ANALYSIS OF OCTOBER 4, 2018 SUPREME COURT OPINIONS

(Posted October 4, 2018) It’s opinion day here in the Commonwealth, and today brings two new additions to Virginia jurisprudence.

Torts

The setting for Haynes-Garrett v. Dunn is right here in beautiful Virginia Beach. The dispositive issue is what duty arises when the owner of a beach house rents it out by the week.

The Dunns own the house in the Sandbridge area of our fair city. They bought it as a beach escape, as a means of some rental income, and as an eventual retirement home. For the second purpose, they engaged the services of a local realty company to manage the rentals. The owners instructed the company not to rent it to college-age partiers; only to families.

Haynes-Garrett and her extended family decided to rent the cottage for a week in the summer of 2014. When she arrived at the property, she tripped and fell, badly injuring her elbow. She sued the owners and the realty company, claiming that her fall stemmed from a dangerous condition on the floor.

The case went all the way to trial. When the plaintiff rested, the defendants moved to strike. The owners asserted that they owed only the duty that the law imposes on a landlord toward a tenant. That is, since the tenant is in control of the property during the lease period, the tenant takes the property as-is (assuming the landlord hasn’t done something foolish, like leaving booby traps). The realty company argued that it owed no duty at all.

The plaintiff responded that both defendants owed the duty of an innkeeper toward a guest. In that scenario, the defendant owes an elevated duty to ensure that the premises are safe. Specifically, it’s a duty “to take every reasonable precaution to protect the person and property of their guests and boarders.”

The trial court ruled in favor of the defendants and struck the plaintiff’s evidence. On appeal, the plaintiff’s assignment of error contended that the trial court “erred in granting the defendants’ motion to strike at the end of Mrs. Haynes-Garrett’s evidence on the grounds the defendants only owed Mrs. Haynes-Garrett a duty of care commensurate with that of landlord and tenant.”

Today, the justices unanimously affirm the dismissal. The path to affirmance is painfully short for the plaintiff’s appeal against the realty company. In an all-too-familiar pattern, the plaintiff assigned error to a ruling that the trial court didn’t make. Remember, the company had moved to strike by asserting that it owed no duty at all to the renting family. The trial court granted that motion. Thus, the court never ruled that the company owed a duty based on landlord/tenant law. Since you must appeal the ruling that the trial court actually made, the justices quickly affirm the dismissal of the company.

For the owners, the justices examine the facts of the rental and conclude that this is much more like a landlord/tenant lease than a drop-in visit to an innkeeper. There are a few key differences, but in reading Justice McClanahan’s opinion for the court, the most important ones seem to be the facts that the owners of the cottage weren’t onsite, didn’t actively control the property during the week, and provided no daily housekeeping or security services – things that an innkeeper typically does.

Since the plaintiff only appealed the duty-of-care issue, not the finding that the owners didn’t breach that duty, this ends the appeal. It may not end the question, however, in other related contexts. For example, while this rental looked like a middle ground between a long-term lease from a landlord and a nightly rental from an innkeeper, there remain gradations between this weekly rental and your typical overnight stay at the Hilton. Airbnb, anyone? Does a homeowner who rents out his home to someone in that context owe a heightened duty or the one the justices settle on today? That question will await another appeal.

Today’s ruling continues an enduring losing streak for tort plaintiffs in the Supreme Court. For the year, those plaintiffs (including quasi-tort claims, such as for disability benefits) have won twice and lost seven times in the court’s published opinions. Going back to the beginning of 2016, plaintiffs have won just six times and have lost 23, a clear signal of the court’s unmistakable rightward drift. These are difficult days to be a tort plaintiff in Virginia. (In contrast, the defense bar is smiling quietly.)

Arbitration

Today’s opinion in Meuse v. Henry is just over 25 pages, and fully half of it is a detailed recitation of facts and procedural posture. I could recount those in detail, but then you’d have an impossibly long essay. Because I value your time, I will instead say only that the appeal involves the arbitration of a dispute over commercial properties in Alexandria. This in turn implicates the creation of a trust to hold that property because of a bankruptcy filing, and subsequent litigation over the management of that trust.

Here are the key holdings in today’s opinion:

• A challenge to an award under Code §8.01-581.010(3), asserting that arbitrators exceeded their powers, cannot be used as a roundabout way of asserting that the award is legally incorrect.
• If an arbitration agreement is void, any party can challenge it before or after the arbitral award. If it’s merely voidable, that challenge has to precede the award, or it’s waived.
• A violation of public policy may make an agreement to arbitrate void.
• Where an arbitration agreement exists between a lawyer and his client, the agreement doesn’t automatically violate public policy merely because the lawyer failed to get his client’s consent in writing, as RPC 1.8(a)(3) requires. If the evidence shows, as here, that the client knowingly and intelligently consented orally, that’s sufficient.
• Arbitrators do not fail to conduct a hearing merely because they decline to subpoena documents that one party wants to use. This matters because Code §8.01-581.010(4) requires that there must be an arbitration hearing.
• A sanction award of over $900,000 (admit it – that got your attention) is proper under the Arbitration Act and Code §8.01-271.1, where the arbitrators found that the plaintiff filed unwarranted pleadings that were also for an improper purpose.

Because I’m always interested in the development of sanctions law, this last ruling caught my eye. The justices’ approval of the award under the general sanctions statute doesn’t even touch on one issue that I wondered about: Can an arbitrator award sanctions? The statute allows a court to do that, but doesn’t mention an arbitrator. This distinction may not have been presented in the briefs, so I won’t regard it as fully settled; but the implicit approval probably means that the answer is yes.

Second, whenever anyone gets hit with a ruinously large sanction award, I always wonder about a still-unaddressed issue in our jurisprudence: Must a court consider the “sanctionee’s” ability to pay, as it must with punitive-damage claims? It appears that the appellant didn’t raise this issue, so the justices don’t touch it, and it, too, will have to await another appeal and another day.