ANALYSIS OF FEBRUARY 25, 2021 SUPREME COURT OPINIONS
(Posted February 25, 2021) Today brings a bountiful harvest of opinions from the Supreme Court of Virginia.
In NC Financial Solutions of Utah, LLC v. Commonwealth, the court takes up a challenge by the Attorney General to the practices of an online lender. The AG alleged that the lender made loans to Virginians at exorbitant interest rates, in violation of the Virginia Consumer Protection Act. The suit sought injunctive relief, civil penalties, attorneys’ fees, and “all sums necessary to restore to any consumers the money or property which may have been acquired from them” in violation of the Act.
A note about the caption of the appeal: I infer that the NC in the name refers to North Carolina. So what’s the State of Utah doing in there? Simple: Utahns, alone in our republic, have no usury laws. Lenders operating under the laws of that state can charge any interest rate that the borrower is willing to pay. That’s why you see loan agreements’ reciting that the loan is governed by the laws of the state of Utah.
Back to our story: The lender fired off a motion to dismiss or to compel arbitration. Each of its loans contained a binding-arbitration provision, to which the borrowers had agreed in taking out the loan. Citing paramount federal law, the Federal Arbitration Act, the lender asserted that an enforcement action like this would violate the federal law.
In circuit court, the learned judge was unmoved; he denied the motion to dismiss and refused to compel arbitration. The lender then used a little-known wild card available in arbitration cases: It exercised a statutory right to an immediate appeal of the order refusing to compel arbitration. Note that this wild card runs in one direction only: You can’t appeal an order compelling arbitration; just one refusing to compel.
Today, the Supreme Court unanimously affirms. Justice Chafin, writing for the court, notes that while individual consumers may have “signed” an agreement to arbitrate, the Attorney General never did; nor did the Commonwealth. Under SCOTUS precedent, that means that enforcement actions like this are permissible and the arbitration agreement doesn’t apply. The court goes on to note that under applicable law, the AG has the right to seek relief for individual consumers, even within the contours of a public-enforcement suit like this.
Today’s opinion isn’t technically the end of the game; the affirmance means that the case goes back to the circuit court for trial on the AG’s claims. But you don’t have to read tea leaves as well as Madame Mysterio to know that things will go rapidly downhill from here for the lender.
The header above is, as I’ve described it, the sweetest two-word phrase known to the law (or at least to lawyers). Today the justices address an exception to the American Rule, which generally provides that each litigant pays his or her own lawyer. The case is St. John v. Thompson, arising from an action for fraud.
According to the underlying complaint, St. John fraudulently manipulated his elderly and feeble neighbor into giving him control over his affairs, including possession of his gun collection (valued at about $100K). The suit alleged that St. John engaged in self-dealing, and the trial court agreed. It ordered St. John to return the guns or pay their value. It further awarded the plaintiffs $100,000 in attorneys’ fees.
On appeal, St. John asserted that the trial court had misapplied the seminal Virginia case on fees in fraud cases, Prospect Development v. Bershader in 1999. The justices today reject this challenge, holding that a fee award based on fraud need not rest on particularly egregious fraud; it’s up to the good judgment of the chancellor, and the Supreme Court finds today that he didn’t abuse his discretion.
The concluding paragraph implicates the sweetest three-word phrase in the law, as the justices remand the case to the circuit court to consider whether to award appellate attorneys’ fees.
Sexually violent predators
Gamesmanship is the theme of Ferrara v. Commonwealth. Ferrara served 15 years in prison, and before his release, a doctor named Hastings evaluated him. Dr. Hastings concluded that Ferrara wasn’t a sexually violent predator, so the Director of Prisons released him.
Ferrara bounced in an out of custody for a couple of offenses after that – petit larceny and, later, indecent exposure – and Dr. Hastings again evaluated him as a possible SVP. The result was the same, and Ferrara left custody on probation.
The last straw was, in the cosmic scheme of things, a seemingly mild violation: He “attended Jehovah’s Witness meetings where children were present, despite warnings from his probation officer not to do so without an approved chaperone.” That put him back in jail. Before his release this time, a different doctor evaluated his record – Ferrara refused to cooperate in person – and found that Ferrara met the criteria for an SVP.
That finding triggered a probable-cause hearing. But when the Commonwealth insisted that Ferrara cooperate with its doctor, he continued to refuse. He was informed that, by statute, his continued refusal could result in his being barred from calling an expert of his own, but still didn’t budge.
The trial court found probable cause and scheduled a jury trial. Ferrara continued to refuse to meet with the new doctor, but at trial, sought to introduce the two sets of findings by Dr. Hastings. The circuit court cited the statute and forbade the evidence. The jury found that Ferrara was indeed an SVP.
Justice McCullough pens the opinion of the court. He first agrees with Ferrara that the circuit court erred in applying the statutory bar at trial. That statute applies in the probable-cause hearing. A different statute, one more favorable to the defendant, applies at trial.
But the court affirms anyway, calling this error harmless. It finds Ferrara’s actions to be gamesmanship, an attempt to play the system. Trial courts have inherent authority to deal with litigants who do that, including by excluding proffered evidence. The justices conclude that if the judge hadn’t made the mistake that he did, he’d still be entitled to exclude the evidence under that inherent authority.
A part of me complains, in a feeble voice, that this conclusion is technically a non sequitur. That is, it doesn’t necessarily follow from the availability of this judicial remedy that the judge would have taken that route. Perhaps he wanted to rule in favor of Ferrara but mistakenly felt bound by the statute that he misinterpreted.
In the end, though, I’ll go along with Justice McCullough’s conclusion. The parties had a fair trial, and this was non-constitutional error.
I’d be remiss if I didn’t mention this delightful turn of phrase in today’s opinion: “The predictable consequences of his refusal to cooperate neither deprived him of a fair trial nor violated due process. Ferrara held the key to unlock the evidence from Dr. Hastings. He chose to keep it in his pocket.”
The final published opinion of the day is Kenner v. Commonwealth, a prosecution for animate object sexual penetration of a child. There are two issues on appeal – one relating to the admissibility of certain computer evidence, and the other relating to the timing of a request to poll the jury.
I will confess that I found the evidentiary issue to be fairly straightforward; the justices affirm a finding that certain pornographic images on the defendant’s computer were relevant to the charges against him. The polling issue was far more interesting, though it occupies only 2½ pages of this 14-page opinion.
At the conclusion of the guilt phase of trial, the jury returned a guilty verdict. The clerk read the verdict and added the familiar query, “So say you all?” Today’s opinion indicated that the jurors “responded affirmatively.”
The court then sent the jury out while it took up sentencing-phase instructions with counsel. The jury then returned and received the court’s instructions, after which the lawyers gave their closing arguments.
At the conclusion of the defense argument, the defense lawyer asked the court to poll the jury to ensure unanimity on guilt. The court denied this request, finding that it came too late; once the guilt phase was over and the sentencing phase underway, a polling request was untimely.
The jury handed the defendant a predictably long prison term. He appealed, and a divided panel of the Court of Appeals affirmed. Today the Supreme Court unanimously affirms the conviction and sentence. In a matter of first impression at this level, the justices weave together a statute, a Rule of Court, and (surprise!) some CAV jurisprudence to conclude that the right to poll the jury on guilt expires when the sentencing phase begins.
The statute describes sentencing as “a separate proceeding.” Rule 3A:17(d) states that “When a verdict is returned, the jury shall be polled individually at the request of a party or upon the court’s own motion.” And the CAV has knitted these two provisions together to conclude that a guilty verdict is final once the court ascertains that it’s unanimous. After that, it can’t be changed in a later phase of the case.
The Supreme Court approves this view of the process in bifurcated trials. Once the sentencing phase begins – and here, it was well underway – it’s too late to poll the jury.
NOTE ON SOME LESSER-KNOWN APPELLATE NAMES
(Posted February 15, 2021) The courthouses are all dark today, so let’s have some fun and explore the history of a few appellate names that might not be familiar to you.
Legal old-timers will recall at least the surname of this durable Reporter of Decisions for the Supreme Court of Virginia. The modern practice is to cite older SCV opinions using the numerical system that we all know – say, 237 Va. 33 (1989) – starting with volume number 1 and going forward. But back then, in the Nineteenth Century, they used a different system: The Reports were organized by the surname of the Reporter of Decisions.
Thus, you may see some references in older appellate opinions to a citation like this: Womack v. Circle, 32 Gratt. 324 (1879). Years later, when the 1-to-infinity numbering system arrived, authors perhaps grudgingly bowed to the change but still paid homage to the old form: Womack v. Circle, 32 Gratt. (73 Va.) 324 (1879).
The first volume of Virginia Reports that wasn’t named for the Reporter of Decisions, as far as I can determine, is volume 91, reporting decisions handed down in 1895. The unlucky Reporter who first got snubbed in this way was the estimable Martin P. Burks, who eventually stepped up to the Supreme Court bench himself, following in his father’s footsteps. You know the son as the author of Burks’ Pleading & Practice, which was last updated in 1961, but which occasionally still finds its way into a published opinion or two.
Back to our original protagonist. Peachy R. Grattan – that really was his given name, and not a nickname – served as Reporter for 37 years. A trip to an actual library with actual books will show you that 1 Gratt. (42 Va.) reported decisions in 1844-45, while his final volume, 33 Gratt. (74 Va.), covered 1880’s rulings. There’s a touching tribute to him at the beginning of Volume 75 — that would be 1 Matt. to us purists — from the local bar association, delivered upon his passing.
Who is Rose Lafoon and what does she have to do with appeals? In this case, the answer isn’t a who but a what: The Rose & Lafoon realty firm had a building constructed at the corner of Eighth and Franklin in Richmond in the 1930s and occupied it for a time. I don’t know how many intervening owners there have been, but at some point, the Commonwealth acquired it and it’s now in use as the headquarters for the Court of Appeals of Virginia, where it’s known simply as the Rose Lafoon Building.
It’s structurally attached to the adjacent Supreme Court Building in some of the higher floors, so up there, you can walk all the way from the Eighth Street side over to Ninth, where you can gaze across the street at Capitol Square. At street level, there’s an intervening passage for vehicles that’s off-limits to mere mortals like us. That reflects the SCV’s building’s original use as the Federal Reserve Bank of Richmond. The passageway is where the feds drove armored cars in to make deposits, back in the era of Tommy guns. Yes, on occasion, crooks did attempt to knock over the Fed; there are bullet marks inside the building to show where.
The Hon. Archer A. Phlegar of Christiansburg lived an interesting life. Enlisting in the Confederate Army in his teens, he rose from private to lieutenant, making him what the military folks call a mustang. (I had a great-great-great grandfather who was a mustang, though he wore blue.) Phlegar then studied law and became an attorney; his career included a stint as Commonwealth’s Attorney and service in the Virginia Senate.
In October 1900, Governor Hoge Tyler appointed Phlegar to fill a vacancy on the Supreme Court. Both men were from Montgomery County, and Tyler probably figured he was doing his “neighbor” a favor.
Alas, all he did was etch Phlegar’s name into the annals of history in an unflattering light: In the subsequent meeting of the General Assembly early in 1901, the legislature declined to reelect Phlegar for a full term, replacing him with Stafford Whittle of Mecklenburg County. This action reflected Tyler’s declining political power, plus his disregard of an old tradition. Back then, the five-member court included one justice from each of the five geographical “grand divisions” of the state. Phlegar became a second justice from the Southwest, leaving Southside unrepresented until the General Assembly tapped Whittle. Phlegar thus enjoyed — and I use the verb advisedly — what is almost certainly the shortest tenure of any member of Virginia’s highest court in our history, at just four months.
Phlegar is thus the answer to the trivia question of who was the last justice to be removed from office by the method of not being reelected, before the infamous treatment of Justice Jane Marum Roush in 2015. One last note of painful irony: The 1901 legislature ejected Phlegar from his seat on February 22 – Phlegar’s birthday.
APPELLATE NEWS AND NOTES
(Posted February 12, 2021) In honor of Lincoln’s Birthday, let’s start with a tale about the great man during his days of practicing law. According to a collection of anecdotes that occupies a privileged place on my bookshelf, one stubborn client who asked Lincoln to “bring suit for $2.50 against a debtor would not be put off in his passion for revenge. [Lincoln] therefore gravely demanded ten dollars as a retainer. Half of this he gave to the poor defendant, who therefore confessed judgment and paid the $2.50. Thus the suit was ended to the entire satisfaction of the angry creditor.”
No doubt this novel approach would raise some eyebrows with modern Bar counsel, but who cares? It’s a great story, and it includes a 200% legal fee. Is this a great country, or what?
Storm shutters appellate courts
A winter storm dropped enough white stuff on Richmond overnight that all three appellate courthouses are closed today. In the ever-stoic Fourth Circuit, “Staff are available by phone, and CM/ECF is available for electronic filing.” All appellate deadlines that would otherwise expire today are automatically extended until the courts’ next business day, which is Tuesday, February 16.
CAV expansion bill advances
I promised to keep an eye on Senate Bill 1261 for you. That’s the proposal to expand the size and jurisdiction of the Court of Appeals of Virginia, and to provide the badly needed reform of an automatic right of appeal in all cases, without the necessity of a petition for appeal. In case my sentiment isn’t already clear, I earnestly support this long-overdue change, as a mere 49 other states provide that of-right appeal; we are quite literally alone in failing to provide this essential legal protection.
The bill has cleared the Senate after a few tweaks, and is now in the House Courts of Justice Committee. The Roanoke Times is reporting that the bill is still alive despite Republican opposition. GOP lawmakers are concerned about the cost of providing this element of legal modernity. They also fear the prospect of Democrats’ filling several seats on a court that’s chock-full of Republican appointees.
I expect the 140 Level Heads to resolve the matter internally, one way or the other, and if the bill passes, they’ll choose new judges later this month. As currently phrased, the bill creates the of-right appeal and expands the court effective October 1, 2021.
Interesting cert grant at One First Street
The Supreme Court of the United States has granted certiorari in City of San Antonio v. Hotels.com. The underlying dispute was about taxes assessed by a host of Texas jurisdictions against the online hotel-booking site and several other similar online sites. The localities got a deep-eight-digit judgment, and Hotels.com posted a supersedeas bond. An appellate court reversed the judgment and on remand, the district court included as part of the costs taxed against the localities the amount of the bond premium. That premium was $2 million, an amount the localities understandably didn’t want to pay. The Fifth Circuit affirmed the full amount of taxed costs.
The localities filed a cert petition and Hotels.com waived its right to file a brief in opp. But The Robes asked for such a brief, and ultimately granted cert to decide what discretion, if any, a district court has to deny costs to a successful appellant. The appellants – the Texas localities – argue that the ruling here, that there is no such discretion, is at odds with every other circuit court’s position on this point.
Honestly, if you aren’t an appellate geek, this issue might seem hopelessly arcane to you. But those who swim in my pool recognize that, in big-dollar litigation, this can be a major issue. Let’s take the example of a plaintiff in a wrongful-death suit who gets a $20 million judgment against the manufacturer of an allegedly defective product. If the district court has no discretion to deny costs, the personal representative might face significant liability unless she consents to allow the appeal to go forward without a surety bond.
In addition to the initial waiver of a brief in opp, this appeal features one additional oddity: a complete lack of amicus briefs. Nowadays, the general sense among the Supreme Court bar is that if you want a cert grant, you’d better have plenty of amici. That isn’t to say that one without any amici never sneaks onto the merits docket; but I sense that this is a true rarity.
Normally in appeals heard on the dismal side of the Potomac, I refer you to SCOTUSblog for first-rate coverage. For reasons I can’t guess, that excellent site hasn’t said a word about this appeal, other than to note the cert grant. There’s no discussion at all; at least, not yet. My pal Dan Huckabay at Court Surety Bond Agency in California has an essay about the issues here.
The Supreme Court granted cert in early January. I expect it to calendar the appeal for the April sitting, with a decision likely coming in June. Because that’s when the high-profile rulings come down, this decision might well be overshadowed by those seemingly sexier cases in the mainstream-media coverage, and perhaps in legal media, too.
In case you have a cultural, spiritual, or chickenhearted objection to federal court and you stick firmly to the state courts, please know that this coming ruling will likely have no effect on you. In questions of Virginia law, the Supreme Court of Virginia is the court of last resort. And if you’re asking, I’m not aware of any ruling from our Robes on whether large bond premiums are taxable.
ANALYSIS OF CAV JURISDICTIONAL RULING
(Posted February 9, 2021) The Court of Appeals of Virginia hands down an interesting jurisdictional decision this morning. The case is Johnson v. Johnson, a divorce proceeding from here in Virginia Beach.
Husband and Wife married in 1974. After 43 years of marriage, Wife had had enough; she filed to end the union in 2017.
It took the case 2½ years to mature for trial. In February of last year, a circuit-court judge heard evidence and announced in open court that he would award Wife a no-fault divorce based on separation for one year. The judge directed Husband’s lawyer to prepare a final divorce decree, and asked the lawyers to put their heads together on the wording and on any exceptions.
Wife, sadly, had brain cancer. Just over two months after the hearing, and before the parties submitted a sketch final order, she died. Husband’s lawyer reported that she had duly prepared the draft order and submitted it to Wife’s lawyer before the death, and that the lawyers were engaged in a back-and-forth discussion of the terms before Wife’s passing.
Wife’s lawyer moved the court to enter a decree of divorce nunc pro tunc, carrying out the judge’s announcement of his ruling. He argued that such an order would be appropriate because, in the words of today’s opinion, “without a pre-death divorce decree, [Husband] was still legally [Wife’s] next-of-kin and that would complicate her last wishes.”
Four weeks after Wife’s passing, the court held a hearing to consider the motion. It ultimately ruled that it was powerless to grant a divorce after the death of one of the parties. The court granted a motion filed by the spouses’ daughter — her mother’s qualified personal rep — to substitute as a party. It then dismissed the case for lack of jurisdiction. The daughter then brought this appeal.
Judge Humphreys writes today’s short and compelling opinion for a unanimous panel of the court. It affirms the circuit court’s decision that a court’s power doesn’t extend to granting divorces to a marriage that no longer exists. As Judge Humphreys notes, “Put simply, the words ‘until death do us part’ found in traditional marriage vows are reflected in the law of the Commonwealth. A marriage ends upon the death of a spouse.”
As for the daughter’s argument that the circuit court should have carried out its express in-court ruling, there’s a difference between rendition of judgment and entry of judgment. A court may render a judgment orally by announcing a ruling, or even in writing through a letter opinion. But entry of judgment calls for signing a written order, and that didn’t happen here before the marriage ended the way so many others have, and so many others will.
The panel also rejects the notion of a nunc pro tunc solution to this problem. That kind of order is fine to correct errors or omissions; but it can’t “record an event that never occurred.” Trial courts, being courts of record, speak through their orders; not through their oral pronouncements.
What can a lawyer in a similar situation do to prevent something like this? That’s hard for me to say without a greater knowledge of the trial record than today’s seven-page opinion provides. There’s a suggestion there that Wife’s lawyer could move to bifurcate equitable-distribution issues from the divorce itself; but that wouldn’t necessarily have hastened the divorce here. The only thing I can conceive is a motion to expedite the trial once the lawyer knows of her client’s diagnosis, but there may be circumstances about this case’s trial preparation that made that impractical.
I expect my appellate pal John Koehler to post analysis of this decision plus the other CAV published opinion today, in Wills v. Wills, on his website by this evening. You’ll be able to see that analysis here.
NOTES ON THE DAWN OF A NEW APPELLATE YEAR
(Posted January 7, 2021) The turn of the calendar means that a dreadful year (by most accounts) is safely in the rear-view mirror. This looks like a good occasion to look around and see what’s going on in the world of appeals.
Final David-Goliath Index of 2020
In the final quarter of last year, we saw five published decisions that fit the parameters of the David-Goliath Index. Goliath took the gold medal in four of those. That gives us a year-long total of 13 wins for David and 31 for Goliath. The final D-GI is thus 30-70.
If that seems lopsided to you, please note that this has been a solid year for our Davids. In the previous four years, Goliath won 78% of the time. Overall, our Big Guys have been winning three appeals for every one the Little Guys win over a five-year period.
Preliminary caseload indicators in the SCV
The justices issued 48 published opinions, 7 published orders, and 28 unpubs in 2020, for a total of 83 merits decisions. The court received oral argument in 82 granted cases over the course of the year.
If you think that those are small numbers, your Jedi sense serves you well. The size of the merits docket is way down from the heady days of about 15 years ago, and the number of published decisions is the lowest of which I have any record. My records go back to 1965.
Get ready for a new record a year from now. The court will convene next week for a 14-case session. But by the April session at the latest, and possibly as soon as the March docket, the effects of the judicial emergency will kick in, dramatically reducing the size of merits dockets simply because there are very few final judgments coming out of circuit courts. I had hoped that the Robes would grant more writs to preserve the image of busy merits dockets; but I think I’m doomed to disappointment there. In sum: 2020 was a historically bad year for appellate business, and 2021 will be even worse.
In 2020, SCV Clerk Doug Robelen opened 1,571 new records. That’s a drop of 10% from the 1,760 new filings in 2019. And remember, 2021 will be worse.
CAV published-opinions count
The Court of Appeals of Virginia issued 71 published opinions in calendar 2020. The previous year saw an abnormally high figure of 86; the 2020 figure looks to be a regression toward a likely mean. For comparison purposes, the court handed down 66 published opinions in 2018, so 2019 really looks like an outlier.
I’ve pondered whether the CAV will also suffer a retrenchment in overall business volume. My best guess is that it will, but likely not as dramatic a drop as the one on the other side of the building. Three-fourths of the CAV’s docket is criminal appeals, and as courthouses reopen across the Commonwealth, those courts will give priority to those cases. The other two major components of the CAV’s docket, domestic relations and Workers’ Comp, don’t require juries, so they may bounce back more quickly, too.
Close of a remarkable career
My appellate pal George Somerville of Harman Claytor in Glen Allen has decided to call it a career. I’m happy to report that there’s no ill-health component to this decision; he simply concluded that it was time.
Of all my friends in the appellate guild, I think I’ve known George the longest; we met perhaps 25-30 years ago when he and another lawyer from his firm came to the Virginia Beach City Attorney’s Office to give us some in-house training in litigation, including appeals. George could speak authoritatively, having clerked for one of the giants of the federal appellate bench, Judge Ruggero Aldisert of the Third Circuit. We became friends then and stayed that way without interruption ever since.
The appellate bar is thus a bit poorer today. The silver lining, for those of you who sensibly aspire to join us, is that there’s a bit more room at the top now. As usual when one of my pals retires, I’ll borrow a Navy term because I live in a Navy town: Fair winds and following seas, my brother.
Remote oral arguments
All three appellate courts that meet here in Virginia continue to operate with closed courtrooms. That is, all oral arguments are conducted remotely, with no one in the actual courtroom. The Court of Appeals of Virginia will continue to do that at least through April 30. The SCV announces its plans session-by-session; next week’s session is definitely remote, and my best guess is that the March session will be, too. The Fourth Circuit will entertain remote arguments in its upcoming session running from January 25-29.
Expansion of CAV jurisdiction on the horizon?
I expect the upcoming General Assembly session to take up a bill to revolutionize the appellate system in Virginia. The bill would effectively give us a parallel to the federal system, where each losing trial-court litigant gets one of-right appeal in the Court of Appeals, followed by certiorari review in the Supreme Court.
There are still plenty of details to be worked out, and I’m not about to start counting chickens. But in my view, this would be an extraordinarily good move. Virginia is alone in the Nation in not providing an appeal of right to every appellant. Alone in these United States, almost all appellants here must first beseech the appellate court to take the case. Our litigants deserve better than that. Litigants in 49 states already get better than that.
Because of its profound effect on our field of practice, I intend to monitor this bill after it’s filed and will report on it when I get news. If it passes, appellate practice could grow significantly, as more losing litigants might decide to pursue an appeal without the need to face the daunting hurdle of getting a writ.