ANALYSIS OF JUNE 6, 2008 SUPREME COURT OPINIONS[Posted June 6, 2008] In addition to its being the 64th anniversary of the most important single day of the Twentieth Century, today is the final opinion day of the 2007-08 Term of the Supreme Court of Virginia. After the conclusion of the June Session today, the court goes into recess for the summer, reconvening on September 8 for the beginning of the next term.
Lest you feel abandoned, the court gives us a grand total of 32 parting gifts today – 28 published opinions and four orders, one of which is also published. Given the pace at which I am generally able to post analysis of these decisions, this looks to be at least a three-day job. I’ll start posting analysis this morning, and will likely conclude some time on Sunday or Monday. You’re welcome to stop in from time to time, as I’ll post analysis on additional cases every couple of hours or so.
Among the more noteworthy decisions handed down today, the former Randolph Macon Woman’s College wins two appeals arising out of its decision to accept men as undergraduates. The capital murder conviction of Thomas Alexander Porter is affirmed, and the court elsewhere rules that mandamus is not an appropriate remedy to compel a lower court judge to rule, instead of deferring a finding, in a criminal case. The court also affirms the Court of Appeals’ ruling last year in Miller-Jenkins v. Miller-Jenkins, a visitation case involving a same-sex civil union under Vermont law.
Today, I am grateful to Tom Purcell, who has given me the stamina to plow through all these opinions.
One of the most widely-followed cases of the day will undoubtedly be Miller-Jenkins v. Miller-Jenkins, a child visitation case involving a former same-sex couple. I wrote about this case extensively when it was originally decided by the Court of Appeals in 2006, so today I’ll just focus on how this ruling is crafted. You can access my earlier analysis here. (The Reader’s Digest version is that Lisa, the child’s mother, unsuccessfully sought to ignore a Vermont court’s visitation order in favor of her former civil partner, Janet; that order had given Janet visitation rights with regard to Janet’s child.) My readers should keep in mind that this is a purely procedural ruling. The court makes zero pronouncements about child visitation, or civil unions, today.
The court affirms the CAV’s ruling on the law of the case doctrine. This is the second go-round for these litigants; in the first case, Janet had succeeded in having the Virginia courts recognize the Vermont court’s visitation order. I fully expected subsequent appellate history (as I wrote in 2006), but Lisa’s petition for appeal was filed too late, and that, as we all know, is a fatal defect.
Lisa then sought to challenge the Virginia courts’ registration of the Vermont order. The Virginia circuit court, thinking this a wholly new bout of litigation, considered the matter from square one and decided that it didn’t have to honor the Vermont order. Vermont permits civil unions between same-sex couples, while Virginia, as you might have discerned from living around here for a while, doesn’t.
The Court of Appeals summarily reversed, finding that the result was dictated by the first appeal. The Supreme Court agrees today, and affirms the CAV’s unpublished order. It holds that the earlier appellate ruling resolved certain factual and legal issues between the parties, and those matters are now conclusive as between the parties. Lisa sought to establish that this appeal presented different issues, but the court notes today that her assignments of error in the two cases are identical. (Oops. That’s a pretty telling factor.) The chief justice files a short concurring opinion, in which he contends that the first appeal was wrongly decided, but agrees that the law of the case doctrine forecloses reconsideration of the issues decided therein.
The ultimate lesson of this decision is that the law of the case doctrine doesn’t apply only to subsequent proceedings in the very same litigation (such as an appeal after an issue is conceded in the trial court). It also applies to subsequent and separate legal proceedings between the same parties over the same issues.
It’s no secret that defense lawyers generally prefer to have cases decided in federal court, while plaintiffs like to stay in the friendly confines of the state court system. The primary reasons include the federal courts’ regard of summary judgment as a favored procedural tool, and the use of depositions to support such a motion. Personally, I believe this is a misconception, as both sides can use that tool to great effect. Nevertheless, that’s the perception, so lawyers have fought for quite some time over how to obtain, or avoid, removal of cases to federal court under the diversity statute ( 28 USC § 1332 (a)).
Today, in Whitaker v. Heinrich Schepers, the Supreme Court addresses one commonly used means of avoiding removal. The statute only permits removal where the amount in controversy exceeds $75,000. It also prohibits removal more than one year after the date the suit is filed. Thus, a plaintiff with a big claim can sue for $74,000, wait a year, and then move to amend the ad damnum to whatever he wants. That’s what Whitaker did in this case. Three months after filing suit, he answered discovery requests and told the defendant that his actual damage may exceed the jurisdictional floor, despite his low ad damnum. After ten months (note that there’s still time to remove within the one year), the defendant asked Whitaker to stipulate that his damages didn’t exceed $74,000, but Whitaker would do no such thing. A month later, and one month before the year expired, the defendant removed the case.
In federal court, Whitaker sought remand, since the defendant had known after the first 90 days that the claim was actually bigger than the amount originally sued for. Essentially, he argued, you should have known what I was doing. The defendant had to agree that he didn’t remove within 30 days after he first got word that Whitaker’s damages exceeded the jurisdictional threshold, so it consented to remand.
That didn’t mean that the defendant was out of ammunition. Back in state court, it argued that Whitaker should be stuck with a $74,000 claim, since his insistence upon that amount had by now deprived the defendant of a meaningful right – the right to have the case tried in federal court. The trial court, perhaps sensing gamesmanship on the part of Whitaker, agreed and refused to allow Whitaker to amend his claim to seven figures. In the end, the trial court entered judgment (with the defendant’s consent) for $74,000.
Whitaker appealed, and today the Supreme Court reverses. But lest you think that the court has issued a blanket pass to plaintiffs to do this with impunity, you need to read the opinion carefully; the court notes that the defendant wasted its opportunity to remove when it did nothing within 30 days after getting those interrogatory answers. The subsequent motion to amend the ad damnum didn’t prejudice the defendant, because it had already forfeited the right to remove. Accordingly, Whitaker gets to go back to the trial court for a hearing on damages alone.
There is one more note of caution here for plaintiffs who might be eager to try out this new toy. The court observes that the trial court found that the setting of the earlier ad damnum artificially low was in bad faith. But it adds in a footnote that neither the defendant nor the trial court thought to impose sanctions upon Whitaker for this “bad faith” procedure. This is a subtle suggestion, with red flags waving and sirens blaring, that the court might approve sanctions against a lawyer who deliberately uses this tactic solely in order to deprive the defendant of his right of removal. Given the recent explosion of sanctions cases, only the foolhardy lawyer will ignore the danger of playing footsie with the trial court, and thereby risk getting slammed with sanctions.
There are several important procedural and evidentiary rulings in Ayala v. Aggressive Towing and Transport, but the principal one relates to the use of a guilty plea in a civil case, where the criminal defendant isn’t a party in the civil litigation. This was a wrongful death case in which the decedent was in a no-win situation – he was a passenger in a car operated by a drunk driver, and they collided with a tow truck whose operator was even more intoxicated.
The estate sued the tow truck driver and the towing company. Four days before trial, the defendants sought a transportation order to bring the decedent’s driver in from prison (he had pleaded guilty to involuntary manslaughter and was serving his time). No one will be surprised by the reason for that request – the defendants wanted to point at the guy in the prison jump suit and say to the jury, “It was all his fault.” The trial court refused this last-minute request, finding that the defendants had not listed the inmate as a witness.
But the defendants were not to be denied; instead of the live witness, they brought in the inmate’s criminal conviction records, to show that he had pleaded guilty to the manslaughter charge and had been convicted of it. The estate objected on various grounds, but the trial court allowed it. And the empty chair defense worked; the jury returned a defense verdict.
But the estate gets a reversal today, as the Supreme Court rules that the admission of the criminal records was in error. There are several key holdings here that trial lawyers need to know:
1. The criminal conviction isn’t res judicata or collateral estoppel as to the fact of the inmate’s culpability in the civil case. That’s because the victim doesn’t stand in the Commonwealth’s shoes, so the requirement of mutuality of parties isn’t met. The court also cites its previous doctrine that a judgment in a criminal case doesn’t establish the underlying facts in subsequent civil litigation, and it’s not even admissible in evidence.
2. The inmate’s guilty plea is, on its face, hearsay; it’s an out-of-court (well, out of this court, anyway) statement, offered to prove the truth of the inmate’s statement, “I’m guilty of this charge.” There is a well-known exception to the hearsay rule for statements against penal interest, and this would appear to save the defendants’ position. But that exception requires a showing that the declarant is unavailable to testify. The defendants understandably argued that the inmate was indeed unavailable, as he was holed up in a prison cell. But the court rules today, citing earlier precedent, that one seeking to take advantage of this exception must have used “reasonable diligence” to obtain live testimony. Failing to list the inmate as a witness and then submitting a request for a transportation order in the bottom of the ninth isn’t reasonable diligence, so that plea wasn’t admissible. (The opinion notes that the defendants didn’t assign error to the trial court’s ruling that the defendants had waived the right to obtain the live testimony by their delay. Quite often, when I see the phrase, “No one has assigned error to this ruling” in an appellate opinion, it translates to, “Why on earth didn’t anyone assign error to this ruling?” Buy I don’t get that sense here; I think the Supreme Court heartily approves of the trial court’s ruling, and would have affirmed it if it had been the subject of an assignment of error.)
3. The defendants have one last stab at defending the admissibility ruling below – they claim that the documents were judicial records and therefore admissible under another hearsay exception. But here, they fall victim to a recurrent problem, the absence of a transcript. In this appeal, the parties used a written statement under Rule 5:11 (c). This procedure is, the court notes, permissible, and in my experience it is often sufficient in cases involving little or no testimony or extended colloquy. But in this case, there is nothing in the record to show that this argument had ever been made in the trial court. The Supreme Court therefore declines to consider it, citing Rule 5:25.
I will once again preach the appellate gospel on this point – when in doubt, hire the damned court reporter! If your case is important enough to win, then it’s worth paying a professional at least the appearance fee to take down the proceedings. If the case doesn’t get appealed (or if you win and your opponent has to appeal), then you’re only out a few hundred dollars. If you need a complete record for your own appeal, that transcript is quite often priceless.
One last point here – the defendants may well wriggle out of this problem, depending on how the trial court decides to conduct the retrial. Remember, the inmate didn’t testify because the defendants waited too long to list him as a witness, and to seek a transportation order. I’ve got two bucks in my pocket that say they won’t make that little mistake again. I’m guessing they’ll promptly supplement their discovery responses now, and will apply for a transportation order long before the new trial date. At that point, the trial court will have to decide whether the defendants should, in effect, get a nice, long continuance in order to get that inmate testimony after all. I don’t know how that one will come out, as today’s ruling doesn’t address the issue.
Statutes of limitations, lawyers know well, are deadly things. They slay otherwise valid lawsuits on a regular basis, leaving parties without their primary remedy. (Some lawyers have learned, to their chagrin, that the client may still retain a – ahem! – secondary remedy. But that’s getting far from our story.) Today, a local government seeks to inflict a premature death-by-statute upon litigation filed by several of its utility customers who cried foul over a glaring instance of discriminatory pricing. The case is Town of Leesburg v. Giordano.
Leesburg is a town in Loudoun County, and by agreement with the county, it controls the right to provide water service to certain county residents who live outside the town limits. That right is exclusive, so those citizens have the choice of getting their water from the town, or going thirsty. You can imagine the reaction from those citizens when the town abruptly announced late in 2005 that it was imposing a 100% surcharge on the price of water delivered to them – but not to residents of the town. In effect, the county residents had to pay twice as much for the same water that their townie neighbors were getting.
You might suspect that the town justified this price discrimination on the basis of the cost of bringing the water so far outside the town limits. You’d be wrong; the only reason given for it was the desire to bring in additional revenue to support a $63 million utility bond project. (Today’s opinion doesn’t specify the exact nature of the project.)
Now, if you’re in local government, this is a sweet arrangement. You can raise money without raising the taxes or fees you charge to the residents of your town. Sure, the county folks will squawk; but they don’t vote in town elections, so you won’t have to face any retribution on Election Day. Is this a great setup, or what?
The now-fuming county residents sought succor in the judicial branch, but the town had another surprise for them. It relied upon a relatively obscure provision in the Public Finance Act that requires that any challenges to bond issues be filed within 30 days after the filing of the bond ordinance. That ordinance had been filed 9 ½ months before the plaintiffs filed suit. Accordingly, the trial court sustained the plea of the special statute of limitations, and dismissed the case.
Today’s unanimous opinion is written by Senior Justice Russell. His usual efficient and subdued prose tells the story well, but I think I can read between the lines the court’s astonishment and dismay at the way these developments have unfolded. The court today reverses the judgment and reinstates the case on the trial court’s docket. It notes that while challenges to bond issues do have to be brought within 30 days, there was nothing in this ordinance that set water rates, or that imposed surcharges. The town added that little zinger separately. Accordingly, it was perfectly permissible for the citizens to file their suit without regard to the special statute.
For reasons unrelated to the resolution of the legal issues decided today, this case is very troubling for me. Not because of the outcome of the case; I firmly applaud that. What troubles me is the purely political question of why the county would have surrendered its citizens’ right to a representative government when it comes to their water supply. (I infer, but am not certain, that the county citizens were given no voice in town government when the town acquired the exclusive right to provide water to them. I don’t pretend to understand all aspects of government and life up in the State of Northern Virginia.) If I were one of those county citizens, I would share their fury and their sense of unfair treatment by the entity that they have no meaningful choice but to deal with.
There is an important procedural lesson in today’s only published order, in the consolidated cases of Dillard’s v. Judkins and Dillard’s v. DeWalt. The underlying suit alleged malicious prosecution by the retailer against two former employees who were suspected of theft. After they were terminated, and against the advice of the retailer’s security consultant, the store obtained criminal warrants against the two women. The charges were dismissed at the preliminary hearing stage, and the women filed suit. Dillard’s sought to compel arbitration under its employee policy, but the trial court refused, holding that the suit came out of the prosecution, not out of the employment.
The Arbitration Act gives the parties a right of interlocutory appeal to review rulings compelling or refusing to compel arbitration, so the retailer took this step. But the timing was wrong, and that’s at the heart of the lesson embedded in this order. The trial court announced its ruling from the bench on March 20, 2007. Dillard’s filed notices of appeal two weeks later, on April 4. But the trial court didn’t enter orders denying the arbitration motion until April 10.
In federal appeals, there is a specific provision for this situation. FRAP 4(a)(2) provides that when a party notes an appeal after rendition of judgment, but before entry of judgment, then the notice will be treated as being filed on the day of, and after, the entry of judgment. But Virginia law is different: Rule 5:9 states that “No appeal shall be allowed unless, within 30 days after the entry of final judgment or other appealable order or decree, counsel for the appellant files . . . a notice of appeal . . ..” Thus, in Virginia courts, it’s possible to file a notice of appeal too early, and that’s what Dillard’s did here.
In order to avoid this fate, keep in mind the difference between rendition of judgment (that’s when the court announces its ruling) and entry of judgment (which is accomplished by signing a judgment order, sometimes days, weeks, or even months later). That’s vitally important in this context, because the court regards Rule 5:9 as mandatory – you can’t appeal without strictly complying with it. The court accordingly dismisses this appeal as improvidently awarded.
There are two med mal decisions today, and one of them revisits a doctrine we just saw a couple of sessions ago. In Webb v. Smith, the court again takes up the question whether expert testimony to establish medical negligence.
Earlier this year, the court decided Coston v. Bio-Medical Applications, in which it held that no expert testimony was necessary. There, staff at a medical facility placed Coston in a chair that collapsed. They helped her up, and then inexplicably had her sit back down in the same chair again. It collapsed again, of course. The court held that this was one of those rare exceptions to the usual rule that medical negligence must be shown by expert evidence.
Today’s case involves a claim by a woman who had been told by her doctor that she might need a procedure called a bilateral salpingo oophorectomy (fortunately abbreviated BSO, so I don’t have to sprain my fingers by typing all that out again) in order to address menstrual pain. She went to Dr. Smith and signed up for the BSO and a simultaneous hysterectomy. She reported to the hospital; the anesthesiologist put her under; and Dr. Smith went to work. But while he performed the hysterectomy, he somehow “forgot to perform the BSO.” (Probably didn’t want to have to spell it in his surgical notes.)
Webb went through a separate surgical procedure to have the BSO performed, and she sued Dr. Smith for medical malpractice. She offered an expert witness on the standard of care, and that doctor testified that Dr. Smith violated the standard of care by not performing both procedures in the same session. But Webb didn’t offer an expert witness on causation, reasoning that anyone but a damn-fool could see that the only reason why she had to go through the second surgery was because Dr. Smith had blown the first surgery.
The doctor moved to strike because no doctor had testified that the negligence had required her to undergo the second surgery. The trial judge took that under advisement and let the jury have a go at it. There were evidently no damn-fools on the jury, because they all saw that the second surgery had obviously been necessitated by the failure to perform the procedure the first time around; the jury returned a verdict in Webb’s favor for $75,000.
But now the doctor renewed his motion, and at this point, something interesting happened. The trial court noted that this was a med mal action, not a breach of contract action. And she noted that no expert had testified that Webb had to have the BSO; as far as anyone knew, it was an entirely elective procedure, perhaps two steps removed from a nose job. The only way Dr. Smith’s negligence could have caused the need for the second surgery was if it was really necessary, and that required medical testimony. Since there was none of that, the trial court set the verdict aside and entered judgment for the doctor.
Today a divided Supreme Court reinstates the verdict, ruling that this is indeed one of those “rare cases” involving an exception to the requirement of expert testimony on causation. The majority opinion, authored by Senior Justice Stephenson, concludes that “[a]s a result of Dr. Smith’s failure to perform the BSO, Webb had to undergo the second surgery and incur damages attendant thereto. A reasonably intelligent juror did not need an expert to explain why Dr. Smith’s negligence was the proximate cause of Webb’s damages because the issue of causation was within the common knowledge of laymen.”
That’s all well and good, the dissent (Justice Kinser, joined by Justice Agee) notes; but who says she had to undergo the surgery? It takes a doctor to separate what’s necessary from what’s merely a good idea, and from what’s entirely elective. The dissent concludes that if this had been a contract claim (where Webb asked Dr. Smith to pay for the cost of the second surgery), then we’d have a different situation; a normally intelligent juror could decide that. But without a doctor to say that the testimony was really necessary, there was nothing upon which to base the verdict but conjecture. Indeed, the only testimony on the point came from Dr. Smith himself, who stated that during the surgery, he saw Webb’s fallopian tubes and ovaries and saw nothing wrong with them. Thus, the only testimony in the case on this point was that the BSO was not required.
In this context, I agree with the dissent; I think this case is incorrectly decided. If it were a contract claim, then I agree that no expert would be needed. But the only way in which you can say that Dr. Smith’s negligence caused the need for the second surgery, is to conclude that there was a genuine need for that surgery. Perhaps there was and perhaps there wasn’t, but I believe there has to be some medical testimony to establish that need.
The other med mal case of the day, Williams v. Le, illustrates how hard it is to justify a superseding intervening cause instruction, and how closely the court studies jury instructions.
In May 2005, a patient consulted a doctor about pain in her calf. The doctor set up an ultrasound test for three weeks down the road. But a few days later, the patient had recurring pain, so she went to see her primary care doctor. The doctor advanced the ultrasound to the next day. The patient underwent the test, and a technician thought she spotted a deep vein thrombosis (I happen to know that this is abbreviated DVT), a dangerous blood clot that can be fatal if it migrates to the lungs. The technician told the patient to contact her primary doctor right away, and called a radiologist to report the test results. The radiologist confirmed the existence of the DVT.
At this point, the radiologist tried to call the primary doctor, and encountered an especially pernicious form of Hell with which we’re all familiar. He navigated a voice menu and eventually got to speak with a human. He told the receptionist who he was and asked to speak with the primary doctor. The receptionist told him she would hunt for the doctor, and then put him on Ignore. (The opinion describes it as “on hold,” but we know what it’s really called.) After a long wait, the radiologist gave up; he hung up and ordered his assistant to fax the test results to the primary doctor, which she did.
Unfortunately, things weren’t very organized on the other end of that fax line; the primary doctor never did see the test, although it did arrive in his office. The patient dutifully called her primary doctor as she had been told, but he never got the message.
At this point, this comedy of medical errors becomes a tragedy – the DVT proved deadly, as the patient died six days after the ultrasound revealed its presence. Medical testimony at trial established that the patient could have been saved if the primary doctor had ordered suitable treatment even one day before the death, well after the test results were delivered to his office.
If you have read this far and are thinking that this is a med mal claim against the primary care doctor, think again. The patient’s administratrix sued everyone she could find, and settled with everyone except the radiologist, who was the only defendant at trial; the administratrix claimed that he was negligent for not making voice-to-voice contact with the primary doctor. One of the radiologist’s defenses was that any negligence he may have committed was overridden by the negligence at the primary doctor’s office. Keep in mind that the test results, with the DVT circled on the chart, did actually make it to the primary doctor’s office in plenty of time to save the patient’s life.
Over the administratrix’s objection, the trial court gave an intervening negligence instruction, and the jury apparently bit for it, returning a defense verdict. Today, the Supreme Court reverses and remands for a new trial, holding that the trial court should not have given the instruction. The reason is the demanding nature of intervening cause defenses – they are available only if the intervening act causes the injury without any contributing negligence by the defendant “in the slightest degree.” This is perhaps the closest thing you’ll see to a scintilla rule in Virginia jurisprudence – if the defendant’s negligence even slightly contributed to the injury, then he can’t escape liability by pointing the finger at a later negligent act by someone else.
As with other cases involving errors in jury instructions, the court presumes that the jury relied on the erroneous instruction, and thus remands the case. It was not the administratrix’s obligation to prove that the jury decided the case based on this theory; if there is any possibility that the instruction influenced the verdict, then back it goes for a new trial.
Today is a banner day for the trustees of the former Randolph Macon Woman’s College in Lynchburg. The formerly all-female school decided, in the face of economic necessity, to start admitting men beginning in the fall of 2007. Undergraduates and graduates of the institution cried foul, and got themselves lawyers. Today the court decided two separate appeals, both traceable to that hard economic decision.
In the first case, the court tackles head-on the question of whether the college is permitted to change the rules of the game in the face of its agreement to provide single-sex education. Indeed, the very heart of the appeal is the question of whether the college had a “females-only” contract with its students or not. The trial court decided, on demurrer, that no such contract existed. Today, a divided court affirms, holding that the several indicia of such a contract, identified by the plaintiffs, did not establish a clear and complete agreement to provide that type of education.
The students had contended that every bit or promotional literature they had received before accepting admission had indicated that the school was single-sex. Importantly, they also argued that the school had made oral promises to the same effect. The trial court had decided the case on a sort of enhanced pleadings, where the students had agreed to file a bill of particulars to define the alleged contract, and the Supreme Court agrees that what they provided was not enough to establish a binding contract to exclude men.
Justice Lemons (joined by Senior Justice Russell) dissents. He identifies eight specific allegations of promises in the pleadings, and concludes that, at the demurrer stage, those are enough for the claim to survive. He especially notes that some of the promises were oral, and those alleged promises “can only be tested at trial.”
The second appeal deals with gifts made to the school. I’ll preface my analysis of this decision by citing the eminent contemporary philosopher, Judge Judy Sheindlin: “When does a gift become a loan? When the relationship ends.” Now, her Honor was referring to romantic relationships, of course, but the second opinion subtly recognizes the wisdom of her words. Some of the school’s previous donors sought to enjoin the school from selling things like works of art in order to finance the gender-integration of the school. You can’t do that under normal contract theory – once you make an unconditional gift, it’s generally up to the donee what to do with it – so they looked to the law of trusts in an effort to hamstring the college.
These plaintiffs found a statute that entitles the Attorney General to intervene in an appropriate case “to protect the public interest” in the assets held in public trusts. The trouble with this theory, the court unanimously notes today, is that it necessarily reads into the statute language that isn’t there. The court finds that the law of corporations, not that of trusts, applies to this set of facts; to hold otherwise would “transform all charitable Virginia nonstock corporations into charitable trusts.” (It’s worth noting that the Attorney General was nowhere to be seen in this case, tacitly indicating that that office may not have regarded this as a public trust.)
A few additional points about these cases:
The donors lost the opportunity to argue a couple of matters because of technical requirements. In one, they filed an amended pleading, but did not incorporate their earlier pleading into the amended version. That waives their right to stand on their original pleading, as provided in Code § 8.01-273 (B). And they lost a second argument, the doctrine of cy pres, by failing to argue it in their brief.
I had the opportunity to watch these two cases get argued back in April, and it was a genuine pleasure. The oral advocates on both sides of each case were outstanding. And while I have not seen the briefs, I infer that those were well-crafted as well. This level of advocacy makes life much easier on the justices, as it helps them to focus on the issues instead of making them wade through a morass to determine what, exactly, is the issue in the case.
There was one issue that struck me during oral argument, but that is not addressed in today’s opinion in the first decision. I infer that this case was filed in late 2006or early 2007, after the decision was made by the college to admit men. (The students sued on a theory of anticipatory repudiation, before their future male counterparts could matriculate.) But the students didn’t seek a temporary injunction to prevent the admission of men pendente lite (no doubt because the injunction bond would have been astronomical). Accordingly, the first men showed up on campus last fall, and that freshman class finished final exams last month. It occurs to me that those men have a property interest (based on contract) in staying at the school. So why weren’t they necessary parties? If the female students had won the first suit, preventing the men from attending, where do those men go now? In my view, the men had rights that should have been protected in the litigation. Of course, the way in which the court resolves these cases today makes that concern moot.
Depending on the nature of the dispute, opinions in contractual interpretation cases are either very helpful as precedent, or else of little use beyond resolving the particular dispute between the parties. That’s because it’s rare that identical contract provisions will present themselves in subsequent litigation. (Especially where an appellate decision exposes a fatal flaw in a contract, diligent lawyers almost always find ways to correct the problem for future agreements.) Today’s ruling in Palmer & Palmer Co. v. Waterfront Marine will likely prove to be of the latter type, unless you’re suing (or being sued by) Waterfront Marine.
The object of this suit was to recover damage to a crane that was damaged during a construction project in the Croatan section of Virginia Beach. Waterfront Marine contracted with Palmer & Palmer for the former company to drive piles on a lot (which I infer from the street address was oceanfront) for the construction of an elevated home. During the process, one of Waterfront’s cranes fell into an old buried septic tank that had been covered by a few inches of sand. There was no evidence that either party knew about the existence of the tank.
Waterfront Marine pointed to a few contract provisions, and then pointed at Palmer and said, “Pay up; you owe me for the damage to my crane.” The operative language says that Waterfront “assumes no responsibility for . . . removal of underground or overhead obstructions.” The contract also provided that “Should additional work such as, but not limited to, underground obstructions . . . be encountered,” Palmer would pay Waterfront an additional $250 an hour to remove it.
If you read that carefully, you’ll note that there is a difference between the contractor’s not being responsible for a given condition, and the owner’s being liable for it. The court finds that this language merely says that Palmer can’t require Waterfront to remove subterranean obstructions. That’s not the same thing as imposing an affirmative obligation on the owner to remove all such obstructions, so the trial court’s award of damages and attorney’s fees to Waterfront is reversed.
The court also rules on another of Waterfront’s justifications for payment. The contract did specify the “Work and/or Services to Be Performed by Owner Prior to Pile Driving .” (Now we’re getting somewhere; this section imposes an affirmative obligation on the owner to do stuff.) That section charges Palmer to locate, protect, and remove “all utilities in area.” Waterfront argued that the septic tank was a “utility” and so it should have been removed. But the contract doesn’t define utility, so the court goes to a dictionary to find the meaning of the term. There are several definitions for the word, but the relevant one here is “a unit composed of one or more pieces of equipment usually connected to or part of a structure and designed to provide a service (as heat, light, power, water, or sewage disposal).”
The problem is, no one knew when the last time was (if ever) that septic tank was part of a unit to provide any sort of service. Even the City of Virginia Beach’s Department of Public Utilities had no record of a septic tank there, so it must have been awfully old. The court rules that “an empty, abandoned septic tank” isn’t a utility within the meaning of that contract.
As I noted above, lawyers who draft contracts are awfully smart. I can guarantee you that future Waterfront Marine contracts will contain language requiring owners to remove all underground obstructions, and making them fully liable for damage to Waterfront’s equipment and employees for the failure to do that. But it’s too late to save this case, which is reversed with final judgment for Palmer.
Calculating damages in a breach of contract case can sometimes be a complex undertaking. We get some useful guidance on that process today in Nichols Construction v. Virginia Machine Tool Co. Virginia Machine bought an industrial building in Henry County, and paid a bargain price because the building’s roof needed a lot of work. The new owner sought bids for the roof work, and eventually settled on Nichols Construction to do the job.
The contractor did the work, all right, but hardly to the owner’s satisfaction. Even before the new roof was installed, it was clear that it still had major problems, including sagging and leaks. (A pal of mine who’s in the construction industry once told me that no one ever built a flat roof that didn’t leak. Two guesses what kind of roof this was.) The contractor brought in the manufacturer of the roofing system, and they settled on some remedial work, which the contractor performed. But despite the contractor’s efforts, the problems persisted, and the owner eventually barred the contractor from the job, and sued for damages.
The trial court found that the contractor had breached the agreement, and no error was assigned to that finding, so it’s not in issue today. The only issue on appeal is the calculation of damages due to the owner. The owner brought in an expert who said that the only way to remedy the problem was to remove the defective roof and replace it. The contractor contended that that wasn’t necessary, and further argued that replacement cost shouldn’t be the proper measure of damages; it urged instead that the trial court regard the difference between the value of the property as-is, and the value it would have had if the roof were just fine.
The trial court adopted the owner’s theory of damages, and awarded the owner $450,000, representing the cost to tear off the old roof and put on a new, functional one. The contractor got a writ.
First, the Supreme Court notes that the goal of a damage award is to put the damaged party “in the same position, as far as money can do it, as if the contract had been performed.” There are usually two methods of determining that level of damages in a case like this, and they are the two recited above. But the court also notes that the cost rule (the one urged by the owner) is normally the best way to determine damages. The value rule (the one favored by the contractor) is only substituted when the cost rule would produce a disproportionate level of damages, or if repairing the damage “would involve unreasonable economic waste.” For example, if it would cost a million dollars to repair a building that’s only worth half a million, then you use the value method.
The owner made that argument, but the Supreme Court rejects it. Using the familiar metaphor of someone who pays for a Chevy but now wants a Caddy (I prefer the pithier phrase, “champagne taste; Budweiser budget”; but it wasn’t my case), the contractor argued that it was being assessed damages for a better roof than the owner had contracted for. That might work in some instances, but here, the trial court found that repair wasn’t a viable option, and the contractor didn’t challenge that finding on appeal. Moreover, the contractor didn’t adduce any evidence of what the cost of a new roof was as of the trial date, so there is no way for the Supreme Court to conclude that the replacement cost is disproportionate. (In the same vein, the contractor never introduced any evidence of the real value of the owner’s property, so it’s similarly impossible to decide whether this approach would involve “unreasonable economic waste.”)
There’s one last point in today’s opinion, and it offers the contractor a small dose of consolation. The Supreme Court reverses the judgment to the extent the trial court had refused to allow the contractor an offset for the unpaid part of the contract price. Speaking as a college Economics major, I heartily agree. Refusing that adjustment would put the owner in a superior position to what he would have been in if the contract had been performed. The case is thus remanded for the trial court to recalculate the damages awarded.
There’s a BIG difference between real property and personal property in Virginia. That doctrine gets another workout today in Jenkins v. Johnson, which involves property once owned by a man who had six children. Unfortunately, his wife was in the vicinity for only four of the conceptions. The other two children were born out of wedlock. In a distant day, perhaps all traces of the former stain of illegitimacy will be erased in our law and in our culture. Indeed, we have come quite a way from the days in which illegitimate children were routinely called bastards, with all the negative connotations of that word. Nowadays, illegitimate children can inherit property just as their “legitimate” brethren and sistren can. But while the law has come a long way toward removing the societal punishment inflicted upon these innocent persons, there are still certain ways in which illegitimate children are regarded as second-class citizens. One of those is the right to inherit property though a decedent’s estate.
Last year, the court decided Belton v. Crudup, in which it ruled, perfectly consistent with the statutes, that an illegitimate heir was required, as a condition of inheriting through a decedent’s estate, to file an application within one year. That decision seemed particularly harsh since the decedent’s personal rep had initially filed a list of heirs that had included the illegitimate child; but the court ruled that such a filing didn’t excuse the prospective heir’s failure to file the required form.
Today, the court takes up a similar claim in the context of real property. The two illegitimate children didn’t do anything for many years after the death of their father. When the widow went to sell a piece of property 13 years later, the two children sought a share of the value of the land, claiming to be full heirs to their father’s real property.
Under the reasoning of Belton, you’d think the claimants would be out of luck, but as I said at the beginning of this sermon, there’s a BIG difference between real property and personalty. And that difference is case-dispositive here. The court rules today that the widow and her four children must share the value of the property with the decedent’s other two children.
The decisive difference is that the one-year provision is for those looking for something out of “the settlement of a decedent’s estate.” For someone who died intestate, as did this man, the estate includes his personal property, but it doesn’t include his land, which passes directly to his heirs immediately upon his death; no application required. Thus, all the claimants had to show was that they were the decedent’s children, and they’re now co-owners of the land. The trial court had ruled that the two had established paternity, and the Supreme Court refused a writ to review that part of the judgment. Accordingly, the Supreme Court affirms the judgment in favor of the two claimants.
In Duty v. Duty, two people with the same last name squabble over a half-acre parcel in Russell County. Given the extent of the litigation to this point, and the currently plummeting real estate market, I wonder whether the two, taken together, have spent more to litigate ownership than the parcel is worth.
We don’t know how the two Dutys are related, if at all, but they’re each holding a deed to the same tract. In the trial court, each tendered that deed into evidence, and David Duty added a few additional deeds, which he contended comprised his chain of title. But the earliest of his deeds, and Margaret Duty’s sole deed, share the same defect – neither had a source clause, indicating how and where the grantor derived title to the land. The challenge for the trial court became how to reconcile the competing claims.
The trial court ruled in favor of Margaret, whose one and only deed was dated 1973, and described the property by metes and bounds, including natural and artificial monuments such as a creek and US Route 19. The deed helpfully stated that the parcel comprised “0.521 acres, more or less.”
David’s earliest deed was from 1938, which is a good sign for him, since Virginia is a “race notice” state (whoever gets a deed recorded first is regarded as having the superior title). But that deed related to a one-acre parcel, and while it also referred to some monuments in the meandering metes-and-bounds description, it’s admittedly hard to match things up completely to ensure that we’re talking about the same property. Later deeds in his chain (the next one was from 1975) used the same property description as in Margaret’s deed (the 0.521 acres), so at least now we know we’ve got the same piece of land. David’s final deed was a 2004 deed of gift into him.
The trial court found, as a matter of fact, that David had actual knowledge of Margaret’s early deed, going back as far as the 1980’s, so he cannot claim to be a purchaser without knowledge of defects in the title. (Trust me; this means a great deal when litigating title.) David wisely pointed to the fact that his predecessor in title, one Bonnie Lou Gibson, had no such knowledge, and he argued that “a purchaser with notice from a purchaser without notice takes good title,” citing a 1963 decision to that effect. But he neglects one point – he isn’t a purchaser. Remember his claim to the property is by deed of gift. The court notes that one cannot bootstrap good title in this way through a deed of gift; that privilege is reserved for those who paid for their land.
Today’s opinion contains a useful ruling on the reliability of evidence, which will have application elsewhere. The trial court found that David had not proved that the land in the 1938 deed encompassed the 0.521 acres we’re squabbling over here. David argued that he didn’t have the burden to establish that; that his deed was prima facie evidence, and it was up to Margaret to show otherwise. No dice, the Supreme Court rules today; the proponent of evidence “vouche[s] for its contents and its authenticity,” so it’s up to David to make that showing. (This, to me, makes perfect sense. Otherwise, one could show up with any deed to several thousand acres from the turn of the last century, and then challenge one’s opponent to prove that it didn’t contain the subject land.)
There’s one last interesting point that relates to David’s failed effort to make that very connection. In footnote 3, the opinion observes that David introduced at trial a plat that included several of the natural and artificial monuments that were present in both deeds. But that plat only relates to a 0.31 acre parcel, and it doesn’t include the biggest monument – US 19 – at all. The footnote concludes with this bon mot, courtesy of Senior Justice Carrico, the author of today’s unanimous opinion:
“When questioned about the discrepancies during oral argument [in the Supreme Court], David Duty’s counsel stated that he could not ‘explain anything about the plat, it was just a plat.’ We cannot explain it either and have not given it any consideration.”
My best guess is that David’s counsel would like a do-over on that particular question and answer. Appellate attorneys spend plenty of time in advance of oral argument, thinking of possible questions from the court so we won’t have to answer anything on the fly. This one looks to me to have been an eminently foreseeable question.
There’s one statute of frauds case today – Moorman v. Blackstock, Inc. I don’t propose to recite all the facts, which are very lengthy (today’s opinion contains nine full pages of facts). Let it suffice to say that a family, comprising several siblings and their relatives, proposed to sell a 194-acre family farm to a developer. The farm had been in the family since the Nineteenth Century, so the sellers wanted some control over its ultimate development (mansions, good; slums, bad). The prospective buyers and sellers exchanged numerous e-mails and faxes over the course of about two years, but they never agreed on every essential term, and no contract was ever signed.
If you know the statute of frauds, you know that that last fact is generally fatal to an action for specific performance. Indeed, the Supreme Court concludes today that there was no meeting of minds on all essential terms, and the absence of a written agreement thus defeats the primary request for performance. But the unsuccessful buyer, who sued to compel the sale, also argued that the sellers were equitably estopped from asserting the statute of frauds. The buyer had spent a quarter-million dollars in acquiring an adjacent tract of land that would be needed for development. But detrimental reliance, the court rules, is only one of the elements of an equitable estoppel plea. You also have to show (in an action relating to a land sale) that the other side falsely represented or concealed a material fact – in essence, fraud. There was nothing of the sort in this record, so the trial court’s reliance on estoppel was unsupportable. The buyer played one last card, arguing that the agreement had been partly performed. The buyer pointed out that he had undertaken surveying, testing, and engineering work on the site (the draft agreements had all contemplated that the buyer would have pre-closing access to the property to enable him to perform this work). This might get him somewhere, but alas, the buyer’s own trial testimony dooms him here. He told the trial court that he had done those things in order to facilitate his separate acquisition of a right-of-way to a public road, not for his purchase of the farm. In the end, the Supreme Court reverses and dismisses the specific performance case.
I don’t sense that this decision breaks any new ground in the law of specific performance. Nor does it signal anything new about the court’s long-standing respect for the salutary purposes of the statute of frauds. But any guidance the court can give us about the exceptions to the statute, such as for part performance or estoppel, will always be welcome, and that will probably be the primary purpose for which this case will be cited.
In a long-awaited development, the Supreme Court finally decides the question of whether a trial court has the authority to defer a finding of guilt in a criminal case. Sort of.
Two cases decided today involve deferred findings. By far the more “mature” is Moreau v. Fuller, which involved a deferred finding in a juvenile court. When the juvenile judge did that, the local Commonwealth’s Attorney headed up to circuit court and got a writ of mandamus directed to the juvenile judge, essentially saying, “Rule, already.” The judge got a writ to review the case, specifically including the question of whether mandamus is an appropriate remedy to compel a judge to decide a case.
The court decides today that it’s the wrong remedy. Mandamus lies only to compel ministerial acts, not discretionary ones, and the acts of deciding a case and pronouncing sentence are emphatically discretionary.
The second case is Gibson v. Commonwealth, a more conventional appeal involving a conviction for failure to pay a withholding tax. Last year, the Court of Appeals ruled emphatically that trial courts had no authority to defer findings absent a specific statutory grant of that authority. The legislature has given judges that specific authority in certain limited instances, and the CAV had reasoned that if courts possessed an inherent authority to do that, then there would be no reason for those specific statutory grants. The legislature isn’t presumed to take unnecessary actions, so the CAV was compelled to conclude that no such general authority exists.
In a remarkable fashion, the Supreme Court today reverses that doctrine by finding that, in this case, it wasn’t properly before the Court of Appeals. That’s because the trial court had never ruled that it had or did not have such authority. Courts don’t decide legal questions in a vacuum, and where the record doesn’t support the presence of a given legal question, it’s error for an appellate court to decide it.
Ironically, the court overrules the CAV’s strong no-authority ruling, not in the Gibson case but in Moreau. (Check the Moreau slip opinion at page 12, footnote 5. One can only wonder how the Court of Appeals will view this reversal of one of its major holdings, coming as it does in a footnote on an ancillary issue in a different case.)
These two cases, so different procedurally, are nevertheless inextricably intertwined. Indeed, the Moreau case has been passed by the court several times since it was argued last year, presumably in order to permit its simultaneous adjudication with Gibson. Both opinions are authored by Justice Lemons who writes with characteristic clarity (so that even a caveman can understand the ruling, perhaps?), noting that “the act of rendering judgment . . . is the very essence of adjudication . . ..” Because of the separation of powers, courts have the inherent power to adjudicate, a function that neither of the other two branches of government can take away.
Now, then. The end of the story has not yet arrived. Justice Koontz writes a short concurrence in Moreau, pointing out that the ultimate question of whether trial courts can defer findings is till up in the air. And he’s right; Moreau decides only that mandamus isn’t a suitable remedy to compel a final adjudication. (I have mused that if the Commonwealth really felt that the trial court didn’t have the power to defer findings, then an appropriate remedy would be prohibition, asserting that the lower court was exceeding its jurisdiction by deferring findings. Perhaps another day.) Justice Koontz strongly hints that his sentiment is in favor of continuing this long-standing practice, while Justice Kinser, joined again by Justice Agee, writes her own concurrence in which she takes the opposite approach to the ultimate question. These concurrences, telegraphing the justices’ views of a question that the court is yet to confront directly, are truly remarkable, adding yet another layer of complexity to this fascinating pair of cases.
* * *
Over the course of the last year or two, a clear trend is developing in the Supreme Court’s criminal jurisprudence. But I’m not aware of any articles, essays, or treatises that deal with this situation; it’s the elephant in the room that everyone (at least, those of us who follow the appellate courts) can see, but no one has acknowledged. But as today provides significant additional evidence of it, we might as well talk about it in the open.
The Supreme Court is granting criminal writs from the Court of Appeals and reversing convictions at a remarkable rate. The pinnacle of this trend (so far) came in one session last year, when fully 20 of the 29 cases on the argument docket were criminal appeals from the Court of Appeals. That’s astronomical, considering that in past years, three to five criminal appeals per session were the norm. In my view, the continuation of this trend is part of the reason why the pace of civil appeals has slowed. Once upon a time, a litigant could count on having her appeal decided on the merits by the Supreme Court within 11-12 months after the date of judgment. Nowadays, that figure is probably closer to 15-16 months, because criminal cases get priority on the Supreme Court’s docket, just like they do in the trial courts.
The Supreme Court has shown a notable tendency to grant such writs and to reverse even in cases where the CAV doesn’t even grant a writ. Why is all this happening? The simplest explanation would be that the Supreme Court simply isn’t as conservative as is the Court of Appeals, where a substantial number of former prosecutors now wear robes. (Note that I didn’t say “is more liberal than.” Neither court can be described as a hotbed of liberalism. But the CAV is clearly more conservative, as a whole, than is the Supreme Court.) The justices somehow take a wholly different view of many of these criminal cases than do the judges of the CAV. Undoubtedly, there is a spectrum of views on the Supreme Court, and one or two of the justices could be described as relatively conservative in criminal cases. (No, I will not name names. Go read the opinions and figure it out for yourself.) But as the following four decisions, all unanimous, reveal, the Supreme Court is no longer a comfy, warm environment for the Attorney General when he seeks to preserve his victory in the Court of Appeals.
I never even knew before today’s ruling in Jones v. Commonwealth that Virginia had a statute that made it a crime to maintain a “fortified drug house.” There are three elements of the offense, which is a Class 5 felony. You have to “substantially alter” a structure from its original status to make it harder for police to enter; you have to use it for manufacturing or distributing drugs; and it has to be the object of a valid search warrant.
Only the first element of that statute is at issue in today’s appeal; when police came to Jones’s property, they found that he had propped a stove against the rear door and secured that in place with a 2×4, braced against the foot of a stairway. He also jammed a screwdriver into the door latch. That didn’t meaningfully stop the police, who got in by the simple expedient of clobbering the door with a battering ram.
At this point, the game is afoot; did these impromptu means constitute substantially altering the house from its original state? The trial court and the Court of Appeals held that it did, but the Supreme Court, even viewing the facts in the light most favorable to the Commonwealth (since it won at trial), disagrees. The court fids today that while obstructing the doorway with the stove certainly impeded the gendarmes’ entry, it still wasn’t a substantial alteration of the house. The court reaches that conclusion because “A house’s original status is not substantially altered by the temporary movement of personal property within it.” The opinion hastens to add that the court isn’t providing a definitive, bright-line test for what is and what isn’t a substantial alteration; that, the court concludes, will depend on each individual set of facts from case to case.
The next case, Pryor v. Commonwealth, was at least one in which the CAV granted a writ. It involves a controlled drug by that was recorded by a very small video camera. Actually, there were two such purchases, but at trial, the civilian purchaser (that’s the polite term for what the crooks would call her) waffled on her description of who actually sold her the drugs in the second purchase. The trial court accordingly dismissed the prosecution for Sale #2, but let the jury decide Sale #1. Since the videotapes of both sales were in evidence, the jury got to take them back to deliberate. At one point, the jury asked if it could watch the tape of Sale #2. The trial court told them that they could, but only as it may be relevant to Sale #1.
How on earth could the later video prove anything about the previous sale, you ask? Because, the Commonwealth responds, it helps to establish the identity of the vendor. Remember, the purchaser was a little fuzzy on her ID once, so any help the jury can get on this point should be useful. That explanation was good enough for the Court of Appeals, but it falls flat today; the Supreme Court rules that even if the tape did prove anything about Sale #1, the prejudicial effect greatly outweighed any probative value, so it was error to give it to the jury. In its June 2007 ruling (which I discussed here), the CAV had respected the discretion of the trial court in weighing this balance, but the Supreme Court isn’t as deferential, so the conviction is reversed and the case is remanded.
A jury question is also the trigger for a reversal in Booker v. Commonwealth, a cocaine distribution appeal where Booker was convicted of three separate offenses. This decision relates only to the sentencing phase, so Booker isn’t looking at freedom any time soon. But he does get a new sentencing hearing before a new jury. Here’s why:
When instructing the jury on sentencing, the trial court informed it that Virginia had abolished parole, so Booker would serve at least 85% of the sentence imposed by the court. After deliberating for some time, the jury submitted a question: “Can the Judge alter the sentence?” Hmmm, the lawyers think to themselves; I wonder what they’re thinking? Is this bad for me? (I know this because this is lawyers’ reaction to every question from the jury. We are, in this context, a fairly paranoid lot.)
The correct answer to the question, as criminal attorneys on both sides of the aisle know well, is that the judge can reduce the sentence but cannot increase it. That’s how the trial court was inclined to answer. But Booker objected, arguing that such a response might send the wrong message. Booker asked that the court tell the jury that it was not to concern itself with what would happen afterwards. So the judge came up with a Solomonic solution, and said this to the jury: “The court has the power to reduce, but not increase the sentence. However, you shall not concern yourselves with what happens after your verdict is returned.”
Armed with this guidance, the jury recommended separate 12-year prison terms for the three convictions. The trial court imposed that, giving Booker 36 years to mull over the wages of this particular sin. But that didn’t stop him from appealing. The Court of Appeals affirmed in an unpublished order, finding nothing wrong with the trial court’s answer to the question. But the Supreme Court finds that this answer invites speculation by the jury on future events, likening it to the possibility of Booker’s earning good-time credit for completing educational programs while in prison. True, the judge might reduce the sentence, but why invite the jury to speculate on that possibility? The Supreme Court finds today that answering the question in the manner set forth above does just that, so it remands for a new sentencing hearing.
The Commonwealth also argued that the trial court’s final admonition, telling the jury essentially to disregard the explanation it had asked for and was receiving, did nothing to erase the taint of the answer.
There’s an intriguing decision today in Hubbard v. Commonwealth, a prosecution for felonious escape from custody. When a state trooper spotted Hubbard cruising down the road with illegal windshield tinting, he activated his lights. That, in turn, activated Hubbard’s right foot; the suspect hit the gas and accelerated to 85 mph in a 55 zone. Hubbard led the trooper on a ten-mile chase (if you think about it, that’s a really, really long time to be evading a police officer) before he ran of the road and headed toward a nearby forest.
Give credit where it’s due; the State Police hire some physically fit troopers. Despite his head start, Hubbard was unable to outrun the trooper, who caught and tackled him in the woods. The two wrestled for a time before the trooper got Hubbard face down. When he reached for handcuffs, Hubbard resumed struggling, eventually freeing himself by striking the trooper. He thus got away, and escaped into the forest.
What, you think he’s getting away that easy? The trooper got out his radio and asked for a K-9 backup unit, and Hubbard soon had the right to remain silent. He also got slapped with a charge of felonious escape from custody.
In order to appreciate today’s ruling, you need to know the elements of a felony escape charge. The Commonwealth has to prove that the defendant was in the lawful custody of a police officer; that he was charged with a criminal offense before being taken into custody; and that he escaped by force or violence. If you read that list quickly just now, you might have skimmed right over the problem here – “charged with a criminal offense before being taken into custody.” No one had charged Hubbard with anything at the time the trooper wrestled him to the ground. Sure, he had abundant probable cause for an arrest – let’s go with felony eluding, for starters – but what, exactly, does it mean to be “charged with a criminal offense”?
The court rules today that probable cause isn’t enough to prove this element of the charge. A “charge,” the court decides today, requires “a formal accusation upon which a trial court could act and pass judgment.” In most instances that means an indictment, but in any case it has to be a written charge. Accordingly, an essential element of the conviction has gone unproven, so the conviction is reversed and the indictment is dismissed. No word on whether the traffic judge nailed him on that eluding charge . . .
There’s a razor-thin distinction over a jury instruction in Velasquez v. Commonwealth, where the court refines an extremely fine point of law. But then the whole thing collapses in a figurative heap. Read on:
Velasquez was charged with rape and with breaking and entering with the intent to commit rape. The jury convicted him of rape, but shook him loose on the burglary charge. During the trial, the court instructed the jury: “In the absence of evidence showing a contrary intent, you may infer that a defendant’s unauthorized presence in a building of another was with the intent to commit rape.” This instruction was obviously directed to the specific intent component of the burglary charge.
The problem is, it went too far; similar instructions dealing with burglary left the ultimate intent up to the jury. Here’s one that the court still finds appropriate: “When the Commonwealth has proven beyond a reasonable doubt that the defendant made an unlawful entry into a dwelling house in the night time, the presumption is that the entry was made for an unlawful purpose and the purpose may be inferred from the surrounding facts and circumstances.”
See the difference? The second instruction tells the jury that the law presumes the intent was unlawful, but leaves it up to the jury to determine exactly what that intent was. The first one, the one given in Velasquez’s prosecution, went straight to an inference of intent to commit the specific crime of rape.
Since Velazquez was also charged with rape, the court finds that this instruction was unduly suggestive, and constitutes an impermissible comment on the evidence. Accordingly, the court finds that it was error for the trial court to give it.
Alas for poor Velasquez, he still gets twenty years of free room and board, with the compliments of the Attorney General. That’s because the court finds that the error was undoubtedly harmless, as the evidence of guilt in the case was overwhelming. That included Velasquez’s confession and a DNA match. This case thus represents one of the few in which the court will decline to overturn a conviction where the jury has been improperly instructed.
The significant lesson from this case for criminal practitioners is that the court has disapproved the use of VMJI 12.510 in this type of case. While we have all seen dicta in which the Supreme Court says, in essence, “Just because it’s in the model instructions, doesn’t necessarily make it right,” it is still big news when the court singles out a given instruction as erroneous. I recommend, at a minimum, that you slap a Post-It note on that page in your model instruction book, with a citation to Velasquez, until the new filler pages come in to correct it.
Porter v. Commonwealth is the longest opinion of the day, by a wide margin (the slip opinion is 111 pages). It’s a capital murder appeal arising out of the shooting death of a police officer in Norfolk in 2005. In some ways, the opinion is noteworthy for what’s not present – scores of assignments of error, for one. In the 2005 decision that affirmed the death sentence for sniper John Muhammad, for example, the defense had assigned 102 errors. As in Muhammad, many of Porter’s assignments are found to be abandoned by not being argued in the briefs – 12 out of 21, in Porter’s case.
The case presents some of the familiar litany of death penalty issues, but in my view, it will be known in legal circles primarily for what it says about a trial court’s subject matter jurisdiction when the venue of the trial gets changed. The case is decided by a vote of 5-2, with the majority voting to affirm; Justice Agee writes the principal opinion. Justice Koontz files the principal dissent, and Justice Keenan files a short statement in which she agrees with Justice Koontz on one dispositive issue, that of subject matter jurisdiction. (Justice Keenan writes that, in her view, the trial court had no subject matter jurisdiction, so Porter “thus ultimately will be executed based solely on the indictments that were returned against him.” Now, that’ll get your attention.)
I will engage in a bit of understatement her when I report that this crime and Porter’s prosecution got a great deal of media attention down here in Tidewater. The officer had confronted Porter, who was a convicted felon, in a high-crime part of Norfolk known as Park Place. Porter testified that the officer drew his gun first, and that he [Porter] responded out of panic, but the jury chose to believe the several eyewitnesses who said that Porter simply drew his own pistol, pointed it at the officer’s forehead, and pulled the trigger. When the mortally-wounded officer collapsed, Porter then bent down and shot him twice more in the head. He then took the officer’s gun and fled, eventually being captured in New York a month later.
Given the inevitable local publicity about the case, Porter sought a transfer of venue away from Norfolk. He might also have hoped to avoid Norfolk Circuit Court Judge Charles Griffith, who was initially assigned to the case. Judge Griffith was widely perceived by the criminal defense bar as being very, very tough on criminal defendants, so it probably occurred to Porter’s lawyers that moving to another jurisdiction might carry benefits beyond avoiding publicity.
The judge granted the motion, but with a twist: He moved the venue to Arlington, but decided that he would travel with the case. Normally when that happens, an order of designation is entered by someone – perhaps the chief justice; maybe the chief judge of the transferee court – authorizing the judge to preside over the case. In this instance, no such order was ever entered, and that’s the source of the jurisdictional dispute. The life-or-death question here is, Can a circuit court judge just pick up and move to another jurisdiction and try a case there?
There’s more on this point – the court conducted all of the trial while ostensibly sitting as the Circuit Court of Arlington County. But when the jury was done with its job, having recommended death, the trial court then scheduled a sentencing hearing for back in Norfolk Circuit, and entered the sentencing order from that court. The secondary jurisdictional question, then, is whether the law authorizes one court to try a defendant for a crime, and another court to sentence him.
Nonlawyers will probably regard these highly technical jurisdictional issues as the equivalent of, “How many appellate judges can dance on the head of a pin?” That is, they focus only on the unquestionably sufficient evidence of Porter’s guilt, and figure that the rest of it doesn’t matter, as long as justice is done. For those of us who know better, these are weighty issues indeed, and the two principal opinions spend a great deal of ink analyzing them.
The majority concludes that the venue issue implicates the trial court’s authority to act, not its subject matter jurisdiction, so any error would render the judgment only voidable, not void ab initio. That matters a great deal because Porter had not objected to Judge Griffith’s decision to travel with the case. Indeed, this jurisdictional issue was raised by the Supreme Court, sua sponte, and was the subject of supplemental briefing by the parties to address the point. Of course, Porter latched onto the argument and maintained that the trial court had no subject matter jurisdiction to act extraterritorially, and Justices Keenan and Koontz agree with him. But the majority rules that since he didn’t raise this argument in the trial court, that constituted a waiver of the issue.
The opinion also contains a lengthy debate as to the propriety of the trial court’s refusal to appoint a neuropsychologist to help him with sentencing. Specifically, the jury found the future dangerousness factor to justify the death penalty, and Porter wanted the expert to show that he would not, in fact, pose a future danger if he were sentenced to life in prison. The majority holds that the evidence would not have been relevant because Porter did not show a “particularized need” for it. In this context, “particularized need” means that the need is particular to this defendant, not to the class of persons facing life in prison. In addition, the majority importantly rules that the jury (and, concomitantly, the trial court and the Supreme Court) must determine future dangerousness by referring to past events – the facts of this crime, plus the defendant’s personal and criminal history. This kind of testimony would have related to future factors, and is thus not a proper subject for the jury’s consideration.
This is a complicated proposition, as it necessarily entails some cutoff point at which evidence is no longer regarded as relevant. I will admit to some uneasiness with the concept that a defendant could not put on evidence that conclusively shows that he would not commit any violent acts in the future, and could thereby be sentenced to death based on future dangerousness. But the majority cites several of the court’s previous opinions in support of this doctrine, and a large number of those cites are followed by the phrase, “cert. denied.”
The dissent concludes with a warning. Justice Koontz is clearly troubled by several aspects of this trial (I have not attempted to analyze here every one of the legal issues; there are a few others of some importance), and forecasts that permitting sloppy procedures in death penalty cases will eventually erode public confidence in the way the judicial system administers justice in such cases. He notes with some sense of relief that the procedures used in this case were “atypical of the manner in which our trial courts conduct capital murder trials.” This is a clear reference, in my mind, to the fact that that virtually all trial courts will obtain an order of designation, instead of merely a street map, before sitting in another jurisdiction.
Commonwealth v. Jackson is not, strictly speaking, a criminal case. But I’m putting it in this section, instead of creating a separate section for sexually violent predator cases, as I have done in the past. That’s because the most important – indeed, the most surprising – ruling of the case will affect hundreds of criminal cases for every SVP case. If you handle criminal litigation, either as a prosecutor or a defense attorney, you must learn about this case!
I’ll first spoil all the surprise by telling you that the inmate wins this appeal. Then again, perhaps that’s not such a big surprise, because inmates have a remarkable winning percentage in these cases. My own theory about that is that SVP commitments are prima facie inconsistent with American jurisprudence, which presumptively entitles each person to liberty. Felons give up that liberty by committing their crimes, of course, but once they have served their prison sentences in full, it takes a compelling state interest to justify confining them further.
Inmates don’t win all of the time, to be sure; nor should they. But my sense is that this Supreme Court holds the Commonwealth to a very high standard of proof when it comes to these commitments – and justifiably so.
The Commonwealth’s case against Jackson as a sexually violent predator was a bit shaky. That, at least, was the conclusion of the trial judge who conducted the preliminary hearing. The government expert (I infer he was a psychologist) first opined that Jackson wasn’t a SVP, but then the Commitment Review Committee gave him some additional information, and he changed his mind. The additional information was an unadjudicated accusation of sexual assault from eleven years ago. In addition, the expert acknowledged on cross-examination that he had done roughly 40 SVP examinations, and had opined in favor of commitment all but thrice. In two of those three exceptions, the Committee had given him additional information, and he had switched the conclusion in his report.
This is the stuff of which brutal cross-examinations are made – a vacillating witness who almost always gives the government favorable testimony, and who changes his views upon helpful suggestion from the government. Trial lawyers salivate at the chance to examine such a witness, and Jackson’s court-appointed lawyer had at him. It worked, too; the trial court decided that there was insufficient probable cause for further testing to determine if Jackson was, in fact, a sexually violent predator. The court accordingly dismissed the petition.
The first issue the Supreme Court tackles today is just what “probable cause” means in this context. We all know what it means in terms of criminal procedure, but SVP proceedings aren’t criminal; they’re civil. After examining the language of the statutes (the SVP Act doesn’t define the term), the court concludes that the term means the same thing here that it does in criminal cases. All seven justices agree on this point.
But the justices diverge on the majority’s next step, which is to acknowledge and approve the trial court’s decision, based on his live evaluation of the witnesses, of credibility. Now, trial judges evaluate credibility all the time; that’s why they get the medium bucks. (We can talk in depth about judicial pay another time, but I couldn’t resist throwing in a gratuitous opinion there.) This trial court saw the witnesses, decided what the facts were, and made a ruling. How could there be any disagreement about that?
Because this is the probable cause hearing; that’s why. The purpose of such a hearing is to ensure that there is at least some plausible reason to hold someone is custody until he can be indicted (in criminal cases) or further tested (in SVP cases). Evaluating credibility has to be done at the trial on the merits, but does a trial judge get to make credibility determinations at this early stage?
As of today, yes he does. A majority of the court, led by Justice Agee, finds that it’s perfectly permissible for the court to decide matters of credibility in deciding the early state of the case against either type of defendant. The Commonwealth had argued that it merely had to make out a prima facie case, at which point the court had to certify the matter for further proceedings. The majority rejects this approach, which would, it finds, make the trial judge “a mere gatekeeper, [instead of] the sole judge of the credibility of the witnesses.”
Justices Kinser and Lemons dissent, taking up the Commonwealth’s objection to this early view of credibility. They argue (correctly in my view) that “the majority decides an issue of first impression without acknowledging that it is doing so . . ..” They then assert that credibility determinations must be reserved for the finder of fact at trial, citing strong language in decisions from other jurisdictions on this question. They also conclude that preliminary hearings inquire into probabilities, not certainties, so credibility really isn’t an element of the analysis yet. The dissent would rule that the proper function of the judge in a probable cause hearing is to “determine whether the evidence, if believed, supports a finding of probable cause.”
I sense that this ruling will provide defense attorneys with an important weapon, the ability to mount an attack on a prosecution before it starts. True, the Commonwealth can always seek a direct indictment, but the prosecution will have to release the defendant in the meantime. The ruling may also have the effect, foretold in the dissenting opinion, of giving the defense an opportunity for some free “discovery” in criminal cases, something not contemplated by Title 19.2. My own humble prediction is that this decision will spur an effort by prosecutors to secure passage of legislation designed to overturn it.
Late in 2001, the Orange County Board of Supervisors peered over what looked like a terrific idea for a development along Lake Anna. The owners of a tract of land on the lakeshore wanted to develop thirty lots, and to reserve a sizeable chunk of land as open space. Featuring acre-sized lots and over 100 undeveloped acres, the proposed Daniel’s Point no doubt looked likely to feature upscale homes and attract wealthier families. The Board approved the developer’s request for a special use permit.
A few months later, the developer recorded a plat showing the 30 lots and 106 acres identified as “remaining land.” The legend on the plat stated in part, “Reserved area as shown hereon is intended as open space as part of Daniel’s Point subdivision and is not to be further developed or subdivided.”
A year and a half later, the developers sold the 106-acre “remaining land” to a couple. That may or may not have raised some eyebrows, as everyone no doubt understood that the tract couldn’t be developed; it said so right on the plat. But 2 ½ years later, the new owners applied to the county for a permit to build a home there. Initially, the county blew it, and issued the permit. Then someone fell awake and decided that the permit had been issued in error; the zoning administrator declared it null and void, since the land couldn’t be developed, in accordance with the restrictions on the plat. (In case you’re wondering about the doctrines of estoppel and waiver, they don’t apply to governments when they act in their governmental capacity. Trust me on this.) (What, you don’t trust me? Go read Segaloff v. Newport News, 209 Va. 259 (1968) and get back to me.)
The couple appealed the administrator’s decision to the Board of Zoning Appeals, but the BZA affirmed. So did the circuit court, on further appeal. But the Supreme Court granted a wit, and today, in Lovelace v. Orange County BZA, it reverses the judgment, and tells the county to fork over the permit. Here’s why:
The county ordinance requires the recordation of a declaration of restrictions in situations like this, so purchasers will be on record notice of the limitations on the developability of the land. These developers never did that. But remember the legend on that plat? That was recorded, and surely that’s enough to let the prospective purchasers know about the restriction . . .
The trouble here, as it so often is in legal matters, is an ambiguity. The legend said that the “reserved area” couldn’t be developed. But nowhere on the plat is any parcel designated as “reserved area”; the subject tract is described as “remaining land.” Of course, they might be the same thing; the developers may well have intended that the 106-acre area be the reserved area, and thus undevelopable. But that’s not what the plat says.
That makes the designation on the plat ambiguous. And since restrictions on land use aren’t favored, any ambiguity is resolved in favor of the free use of land. That means the couple get to develop their enormous “lot” with the house of their dreams after all.
If you’re wrongfully arrested and charged with a criminal offense, the law provides a mechanism for expunging records of your arrest and prosecution. That can be important for your job, including jobs that require security clearances. The expungement statute, Code § 19.2-392.2, empowers you to file such a motion when you’re acquitted, when the prosecution takes a nolle prosequi, or when “the charge is otherwise dismissed.”
So what about dismissals under first-offender statutes? Are those among the “otherwise dismissed”? That’s the dispositive question in Commonwealth v. Dotson, involving a first-offender dismissal for a possession of marijuana charge.
Dotson persuaded a trial court to expunge her record three years after she fulfilled the terms of her first-offender deferral. The Commonwealth appealed that ruling, and the Supreme Court agreed to take up the question. Today, the court reverses, finding that a first-offender dismissal is not the kind of dismissal the expungement statute was crafted to address.
Dotson had pleaded nolo contendere to the original charge several years ago, upon which basis the court fashioned her first-offender terms. (For our purposes, a nolo plea is the functional equivalent of a guilty plea.) That fact proves to be one of two vital criteria that lead to today’s reversal. The other is that the first offender statute, Code § 18.2-251, empowers the trial court to defer a finding on terms “if the facts found by the court would justify a finding of guilt.” Those two facts mean that Dotson acknowledged that she wasn’t innocent, and the trial court had enough facts before it to find her guilty. That means she wasn’t an “innocent citizen.”
Why does that matter? Because the expungement statute, by its very terms, was created to protect “an innocent citizen’s ability to obtain employment, an education and . . . credit.” (See for yourself; it says so right here.) The Supreme Court thus finds that a person who is in fact guilty can’t take advantage of the first offender provisions.
The timeworn phrase is that “you can’t sue the King in the King’s court.” It’s borrowed from the English common law, of course, and became a part of American jurisprudence a long time before you and I were born. The only exception to this doctrine is where the sovereign waives its immunity and consents to be sued. One easy example is the Tort Claims Act, containing a limited waiver of that immunity. Another is the state’s liability for inverse condemnation, which arises in contract and out of Article I, section 11 of the state constitution. Today, in Gray v. Secretary of Transportation, the court takes up another constitutional provision, to see whether another such waiver exists.
Northern Virginia is the only part of the Commonwealth where the traffic is as bad as it is down here in Tidewater. But up north, regional planners at least had the good sense to plan and build a useful mass transit system (otherwise no one would ever be able to get around the District of Columbia and its suburbs in Virginia and Maryland). If you live up there, you know about the twin roadways known as the Dulles Airport Access Highway and the Dulles Toll Road, which occupy pretty much the same strip of land. The Airport Authority (a multi-jurisdictional compact between the three governments), which owns the right-of-way for the two roads, has leased the land for the Toll Road to the Commonwealth, so while the Authority owns the land, the Commonwealth operates the Toll Road.
Now, the Authority wants to extend the Metro all the way to DullesAirport, which seems like a fine idea to me; the ability to ride the Metro all the way to the airport is virtually certain to reduce congestion on the roads and at the terminal’s parking facilities. The Authority and the Commonwealth agreed that the best way to approach this was for the Commonwealth to turn over the Toll Road to the Authority. That means that the Authority will operate and maintain the Toll Road, and will set the toll rates.
And that brings us to today’s controversy – two citizens filed suit to stop the handover of the Commonwealth’s property to the Authority. The only issue in today’s ruling is whether the Commonwealth is immune from this type of suit, or if it has waived that kind of immunity. The trial court had ruled in favor of the Commonwealth.
The key factor here is whether the constitutional provisions upon which the citizen rely are “self-executing” or not. Everyone agreed that if those provisions are self-executing, then the Commonwealth is not immune and the judgment gets reversed; if they’re not self-executing, then the trial court got it right and the Commonwealth is immune. The Supreme Court finds today that these provisions are self-executing, so the matter goes back to the trial court.
Perhaps the best-known example of a self-executing provision of the constitution is the one I mentioned above, in Article I, section 11, which provides that the Commonwealth may not take or damage private property for a public purpose without paying just compensation. Hundreds (more likely thousands) of inverse condemnation suits have been based on that language, and the Commonwealth clearly is not immune from that type of action. On the other hand, some constitutional provisions aren’t self-executing. The court gives one example today, from Article XI, section 1, noting the public policy of the Commonwealth in favor of clean air and water and open access to recreational property. The dividing line between the two types is whether the provision “supplies a sufficient rule by means of which the right given may be enforced . . ..” That is, if it’s clear what the enforcement procedure is, then you’ve probably got yourself a self-executing provision. You have to admit, the general, aspirational language of the clean-air provision doesn’t exactly lay down a specific, enforceable rule of decisionmaking.
The Court finds today that the rights asserted by these citizens are self-executing. They include the separation of powers, and the vesting of legislative powers in the two houses of the General Assembly. Here’s a line from today’s opinion that provides the clincher to that last provision as self-executing: “It would be an anomaly to say that a constitutional provision vesting the legislative power in the General Assembly is not self-executing and thus requires further legislation to make it operative.” I smiled as I read this statement, and recognized that the legislature would never quibble with its own constitutional power to legislate.
So this case goes back to the trial court for further proceedings. Personally, I believe that those proceedings will be short, swift, and fatal to the citizens’ position; the court strongly hints today in a footnote that they don’t have the requisite standing to bring this type of proceeding. The standing issue wasn’t before the court today because the Commonwealth didn’t plead it, but you can bet the mortgage that the Commonwealth will speedily amend its pleadings in the trial court to raise the issue now.
There are all sorts of consumer violations alleged in Schmidt v. Household Finance, stemming from a mortgage loan. Unfortunately for the consumer, the trial court had just one answer for each claim, and it was a thumbs-down. The Supreme Court represents his last opportunity for relief.
Schmidt got a call from HFC some time before February 2002, offering to give him a better deal on his mortgage. This sounded good to him, so he submitted an application. HFC was thereafter happy to offer him a loan that would cut his interest rate and shorten his loan term. Schmidt had one response to that offer: “Where do I sign?”
Well, actually, where he signed was a restaurant. Most of us go to conventional locations like law offices or mortgage companies’ locations for our real estate closings. But the HFC representatives told Schmidt that they couldn’t do it at their place, so they suggested the restaurant.
The plan was for a notary to meet them at the restaurant on February 28, but when no notary showed after a time, Schmidt looked at his watch and said he needed to go back to work. But wait, the HFC guys told him; you have to sign these papers today, or else you won’t get the loan you want. (Probably one of those last-day-of-the-month things that are so familiar to real estate lawyers.) Why don’t you just sign them now, and we’ll have them notarized later?
Do any of you get a bad feeling about this? Well, Schmidt didn’t; or maybe his desire to get the sweetheart deal overrode his concerns. He signed. And despite the HFC guys’ promise to send him copies, he never got any.
Fast-forward 2 ½ years. Schmidt wants to refinance the loan. His new prospective lender asks him about his MBNA mortgage loan. “Never heard of ‘em,” he replies. “My mortgage company is HFC.” The new lender straightened him out on that little matter – MBNA was, indeed, his lender. Moreover, his interest rate wasn’t anywhere as sweet as he’d thought it was. Looking into the matter, Schmidt seemed to discern that the HFC guys – the scalawags! – had forged his signature on some loan documents.
Schmidt refused to pay another cent to – well, to whoever they were, and eventually filed suit under several consumer protection statutes. He pleaded fraud and sought rescission. When he didn’t pay his mortgage, he soon got a foreclosure notice. He managed to avoid foreclosure by selling the house, but he claimed in the suit that he got $100,000 less than he would have, but for the fire sale circumstances.
Schmidt’s only target in this suit was HFC. He didn’t sue MBNA, nor the HFC guys who had been so mean to him. HFC files a demurrer and a special plea of the statute of limitations, because Schmidt first filed suit in November 2005, almost four years after the alleged fraud. Instead of conducting a hearing on these pleas (careful practitioners know that you can get a jury trial on these things now, after the 2006 decision in Bethel Investment v. City of Hampton), the parties agreed to submit the matters on the pleadings. (The factual recitation above is taken from Schmidt’s amended complaint, so the trial court and I have to assume that they’re true for the purposes of this analysis.)
This, you will probably have figured out by now, was a big mistake. The trial court saw from the pleadings that the two-year statute of limitations had long before passed, so it sustained the special plea as to all but the rescission count. It dunked the rescission claim because, among other things, Schmidt didn’t sue the real lender, MBNA. The trial court also noted that since Schmidt had sold the house, it would be impossible to rescind the deal and put the parties back in the position they were in beforehand.
Schmidt was undeterred. He argued that HFC should be liable as an agent for an undisclosed principal on the rescission claim. That still didn’t get him any relief. And he asserted that the statute of limitations didn’t begin to run on all those other claims until he discovered what had happened, and that discovery didn’t take place until he applied for the refinance with the new lender.
This last argument is the most intriguing issue in today’s opinion. The Supreme Court acknowledges that the accrual of a cause of action founded upon fraudulent conduct can be delayed until the plaintiff learns, or by the exercise of due diligence should have learned, that he had been defrauded. But here again, Schmidt is hamstrung by the fact that he elected to have the trial court decide the case on the pleadings, without any evidence being presented. Of course, doing that got him a favorable view of the facts, but it also meant that the trial court had nothing whatsoever upon which it could base a finding that Schmidt couldn’t have discovered the fraud much sooner than he did. Importantly, the court rules that such a deferred accrual, if it is to be a factor in the case, must be proved by the plaintiff; it does not have to be disproved by the defendant. This, in my view, is the most important lesson of today’s affirmance.
The result of all this is that Schmidt is out his $100,000; HFC and MBNA are off scot-free; and we’re still waiting for that notary to show up at the restaurant.
I don’t deal much in the world of closely-held corporations, so I really don’t know whether Andrews v. Browne will prove to be a decision of seismic proportions for practitioners in that area. The key question – indeed, the only question – is whether the Virginia Securities Act applies to sales of all of the stock of a business.
The business deal was one to purchase a health club. The sellers gave the buyers some financial data on how the club was doing, and upon that basis, the buyers agreed to pay half a million dollars for 100% of the stock in the company that owned and operated the club. After the closing, the sellers gave the buyers a computer disc that they said was damaged and unreadable; it had contained copies of the business’s books and records, including financial information. But one of the buyers was techno-savvy (or more likely, he “knew a guy . . .”) and was able to read the disc. Guess what? The financial picture was nowhere near as rosy as the sellers had indicated.
That buyer then bought out his partners and filed suit against the sellers, in which pleading he claimed that the original report that the sellers had given him was materially false, and that it showed a grossly inaccurate view of the company’s finances. The Virginia Securities Act frowns on making false statements in connection with the sale of securities, so the buyer relied on that for his suit.
The trial court granted summary judgment to the sellers. It held that the Act applied to sales of stock, but not to sales of entire businesses. Evidently the trial court had concluded that the Act was designed to protect garden-variety stock purchasers from shady shills who tried to pawn off worthless stock on the public. (These are the Commonwealth’s version of the so-called blue-sky laws, so designated because some citizens are so gullible they’d buy the blue sky, or perhaps stocks with nothing more substantive than the blue sky, from a con artist.)
On this one and only issue, the Supreme Court has one and only one ruling – reversed. While there is a split of authority on this question across the country, the court finds it more persuasive to follow a US Supreme Court decision, now superseded by federal statute, that held that if a document contains the label “stock” and has the usual legal characteristics – assignability; voting rights; the right to receive dividends and the benefit of appreciation – then it’s a security. That means that the Act governs this transfer, and the buyer gets to move forward against the sellers, CD-ROM in hand, in the trial court.