ANALYSIS OF JANUARY 17, 2019 SUPREME COURT OPINION

 

 

(Posted January 17, 2019) The legal issue in today’s lone SCV decision, Erie Ins. Exch. V. EPC MD 15, LLC, is fairly straightforward. Does an insurance policy covering property owned by a company also cover property owned by a wholly owned subsidiary?

The parent is a Maryland company that held a policy from Erie. That policy covered losses from fire damage to property owned by the parent. The parent later bought a Virginia LLC that owned commercial property in Winchester. When that property sustained fire damage, the parent submitted a claim.

Erie denied coverage, saying in essence, “We insure you; not your subsidiary.” When the parent sued to establish coverage, a trial court looked to policy language providing coverage for “newly acquired buildings.” The court ruled that when the parent bought the LLC, it “newly acquired” the building in Winchester. At worst, the court reasoned, this is an ambiguity, and the court construed the ambiguity against the insurer, who drafted the policy language.

The justices today unanimously reverse. Because companies, including LLCs, are separate entities from their owners, the parent didn’t “acquire” the building; it still belonged to the subsidiary. And the policy covered property owned by the named insured, which is the parent. The court accordingly enters final judgment in favor of the insurer.

There’s an interesting preservation issue in a footnote on pages 3-4 of today’s slip opinion. When the trial judge issued an interlocutory order interpreting the policy language, he added that the parties had ten days to file exceptions to that ruling. Neither party filed anything. On appeal, the parent asserted that this waived Erie’s right to appeal.

No dice, Justice Kelsey explains today. By statute, exceptions aren’t required in Virginia (unless you’re in an eminent-domain proceeding; but that’s another story). All you have to do is explain on the record, orally or in writing, your position and what it is that you want the court to do, and then get a ruling on that issue. Trial judges aren’t free to create additional preservation requirements on a case-by-case basis. Because Erie had fully briefed its argument, the justices have no reluctance about reaching the merits.

 


ANOTHER YEAR, ANOTHER MILESTONE

 

 

(Posted January 14, 2019) This is always an important date on my calendar: Today marks 14 years since I launched this site. This is a good time to take a moment or two to reflect on how things have changed in the appellate world.

Perhaps the most obvious change is in court personnel. Of the seven active justices on the Supreme Court of Virginia in January 2005, only one remains: Chief Justice Don Lemons. Similarly, of the eleven judges on the 2005 Court of Appeals, only Judge Bob Humphreys is still on the court. The Fourth Circuit has a bit more continuity because of lifetime tenure. Six of the current 15 judges have been on the court for more than 14 years.

In contrast, the Clerk’s Offices have been stable, at least in the corner offices. Trish Harrington, Cindi McCoy, and Pat Connor have managed to stick around for half a generation, though Trish is retiring at the end of this month.

Next we’ll look at how the caseloads have changed. In 2005, there were just under 2,700 new filings in the SCV. I remember noting that with a bit of alarm, as it represented a sudden 10% dropoff from the previous norm of about 3,000 per year. That alarm seems quaint now, as incoming business has fallen of a cliff. I don’t have final figures yet from any of the courts for 2018, but I believe the total in the SCV will fall just shy of 1,700. That means that incoming appeals in that court are off by more than 40% in the time I’ve been publishing.

This dynamic has produced a predictable effect: There were 172 merits decisions (opinions or orders) in 2005, and just 104 last year. If you look to Virginia Reports for legal guidance, you’re getting less of it, mostly because there are fewer appeals. The secondary cause is that the justices are getting pickier about granting writs.

How about the Court of Appeals and the Fourth? I don’t have the same level of detail yet for the CAV, but it issued 127 published opinions in 2005 and just 66 last year. The Fourth Circuit terminated – that’s a foreboding word for decided – 4,307 appeals in the year ending June 30, 2018, down about 10% from the 2005 number.

But let’s not get bogged down in numbers. The past 14 years have seen several significant changes in the courts and their procedures. Nowadays, you can click on a link for each court and listen to audio recordings of oral arguments. You can now use an online case-management system – indeed, e-filing is now mandatory for some documents in the state system and all filings in the Fourth. The courts’ electronics policies have evolved from the neo-Luddite days of 2005, when, for example, you couldn’t use a tablet or pad to give an oral argument. (Apple introduced the iPad in 2010, so that wasn’t an option when I began publishing.)

From my perspective, perhaps the biggest change in the appellate courts’ procedures came in September 2015, when the SCV shifted to rolling release dates, making each Thursday a presumptive opinion day. Previously, there were six predictable opinion days per year, so planning was simple: I walled off my schedule on those days, knowing that I’d be reading and publishing analysis all that day and usually most or all of the next. Now we have fifty-two potential opinion days a year. One other casualty of this switch was that the justices stopped the generations-old practice of literally handing down opinions in open court. I always appreciated the ceremonial feel of that. But now, they just appear prosaically on the court’s website.

There have been other subtle changes. The CAV used to convene in just four courthouses: Chesapeake, Salem, Alexandria, and Richmond. The court has now added sittings in Norfolk, Lexington, and Fredericksburg. In the Supreme Court, session week used to begin on Monday and run through Friday. Now the justices begin hearing arguments on Tuesday, and it’s a rare session week when the arguments extend past Thursday. The court heard Friday arguments only twice in the six sessions last year, after convening on five Fridays in 2017.

Things have changed a bit on this end of the keyboard, too. Once upon a time, I had the leisure to follow all CAV opinions fully, as I do with the SCV. A number of years ago, that became too unwieldy and time-consuming, so I’ve reduced sharply my coverage of that court. That’s something that I regret greatly, because it largely eliminates my coverage of Workers’ Comp and domestic-relations appeals, and sharply reduces criminal-law discussion. But it has become a practical necessity, because I have a law practice, and the justices expect me to file my briefs on time.

This publishing experience has made me a better lawyer. I know about changes in caselaw immediately, of course. But it also greatly aids one’s understanding of the law to (1) read every opinion and (2) write an essay that explains that opinion to others. I suspect that doing this has also helped to improve my writing.

In 2015, we upgraded the website to make it compatible with mobile screens. There’s a new hosting company as of a couple weeks ago. You should know that managing the tech details are beyond my ability, but I’m grateful that Dave Rourk and Rick Vidallon have always been there to manage things for me. All I have to do is write and upload the content.

Today thus begins my 15th year in this project. I have no plans to stop anytime soon, because I enjoy this. If you have any ideas or suggestions, please don’t worry that I’ll be resentful if you contact me about them; I want to hear what you have to say. Now let’s see if the justices have any love letters for us this Thursday.

 


ANALYSIS OF JANUARY 10, 2019 SUPREME COURT OPINION

 

 

(Posted January 10, 2019) The Supreme Court of Virginia kicks off the new year today with a single published opinion, in an appeal argued in the October session. Today’s ruling in May v. R.A. Yancey Lumber Corp. addresses statutory provisions for the protections of minority shareholders in stock corporations.

This small family-owned company is, as you would deduce from the name, in the timber and lumber businesses. The overwhelming majority of its revenues – 98.5% – comes from its operation of a mill, where it processes logs into lumber. The remaining 1.5% comes from the timber business, through which it sells logs to other buyers.

Today’s opinion reports that the mill business, despite bringing in almost all of the company’s revenue, wasn’t always profitable. The owners of the stock were three siblings and their spouses (including one ex-spouse, but I’ll ignore that here for simplicity’s sake), and four of those six wanted to sell the mill business, especially when a $10 million offer came in for it. The other two wanted to keep the entire company intact.

And that brings us to the statute I mentioned in the beginning of today’s post. That act requires the approval of more than 2/3 of a company’s shareholders for any sale not in the usual and regular course of business, if that sale “would leave the corporation without a significant continuing business activity.” The objecting sibling and her spouse – the ones who didn’t want to sell – owned a tad more than one-third of the stock. That seems to scotch that idea.

But the statute also contains something of a safe harbor. If the company retains at least 20% of its prior assets and 20% of its prior revenue stream, “the corporation will conclusively be deemed to have retained a significant continuing business activity.” The statute also says that the company’s articles of incorporation may provide for a greater or lesser vote than the 2/3 requirement in the Code.

The majority owners read these provisions and realized that they could amend the bylaws by simple majority vote. Accordingly, by a 2-to-1 margin, the company amended those bylaws to specifically provide that the lumber business was a significant continuing business activity, so selling the mill business wouldn’t require a 2/3 vote. With the deck thus reshuffled in their favor the majority signed the purchaser’s offer. That led the dissenter to circuit court.

The court construed the statute to permit the amendment of the bylaws as happened here, so the judge refused the dissenter’s request for a temporary injunction to halt the sale. It also granted a plea in bar and entered judgment for the company.

Thus endeth the good news for the company; today the justices unanimously reverse. Justice Goodwyn’s opinion for the court cites the plain meaning of the statute, noting that it exists to provide protection for minority shareholders. The court rejects the idea that the company can redefine “significant continuing business activity” to mean anything it wants; that interpretation would gut the protections of the statute. In addition, the company didn’t actually amend its articles of incorporation, as the statute allows; it amended its bylaws.

The Supreme Court today finds that the trial court incorrectly applied the statute and therefore used the wrong standard in considering and denying the injunction request. The justices remand the case for trial on whether the sale left the company without a significant continuing business activity.

 


A QUICK REPORT ON 2018 STATISTICS

 

 

(Posted December 31, 2018) Virginia’s appellate courts are closed today, so we have time for a quick look at what happened in 2018.

 

Decisions on the merits

I was worried for a time that we wouldn’t reach 100 merits decisions in the SCV, but the justices put together an admirable late push, handing down 14 published opinions and one published order in December to get us over the mark. The court gave us 74 published opinions and four published orders this year. It also reissued two corrected opinions from last year. Add those to the 24 unpubs we saw n 2018 and you get 104 merits decisions.

For comparison’s sake, in 2017 there were 79 published opinions and 111 merits decisions. In 2016, we got 78 opinions and 125 merits decisions. For those of us who make our living at the appellate lectern, 2018 continues a disheartening downward trend in business.

 

David-Goliath Index

I promised you this as a recurring quarterly feature. Through the first half of 2018, David (the little guy in appeals, such as a defendant appealing a criminal conviction or an employee suing for wrongful termination) won about one out of three published rulings from the Supreme Court. But his third quarter was a disaster: one win and eight losses. A strong(-er) fourth quarter, where David won eight times and lost 13, brings our final David-Goliath Index to 31/69. That is, the little guy won 31% of the time and the big guy won 69% in 2018. Whether that’s a good sign or a bad one probably depends on which side of the litigation aisle you occupy.

 

CAV published opinions

By my preliminary count, the Court of Appeals of Virginia handed down 66 published opinions in 2018. That’s the same number as in 2016. I’ll have a fuller analysis of these figures when the court issues its full report in the spring.

 


 

EMERGENCY APPEALS: A HOW-TO GUIDE

(Posted October 15, 2018) I’ll confess that I’ve tended to take a lighthearted view of what I’ve described as “omigod appeals,” where a party just has to have immediate review of a trial court’s ruling. I’ve given the example of, “You’re litigating over an ice cream truck, and it’s 97 degrees outside.” I never really gave much thought to when a real need for such an appeal might arise, or how I would go about pursuing one.

All that changed recently when I was asked to speak at an upcoming conference. My topic is how to appeal in denial-of-care cases. Yet another confession: My immediate reaction to that request was, “What’s a denial-of-care case?” I really have lived a sheltered life.

I soon found out that these cases are nothing to take lightly. They refer to the circumstance where a hospital denies medical care needed to preserve someone’s life. There may be squabbling family members, and maybe even a do-not-resuscitate provision in an advance medical directive. In these cases, if a circuit court issues an order allowing or directing the hospital to deny care, and a family member wants to appeal, the normal appellate process is out of the question. These days, it takes well over a year to get from circuit-court judgment to Supreme Court opinion, and most patients in that circumstance don’t have anywhere near that much time. For these folks, there has to be a faster way.

CLICK HERE to continue…

 


 

FIRST-HALF 2018 STATISTICS

(Posted June 29, 2018) Now that the dust is starting to settle from all that federal appellate news this week, it’s safe to return to Virginia courts. At the midpoint of 2018, let’s see what the Virginia appellate numbers show.

SUPREME COURT OF VIRGINIA

Decisions

The Supreme Court of Virginia has handed down 34 published opinions and orders, and 12 unpublished orders. For comparison’s sake, the court decided 79 appeals by opinion and 59 by order in calendar 2017.

Writs

The court’s website lists 49 writs that have been granted since the beginning of the year. It is conceivable but not likely that there may be a couple more that aren’t showing up on the page because they’ve already been decided. (The court removes appeals from the writs-granted page after an opinion comes down.) Last year, the court granted 112 writs, including one certified-question case.

Upcoming panels and sessions

The justices will convene three more sets of writ panels in 2018, in addition to the three that are already in the books. In late August, we’ll get the annual road shows, where the court sends two panels out of Richmond to hear arguments. This year’s road shows will convene in Lovingston (Nelson County) and here in Virginia Beach, both on August 30. We’ll also see one in Richmond, probably on August 29. After that, conventional panels (all in the Supreme Court Building in Richmond) will meet October 16 and December 4. There are two sessions (where lawyers argue merits appeals to the full court) left: the weeks of September 10-14 and October 29-November 2. Four sessions are already in this year’s rearview mirror.

The David/Goliath Index

As I promised you on May 11, I will quarterly announce how the Big Guys and the Little Guys are faring at Ninth and Franklin. (See that essay for a description of the concept.) For the second quarter, David won four appeals in published opinions and Goliath won eight times, for a D-GI of 33/67. While that may sound lopsided, David actually has won almost twice as frequently as he did in 2017 and 2016. For the year, the Index is 32/68.

COURT OF APPEALS OF VIRGINIA

Decisions

Thus far the CAV has decided 29 appeals by published opinions and 137 by unpub. (The CAV releases far more of these decisions because by statute, it has to explain the reasons for each ruling. Most appeals in the SCV die with a one-sentence refusal order that virtually no one sees.)

David-Goliath Lite It’s possible to calculate something of a David-Goliath Index for the Court of Appeals, too, using two case areas: criminal appeals and Workers’ Comp cases. The court has decided 12 Comp appeals and the employee has gone 4-8, resulting in a 33/67 D-GI in that field. In the other field, Goliath is running away with it. The prosecution has won 89 out of the 97 criminal decisions thus far in 2018; that adds up to an Index of 8/92.