ANALYSIS OF SEPTEMBER 14, 2017 SUPREME COURT OPINIONS

(Posted September 14, 2017) The Supreme Court today decides three appeals by published opinion and one by published order. In doing so, it clears from its figurative desk the hoariest appeal on the docket. 

Easements

The three primary types of easement are express (usually set out in a deed or will), by prescription (think adverse possession), and by necessity. The third type is the backdrop for Palmer v. R. A. Yancey Lumber Corp., which comes to us from Albemarle County.

The two parcels at issue here came from a common grantor two centuries ago. When one Richard Richardson died in 1828, he left portions of a single tract to two heirs. The larger one, now over 300 acres, was landlocked by this separation, and under Virginia law, an easement automatically arose over the smaller parcel, now 44 acres, to a public road.

Isn’t that a taking, you might wonder? After all, the recipient of the smaller tract never agreed to allow its use by the owner of the larger one, and the late Mr. Richardson didn’t expressly create such an easement in his will.

The answer is that public policy frowns on landlocked parcels, because they thwart the development, use, and enjoyment of real property. The law accordingly creates an automatic easement by necessity, irrespective of the “subdivider’s” intention.

I suppose the owner of the large parcel could fly a helicopter in, but that isn’t realistic. It’s especially unrealistic when you consider the primary use of the large parcel: as a lumber “farm.” Its owner grew trees there and wanted to send equipment in to harvest the lumber, and semis in to haul the logs away. The owner of the smaller parcel didn’t mind the activity when it last occurred 30 years ago, using smaller hauling trucks; but now the lumber company wanted to widen and improve the access road to allow big trucks. Nowadays, the most efficient way to haul logs is by tractor-trailer, and the existing road wasn’t suitable for those vehicles.

The lumber company filed suit seeking a declaratory judgment that it had the right to widen and improve the road. Its owner and two experts testified about the current need to use semis and the inadequacy of the road for that purpose. The small-parcel landowner didn’t use experts; she simply said that she didn’t consent to a larger easement and nobody was paying her to take away her land. She argued that an easement, “once located cannot be widened.”

The trial court disagreed and allowed the lumber company to make certain improvements to accommodate the semi traffic. The company didn’t get all it had asked for, but it was enough of a victory to convince the defendant to appeal.

The justices affirm today. They observe that there’s no caselaw to support the defendant’s “once located” contention, noting that on brief, she called it “Palmer’s rule.” Actually, there’s plenty of precedent for judicial authority to modify the dimensions of easements, based on changing circumstances over the years. After all, the court notes, if an easement started out as a path for horses in, say, 1828, it would be largely useless in the 21st Century. That would defeat the public policy I described above.

Justice Mims offers an intriguing dissent. He’s okay with some of the majority’s holding, allowing a few minor modifications to the road, but he parts company with the rest of the court over the use of semis. he notes that the lumber company’s testimony only established that tractor-trailers are the most efficient way to remove the logs; not that they were the only possible way. The company could, for example, cut the logs shorter and continue to use the smaller trucks that it had used in the 1980s. That wouldn’t maximize its profit, but the easement-by-necessity doctrine doesn’t go that far. Justice Mims believes that in order to justify the relief granted by the trial court, the company would have to show that the smaller-log approach was economically unviable, not merely less profitable.

I referred above to “the hoariest appeal the docket,” and this is it. The parties argued this appeal on March 1, and have been sitting on their hands for over six months, waiting for a ruling. That makes this the longest period between argument and decision I can recall in my nearly 13 years of publishing this analysis; the previous record holder was Muhammad v. Commonwealth, the DC sniper appeal that produced 137 pages’ worth of opinion back in April 2005. The court took five months to decide that one.

Separation of powers

When I set out just now to specify the heading under which I’d analyze Old Dominion Committee for Fair Utility Rates v. SCC, I hesitated. It involves the power of the SCC to regulate utility rates, so I considered “Administrative law” and “Utilities” before discarding those as too general, given the issues in the appeal. I briefly considered “Constitutional law,” but that might lead you, my dear readers, astray. In the end, this case is about the ability of the General Assembly to restrict the Commission’s ability to use a power granted unto the SCC by the Constitution of Virginia.

The setup will be familiar to anyone who followed the 2015 session of the General Assembly. That year, the legislature agreed to suspend for 4-5 years the SCC’s usual biennial reviews of rates charged by Dominion Energy (I’m using its current name) and Appalachian Power Company. Over protests by the Attorney General and the SCC itself, the legislature agreed to do this in exchange for certain commitments by the utility companies.

Old Dominion Committee is “an association of large industrial customers of APCO.” It petitioned the SCC for a declaratory judgment that the statute suspending the reviews was unconstitutional, since it deprived the SCC of constitutionally conferred powers. Soon, an association of local governments joined, as did a private citizen. Each petitioner asserted that the constitution gave the SCC the power to regulate utility rates, and that the General Assembly could only specify the “criteria and requirements” for exercise of that regulatory power. The constitution never gave the legislature the right to prevent the SCC from regulating rates at all. According to the petitioners, the statute did just that: No regulation for the next four years (five, in the case of Dominion).

A divided SCC, acting in its judicial capacity, ruled that the statute was constitutional. It began with the strong presumption that any statute is constitutional, and held that the statute constituted nothing more than the “criteria and other requirements” that the legislature still controls. The commission rejected the contention that the SCC has “a plenary power to legislate [note: rate-setting is a legislative act] that is both exclusive of, and superior to, the General Assembly.”

The petitioners exercised their right to a rare appellate treat: an of-right appeal to the Supreme Court. There is no petition stage in appeals from SCC decisions; the justices must accept the case — assuming, of course, that there are no jurisdictional defects in the pleadings. Today, the Supreme Court rules 6-1 that the SCC majority got it right: The statute is constitutional.

Justice McClanahan writes for the majority. She starts with the language of the constitution that grants rate-setting authority to the SCC. Importantly, that section begins, “Subject to such criteria and other requirements as may be prescribed by law,” the commission has the power to set rates. While the SCC can set rates, it’s always subject to control by the General Assembly. As the court had held in a 1974 case involving VEPCO, the SCC’s powers are subordinate to those of the General Assembly.

It’s worthwhile to pause momentarily here for a minor digression, one that I’ve recognized for years, but that is spelled out well in the majority opinion. The Virginia legislature is unlike its federal cousin in that the federal Constitution enumerates Congress’s powers, while Virginia’s General Assembly has unlimited powers — except where the Constitution limits them. The implicit underpinning of this section of today’s opinion is the concept that the General Assembly can do whatever it wants, unless that’s something that the constitution clearly forbids. Close calls go to the legislature.

In that context, the majority today reaffirms that 1974 decision, holding that the General Assembly had enough power over the functioning of the SCC that it could do what it did in 2015.

Justice Mims again dissents, in one of the most fascinating pieces of judicial writing I’ve seen in quite a while. (Justice McCullough’s recent discussion of substantive due process also gets a nod in this category, as do several of Justice Kelsey’s forays into the arcana of legal history.) His thesis is that the 1974 VEPCO case was wrongly decided. While he respects stare decisis as well as the next Robe, he notes that that doctrine has to yield when it runs up against the constitution.

I’ll allow you to read the dissent to get Justice Mims’s sense of why the 1974 decision was wrong — it has to do with an interpretation that either would or would not lead to a redundancy — and skip right to the fire-and-brimstone part. Here is the heading to part C of his dissent. He wrote it in all caps, and I won’t change that.

Well, now. That, my brethren and sistren, is how you make a point forcefully.

The dissent points out that the people of Virginia, not the General Assembly, created the Commission and the people, not the General Assembly, gave the commission the power to regulate rates. Once upon a time, before the 1902 Constitution of Virginia, the legislature did have this power, but that constitution took that power away and gave it to the SCC. The 1971 constitution repeated that distribution. Justice Mims regards the majority’s opinion as essentially rescinding the people’s allocation of governmental power between the legislature and the commission. And that makes this a case about separation of powers.

I haven’t listened to the audio recording of the oral argument of this appeal, but I infer that Justice Mims put this very conundrum to the Commonwealth’s lawyer: “Can the General Assembly suspend the SCCs rate-making powers forever?” That lawyer replied that if the legislature did that, the people would react by exercising what I’ll call the democratic veto, also known as “throw the bums out” on election day. Justice Mims, the only member of the court who’s a former legislator, has a skeptical reply. He notes that the Commonwealth and today’s majority

He’s right about this last point, of course; probably 90%+ of Virginia voters have never heard of the State Corporation Commission, have no idea what its function is, and won’t get worked up over a perceived power grab by the legislature in a matter like this.

In reality, the only body that provides a meaningful check on legislative power — the only body that can really halt a governmental power grab — is the Supreme Court. Today, the court declines to do so. Perhaps this ruling will inspire the villagers to gather with pitchforks and torches (if only metaphorically, on election day), but I doubt it. Pocketbook issues and disputes that fit into a 30-second commercial will drown this issue out when voters go to the polls.

Insurance

The court decides one appeal by published order today: Erie Ins. Co. v. McKinley Chiropractic Center, PC. It’s a suit by some doctors who treated a patient after an auto collision. The doctors got the patient to sign an agreement assigning to the doctors “all insurance and/or litigation proceeds to which Patient is now or may hereafter become entitled” as a result of her bodily injury claim. The doctors faxed a copy of the assignment to Erie, which insured the driver of the car that hit the patient, and then proceeded to treat the patient.

A funny thing happened at some point thereafter: The patient settled with Erie, the insurer sent her a check for the full amount of the settlement — essentially ignoring the assignment — and the patient signed a full release of all claims. When the doctors found out about that, they sued Erie for the amount of its unpaid bill. The doctors won in GDC and in circuit, but today the justices reverse and enter final judgment for the insurer.

One of the fundamentals of insurance law is that an insurer has no duty to pay a claim until it’s reduced to judgment. That never happened here; the patient settled without getting a judgment, and maybe even without filing suit. By statute, an injured party can’t sue the tortfeasor’s insurance company. That means that the doctors don’t have a right to sue as an assignee.

My sense is that this ruling is going to generate substantial wailing and gnashing of teeth among the healthcare industry. How do healthcare providers enforce these assignments? They obviously have a right to sue their patient, but the point of the assignment was to ensure a liquid, no-fuss source of payment. (One never knows what the patient has done with the money in the intervening years.) I suppose that providers could ask insurers for a contractual commitment to honor their patients’ assignments, but I doubt any such commitment will be forthcoming.