Ulloa v. Qsp, Inc.

• Decision Date: 13 January 2006
• Docket Number: Record No. 050095.
• Citation: 624 S.E.2d 43
• Court: Virginia Supreme Court
• Parties: René ULLOA v. QSP, INC.

624 S.E.2d 43

René ULLOA v. QSP, INC.

Record No. 050095.

Supreme Court of Virginia.

January 13, 2006.

COPYRIGHT MATERIAL OMITTED

Virginia A. Seitz, Washington, DC (C. Michael DeCamps, L. Lee Byrd, Richmond; Carter G. Phillips; Brian R. Matsui; Philip D. Chen, Washington, DC, Sands, Anderson, Marks & Miller, Richmond; Sidley, Auston, Brown & Woods, Washington, DC, on briefs), for appellant.

Douglas M. Palais (David E. Nagle; John M. Barr; LeClair Ryan, on brief), Richmond, for appellee.

Present: LACY, KEENAN, KOONTZ, KINSER, LEMONS, AGEE, JJ., and COMPTON, Senior Justice.

LAWRENCE L. KOONTZ, JR., Justice.

In this appeal, we consider whether the trial court erred in sustaining a jury verdict in favor of the plaintiff for breach of contract and in granting an award of $691,099.05 in attorneys' fees, costs, and expenses to the plaintiff when the jury awarded no damages on any of its claims.

BACKGROUND

QSP, Inc., a subsidiary of Reader's Digest Association, Inc., provides goods and services to schools and other non-profit organizations to assist them in conducting their fundraising campaigns. QSP conducts its business through sales representatives who work within a prescribed territory to develop and maintain business relationships with school officials and other customers. QSP hired René Ulloa as such a sales representative in July 1992.

Upon being employed by QSP, Ulloa signed an employment contract which provided that he "recognize[d] and acknowledge[d] that the goodwill and patronage of the accounts of QSP ... are solely the property of QSP and that information concerning the identity and size of and contacts at such accounts and the identity of other employees of QSP ... are the confidential business information of QSP." To protect QSP's business information and interests, the employment contract included confidentiality, no-solicitation, and non-competition provisions that would apply to Ulloa for twelve months after he stopped working for QSP.

These contractual provisions bound Ulloa in various ways. Ulloa could not disclose the identity, size, and contacts of accounts, the identity of QSP employees, or QSP's business practices. He also could not contact or solicit for his own benefit any QSP customer that he serviced, work for any QSP competitor in his territory, or commit any act that would harm QSP's goodwill or disparage QSP's relationships with its customers.

The employment contract also contained a provision which is of particular significance in this appeal. Pursuant to that provision, in relevant part, Ulloa agreed that "if I violate this Agreement ... I will be responsible for all attorneys' fees, costs and expenses incurred by QSP by reason of any action relating to this Agreement." (Emphasis added.)

Ulloa serviced customers in a territory encompassing over thirty different localities and stretching from Charlottesville in the west through Richmond to the Northern Neck region in the east. Ulloa was very successful generating sales in his territory and enjoyed considerable financial success working for QSP. Ulloa's success made his services marketable within the fundraising industry, and he began to explore employment opportunities with other companies. On April 14, 2003, Ulloa resigned from QSP and went to work for Great American Opportunities, Inc. (Great American), a direct competitor of QSP in the fundraising business.

QSP learned that Ulloa had appropriated confidential information pertaining to QSP's business and had contacted his QSP accounts in violation of his employment contract. As a result, QSP filed a bill of complaint in the Circuit Court of Henrico County against Ulloa. The bill of complaint contained, among others, three claims: (1) breach of contract; (2) statutory business conspiracy under Code § 18.2-499 et seq.; and (3) misappropriation of trade secrets in violation of the Uniform Trade Secrets Act, Code § 59.1-336 et seq. QSP sought injunctive relief, monetary damages, and an award of reasonable attorneys' fees and costs.

Ulloa, in turn, concluded that QSP had contacted his QSP accounts before he had resigned and had told them that he was no longer servicing these accounts. Consequently, Ulloa filed a cross-bill containing, among others, a statutory business conspiracy claim and a breach of contract claim. QSP did not seek a hearing for a preliminary injunction. By order entered on March 9, 2004, the case was transferred from the chancery to the law side of the trial court's docket.

The parties conducted extensive discovery. Each stage of the litigation was protracted and contentious; numerous motions were filed and hearings held. In the process, attorneys' fees for both parties accrued in substantial amounts. At the start of the May 3, 2004 jury trial, the parties agreed to a procedure for determining any award of attorneys' fees. The parties agreed that each party would present evidence regarding the asserted amount of accrued attorneys' fees, and the jury would decide only whether attorneys' fees should be awarded. The parties further agreed that the trial court ultimately would fix the amount of any fee award in a post-trial proceeding. QSP presented evidence that it had incurred attorneys' fees in the amount of "approximately" $770,000 through April 2004.

During the trial, QSP introduced evidence that supported its claims against Ulloa. Specifically, that evidence showed that Ulloa, two days prior to his resignation, had faxed to Great American a hand-drawn map of his QSP territory containing names and directions to QSP accounts and the amounts and types of sales made to these accounts. Subsequently, in a letter ruling on post-trial motions, the trial court characterized the map as "clear proof of breach and deception by Ulloa." QSP also introduced evidence that Ulloa had given Great American a copy of his QSP customer list, the sales breakdown for his QSP territory in Virginia, and information concerning QSP's business in Florida.

At the conclusion of the evidentiary stage of the trial, the parties agreed to a set of jury instructions. Without objection from Ulloa, the trial court instructed the jury on QSP's breach of contract claim as follows:

The issues in this case are was there a contract between the parties. If there was, did Mr. Ulloa breach it. If QSP is entitled to recover, what is the amount of its damages, if any. On these issues, QSP has the burden of proof.

You shall find your verdict for QSP if they have proved by a greater weight of the evidence that there was a contract and Mr. Ulloa breached the contract.

You shall find your verdict for Mr. Ulloa if QSP fails to prove any of the two elements.

Counsel jointly drafted a special verdict form which was submitted to the jury with the agreement of both parties. The top section of the form listed QSP's three claims and in adjacent blanks permitted the jury to render its verdict whether QSP had proven a particular claim by recording a check mark in the "yes" blank or the "no" blank. The next section provided spaces for the jury to put dollar amounts indicating the jury's award of damages on each claim. The last section provided a space for the jury to put a check mark indicating the jury's award of reasonable attorneys' fees on each claim. The remaining portion of the verdict form used the identical format for Ulloa's counterclaims.

The jury returned verdicts for QSP on all of its claims against Ulloa, and a verdict for Ulloa on his business conspiracy claim against QSP by recording a check mark in the appropriate "yes" blanks. The jury rendered a "no" verdict on Ulloa's breach of contract claim. The jury specifically awarded "0" damages to both parties on each of their successful claims. However, the jury also checked the appropriate spaces awarding reasonable attorneys' fees to both parties on these claims.

The parties filed eight post-trial motions which the trial court addressed in an opinion letter dated August 20, 2004. The trial court first set aside the business conspiracy verdicts for both parties.¹ As a result no verdict in favor of Ulloa or Ulloa's corresponding claim for an award of attorneys' fees remained before the trial court.

The trial court then addressed Ulloa's motion to set aside the breach of contract verdict in favor of QSP. Ulloa contended that QSP could not recover for breach of contract because the jury awarded no damages on that claim. The trial court denied Ulloa's motion. The court reasoned, in part, that attorneys' fees were recoverable by QSP as damages in this case based on the particular language of the parties' employment contract regarding the payment of QSP's attorneys' fees.

Finally, the trial court addressed QSP's motion for attorneys' fees, costs, and expenses. Over Ulloa's objection, the trial court granted QSP's motion for a total award of $691,099.05.² The trial court noted that the jury had returned favorable verdicts for QSP on each of its three claims against Ulloa, concluding "any of which supports an award of attorneys' fees." With regard to the breach of contract and the misappropriation of trade secrets claims, the trial court found that QSP had an "unambiguous right" to recover attorneys' fees pursuant to the attorney-fee provision in Ulloa's employment contract. Regarding the amount of fees QSP requested, the trial court stated that it examined the time records of QSP's counsel and the supporting expert opinion as to the services involved and found that the services and charges were reasonable.

The trial court entered its final judgment order, incorporating its prior opinion letter, on October 12, 2004. We awarded Ulloa this appeal on the issues whether, in the absence of an award for damages, the trial court erred in sustaining the jury's verdict for breach of contract, and whether the trial court erred in awarding attorneys' fees under the circumstances of this case.

DISCUSSION

We first address the question whether the jury's...