ANALYSIS OF DECEMBER 10, 2020 SUPREME COURT OPINIONS
(Posted December 10, 2020) The Supreme Court of Virginia today issues three published opinions. All three are real eye-openers.
Back in 2001, the Supreme Court ruled that a litigant could impeach the testimony of a defense medical expert by pointing to financial records showing how much the expert received from the insurance company for consultations and testimony. The case was Lombard v. Rohrbaugh, and coined the name “Lombard materials” to indicate the relevant financial records.
Today’s decision in Graves v. Shoemaker sands a rough edge in the Lombard doctrine. In this case, a defense lawyer hired the doctor, who prepared a report favorable to the defense. The doctor billed the lawyer; the insurance company paid the bill.
The plaintiff got the doctor’s Lombard materials and sought to introduce them at trial, because they indicated over $800,000 in fees over a seven-year period. The trial judge balked, accepting the defense argument that the lawyer, not the insurer, had hired the doctor. The court allowed questioning about how many times the doctor had testified for this lawyer, but that sexy $800,000 figure wasn’t coming in.
The jury evidently liked what the doctor had to say, because in an admitted-liability case, it awarded the plaintiff a small fraction of her medical bills in damages. On appeal, the Supreme Court today reverses and orders a new trial, ruling that the court should have allowed the Lombard cross-examination. The court rules that the nature of the relationship between an expert and an insurer is the important factor; not the identity of who originally hired the expert. That identity is a relevant factor, but not determinative, as the circuit court had held.
Because a witness’s credibility is always a matter for the jury, the court finds that this error matters. On retrial, the plaintiff will get to wave the years’ worth of bills to try to convince the jury that the expert is a professional witness. (Indeed, today’s opinion describes him as a “medicolegal specialist,” a term that will no doubt come up in future cross-examinations.)
This case is noteworthy because the court finds an abuse of discretion. That’s one of the more lenient standards of appellate review, but under these circumstances, the justices couldn’t stomach the idea of keeping this long-term relationship from the jury.
The term “fair market value” is a familiar one to lawyers. It operates in many contexts, including taxation, eminent domain, and domestic relations. The law usually defines the term as “the price that a willing, non-compelled buyer would pay to a willing seller who is under no compulsion to sell.”
In many of those contexts, the courts have presided over litigation about the fair market value of a particular real parcel. In Wilburn v. Mangano, the Supreme Court today explores its use in the context of a contract stemming from a provision in a will.
A woman we’ll call Mom signed a will that left her home to her three daughters, and gave her son an option to purchase it from them within a year after the probate of Mom’s will. The will stated that the purchase price would be equal to the County tax assessment of the property. Three years later, Mom executed a codicil, changing the purchase price to “the fair market value at the time of [Mom’s] death.”
After Mom died, her son notified his sisters that he was executing the option to purchase. He also sued to invalidate the codicil, apparently believing that the assessment was much lower. The case went to trial, and the court ruled that the codicil was valid; fair market value it is.
But the son balked at paying the full fair market value. The sisters forked over an appraisal if $311,000 and demanded payment: “You want it, fine; you pay for it.” That price was too step for the prospective purchaser’s blood, so he declined to follow through with the sale.
That generated a second suit, as the sisters sued for specific performance. The brother demurred, claiming that the term “fair market value” was too vague to ensure a meeting of minds on the sale price. The sisters answered that it wasn’t too vague for all those other contexts – taxation, eminent domain – and it should serve just as well here.
The circuit court agreed with the brother. Despite the earlier final judgment that the codicil was valid, it found that the description of the purchase price was too indefinite to make a binding contract. The court dismissed the suit. Today, the justices affirm.
The Supreme Court observes that “there is no single, fixed approach to determine fair market value, as applied by appraisers or Virginia courts.” It rules that the purchase price here “cannot be known with certainty absent a more specific means for determining it being provided in the codicil.” Because there’s no precise purchase price, the son’s “strike” of his option didn’t create a binding contract, so the circuit court correctly refused to compel him to buy.
This morning I received a note from Kyle McNew, an appellate pal who perceives that this ruling may have unintended consequences in many areas. He points out that agreements to purchase at fair market value – a figure that courts have been calculating for generations in other contexts – are now void. My pal is right. If you advise clients in matters of contract, wills, employment, securities law, corporate operating agreements, and a host of other fields, you now have a lot of work to do. You need to comb through any documents that you crafted to see if you inserted the term fair market value. If it’s there, there’s a good chance that the Supreme Court just invalidated your document.
Kyle finally observes that the subtext of the court’s view during oral argument was a desire to ensure certainty in contracts. Assuming that to be a correct read, the court has just created the opposite, at least for now. In reliance on an extensive body of caselaw interpreting fair market value over the years, lawyers have for decades been building that term into agreements of various natures. All those lawyers just fainted, realizing the chaos that this ruling creates for their files. Get to work, folks!
Anybody with a pulse knows that environmental law has undergone massive changes in the past century. The question is whether Virginia property-rights law has kept up. We find out today, in Johnson v. City of Suffolk.
The plaintiffs in this litigation hold oyster leases in the Nansemond River, down here in Tidewater. Those leases give the oystermen the right to plant and harvest oysters in designated areas. They filed an inverse-condemnation suit, alleging that the City of Suffolk and Hampton Roads Sanitation District operated sanitary sewer and stormwater systems that were knowingly inadequate.
The result, the oystermen pleaded, was a calamity: On occasions, the systems would fail, releasing immense volumes of either stormwater or raw, untreated sewage into the river and over their oyster beds. Both types of discharges damaged the beds, and from time to time, the State Department of Health would close the river to harvesting, basically putting the oystermen out of business.
The City and the District both demurred, relying on a century-old ruling from the SCV, later affirmed by SCOTUS, Darling v. Newport News, 123 Va. 14 (1919). There, the Robes had noted that the rivers are the natural sewer for communities, and people who live on the water, and particularly those who farm oysters under it, must live with the occasional inconvenience of periodic pollution. The 21st Century trial judge agreed with this argument, perhaps feeling that a circuit court had no right to overturn Supreme Court precedent, no matter how hoary. The court dismissed the action.
The Darling decision held that the General Assembly had not restricted the “ancient and undoubted right” of localities to pollute, and its intent to do so cannot be presumed “in the absence of a clear and explicit statute indicating such purpose.” The oystermen argued on appeal that the generations of Virginia environmental law since the 1930s had done just that, prohibiting localities from polluting and stating an express public policy in favor of clean water. They also noted that the City and the District had endorsed consent orders that acknowledged the problems with their systems, in which the entities promised to, shall we say, clean up their acts.
In this context, you might expect to see a landmark decision today that embraces modern pollution-control law and technology and salutes the now-unmistakable public policy, while reversing and ordering the case back to circuit court for trial. If you expected that, you would be mistaken.
Today the Supreme Court turns its collective back on all that environmental law, all but ignores the express public policy – the policy manages only to elbow its way into a footnote on page 8 of the slip opinion, and is never seen again – and takes us back to the pollution tableau of 1919. It does so by ruling that the oystermen have only a leasehold interest; not fee simple title. That means that the City and the District are not answerable to the oystermen for the loss of their livelihoods.
The leasehold-only distinction will come as a cruel blow to the oystermen, for two reasons. First, by statute, property for eminent-domain purposes is defined expansively; it includes “any right, title, interest, estate, or claim in and to” land or personalty. The court has today placed leasehold interests on a lower tier than the statute would indicate. I can’t say whether this ruling indicates lesser eminent-domain protection for tenants going forward.
Second, during the Eisenhower Administration, the Supreme Court ruled that the taking or damaging of leased oyster beds – essentially, the very claim raised here – was compensable in an inverse condemnation proceeding. Town of Cape Charles v. Ballard Bros. Fish Co., 200 Va. 667 (1959). The court today brushes that holding aside, noting that the Ballard Bros. oyster beds were destroyed by a dredging project, an act that “differs from an asserted right to raise them in favorable environmental conditions.” This passage contains no mention of the oystermen’s original claim of a physical-invasion taking.
How you view this decision depends on your point of view. I suspect that you can discern mine quite easily. I regard threats to the environment to be among the most crucial issues of our time, and it’s dismaying to see the Supreme Court of my state treat this kind of threat so dismissively. A publication covering property rights might well describe this ruling with the headline, “Court Narrows Oyster Lease Rights.” That headline would be correct. Environmental advocates might describe it as, “Court Sides with Polluters.” That headline would be correct, too. As I see it, the court has to adopt a strained view of environmental and eminent-domain law to enable it to rule as it does.