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L.Steven Emmert
Virginia Appellate News & Analysis by L. Steven Emmert - Inside the Case Decisions, RUlings & Opinions
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L. STEVEN EMMERT
   


KELSEY ELECTED TO SUPREME COURT

[Posted January 21, 2015] The General Assembly has elected Court of Appeals Judge Arthur Kelsey to a seat on the Supreme Court of Virginia. According to this story from the Richmond Times-Dispatch, the vote was unanimous. Judge Kelsey received very high ratings from statewide bar groups and enjoyed broad legislative support for the new position, which arose as a result of Chief Justice Cynthia Kinser's retirement at the end of last year.

I don't have details on a date for an investiture, but the effective date for the election is February 1. I'm confident that the court's newest member will be installed and fully up to speed when the Supreme Court's next session begins on February 23.

The General Assembly also filled three vacancies on the Court of Appeals, including one that arose from Judge Kelsey's elevation to the SCV. Judges Mary Grace O'Brien and Rick AtLee, Jr. and Richmond attorney Wes Russell have been selected to begin new terms on the court, also effective February 1.



IMPORTANT APPEALABILITY RULING FROM SCOTUS

 

[Posted January 14, 2015] Leave it to the Big Supremes to upstage my tenth anniversary with a significant decision on an appellate-procedure topic. But today, the US Supreme Court hands down Jennings v. Stephens, which addresses the obligation of an appellee to appeal issues that he loses below.

 

This is a habeas proceeding in a death-sentence case. Jennings asserted three separate grounds for habeas relief in US District Court after being sentenced in Texas state court. The district court refused the petition on one of the grounds, involving improper closing argument by Jennings’s own lawyer; but it granted the petition as to two other grounds, relating to the lawyer’s failure to obtain and adduce mitigating evidence. The district judge gave the state 120 days within which to give Jennings a new sentencing hearing, commute his sentence, or (gulp!) release him.

 

Well, don’t worry about this last part; the sovereign State of Texas is not about to let a murderer just walk. The state appealed to the Fifth Circuit. On appeal, Jennings defended the issuance of the writ on the two successful counts, but he also urged affirmance on the third ground, on which he had lost below.

 

Now, here’s the twist that makes this an interesting procedural case: Jennings hadn’t noted an appeal. Nor had he obtained a certificate of appealability for the one issue on which he lost.

 

The Fifth found this to be a fatal deficit. It reversed on the two evidentiary issues, and found that it didn’t have jurisdiction to consider the closing-argument issue. That means that Jennings is back on death row. But the Supreme Court granted certiorari to review the case.

 

Today, by a vote of 6-3, the Court reverses the judgment and directs the Fifth Circuit to address the closing-argument issue. The majority comprises some unusual bedfellows: Justice Scalia writes the opinion of the Court, joined by the Chief Justice and the four members of the Court’s liberal wing – Justices Ginsburg, Breyer, Sotomayor, and Kagan. (If you’ve been paying careful attention, you’ll know that Justice Scalia, one of the Court’s most prominent conservatives, has been voting in favor of criminal defendants quite a lot lately.)

 

Relying on a 90-year-old decision that’s still good law, the majority notes that the relief that Jennings sought in the third count is exactly the same as the relief he sought elsewhere in the petition – resentencing, commutation, or release. In such situations, an appellee may “urge in support of a decree any matter appearing before the record, although his argument may involve an attack upon the reasoning of the lower court,” even where he doesn’t press a cross-appeal.

 

This sounds much like the right-for-the-wrong-reason approach that’s employed by appellate courts everywhere. But Texas makes it interesting with a novel argument. The state points out that if Jennings succeeds in getting a new sentencing based on the argument issue, then the new hearing will have to take place without the contested argument. That's relief that he wouldn’t have received based on the two evidentiary issues. The majority answers that appellate courts don’t review lower courts’ opinions; they review lower courts’ judgments. Federal courts don’t have unlimited “supervisory authority over state trial courts.”

 

The state’s argument fails because by adding the extra ground in his argument, Jennings wasn’t expanding on his rights; nor was he asking the court to impose any additional obligations on the state. But that leaves the issue of a certificate of appealability, which Jennings certainly didn’t get. Normally that certificate is an essential jurisdictional requirement for appealing the denial of a habeas petition. But the majority dodges this problem by noting that Jennings wasn’t appealing to the circuit court. The state was. The justices specifically hold that “the defense of an appealed judgment on alternative grounds” is not itself an appeal.

 

The Court sends the case back to the Fifth Circuit, to consider the merits of the closing-argument issue. Keep in mind that this may turn out to be an empty victory for Jennings; the reasonably sympathetic district court has already rejected it, and the Fifth hasn’t seemed too receptive to his position up to now. But his appeal is still alive.

 

For the rest of us, we get an important ruling on which issues a partially successful litigant must cross-appeal in a federal case.




VANA AT THE TEN-YEAR MARK

 

[Posted January 14, 2015] I’m not ashamed to admit it. I was scared.

 

Somewhere around mid-2003, I was becoming perfectly miserable as a trial lawyer. I grew to dread trial dates – unlike oral argument dates, when I couldn’t wait to get to the lectern. One day, when my alarm clock went off on the morning of a jury trial, I reached over to turn it off and thought to myself, “Gee, maybe one of the witnesses will be ill and they’ll have to continue the case…”

 

This is what’s called “a sign.” It was a message from myself, to myself, telling me that I needed to find a way out of trial practice. I loved appellate work, but I’d always been told, by sensible older lawyers who advised me in my legal youth and adolescence, that a purely appellate practice was impossible. I had never questioned their judgment before. But this idea offered me a glimmer of hope as to how I could come to enjoy the practice of law again.

 

I studied. I planned. I interviewed five generous lawyers whom I esteemed – each a worthy AV – and got valuable advice from each of them. I still have that advice in a book that I consult from time to time. I hired a media consultant – Dave Rourk, who’s been with me for over ten years now – and have long regarded that as one of the smartest things I've ever done for the development of my career. I developed a sensible business plan that had every chance of working.

 

And still, I was scared. As far as I knew, no one had ever done this before in Virginia. But I was ready to try. I had to try.

 

I made one dumb mistake: I didn't do it ten years earlier. The earliest published appellate decision in one of my cases goes back to 1989 – CUNA Mutual Insurance v. Norman, 237 Va. 33, if you want to know. But I date the beginning of my practice’s appellate focus to ten years ago today, January 14, 2005, when I launched this website with analysis of that day’s Supreme Court opinions. I continued to handle some trial work for another two years before I gave it up and became 100% appellate as of January 1, 2007. Now, that was a red-letter day. But the January 14 date has always been magic to me, since it’s when I started to make myself happy in my career.

 

Much has happened in the appellate world in the last decade. Let’s start with the turnover on the Supreme Court of Virginia. Of the court’s seven members in January 2005, only one remains on active status today – the court’s newest chief justice, Donald Lemons. In 2005, the SCV took in 2,697 new cases, granted 182 writs, and issued 105 opinions. In 2013, the last year for which I currently have numbers, those numbers were 2,050, 112, and 64, respectively.

 

One important development that’s worth noting is the court’s docket pace. Several years ago, the Supreme Court was so backlogged that it took almost a year and a half to get from circuit-court judgment to Supreme Court opinion in a granted case. But the court has been proactive about moving things along, and nowadays, that gap is on the order of ten or eleven months.

 

The Court of Appeals of Virginia has seen the retirements of several long-tenured judges over the years, including Chief Judge Walter Felton and Judge Robert Frank just two weeks ago. Those two vacancies, plus one on the Supreme Court, will be filled in the next month or so by the General Assembly. In October, the CAV elected Judge Glen Huff of Virginia Beach as its newest chief judge. If you want to compare caseloads at this level, the 2005 Court of Appeals took in 3,184 new cases and decided 924 cases on the merits. 2013 saw just 2,471 new filings and 752 decisions on the merits. (It’s looking like this may not be much of a growth industry.)

 

The Fourth Circuit was, at one point, down five judges from its allotment of 15. It’s now up to full strength, in part by having purloined two of its judges – Agee and Keenan – from the Supreme Court of Virginia. As for a caseload comparison: In 2005, 5,307 new cases arrived at the Fourth, and it took, on average, 8.0 months to get from the filing of the notice of appeal to final appellate decision. That eight-month gap was the shortest for any circuit in the nation. In 2013, the court took in 5,061 new cases and again led the nation with a median disposition time of just 5.0 months.

 

We’ve seen technological changes, too. Now all three courts post online the audio recordings of oral argument. Very recently, iPads were unwelcome in the appellate courts; now technophiles can approach the lectern carrying the entire record, plus all of the briefs and all of the caselaw, in one hand, in a tablet computer. It's still a three-ring binder for me. I've never had a battery die or a screen freeze on my three-ring binder.

 

Most important, we’ve seen the rise of an appellate bar in Virginia – a welcome change that can only help the development of Virginia’s jurisprudence. A better-prepared advocate makes the jurists’ job easier and leads to sounder results. (At least, that’s the theory. Don’t ask any losing litigants for their opinions on this.)

 

Change has come to this website, too. My earliest opinion-day analysis is still available on the archive pages. I smile a little, and cringe a little, when I go back to review it and consider how scant was my first coverage of that day’s batch of opinions. Since then, I’m confident that I’ve posted well over a million words of commentary. I covered my sixty-first SCV opinion day last week, and have posted perhaps 200 essays and appellate updates, most of which are still available in the archives.

 

I’ve heard your suggestions, too. A few years ago I added a word-search feature, so if you want to find my analysis of the seminal Cowznofski decision from several years ago, you can do that without even knowing the decision date. Several of you have suggested an RSS feed. If I can figure out how to do that without giving you a false ping every time I go in to correct a typo, I’ll do that.

 

I’ve had more than one request for more coverage of important SCOTUS decisions. I do rarely venture across the Potomac, but I’d need another life to do that on a consistent basis. Besides, SCOTUSblog does a fabulous job of covering the court, and I don’t propose to regularly post analysis that’s based on my relative unfamiliarity with that court.

 

I’ve heard your views about your favorite essays. “What Not to Say,” from way back in 2006, seems to be one of the favorites, or at least the most useful. I’m probably proudest of “On Professionalism” from 2009. So far no one has written to tell me that my prose needs polish, or that my advice is all wet. That’s reassuring.

 

I’ve received questions, too – a lot of them. As you know, I occasionally compile some of them into a “FAQs” post. Probably the most frequent question about the site itself is, “How do you find time to write as much as you do?” [I budget the time in advance.]

 

Five years ago today, in another milestone essay, I noted that I had no plans to charge a subscription fee or accept advertising. That’s still true today, as is my 2010 report that “I plan to keep this up as long as I enjoy it, which I emphatically do right now.”

 

One last point here, and it relates to something that you’ve probably overlooked. On every page on this site, consistently since Day One, the word benignitas has appeared in the left margin, just under the navigation box. Maybe you thought that was the name of the company that built the website. If you saw it, you shrugged and glanced away.

 

Benignitas is a treasured word for me, and it was important for me to ensure that the website features it, as a sort of motto. It’s the Latin word for kindness, which I consider to be one of the two most important human qualities.

 

I am grateful for your continued kindness to me over the past ten years. Thank you for making this website a success.

 



ANALYSIS OF JANUARY 8, 2015 SUPREME COURT OPINIONS

[Posted January 8, 2015] The Supreme Court today hands down eight published opinions and two published orders in appeals that were argued in the October session. But this batch implicates Sherlock Holmes's famous "dog that did not bark in the night," as perhaps the most eagerly awaited decision from the last session, the significant First Amendment challenge in Yelp, Inc. v. Hadeed Carpet, is held over for later decision, presumably at the conclusion of the February session. Let's dig into the batch that did come down today.

Administrative law
When I read the assignments of error in Department of Health v. Kepa, Inc., my eyebrows rose. Kepa operates a hookah lounge in Blacksburg, but it also serves food in the same space. The key question is whether Virginia's Indoor Clean Air Act, which prohibits smoking in restaurants, applies here. If it does, that might spell doom for the lounge; after all, smoking is the primary -- perhaps only -- purpose of such an establishment.

The case wended its way through two administrative hearings within the Health Department, then review in circuit court. All three of those ended badly for the lounge. It then appealed to the Court of Appeals, which initially affirmed by a vote of 2-1. But the CAV granted rehearing en banc, and for the first time, the sun broke through the clouds; the en banc CAV reversed, 6-3.

That made the Department the appellant in today's appeal. The issue is whether the exemption in the Act for a restaurant "located on the premises of any manufacturer of tobacco products" applies to allow the lounge and restaurant to coexist.

If your eye caught on the word manufacturer, go to the head of the class. Another provision prohibits the regulation of smoking "in retail tobacco stores, tobacco warehouses, or tobacco manufacturing facilities." This law exempts three types of facilities -- as today's opinion describes them, three tiers within the tobacco industry -- from the Act's provisions. But that troublesome prohibition of smoking in restaurants is still there.

Today, by a margin of 6-1, the justices reverse the Court of Appeals and rule in favor of the Department. The majority rules that this is a restaurant -- despite the fact that most of the site's income comes from tobacco sales, not food -- so the Act applies here. And since there's no exemption for restaurants in tobacco retail stores, that exemption doesn't help.

Based on my initial reading, I was concerned that this would doom the business to close. But the legislature has already ridden to the rescue; the statute permits smoking in restaurants where the smoking area is physically separated and there are separate ventilation systems. So Kepa can continue to operate the lounge, after it hires a construction contractor to do a little work.

Torts
Hyundai Motor Company v. Duncan involves a $14 million judgment against a manufacturer, based on an air bag that didn't deploy in a single-vehicle collision, resulting in traumatic brain injuries to the driver. He sued Hyundai on a breach-of-warranty theory, claiming that the design of the system was flawed. Specifically, he asserted that while the bag itself was fine, Hyundai had placed the sensor -- the unit that triggers deployment at the first sign of a crash -- in a location that rendered the car unsafe, since the bag wouldn't deploy when it was needed.

This appeal focuses on the admissibility of testimony from the driver's air-bag expert, and on that witness's conclusion that the sensor was placed in the wrong location. The expert hadn't conducted any independent testing; he relied on the manufacturer's own sensor-location study, back when the car was designed. He also performed something called a crash-severity analysis, and compared the severity of this crash with the manufacturer's unquestioned desire for bag deployment at a significantly lower impact speed.

Today, a majority of the court rules that this evidence was inadmissible, because neither the expert nor the manufacturer had tested the precise location that the expert had indicated would be best. The court also holds that this testimony failed to establish that another sensor location would have produced deployment and prevented the brain injury. Since the driver's evidence on causation depended on that expert testimony, the court reverses and enters final judgment for the manufacturer.

Justice Powell dissents. She notes that the majority's reasoning focuses only on the manufacturer's cross-examination of the expert, not on his direct examination, which was much more favorable. Since the driver prevailed below, she believes that the evidence should have been viewed in a light most favorable to him. And in a footnote, she cautions,

. . . the majority opinion could potentially lead to parties purposefully asking opposing experts about untested alternative theories that relate to the subject matter at issue and then using this testimony as a means of disqualifying the experts.

Keep that tactic in mind when you start your jury trial next Tuesday. In the end, Justice Powell still would have voted to reverse, based on a jury instruction on vehicle-safety standards. But the majority's decision ends the litigation instead of leading to a retrial.

Corporations
It can be pretty lonely being a minority corporate shareholder. The appellants in Fisher v. Tails, Inc., owned just 21% of a company that operated a real-estate-brokerage franchise. When the company undertook a complex reorganization operation, the minority owners didn't like what they saw, so they asked a trial court to order that they were entitled to appraisal rights under Virginia's corporation law.

The four steps in this process matter, so I'll describe them briefly here. First, the corporation would be reincorporated in Delaware. Second, the company would merge with another Delaware company, and would be owned by a holding company. Third, the transferred company would amend and restate its operating agreement. And fourth, the holding company would sell off the transferred company.

If that sounds complicated, it is. But there was a method to the majority's madness: Once the first step was taken, Delaware law applied. And Delaware law, unlike Virginia law, doesn't give appraisal rights to minority shareholders.

The minority holders duly voted against this whole process in a shareholder meeting, but unsurprisingly were outvoted. They sued, but the trial court sustained a demurrer and dismissed the case with prejudice. The Supreme Court agreed to review the case, probably in significant part because of the paucity of Virginia interpretive case law in this area.

The court today unanimously holds that the whole process is completely legal. The General Assembly has listed five circumstances that trigger appraisal rights, and reincorporation isn't one of those. So with the first step deemed legit, there's no avenue of relief for the shareholders under the Delaware statutes.

But wait; they aren't done yet. The minority argued that the trial court should have applied something called the "step transaction doctrine" to look past the technical legal analysis, and see the whole complex transaction for what it really -- and from what I can see, unquestionably -- was. And Delaware law does recognize this doctrine, so perhaps there's a ray of hope here.

Alas for the minority owners, this approach gets them nowhere. The justices today assume without deciding that Virginia law would allow the step-transaction doctrine. But the reincorporation step -- that was way back at Step 1 -- has "independent legal significance," so it cannot be disregarded, as the minority had asked. Delaware law recognizes that "a transaction effected pursuant to a statute will be subject to the requirements an consequences of that statute alone," and may not be overridden by equitable principles. Accordingly, the trial court properly sustained the demurrer.

Criminal law
We venture into the land of 4-3dom in Powell v. Commonwealth, a prosecution for selling an imitation controlled substance. Powell had the misfortune to sell a bag, containing a "white rock-like substance" to an undercover police officer. When Powell had beckoned the officer over in what the officer described as "an open-air drug market," he was given an order for "a four." In street parlance, that means $40 worth of cocaine.

I didn't know that, and from now on, I plan to be very careful with my numerical language. In any event, Powell went into a house and came back with a baggie containing that rock-like substance. The officer handed over the cash and drove off.

A state laboratory analyzed the substance and found that it wasn't cocaine at all; it was merely an oblong pill that had been cut in half. Since cocaine generally doesn't come in oblong pills, this is bound to be something else. And it was: a prescription pill used as an antidepressant and to treat schizophrenia. Technically, it was a controlled substance, although it was way down at the more-benign end of the controlled-substances scale, at Schedule VI.

Powell was indicted for selling an imitation controlled substance. At trial, he argued that he couldn't be convicted of this crime, because he really did sell a controlled substance. Since selling a Schedule VI substance is a misdemeanor, that's all he could have been convicted of. The trial court was having none of that; it allowed the prosecution to go forward, and Powell was convicted. The Court of Appeals stamped that conviction as "approved," bringing us to today's opinion.

A bare majority of the court votes to affirm. The chief justice writes the majority opinion, which holds that one can be found guilty of selling an imitation controlled substance even if the stuff really is a lower grade of forbidden fruit. The key, under the current wording of the statute, is whether the material sold has "the potential for abuse," and in this case, the antidepressant wasn't specifically listed as such -- that's why it was listed in Schedule VI. This, the court finds, means that the pill that Powell actually delivered was not "a controlled substance subject to abuse," so it was, in fact, an imitation. 

Justice Millette dissents, and he's joined by Justice Goodwyn and Senior Justice Lacy. The dissent notes that Schedule VI includes drugs that are and are not subject to abuse, so the mere classification of the antidepressant in Schedule VI isn't sufficient to answer the question the way the majority answers it. The problem, in the dissent's view, is that the listing on Schedule VI was the prosecution's only evidence on "subject to abuse," so there's no proof of this essential element.

Real property

When a trial court orders the equitable remedy of rescission, the purpose is to put the parties back in the positions they were before. In two opinions handed down today, both under the caption Devine v. Buki, the justices explore one thorny aspect of a rescinded real-estate contract. Specifically, where sellers own property jointly, and a court orders rescission because of fraud by only one of the sellers, what kind of relief can it fashion? The answer is trickier than you might think. There are lots of goodies in here for the property lawyers among us, so this case is definitely worth a careful reading.

 

In my many travels across the Commonwealth, I’ve found few regions as beautiful as the Northern Neck. It contains Washington’s birthplace, the gorgeous resort known as The Tides Inn, and even a small town called Emmerton. I still haven’t found a connection between the town name and any ancestor, but I haven’t given up hope.

 

Because the Neck was among the first areas of Virginia to be settled in the 17th Century, it also has its share of old estates. One of those is a place called Rock Hall, a structure that dates back over 200 years. A husband and wife acquired the home in 2005, and set about the process of making substantial renovations.

 

After making a number of repairs, the couple engaged an agent, who listed the property as “completely renovated and restored … from the brick foundations to the roof and chimney.” The ads also contained a disclaimer that this information “was deemed accurate, but it was not guaranteed.”

 

The ads soon produced a purchaser. The parties signed a contract of sale. As every dirt lawyer knows well, the sellers had the option of providing a disclosure of known conditions on the property, or a disclaimer that basically told the buyer, “You’re on your own to check out the condition of what you’re buying.” The sellers chose the latter route, telling the buyers that the property would be conveyed “as is.”

 

The buyers sensibly hired a couple of inspectors. Those professionals each identified some minor concerns, but neither one found anything that was significant enough to warn the buyers away from the contract. The buyers asked for and got some specific repairs, after which the parties closed on the sale, and the buyers moved in to their new-old home.

 

It didn't take long for problems to arrive. The first signs of trouble were leakage due to wind-driven rain, and water dripping from the living-room ceiling. Since these were decidedly bad signs, the new homeowners hired two contractors to find and fix the problem.

 

They found it, all right: structural problems with the foundation that “significantly compromised” the integrity of the house. Recalling the listing that specifically mentioned that the sellers had “completely restored” the foundation, the buyers figured that they’d been had. They sued to rescind the contract of sale, for compensatory damages, and for a Consumer Protection Act violation.

 

The case had a complex procedural history in the trial court, including referral to a commissioner in chancery and some exceptions to the commissioner’s report. Rather than recount those, I’ll get to the bottom line.

 

The trial court found that the husband had defrauded the buyers, but the wife’s only involvement was in signing the contract and the deed. The court ordered rescission of the contract, directing the sellers – that would be both of them – to repay the $590,000 purchase price, at which time the buyers were to reconvey title by deed. The court also entered judgment for damages against the husband only, for $135,000, plus almost $100,000 in attorney’s fees.

 

The husband and wife appealed separately, and today we get two separate published opinions. In husband’s appeal, the court affirms in part and reverses in part, remanding the case for further proceedings. The court first turns aside a jurisdictional challenge based on the old distinction between law and chancery, holding that the trial court did have equitable jurisdiction over husband. There was, the justices find, no indication that the relief sought “was a pretext to bring an action at law in a court of chancery.”

 

And now we get to the tricky part, the one that will intrigue the dirt lawyers. Remember, the trial court had ordered rescission against both sellers, even though it found no fraudulent conduct by the wife. How does a court of equity order relief against a party who has done nothing wrong? And if it can’t order relief against the wife, how does it have jurisdiction to order relief against the husband alone? This part of the opinion gets into the weeds of unitary tenancies – specifically a tenancy by the entireties – and considers the doctrines of equitable conversion and merger when evaluating the relief available.

 

Today’s majority holds that the equitable-conversion doctrine extinguished the sellers’ tenancy by the entireties as soon as the parties fully executed the contract. It also holds that the rescission of the contract doesn’t automatically restore that tenancy; that’s why the trial court ordered reconveyance by deed, after the repayment of the purchase price. The court notes that once the sellers delivered the original deed, the contract merged into it.

 

The court holds that trial courts have substantial discretion in fashioning an appropriate remedy to eliminate or minimize hardship caused by fraudulent conduct. That includes ordering relief against the wife, while ensuring that the husband alone is responsible for refunding the purchase price.

 

The court next rules that the “as is” language in the contract didn’t insulate the husband from liability. That’s because, under preexisting law, you can’t commit fraud and then hide behind a disclaimer. The court distinguishes between fraudulent inducement to sign the contract, and fraudulent inducement to close – the latter is the only theory on which the buyers sued – and holds that the latter is indeed a valid claim in Virginia, because “regardless of when the concealment occurs (i.e., before or after the contract has been entered into), the wrong is still the same.” Because the husband concealed the condition of the foundation, the trial court was right to order rescission.

 

Having done that, the court then reverses the award of monetary damages, though it affirms the attorney’s-fee award. The damages were for fees paid to others – things like real-estate taxes, mortgage interest, and the contractors’ fees. But caselaw establishes that any restitution award is limited to the benefit that has been received by the defendant. Here, because the buyers didn't pay that money to the sellers, their sole relief against those sellers is return of the purchase price.

 

Next, in the wife’s appeal, the court takes up the question noted above: Can a court of equity order equitable relief against a party who has done nothing wrong? Remember, there were no damages awarded against the wife, so that aspect of the first opinion isn’t present here.

 

This one turns out to be straight-forward. In the absence of liability, a court can’t “be made the subject of a remedial decree,” so the trial court was powerless to order the wife to repay the purchase price. That part of the decree is reversed.

 

Well, what about that tenancy-by-the-entireties issue? If the parties are really to be restored to the status quo ante, don’t you have to include the wife in the decree? If that’s been troubling you, you have company. Justice McClanahan files a dissent in each appeal, arguing that the doctrine of equitable conversion doesn’t really destroy the unitary tenancy, and they even hold the sale proceeds by that tenancy. Justice McClanahan thus thinks that since the deed was conveyed by two persons acting as one, who received the money as one, then the court must treat them as one when ordering rescission. And that, in turn, means that the wife should be included in the obligation to repay the purchase price.

 

This is, you will appreciate, a tough call, with competing equitable considerations, all based on viable caselaw. In the end, sometimes a trial court has to be creative in doing what’s right, a primary goal of courts of equity. Today’s decision indicates that there are indeed limits to what those courts can do.


Taxation

If you don’t handle tax work, then The Nielsen Company v. Arlington County is going to seem at first like it’s written in a foreign language. But really, Justice Millette does a good job of setting out the court’s unanimous resolution of the case. It isn’t all that painful; why don’t you come along?

 

This appeal is about BPOL taxes. Nielsen is the familiar provider of marketing surveys. Its job it to tell advertisers what viewers are watching and what products they’re buying. It has offices in 18 states; its sole Virginia location was in Arlington.

 

The county has imposed a BPOL tax that covers Nielsen’s business. But it can be difficult or impossible to calculate just what income the company received that’s attributable to any one office. Arlington can only tax the company’s receipts that are attributable to its Virginia operations. So how much does the county get to tax?

 

State law provides a solution for this problem. Companies like this are permitted to apportion the nationwide company’s business to individual sites by a sort of interpolation. The method is reasonably simple: You take the Virginia office’s payroll, divide it by the nationwide payroll. You then multiply the quotient by the company’s gross receipts. That becomes the Virginia-taxable portion.

 

Nationwide, Nielsen made about $100 million in the relevant tax year, 2007. Its Virginia payroll was about 24% of its total payroll. That means that the county can tax about $24 million in receipts. And if that’s all there were, we wouldn’t have much of a Supreme Court opinion.

 

But there is more. The tax laws also allow the company a deduction for:

 

Any receipts attributable to business conducted in another state or foreign country in which the taxpayer (or its shareholders, partners[,] or members in lieu of the taxpayer) is liable for an income or other tax based upon income.

 

The real dispute in this appeal is how that deduction is calculated. The county argued that it must be added up individually, a laborious process that seems likely to dissuade any business from even trying to claim the deduction. The company responded that it was permissible to perform another round of interpolation.

 

Here’s the bottom line: the Supreme Court sides with the taxpayer here, ruling that receipts that are created by business occurring elsewhere can be deducted using an interpolation process approved by the State Tax Commissioner. That means that the taxpayer can calculate the deduction without hiring an army of CPAs to do all the math.

 

There’s an important subordinate legal issue in today’s opinion that will apply to non-tax litigation. The Tax Commissioner had ruled in favor of Nielsen, and the question is what weight or deference should be given to his determination. According to something called the rule of practical construction, when there’s a close interpretive call on a legal issue, courts often give credence to the construction that’s been consistently employed by officials who are charged with administering the law in that field.

 

But as today’s opinion notes:

 

We recognize that our decisions have been less than clear about a distinction in terminology, as we have sometimes conflated "deference" with "weight." … However, a review of our precedent underscores that we have distinguished "deference" from "weight." "Deference" refers to a court's acquiescence to an agency's position without stringent, independent evaluation of the issue. "Weight" refers to the degree of consideration a court will give an agency's position in the course of the court's wholly independent assessment of an issue.

 

[Citations omitted] The court resolves this confusion by holding that courts never defer to administrative agencies on the interpretation of statutes, though it can sometimes “afford greater weight than normal to an agency’s position.” In cases of ambiguity, that weight can tip the balance, but it’s never binding on courts, which have the primary duty to determine the meaning of statutes.

 

Since the rule of practical construction applies in a host of legal contexts, this ruling deserves attention even from those lawyers who would never dream of practicing in the field of taxation.




PROGRAMMING NOTE

 

[Posted January 7, 2015] Opinion day comes a day early this week; the Supreme Court of Virginia will hand down tomorrow the decisions from the appeals that were argued in October. This is an instance of troublesome timing for me; for only about the fifth time in the nearly ten years that I’ve published this website, the clerk has scheduled me to argue an appeal on opinion day.

 

Now, I love oral argument, but on opinion day, I’d far prefer to be here at my desk, reading the new opinions and posting analysis for you. Life intrudes sometimes, and I’ll adapt, as I’ve done on the four previous occasions.

 

Tomorrow also marks the investiture of Justice Lemons as the chief justice. I’ll be privileged to attend that ceremony, and will drive home afterward, tomorrow evening. This means that while I’ll be able analyze a few opinions tomorrow between the time of my argument and the time of the investiture, I’ll have to post most of my analysis on Friday.




THE PASSING OF AN APPELLATE GIANT

 

[Posted December 30, 2014] The sad news reached me this morning of the passing of Judge Ruggero Aldisert, at the age of 95. Judge Aldisert was a Senior U.S. Circuit Judge of the Third Circuit Court of Appeals, and had retired this past summer.

 

I never got to meet Judge Aldisert, but he helped me on numerous occasions, through his wonderful book, Winning on Appeal, one of the NITA Practical Guide Series. If you’re an appellate lawyer, you have to read it; I keep my copy (2nd edition, 2003) in a small bookcase that’s right by my elbow, for easy reference.

 

Judge Aldisert wrote other books about the law and judging, but for me, Winning on Appeal is the next-best thing to an owner’s manual for a successful appellate practice. It offers excellent practical advice on briefwriting and oral advocacy. Sometimes I disagree with what’s in there; for example, I believe that his advice to “Preserve the issue [in the trial court] at all costs” is too broad, and there may be instances in which you may intentionally sacrifice an appellate issue in order to win the trial. But as a whole, the advice is dynamite.

 

I’ve often told the story that there’s an easy way to tell whether you’re hiring the right appellate lawyer: Go to his office and ask if you can borrow his copy of Aldisert. You’ll get two possible responses. The first is, “What’s an Aldisert?” If that’s what you hear, look at your watch and make a polite excuse before leaving. The only other possible response is, “No, you can’t borrow it; but I’ll let you look through my copy here in my office, while I keep an eye on you.” That’s your guy.

 

I can’t conclude this essay without quoting my favorite passage from the book. It’s part of a “litmus test” that reflects what appellate jurists think about a brief, based on how many issues are contained in it. The list, which Aldisert describes as “purely subjective guidelines for civil cases,” begins with three issues, and indicates that the judge’s reaction to such a focused brief is, “Presumably arguable points. The lawyer is primo.”

 

As the number of issues rises, the judge’s reaction correspondingly worsens. By six issues, the reaction is, “Probably no arguable points. The lawyer has not made a favorable initial impression.” But it goes on, to seven issues: “Presumptively, no arguable points. The lawyer is at an extreme disadvantage, with an uphill battle all the way.”

 

The list concludes with eight or more issues: “Strong presumption that no point is worthwhile.” The first edition of the book contained this irresistible bon mot, which has for some unfortunate reason been excised from the second edition: “To the lawyer: Go home. Do not collect $200.”

 

Think about that the next time you think you just have to list seventeen assignments of error.

 

In pace requiescat, your Honor. Thanks for making me a better lawyer.




FOURTH ISSUES THREE IMPORTANT RULINGS

 

[Posted December 22, 2014] Do you handle federal appeals? If so, I need to take a few minutes of your time to go over three decisions from the past week. Right now would be a good idea, for reasons that will be quite clear to you very soon.

 

On Wednesday, December 17, a panel of the Fourth Circuit handed down Hudson v. Pittsylvania County, a thou-shalt-read, no-excuses-allowed, published opinion that addresses when a judgment is final and appealable.

 

On Friday, the same court issued Whiteside v. US, a §2255 proceeding. Friday’s opinion comes after an en banc rehearing, something that’s always important to consider. But the lesson – and I think it’s appropriate to describe it as a painful lesson – should carry over to other appellate proceedings.

 

Ignore these decisions at the peril of your malpractice carrier.

 

In addition, today another panel rules that North Carolina’s ultrasound statute violates the First Amendment by compelling speech by abortion providers. The decision is Stuart v. Camnitz. It emphatically is not a slow news week at 1100 East Main.

_______

 

Hudson is a challenge to Pittsylvania County’s practice of beginning its semi-monthly Board of Supervisors’ meetings with an invocation. As the opinion describes it, “This opening invocation was usually explicitly Christian in nature, and the Board asked the audience to stand for the prayers.” Hudson, who is identified only as “a non-Christian resident of Pittsylvania County who has attended nearly every Board meeting since late 2008,” objected to what she saw as an establishment of religion. She filed a civil-rights action in US District Court.

 

In March 2013, the district court entered summary judgment in her favor, permanently enjoining the county “from repeatedly opening its meetings with prayers associated with any one religion,” and retained jurisdiction to consider a §1988 fee petition. Five months later, the court awarded $53,000 in fees and costs. The county appealed within 30 days after entry of this order.

 

Earlier this year, while the appeal was pending, SCOTUS handed down Town of Greece v. Galloway, a sharply divided decision that upheld that New York town’s practice of beginning its meetings with prayers. That seemed to portend a reversal here. But wait:

 

Before turning to the merits, however, we must first address the threshold jurisdictional issue presented by [Hudson’s] motion to dismiss.

 

What’s this? A dismissal motion? Hudson asked the Fourth not to reach the merits because, she claimed, the notice of appeal had been filed too late. She argued that the county had to note the appeal within 30 days of the March judgment order; it wasn’t allowed to wait until entry of the fee order in August.

 

If you’ve ever received a motion like this, you know well the hot feeling it engenders in the pit of your stomach. Your head reels as you contemplate the awful possibility that the Bad Guys might be right, and you’ve screwed up the appeal by missing a jurisdictional deadline.

 

Alas, that dreadful sensation can only grow for the county’s lawyers, as the panel unanimously concludes that the appeal is untimely. When a district court enters judgment on the merits of a claim, and retains the case solely to consider an award of statutory fees and costs, the clock starts ticking immediately for an appeal of the underlying judgment. That means that the notice of appeal had to be filed in April, not September. Accordingly, the appellate court is without jurisdiction over the case, so it never reaches the merits of the primary issue.

 

There is a saving provision that might have salvaged the county’s appeal: FRAP 58(e) allows tolling of the running of the appeal period to allow the district court to adjudicate post-trial motions, and this fee petition likely would qualify for that. But the tolling provision doesn’t apply automatically; it only applies when the court invokes it, presumably in response to a motion. Since the county never made that motion, the rule doesn’t help.

 

I invite my loyal readers – and what the heck; even those of you who have only arrived on this scene recently – to note that this result is almost certainly different from what would prevail in state courts. There, where a circuit court enters what would normally be a final order adjudicating the merits, but “retains jurisdiction” to consider ancillary relief such as fees or sanctions, that order is not final and cannot be appealed.

 

There’s a denouement to the story. The panel does take up the county’s appeal of the fee award, since the notice of appeal was timely as to that decision. But this challenge fails on the merits, as the Fourth finds that the fee award was within the district court’s discretion.

_______

 

The en banc decision in Whiteside v. US will raise some eyebrows. Whiteside pleaded guilty in 2010 to a drug-distribution offense. Because he had two previous drug-distribution convictions, he was classified as a career offender under then-current Fourth Circuit caselaw. The district court sentenced him to 210 months in prison. I’ll do the math for you; that’s about seventeen years.

 

One year and twelve days later, the Fourth Circuit handed down US v. Simmons, in which the court acknowledged that a recent decision from SCOTUS meant that that preexisting career-offender caselaw from the Fourth was incorrect. With this new arrow in his quiver, Whiteside filed a §2255 action in which he sought resentencing. He pointed out that without the erroneous sentencing enhancement, he might only be looking at nine years in prison, not 17.

 

The district court denied the petition, noting that it was untimely filed. Earlier this year, a Fourth Circuit panel reversed that decision and sent the case back for a hearing on the merits. But the court chose to rehear the case en banc, leading to Friday’s decision.

 

By a vote of 12-3, the Fourth votes to affirm the denial of the petition as untimely. Such petitions have to be filed within one year, and Whiteside missed that deadline. He argued that the Simmons case from 2011 constituted a new “fact” that restarted the clock for him. But adopting the uniform view of other circuits, the majority notes that Simmons was a change of law, not a new fact, so that won’t work.

 

Whiteside’s next tack produces the “3” in the 12-3 ruling. He argues that the statute of limitations should be equitably tolled. As the majority opinion notes,

 

Equitable tolling of petitions for collateral review is available only when a defendant demonstrates “(1) that he has been pursuing his rights diligently, and (2) that some extraordinary circumstance stood in his way and prevented timely filing.” Holland v. Florida, 560 U.S. 631, 649 (2010) (internal quotation marks omitted). Under this court’s precedent, equitable tolling is appropriate in those “rare instances where – due to circumstances external to the party’s own conduct – it would be unconscionable to enforce the limitation period against the party and gross injustice would result.”

 

The question becomes, then, whether the Fourth Circuit’s incorrect caselaw, once uncovered and corrected in Simmons, is an extraordinary circumstance.

 

The majority holds that Whiteside had not, in fact, “been pursuing his rights diligently.” He could have filed a petition within a year, but he didn’t. In response to his argument that the prior caselaw made that futile, the court cites SCOTUS precedent for the premise “that alleged futility cannot serve as ‘cause’ for a procedural default in the context of collateral review.” That is, you have to exercise your right to sue even though it would be objectively futile to do so under the current state of the law.

 

The majority also looks to practical considerations. It holds that opening the courthouse doors to Whiteside would essentially open a floodgate of claims, all time-barred but subject to ex post facto review based on subsequent changes in law – it would “foreshadow a tectonic shift of resources from trial and direct appeal to repetitive rounds of collateral review."

 

There are two dissenting opinions. Both Judge Gregory (writing for Senior Judge Davis) and Judge Wynn channel their inner John McEnroe, fairly shouting, “You cannot be serious!” The dissents note that the origin of Whiteside’s predicament is the Fourth Circuit itself, which got the interpretation of the sentencing parameters wrong in the first place. When the court corrected that error in 2011 – after a gentle prod from the Supreme Court – it should, the dissenters feel, have afforded some succor to those who suffered because of the court's mistake.

 

There are plenty of appellate bons mots in the dissents. The authors have, you will see, been boning up on their Scalia-isms.

 

Judge Gregory notes that the court has the SCOTUS-given authority to grant equitable tolling, observing that the Supreme Court caselaw provides that there is a presumption in favor of doing so. But “[r]ather than heed the Supreme Court, the majority constructs for itself and then hides behind false barriers to doing what is right.” While he acknowledges that the perceived futility of a motion doesn’t forgive a failure to make that motion, he notes the irony implicit in the majority’s holding: “I find it glaringly inconsistent of the majority to warn against ‘invit[ing] additional collateral attacks,’ … while simultaneously penalizing Whiteside for not bringing a meritless petition in the time before Simmons was decided …” He derides the majority’s deference to “the holy principle of finality” – now, there’s a phrase that will make its way into future appellate briefs – and criticizes “the majority’s hyperbolic tendencies” when it forecasts a collateral-review deluge.

 

Here’s his concluding paragraph, which is worth quoting in full:

 

My point is that the statistical deck was stacked against Deangelo Whiteside from the beginning. Then, our mistake in casting him a career offender relegated him to an even longer term of imprisonment. In the face of this mistake, it is ironic that our branch of government is the one dragging its feet on the road towards equal justice under the law. Rather than take the slightest step in defense of a citizen’s liberty, we throw up our hands and say, “too little, too late.” And for what reason? To avoid the chaos that would befall society if criminals were imprisoned according to a correct understanding of the law?

 

Not to be outdone, Judge Wynn takes up the cat-o-nine-tails and resumes the process of scourging the majority. He starts by quoting Judge Wilkinson – not even remotely coincidentally, the author of the majority opinion:

 

The majority opinion will, without a doubt, “drive citizens to rub[] their eyes and scratch[] their heads.” United States v. Foster, 674 F.3d 391, 395 (4th Cir. 2012) (Wilkinson, J., concurring in denial of rehearing en banc). “If one were to inquire of an objectively reasonable person on the street whether” a court should allow the correction of a sentencing mistake caused solely by its own error—an error that will likely cost a man eight years of freedom—no doubt the citizen’s “response would be ‘Of course. Why do you ask?’” Id.

 

And:

 

The majority opinion spills considerable ink explaining why the judiciary should not bear the burden of its own mistake. Those who were wrongly (over-)sentenced will surely sleep easier knowing that the courts are not being overworked by too many “tickets to being resentenced.” Ante at 16. The prison staff that must look after wrongly-imprisoned defendants—not to mention the taxpayers who foot the hefty bill for their (wrongful) incarceration—might, however, take issue with the majority’s calculus.

 

Time for an aside: For those of us who make our livings by reading appellate opinions – usually exceedingly dry stuff – vituperative prose like this is fascinating, in a morbid kind of way. It’s like an appellate auto crash: you can’t avert your eyes, even though you know that, in the interest of civility, decorum, and respect for the institution, you should. I will readily admit that you’re a better person than I am if you can turn away from this series of highly entertaining bench-slaps.

 

Now, where were we? Oh, yes; Judge Wynn’s vigorous dissent. He next cites a Seventh Circuit decision, which held that “justice requires the ability to rectify substantial uncontroverted judicial errors that cause significant injury. This is why in our anthropomorphization of Justice, she is wearing a blindfold, and not running shoes.” Finally, he returns to his starting point:

 

“Even appellate judges are endowed with brains in the hope and expectation that they will be used to obvious purpose.” Foster, 674 F.3d at 394 (Wilkinson, J., concurring in denial of rehearing en banc). If rectifying a mistake of our own creation—one that will cost a man eight years of his freedom—does not constitute an “obvious purpose,” I do not know what does.

 

I really do commend to you the task of reading the full opinion – plus dissents, of course – to get a sense for where the Fourth is on this issue.

_______

 

Finally, today’s decision in Stuart v. Camnitz is unanimous; Judge Wilkinson writes for Chief Judge Traxler and Judge Duncan. The court holds that North Carolina’s ultrasound statute cannot be squared with the First Amendment. In doing so, it affirms a district judge’s order granting summary judgment and enjoining enforcement of the statute.

 

The Tar Heelers’ act required doctors or technicians to perform and narrate an ultrasound before an abortion can be performed, even if the patient doesn’t want to see or hear it. “The woman, however, may ‘avert[] her eyes from the displayed images’ and ‘refus[e] to hear the simultaneous explanation and medical description’ by presumably covering her eyes and ears.”

 

This, you will immediately appreciate, is not a requirement that finds its direct inspiration in Hippocrates. It’s unquestionably an attempt by opponents of abortion to make it tougher for pregnant women to go through with the procedure, by conscripting physicians to provide arguments to dissuade the patient.

 

The threshold issue is what level of scrutiny should be applied to the statute. The state understandably urged rational-basis review, while the challengers argued that the court should apply strict scrutiny.

 

The court notes that compelled speech is fully within the First Amendment. (“[T]he First Amendment . . . includes both the right to speak freely and the right to refrain from speaking at all.”) Finding this “quintessential compelled speech,” the court observes that a content-based speech regulation typically gets strict scrutiny; but the state countered that this is a regulation of the practice of medicine, and that leads to rational-basis analysis. So, how does a court resolve these competing principles?

 

Easy: heightened scrutiny. The Fourth Circuit affirms the district court's decision to follow the middle path of intermediate scrutiny. In doing so, it parts company with the Fifth and Eighth Circuits, each of which had applied the more-forgiving rational-basis review. The Fourth finds that those decisions rely on a misreading of the relevant SCOTUS decision.

 

Using the middle-ground approach, the court notes that protecting fetal life and health are indeed valid governmental interests. But it finds that this statute goes far beyond a reasonable means of addressing that interest:

 

This statutory provision interferes with the physician’s right to free speech beyond the extent permitted for reasonable regulation of the medical profession, while simultaneously threatening harm to the patient’s psychological health, interfering with the physician’s professional judgment, and compromising the doctor-patient relationship.

 

The court concludes that this statute imposes “an extraordinary burden on expressive rights,” and thus affirms the district court’s injunction.

 

In answer to the question that has already occurred to you, I’m not certain what this ruling portends for Virginia’s parallel statute. I doubt that our statute contains the exact provisions at issue here, so today’s ruling may not be on all fours with the Virginia act.

 




 
         
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