Background
Ar-Razzaaq Properties, LLC retained LPC Commercial Services, LLC to manage a Fairfax County office building. Their property-management agreement allowed reimbursement for personnel located at the property or spending part of their working hours there, on a pro rata basis, provided the expenses were approved in advance or included in the approved budget. LPC charged Ar-Razzaaq for a property manager and assistant property manager who worked from LPC’s offices across the street.
After Ar-Razzaaq questioned the payroll allocations, gave notice of default, and terminated LPC, it sued for breach of contract and fraudulent inducement. Following a bench trial, the circuit court found a contractual breach, rejected the fraud claim, and awarded Ar-Razzaaq $91,826. It reasoned that LPC’s conduct constituted “willful misconduct” under the agreement’s indemnity provision, although it also found that LPC had acted in good faith.
The Court’s Holding
The Court of Appeals affirmed the finding that LPC breached the agreement. The reimbursement language unambiguously tied payment to personnel working at the property site, and the undisputed evidence showed that the two managers worked across the street. Because the provision was unambiguous, LPC could not use the parties’ course of dealing to contradict it, and LPC failed to prove trade custom, waiver, or estoppel.
The court held that the circuit court misinterpreted the remedy provisions. Section 2.11 governed indemnity against third-party claims, while Section 5 governed defaults and first-party breach-of-contract remedies between LPC and Ar-Razzaaq. Section 5 permitted recovery for losses caused by LPC’s uncured default without requiring gross negligence or willful misconduct. The court therefore affirmed the $91,826 award under the right-result-for-the-wrong-reason doctrine.
The court also found that Ar-Razzaaq’s appellate brief violated Virginia Code § 8.01-271.1 by presenting 25 inaccurate quotations attributed to Virginia decisions, apparently resulting from inadequately verified computer-assisted research. Because a sanction was mandatory, the court ordered counsel to complete a continuing legal education course concerning artificial intelligence or appellate practice within six months.
Key Takeaways
- An approved budget and prior course of dealing cannot override an unambiguous contractual restriction tying personnel reimbursement to work performed at the property site.
- A provision labeled and written as an indemnity clause ordinarily governs third-party claims and does not displace a separate provision expressly establishing remedies for defaults between the contracting parties.
- Lawyers remain responsible for verifying computer-assisted legal research; filing a brief containing fabricated or inaccurate quotations can require sanctions under Virginia Code § 8.01-271.1.
Why It Matters
The decision illustrates that Virginia courts interpret commercial agreements as a whole and will not allow broad indemnity language to nullify specific contractual default remedies. Property managers and owners should ensure that payroll-allocation practices comply with the agreement’s actual reimbursement terms, even when budgets have been approved and longstanding practices continued.
The opinion also delivers a direct warning about AI-assisted legal work: attorneys must independently verify every quotation and citation before filing. Lack of intent to mislead does not eliminate counsel’s responsibility or the statutory requirement to impose an appropriate sanction.