COURT OF APPEALS OF VIRGINIA

Present: Judges O’Brien, Ortiz and Raphael PUBLISHED

Argued at Richmond, Virginia

JOHN E. NESTLER, M.D. AND STEPHANIE CALL, M.D. v. Record No. 0497-22-2

TIZIANO SCARABELLI, M.D., HARRIS D. BUTLER, III AND BUTLER CURWOOD, PLC OPINION BY JUDGE DANIEL E. ORTIZ TIZIANO M. SCARABELLI, M.D. MAY 2, 2023 v. Record No. 0421-22-2

KENNETH ELLENBOGEN, M.D., ANTONIO ABBATE, M.D., STEPHANIE CALL, M.D. AND MCV ASSOCIATED PHYSICIANS

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND Phillip L. Hairston, Judge

Charles M. Sims (Charles G. Meyer, III; Rachael L. Loughlin; O’Hagan Meyer, PLLC, on briefs), for Kenneth Ellenbogen, M.D., Antonio Abbate, M.D., Stephanie Call, M.D., MCV Associated Physicians and John E. Nestler, M.D.

L. Steven Emmert (Sykes, Bourdon, Ahern & Levy P.C., on briefs), for Tiziano M. Scarabelli M.D., Harris D. Butler, III and Butler Curwood, PLC.

When a party or an attorney files an objectively baseless defamation complaint, a trial court must impose sanctions under Code § 8.01-271.1. We apply this familiar principle to an acrimonious disagreement between several litigants. After hiring Dr. Tiziano Scarabelli, MCV Associated

Physicians (“MCVAP”) began receiving complaints about Scarabelli’s behavior, resulting in intense litigation involving defamation, fraudulent inducement, and sanctions. On appeal, Drs. Stephanie Call and John Nestler argue that the trial court erred in denying their post-trial sanctions motions against Scarabelli and his attorney, Harris D. Butler, III, concerning

Scarabelli’s defamation claims and related litigation. Although Scarabelli’s complaint against

Call was objectively reasonable, his complaint against Nestler was baseless, as Nestler’s alleged defamatory statements did not carry the requisite defamatory “sting.” Thus, we affirm the trial

court’s denial of Call’s motion for sanctions but reverse its denial of Nestler’s motion for sanctions. On separate appeal, Scarabelli argues that the trial court erred in allowing MCVAP’s

fraudulent inducement counterclaim to go to the jury, claiming that the source of duty rule, voluntary payment doctrine, Virginia Wage Payment Act, and “Gasque” doctrine preclude such a claim. See Gasque v. Mooers Motor Car Co., 227 Va. 154 (1984). Because the doctrines cited by Scarabelli do not apply, we affirm the jury’s verdict on the fraudulent inducement claim.

BACKGROUND

MCVAP hired Scarabelli as the Virginia Commonwealth University (“VCU”) Health

Systems’ Director of Cardio-Oncology on a one-year contract, from June 2017 to 2018. By winter, MCVAP had received several complaints from staff members concerning Scarabelli’s lack of professionalism. Several MCVAP doctors believed that these misunderstandings were

cultural1 and attempted to counsel Scarabelli. MCVAP also received complaints from interns, residents, and patients that appeared to constitute allegations of sexual harassment, prompting a

Title IX investigation referral. During the investigative process, MCVAP placed Scarabelli on administrative leave from February to June 2018. It continued to pay Scarabelli’s salary—over

$20,000 per month—during this time. Ultimately, MCVAP chose to not renew Scarabelli’s contract.

Scarabelli filed a complaint against Drs. Kenneth Ellenbogen, Antonio Abbate, Nestler, Call, and MCVAP (collectively, “Defendants”), alleging that they defamed him because he questioned VCU’s cardiac monitoring process. In an amended complaint, Scarabelli alleged that

Defendants falsely (1) attacked his professionalism and (2) alleged that he committed sexual misconduct with interns, residents, and fellows “to discredit [him], stop his concerns regarding the cardiac care of chemotherapy patients, and . . . ruin him professionally.” Scarabelli sought to prove that Call defamed him when she authored a January 2018 memorandum that stated in part:

• “There were some instances where he made some mildly uncomfortable comments to the female NP or patients which were a little inappropriate in nature . . . .” • “From one trainee . . . : o ‘When introducing himself and helping those around him correctly pronounce his name, he would say . . . “Tiziano . . . like tits (grabbing his chest) and ano (pointing to his anus).”’ o ‘I remember him stating that “blondes are for dating and brunettes are for marrying.”’ o ‘I recall him being very touchy feely, including placing his hands on many of the resident’s thighs, including my own.’ o ‘When going to the ED to see a new admission, the fellow and I escorted him down there since he was new and did not know how to get there. Once we got to the ED he began speaking to a female care partner, roughly 20-24 years of age, and he then pursued to ask her for a tour. While the fellow and I waited a few minutes for him to return, we asked what he was doing. He said something along the lines of her being very attractive so he asked her to show him around.’ o ‘I also remember him mentioning that his wife is sexy a couple times.’” • “I only worked with him for a few days. It was the worst experience of my medical career . . . . Everyone else told me that they felt sorry for me . . . . He was rude; he constantly interrupted, correcting me and dressed me down in front of the team while I tried to present . . . . He made me stand up in front of the entire team to ‘act out’ vectors for EKG reading and said ‘no, not like that, put your hand on your chest . . . .’” • “I have heard negative things about him from other attendings—that their patients complain about him being unprofessional and rude.”

• “He is always putting down other physicians and our healthcare system.” • “He told the interns not to page him.” • “He made reference during rounds recurrently to ‘my beautiful eyes’; it made me uncomfortable . . . . He touched my leg . . . . He made multiple inappropriate comments on rounds . . . . I felt like he tried to come on to me, like he was constantly staring at me . . . . He was constantly complaining about other attendings and making comparisons to past institutions, clearly stating that ours was inferior.”

And Scarabelli sought to prove that Nestler defamed him in making the following statements:2

• “Based on multiple complaints raised against you by interns.” • “Concerns that were raised.” • “Multiple complaints have been raised.” • “Administrative leave.” • “Dr. Scarabelli was placed on administrative leave.”

MCVAP counterclaimed, alleging that Scarabelli fraudulently induced his hiring.

Specifically, MCVAP alleged that Scarabelli submitted a curriculum vitae that he knew

“contained references to fraudulently procured articles published in medical . . . journals” and “purposefully concealed . . . the true circumstances” of his termination from the University of Alabama. MCVAP claimed it “would never have employed” Scarabelli had it known the truth.

Defendants filed a plea in bar and a demurrer to Scarabelli’s amended complaint. On demurrer, Defendants argued, in part, that the statements by Call and Nestler were not actionable as defamation. After argument, the trial court overruled Defendants’ renewed plea in bar and demurrer.

A six-day consolidated trial followed. After argument, Scarabelli moved to strike, arguing that MCVAP voluntarily paid his administrative leave and did not sufficiently quantify its damages. MCVAP countered that their damages were properly quantified3 and that the voluntary payment doctrine sounds in contract, not tort, and does not apply to fraudulent inducement claims. Defendants also moved to strike Scarabelli’s defamation claims, arguing that the statements were true, did not have defamatory “sting,” and were subject to a qualified

privilege. Scarabelli countered that all the statements showed an intent to damage his reputation, due to his perceived lack of collegiality and cultural differences. Although the trial court took both matters under advisement, it ultimately refrained from addressing the motions to strike by joint request of counsel.

Because Scarabelli agreed to dismiss all defamation claims against Nestler, the jury considered only these issues: (1) Ellenbogen’s alleged defamation per se, (2) Abbate’s alleged

defamation per se, (3) Call’s alleged defamation per se, (4) MCVAP’s alleged defamation per se, and (5) MCVAP’s fraud in the inducement claims.^[4] The jury returned a verdict against

Scarabelli, finding that he failed to prove a prima facie defamation case against the above-named individuals. It ruled in favor of MCVAP on the counterclaim, awarding compensatory damages of $102,500 and punitive damages of $143,500.

Call and Nestler moved for post-trial sanctions on the defamation claims against them.

Scarabelli also filed several post-trial motions, including a motion to set aside the verdict on the counterclaim and a motion for a new trial. The trial court denied all four motions and entered final judgment pursuant to the jury’s verdict and its post-trial rulings. These appeals followed.

ANALYSIS

On appeal, Call and Nestler argue that the trial court erred in denying their post-trial sanctions motions, stating that Scarabelli’s defamation claims were baseless. On separate appeal, Scarabelli argues that the trial court erred in allowing MCVAP’s fraudulent inducement counterclaim to go to the jury and in refusing to set aside the jury’s verdict. We begin with Call and Nestler’s appeal concerning Scarabelli’s defamation claims and the denial of their post-trial sanctions motions. After examining the record, we find that Scarabelli’s claim against Call was

not objectively unreasonable but that Scarabelli’s claim against Nestler was baseless and warranted sanctions. We then address Scarabelli’s appeal of MCVAP’s fraudulent inducement claim and conclude that the record supports the jury’s verdict. Finally, we find MCVAP’s damages were appropriate in tort.

I. Call’s and Nestler’s Appeal a. Standard of Review

We review the imposition of sanctions under an abuse of discretion standard. Williams & Connolly, L.L.P. v. People for Ethical Treatment of Animals, Inc., 273 Va. 498, 509 (2007). “A court always abuses its discretion when it makes an error of law.” Davenport v. Util. Trailer

Mfg. Co., 74 Va. App. 181, 206 (2022). It may also abuse its discretion by: (1) ignoring “a relevant factor that should have been given significant weight,” (2) “considering and giving

significant weight to an irrelevant or improper factor,” and (3) “committing a clear error of judgment, even while weighing ‘all proper factors.’” Id. (quoting Lawlor v. Commonwealth, 285

Va. 187, 213 (2013)). “We employ an ‘objective standard of reasonableness’ in evaluating the written representations” in the motions and pleadings filed with the trial court. Williams & Connolly, 273 Va. at 510. “On appeal, we view the evidence in the light most favorable to . . . the party prevailing below”—here, Scarabelli. Black v. Powers, 48 Va. App. 113, 119 (2006).

Finally, our appellate review of defamation consists of two steps. First, we look at whether the defamatory statement was actionable. Whether an alleged defamatory statement is actionable is a question of law to be reviewed de novo. Jordan v. Kollman, 269 Va. 569, 576

(2005). A statement is not actionable if it “does not contain a provably false factual

connotation,” id. (quoting Fuste v. Riverside Healthcare Ass’n, Inc., 265 Va. 127, 132 (2003)), or if it does not contain the requisite defamatory “sting,” Schaecher v. Bouffault, 290 Va. 83, 92

(2015). Second, we look at whether the evidence—viewed in the light most favorable to the prevailing party below—could have supported a jury’s finding that the challenged statements were false. Jordan, 269 Va. at 576. “Thus, on appeal, we determine only whether there is sufficient evidence to support the jury’s decision. A trial court’s judgment will not be set aside unless it is plainly wrong or without evidence to support it.” Id.

b. Call and Nestler’s Assignments of Error Call and Nestler argue that the trial court erred in denying their motions for sanctions, as their alleged defamatory statements were true and lacked both malice and defamatory “sting.”

Thus, they argue that Scarabelli’s claims lacked legal merit and warranted sanctions. Because

Scarabelli’s amended defamation complaint against Call was not objectively unreasonable, Call’s appeal fails. Conversely, Scarabelli’s amended defamation complaint against Nester was baseless and violated Code § 8.01-271.1 and the trial court erred in denying Nestler’s motion for sanctions. i. The trial court did not abuse its discretion in denying Call’s motion for sanctions.

In defamation5 cases, a plaintiff must show: “(1) publication of (2) an actionable statement with (3) the requisite intent.” Jordan, 269 Va. at 575. Actionable defamation is “both false,” id., and contains “defamatory ‘sting,’” Schaecher, 290 Va. at 92. True statements and opinions are not actionable. Jordan, 269 Va. at 575-76. Language contains defamatory sting

when it: harms “one’s reputation in the common estimation of mankind”; vilifies, shames, or disgraces; tends to cause “scorn, ridicule, or contempt”; or “is calculated to render [the subject] infamous, odious, or ridiculous.” Schaecher, 290 Va. at 92. We give “allegedly defamatory words . . . their plain and natural meaning[,] . . . to be understood by courts and juries as other people would understand them, and according to the sense in which they appear to have been used.” Carwile v. Richmond Newspapers, 196 Va. ^[1], 7 (1954).

An attorney’s signature on a pleading, motion, or other paper “constitutes a certificate” that “(i) he has read the pleading,” “(ii) to the best of his knowledge,” and “after reasonable inquiry,” he finds that “it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law,” and (iii) “is not interposed for any improper purpose.” Code § 8.01-271.1. And again, “[w]e employ an

‘objective standard of reasonableness’” when evaluating a party’s “written representations.”

Williams & Connolly, 273 Va. at 510. Thus “we consider whether ‘after reasonable inquiry, [counsel] could have formed a reasonable belief that the pleading[s] [were] well grounded in fact, warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and not interposed for an improper purpose.’” Id. (alterations in original) (quoting Flippo v. CSC Assocs. III, L.L.C., 262 Va. 48, 65-66 (2001)).

The Supreme Court has stated that if Code § 8.01-271.1 is violated, the trial court must

impose sanctions because the statute uses the words “shall impose.” N. Virginia Real Est., Inc. v. Martins, 283 Va. 86, 114 (2012). Our Code § 8.01-271.1 is based on the 1983 version of Rule

11 of the Federal Rules of Civil Procedure, as is evidenced by the similar language of Code

§ 8.01-271.1 and its lack of substantive amendment since 1987. See Code § 8.01-271.1(D) (“If a pleading, motion, or other paper is signed or made in violation of this section, the court, upon motion or upon its own initiative, shall impose upon the person who signed the paper or made the motion, a represented party, or both, an appropriate sanction . . . [including] the reasonable expenses incurred because of the filing . . . [and/or] reasonable attorney fees.”). In 1983, Federal

Rule 11 “oblig[ated] [the district court] to impose sanctions once it determined that a signer had violated Rule 11 . . . [as] ‘the court shall impose’ sanctions if a violation has occurred.”

Benjamin Spencer, Federal Practice & Procedure (Wright & Miller) § 1331 (2022 update). In 1993 and 2007, Rule 11 was amended again. See Fed. R. Civ. P. 11. As a result of the 1993 amendment, its language was changed from obligatory to permissive, now stating that the court

“may” impose sanctions if it finds that Rule 11 was violated. See Fed. R. Civ. P. 11.

Recognizing this, our Supreme Court stated: “the General Assembly had the opportunity to make discretionary a court’s imposition of sanctions upon finding a statutory violation, but elected not to do so. Instead, it used the mandatory words ‘shall impose.’” Martins, 283 Va. at 114.

Thus, we must first determine whether Scarabelli presented a valid defamation claim

against Call. To do so, Scarabelli and his attorney must have complained that Call published, with malintent, a false statement containing defamatory sting, see Jordan, 269 Va. at 575, and must have included more than mere conclusory allegations, see A.H. by next friends C.H. v. Church of God in Christ, Inc., 297 Va. 604, 613 (2019) (quoting Bell Atl. Corp. v. Twombly, 550

U.S. 544, 556 (2007)); Dean v. Dearing, 263 Va. 485, 490 (2002). If they failed to present a

proper and well-grounded defamation case in the amended complaint, motions, discovery, and other papers, we must then determine whether Scarabelli and his attorney violated Code

§ 8.01-271.1. Finally, if Scarabelli and his attorney violated Code § 8.01-271.1, the trial court abused its discretion in denying sanctions.

Viewed in the light most favorable to the prevailing party—Scarabelli—the trial court did not abuse its discretion in denying Call’s sanctions motion. Because Scarabelli and his attorney

presented a valid, non-conclusory defamation claim against Call that appeared well-grounded in fact, they did not violate Code § 8.01-271.1. See Jordan, 269 Va. at 575 (requiring

“(1) publication of (2) an actionable statement with (3) the requisite intent” in defamation claims).

Here, Call published the January 2018 memorandum to several staff members. In the memorandum, she restated—verbatim—several allegations that Scarabelli had sexually harassed

patients and staff and lacked professionalism. Call’s statements were vivid, not opinion, and contained sufficient sting to harm Scarabelli’s “reputation in the common estimation of mankind.” Schaecher, 290 Va. at 92. Because Scarabelli vehemently denied these allegations, reasonable people could differ as to the veracity of these statements. For example, Call restated complaints like:

• “He was rude; he constantly interrupted, correcting me and dressed me down in front of the team while I tried to present . . . . He made me stand up in front of the entire team to ‘act out’ vectors for EKG reading and said ‘no, not like that, put your hand on your chest . . . .’” and • “He made reference during rounds recurrently to ‘my beautiful eyes’; it made me uncomfortable . . . . He touched my leg . . . . He made multiple inappropriate comments on rounds . . . . I felt like he tried to come on to me, like he was constantly staring at me . . . .”

As such, the truth of Call’s statements in the January 2018 memorandum was a proper question for the jury, despite Call’s contention to the contrary. Lastly, Scarabelli’s testimony that he believed Call’s memorandum was made with malintent, in retaliation for his concerns about

VCU’s cardiac monitoring processes, was a proper question of credibility for the jury. For these reasons, we cannot say that Scarabelli’s claims against Call were “objective[ly]” unreasonable, - 10 -

Williams & Connolly, 273 Va. at 510, were not “well grounded in fact,” or were “interposed for an[] improper purpose,” Code § 8.01-271.1.

While the jury rejected the claims against Call, Scarabelli presented a valid defamation claim against Call with sufficient evidentiary support. As such, Scarabelli and his attorney did not violate Code § 8.01-271.1, and the trial court did not abuse its discretion in denying Call’s motion for sanctions. ii. The trial court abused its discretion in denying Nestler’s motion for sanctions.

Even viewed in the light most favorable to Scarabelli, the trial court abused its discretion in denying Nestler’s motion for sanctions. As previously stated, we must first determine whether

Scarabelli and his attorney presented a valid defamation claim against Nestler in the amended complaint, motions, discovery, and other papers. To present a valid defamation complaint against Nestler, Scarabelli and his attorney must have complained that Nestler published, with malintent, a false statement containing defamatory sting and must have presented more than mere conclusory allegations. See Jordan, 269 Va. at 575. If Scarabelli and his attorney failed to present a prima facie, non-conclusory defamation claim against Nestler, we must then determine whether they violated Code § 8.01-271.1. And, lastly, if Scarabelli and his attorney violated that code section, the trial court abused its discretion in denying sanctions.

Here, Scarabelli failed to present a valid defamation claim against Nestler, as Scarabelli could not provide a single actionable defamatory statement made by Nestler or present any

evidence at trial that Nestler defamed him. One month before filing the amended complaint, Scarabelli was deposed and admitted that Nestler made no defamatory statements. Rather, Scarabelli was upset about Nestler’s actions:

A: [I]n a nutshell, what Nestler did . . . it would be difficult for me to come up with a specific sentence. ....

- 11 -

Q: Okay. So I understand you cannot give or, come up with a specific sentence, or words that Dr. Nestler used that were false and defamatory, but your issue with him was his actions enabled the ultimate termination of your employment, the nonrenewal of your contract? A: Yes. .... Q: Okay. So you would agree you don’t have any particular defamatory words that he said, but your issue with Dr. Nestler is his actions? A: The action and the fact that he didn’t . . . try to find a remedy for the wrong which had been done until that point.

Nevertheless, only one month later, Scarabelli and his counsel filed an amended complaint, alleging that Nestler uttered five defamatory statements: (1) “based on multiple complaints raised against you by interns,” (2) “concerns that were raised,” (3) “multiple complaints have been raised,” (4) “administrative leave,” and (5) “Dr. Scarabelli was placed on administrative leave.”

Several of these statements were undeniably true and, therefore, not actionable. Jordan, 269 Va. at 575-76. Scarabelli does not contest that he was placed on administrative leave.

Instead, he argues that he should not have been placed on administrative leave because it was retaliatory. But whether Scarabelli’s administrative leave was unjust is not at issue here, only

whether Nestler’s statements were defamatory. Because true statements cannot be defamatory, statements (4) and (5) cannot constitute actionable defamation. We note that the other statements appear equally true, as Scarabelli never challenged the fact that complaints were made, only the content and veracity of those complaints.

Alternatively, none of the above statements contain the requisite defamatory sting.

Therefore, they were not actionable. As stated above, language contains defamatory sting when it: harms “one’s reputation in the common estimation of mankind”; vilifies, shames, or disgraces;

tends to cause “scorn, ridicule, or contempt”; or “is calculated to render [the subject] infamous, odious, or ridiculous.” Schaecher, 290 Va. at 92. We give “allegedly defamatory words . . .

- 12 - their plain and natural meaning[,] . . . to be understood by courts and juries as other people would

understand them, and according to the sense in which they appear to have been used.” Carwile, 196 Va. at 7. “[B]efore allowing the matter to be presented to a finder of fact,” courts “must decide as a threshold matter . . . whether a statement is reasonably capable of defamatory meaning.” Schaecher, 290 Va. at 94.

In Schaecher, the Supreme Court held that a local planning commissioner’s comment that an applicant seeking to build a dog kennel “was not totally truthful” did not contain defamatory

sting. Id. at 101-02. But it held that the statement “I firmly believe that [she] is lying and manipulating facts to her benefit” contains defamatory sting, as this statement could be

reasonably understood as an attack on the applicant’s reputation and character. Id. at 101. In Bryant-Shannon v. Hampton Roads Cmty. Action Program, Inc., 299 Va. 579 (2021), the Supreme Court held that a supervisor’s statements in a disciplinary letter did not contain defamatory sting when those comments merely instructed an employee to change her unprofessional behavior. Id. at 587-88 (stating, for example, “[y]ou are not allowed to take sick leave without giving notice to your immediate supervisor prior to the start of the work day . . .”); see also Theologis v. Weiler, 76 Va. App. 596, 605-08 & n.6 (2023) (finding that twenty-six allegedly defamatory statements lacked sufficient sting to be actionable).

Here, Nestler’s statements could not be construed as an attack on Scarabelli’s reputation or character, as none of these statements are “reasonably capable of defamatory meaning.” See

Schaecher, 290 Va. at 94. Like the statements in Bryant-Shannon, Nestler’s statements constituted mere observations. As such, Nestler’s statements contained no defamatory sting on their face and were not actionable defamation. Moreover, Scarabelli and his counsel appeared to recognize the utter lack of merit in the defamation claims against Nestler—either for truthfulness

- 13 - or lack of defamatory sting—as they quietly agreed to remove the claim against Nestler from the jury’s consideration. Although sanctions should not be awarded lightly, sanctions must be awarded in certain circumstances under Code § 8.01-271.1(D). This case is one of those rare circumstances. One month after Scarabelli stated, under oath, that he could not identify any defamatory statements made by Nestler, Scarabelli—by and through his attorney—filed an amended complaint stating, again, that Nestler defamed him. The amended complaint contained no reasonable, actionable defamatory statements by Nestler. Despite Scarabelli’s inability to identify any defamatory statement made by Nestler and the utter lack of defamatory sting, Scarabelli and his attorney nevertheless certified that the amended complaint was “well grounded in fact” and “not interposed for any improper purpose.” Code § 8.01-271.1. They then forced Nestler to litigate for several years and participate in a six-day trial, only to drop the case against Nestler at the last minute because their claim was clearly not well-grounded in fact. Under an “objective standard of reasonableness,” both Scarabelli and his attorney violated Code § 8.01-271.1 in filing the amended complaint, motions, and other papers concerning Nestler and in litigating against him for several years. See Williams & Connolly, 273 Va. at 510. As previously stated, when Code § 8.01-271.1 is violated, the trial court must “impose upon the person who signed the paper or made the motion, a represented party, or both, an appropriate sanction.” Code § 8.01-271.1(D); Martins, 283 Va. at 114. Because Scarabelli’s claims against Nestler were clearly not “well grounded in fact” and/or were “interposed for an[] improper purpose,” Code § 8.01-271.1, the trial court erred in failing to impose sanctions against Scarabelli and/or his attorney.^[6] Finally, we note that although the imposition of sanctions was