PROGRAMMING NOTE

 

I will be away from the keyword this week (August 19 – 23). If any opinions are handed down I will post analysis next week.

 


ANALYSIS OF AUGUST 15, 2019 SUPREME COURT OPINIONS

 

 

(Posted August 15, 2019) After a one-week hiatus, the Supreme Court of Virginia hands down three published opinions this morning.

 

Insurance

In Llewellyn v. White, the court answer the question whether a tortfeasor is entitled to a reduction from liability when the injured party’s UIM insurer settles with its insured. White, the tort victim, filed an action against Llewellyn seeking $3 million in damages. The tortfeasor had $250K in liability coverage, while the victim had a $1 million policy.

The UIM insurer reached an agreement with its insured and paid her $750,000 – essentially the limits of coverage – and agreed to waive subrogation. A jury later awarded the victim $1.5 million, and the tortfeasor asked for a reduction of the judgment in that amount. The trial court said no, and today the justices affirm that decision.

In so ruling, the court notes that a UIM carrier doesn’t fit the statutory description of a person “liable for the same injury.” That’s in Code §8.01-35.1, which normally requires a dollar-for-dollar reduction when a victim settles with one party who’s liable. But a carrier isn’t a tortfeasor; the victim’s claim against it sounds in contract, not tort.

The collateral-source rule also counsels affirmance here. The justices cite with approval a recent decision of the North Carolina Supreme Court, making the wise victim – who chose to purchase plenty of UIM coverage – the beneficiary of any windfall, rather than the tortfeasor who chose to drive around underinsured.

Justice Goodwyn authors today’s decision for a unanimous court.

 

Torts

The opinion in A.H. v. Church of God in Christ is all about pleading and duties to protect. It arises from  allegations of child sexual abuse against a church deacon, while the victim was between four and eight years old. Her parents filed a next-friend action against the deacon and others, including the local church and the national denomination.

The trial court sustained demurrers filed by the church and the denomination. The parents nonsuited the remaining claims to create finality, and appealed. Today the Supreme Court reverses in part and remands the case for further proceedings on two claims. Here, in summary, are the key rulings:

The justices affirm the dismissal of assumed-duty claims, based on the recent truncation of that doctrine in Terry v. Irish Fleet (holding that an assumed duty must rest on an express promise to protect). They reverse, however, for trial on a special-relationship claim.

The court affirms the dismissal of negligent hiring, retention, and supervision. The hiring claim fails because the church hired the perpetrator before his first instance of abuse (upon a different victim) occurred after he was hired. The retention claim fails because that requires a showing that nothing short of termination would suffice, and the parents had pleaded that the church should have taken some restrictive measures short of firing. And Virginia simply doesn’t recognize a claim for negligent supervision.

The court also affirms the dismissal of a negligence per se claim, reaffirming that a statute that creates a standard of care doesn’t also create a duty of care. That duty has to exist otherwise.

The parents pleaded a claim for negligent infliction of emotional distress. The court rules that that claim can proceed, but it’s subsumed within the two surviving claims, not as an independent cause of action.

Finally, the complaint stated a claim for pure respondeat superior liability, since it alleged that the perpetrator abused the child while performing services in his capacity as a church employee.

Justice McClanahan dissents in part. She agrees that there’s a respondeat superior claim, but feels that the complaint doesn’t plead facts sufficient to state a special-relationship claim.

I’ll add one observation here. Previous caselaw, stretching back to the last century, has held that when the Supreme Court reviews a demurrer, it accepts as true all of the plaintiff’s factual allegations, plus all the reasonable inferences that may be drawn from them. I’ve noticed that recent SCV jurisprudence is clawing back some of that liberality.

Last year, in Coward v. Wellmont Health System, Justice Kelsey emphasized that a fact must be “expressly pleaded” and cast a skeptical judicial eye on inferences that “are strained, forced, or contrary to reason.” The opinion then went on to reject several claimed inferences on that basis.

Today, the court again emphasizes, on page 2 of the slip opinion, that the courts aren’t bound by what they find to be unreasonable inferences. Not coincidentally, Justice Kelsey also writes today’s majority opinion. You should regard him as effectively leading the charge to rein in the use of inferences in demurrer analysis. On the same page, he cites with approval the two watershed federal pleading-analysis decisions, Ashcroft v. Iqbal and Bell Atlantic v. Twombly. Virginia has long resisted Iqbal and Twombly analysis, where a federal judge first decides how plausible the plaintiff’s claims are. In our jurisprudence on the correct side of the Potomac, juries, not judges, decide what’s plausible.

If this is the federal camel’s nose creeping under the Virginia pleading tent, get ready for some major changes in demurrer rulings.

 


ANALYSIS OF AUGUST 1, 2019 SUPREME COURT OPINIONS

 

 

(Posted August 1, 2019) After a one-week hiatus, opinions reappear this morning, as the Supreme Court hands down three published decisions.

 

Pleading

An interesting procedural issue features prominently in Ferguson Enterprises, Inc. v. F.H. Furr Plumbing, Heating and Air Conditioning, Inc. This is a suit by one business, an HVAC installer, against its supplier. The HVAC company contended that, beginning in 1995, the supplier had made false and fraudulent statements that led the buyer to overpay for HVAC equipment.

The buyer sued in 2013 and the supplier understandably filed a special plea of the statute of limitations, along with a demurrer to other counts. The court sustained the demurrer as to non-fraud claims, but declined to rule on the limitations plea, holding that the court would require evidence to adjudicate it. It granted the buyer leave to amend the other claims, adding that the buyer must restate the fraud claims verbatim in the new pleading. The court told the supplier that it could respond to any new claims by answer.

The buyer did as it was told, filing an amended complaint with new non-fraud claims and identical fraud claims. The supplier dutifully answered but didn’t reassert the limitations plea. The court again sustained the demurrer and set the fraud claims for a jury trial.

That trial took nine days. Nine days! This is one of the chief advantages of an appellate practice; my “trials” are over in thirty or forty minutes, resulting in far less stress and a much happier person when I return home to The Boss each evening. But I digress.

The supplier moved to strike at the appropriate points in the trial, but the court let the jury decide the actual-fraud claims. It refused the supplier’s instruction on due diligence, believing that it had already overruled the special plea. The jury returned a $3 million verdict. The supplier moved the court to set that aside, and the court convened a hearing on that.

During the post-trial hearing, the judge realized his error during the trial; the court had never ruled up-or-down on the special plea. But it ruled that the supplier had waived that plea by not reasserting it after the buyer amended. Adding a belt to those suspenders, the court ruled that the supplier also abandoned the argument by not setting the plea for hearing. It finally ruled that the instruction was incorrect because it placed the burden of proof on the plaintiff, instead of the defense where it belonged. The court entered judgment on the verdict.

The Supreme Court today addresses only two of these three justifications for the judgment. First, it rules that the plea was very much alive despite the supplier’s failure to raise it anew when the buyer repleaded, because of the unique circumstances of the amendment order. The justices note that the trial court had expressly directed the buyer to replead its fraud claim verbatim. It ordered the supplier to respond with an answer and didn’t require it to replead the limitations defense. This meant that the plea was still alive.

When I read this passage in the opinion, it surprised me. I recalled that the effect of filing an amended plea is to nullify the original, and it occurred to me that any previously filed defenses wouldn’t apply to a now-nullified plea. I figured the defendant has to replead or waive its original defenses.

Even apart from the special circumstances that the Supreme Court identifies here, it turns out that I was wrong. Some very old caselaw holds that a defense raised to original pleading still survives the amendment, unless the defendant withdraws it. Power v. Ivie, 7 Leigh (34 Va.) 147 (1836). Despite this, my advice to trial-court pleaders is not to rely on this Alamo-era ruling; if the plaintiff amends, you’re best advised to reassert any defenses that you want to present to the jury. That failure doesn’t cost the supplier here, but as I’m fond of observing, you don’t want to be a test case in an issue of procedural default.

The justice also hold that the failure to calendar the plea for a hearing isn’t a waiver, because the same jury that decides the merits can adjudicate the plea. Imbedded here is an important point. The buyer, not the supplier, had demanded a jury trial, and the buyer argued that to preserve the right to a jury trial on the plea, the supplier had to file its own jury demand. No dice, the justices hold today; under the rules, a single jury demand is sufficient, and an adverse party can reply on his opponent’s jury demand.

The court remands the case for a limited trial on whether the statute of limitations barred all or part of the buyer’s claim. Justice Powell’s opinion for a unanimous court telegraphs that the primary – and maybe the only – issue for that trial will be when the buyer should have learned of the allegedly fraudulent nature of the statements. That fixes the accrual date for the fraud claim, and starts the limitations clock ticking.

 

Corporations

It’s dismaying to discover the same surname on both sides of the “v” in litigation. One way or the other, it’s almost always a tragedy. Today’s ruling in Knop v. Knop resolves a family dispute over just how much of a family-held corporation the principal’s children owned.

A man we’ll call Dad incorporated a company in 1982. It owned a large tract of land – almost 1,000 acres – in Loudoun County. Back then, the land’s value may have been relatively modest, but if you know today’s Loudoun, you’ll realize that it’s now probably worth a fortune for development purposes.

In 1987, Dad owned about 73% of the shares; his three adult children owned 9% each. The corporate books reflected these certificated ownership shares. For estate-planning purposes, Dad decided to transfer to his children stock in the amount of the maximum annual gift allowance each year for several years. The company issued K-1s to Dad and the children showing their new percentages, and everyone filed tax returns showing the new percentages. But the company issued no new certificates for the extra shares.

Let’s now turn to the modern era, with that fast pace of growth. Dad evidently perceived that a developer might want to turn this parkland into a neighborhood. Preferring to see things remain the way they had been for years, he proposed to sell or donate some of the company’s land to create a scenic easement. His three children, who perceived by then that they each owned almost 15% of the company, disagreed.

This simple disagreement ensures that this happy situation can only end in tears. The children pointed to the company’s bylaws, which required a 90% vote to sell company property. At this point, Dad decided to play hardball.

The Code of Virginia states that if a shareholder owns more than 2/3 of a company’s stock, he or she can convert it to another form. Dad claimed that while he may have meant to give his kids extra stock, he never actually completed those gifts, so he still owned 73%. Flexing that muscle, he took steps to convert the corporation to an LLC, giving himself complete control, including the right to sell land regardless of the 90% threshold.

Having been thus outflanked, the children went to court, seeking a declaratory judgment that they together owned almost 45% of the company and could block the shift to an LLC. At a bench trial, the judge noted that nothing showed an effective transfer of shares, so Dad really did have the power to do what he did. The court expressly rejected a claim that Dad was estopped from maintaining that there was no transfer.

For a gift to be effective, Virginia law requires proof of (1) donative intent and (2) actual or constructive delivery. That means that a stated intent to donate, no matter how clear or forceful, isn’t enough to transfer ownership. On these facts, the Supreme Court notes today, there’s clearly no actual delivery. On the issue of constructive delivery, the court rules today that that doesn’t occur unless the donor surrenders control of the shares. That didn’t happen here, and the kids failed to establish the detriment component of estoppel. The justices accordingly affirm the circuit court’s judgment in Dad’s favor.

 

Criminal law

The justices finally decide Stoltz v. Commonwealth today by published order. It’s a conviction for use of a computer to solicit a minor. The appellant is an adult who sought a sexual encounter, not expressly directed to juveniles, on a Craigslist page (since terminated by Craigslist’s publisher) devoted to social encounters. When Stoltz got a reply from a 13-year-old girl, he decided to follow it up.

As so often happens, Stoltz was actually communicating with a quite-adult detective, posing as a juvenile. The conversation continued in sufficient length and detail to make Stoltz’s intentions unmistakable. He arranged a meet-up location and traveled there, but found no 13-year-old waiting for him. A subsequent search of his home computer closed the trap.

The primary issue at trial and on appeal was whether the applicable statute is unconstitutional, for either vagueness or overbreadth. In today’s published order, the justices reject both challenges.

On vagueness, the justices rule that there’s nothing vague about the phrase “reason to believe” in the statute, which proscribes use of a computer to solicit a person who the defendant “knows or has reason to believe is a child younger than 15.” That phrase appears in numerous statutes and the court has never found fault with it before.

The court also rules that the statute isn’t overbroad. Its gravamen isn’t speech but the use of a communication system: “The act of using a communications system is the actus reus of the crime, while the purpose of soliciting the child is the mens rea.” The justices thus unanimously affirm Stoltz’s conviction.

 


NEW DAVID-GOLIATH INDEX

 

 

(Posted July 15, 2019) I’m a bit overdue in reporting on the justices’ voting patterns in the second quarter of 2019. This feature, which I instituted early last year, collects results from published rulings (opinions and published orders) from the Supreme Court of Virginia, where those appeals have an identifiable Big-Guy-vs.-Little-Guy dynamic. About 15 years ago, each side was winning roughly half of the time on appeal, which is the sort of distribution you’d expect. Trial judges aren’t perfect – a fact for which we appellate lawyers are profoundly grateful – and they’re as likely to err in favor of either side as the other.

But I noticed that the voting started to shift a few years ago, to the point that Goliath was winning far more than was David. I decided to keep track of the results and report them here. In 2016 and 2017, Goliath hit an admirable high-water mark, prevailing in over 80% of those published decisions. Last year, David did a little better, winning 31% of the time and losing 69%. In the first quarter of this year, the DGI was 27/73, meaning that Goliath was still winning far more than losing.

The numbers are in for the second quarter. I had to go back and check again before posting this, because the results surprised me: Goliath had an undefeated quarter, winning all ten decisions in April, May, and June. That raises the year-to-date DGI to 86/14 (18 wins for Goliath to 3 for David). That’s the greatest imbalance I’ve ever seen, though the year obviously isn’t over yet.

 


HOW TO SPEAK TO AN APPELLATE COURT

PART 1

 

 

(Posted January 22, 2019) It’s been quite a while since I’ve addressed the topic of oral advocacy. While there are numerous speaking styles, and no one of them is definitively correct, here are some notes on the way I do things.

Part 1 – How to Speak

This section is simultaneously breathtaking in its scope and dangerous in its connotation. The topic of how to speak is immense; the study of rhetoric and oratory goes back at least to Aristotle and Demosthenes. And tackling the task of telling people – educated people, at that – how to do something as basic as talking risks giving offense. After all, while we may realize that we’re not very good at painting portraits or singing or ballet, everybody perceives that he or she can talk well. You do, right?

As for the scope, I won’t try to be comprehensive here. I couldn’t possibly set out in an essay everything I’ve learned about public speaking since I was 13 years old and received my first training in it. It’s far too voluminous, and besides, there are some things that I don’t even realize that I know; they just come naturally after a lifetime of practice.

As for giving offense, please be assured that I’m not here to insult anyone. One of my primary goals in publishing this website is to help you to become a better appellate advocate. But even professionals who are highly skilled in their chosen craft may not know how to convey ideas clearly, forcefully, and persuasively. Here are a few basic suggestions.

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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.

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