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

• Decision Date: 31 October 1997
• Docket Number: No. 962519,962519
• Citation: 254 Va. 408,493 S.E.2d 375
• Court: Virginia Supreme Court
• Parties: MAXIMUS, INC. v. LOCKHEED INFORMATION MANAGEMENT SYSTEMS COMPANY, INC., et al. Record

Page 375

493 S.E.2d 375

254 Va. 408

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

Record No. 962519.

Supreme Court of Virginia.

Oct. 31, 1997.

Stephen E. Baril (Walter H. Ryland; Williams, Mullen, Christian & Dobbins, on briefs), Richmond, for appellant.

Kenneth W. Thorson; A. Linwood Holton, Jr. (Mezzullo & McCandlish, on brief), Richmond, for appellees.

Present: CARRICO, C.J., and COMPTON, LACY, HASSELL, KEENAN and KINSER, JJ., and WHITING, Senior Justice.

LACY, Justice.

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, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), and United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), and the principle that statements made within a judicial 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 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 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 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...