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Richmond court awards 10K sanctions in contract case

Attorneys for Cavalier Telephone LLC knew that a default judgment had been entered against the company in Fairfax Circuit Court in May 2007 on a claim based on a Jan. 17, 2005, contract with Step 9 Software Corp.

Nevertheless, they revived in July 2007 a lawsuit based on the same contract that the company had filed in Richmond Circuit Court and then nonsuited before Step 9 filed its suit in Fairfax.

Worse, from the standpoint of Step 9, Cavalier’s attorneys sought service on Step 9 through its registered agent and the clerk of the State Corporation Commission even though they knew that the addresses for the agent and Step 9 were out of date.

Cavalier then won entry of a default judgment against Step 9 in October 2007, based on the failure of Step 9 to respond to the suit, and Step 9 learned of the judgment only after Cavalier filed a garnishment summons against it.

Step 9 attorneys Travis A. Sabalewski of Richmond and George E. Kostel and Stephen T. Fowler of Falls Church asked the judge who had entered the Richmond default judgment, Melvin R. Hughes Jr., to set it aside and quash the garnishment summons.

They also sought sanctions against Cavalier by asserting that the revived suit violated Virginia Code § 8.01-271.1 because the default judgment in favor of Step 9 was already res judicata on the contract claim when the suit was revived. And they contended that Cavalier’s attorneys had gone out of their way to conceal the revived suit by having it served at out-of-date addresses at the same time they were serving motions at the correct address in the Fairfax litigation.

The Cavalier attorneys countered that they were under no obligation to do more than state law required in effecting service.
Earlier this month, Judge Hughes ruled in favor of Step 9. The revived suit was barred by Rule 1:6, he said. And he awarded $10,000 in sanctions against Cavalier for filing and continuing to pursue the breach of contract claim after judgment on it had been entered in Fairfax.

The Fairfax proceedings also were unusual. Judge Randy I. Bellows entered a default judgment on liability against Cavalier because of its repeated failures to comply with discovery. During the damages phase of the trial, Step 9 won $1.4 million in damages based on its claim that it had complied with the contract to provide a broad-based software overhaul for Cavalier.
The Supreme Court of Virginia refused Cavalier’s petition for appeal in April.

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