Group Hospitalization & Medical Services, Inc., Plaintiff-appellant, v. Blue Cross and Blue Shield of the National Capital Area,inc. and Blue Cross and Blue Shield of Virginia; and Bluecross and Blue Shield of the Capital Area, Inc., and Capitalarea Blue Cross and Blue Shield, Inc., and Blue Cross Andblue Shield of the District of Columbia, Inc., Andmetropolitan Blue Cross and Blue Shield, Inc., Six Staplesmill Corp., Defendants-appellees. v. Capitalcare, Inc., Third Party Defendant-appellant,andaccess America, Inc., Third Party Defendant.group Hospitalization & Medical Services, Inc., Plaintiff-appellant, v. Blue Cross & Blue Shield of Virginia, Defendant-appellee.group Hospitalization & Medical Services, Inc., Plaintiff-appellee, v. Blue Cross & Blue Shield of Virginia, Defendant-appellant,andblue Cross & Blue Shield of the National Capital Area,incorporated; Blue Cross & Blue Shield of the Capital Area,incorporated; Capital Area Blue Cross & Blue Shield,incorporated; Blue Cross & Blue Shield of the District Ofcolumbia, Incorporated; Metropolitan Blue Cross & Blueshield, Incorporated; Six Staples Mill Corporation, Defendant, v. Capitalcare, Inc., Third Party Defendant-appelleeandaccess America, Inc., Third Party Defendant, 819 F.2d 1138 (4th Cir. 1987)

The instant case is a dispute between Group Hospitalization and Medical Services, Inc. ("D.C. Plan") and Blue Cross and Blue Shield of Virginia ("Richmond Plan"), two licensees of the Blue Cross and Blue Shield Association, Licensor. Each of the licensees are in the business of, inter alia, advertising and selling prepaid health care services. While each group was assigned, according to their respective license agreements, an exclusive territory in which to transact business, the instant dispute arose over the geographical boundaries of those territories. The license agreements did not expressly delineate the parameters of the territories, but merely stated that each plan should have as its exclusive territory that geographical area which it was servicing on June 30, 1972, the effective date of the license agreements.

Plaintiffs filed this suit invoking federal question jurisdiction, pursuant to 28 U.S.C. § 1331; copyright and trademark jurisdiction, pursuant to 28 U.S.C. § 1338; and declaratory relief, pursuant to 28 U.S.C. §§ 2201, 2202, however, the court's ultimate disposition of the case was, of necessity, premised on the general contract law of the Commonwealth of Virginia as it applied to the interpretation of an order rendered by the Virginia State Corporation Commission ("SCC").

This case was initiated by the D.C. Plan against the Richmond Plan, et als., for injunctive relief against defendants' use in the Washington Metropolitan area of names similar to that of plaintiff. The Richmond Plan then filed its counterclaim against the D.C. Plan and its wholly owned subsidiary, Capital Care, Inc., and Access America, Inc., a corporation in which the D.C. Plan held a minority stock interest, alleging invasion of its territorial rights by the D.C. Plan. The original complaint, along with the counterclaim against American Access, Inc., were amicably adjusted and therefore dismissed, leaving the sole issue for the court's determination the territorial dispute raised by the Richmond Plan's counterclaim against the D.C. Plan.

In his memorandum opinion issued on April 8, 1986, the trial judge found that in 1972, the Licensor, as part of a national practice created by it and consistent, so the parties contended, with the 1955 Order of the SCC, granted each of the instant parties exclusive territorial rights. As the trial court recognized, the controversial issue was plain and simple: What was the meaning to be accorded the SCC Order upon which the 1972 license agreements were premised?

The court found that in 1955, the D.C. Plan submitted an application to the SCC for authority to transact business in an area defined in its application as:¹ 

the city of Alexandria, Arlington County and a part of Fairfax County, all of said area lying within Route 123 to the West, and the Potomac River to the East, including all cities and towns bordering on Route 123. The cities and towns bordering on said route include Langley, Mclean, Tyson's Corner, Vienna, Oakton, Fairfax, Burke, Occoquan and Woodbridge.

In response, the Commission ordered in August, 1955 that:

An authorization under Title 32, Chapter 11, of the Code of Virginia is hereby directed to issue in favor of the applicant for the offer and sale in Virginia of contracts for future hospitalization, in accordance with the plan set forth in the record.

While the D.C. Plan's original petition to the SCC for authority to transact business contained the specific territorial areas it sought to control, the trial court found the petition itself ambiguous; despite the territories' identifiable names, they were unincorporated areas whose boundaries, therefore, were undefinable. Coupled with the ambiguous petition filed by the D.C. Plan to the SCC, the court further found--and correctly--that the order entered by the SCC granting the D.C. Plan its "transacting territory" was non-specific. The trial court therefore correctly concluded that in order to best determine what was intended by the grant of territory, the court would have to look to the construction the parties themselves put upon it. See American Realty Trust v. Chase Manhattan Bank, 222 Va. 825, 281 S.E.2d 285 (1981); Phipps v. Leftwich, 216 Va. 706, 222 S.E.2d 536 (1976); Dart Drug Corp. v. Nicholokos, 221 Va. 989, 277 S.E.2d 155 (1981).

The court found that the parties had, early on, construed the D.C. Plan's boundary as including what was then considered the City of Fairfax and the Town of Vienna, even though they fell partially outside Route 123. The disputed area was, as the trial court found, of little profit to either group until late 1970 and early 1980 when the area began to experience significant growth. However, even before this area began to grow and become a major profit center, the Richmond Plan, pursuant to a firmly held legitimate belief that the disputed area belonged to it, serviced the areas outside of Route 123, exclusive of Fairfax and Vienna. In contrast to the Richmond Plan's established business practice in the disputed area, the trial court found that the D.C. Plan had no concrete territorial guideline; there were no maps or specific company-wide instructions to follow which could be used as evidence of its marketing area boundaries.

Premising its conclusion on the parties' own construction of the grant of territory, the court found that the D.C. territory was limited to the City of Alexandria, Arlington County, that part of Fairfax County lying within State Route 123, plus those parts of the incorporated entities of Fairfax and Vienna which are located outside State Route 123. The court found that as to Prince William County, Virginia, the D.C. Plan's territory was limited to that portion of the county lying within State Route 123. Following its determination as to what was intended by the grant of territory encompassed in the 1955 order, the court entered an appropriate decree encompassing its conclusions. The trial court properly rejected the D.C. Plan's belated contention that the SCC's geographic description made by references to the record before it, was unambiguous. This Court notes that such a position was effectively refuted by its own record.

This Court, in reviewing the district court's disposition of the instant matter, is bound to apply the clearly erroneous standard. Fed. R. Civ. P. 52(a). See also United States v. National Association of Real Estate Boards, 339 U.S. 485, 495-96 (1950); Canron, Inc. v. Plasser American Corp., 609 F.2d 1075 (4th Cir. 1979).

We conclude that the trial court properly found that the D.C. Plan's petition was ambiguous and the SCC order granting it authority to transact business was non-specific. These ambiguities were emphasized when the Licensor adopted the SCC's order to define, in its 1972 license agreements with the D.C. Plan and the Richmond Plan, the exclusive territorial boundaries of these Plans. The trial court, applying general contract principles, correctly concluded that the ambiguities would best be resolved by looking to the parties and their construction of the agreement. Upon a review of the other matters raised on appeal, we conclude that the dismissal of Civil Action 86-0303A, on the grounds that the court's determination of the issues in Civil Action No. 85-1123 (which this Court has addressed in this opinion), had effectively disposed of any and all remaining controversies, was proper. Accordingly, it is our holding that the decision rendered by the district court in this matter is AFFIRMED.

AFFIRMED.