ANALYSIS OF FEBRUARY 27, 2014 SUPREME COURT OPINIONS
[Posted February 27, 2014] The Supreme Court hands down ten published opinions today, along with four published orders. Before I get into today’s analysis, it’s appropriate to acknowledge something new for today, and to recognize the progress that’s been made in a short time in the category of judicial openness.
Today the court will begin posting online its unpublished orders. Unpubs from the CAV have been online for years now, but until now, if you wanted to see one from the SCV, you had to ask. This is a terrific step forward. But it isn’t alone. As I’ve noted here in the past few months, the court has made major strides toward openness and modernization. In September, it began to allow lawyers to use electronic devices (specifically, laptops and tablet computers) to deliver oral arguments. More recently, it has joined the many appellate courts across the nation that post audio recordings of oral arguments online.
It’s amazing to me to consider that these tremendous steps have occurred in the space of about five months. Past generations of Supreme Court justices would never have agreed to do these things; these changes are a testament to the current justices, who have resolved at each step to do the right thing. Bravi, your honors.
Preservation of issues
Today is something of a red-letter day in the field of preservation of issues for appeal. The court hands down two decisions that address, as a matter of first impression, the portion of Code §8.01-384 providing relief for an appellant who had no opportunity to make a contemporaneous objection at trial. Since preservation is primarily a trial skill, not an appellate skill, trial practitioners need to pay careful attention to these rulings.
Both of today’s decisions arrive via the Court of Appeals, as they involve criminal proceedings. Commonwealth v. Amos involves an appeal of a finding of contempt of court. The appellant was a complaining witness in a show-cause proceeding against her husband, against whom she had obtained a no-contact order. At the conclusion of the hearing, the trial judge felt that the complaining witness had lied under oath (the husband’s apparently surreptitious tape recording of the encounter evidently didn’t help her plight). As soon as he dismissed the show-cause, the judge directed the witness to the lectern, summarily found her in contempt, and had her immediately led away to jail.
Now, remember, at this hearing, the witness was just that – a witness, not a party – and she had no lawyer to speak up for her. She simply walked with the nice deputy into lockup. Two weeks later, she filed a pro se motion seeking to vacate the finding of contempt, but the court never ruled on that. (As we learned from Brandon v. Cox, if the trial court doesn’t rule on a motion, there’s nothing to appeal.)
The witness simultaneously appealed to the CAV, which reversed the conviction in an en banc ruling. The vote in that one was tight – 6-5 – but the appellate court ruled that the trial judge had deprived the witness of an opportunity to object at the time, and the failure of the court to rule on the post-conviction motion was irrelevant, given this language in the statute:
if a party has no opportunity to object to a ruling or order at the time it is made, the absence of an objection shall not thereafter prejudice him on motion for a new trial or on appeal.
Now it’s the Commonwealth’s turn to appeal. Importantly, the Commonwealth didn’t assign error to the CAV’s finding that the trial court had denied the witness an opportunity to object. In my view, that omission may have been case-dispositive on appeal.
The Supreme Court today affirms the Court of Appeals’ ruling. It points to the portion if the statute that I quote above, and notes that it doesn’t contain a requirement that the appellant must file and obtain a ruling on a post-conviction motion, or some similar request for relief. The statute triggers relief from the contemporaneous-objection rule automatically when the appellant has no opportunity to object.
Justice McClanahan dissents; she would find that even where there’s no immediate opportunity to object, an appellant has a duty to bring the issue to the trial court’s attention while it still has control over the case (here, within 21 days after sentencing). She would hold the issue barred by the witness’s failure to get a ruling on the post-conviction motion.
The second preservation opinion today involves two consolidated appeals, decided under the caption Maxwell v. Commonwealth.
In the first case (Maxwell), a case was tried to a jury. When the jury retired to deliberate, the lawyers and the defendant left the courtroom (with the trial court’s blessing); the defense lawyer indicated that she hadn’t had anything to eat, but her office was just ten minutes away. When the jury returned after deliberating, it found the defendant guilty.
If that were all, we wouldn’t have much of a story on appeal. But unknown to the defense, the jury had submitted a couple of questions to the court while the lawyers and the defendant were away. The trial judge looked at the questions and decided that the answer was simple. The jury was summoned into the courtroom, told to go back and reread the instructions, and sent back into the jury room.
Memo to trial judges: In case you didn’t know, you can’t do this. State law and arguably the Sixth Amendment require that the defendant (and his lawyer) must be present whenever the judge interacts with the jury.
When the defense lawyer found out about this, the jury had already been discharged. She eventually filed a motion to set aside the conviction because of the judge’s ex parte communication with the jury. The court denied the motion.
On appeal, a CAV panel ruled that the ex-parte issue was waived because there was no contemporaneous objection, so it declined to consider the merits of the argument. The justices today reverse that decision and send the case back to the CAV to consider those merits. A majority of the court finds that in this instance, the defendant plainly had no opportunity to object because he wasn’t even there, and didn’t know that the ex parte conduct was going on.
There’s an important distinction to be made here. The majority decides that it isn’t the content of the judge’s comments to the jurors that matters; it’s the fact that he spoke to them at all. In that sense, it doesn’t matter what he said. Justice McClanahan dissents on this point, believing that if the judge answered the question correctly, then it’s at most harmless error. She notes that during oral argument in the Supreme Court, the appellant’s lawyer was unable to express how the judge should have answered the question differently.
Beyond question, even constitutional rights can be waived if they’re not timely asserted, a point that Justice McClanahan drives home forcefully in her dissent. For example, if a trial court allows testimony in a criminal trial that violates the Confrontation Clause, but the defense doesn’t object at the time, that objection is waived. The same thing goes for voluntary statements to police in a custodial interrogation; criminal suspects, in the wise words of humorist Bill Engvall, have the right to remain silent, but all too often, they don’t have the ability. When they blab after being Mirandized, it doesn’t matter what the Fifth Amendment says.
In this case, I sense that the difference is that a judge’s ex parte communication with a jury constitutes structural error, to which harmless-error analysis doesn’t apply. Today’s opinion doesn’t use that phrase, but I sense that it’s the subtext of the majority’s holding. Having a trial judge talk to a jury, in flagrant disregard of a clear statutory mandate, might have helped this conclusion along.
In the other case decided here (Rowe), a prosecutor made a statement at the very end of his closing argument that engendered the appeal. The prosecutor commented on the defense’s failure to produce evidence, and suggested that the jury could view that as a negative inference against the defendant.
Uh, no dice. That’s clearly inappropriate argument, and would likely produce a mistrial, since you can’t un-say it, and a judge’s cautionary instructions would only serve to emphasize the defendant’s decision not to testify.
The inappropriate comment came just two sentences before the prosecutor sat down. The judge called on the defense for a closing argument. Here’s what happened next:
“Actually, before I make my argument, there is a motion I would like to make outside the presence of the jury.” The circuit court responded, “We’ll deal with it when the jury goes out to retire,” and Rowe replied, “Very well.”
If you’re a criminal-law practitioner, that instruction from the judge set off the fire alarm. Objections to counsel’s argument to the jury must be raised before the jury retires to deliberate. If you wait until the jury starts deliberating, it’s too late for the judge to do something about it. Even so, the defense lawyer went on to make a closing argument, and as directed by the court, later moved for a mistrial, which the court denied.
The Court of Appeals ruled that the mistrial motion came too late, so it refused to reach the merits of that. The justices affirm that ruling today, finding that the facts in Rowe were dispositively different from those in Maxwell. The court rules that Rowe’s lawyer did have an opportunity to object. The trial judge directed the lawyer to wait until a time that was too late to raise it, and instead of objecting to that ruling, the lawyer accepted it.
That acceptance is Rowe’s undoing today, as the justices rule by a 5-2 vote that the language in 8.01-384 doesn’t protect the appellant. In Amos’s and Maxwell’s appeals, the defendant had no meaningful opportunity to do anything. Here, the lawyer had that opportunity, but when a judge (wrongly) denied it, the lawyer didn’t object to that denial. In my opinion, if the appellant had spoken up promptly, and had added an assignment of error to the court’s refusal to allow a timely motion, this outcome would have been different.
Justice Lemons and Mims dissent. They begin with the premise that anyone who’s ever tried a case knows precisely what went on here, and knew exactly what motion the defense wanted to make in the wake of this inappropriate argument. This thing happens from time to time, and the response from the defense is speedy and consistent: We want a new trial because the prosecutor just crossed a line. Indeed, that’s the very motion that the defense ultimately made.
The dissent notes that the defense was in a terrible position here – it was about to argue the case to a jury, and it didn’t want to risk an open dispute with the trial judge. Note that the lawyer asked for time to make the motion out of the jury’s presence; that recognizes the effect that such an argument in the jury’s presence would have had.
In finding that the defense should be entitled to the benefit of the statutory exception, the dissent turns to an issue that’s near and dear to my heart: civility. Behold:
By acknowledging the trial court’s authority to hear the motion at a later time, counsel should not have to risk waiving his client’s fundamental right to an appeal. Civility and decorum on the part of defense counsel should not be equated to a waiver of the defendant’s fundamental right to appeal.
So what should a lawyer do in order to remain civil, stand up to an adverse ruling by a judge, and still protect his client’s rights? There’s no foolproof way to do all of these things with no consequences at all. In light of today’s ruling, though, I’ll make a suggestion.
Here’s the oath that all attorneys take upon being admitted to practice in the courts of this commonwealth:
Do you solemnly swear or affirm that you will support the Constitution of the United States and the Constitution of the Commonwealth of Virginia, and that you will faithfully, honestly, professionally, and courteously demean yourself in the practice of law and execute your office of attorney at law to the best of your ability, so help you God?
You’ll note the words “professionally, and courteously” in that oath, so lawyers have made a promise to act that way. But among this list of adverbs, you will not find the word timidly. If you’re going to handle trial work, you must be willing to stand up to judges, even those who make mistakes, and particularly those who seek to insulate those mistakes from appellate review. That’s your obligation to your client and to the profession.
There is a way to address this situation, in case you’re ever unlucky enough to find yourself in it. In retrospect, what the defense lawyer could have done here was respond to the judge’s direction to wait: “Your honor, I understand your desire to move things along. But under Virginia law, I can’t wait until the jury begins to deliberate, or else this motion will be untimely. May we please take it up now?” If you say that in a respectful tone, you’re likely to get your wish. If the judge proves obstinate, the response is simple: “Very well, your honor. I object to your refusal to allow me to make a timely motion.” You then turn to the jury and begin your argument.
I recognize that doing this might take guts. But as a very wise man has observed to a crop of lawyers, “If you’re afraid of trial judges, perhaps you should consider a career as a transactional lawyer.”
The court takes up the issue of charitable immunity in The Byrd Theatre Foundation v. Barnett. The Byrd Theatre in Richmond is a national landmark that began operation in 1928; it includes as original equipment a 1928 pipe organ. The Foundation, a 501(c)(3) entity, now owns the theatre, and has the task of maintaining an antique musical instrument.
Barnett is a pipe-organ aficionado (although interestingly, he doesn’t play the organ) who has been a member of the foundation’s organ-restoration subcommittee. When the organ needed work, but the foundation was still looking for a contractor to maintain it, Barnett volunteered to repair it. He seemed amply qualified to do so, as he had bought a different one, renovated it, and assembled it inside his home. (Now, that’s dedication to a cause.) During the work, a plank collapsed, causing Barnett to fall four feet. He sustained injuries and sued the foundation.
The foundation filed a plea of charitable immunity. It contended that Barnett derived a benefit by pursuing his passion of working on pipe organs, and he got the very rare opportunity to work on an original-installation unit here. The trial court denied that plea, finding that although the foundation was indeed a charity, Barnett wasn’t a beneficiary of its mission at the time he was injured. A jury returned a verdict in favor of the injured worker and against the foundation.
The justices today unanimously affirm that finding. Here’s the key portion of today’s holding, a remarkably lucid passage that’s self-explanatory:
Based on the Foundation’s articles of incorporation and amended bylaws, its charitable aim was to cultivate an appreciation for the performing arts through restoration and preservation of the Byrd Theatre and the organ. The Foundation was neither organized nor operated for the purpose of providing theater organ enthusiasts an opportunity to repair or restore the Byrd Theatre organ. At the time of Barnett’s accident, the Foundation was not undertaking to provide Barnett with the benefit of an opportunity to repair its organ. In short, the Foundation’s mission was to restore and preserve the theater, including its organ; not to provide a venue for individuals, such as Barnett, to practice their hobby of restoring organs.
The court turns to the question of remittitur of punitive damages in Coalson v. Canchola. Coalson was one of two occupants of a car who were injured when Canchola turned in front of them while making a turn into a parking lot. Canchola was talking on a cell phone at the time. He was also quite snockered (I’m inferring that his BAC was about .15%). Worse, he had frequent-flyer miles in traffic court; he had seven prior DUI convictions plus one for driving on a suspended license.
Coalson and her fellow injur-ee each filed suit seeking compensatory and punitive damages; the cases were tried together. Coalson got a verdict of $5,600 in compensatories and $100K in punitives; the other plaintiff got $14,000 and $100K, respectively.
Canchola asked the judge, among other things, to remit Coalson’s punitives award. The trial court pondered that motion and then granted it, remitting the punitive damages in her case alone (the court didn’t touch the other plaintiff’s award) to $50K. Coalson got a writ to review the remittitur.
On appeal, the justices reverse and reinstate the verdict. The court analyzes the factors that are required in evaluating a remittitur motion, and emphasizes the first one, which is egregiousness of the defendant’s conduct. The trial court found Canchola’s conduct to be egregious, and the justices agree. (So do I.) From there, the court rules that it’s legally improper to compare punitive-damage verdicts in evaluating whether one is excessive. That’s been the rule with compensatory damages for some time, but in this case the court employs that reasoning to punitive awards.
Once the court finds that the trial court improperly remitted the award, the court’s attention shifts to an evaluation of the reasonableness of the original award. It’s here that future litigants will find plenty of fuel for argument, as the court takes up the Big Supremes’ 2003 State Farm decision, in which the Nine Robes held that an award of punitives that’s more than ten time that of compensatories is probably excessive under due-process analysis. Today, the Virginia justices offer a hat-tip in that direction – it stops just short of affirming that that’s the rule in Virginia state-law jurisprudence – but it notes that this is one of those hyper-egregious cases that would justify deviating from the 10x rule in any event.
Justice McClanahan rebels at this finding. She begins by noting that the Supreme Court is, per its precedent, supposed to afford substantial deference to the trial court’s decision. According to her, the majority cites this rule and then flings it into the sea before engaging in what is effectively de novo analysis. The dissent focuses on proportionality (the 10x rule) and would hold that a reduction here is perfectly reasonable, not to mention consistent with SCV precedent. She thinks that when one plaintiff gets $14K plus $100K in punitives, and the other plaintiff in the same collision gets less than half the compensatories and the same punitives, that indicates arbitrariness, partiality toward the plaintiff, or prejudice against the defendant.
Her honor can’t resist returning to last year’s Allied Concrete decision, in which she forecast in dissent that remittitur is now dead for compensatory damages; she feels that today, the justices have effectively killed it for punitives, too.
In Dunlap v. Cottman Transmission Systems, the justices address the contours of a conspiracy claim founded upon tortious interference with contract or with business expectancy. This one comes on certified questions from the Fourth Circuit.
Dunlap operated two AAMCO transmission/repair facilities as a franchisee for 30 years. Cottman was a competing company that also operated such facilities. The parent company of Cottman bought a controlling interest in AAMCO, and started converting Cottman storefronts to the AAMCO name (which presumably was better-known). In doing so, this caused a fair amount of overlap and the concomitant closing of some existing AAMCO stations – including those operated by Dunlap.
Dunlap sued for tortious interference with contract, tortious interference with business expectancy, and statutory business conspiracy. After removal of the claim to federal court, the district court dismissed the case. On appeal, the Fourth asked the Supreme Court of Virginia to resolve two questions that would resolve the appeal:
1. May a plaintiff use tortious interference with contract or tortious interference with business expectancy as the predicate unlawful act for a claim under the Virginia business conspiracy statute, Va. Code §§ 18.2-499, 18.2-500?
2. Does a [I] two-year or [II] five-year statute of limitations apply to claims of tortious interference with contract and tortious interference with business expectancy under Va. Code § 8.01-243?
The justices took all of three weeks (trust me, that’s fast action) to decide that these issues were indeed worthy of resolution, so they took the case.
Today’s opinion, authored by the chief justice, is expansive in its body of citations, but it really comes down to two primary rulings. First, tortious interference claims can indeed serve as the underlying basis for a conspiracy claim. While they depend upon the existence of a contract, the nature of the wrong is one addressed by tort law.
Under familiar principles, in order to determine which side of the tort/contract boundary a claim falls on, you look to the source of the duty. If a duty is imposed only by contract, then the law of contracts furnishes the sole basis for addressing the wrong. If the duty arises from operation of law (often statute, but quite frequently common law), then it’s a tort.
Tortious interference, as the name implies, sounds in tort. Even though it depends on a contract, the gravamen of the claim is that the defendant violated a common-law duty to refrain from impairing someone else’s contract rights. Since that’s a wrongful act (as opposed to a mere breach of contract), it can support a statutory conspiracy claim.
Second, the court finds that the five-year statute of limitation applies. That because the nature of the damage is to property – specifically someone’s property right “to performance of a contract and the right to reap the profits therefrom,” in the words of an earlier case. It clearly isn’t a bodily injury, and today the Supreme Court clarifies that the nature of the claim is for damage to property. That means that the five-year statute applies.
For those of you who handle D-I-V-O-R-C-E cases, David v. David is essential reading. Thou shalt. No excuses. The case is that important, because it wipes away a generation of Court of Appeals jurisprudence.
Got your attention? Okay, here’s the deal: This appeal involves the 1991 amendment to the equitable-distribution statute. As domestic-relations practitioners know well, in distributing property, courts must classify assets as either separate, marital, or “part separate and part marital.” (The domestic-relations bar refers to the last category as “hybrid.”) If property is separate, then it usually stays separate through the course of the marriage.
But what happens if separate property appreciates in value during the marriage? Should the increase in value be considered separate or marital? If the latter, then the non-owning spouse may be entitled to a slice of the augmented pie. That’s the subject of the 1991 amendment, and of the dispute in today’s decision.
In this appeal, our Happy Couple remained Happy for less than eight years before Husband filed for divorce. When they married, he already owned an investment account that was worth almost a quarter-million dollars. By the time they separated, it had appreciated by over $300K. Without dispute, the asset was separate. But Husband was a financial advisor at a securities company. Wife asserted that the increase in value should be marital and subject to distribution.
Here’s the text of the relevant portion of the statute; this is after the 1991 amendment:
In the case of the increase in value of separate property during the marriage, such increase in value shall be marital property only to the extent that marital property or the personal efforts of either party have contributed to such increases, provided that any such personal efforts must be significant and result in substantial appreciation of the separate property.
For purposes of this subdivision, the nonowning spouse shall bear the burden of proving that (i) contributions of marital property or personal effort were made and (ii) the separate property increased in value. Once this burden of proof is met, the owning spouse shall bear the burden of proving that the increase in value or some portion thereof was not caused by contributions of marital property or personal effort.
That seems to create a burden-shifting arrangement. The non-owning spouse (here, Wife) has to show that “personal effort [was] made,” and that the property appreciated. Once that happens, the burden shifts to the owning spouse to show that the appreciation was not due to the personal effort. If he succeeds in doing that, then the burden presumably shifts back to the non-owning spouse to rebut that showing.
It all seems so tidy; and yet, that’s not how the Court of Appeals has interpreted this provision ever since it was enacted. That court has added a third item to the list of the non-owning spouse’s initial burden, to prove that the personal efforts proximately caused the increase.
That’s not what the statute says, the justices rule today in unanimously reversing the decision of the Court of Appeals. Courts aren’t free to rearrange burdens that have been allocated by the legislature, and in this instance, the General Assembly gave the non-owning spouse two relatively simple tasks. It left to the owning spouse the tougher burden to prove causation (or more precisely, a lack thereof). That makes sense in light of the fact that the owning spouse is far more likely to possess information and evidence about causation.
I don’t swim in domestic-relations waters very often, but my sense is that this decision will work a huge change in the way trial courts equitably distribute property. Of course, any time a burden of proof gets wholly reversed, a sea change like that is bound to occur.
Over the 9+ years that I’ve been covering Supreme Court opinion days, I’ve seen a significant number of appeals involving relatively small tracts in Alexandria, especially in Old Town. This proves to me that folks up there pay extremely close attention to every square foot of their property, in a way that doesn’t seem to occur in other places – such as down here, in Tidewater. Beach v. Turim involves the question whether one property owner has a right to use a 4’ walkway that’s apparently on the interior of a block – that is, it isn’t a means of ingress or egress. But it’s still important enough to generate what was presumably very expensive litigation.
From my reading of today’s opinion, I note that a city block was subdivided in 1960 into 11 lots; they’re numbered 1 through 6 and 507 through 511. The deed of subdivision expressly describes “private walk easements” along the rear of all of the lots. A plat accompanying the deed notes that the easements are on nine of the lots; this list includes Lot 509 (owned by Beach) but not 510 (owned by Turim).
Beach lived in her home since 1987; Turim moved in 15 years later. In 2011, Beach walled off Turim’s access to the easement. That brought a nuisance lawsuit, in which Turim argued that Lot 510 was the dominant tenement in an express easement over Lot 509, so the wall was wrongly placed there. Turim disavowed any intention to claim a prescriptive easement, perhaps because of an inability to prove what had happened over the course of the previous 20 years.
The trial court agreed with Turim and ordered Beach to take down the wall. Beach instead went to Richmond for succor, and today, she gets it. The justices rule that the language used in the deed and on the plat was insufficient to create an express easement. Such an easement has to describe the property with particularity, and more important, it has to identify the grantees. This deed didn’t do that, so it fails as an express easement.
Today’s opinion is careful to point out that the only issue that’s being adjudicated is that of an express easement, not one by prescription. If Turim had been able to show continuous use for two decades, this result might have been different.
A couple of criminal-law appellants try their hand at appellate relief today, but neither gets the result he was hoping for. There; I’ve spoiled the surprise.
Woodard v. Commonwealth is a novel situation where a defendant was convicted in a bench trial of possession of meth with intent to distribute, sale of meth, and felony murder (after the vendee ingested the substance and died). The trial court was asked to look at the sentencing guidelines in two ways – the defendant proposed using the sale as the primary offense, since the murder charge was derived from that sale; the Commonwealth urged using the murder as the primary offense. Unsurprisingly, the latter approach produced a stiffer set of guidelines.
The judge played Solomon and departed form both sets of guidelines. It sentenced the defendant to terms of incarceration (a separate sentence for each conviction) that were higher than what the defendant’s guideline approach would have called for, and lower than the Commonwealth’s.
On appeal to the CAV, where the single assignment of error related to the sufficiency of the evidence on the murder charge, an interesting thing happened – the court threw out the murder conviction. The defendant had asked the court to remand for resentencing under lower guidelines, but the court declined to do that.
The justices approve that ruling today in a unanimous decision. The court reasons that guidelines are non-binding recommendations anyway, and since the trial court issued sentences within the statutorily prescribed range – and explained its reasoning – there was no cause for remand. Presumably the defendant figured he could get a lighter prison term on his two unchallenged convictions without being saddled with the murder charge; but that’s not in the cards.
D’Amico v. Commonwealth isn’t technically a criminal appeal, but I’ll place it here anyway, for reasons that you’ll understand. D’Amico was arrested for DUI. The arresting deputy sheriff read him the implied-consent statute, then whisked him away to the local magistrate’s office. There, he turned D’Amico over to a police officer to administer the breath test.
Except there would be no breath test. D’Amico insisted upon speaking with a lawyer first, saying that only if the lawyer approved would he take the test. That’s not a good enough reason (there is indeed caselaw holding just that), so after the officer tried unsuccessfully three times to persuade D’Amico, the deputy took the arrestee over to the magistrate’s desk and got a warrant for refusal.
During the trial, the deputy couldn’t recall whether he had read the refusal form to D’Amico, although he had earlier signed the form to indicate that he had done so. But the police officer testified that he read the statute to the defendant. D’Amico contended that the refusal statute didn’t allow the test operator to certify a refusal. The trial judge first took that motion under advisement, and then denied it, convicting the defendant of refusal.
On appeal, the Supreme Court agrees with the trial judge. The court declines to read into the substantive portion of the statute the procedural requirements found in other subsections. The substantive violation is simple: it requires a showing that the defendant be arrested for DUI and then unreasonably refuse to take a test. Those facts were undisputed, so this conviction stands; the admission of the form is harmless error at most.
I’ll warn you that we’re about to go into an area that’s usually a legal and factual morass, as we take up Rodriguez v. Leesburg Business Park LLC. This appeal turns on a trial court’s determination that a property owner was a statutory employer of a construction worker who was killed during the construction of some warehouses on the owner’s property.
The LLC was formed by a single manager/member in order to develop a piece of raw land into (no surprise here) a business park. The owner wished to build warehouses and then sell or lease them to buyers and tenants. The LLC had no employees; it contracted out literally all of the work. Here’s how its operating agreement describes its business purpose: “acquiring, holding, improving, managing, leasing and selling real property in Virginia and elsewhere, and engaging in any other business agreed to by the members of the LLC and permitted under the laws of the Commonwealth of Virginia.”
Once upon a time, back in the Dark Ages when I formed corporate entities for clients, I remember using broad language like this, because it would enable the new business to carry on any sort of work it chose, even if its business model evolved over time. As it relates to Comp-bar cases such as this one, sometimes that broad language can have unintended consequences. But I digress.
The decedent was an employee of a subcontractor; he was electrocuted when an employee of a different sub made contact with a power line while operating a piece of equipment. His widow collected Comp benefits from the decedent’s employer, and then sued the owner of the property to recover tort damages for the death. The trial court sustained the owner’s plea in bar, finding that the owner was the statutory employer of the decedent, so it was immune from tort liability.
Today, the Supreme Court reverses that ruling and sends the case back for a trial on the merits. It finds that the owner didn’t meet its burden to prove that the decedent’s construction work was “part of [the owner’s] trade, business, or occupation.” In reaching this conclusion, it notes that while it’s necessary to build a warehouse before you can sell or lease it, that doesn’t make construction a normal part of the owner’s business. In short, the owner failed to show that the decedent’s work was part of its trade.
Justice McClanahan won’t bite for this reasoning or this conclusion. She points out that the LLC’s operating agreement specifically describes “improving . . . real property” as part of its business purpose, and of course this building was being constructed in order to facilitate the eventual sale or lease of these very warehouses, for the LLC’s profit. The decedent was literally engaged in work that was the improvement of real property, so its hard to see why that isn’t a normal part of the owner’s trade or occupation.
The court’s body of statutory-employer caselaw indicates repeatedly that these determinations are fact-specific, so it’s difficult to find many bright lines here. My personal view is that this area of the law is so obscure, you’d need a GPS unit, a topo map, and the assistance of Henry Morton Stanley to guide you through it. But today’s opinion gives the current court’s view of just when a statutory-employment situation will arise, and that’s perhaps a bit narrower today than it was before opinion day.