Company’s Failure to Object at Trial May Have Cost It Millions

In a complex civil matter, the founder and CEO of a large publicly traded on-line banking company sued his former company for millions after he was voted off as CEO.  The company, Online Resources Corporation (ORC), appealed the decision after a Fairfax County jury decided it was liable to pay over $5 million in compensatory damages and over $2 million in attorney’s fees.  On appeal, the Virginia Supreme Court upheld the trial court’s decision on compensatory damages.  The Supreme Court’s decision in Online Resources Corp. v. Lawlor serves as a cautionary reminder that objections should be noted as specifically as possible during a trial.

In this lawsuit, the former CEO claimed that ORC owed him payments under several agreements between him and the company.  According to the contracts, payments became due to him if a “change in control” occurred in the company’s governance.  Although the term “change in control” was ambiguous, the jury found that a change in control had occurred.  ORC noted several errors on appeal, and two of these revolved around jury instructions.

The first instructed the jury that, pursuant to Virginia law, it should construe any ambiguities in a contract against the drafter.  On appeal, ORC submitted a cogent argument to the Supreme Court, contending that the contract should be construed under Delaware law.  ORC argued that under Delaware law, reading ambiguities against the drafter is a law of last resort, thus, it was improper for the jury to have received this instruction.  However, the Supreme Court did not consider ORC’s argument.  Although ORC objected to this instruction at trial, it did so by arguing it was improper for other reasons.  ORC never raised this specific argument with the trial court.  Therefore, despite the fact that ORC noted an objection to this jury instruction with the trial court, the Supreme Court refused to consider this specific argument on appeal.

The second jury issue concerned the CEO’s unjust enrichment claim against the company.  ORC preserved its right to object to the sufficiency of the evidence with respect to this claim because it moved to strike the claim during trial.  However, on appeal, ORC sought to object to the specific wording of the jury instruction with respect to the unjust enrichment claim.  The Supreme Court was quick to remind ORC that “[jury] instructions given without objection become the law of the case and thereby bind the parties in the trial court and this Court on review.” Online Resources Corp. v. LawlorAgain here, even though ORC objected as a general matter to the sufficiency of the unjust enrichment claim during the trial, it failed to specifically object to the language of the jury instruction.  Accordingly, the Supreme Court refused to consider any argument on appeal that was not specifically raised with the trial judge.

For an appellate court to entertain an appeal, a litigant should be sure to preserve any alleged errors in the trial court.  If objections were not timely made, with specificity, or if the trial court did not have a chance to rule on the issue, then the appeal may be barred altogether.  The burden remains with the party raising an appeal to cite where in the record it preserved the issue it wishes to raise.