ANALYSIS OF DECEMBER 14, 2017 SUPREME COURT OPINIONS
(Posted December 14, 2017) The Supreme Court hands down four published opinions this morning, all in appeals argued in the November session.
The issue in Shifflett v. Latitude Properties, Inc. is whether a judgment creditor can seize his debtor’s income-tax refund to satisfy the judgment, where the debtor hasn’t filed a tax return yet.
The creditor here served writs of fieri facias on the debtor with a return date of January 6, 2016. The fifa sought the debtor’s 2015 state and federal tax refunds. The debtor replied that the refunds were, at that point, merely inchoate, since neither return had been filed. The trial court ruled in favor of the creditor.
The justices today reverse. The creditor based much of its argument on bankruptcy law, since the SCV has never decided this issue in the context of Virginia law. But Justice Powell, the author of today’s unanimous opinion, points out that bankruptcy law defines property of the estate expansively, while Virginia law defines property subject to levy narrowly. In this context, that means that while a debtor’s right to his refund is fixed for bankruptcy purposes on December 31 of the tax year, Virginia execution law still regards that refund as inchoate until the debtor files a tax return claiming it. And since Virginia law doesn’t permit execution on inchoate claims, there was nothing subject to the lien of the fifa.
There are a few narrowly defined ways under Virginia law to make, or to modify, a will. The justices take up a purported change to a formal will in Irving v. Divito.
I’ll warn you that when you start to read the opinion in this case, you may get a mistaken impression as to the issue. On page 1, Justice Mims tells us that the testator has made two inconsistent representations about whether a juvenile is or is not his natural son. One of those came in a property-settlement agreement during divorce proceedings; there, he stated that the child was not his.
But in his will, he listed the child as “My child born before the date of my Will.” That led me to expect a debate over whether a PSA is a document of equal dignity as a will.
Wrong, Steve; this appeal is about a handwritten codicil. The testator’s brother found a storage-unit key in the testator’s hotel room. In that unit, the brother found a briefcase containing the original will. The storage unit also contained a binder with various estate-planning documents. And here we have our legal controversy. On one of the dividers in that binder, the testator had written this:
I wish to remove Patrick named as my son entirely from this will – no benefits.
There’s no question that the original will was valid; the only issue in this appeal is whether the handwritten note was a valid codicil. A trial court decided that it was not. The justices agree today, affirming in large part because in contrast to his other probate documents, where he signed his full name, the testator here used only his initials. That fact indicated to the trial court that the testator had not manifestly intended those initials to constitute a signature to authenticate the writing, which is one of the requirements for a valid probate document.
The court finds other support for this conclusion. The testator had instructed his brother that a local law firm had his will, but mentioned nothing about the handwritten notes. Justice Mims also turns to rules of grammar to buttress this conclusion, noting that the handwritten note says only that the testator “wish[ed] to remove Patrick” as his heir; not that he was actually doing so. Another document in the binder instructed the testator to consult an attorney if he wanted to make any changes to his will.
All of this falls short of the clear-and-convincing evidence necessary to establish that the testator intended these notes as a codicil.
The justices again explore the boundary between claims sounding in fraud and those arising in contract. The appeal is MCR Federal, LLC v. JB&A, Inc.
Both of the named companies operated in the (broadly defined) defense industry. JB&A undertook to market itself to potential buyers. MCR sent the seller a letter of intent, which the seller accepted. That letter called for the parties to negotiate the specific terms of a contract for the buyer to acquire the seller. It also prohibited the seller from marketing itself to other potential buyers while the parties were thus engaged in this process.
The parties signed a formal contract on May 5, 2011, calling for a closing date of May 31. The terms included a $42 million cash payment and (as is now fairly common in corporate acquisitions) the potential for nearly $20 million in additional payments if the acquired business met certain earnings thresholds. The buyer also warranted that there were no adverse suits, investigations, or government actions against it. The agreement finally required the buyer to reaffirm those warranties at closing, in something commonly called a “bringdown certificate.”
The warranties were accurate on May 5, but the trial court found that by the 31st, they were no longer accurate. In the intervening weeks, the buyer was bidding on an unrelated government contract with the Air Force. The Air Force inadvertently sent to the buyer details of a competitor’s bid for the same contract, and several persons within the company saw it. That eventually led the USAF to launch an investigation, and eventually to suspend the buyer – three months after the May 31 closing date – from bidding for two periods of time totaling about a month.
The newly acquired business failed to meet the earnings thresholds, so the buyer didn’t pay any part of the $20 million. The seller sued, claiming that the “clean” bringdown certificate produced at closing was both fraud and a breach of contract. After a lengthy bench trial, the circuit court entered judgment, based on both the fraud claim and the contract claim, for the seller. The court awarded $12 million plus interest, and about $2 million in attorney’s fees.
Today the justices focus primarily on the fraud claim, which was the basis of the fee award. The court finds that the seller’s claim based on the bringdown certificate sounded in contract, not in tort. The buyer had no duty outside of the May 5 contract to furnish that certificate, which after all was a reaffirmation of warranties. Since there was no proper tort claim, the justices reverse the fee award.
This ruling illustrates the SCV’s longstanding refusal to tolerate the mixing of tort and contract claims. It has repeatedly held that lawyers too often want to “turn every breach of contract into a tort,” presumably because of the ability to obtain greater damage awards, including in some cases punitive damages. (There was no punitive award here.) This part of today’s opinion focuses on the source-of-duty rule, which holds that if the only basis for a duty is a contract, then you can’t sue in tort.
The buyer wins this battle, but loses the war. The justices go on to affirm the large award of damages, finding that the trial court had a satisfactory evidentiary basis to fix damages based on the buyer’s internal valuation of the “asset” it had acquired in the purchase.
Given the unique nature of the damages evidence in this case, I suspect that this ruling will be cited more for the financially smaller ruling on the source of duty instead of the larger breach-of-contract award.
The Supreme Court looks into the effect of a defective search warrant today in Commonwealth v. Campbell.
You never know what’s goin’ on in the woods. In August 2014, Amherst Sheriff’s deputies got word of an impending “meth cook,” a process for the manufacture of methamphetamine, at property belonging to Campbell. The word came from a paid informant, who told the deputies that he was present and that Campbell and two associates were going to start the process shortly.
An investigator sent some law-enforcement officials to the scene to monitor it discreetly while he went to get a search warrant from a magistrate. The magistrate was satisfied with the investigator’s description, and he issued the warrant. As required by statute, the magistrate faxed a copy of the warrant, as part of a four-page package, to the local clerk of court. But as often happens in facsimile transmissions, one of the pages didn’t go through. It was a fairly important page, too: the warrant itself, describing “the basis for probable cause” and outlining the reason why the officer felt the information was credible.
Meanwhile, back at the meth lab, officers continued to observe activities that matched well the steps in meth manufacture. The informant, having excused himself from the scene, called the investigator and asked urgently, “Where y’all at? They’re starting to make this thing, man.” The investigator arrived and executed the warrant, finding plenty of inculpatory evidence; at this point, Campbell acquired the right to remain silent.
But his lawyer noted the incomplete package in the clerk’s office. That lawyer moved to suppress, citing that same statute, which also governs defective warrants. It requires that the warrant be filed within seven days, but it allows a grace period of up to 30 days. Failing that, evidence seized is inadmissible.
The trial court denied the motion, finding that even if the warrant were invalid, the search was justified based on exigent circumstances. (Among other exigencies, the manufacture of meth can produce toxic gases and even explosions.) The court convicted Campbell and gave him plenty of free room and board.
But the Court of Appeals thought otherwise. A panel of that court unanimously found that the language of the warrant statute is mandatory, and “rendered the fruits of the search categorically inadmissible as a matter of state law.” The Commonwealth sought and obtained a writ from the justices.
Today the Supreme Court unanimously reverses and reinstates the conviction. The court assumes without deciding that the warrant was defective, but notes that the statute deals only with the treatment of search warrants. It doesn’t address warrantless searches. And analyzing these circumstances, the justices agree with the trial court that exigent circumstances fully justified this search, regardless of a warrant.
Justice McCullough writes today’s opinion. He notes that there was undoubtedly probable cause and that there was a serious risk of disposal of evidence or flight by the participants. He also observes that the officers faced a situation that was imminently risky to the participants. In this regard, he offers a nice turn of phrase in a footnote, dispensing with a defense objection:
We reject Campbell’s argument that those present had assumed the risk of death or serious injury, and that this assumption of the risk defeats exigent circumstances. The exigency arising from the need to protect human life extends to the guilty as well as the innocent.
I’ll mention one other point here: This is the fifth time in 2017 that the Supreme Court has reinstated a criminal conviction after a prior reversal in the Court of Appeals. I don’t have statistics on prior years, but that figure seems to me high enough to be noteworthy.
But let’s not stop there; in addition to today’s four published opinions, the justices decide two appeals by unpublished order. These, too, are from the November session.
The first, Collins v. Commonwealth, involves convictions of grand larceny and statutory burglary arising out of a break-in of a Portsmouth home. The thief took several items, including three flat-screen televisions. Those three items were discarded on the ground next to a street adjacent to the victim’s home. Investigators dusted the items and got two hits on Collins’s fingerprints – ne from his left index finger and one from his left middle finger.
A circuit court used those prints to convict Collins of the break-in, but the Supreme Court today reverses. Fingerprint evidence alone is seldom enough to establish guilt; it generally requires some corroboration, and it must negate every reasonable hypothesis of innocence. Here, because there was no corresponding thumb print on the opposite side of the television, the evidence couldn’t exclude the possibility that Collins had merely bent down to touch TV units that some other thief had taken and discarded (presumably because of their bulk). The Supreme Court accordingly reverses and dismisses the indictments.
Another criminal appellant has similar, though more limited, success today: In Cilwa v. Commonwealth, the Court of Appeals dismissed an appeal as mot shortly before oral argument. The appellant had been ordered to serve 90 days in jail on a probation violation, and when the CAV learned that she had served that term and had been released, it found it unnecessary to determine the legality of her incarceration. (Note that the rule is different with an initial conviction. You always have an interest in clearing your name of being convicted of a crime.)
After the CAV’s decision, SCOTUS decided Nelson v. Colorado in April 2017. Nelson held that states cannot keep money paid by criminal defendants for things like fines and costs if the conviction is later invalidated. Since Cilwa had paid almost $850, she has a right to that money back if her appeal is successful. The justices accordingly remand the case to the CAV for a decision on the merits of the appeal.
One interesting side note: Nelson was a 6-1 decision (not counting Justice Alito’s separate concurrence). Justice Thomas alone believed that even if a conviction is reversed, a state has the right to keep any money the defendant paid before getting his conviction vacated – even if he’s fully exonerated: “Colorado is therefore not required to provide any process at all for the return of that money.” You read that correctly.
ANALYSIS OF DECEMBER 7, 2017 SCV DECISIONS
(Posted December 7, 2017) The Supreme Court hands down two published decisions today – one opinion and one order. Both of these decisions come in cases argued in the September session.
The Supreme Court fills in a noticeable gap in pleadings jurisprudence in Eilber v. Floor Care Specialists, Inc. Eilber filed a Chapter 13 bankruptcy petition and received confirmation of a 36-month payment plan. During that three-year period, he was fired from his job and sued a subcontractor for defamation, asserting that two of the subcontractor’s employees had made statements that damaged him in his profession, thus constituting defamation per se.
The defendants filed some fairly vanilla demurrers, which the court denied. They then moved for summary judgment “on the ground that Eilber lacked standing to prosecute his defamation action because he failed to disclose the claim to the bankruptcy court.” Eilber duly responded, and in a reply brief, the defendants asserted for the first time that judicial estoppel barred the claim.
The trial court took this bait, dismissing the case on the judicial-estoppel argument. Eilber appealed, asserting that the defendants hadn’t pleaded judicial estoppel, so it was inappropriate as the basis for a dismissal.
The Supreme Court today notes that in general, a defendant must plead an affirmative defense, or it may be held waived. There are some specific exceptions to that, but prior caselaw from the SCV has never addressed whether judicial estoppel is one of those exceptions or not.
The court resolves this issue today by joining five federal circuits that have held that a defendant need not plead judicial estoppel in order to prevail in that basis. A court may even raise the issue sua sponte. The reason is that the doctrine of judicial estoppel is designed to protect the integrity of the judicial process and to guard it from improper use.” After all, a litigant who asserts one thing in a given court and the opposite fact in another court is likely gaming the system.
Eilber’s failure to disclose the defamation claim during the pendency of his bankruptcy case is tantamount to a statement that he had no such claim. On that basis, the justices unanimously affirm the dismissal.
The surface-level lesson of this case from a plaintiff’s perspective is that you have to ask your incoming client if he or she has a pending bankruptcy claim, and you have to disclose any tort claim to the trustee, even one that arises after the filing date. The lesson to litigants more broadly is that judicial estoppel is a card that can be held in reserve and played at a strategically advantageous time for the defense.
Trusts and estates
There’s a fairly simple resolution to Kim v. Kim, involving a revocable trust, a pour-over will, and a claim of undue influence. It also shows you that lawyers who do favors – even innocent ones – for family members eventually end up getting punished.
There are actually three Kims in this story. Kim #1 is the settlor of the trust and the testator of the will. Kim #2 is his brother, a licensed attorney. Kim #3 is the testator’s wife.
The testator saw that the end was near; he was undergoing treatment for end-stage lymphoma at Johns Hopkins Hospital. He called his brother to his side and asked him to draw up the will and trust. The brother did so, naming himself as executor in the will and as successor trustee in the trust. Even the medical heroes at Hopkins could not postpone the inevitable; eight days after executing the documents, the testator passed away.
His widow speedily qualified as personal representative and sued her brother-in-law, claiming undue influence. She asserted that suspicious circumstances existed, in that her late husband was enfeebled when he signed; was entirely dependent on others; and relied on his brother, who stood in a fiduciary relationship with the testator. These circumstances have in the past given rise to a presumption of undue influence. (I hardly need point out that the terms of the trust were noticeably less beneficial for the widow than intestate succession would have proved to be.)
The brother who prepared the documents had a ready reply: Even assuming all that to be true, he hadn’t named himself as a beneficiary, and he stood to gain nothing from his late brother’s will except the normal fees that any other fiduciary would charge for estate administration. Indeed, the trust stated that the brother could not distribute any of the proceeds of the estate to himself. The trial court agreed with the brother and granted judgment in his favor.
On appeal, the justices consider and reject the widow’s claim that the brother stood to benefit from the will and trust: “Neither [the brother’s] entitlement to compensation as executor and trustee, nor his power as trustee to choose beneficiaries of certain Trust property make him a beneficiary of the Will or Trust.” Since the brother wasn’t a beneficiary, directly or indirectly, he can’t be held to have unduly influenced the testator to benefit himself. The court thus affirms the judgment.
ANALYSIS OF NOVEMBER 30, 2017 SUPREME COURT OPINION
(Posted November 30, 2017) The Supreme Court today decides an appeal involving a breach-of-contract claim in the third-party-beneficiary context. The case is Rastek Constr. & Devel. Corp. v. General Land Commercial RE Co., from Chesterfield County.
In 2010, Rastek contracted to sell a commercial tract to an entity known as G & G Harley Club. The sale price was $3 million; closing was set for October 1 of that year. But the sale didn’t close as scheduled. The parties revised their agreement to allow for closing in March 2011, but that didn’t happen, either; nor did the parties close by either of two subsequent dates. Eventually, a bank foreclosed on the property and resold it to the Harley Club, which presumably got the land for less than the original contract price.
In this way, the bank got paid; the club got its land; the seller got rid of the property at a challenging time for the real-estate market; everybody got what they wanted, with one exception. The original contract contained a provision obligating the seller to pay a real-estate broker a commission once the sale closed. The obligation was expressed as a condition precedent: “if and only if closing occurs.”
Well, no closing occurred, so you might figure that the broker is out of luck. But it would not be dissuaded so easily: the broker sued the seller anyway, claiming that the seller had improperly prevented the closing by not coming up with funds sufficient to clear liens against the property (including the bank’s mortgage). The trial court rejected a demurrer and eventually granted judgment to the broker for the amount of the commission.
The seller appealed, and today the Supreme Court reverses and enters final judgment. The trial court had based its ruling on something called the prevention doctrine. That principle states that if a deal falls through and you caused it to do so, then you can’t rely on the failure to close as a defense to liability.
Justice Kelsey writes for a unanimous court. He notes that the prevention doctrine requires affirmative conduct, not merely passive inability to comply with contract terms. Specifically in this context, it requires proof of “a purposeful act or omission that wrongfully prevented the if-and-only-if condition of closing from being satisfied.” (Internal quotation marks omitted) Not having enough money on hand on the scheduled closing date doesn’t meet that standard, so the seller is entitled to judgment. The court also points to another unfulfilled condition precedent to closing: a final certificate of occupancy from the County. The County had issued only a temporary CO.
I’ll mention a couple of other issues that stood out to me. The first is the court’s discussion of the third-party-beneficiary doctrine. In most real-estate deals, real-estate agents and brokerages sign the contract, so they have a direct claim. That didn’t happen here, so the brokerage has only a derivative claim. The broker had sued the buyer, too; but that claim died because of the statute of frauds, which bars real-estate commission claims based on oral contracts.
There’s one last point that illustrates a principle that’s familiar to appellate lawyers. The justices today rule that the trial court should have sustained the seller’s demurrer; the court holds that the complaint fails to state a claim, since there was no duty as a matter of law.
That being said, there’s one seeming omission here that might give the occasional practitioner pause. Here’s the text of footnote 4: “While the trial court’s order alludes to a November 20, 2015 demurrer hearing, no transcript of that hearing appears in the record.”
My readers have heard me preach often about the need to have a court reporter take down everything in a trial-court proceeding, except perhaps your lunch order. This decision points out one exception to that general advice. Because a demurrer raises issues of law, it isn’t essential to have a transcript of proceedings when you’re appealing a ruling like this. A demurrer can only be sustained based on grounds asserted therein, so the question in the Supreme Court is identical to the one in the trial court: Does this complaint state a claim? I still believe that the best practice is to include a demurrer-hearing transcript, but in appeals like this one, you won’t be out of options if you don’t have one.
ANALYSIS OF THORMAC, LLC v. DEP’T OF ABC
(Posted November 28, 2017) If you listen carefully, you can hear the sound of the phones ringing this afternoon in legislators’ offices across the Commonwealth. Some well-heeled constituents are likely giving their elected representatives an earful after today’s ruling in Thormac, LLC v. Dep’t of ABC in the Court of Appeals of Virginia.
Here’s the legal framework: In order to prevent the proliferation of pure bars – today’s opinion refers to them as “gin mills” – Virginia law requires ABC licensees to maintain a 45% ratio between food sales and gross sales. There are some exceptions, such as for beer and wine; but in general terms, if a given establishment hypothetically has gross sales of $500,000 in a year, at least $225,000 of that has to be from sales of food and nonalcoholic beverages. If a licensee fails to reach that threshold, it’s subject to a fine and/or suspension. The ratio is mandated by statute; it’s not an administrative regulation.
Thormac operates a restaurant in the Museum District in Richmond. (For those of you who will, after reading this analysis, decide it’s worth a visit, it’s McCormack’s Whisky Grill and Smokehouse. This is as close as I’ll ever come to “product placement” on this website.) It sells food – plenty of it, in fact – and entrees cost $22 to $24 on average. Indeed, if its whiskey prices were below stratospheric levels, we probably wouldn’t have a dispute here.
But McCormack’s sells high-end stuff. Behold, from page 20 of the slip opinion: “The price of a shot of liquor there ranges from $7.25 to approximately $2,000.” If you wish, you may reread that sentence and keep in mind my promise that I didn’t fiddle with the placement of the decimal. Two thousand bucks a shot.
Now I’ve never heard of any whiskey or other fluid that costs that much, and I have no intention of ever paying that much for it, unless it will save my life somehow. But some customers do. While those customers presumably do not get sloshed – who could afford to, at those prices? – the disparity between the price of a normal meal and the price of a normal amount of alcohol is immense. Over the course of its 2014-15 fiscal year, that disparity tilted the balance on McCormack’s books so that food sales were only 39% of gross. On paper, that’s a violation.
It’s a violation in the ABC Board, too. A hearing officer considered essentially uncontroverted evidence and, perhaps shrugging, ruled that the restaurant was noncompliant with the statutory ratio. She suspended McCormack’s ABC license for 30 days, but by law, the restaurant could cut that period in half by paying a $1,000 civil penalty.
Instead, it appealed to the full ABC Board. After a hearing, the Board ruled 2-1 that it was still a violation, but cut the suspension to seven days, and even that would go away if the restaurant paid a $500 fine. One member of the Board voted to use the Board’s discretion not to impose any penalty, given the unique circumstances of this case.
It would be easy for the restaurant to pay the $500 and get back to business, but there’s a principle involved here, not to mention next year’s food-to-gross ratio. It appealed to circuit court, and lost, and appealed again to the Court of Appeals.
This one ends in a loss, too, as a unanimous panel of the court rules that this case, quirky as it may be, falls squarely within the prohibition of the statute. The analysis is straightforward and doesn’t break what I would consider any new ground; I agree with the panel’s assessment and with its conclusion that “Appellant’s true grievance lies with the food-beverage ratio itself. Only the General Assembly can change a statute – not the courts.”
Hence those ringing phones. I suspect that if the next year’s ratio is comparable, and if the Board sticks with the $500 fine, there won’t be a recurrence of this litigation; the restaurant will just pay it. But this decision illustrates that Virginia’s effort to regulate liquor sales in restaurants, while perhaps well-intentioned, might benefit from a reworking in light of modern trends in the restaurant industry.
I cannot resist one last note. Here is a link to the restaurant’s drink menu. Sure enough, there it is: Macallan M for $2,100 a shot. You may wish to click on the link to download the full drink menu, so you can see more than just Scotches. I’m a bourbon man, and I found the prices for Kentucky’s Greatest Gift to the World to be perfectly in line with what I’ve seen elsewhere. (Pappy Van Winkle is fixed at “$market.”)
ANALYSIS OF NOVEMBER 27, 2017 SUPREME COURT OPINION
(Posted November 27, 2017) We get a very rare Monday opinion release in a very rare case area for the Supreme Court of Virginia.
I have never interviewed any of the justices about this, but I’m confident that judicial-discipline proceedings are among the most troubling matters they see on their docket. The court today decides JIRC v. Pomrenke, argued just 25 days ago.
The Judicial Inquiry and Review Commission charged a JDR judge with misconduct in connection with a federal prosecution of the judge’s wife. The feds had indicted the wife for corruption in her role as an officer of the Bristol Virginia Utilities Authority.
Shortly after the indictment, the judge sent a short handwritten note to his wife’s boss:
I just wanted to sincerely thank you for your kindness and understanding support for Stacey during these horrible times. By now I am sure you would agree she is absolutely honest, truthful, ethical, and innocent! It is horrible what our government is doing to her. She will be proven innocent. Thank you for believing in her.
The judge explained that the criminal defense was draining the family’s finances, and he wanted to thank the boss for allowing the wife to keep working and earning money during the prosecution. He inserted one of his judicial business cards in the envelope.
The boss, a licensed attorney, read the note and blanched. He took it to the federal prosecutor, and the wife was eventually charged with contempt of court. The boss, you see, was a possible witness in the upcoming criminal trial. (In fairness to the judge, he sent the note 2 ½ months before the feds filed a witness list in the case. He contended that he hadn’t known at the time that the boss would be a witness.)
Three days before the trial, the judge compounded his problems by leaving a voice message for a person he knew would be testifying (I infer she would testify on behalf of the wife, though I’m not sure), a “close personal friend” of the judge. This voice message suggests ways in which the witness could shade her testimony by inserting laudatory statements about the wife, even where the question wouldn’t call for any such statements.
As it turns out, the boss didn’t testify, and the federal court convicted the wife. But no matter; JIRC instituted these charges anyway, citing Canons 1 (integrity and independence of the judiciary), 2A (public confidence in the judiciary), and 2B (lending prestige of judicial office for private benefit) of the Canons of Judicial Conduct. After a hearing, the Commission unanimously found the charges to be well-founded.
It’s here that we’ll take a minor detour to mention a couple of procedural aspects of these rare proceedings. The Commission’s finding is the functional equivalent of an indictment: It’s an accusation, not a conviction. The trial court in JIRC proceedings is the Supreme Court of Virginia. That makes this what court insiders call an “OJ proceeding,” invoking the Supreme Court’s original jurisdiction. This was not an appeal at all, and it didn’t require a writ.
In the Supreme Court, the judge commendably agreed that his actions were wrong; he apologized to the justices, as he had done in the hearing before the Commission. That means that the finding of misconduct will stick, and the only issue is what to do about it. By law, there are only two options for the Supreme Court: censure of the judge, or removal from office.
The judge had produced character witnesses and plenty of supporting letters from local attorneys during the Commission hearing. In the end, those letters are unavailing. Citing the effect of the judge’s actions on the judiciary – not on the pending criminal trial, which is almost a secondary factor in the ultimate disposition – the justices take the extremely rare step of ordering the judge’s removal from office. The Supreme Court finds that what the judge did “strikes at the heart of the judicial system” and impairs the functioning of that system – all 400 judges’ worth. Although the federal prosecution obviously took a terrible toll on the judge’s family, “such considerations cannot outweigh the extraordinary harm that will be done if he remains on the bench.”
My sense as I read the factual recitation is that the initial note to the boss may have been a somewhat close call for the court, especially if the judge really didn’t know that the boss would be a potential witness. That being said, today’s opinion adopts several facts from JIRC’s brief that establish that he should have known. The voice mail is another matter entirely; there is no question that this was an attempt to tamper with a witness. And no judge can do that and expect to keep his robe.
The chief justice writes the opinion today for a unanimous court. While the assignment of opinion writing is at least initially random, I would be very much surprised if that happened here. There is an air of professional disappointment and even betrayal about this opinion, and I believe the chief justice was unwilling to impose its authorship upon any other member of the court.
May it be a good, long time before we ever see another of these cases.
ANALYSIS OF NOVEMBER 22, 2017 SUPREME COURT OPINIONS
(Posted November 22, 2017) Wait! Hold it! I know you’re eager to leave the office early so you can head over the river and through the woods to grandmother’s house. But we’ve got opinions! The Supreme Court decides three appeals by published opinion today – they weren’t about to hold them for release tomorrow, as you can imagine – and you can use this information. After all, if one of your cousins starts to talk politics at the dinner table tomorrow, you can change the subject with, “Never mind that; did you see that land-preservation-tax-credit opinion from the Supreme Court yesterday?”
I’m trying to be helpful.
When an inmate wants to file a lawsuit, he can do so without paying the required filing fee or service costs if he shows that he “has had no deposits in his inmate trust account for the preceding six months.” The justices explore this provision today in Grethen v. Robinson.
Grethen is enjoying a period of free room and board with the compliments of the Director of Corrections. The Supreme Court describes him today as “a prolific litigator.” He sought to file a mandamus petition challenging the prison’s restriction of his access to computers, legal-research materials, and photocopying. He filed an affidavit saying that he had no available funds.
But “no available funds” isn’t the same thing as “no deposits … for the preceding six months.” His account records showed deposits of $25 for one three-month period and $183 for the preceding year. Based on that, a circuit-court judge refused to allow him to proceed in forma pauperis. Grethen appealed, and the justices agreed to take a look.
This morning, a divided court reverses. Justice McCullough writes for the majority, noting that each inmate has several trust accounts for different purposes – court obligations, loans, and others – with the residue held in a “spend” account, available for any purpose the inmate chooses. When the inmate incurs costs, such as a $5 fee for a doctor’s visit, the facility either deducts that amount from his trust funds or “lends” him the money and then debits it immediately. These loans/debits are the basis of the roughly $200 in deposits shown on the records.
The Supreme Court today holds that while the prison may call those loans “deposits,” that doesn’t match the commonly accepted definition of what a deposit is. No real money ever changed hands, so there’s no way that Grethen could use the money to pay the filing fee. The majority thus remands the case for adjudication of the mandamus petition.
Justice McClanahan (joined by Justice Powell) has other ideas. No real money? Tell that to the taxpayers whose cash funded Grethen’s lifestyle (modest as it may be). The dissent maintains that no matter the source, someone deposited money into Grethen’s account, so he doesn’t qualify for automatic IFP status. In that instance, the trial court has the discretion to allow it or not.
It’s impossible to read today’s decisions without that frequent-flyer status in the back of your mind. Justice McClanahan quotes the majority’s own phrase – “a prolific litigator” – and implies that the trial court should, in this context, be allowed to consider that in deciding whether Grethen deserves to file yet another free lawsuit.
We’ll turn now to your dinner-conversation topic for tomorrow. In Woolford v. Department of Taxation, the justices evaluate a claim for a $5 million tax credit for donation of a conservation easement.
Woolford is the trustee of a family trust that owns a large agricultural tract in King William County. The family wanted to donate a conservation easement over part of the farm to preserve it from development for a sand-and-gravel mining operation. They secured a report from a licensed appraiser, indicating that the land was worth about $13 million as it stood – with development potential intact – but would be worth only $1 million without those development rights.
The trust conveyed a deed of gift to a public conservation agency and then claimed a 40% tax credit for the value thus conveyed. That’s how we get to our $5 million playing field in this appeal.
The Department of Taxation initially accepted the credit application, but later rescinded that ruling, contending that the appraiser didn’t meet statutory requirements. The Department reduced the credit to zero, prompting a trip to court. The circuit court agreed with the Department, since the appraiser – who otherwise appeared well-qualified in his field – had not received educational training in the appraisal of sand/gravel mining operations.
The Supreme Court unanimously reverses today. The court explores the credentialing requirements in state and federal statutes and concludes that the trial court’s analysis of an educational requirement was too strict. To be sure, the court also rejects the trust’s argument for a liberal interpretation of qualifications; but it eventually rules that the appraiser’s credentials in related fields, and his previous experience in four other mining appraisals, were enough to qualify him here. The court remands so the trial court can evaluate the case on the merits.
A two-paragraph coda to today’s opinion lists some of the issues that the trial court will have to resolve. There are some sticky ones in there. For example, there was no active sand/gravel mine on the property, and the trust would have to obtain an expanded special use permit to start one. That leaves a question whether the mining operation really affects the value of the property. (In this sense, this analysis differs from other valuation-testimony rules, since the statute requires that the donation be “consistent with existing zoning requirements.” In other valuation contexts, such as eminent domain, an appraiser can consider uses that are reasonably probable in the near future, and are not limited to the current zoning.)
The court has two parting shots. The first is to implicitly chide the Department for taking an extreme position: In the absence of a qualified appraiser, the correct amount of tax credit is zero. The justices plainly are skeptical of this, and the opinion concludes with a gentle rejoinder to the Department to play a little more fairly with the trust.
Finally, there’s a hand grenade for the appellate bar. In a footnote – where, as I’ve often preached, the goblins usually hang out – the court expressly overrules a previous preservation requirement. That counts as big news here at VANA, so we’ll explore it.
In the trial court, the Department made several other arguments that the trial court decided not to address. Those arguments would have provided an alternate route to the conclusion that the circuit court reached – the one that got reversed this morning – so the judge felt no need to decide them. On appeal, the Department didn’t assign cross-error to that refusal to rule.
In the past, that decision has had fatal consequences. Most memorably, in VMRC v. Clark in 2011, the justices had a nasty surprise for a party to an admin-law appeal. Clark had appealed to the Court of Appeals the dismissal of his claim on standing grounds. In the trial court, Clark had argued against the dismissal and had also asked for leave to amend – leave that the trial court had rejected. The CAV took the easy route, reversing on the standing issue and deciding that the amendment issue was unnecessary in light of its holding.
VMRC appealed and got the standing ruling “re-reversed” by the Supreme Court. When Clark asked the justices to allow an amendment as an alternative, they refused to consider that, because Clark hadn’t assigned error to the CAV’s “economy.”
I felt at the time that that decision was both harsh and mistaken. Today the ruling goes away:
We have previously held that an appellee must assign cross-error to a lower tribunal’s failure to rule on alternative grounds to preserve the issue for appellate review. [Citations to Horner v. Dep’t of Mental Health and VMRC v. Clark] Those holdings are incompatible with our current approach, which requires an assignment of cross-error (or a cross-appeal) “only when an appellee seeks to modify or otherwise change a favorable judgment ‘with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary.’” Our holdings in Horner and Clark on the requirement of assigning cross-error in a failure to rule situation are hereby expressly overruled.
(Internal citations omitted) I emphatically applaud the justices for this decision, though the news will be cold comfort to Clark.
You know that hot feeling you get in the pit of your stomach when you sense that something really bad is about to happen? I got that sensation before I finished reading the first paragraph of Appalachian Regional Healthcare v. Comm’r of Insurance. That’s because I ran across the phrase, “Reciprocal of America.” And every lawyer knows that invoking that phrase is bound to end in tears.
Appalachian is part of a group of hospitals in, of all places, Kentucky that formed two self-insured trusts to cover employee-liability claims (for example, Workers’ Comp) and professional/general liability claims (for example, medical malpractice), respectively. As an aside, the second one was named Kentucky Hospital Association Trust, generating the unfortunate acronym KHAT. Given that khat is a controlled substance, that’s akin to a hospital association with the acronym OPIUM. But I digress.
The two trusts merged into Reciprocal in 1997. As part of the merger agreement, Reciprocal agreed to indemnify the hospitals for any liabilities formerly insured by the trusts. It also promised to cover their reasonable costs and fees incurred in defending claims against the hospitals – basically, the kind of coverage you’d expect.
As you’ll recall, Reciprocal suffered a grisly death by receivership almost 15 years ago. The Commissioner of Insurance, appointed as Special Receiver, filed suit in the SCC seeking approval to continue paying employees’ claims from what assets were left. The Hospitals later joined in that request for relief, and also filed a suit of their own in Kentucky to achieve a parallel purpose. Those efforts were successful; the Virginia litigation and the Kentucky lawsuit both ended in victories for the hospitals.
The hospitals then sought payment of their legal fees, roughly $440,000, for the two actions under the indemnification provision. The SCC refused, and the hospitals exercised that rare right in the Virginia appellate universe: an appeal of right to the Supreme Court.
Today a unanimous court affirms. While the path may seem complex, even tortuous, for someone who doesn’t practice in this field, the ultimate ruling is simple and, in my mind, unassailable. The indemnity agreement assured payment of fees and costs incurred in defending against damage claims. But the hospitals weren’t defending anything; they were plaintiffs, seeking affirmative relief.
The hospitals argued that this was just a matter of semantics, and they were just seeking an advance adjudication of their potential future liability problems. But the justices stop the interpretive process at Step 1: The plain meaning of defend doesn’t extend to the affirmative assertion of claims. And when the meaning of language is plain, courts don’t engage in construction or even interpretation; they just apply the plain language and say, “Next case, please.” The hospitals thus have to pay their own lawyers, without any help from Reciprocal dollars.
A LOOK INSIDE THE SCV’S 2016 STATISTICS
(Posted March 23, 2017) The Supreme Court has now gone two Thursdays without releasing any published opinions, so it’s time for a different angle. The court’s 2016 statistical report is out. Since I know that most of you hate numbers – that’s why you got into a profession that emphasizes words – I’ve done the digging and sifting for you. That being said, if you really-most-sincerely hate numbers, I might not be able to soften this enough for you. I hope you’ll bear with me, for the lessons are worth learning.
Here are a few items that caught my eye.
How’s appellate business?
Business is down (mostly). SCV Clerk Trish Harrington opened just 1,852 new files last year. That’s the smallest number since 1990, and it’s off 7% from the 2015 total of 1,996. But the drop-off is one-sided: by coincidence, the court received the same number of civil petitions in each year: 569.
The big change is in criminal petitions, which fell from 974 in 2015 to just 774 last year, a reduction of just over 20%. I could speculate whether this means that inmates are more accepting of their fates (doubtful) or they’re getting demoralized by the puny reversal rate. The justices ruled in favor of the prosecution in 25 of the 28 criminal appeals that it decided on the merits last year (including published opinions and unpublished orders). The overwhelming majority of criminal appellants never even got a writ. The accused’s overall success rate before the justices last year was on the order of one-third of one percent; the other 99.7% lost.
I do have a couple of encouraging upticks to report: the justices are granting more writs and are publishing more opinions. Last year’s 123 writs – 93 civil, 30 criminal – represented a healthy increase from the four-year average of about 106 writs a year from 2012-15. And the court handed down 78 published opinions in 2016. That’s up slightly over the past three years, though it still lags far behind the 119 opinions we got as recently as 2012. In the halcyon days of the late 1990s, we regularly got 150+ new opinions every year, but those times are gone.
What about the procedural-default rate?
I detest reporting on this, because it’s an embarrassment. In 2016, 7.8% of criminal petitions and 23.6% of civil petitions were dismissed for procedural defaults; they never even got to the writ panel. I suspect that many of the civil appeals were filed by pro se litigants, but I’m confident that an alarming number came from law offices.
Why is the criminal-petition rate so much lower? Possibly because the lawyers who file those petitions have been down this road before and they know the appellate landmarks – and landmines – better than their civil counterparts. It’s also conceivable that the justices may be a bit more lenient with a borderline defect if it occurs in a criminal appeal, but I have no way to evaluate that hypothesis.
I could start offering advice here on avoiding procedural default; but that’s a much longer essay, and it would probably get me on a rant about dabbling in appeals, so I’ll move on now.
How’s the “pace of play”?
(Pardon a golfer’s metaphor here.) My regular readers recall well that in September 2015, the Supreme Court shifted from its nice, predictable, six-days-yearly release dates for opinions, to a rolling-release practice in which opinions might hit the wire any Thursday. I heard several musings back then over how this would affect the time it takes the court to get opinions out. Faster or slower?
Since that sounded like a reasonable question, and since lawyers frequently ask me when to expect an opinion after argument, I decided to keep records on the release dates, so I could determine whether the pace of the decisions would now be faster or slower. Here’s a quick refresher on the previous setup:
The old practice gave us opinions on a seven-week turnaround, though on occasion the court would hold an opinion to the next session – a delay of seven more weeks – if the opinion wasn’t ready for release. In my estimation, that happened in about one case in twenty. Also, unpubs might arrive at any time; the court didn’t hold them until opinion day. Finally, the court’s schedule built in two extra-long breaks: January’s opinion day was about ten or eleven weeks after October/November’s, and the long summer recess meant that lawyers who argued in June would have to wait about 14 weeks before getting their rulings.
I decided to start with the appeals argued in the February 2016 session, because those argued that January were skewed by the Roush Effect. (See the opening paragraphs of my February 12, 2016 SCV analysis for the full story.) After that, I figured we’d see a normal pattern emerge.
The court took, on average, 11.2 weeks to release opinions from the March session, and 6.4 weeks to release unpubs. That makes it look like the smart betting is on “longer.”
For the April session, it was noticeably quicker: 7.8 weeks for opinions and 6 weeks flat for unpubs. That’s still about a week later than the previous seven-week schedule, but it’s not a huge difference.
For June, the court beat its previous pace. Remember, previously June-session arguments resulted in September-session opinions, a delay of 14 weeks. But in 2016, opinions arrived an average of 12.3 weeks after the previous session’s opinion day, with unpubs taking 11.3. Lawyers who argued in June got results sooner, on average, than they had in past years.
The court slipped a bit on appeals argued in the September session, releasing opinions after an average delay of 9.8 weeks and unpubs in 7.3. That’s noticeably slower than the previous seven-week pace.
But the justices more than made up for it in the November session, which previously had meant a delay of 10-11 weeks. The court released opinions from that session in an average of 9.6 weeks, and unpubs in 6.6.
In all, if you were looking for a significant change in the pace, you won’t find it. What you may find instead is that an opinion comes down in eight or nine weeks instead of the 14 that it would previously have taken if the court had held it over for further massaging. That is a decidedly good development.
What’s the trend in tort litigation?
The caveat here is that I cannot give you statistics from the petition stage, other than petitions filed, petitions refused, petitions granted, and procedural dismissals, as noted above. I cannot know how many plaintiffs vis-à-vis defendants filed unsuccessful petitions for appeal, because no one at Ninth and Franklin keeps that kind of record.
Not so on the merits; we have a handy compendium of those decisions, called Virginia Reports. The cases decided in 2016 are all published now – some of them still in advance sheets – and a little metaphorical elbow grease will tell us how the current set of justices is ruling in tort cases.
It’s one-sided. In 2016, the court handed down 15 opinions in appeals involving claims of bodily injury (including medical malpractice and wrongful death) and wrongful termination. In those 15 decisions, the injured party (including the terminated employee in this category) won twice, while the tort defendant (including the employer) won 13. This continues a trend that has been accelerating in the last few years. The last time the justices handed down a published opinion that affirmed a bodily-injury judgment in favor of the plaintiff, where the defendant sought a reversal, was almost 2½ years ago, in October 2014.
I hasten to add that this could be due to a skewed sample. After all, any statistician worth his pocket calculator will tell you that a sample size of 15 cases isn’t sufficient to draw firm conclusions. But I now have detailed statistics on these decisions going back to 1999, and we’ve never seen an imbalance like this before. The defense is winning these appeals by historic margins.
While we could theorize about unusual suspects – that skewed sample size, perhaps; or the possibility that trial courts, en masse, have all started making pro-plaintiff mistakes – I prefer the Occam’s razor approach: the Supreme Court has become far more conservative in the past few years, and that’s showing up in its current body of caselaw.
How’s the success rate for rehearings?
Grim, as always. In 2016, the court granted eight petitions for rehearing filed after a writ-stage refusal, and rejected the other 294, for a success rate of 2.6%. Keep in mind that the appellant may have won only a temporary reprieve; the court may ultimately affirm some of those eight.
After a decision on the merits, 23 losing litigants summoned the courage to seek rehearing last year, but the court refused each petition. RGR v. Settle is the only PFR that the court has granted after a merits decision since the beginning of 2013. The other 102 petitions filed in that time have all been in vain, a success rate of 0.97%. Of course, the success rate for those losing appellate litigants who do not choose to file a PFR is 0.00%, so you can see why they’d try.