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.