ANALYSIS OF FEBRUARY 16, 2017 SUPREME COURT OPINIONS
(Posted February 16, 2017) Three more published decisions arrive this morning from Ninth and Franklin. Let’s dig in and see what the court hath wrought.
Specificity of pleading is the key to Ricketts v. Strange, an appeal out of the Danville Circuit Court. It begins with an auto collision in which Ricketts evidently sustained at least some injury to a disc in her back.
Seven months after the collision, Ricketts filed a voluntary bankruptcy petition. In listing her assets, she claimed as exempt various items, including, “insurance proceeds, proceeds related to claims or causes of action that may be asserted by the debtor …”
Fast-forward to the eleventh hour: Ricketts filed a personal-injury suit against the driver of the other car. That driver moved for summary judgment – an approach that can be a dicey proposition in Virginia – based on the contention that the real party in interest in any action asserting this claim should be the trustee in bankruptcy.
The trial court considered this defense and granted summary judgment, finding that the general language quoted above in the bankruptcy schedules wasn’t specific enough to preserve the bodily injury claim as exempt. Ricketts sought leave to amend her pleading to correct what she called a misnomer, substituting the trustee for her name; but the judge would have none of that. With the suit dismissed with prejudice due to the running of the statute of limitations, Ricketts sought succor in Richmond.
The justices today unanimously affirm. They conclude that the listing quoted above was just too general, citing a Maryland federal holding requiring that “a partially scheduled claim contains enough information that a reasonable investigation by the trustee would reveal the claim ultimately asserted.” While a listing of “Auto Accident Claim” has been held to be specific enough to clue the trustee into the existence of such a cause of action, the justices today find that this language is “overly general at best and boilerplate at worst.”
The court also addresses the misnomer issue. Here’s how that effort dies: “Ricketts and [the trustee] are not the same person. The ‘right person’ was [the trustee], but he was not incorrectly named. Rather, the ‘wrong person,’ Ricketts, was named. This is not a misnomer.”
Today’s opinion stops the analysis there, but I believe it could easily have gone on to another fatal hurdle. While trial courts are generally free to correct misnomers, it’s a separate question whether the amendment would relate back. That matters a great deal where, as here, the original statute of limitations has expired.
The misnomer statute does provide the contours of the relation-back doctrine: “An amendment changing the party against whom a claim is asserted, whether to correct a misnomer or otherwise, relates back to the date of the original pleading if …” I’ve added emphasis to point out that the relation-back doctrine only applies where you correct the misnomer of a defendant. It doesn’t operate when the plaintiff’s name changes. Even assuming the style of the case could be changed in this way, it would result in a dead end on the statute of limitations.
The court takes up issues of nuisance and continuing trespass in Forest Lakes COA v. United Land Corp of America. But there’s an appellate-procedure subplot that will be of particular interest to appellate advocates.
Forrest Lakes is a community owners’ association for a 50-year-old development just north of Charlottesville. The development includes a lake that’s fed by Powell Creek. About 15 years ago, some property owners upstream formulated plans to develop their land. Doing so required the creation of sediment basins; the outflow of those basins led into the creek, and thence downstream to the lake.
Construction of the new development began in 2003. But the next year, owners in the older subdivision noticed sediment flowing through the creek and into their lake.
Alas, this snippet from today’s opinion provides a clear map to what’s ahead:
In late 2004 and early 2005, members of the POAs discussed the need to take legal action. The POAs, however, waited until 2011 to file their suit seeking damages and injunctive relief against the developers, contractors, and owners of the [upstream] site …
Six or seven years? Now, why would they go and do that? (In fairness to the trial lawyers, there was probably some sort of reason; but they had to recognize the danger.) The statute of limitations for damage to realty is five years. The trial court foreseeably sustained the defendants’ pleas in bar, rejecting the COA’s argument that this was a continuing trespass with (effectively) no limitation period.
Okay; that’s oversimplifying it a tad. But the plaintiffs did assert that the statute didn’t begin to run until the continuing trespass was removed, and the Bad Guys’ silt was still clogging the good Guys’ lake. A unanimous Supreme Court agrees with the trial court, ruling that the right of action accrued when the first damage occurred – when the first silt “invasion” arrived. Since that was more than five years before the suit papers hit the clerk of court’s desk, the trial judge was right in sustaining the pleas.
I promised you an appellate-procedure angle. Justice Kelsey, the author of today’s opinion, takes care to quote several key portions of the assignments of error at the top of page 8 of the slip opinion. He notes that the way those assignments are phrased severely constrains appellate review. For example, the plaintiffs below sought damages and injunctive relief, but Assignment 1 refers only to “all trespass damages.” That means that the justices won’t review any issues relating to injunctive relief or laches.
The second assignment claims that the trial court erred in refusing to rule on the continuing-trespass theory. You can indeed assign error to a trial court’s refusal to rule on an issue, but that’ll only help if the court has, indeed, refused to rule. (In my view, if you can establish that a trial judge really has refused to rule on a material issue, that will get you special appellate scrutiny.)
What follows in today’s opinion is a short digression on the crucial nature of assignments of error. The assignments shape and constrain the issues on appeal, just as a complaint shapes and constrains the issues that a circuit court is allowed to try. Justice Kelsey adds another important aspect: the assignments “demark the stare decisis border between holdings and dicta.”
Don’t get me started on the tricks and traps associated with assignments; they contribute mightily to the humiliating procedural-dismissal rate in the SCV. For 2015, the last year in which I have full statistics, 24% of all civil petitions for appeal were dismissed even before the writ panel. Not all of those were for defective assignments; but this is merely the most challenging passage in the appellate labyrinth.
When you’re crafting your petition, do yourself a favor and take a little extra time in writing and editing your assignments. Think about them from alternative angles: If the court agrees with me, will this lead to the result I want? Am I being too narrow, so as to thwart the appellate review I want? Breezing through this part of the brief can generate fatal consequences. It’s worth the extra time to get it right.
Okay, let’s get this first part out of the way now. The last case of the day is The Funny Guy, LLC v. Lecego, LLC. Sound intriguing? Maybe good for a laugh or two in the midst of legal analysis?
Disappointment looms. The only invocation of humor in this decision is the name of the appellant. It isn’t even about a comedy club. It’s a collection action by one LLC against another for what I infer was subcontract work in a construction project. Funny Guy’s total bill was for about $375K, but Lecego only paid $300K.
With the rest of the bill unpaid, the two companies evidently engaged in at least some settlement discussions. Funny Guy felt that it reached a deal to resolve the claim for about 97 cents on the dollar, plus a non disparagement clause (Funny Guy had apparently said some unkind things about Lecego when it didn’t get paid).
But while Funny Guy acted on the purported settlement, Lecego declined to do so, refusing to pay even the 97 cents. Funny Guy accordingly sued for breach of the settlement, but a circuit court sustained a demurrer, finding as a matter of law that there was no meeting of minds.
Fine, responded Funny Guy; if there was no agreement, I’ll sue for 100 cents on the original debt. It filed a second action seeking recovery for breach of an oral contract, and alternatively for quantum meruit.
This produced a nasty surprise, as this time the circuit court sustained a plea of res judicata, based on the dismissal of the first action. Funny Guy argued in vain that the two transactions were separate; the court was convinced that both suits sought the same thing — payment for the work that Funny Guy had done. Since the court felt that the contract and QM claims could have been brought in the first suit, it barred them.
Left wholly without a remedy, Funny Guy got a writ. Today, the justices divide sharply; a thin majority rules that the trial court correctly applied res judicata to bar the second suit. Justice Kelsey takes us on a luxurious stroll through the development of RJ jurisprudence over the years, culminating in the promulgation of Rule 1:6 a decade ago. The rule is important enough to set out here, in pertinent part:
A party whose claim for relief arising from identified conduct, a transaction, or an occurrence, is decided on the merits by a final judgment, shall be forever barred from prosecuting any second or subsequent civil action against the same opposing party or parties on any claim or cause of action that arises from that same conduct, transaction or occurrence, whether or not the legal theory or rights asserted in the second or subsequent action were raised in the prior lawsuit, and regardless of the legal elements or the evidence upon which any claims in the prior proceeding depended, or the particular remedies sought.
The majority concludes that the object of both suits was the same: Funny Guy wanted to get paid for its work. The fact that the company found three separate theories of recovery meant that all three had to be asserted in one action; a plaintiff isn’t entitled to split his claim or engage in serial litigation over the same “identified conduct, a transaction, or an occurrence.”
Justice Mims dissents, and he’s joined by Justices Goodwyn and McCullough. He observes that these were actually two different transactions. The claim asserted in the original suit even had a different accrual date (it arose when Lecego refused to pay the 97 cents). Only when the first suit ended with a ruling that there was no settlement, could Funny Guy know that it had to sue on the original cause of action.
There’s some first-rate legal thrust-and-parry here, and it would take me too much space here to recount it all. The upshot of this decision is that a plaintiff needs to be as inclusive as possible when crafting a pleading. You’re allowed to plead in the alternative, so the proper thing to do in a situation like this is to assert three counts, assuming that somehow your defendant is going to wiggle out of the settlement.
And yet, I acknowledge that there are practical difficulties. Let’s craft a hypothetical situation — which I promise to confine to the realm of plausibility — and see how those difficulties arise.
Consider a landowner whose property is adversely affected by a neighbor’s improvements — something like what happened in the Forest Lakes case immediately above this one. The injured party approaches the alleged trespasser/tortfeasor and negotiates a deal. The would-be plaintiff is motivated to do that because he recognizes that pressing a claim like this would be disproportionately expensive — he’d have to spend more on engineering expenses, attorney’s fees, and other litigation costs to try the case than he could recover in damages.
Happily, the other party — let’s assume it’s an LLC, as we had here — is willing to reach an agreement. The parties sign a deal by which the plaintiff releases the LLC, in exchange for a promissory note payable in one year for pretty much the full amount of damages. Note cases are child’s play to litigate compared with the engineering-intensive suit the plaintiff would have to press otherwise; you simply present the note to the judge, aver that it’s unpaid, and rest.
Except when the year expires, the obligor refuses to pay the note. The noteholder will naturally assume that his remedy is to sue on the piece of paper he’s holding. One of the reasons he agreed to it is to save all those huge litigation costs.
Today’s ruling means that that plaintiff needs to cover his bases, sue for both the note and the trespass, and go ahead and incur the expenses. If he sues only on the note and for some reason loses — there’s a typo that renders the note either void or worthless — he cannot now go back and try the long, slow, hard route.