LATE DECEMBER RULINGS FROM FOURTH, CAV

While you (and I) were enjoying a relatively relaxed pace between the holidays, two appellate courts were busy cranking out opinions. Here is a quick summary of those, to keep you up to date:

Fourth Circuit

(Criminal) The court vacates a conviction of illegal reentry by a deported alien in US v. El Shami . The court finds that El Shami meets the requirements for a collateral challenge to a 1993 deportation order, and then invalidates that order because El Shami was never given proper advance notice of the hearing.

(Criminal) In two consolidated appeals under the name US v. Cardwell , the court rejects challenges to two pretrial rulings in murder for hire and weapons charges. The court finds that the district court did not err in denying one defendant’s motion to sever the two charges against him. It also affirms the trial court’s rejection of a motion to suppress based on statements made after the defendant was Mirandized; the defendant argued unsuccessfully that he never formally waived his rights to remain silent. (The fact that he went ahead and answered questions from the police is held to be a sufficient waiver.) The convictions are thus affirmed, but the court remands the case for resentencing in light of last year’s ruling in US v. Booker, 125 S.Ct. 738 (2005).

(Attorneys) In re Wray presents the unusual situation of a challenge to a district court’s order disbarring an attorney from practicing before that court. A three-judge panel of the Eastern District of Virginia disbarred Wray after finding that he had been convicted of willfully failing to pay income taxes. The district court classified this as a “serious crime” as described in Federal Rule of Disciplinary Enforcement I.B. The Fourth Circuit reversed, holding that while the tax conviction was a crime, it was not a “serious crime.” In doing so, it rejects the argument of the disciplinary enforcement attorney that the failure to pay was deceitful; the court finds that deceit is not an element of the crime, so it cannot be implied from the conviction.

(Insurance) The court affirms a district court’s findings in a case involving allegations of sexual harassment, Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co . The defendant presented the suit to its insurer, but the carrier defended only after issuing a reservation of rights letter. The insured argued that this situation created a conflict of interest that entitled it, the insured, to obtain an attorney of its choosing to represent it, at the insurer’s expense. The district court rejected this claim, holding that the insured could not require the carrier to pay for a second attorney. The Fourth Circuit agreed and affirmed the district court’s decision, applying South Carolina law. The court finds that such an arrangement does not create a per se conflict; it also holds that no actual conflict was shown in this case.

(Bankruptcy) A debtor’s steadfast insistence on a full discharge of her student loans probably resulted in an appellate loss, in Educational Credit Mgt. Corp. v. Frushour . Frushour incurred about $11,000 in educational loans for her classes at various institutions. After getting an initial deferment, she made periodic payments for roughly two years, then stopped. She subsequently filed a Chapter 7 bankruptcy petition, in which this adversary proceeding was brought to determine whether those loans were dischargeable. Bankruptcy practitioners already know that the law affords special protection to educational loans; unlike ordinary debts, those can only be discharged upon a finding that the failure to do so would result in “undue hardship” to the debtor.

This term is at the heart of the Fourth Circuit’s decision in the case; it finds that while hardship unquestionably exists for Frushour currently, there has been no showing that it will continue into the future. More important, it finds that she has not made good faith efforts to repay her loans. The court notes that she had the opportunity to participate in a program that would require her to pay between zero and five dollars per month, with increases only if her income warranted it, and a discharge of the balance after 25 years of these modest payments. Inexplicably, Frushour declined to apply for this program; she determined that it did not suit her, and she wanted a fresh start. This disdain for such a generous provision is probably what ultimately led two judges on the panel to rule against her; in my opinion, if she had tried this option and had been denied entry, the result may well have been completely different.

The case is worth study for a few significant points. One of those is the Fourth’s adoption of the three-part test enunciated in Brunner v. NY State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987) in Chapter 7 cases. The court had referred to Brunner in a Chapter 13 case once before, but this is the first pronouncement of this doctrine’s applicability to Chapter 7, and is probably the biggest reason why this opinion is designated for publication. Another interesting finding is the court’s refusal to hold that cable and Internet bills indicate per se that a debtor has more than a minimal standard of living. The court observes that in this day, when many people work from home, such a connection is often necessary for a minimal standard of living; the court holds that such a factor should be considered on a case-by-case basis. Finally, the court adheres to established precedent that one cannot take a low-paying job in a given field, even the one that was the direct subject of one’s education, and then claim that repaying student loans therefore wreaks an undue hardship justifying a discharge.

Court of Appeals

(Criminal) The Court of Appeals affirms convictions relating to mob violence, including one count of lynching, in Corado v. Commonwealth . It finds that the trial court’s admission of grand jury testimony at trial was erroneous, but that the error was harmless in light of other testimony adduced by the Commonwealth and the defendant’s own testimony. The court also significantly affirms the trial court’s admission of expert testimony from two detectives; the testimony related to “gangs and gang culture.”

(Criminal) In Witcher v. Commonwealth , the court dismisses an appeal by a defendant who had entered a conditional plea of guilty, to preserve his right to appeal an adverse ruling on a suppression motion. The ruling came during the trial, and the Commonwealth did not consent to the conditional plea. Unfortunately for Witcher, his right to a conditional plea is statutory (Code §19.2-254), and that statute specifically requires the Commonwealth to accede to the request. Since Witcher essentially invited the trial court to commit this error, his appeal is dismissed.

(Domestic relations) The court reversed a trial court’s interpretation of the operative beginning date for distributions from a pension under a QDRO in Irwin v. Irwin . In doing so, it notes an important exception to the mandates of Rule 1:1 (trial court retains control over order for 21 days, but no longer); a statute gives trial courts continuing jurisdiction over agreements that divide pension plans. The court also (rather summarily) affirms a denial of attorney’s fees to the husband.

(Administrative) One little-known area of Court of Appeals jurisdiction is the review of administrative determinations, such as that presented in Health Systems Agency of Northern Virginia v. State Health Commissioner . There, the trial court found that a regional health planning agency did not have standing to appeal the state health commissioner’s decision to issue a certificate of public need for new or expanded health care facilities in Loudoun and Fairfax Counties. The court of appeals affirms, finding that under the regulatory framework (including the Administrative Process Act) for such certificates, the agency is not an aggrieved party. The court finds that the duties of the agency, while vitally important, “are of an advisory nature.” It is certainly foreseeable to me that this decision may result in the introduction of a corrective bill in the General Assembly session that will begin next week.

(Workers’ Compensation) One case decided by the court illustrates the danger of uncounseled settlement decisions. In Tuck v. Goodyear Tire & Rubber Co ., the employee ostensibly reached an agreement with her employer’s claims administrator shortly after filing a claim for benefits for an accident. The clam was removed from the hearing docket based on the administrator’s filing of an unexecuted memorandum and the employee’s handwritten note to the commission, stating her understanding that the administrator had done everything he was required to do to pay her claim. A subsequent flare-up of her condition produced additional treatment and a subsequent claim. The court affirms the ruling of the Workers’ Compensation Commission that the claims are barred either by the doctrine of res judicata, or by the statute of limitations.