                             UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                             No. 06-2028



WESTERN INSULATION, LP,

                                              Plaintiff - Appellee,

          versus


HAL MOORE; MELANIE MOORE,

                                           Defendants - Appellants.



                             No. 06-2075



WESTERN INSULATION, LP,

                                             Plaintiff - Appellant,

           versus


HAL MOORE; MELANIE MOORE,

                                            Defendants - Appellees.



Appeals from the United States District Court for the Eastern
District of Virginia, at Richmond.    James R. Spencer, Chief
District Judge. (3:05-cv-00602-JRS)


Argued:   May 24, 2007                      Decided:   July 25, 2007
Before MICHAEL, Circuit Judge, WILKINS, Senior Circuit Judge, and
David C. NORTON, United States District Judge for the District of
South Carolina, sitting by designation.


Affirmed in part, reversed in part, vacated in part, and remanded
by unpublished per curiam opinion.


ARGUED: John B. Simpson, MARTIN & RAYNOR, P.C., Charlottesville,
Virginia, for Appellants/Cross-Appellees.    Stephen C. Tedesco,
LITTLER   MENDELSON,  P.C.,   San   Francisco,   California,   for
Appellee/Cross-Appellant. ON BRIEF: Ronald S. Sofen, GIBBS, GIDEN,
LOCHER   &   TURNER,  L.L.P.,   Los   Angeles,   California,   for
Appellants/Cross-Appellees. Paul J. Kennedy, LITTLER MENDELSON,
P.C., Washington, D.C.; Mendy L. Mattingly, LITTLER MENDELSON,
P.C., San Diego, California, for Appellee/Cross-Appellant.


Unpublished opinions are not binding precedent in this circuit.




                                2
PER CURIAM:

     Hal and Melanie Moore appeal a judgment against them in an

action brought by Western Insulation, LP (“Western”), for the

Moores’   alleged   breaches   of   certain   non-compete   agreements.

Western cross-appeals the decision of the district court to deny

its request for injunctive relief.       We affirm in part, reverse in

part, vacate in part, and remand for further proceedings.


                                    I.

     In March 2001, Hal, as sole shareholder of the San Diego

insulation company Western Insulation, Inc. (“Western, Inc.”),

entered into an agreement whereby Western, Inc. sold most of its

assets to Western, a wholly owned subsidiary of Service Partners,

LLC, for $41,990,000.00 (“the Sale Agreement”). At the time of the

Sale Agreement, Hal’s wife Melanie was an employee and the CFO of

Western, Inc.   Pursuant to the Sale Agreement, both Moores entered

into identically worded Confidentiality, Non-Competition, and Non-

Solicitation Agreements (“the Non-Competes”), which, as is relevant

here, provided:

          As consideration for and to induce the Partnership
     to pay the consideration set forth in the Contribution
     and Sale Agreement, Moore hereby covenants and agrees
     that, except as the Partnership may expressly authorize
     or direct in writing, he [/she] shall not, for a period
     of seven (7) years from the date hereof (the “Non-Compete
     Period”), directly or indirectly (a) own, manage,
     operate, join, or control (or participate in the
     ownership, management, operation or control of), any ...
     business entity that, within the restricted territories
     identified ..., which are the territories in which

                                    3
     [Western, Inc.] conducted business immediately prior to
     the transactions set forth in the Contribution and Sale
     Agreement,   engages   in  the   business   of  selling,
     distributing or installing Restricted Products ... or (b)
     serve as an employee, agent, consultant, officer,
     director or representative of any such business entity
     ....

           ....

     During the Non-Compete Period, Moore shall not directly
     or indirectly:

          A.   employ or retain any individual who is or was
     an employee or officer of [Western, Inc.] during the
     twelve (12) month period immediately preceding the date
     hereof ... [or]

          B.   contact, solicit or assist in the solicitation
     of any [such] individual ....

J.A. 943-44, 951-52.   The geographic scope of the ban was the state

of California and the area within a 125-mile radius of Phoenix,

Arizona.   The agreement provided that it would be interpreted and

enforced in accordance with Virginia law.

     Over more than 20 years, Hal had developed a close and

longstanding relationship with City National Bank.     Melanie used

this relationship to help obtain financing for two insulation

companies that would compete with Western.      In March 2005, she

signed a secondary personal guaranty for a $1.41 million line of

credit to assist Stephanie Schulkamp in forming one of those

companies, American Insulation, Inc.     Schulkamp was a friend of

Melanie’s and had served for several years as a high-level employee

of Hal’s businesses, including Western, Inc.     By virtue of Hal’s

ties to the bank, Melanie was able to obtain preferential treatment

                                 4
for Schulkamp, who would not have been able to obtain the financing

without Melanie’s assistance.       According to the loan guarantee

agreement, Schulkamp may earn only $90,000 per year and must obtain

Melanie’s consent to make any purchase for the company in an amount

exceeding $25,000.     The agreement also entitles Melanie to certain

financial information regarding American.

     In return for the guaranty, Schulkamp granted Melanie a

security interest in American’s assets and secured the guaranty

with her home and her shares in American.         The parties’ agreements

prohibit Schulkamp from transferring any of this collateral without

Melanie’s   consent.     They   further   grant   Melanie   an   option   to

purchase 90 percent of the company for $9,000.         The option may be

exercised between March 13, 2008 (the expiration date for her Non-

Compete) and March 5, 2010, or immediately if Melanie’s Non-Compete

is held to be unenforceable by a court of competent jurisdiction.

     Melanie also signed a secondary personal guaranty for a $1.015

million commercial line of credit to help another former longtime

Western, Inc. employee, Dave Barnes, obtain financing to start his

own insulation business to compete with Western, Empire Insulation.

Melanie also advised Barnes concerning the loan amount he should

seek. As she did with Schulkamp, Melanie used the relationship Hal

had developed with City National Bank to obtain this financing for

Barnes, which he would not have received without her assistance.




                                    5
       Hal also had dealings with American and Empire after signing

his Non-Compete.       Since 1984, Hal has owned a building in San Diego

that he used for many years as the headquarters for Western, Inc.

and     several   of    his    other    businesses.           Western     was    also

headquartered there for approximately three years, ending March 1,

2004.     Following Western’s departure, much of the space in the

building remained vacant until Hal leased it to American in March

2005.     Around that same time, State Insulation, Inc., another of

Hal’s businesses, leased trucks to American, and Hal also sold two

trucks to Empire.

       Western    subsequently     brought         suit   against   the   Moores    in

Henrico County, Virginia Circuit Court, alleging, as is relevant

here, that they violated their Non-Competes in their dealings with

American and Empire. Western sought, inter alia, money damages and

injunctive relief.

       The Moores removed the action to federal district court, and

both    parties   moved   for    partial      summary      judgment.      The    court

purported to deny the motions, but in so doing, ruled that the

scope of the restrictive covenants was reasonable as a matter of

law.    See Western Insulation, L.P. v. Moore, 2006 WL 208590, at *5-

*7 (E.D. Va. Jan. 25, 2006).           The court noted “the vast difference

between    restrictive        covenants       in    employment      agreements     and

restrictive covenants in the context of a sale of a business,

particularly when sophisticated parties are involved.”                    Id. at *5.


                                          6
The court ruled that the geographical scope of the covenants was

reasonable inasmuch as Western did business in approximately half

of the counties in California as well as in Phoenix and that it

advertises throughout California.       See id. at *6.    The court also

ruled the seven-year length was reasonable, noting that the length

of that period was an integral factor in Western’s decision to

purchase Western, Inc. for the price that it paid.              See id.

Finally, the court noted that the covenants would not impose an

undue hardship on the Moores, who own several businesses, and that

public policy supported enforcement of the covenants considering

that they were negotiated and entered into by sophisticated parties

who were represented by counsel.       See id. at *7 n.6.1

     Following   a   non-jury   trial,    the   court   determined   that

Melanie’s Non-Compete was adequately supported by consideration in

that she received the right to enter into an employment agreement

with Western as the result of signing her Non-Compete.2        The court

also found that both Moores breached their Non-Competes.        Hal was

found to have breached his agreement by leasing his building and



      1
       The court ruled, however, that genuine issues of material
 fact remained regarding whether Melanie’s Non-Compete was
 supported by adequate consideration and whether the Moores
 breached the Non-Competes. See id. at *7-*8.
      2
       The Sale Agreement provided that at closing Hal and Melanie
 “shall execute and deliver to [Western] an employment agreement
 containing terms mutually satisfactory to [Western] and him or
 her.”   J.A. 881.   Melanie did indeed enter into an employment
 agreement with Western.

                                   7
his trucks to American, “contacting customers of Western ... (e.g.,

RHA) in order to determine whether additional insulation work was

available and providing work to Empire,” J.A. 868, selling trucks

to Empire, and hiring two former Western, Inc. employees.               Melanie

was found to have breached her Non-Compete by making the loan

guaranties; securing a financial interest in American’s assets,

profits, and shares; securing an option to buy 90 percent of

American; having financial oversight and control over the company;

using former Western, Inc. employees and consultants for American

and Empire; and giving financial advice to Barnes.               The district

court also determined that the Moores jointly violated the Non-

Competes by “provid[ing] their long-standing business contacts and

relationships”    to   Empire   and    American,3    id.    at   870,   and   by

Melanie’s use of Hal’s longstanding relationship with City National

Bank to help secure financing for Empire and American.                   As we

discuss   in   greater   detail   below,    the     court   awarded     Western

$943,659.00 in money damages but denied injunctive relief.


                                      II.

     The Moores first argue that the district court erred in ruling

that Melanie’s right to enter into an employment agreement with



      3
       The district court specifically cited “City National Bank,
 lawyer Frank Levin, long-time friend John Hardisty, insurance
 provider Schell & Eckert, payroll service Paychex, insulation
 supplier Guardian, and the car dealership Connell Chevrolet.” Id.
 at 870.

                                       8
Western was adequate consideration to support her Non-Compete.

Assuming arguendo that this right did not constitute adequate

consideration, we conclude that the Non-Compete was nevertheless

adequately supported.

     Consideration     supporting        a    promise    need      not    benefit    the

promisor himself.      See Brewer v. First Nat’l Bank of Danville, 120

S.E.2d 273, 280 (Va. 1961); Restatement (Second) of Contracts § 71

cmt. e (1981).    In fact, a promisee’s agreement to enter into a

contract with a party other than the promisor can be sufficient

consideration    for   a   promise.           See      Restatement       (Second)     of

Contracts § 71 cmt. d, illus. 12.                     Here, the Sale Agreement

provided that Melanie was required at closing to execute the Non-

Compete, and indeed, the Non-Compete recited that her covenant was

“consideration   for    and   to    induce      the    Partnership        to   pay   the

consideration set forth in the ... Sale Agreement.”                      J.A. 951.    We

therefore conclude that Melanie’s Non-Compete was not unenforceable

for lack of consideration.4


                                         III.

     The Moores next contend that the district court erred in

determining that Hal violated his Non-Compete.                  In reviewing this

determination,   we    review      the    findings      of   the    district     court


      4
       The Moores also argue that the district court erred in
 ruling as a matter of law at the summary judgment stage that the
 restrictive covenants were reasonable in scope. We affirm that
 ruling on the reasoning of the district court.

                                          9
regarding “‘what the parties said or did’” for clear error, “‘while

principles of contract interpretation applied to the facts are

reviewed de novo.’”       United States v. Martin, 25 F.3d 211, 217 (4th

Cir.   1994)    (quoting   L.K.   Comstock    &   Co.    v.   United    Eng’rs     &

Constructors, 880 F.2d 219, 221 (9th Cir. 1989)).                Applying this

standard, we find no valid basis for the determination that Hal

breached his Non-Compete in any manner other than by hiring two

former Western employees.5

       The Moores do not deny that Hal leased property and trucks to

American and sold trucks to Empire.          They argue, however, that the

actions did not amount even to “indirect[] ... participat[ion] in

the    ownership,      management,   operation      or    control      of”    these

businesses.      J.A. 943.    We agree.     Simply put, Western failed to

demonstrate that these transactions were anything more than arm’s-

length      business   transactions,    which     the    Non-Competes        do   not

prohibit.       Nor does the record support the finding that Hal

“contact[ed] customers of Western ... (e.g., RHA) in order to

determine whether additional insulation work was available and

providing work to Empire.”        Id. at 868.      The record reflects only

that Hal returned a telephone call made to him by RHA and gave




        5
       The district court found that Hal’s hiring of these
 employees constituted a breach of his Non-Compete but that Western
 failed to prove damages therefrom. The Moores do not dispute that
 these hirings constituted breaches, and Western does not challenge
 the determination that it failed to prove any damages therefrom.

                                       10
Barnes a good recommendation in the process. Hal’s Non-Compete did

not prohibit such an action.

     Additionally, no evidence justified a reasonable inference

that Hal jointly violated the Non-Competes with Melanie.        Although

the district court found that Melanie used Hal’s preexisting

relationships with City National Bank to help finance American and

Empire, no evidence tended to show that Hal did anything to support

or even permit Melanie’s actions.           His mere possession of a

relationship with the bank that preexisted his execution of his

Non-Compete certainly could not itself constitute a violation,

regardless of whether Melanie unilaterally took advantage of that

relationship. Indeed, Western’s failure to show that Hal knowingly

allowed   Melanie   to   support   Empire     and   American   is   what

distinguishes the present case from Rash v. Hilb, Rogal & Hamilton

Co., 467 S.E.2d 791 (Va. 1996), on which the district court relied.

There, the court held that the record was “replete with evidence”

that a man violated a covenant not to compete similar to Hal’s when

he knowingly allowed his wife to use his credit card, money,

automobile, and home to support a competing business.          Rash, 467

S.E.2d at 794.   Here, Hal did not offer any of his resources for

his wife’s use, and he had no authority to control her actions.6




      6
       Melanie’s loan guaranties did not affect Hal’s assets, which
 were protected by a prenuptial agreement.

                                   11
      Similarly, Hal’s preexisting relationships with other people

and organizations with which Empire and American eventually did

business was not itself a violation of the Non-Compete.                       And, even

assuming that Hal’s introducing Empire and American to these

contacts while his Non-Compete was in force would have constituted

a   breach,    nothing    in   the   record      gives   rise    to     a    reasonable

inference that Hal made such introductions.                     For all of these

reasons, we conclude that the district court erred in finding that

Hal breached his Non-Compete (other than by hiring two former

Western employees).7


                                        IV.

      The     damages    the   district    court    awarded      to   Western     were

comprised of several components:               $500,000.00 simply by virtue of

its   finding    that    the   Moores     both    breached      their       agreements,

$222,999.00 in profits lost from jobs Empire received, $35,460.00

in profits lost from jobs that American received, and $185,200.00

for a 2-3% general reduction in profit margin resulting from the

increased competition from these companies.                  The Moores contend

that the evidence was insufficient to support any damages award.

We agree.




       7
       The Moores also contend that the district court erred in
 finding that Melanie’s signing of the guaranties and related
 documents constituted breaches.   We disagree, and affirm these
 findings on the reasoning of the district court.

                                          12
     “[D]amages may not be determined by mere speculation or

guess.”     Story Parchment Co. v. Paterson Parchment Paper Co.,

282 U.S. 555, 563 (1931).       “It is well settled that damages are

recoverable for loss of profits prevented by a breach of contract

only to the extent that the evidence affords a sufficient basis for

estimating their amount in money with reasonable certainty.” Boggs

v. Duncan, 121 S.E.2d 359, 363 (Va. 1961) (internal quotation marks

omitted).

                                    A.

     The Moores first maintain that the district court erred in

awarding    the   $500,000   component   of   the   damages   award.   The

explanation offered by the district court for that component was

brief:

     [T]he Court finds that in the [Sale Agreement], the [Non-
     Competes] were valued at $250,000.00 at the suggestion of
     the Moores.    Western ... is, therefore, entitled to
     recover $250,000.00 for each of the Moores’ breach of the
     Agreements.

J.A. 871.

     Having established breaches of the Non-Competes, Western was

entitled to damages sufficient to give it the benefit of its

bargain, i.e., to put it in the place it would have been had the

Moores not breached. See Orebaugh v. Antonious, 58 S.E.2d 873, 875

(Va. 1950).       However, there was no evidence that the $250,000

figure had any relation to Western’s injuries.            Rather, it was

simply the value that the parties assigned to the Non-Competes at


                                    13
the time that they agreed to them.8    As such, it was insufficient

evidence that Western was entitled to damages.

     This result follows from Estate of Taylor v. Flair Property

Assocs., 448 S.E.2d 413 (Va. 1994).         In Taylor, the parties

negotiated a land sale and the seller then agreed to reduce the

price by $60,000 in exchange for the buyer’s promise to connect the

land conveyed to a sewer service.     See Taylor, 448 S.E.2d at 415.

In an action for breach of the buyer’s promise to connect the

sewer, the Supreme Court of Virginia held that the amount of the

price reduction was not sufficient proof of the extent of the

seller’s injury from the breach.       See id. at 416.    The court

reasoned that although the parties could have agreed to a $60,000

liquidated damages provision in the contract, they had not done so.

See id.   Similarly, here, even if the allocation of $250,000 of the

sales price to the Non-Competes could be viewed as evidence of the

amount Western was willing to pay for them, it did not constitute

evidence of the extent of Western’s injury from a breach thereof.

The district court erred in treating the $250,000 value as if it

were a liquidated damages provision, which it plainly was not.9


      8
       The record showed that Hal Moore was allowed to choose the
 allocation amount because the amount had tax ramifications only
 for him. See 26 U.S.C.A. § 1060 (West 2002) (requiring allocation
 of consideration received in an asset purchase for purpose of
 determining the transferee’s basis in the assets and the gain or
 loss of the transferor with respect to the transaction).
      9
       Even if there were a basis for a $250,000 award for the
 Moores’ combined breaches, there would not be a basis for awarding

                                 14
                                         B.

       The Moores also contend that the district court erred in

awarding Western damages for lost profits for particular jobs that

it lost to Empire and American.           We agree.

       The district court found that without the Moores’ support,

American and Empire would not have been in a position to compete

with Western.       The court further found that Western lost sales of

$2,027,266.00 to Empire and $322,370.00 to American, by losing

particular jobs to those companies.                 Based on testimony that

Western historically earned a 10-12 percent profit on its work, the

court found that Western suffered lost profits of $222,999.00, and

$35,460.00, respectively, from these jobs.                 These lost-profit

findings rest on several premises (in addition to the validity of

the 10-12-percent figure):         (1) Empire and American obtained the

jobs in question, (2) Western would have received the jobs had

Empire and American not, and (3) the amounts Western would have

been   paid   for    the   jobs   were    $2,027,266.00    and   $322,370.00,

respectively. The Moores challenge the sufficiency of the evidence

regarding each of these premises.             We conclude that Western failed

to prove these premises, and therefore that the district court

erred in awarding the damages in question.




 $250,000 for each of the Non-Competes that was breached. Schedule
 2.7, listing the parties’ allocations, listed $250,000 as the
 value of “Covenants Not to Compete.” J.A. 968 (emphasis added).

                                         15
                                         1.

       We begin our analysis with the jobs that the district court

found were lost to Empire. Western’s only evidence that Empire was

awarded any of the jobs in question were Plaintiff’s Exhibits 35

and 37, both of which were documents created from information

contained in Western’s bid logs. The exhibits purported to contain

information regarding jobs for which Western tendered bids since

Empire began competing with it, including the company that received

each of the jobs and the “Approximate Bid Amount” or “Project

Total” for each job.          J.A. 1093, 1095-1102.       The Moores objected

unsuccessfully to the admission of both exhibits at trial and

contend   again    now    that,   for    several   reasons,     they   were   not

admissible to prove the facts contained in them.

       One contention urged by the Moores is that the information in

these exhibits regarding which companies received the jobs Western

did not receive was based on inadmissible hearsay.               Stephen Heim,

Western’s President and CEO, testified that the information in the

bid logs regarding which companies received the jobs was obtained

from   customers   through      specific      inquiries   by   Western’s    sales

representatives, who entered the information on bid logs, which

they    transmitted      to   their     branch   managers,     who,    in   turn,

transmitted the logs to Heim.            Western maintains that Exhibit 37

was admissible under the business record exception to the hearsay




                                         16
rule, see Fed. R. Evid. 803(6).10      We disagree.     Even if this

exception addresses the first level of hearsay--the fact that the

bid logs were out-of-court declarations--it does not address the

fact that the information in the bid logs was based on the out-of-

court statements of agents of Western’s customers.       See Fed. R.

Evid. 805; Rowland v. Am. Gen. Fin., Inc., 340 F.3d 187, 195 (4th

Cir. 2003).

     For the exhibit to be admissible to show the truth of that

information, the customers’ statements must themselves fit within

a hearsay exception.   See Rowland, 340 F.3d at 195.   Western argues

that the statements themselves fit within the business record

exception and that, alternatively, they fit within the residual


      10
        Rule 803(6) provides:

           The following are not excluded by the hearsay rule,
      even though the declarant is available as a witness:

      ....

           (6) Records of regularly conducted activity.--A
      memorandum, report, record, or data compilation, in any
      form, of acts, events, conditions, opinions, or
      diagnoses, made at or near the time by, or from
      information transmitted by, a person with knowledge, if
      kept in the course of a regularly conducted business
      activity, and if it was the regular practice of that
      business activity to make the memorandum, report, record
      or data compilation, all as shown by the testimony of
      the custodian or other qualified witness ..., unless the
      source of information or the method or circumstances of
      preparation indicate lack of trustworthiness. The term
      “business” as used in this paragraph includes business,
      institution, association, profession, occupation, and
      calling of every kind, whether or not conducted for
      profit.

                                 17
hearsay exception, see Fed. R. Evid. 807. We conclude that neither

is applicable.

     The business record exception does not apply because Western

made no showing that the information obtained from its customers

was obtained from the customers’ business records.11        See 5 Jack B.

Weinstein   &   Margaret   A.   Berger,   Weinstein’s   Federal   Evidence

§ 803.08[3], p. 803-61 (Joseph M. McLaughlin, ed., 2d ed. 2006)

(“To qualify as a business record ..., the record must be in the

form of a ‘memorandum, report, record or data compilation.’”).

Western suggests that the exhibit was admissible to prove Empire

received the jobs in question because even if the customers’

statements were not obtained directly from the customers’ business

records, Western verified them after receiving them.        See Air Land

Forwarders, Inc. v. United States, 172 F.3d 1338, 1348 (Fed. Cir.

1999) (explaining that company possessing documents prepared by

another company may introduce them as its own business records,

even if sponsoring witness from custodian company cannot vouch for

circumstances under which documents were prepared, if custodian



      11
       Nor did Western show that the representatives of the
 customers who provided the information had firsthand knowledge of
 the information they were passing on to Western’s sales
 representatives. See 5 Jack B. Weinstein & Margaret A. Berger,
 Weinstein’s Federal Evidence § 803.08[3], p. 803-63 (Joseph M.
 McLaughlin, ed., 2d ed. 2006) (explaining that “if the source of
 information reported in a record cannot be identified, it cannot
 qualify for the exception” because the record must be shown to
 “have been compiled by persons with knowledge of the facts
 recorded”).

                                    18
company “has made an independent check of the records, or can

establish    accuracy       by   other   means”    (internal    quotation   marks

omitted)).    However, Western points to nothing in the record to

support this assertion, and we have found no support for it.

     Nor do the customers’ statements fit within the residual

hearsay exception.         That exception applies only when the evidence

in   question       has     “equivalent        circumstantial    guarantees     of

trustworthiness” as the Rule 803 or 804 exceptions, “is more

probative on the point for which it is offered than any other

evidence    which    the     proponent    can     procure   through   reasonable

efforts,” and the proponent notifies the opposing party before

trial of “the proponent’s intention to offer the statement and the

particulars     of    it,    including     the     name   and   address   of   the

declarant.”     Fed. R. Evid. 807.12           None of these requirements was


      12
        In its entirety, Rule 807 provides:

           A statement not specifically covered by Rule 803 or
      804 but having equivalent circumstantial guarantees of
      trustworthiness, is not excluded by the hearsay rule, if
      the court determines that (A) the statement is offered
      as evidence of a material fact; (B) the statement is
      more probative on the point for which it is offered than
      any other evidence which the proponent can procure
      through reasonable efforts; and (C) the general purposes
      of these rules and the interests of justice will best be
      served by admission of the statement into evidence.
      However, a statement may not be admitted under this
      exception unless the proponent of it makes known to the
      adverse party sufficiently in advance of the trial or
      hearing to provide the adverse party with a fair
      opportunity to prepare to meet it, the proponent’s
      intention to offer the statement and the particulars of
      it, including the name and address of the declarant.

                                          19
met   here.      First,   there   was   no   indication   regarding   the

trustworthiness of the information the customers allegedly gave to

Western’s sales representatives.        In fact, the customers may well

have had a motive to mislead Western in order to cause Western to

submit lower bids in the future.         Second, clearly it would have

been more probative to produce the testimony of the customers

themselves rather than secondhand accounts of the information the

customers provided. And third, Western failed to notify the Moores

that they were relying on Rule 807 and failed to provide the names

or addresses of the specific people who supplied the information in

question.     Thus, the customers’ statements were not covered by any

exception to the hearsay rule, and Exhibits 35 and 37, which were

based on these statements, therefore could not serve as proof that

Empire was awarded any of the jobs in question.13




      13
       Moreover, Heim did not claim to have any firsthand knowledge
 of the amounts of the contracts awarded. Even assuming arguendo
 that Western established the value of the master contracts for
 these jobs, it failed to prove to a reasonable degree of certainty
 the value of the work that Western would have received had it
 received the contracts. Heim conceded on cross-examination that
 an award of a master contract does not necessarily translate into
 a contract to construct the entire project for which the bid was
 submitted. Heim explained that the projects are phased and houses
 are “released” to the contractor in groups; thus, there are
 circumstances in which the developer refuses to release further
 phases to a contractor and causes the projects to be rebid.
 Therefore, even assuming that Western established the value of the
 master contracts, without any testimony from Empire or the
 customers regarding whether particular contracts were awarded for
 the whole project or only part of the project, there was no basis
 for determining the value of the work actually awarded.

                                   20
                                2.

     Western’s proof with regard to the jobs allegedly awarded to

American was flawed for a different reason, namely, that Western

presented insufficient evidence that it would have received the

jobs absent competition from American.      Two of the three jobs

Western claimed to have lost to American were with The Olson

Company, a San Diego company with which Heim admitted Western had

“not been successful” in obtaining work.    J.A. 386.   Indeed, Heim

testified that prior to 2005, Western was performing only 30

percent of that company’s work.      In light of that history, any

conclusion that Western would have obtained these jobs from Olson

had American not bid them could only be based on rank speculation.14

     The third job Western claimed it lost to American was with

Touchstone Development, for which Heim admitted Western had not

performed any prior work.   Western’s only basis for claiming that

it would have received the Touchstone job had American not received

it was Heim’s testimony that Western at one time had a contract to

do the work but lost it after an increase in its materials cost

prompted it to raise its price.      Heim testified that after the

price increase, American had the low bid and was awarded the

contract.   Since Western presented no testimony that after the



      14
       Additionally, as with the jobs claimed to be lost to Empire,
 there was no admissible evidence that American received Olson’s
 Paradise Walk job. In fact, Schulkamp testified that American did
 not receive it.

                                21
price    increase,      Western   was   the   second   lowest   bidder,   any

conclusion that Western would have received the job had American

not could only be based on speculation.

     For all of these reasons, there was no basis in the record for

a finding that, but for competition from Empire and American,

Western would have received any of the jobs at issue here.             Thus,

the district court erred in awarding damages to Western for lost

profits from these jobs.

                                        C.

     The Moores finally maintain that the district court erred in

awarding damages for reduced profit margins from competition with

Empire.     We agree.

     The basis for the award of these damages was the following

testimony from Heim on direct examination:

     Q       Was there ... any other way that Western Insulation
             has been damaged by competition from Empire?

     A       Since Empire has been in business, our margins have
             suffered between two and three percent off of the
             gross profit we have been making.

     ....

     Q       Can you tell me how you calculated the damage
             caused by that loss of margin?

     A       I added up the total amount of sales when Empire
             was in business, May of 2005 until November of 2005
             and came up with a figure of approximately $7.4
             million, and then I took the average between two
             and three percent loss in margins, came up with the
             average of two-and-a-half, and multiplied the
             previous figure of $7.4 million by two-and-a-half
             and came up with $185,260.

                                        22
Id. at 390-91.        The amount of speculation necessary to reach a

conclusion that Western actually would have made an additional

profit of 2-3% but for American’s and Empire’s competition was

highlighted     in    Heim’s   testimony      on   cross-examination.      Heim

testified that he arrived at the conclusion that Western lost 2-3%

from    its   gross   profit   margin    by    reviewing   monthly    financial

statements (that were not in evidence).             He did not explain how he

calculated that number, nor did he even know what profit Western

had earned in any of the months for which Western is claiming

damages.      Although admitting that the cost of materials and fuel

affects profit margins, he testified that he did not know whether

those costs increased during the period in question.                 Nor did he

even testify that Western reduced its prices during this period.

In the end, all Western produced was Heim’s conclusory testimony

that he would have expected Western’s gross profit margin to be

2-3% greater had American and Empire not been competing with it.

This evidence is plainly insufficient to prove lost profits with a

reasonable degree of certainty under Virginia law.             See Saks Fifth

Ave.,    Inc.   v.    James,   Ltd.,    630   S.E.2d   304,   311   (Va.   2006)

(explaining that to prove entitlement to damages, “a plaintiff must

prove the amount of those damages by using a proper method and

factual foundation for calculating damages”); cf. ADC Fairways

Corp. v. Johnmark Constr., Inc., 343 S.E.2d 90, 92-93 (Va. 1986)

(holding that company did not prove lost profits to a reasonable


                                        23
degree of certainty when it offered only testimony of construction

company   president    that   bid   included   approximately   15%   in

anticipated profit when 15% number was based on estimated expenses

and company offered no records indicating the actual per unit

expenses on project).


                                    V.

     Western argues in its cross-appeal that the district court

erred in denying its request for injunctive relief.      We agree.

     Western requested many different forms of injunctive relief,

including injunctions requiring Hal to “divest himself ... in any

lease agreements with American” and Melanie to “divest herself ...

of any loan guaranties” to American and Empire.        J.A. 834.     The

district court denied injunctive relief, ruling that:

     [T]here are indispensable parties not before the Court,
     whose presence would be necessary in order for the Court
     to fashion complete injunctive relief.... Furthermore,
     Plaintiff has not proven all of the requisite elements
     for injunctive relief [because] [t]he public interest is
     not served by undermining legitimate commercial contracts
     or employment agreements when innocent third parties
     (e.g., banks and employees hired by American Insulation
     or Empire Insulation) are involved--especially if those
     third parties are not before the Court and have not had
     an opportunity to be heard.

Id. at 871-72.

     Western argues that this reasoning did not justify the denial

of all of the injunctive relief that it requested because much of

the requested injunctive relief would not have harmed third parties

had it been awarded.    Western specifically points to (1) enjoining

                                    24
the Moores from further breaching the Non-Competes by providing any

additional   financing    or   leasing    equipment    or   property     to   a

competing business, soliciting any additional Western employees to

leave their employment or employing them, and contacting or having

their employees contact customers of Western in an effort to

solicit work from them; (2) enjoining Melanie from exercising the

option agreement or security agreement with American or entering

into any such agreement with Empire; and (3) equitably tolling the

Moores’ Non-Competes.      Although clearly some of the injunctive

relief   that   Western   requested      would    “undermin[e]   legitimate

commercial contracts or employment agreements,” id., this subset of

relief Western has identified would not do so.              Accordingly, we

reverse the denial of injunctive relief on this basis and remand to

the district court to determine in the first instance whether to

award such relief.   In so doing, we express no opinion on whether

any   particular   form   of   injunctive        relief--or,   indeed,    any

injunctive relief at all--would be appropriate.


                                   VI.

      In sum, we affirm the rulings of the district court that the

Non-Competes were enforceable and that Melanie breached her Non-

Compete by entering into the guaranties and related agreements, but

we reverse the finding that Hal breached his Non-Compete (except to

the extent that he hired two former Western employees).            Further,

we vacate the damages award and reverse the ruling of the district

                                   25
court that injunctive relief should not be awarded because the

relief requested would impact third parties not before the court.

We also remand to the district court for further proceedings

consistent with this opinion.15


                                  AFFIRMED IN PART, REVERSED IN PART,
                                        VACATED IN PART, AND REMANDED




      15
       The district court awarded attorneys’ fees and costs to
 Western as the prevailing party pursuant to the terms of the Non-
 Competes. Because we vacate the damages award in Western’s favor,
 we vacate the award of fees and costs without expressing any view
 concerning the merits of the award.

                                   26
