax for repairs. On July 28, 1987, CBS's contract expired.

Thereafter, Waldrop awarded Halifax a two-year contract to repair DEC equipment for specified compensation. The contract commenced on January 1, 1988, and Halifax's compensation was subject to renegotiation after six months. In spite of Waldrop's stated desire to encourage competition, the record shows that Halifax was the only vendor to whom Waldrop awarded a contract to repair DEC equipment. Although Halifax's performance under the contract was substandard during the first six months of the contract period, Waldrop agreed to amend the contract to allow Halifax additional compensation.

The record clearly established that Waldrop committed serious violations of BellSouth's conflict-of-interest rules. Waldrop established his own company, called EntraCom Corporation, as a means to conduct business with Halifax and other companies that provided services to BellSouth, and he accepted bribes from Halifax in the form of "kickbacks" on transactions between Halifax and EntraCom.

Consequently, in early 1989, upon learning of Waldrop's self-dealing, BellSouth terminated Waldrop's employment. In May 1989, BellSouth canceled its contract with Halifax.

III

We first consider whether the trial court erred in ruling, by way of summary judgment, that, as a matter of law, Waldrop was not acting within the scope of his employment with BellSouth when he engaged in wrongful conduct. It is well settled that, when an agency relationship has been proven, the burden is upon the principal to show that the agent was not acting within the scope of his authority when he committed the acts complained of, and, if the evidence leaves the question in doubt, it becomes an issue for determination by a jury. United Brotherhood v. Humphreys, 203 Va. 781, 787, 127 S.E.2d 98, 102 (1962), cert. denied, 371 U.S. 954, 83 S.Ct. 509, 9 L.Ed.2d 501 (1963); Alvey v. Butchkavitz, 196 Va. 447, 453-54, 84 S.E.2d 535, 539 (1954).

Although the doctrine of respondeat superior is firmly established in Virginia, difficulties commonly arise in applying the doctrine to particular facts. Often, the inferences to be drawn from the facts proved are within the province of a jury. Tri-State Coach Corp. v. Walsh, 188 Va. 299, 308, 49 S.E.2d 363, 367 (1948). In determining whether an agent's tortious act is imputed to the principal, the doctrine's primary focus is on whether the activity that gave rise to the tortious act was within or without the agent's scope of employment. See, e.g., Tri-State Coach Corp., 188 Va. at 305-06, 49 S.E.2d at 366; Davis v. Merrill, 133 Va. 69, 77-78, 112 S.E. 628, 631 (1922); Henry Myers & Co. v. Lewis, 121 Va. 50, 71, 92 S.E. 988, 994-95 (1917).

In Davis, a railroad gateman became agitated when a motorist asked him to raise the gate. After the gateman raised the gate, he shot at the vehicle and killed one of its occupants. A jury returned a verdict in favor of the deceased's personal representative against the gateman's employer. 133 Va. at 71-72, 112 S.E. at 628-29. In rejecting the employer's contention that the gateman, as a matter of law, acted outside the scope of his employment, we stated that

the test of the liability of the master for the tortious act of the servant, is not whether the tortious act itself is a transaction within the ordinary course of the business of the master, or within the scope of the servant's authority, but whether the service itself, in which the tortious act was done, was within the ordinary course of such business or within the scope of such authority.

Id. at 77-78, 112 S.E. at 631 (emphasis added); accord United Brotherhood, 203 Va. at 786, 127 S.E.2d at 102.

In Tri-State Coach Corp., an altercation arose between the plaintiff, a motorist, and a bus driver employed by the defendant bus company when the bus driver was attempting to make a right turn and the plaintiff became apprehensive that a collision with his vehicle would occur. The motorist called out to the bus driver, and the driver stopped the bus. The bus driver then left his vehicle and, after the two men exchanged words, struck the plaintiff in the face, rendering him momentarily unconscious. The blow caused the plaintiff to lose control of his vehicle, which crossed a sidewalk and struck a building, causing damage to the vehicle. A jury returned a verdict for the plaintiff against the bus company, on which the trial court entered judgment. 188 Va. at 301-03, 49 S.E.2d at 364-65. The bus company contended that the driver, as a matter of law, was acting beyond the scope of his employment when he struck the plaintiff and, therefore, the company was not liable. Id. at 304, 49 S.E.2d at 365. We rejected the bus company's contention and affirmed the judgment, stating the modern and better view as follows The courts ... have long since departed from...