On the Docket

Error Preservation in South Carolina: Beware the "Two Issue" Rule.

2011-09-28T08:51:00.000-04:00

By Kirsten E. Small

Because I am an appellate lawyer, error preservation is the bane of my existence. I don't care if the trial judge excluded your evidence, kicked a puppy, or made the jury deliberate through the Clemson-Carolina game. If you don't preserve the error, I can't help you.

As of Monday, I no longer care if the judge awarded the plaintiff damages for breach of contract. We'll be appealing the unjust enrichment claim, too.

"But wait!" I hear you cry. "Breach of contract and unjust enrichment are mutually exclusive! If the plaintiff has a remedy at law, equity doesn't apply!" You are right, of course. (And also, you can stop shouting now.) And when the judge awards damages for actual pecuniary loss, rather than for the increase in the fair market value of the property, it certainly looks like the plaintiff won on its legal theories rather than its equitable one.

But as I said, after Monday that doesn't matter, because on Monday the South Carolina Supreme Court decided Atlantic Coast Builders v. Lewis. In Lewis, the plaintiff sued on theories of breach of contract, negligent misrepresentation, and unjust enrichment. The judge found for the plaintiff on all three theories and awarded damages as measured at law. The defendant appealed the judgment on the basis of the legal theories underlying the damages award. That seemed reasonable to everyone involved, including the plaintiff (who did not argue any error preservation problem) and Court of Appeals, which ruled on the merits and affirmed the award.

Unfortunately, it did not seem reasonable to the Supreme Court, which held that the "two issue" rule required the defendant to appeal the equitable theory, as well. Under the two issue rule, if an award is based on more than one ground, you have to appeal them both; otherwise, the non-appealed ground provides an independent basis for affirming the judgment. So, in Lewis if the defendant had appealed the breach of contract finding but not the negligent misrepresentation one, the two-issue rule would bar consideration of the breach of contract finding.

Lewis takes this one giant leap further, holding that you must appeal the equitable theory even if the trial judge did not (and could not, because law precedes equity) award equitable relief. This doesn't make much sense to me. Practically speaking, there is no judgment the equitable claim, so there is nothing for the defendant to appeal. It's not quite the same as requiring an appeal by a prevailing party, but it comes awfully close.

The Appellate Code: The Many Meanings of "Per Curiam"

2011-09-19T08:26:00.000-04:00

By Kirsten E. Small

We all know that “per curiam” means “by the court.” But, to echo a 1960s hippie-type, what does “per curiam” really mean, man? What message, if any, is an appellate court conveying by issuing an opinion “per curiam”?

Fear not—I’ve got the super-secret decoder ring. Here, in a nutshell, are the various meanings of “per curiam.”

None of the judges wrote the opinion. The Fourth Circuit sends a large proportion of cases—particularly those involving pro se litigants, but also many others—to its Office of Staff Counsel for decision without argument. In such cases, a staff attorney drafts an opinion for review, revision, and adoption by the judges. These opinions are invariably issued “per curiam,” since no single judge has taken responsibility for drafting the opinion.

All of the judges wrote the opinion. This occurs more rarely, usually in highly complex cases that result in very long opinions. Different judges on the panel will take responsibility for drafting portions of the opinion, with the result that the opinion truly is “by the court.”

One of the judges wrote the opinion, but they don’t want you to know who. Sometimes, the panel wants to emphasize that the decision reflects the views of the court writ large, not just the reasoning of an individual judge. When all three judges sign onto a per curiam opinion, all of them are vouching for the reasoning as well as the result, thus throwing the whole weight of the court behind it.

New Fourth Circuit Nominee Stephanie Thacker

2011-09-12T11:39:00.000-04:00

By Kirsten E. Small

Just in time for "On the Docket" to return from its summer hiatus ("hiatus" sounds so much more deliberate than "holy cow, I've been busy lately," doesn't it?), President Obama has officially announced a new pick for the Fourth Circuit: Charleston, West Virginia attorney Stephanie Thacker.

On paper, Ms.Thacker looks to be a very good choice for the Fourth Circuit. She has a solid background in civil practice and has handled some very tough cases during her time with the United States Attorney's office and the Department of Justice. As I've said before, I think it's critically important that judges have "real world" experience with the practice of law. There seems to be something of a pattern for nominations out of West Virginia--like Ms. Thacker, Judge Robert King and the late Judge Blane Michael (for whose seat Ms. Thacker is nominated) spent time in private practice and in the U.S. Attorney's office before ascending to the bench.

I spoke with Charleston attorney Tom Hurney, who confirms that reality matches the résumé. "She's a great pick," he said, because of her experience in criminal law and complex civil litigation. He predicted that she will be a "lawyer's judge"--one who has a deep sense of the interplay between legal principle and practical reality.

Now, of course, begins the long slog toward confirmation.

Blame the Machines

2011-08-15T09:02:00.000-04:00

By Kirsten E. Small

Civil Procedure was my favorite class of my first year in law school, primarily because my professor found the cases in the textbook far less interesting than the many stories he had accumulated over the years. (When it came time to study for the bar exam, I found myself less enamored of that particular teaching style.)

One thing that stuck with me from that class was my professor's theory that modern mass tort litigation was made possible by--and would not have occured without--the invention of the photocopier. Unless you can make many, many copies of documents for many, many plaintiffs and their lawyers, litigating a mass disaster is effectively impossible.

I was reminded of this theory by the news on Friday that the Eleventh Circuit had issued a 304-page opinion striking down the individual mandate portion of the health care law.
I have to wonder if the opinion would have been as long in the days when opinions were handwritten and laboriously typeset. Sure, long publications existed long before word processors, and there were plenty of long opinions. The Supreme Court's 1856 decision in Dred Scott, for example, clocks in at 240 pages of U.S. Reports.

But generally speaking, decisions were shorter before the days of click, cut, paste. The New York Times reported last November that the median length of Supreme Court decisions (the majority opinion and all concurring/dissenting opinions) has more than quadrupled since the 1950s--from a median of 2,000 words to a median of 8,265 words. And the decisions are being issued more quickly. Median time to decision is currently 75 days, compared with double than in the 1980s.

How does the Eleventh Circuit's decision in Florida v. HHS stack up? The decision contains about 75,000 words--rivaling Buckley v. Valeo, the longest-ever Supreme Court decision at 76,639 words. If the Eleventh Circuit panel had been writing longhand, would its decision on the health care law still have been 300+ pages long? Possibly, but I doubt it. Is the decision better because it is longer? Again, possibly, but I doubt it.

Just as photocopiers changed litigation, computerized word processing (which makes it easier to produce more words, faster) has changed judicial opinion writing, and it's not clear that the change is for the better. Like the inestimable Simon Lebon, I blame the machines.

The Importance of Spell-Checking Your Brief

2011-07-22T11:42:00.000-04:00

By Kirsten E. Small

The interwebs have been abuzz this week with gleeful snarking about Sanches v. Carollton-Farmers Branch I.S.D., particularly the Fifth Circuit's dressing down of Sanches' attorney for "grammatical errors ... so egregious and obvious that an average fourth grader would have avoided most of them." Ouch.

Of course, checking your brief for spelling and grammatical errors is important, and not just so you can avoid having a federal court of appeals tell that you are approximately as literate as a 9-year-old. Much like having a run in your stockings (I hear nylons are making a comeback) or a stain on your tie, careless errors in your brief distract from the quality of your argument. Why slave for hours to craft a brilliant argument if the court is going to be too busy snickering over your failure to master subject-verb agreement to notice?

As if that's not enough, careless briefing can cost you money (I knew that would get your attention).

Consider the hapless advocate in Devore v. City of Philadelphia, who consistently submitted filings replete with typographical errors--including, most memorably, a typographical error in the word "typo." The result, when it came time to award attorney's fees, was a $150 reduction in the hourly rate claimed for written work. Again, ouch.

Like the judge who made the attorney's fee award, I would be remiss if I did not reveal to you the full glory of counsel's carelessness:

As previously mentioned, [counsel's] filings are replete with typographical errors and we would be remiss if we did not point out some of our favorites. Throughout the litigation, Mr. Puricelli identified the court as “THE UNITED STATES DISTRICT COURT FOR THE EASTER [sic] DISTRICT OF PENNSYLVANIA.” Considering the religious persuasion of the presiding officer, the “Passover” District would have been more appropriate. However, we took no personal offense at the reference. In response to the attorneys' fees petition, the Defendants note that the typographical errors in [counsel's] written work are epidemic. In response to this attack, [counsel] writes the following:

As for there being typos, yes there have been typos, but these errors have not detracted from the arguments or results, and the rule in this case was a victory for Mr. Devore. Further, had the Defendants not tired [sic] to paper Plaintiff's counsel to death, some type [sic] would not have occurred. Furthermore, there have been omissions by the Defendants, thus they should not case [sic] stones.

If these mistakes were purposeful, they would be brilliant. However, based on the history of the case and [counsel's] filings, we know otherwise. Finally, in the most recent letter to the court, asking that we vacate the settlement agreement, [counsel] identifies the undersigned as “Honorable Jacon [sic] Hart .” I appreciate the elevation to what sounds like a character in the Lord of the Rings, but alas, I am but a judge.

The third time's the charm: ouch.

Is that a Statement of Facts, or a "Fact Dump"?

2011-07-19T08:21:00.000-04:00

by Kirsten E. Small

A friend of mine practices Social Security disability, and hence files quite a few appellate briefs in the U.S. District Court. A while back, Leeds came up with the heretical idea of completely omitting the statement of facts from his brief. Instead, all discussion of the facts occurs in the context of the argument as to each asserted error in the ALJ's decision.

Heretical, maybe--but effective. One of our magistrate judges recently had this to say about a brief prepared in this style:

The Court would stop to express some preference for the organization of the plaintiff's brief. It is traditional in Social Security briefs, both plaintiff and government, to make a kind of initial evidentiary dump, substantially logging the medical evidence and testimony on the front end regardless of relevance, with much less association of that evidence to relevant legal authorities and argument as briefing develops. Here, the plaintiff has more naturally included facts and medical record as they relate to the specific objections she levies against the ALJ's decision. This makes for a more accessible presentation, from the Court's perspective.

As much as I have a hard time wrapping my brain around having no statement of facts at all, I do think there is a tendency to view the Statement of Facts and Argument portions of a brief as ships that pass in the night. True, appellate courts review for errors of law. But the application of law never occurs in a vacuum--it's always in the context of the facts of the case.

So perhaps a more persuasive brief will be one with a shorter Statement of Facts, along the lines of "here's what you need to know to get started," with the detailed exposition being saved for the argument. I am guessing a brief written in this style would be shorter, too, because presenting the facts only in the context of the argument will naturally promote the omission of irrelevant facts.

Effective Appellate Advocacy: Issue Framing

2011-06-29T08:26:00.001-04:00

by Kirsten E. Small

In my inbox this morning was a great blog post by Kendall Gray, writing about the Supreme Court's decision this week in J. McIntyre Machinery v. Nicastro. He pointed out two wonderful examples of issue framing by Justice Kennedy, writing for the majority, and Justice Ginsburg, writing for the dissent.

See the magic for yourself, after the jump.

Nicastro concerned "stream of commerce" jurisdiction under Asahi Metal Industry Co. v. Superior Court. Depending on whether you are Justice Kennedy or Justice Ginsburg, either "the plaintiff seriously injured his hand while using a metal-shearing machine" manufactured by the defendant (Kennedy), or the defendant's "three-ton metal shearing machine severed four fingers on Robert Nicastro’s right hand" (Ginsburg). Nicastro, understandably piqued, sued J. McIntyre Machinery in New Jersey. One problem: J. McIntyre is an English company that sells its products through a U.S. distributor, raising the question of whether it had sufficient minimum contacts to be subject to suit in New Jersey.

Justice Kennedy framed the issue thusly:

"[Whether a] British manufacturer of scrap metal machines was subject to jurisdiction in New Jersey, even though at no time had it advertised in, sent goods to, or in any relevant sense targeted the State."

Justice Ginsburg put it a bit differently:

"A foreign industrialist seeks to develop a market in the United States for machines it manufactures. It hopes to derive substantial revenue from sales it makes to United States purchasers. Where in the United States buyers reside does not matter to this manufacturer. Its goal is simply to sell as much as it can, wherever it can. It excludes no region or State from the market it wishes to reach. But, all things considered, it prefers to avoid products liability litigation in the United States. To that end, it engages a U. S. distributor to ship its machines state-side. Has it succeeded in escaping personal jurisdiction in a State where one of its products is sold and causes injury or even death to a local user?"

Nicely done, on both sides.

The two opinions also call to mind a long-running debate about issue framing in appellate briefs: Must an issue statement be limited to one sentence (Kennedy) or is it okay to use a more narrative, multi-sentence issue? I personally lean toward the latter, though in my wildest dreams I cannot imagine an eight-sentence issue statement (Ginsburg). On the other hand, Justice Ginsberg's framing would make a fabulous introduction to a brief, or would work well in a summary of argument.

Jedi Mind Tricks in the Fourth Circuit

2011-06-20T09:06:00.000-04:00

By Kirsten E. Small

Remember Obi-Wan Kenobi waving his hand at some baddie in the first Star Wars movie saying, "There is no droid"? Of course, there still was a droid, but the important thing was that the bad guy believed that there was no droid.

The Fourth Circuit employs its own Jedi-like powers in Grant Thornton, LLP v. FDIC, issued Friday. A truism of appellate litigation practice is that an appellate court is concerned not just about the case in front of it, but also about the rule that its decision will establish for future cases. In Grant Thornton, the Court affirmed a district court order finding an accounting firm liable for professional negligence, a ruling that has the potential of opening a few floodgates. So, the Court uses Force persuasion: it waves its hand (i.e., issues an unpublished opinion) and tells us there is no rule: The result is "driven by [the] unique facts" of the case, and "it should be well understood we do not announce any new rule of auditor liability and none should be implied."

So the question is, will potential litigants wander off in a haze muttering "there is no rule," or will they sneer back, a la Jabba the Hutt, "Your Jedi mind tricks will not work on me, court"?

Briggs v. Elliot and the Best CLE I Have Ever Attended

2011-05-24T10:25:00.001-04:00

by Andrew Mathias

The South Carolina Supreme Court Historical Society conducted a Colloquium entitled “J. Waites Waring and the Dissent that Changed America” in Charleston on Thursday, May 19 and Friday, May 20, 2011. The Colloquium marked the 60th anniversary of the trial Briggs v. Elliot, South Carolina’s landmark school desegregation case arising out of Clarendon County that was consolidated on appeal with four other cases from around the country. The opinion issued by the Supreme Court of the United States in that consolidated appeal is known as Brown v. Board of Education.

The event kicked off Thursday night with a dinner at which Professor Charles Ogletree of the Harvard Law School delivered a wonderful speech concerning Briggs and the events leading up to the trial of the case. I had the privilege of sitting next to Judge Matthew Perry and listened to him tell stories of attending the trial at the Federal Courthouse in Charleston. Judge Perry, along with hundreds of other interested onlookers, packed into the relatively small court room to watch Thurgood Marshall present ground breaking evidence. This trial was the very first time Professor Kenneth Clark took the stand and gave expert testimony based in his tests using dolls to identify psychological harm to school children. I will remember forever Judge Perry’s stories about the trial and count it a wonderful blessing that I got to hear them first-hand.

The group reconvened the following morning at the Federal Courthouse to hear from a great lineup of speakers at a day long CLE. Presenters at the CLE included Chief Justice Jean Toal; Federal District Judges Richard Gergel, Michelle Childs, and Matthew Perry; as well as several history professors. The most impactful address was delivered by Joe DeLaine, son of J.A. DeLaine. J.A. DeLaine was the minister of St. Marks AME Church in Summerton, South Carolina and helped organize the group of parents that eventually became plaintiffs in Briggs. Joe DeLaine told stories about the families involved in the law suit, the trial, and the real-life sufferings experienced by each of them as a result of their actions. The Charleston Post and Courier ran a short piece on Joe DeLaine’s speech. It provides a little more detail and I recommend that you read it.

I wish I had more time to share details of the event and the history that I learned as a result of my attendance. But, I will simply say this: the 2011 South Carolina Historical Society Colloquium was the best CLE I have ever attended and believe it will be hard to top.

SCOTUS Justices on legal writing--A few tips, and proof that you can't please everyone.

2011-05-19T08:28:00.001-04:00

By Kirsten E. Small

Courtesy of The Blog of Legal Times comes news that legal writing guru Bryan Garner has release the full transcripts of his 2008 interviews with various Supreme Court Justices. The BLT's article is here, and the transcripts are available through the Scribes Journal of Legal Writing (an excellent resource, by the way).

Before hightailing it over to the Scribes site to download and read the transcripts until my nerdy little heart is content, a couple of highlights from the BLT article: short briefs are better than long, avoid legalese (and the improper use of "which"), and cite the record and cases honestly. Justices Thomas and Alito think the summary of argument is important; Justice Scalia thinks its a waste of space.

Finally, be advised that Justice Kennedy does not like it when lawyers verb words.

Appeals in the digital age: Using [sic] when quoting a text message.

2011-05-04T09:05:00.000-04:00

by Kirsten E. Small

This opinion by the Supreme Court of South Carolina caught my eye yesterday. The fact portion of the opinion involved the quotation of numerous text messages, which didn't phase me until I got to this one:

""Leav me tha f*k alone im nt gna txt u bak and I want nothng 2 do w u so jus get out mx [sic] life already."

My first thought was, "Why bother? The entire message is one long [sic]." But then I looked up the proper usage of [sic], and learned that "sic" is a word (not an abbreviation) derived from Latin that means "intentionally so written." So, the SC Supreme Court used [sic] not to point out the unconventional (to put it mildly) spelling of the text message, but rather to indicate that an actual error ("mx" instead of "my") was original to the text message, not an error in transcription by the court.

In other news, an amendment to SC Appellate Rule 219 became effective yesterday. The amended rule clarifies the procedure for seeking initial hearing en banc by the S.C. Court of Appeals.

The Fourth Circuit goes (almost) live.

2011-05-02T07:55:00.000-04:00

by Kirsten E. Small

New Fourth Circuit Internal Operating Procedure 34.3 takes effect today. Beginning with the upcoming May term of court, recordings of oral arguments will be available for free on the Court's website, two days after argument.

The new rule takes effect just in time for the arguments on the health care law, which are scheduled for Tuesday, May 10.

I'm not sure if Oscar Wilde would be amused or aghast.

2011-04-13T08:35:00.000-04:00

By Kirsten E. Small

It's Wednesday, and in my household spring break is coming closer but is still three.whole.days away (my kids are certain they will not make it until Friday afternoon). So, it's time for a little levity, helpfully supplied by SCOTUS, the D.C. bar, and the D.C. Shakespeare Theater in the form of their annual mock trial, which this year is a send-up of "An Ideal Husband." You can read about it (and get a few laughs) here.

There Is A Need To Cross All Of The “T”s And Dot All Of The “I”s

2011-04-01T11:36:00.000-04:00

by Stephen P. Groves, Sr.

Boyd v. Metropolitan Life Insurance Company, ___ F.3d ___ (4th Cir 2011)

(Case No. 10-1702, filed 31 March 2011) (http://pacer.ca4.uscourts.gov/dailyopinions/opinion.pdf/101702.P.pdf)

While this case is essentially directed to all of the Family Court practitioners out there, the basic premises apply to all attorneys. Make sure all of the “T”s are crossed and the “I”s are dotted. When your client or their opposition waives a right to something, such as insurance benefits, pension benefits, etc., make sure everyone who should know about the waiver does know – especially the plan administrator.

Emma Boyd lived in Charleston, South Carolina and worked for Delta Airlines. She participated in Delta’s ERISA-governed life insurance program administered by Metropolitan Life Insurance Company. Emma was married to Robert Alsager and he was her designated primary insurance beneficiary. Emma’s mother, Mary Boyd, was the contingent beneficiary. Sometime in 2007 or so Emma and Robert separated and, in April 2008, the Charleston County Family Court approved their separation and property settlement agreement. As part of the settlement, both Emma and Robert agreed to waive any of their respective rights to the other’s estate and/or property, including specifically any rights to life insurance proceeds. Emma did not, however, notify MetLife to change the policy beneficiary from Robert to either Mary or someone else.

Unfortunately, on November 8, 2008, Emma passed away suddenly. Mary Boyd and others filed a claim with MetLife for the insurance proceeds, noting Robert had previously waived any claim thereto, notwithstanding the settlement agreement. Robert also filed a claim with MetLife. Based upon the plan documents, MetLife determined Robert was entitled to the proceeds and ultimately paid the benefits to him.

Mary sent a letter to MetLife appealing the claim determination on the basis Robert had specifically waived his right to recover any of Emma’s insurance benefits. After the claim decision was upheld, Mary sued MetLife in Federal Court in Charleston. Senior United States District Judge C. Weston Houck granted MetLife’s motion to dismiss “concluding that MetLife had carried out its statutory obligations by disbursing benefits in accordance with the beneficiary designation form on file with the plan. (Slip Op., pp.4-5). Mary appealed to the Fourth Circuit.

Relying on Kennedy v. Plan Administrator for DuPont Savings & Investment Plans, ___ U.S. ___, 129 S.Ct. 865 (2009), the United States Court of Appeals for the Fourth Circuit affirmed the District Court. In Kennedy, the Supreme Court had concluded that ERISA required the plan administrator to disburse benefits “ ‘in accordance with the documents and instruments governing the plan.’ ” (Slip Op., p.5) (quoting 29 U.S.C. § 1132(a)(1)(D)). Furthermore, the Kenney Court concluded that “ ‘ERISA’s statutory scheme ‘is built around reliance on the face of written plan documents.’ ” (Slip Op., p.5) (quoting Kennedy, ___ U.S. ___, ___, 129 S.Ct. 865, 875) (quoting Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83 (1995)).

In Kennedy, a case similar to this one, the ex-wife was a party to a divorce decree which divested her of any proceeds to her ex-husband’s retirement and/or pension benefits, but remained as the designated beneficiary on the plan documents for one of his pension benefit plans. After Mr. Kennedy passed, his estate’s executrix claimed the pension benefits for the estate based on the ex-wife’s benefit’s waiver. The Court rejected the argument and determined the plan administrator was statutorily required to pay benefits pursuant to the plan documents on file, regardless of any alleged waiver. Stated otherwise, “even though [the] ex-wife’s waiver was clear, the [Supreme] Court concluded it could not trump the plan documents.” (Slip Op., p.7) (citing Kennedy, ___ U.S. ___, ___, 129 S.Ct. 865, 874-875). See also Matschiner v. Hartford Life & Accident Insurance Co., 622 F.3d 885 (8th Cir. 2010) (similar case holding).

While this may seem a harsh result given Robert’s clear waiver of Emma’s insurance benefits in the settlement agreement, Emma’s (or her attorney’s) failure to actually have MetLife change the beneficiary is the real problem. To require a plan administrator to honor a beneficiary’s waiver as opposed to simply following the plan documents would clearly open the door to questions of whether the waiver was “voluntary”, “knowing”, “based upon adequate consideration”, and so on. This would be very time consuming, likely to engender significant litigation, and plainly unnecessary. A plan participant, like Emma, could easily avoid all of these machinations by changing the beneficiary designation to another person once the original primary beneficiary, like Robert, has waived his rights to the proceeds.

It Is Not Necessary To Show Damages To Make A Prima Facie Claim For Breach Of Contract

2011-03-30T14:36:00.000-04:00

by Gary Beaver

On March 1, 2011, in Hodges v. Young, the N.C. Court of Appeals reversed a trial court's order granting defendants' summary judgment motion asserting plaintiff failed to prove any damages based on an alleged breach of contract. The court pointed out that there are only two elements of a breach of contract: the existence of a valid contract and a breach of the contract's terms. No damages are required to be shown. The Court of Appeals also affirmed the trial court's grant of summary judgment on plaintiff's Chapter 75 claims which tried to assert fraudulent acts based on "should have known" allegations. We all see these efforts by creative pleaders to manufacture a Chapter 75 claim out of a breach of contract claim so this case may be one to keep in the drawer as an example of Chapter 75 allegations that are too thin.

In Most Cases, You Have To Be A Party To Seek Sanctions Or To Have To Pay Them

2011-03-28T16:44:00.000-04:00

by Gary Beaver

A trial court order sanctioned a plaintiff company and its owner with dismissal of claims, striking of pleadings, and default on counterclaims due to multiple failures to make proper discovery responses. On January 4, 2011, in Honeycutt Contractors, Inc. v. Otto, the N.C. Court of Appeals reversed the sanctions against the individual owner because, though the pleadings alleged piercing the corporate veil, the owner was never made a party to the case and, therefore, the court lacked jurisdiction over him. The sanctions against the company stood. On the other side of the coin, in Lucas v. R.K. Lock & Associates, filed on March 1, 2011, the same court held that a company lacked standing to move for and the court lacked jurisdiction to grant Rule 11 sanctions where the company was listed only as a "dba" in the plaintiff's Complaint, the trial court had ruled that insufficient to make it a party, and the named defendant did not appeal that ruling.

Update: Crossman Communities of North Carolina v. Harleysville Mutual Insurance Company

2011-03-21T15:48:00.000-04:00

By Stephen P. Groves, Sr.

Crossmann Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Company,

___ S.C. ___, ___ S.E.2d ___ (2011) (2011 WL 93716, filed January 7, 2011)

On January 11, 2011, I posted an entry to this blog addressing the South Carolina Supreme Court’s decision in the above-referenced case. As it turned out, my entry was only the tip of the iceberg. This case has created a firestorm of controversy in South Carolina and has been the subject of discussion around this country. Furthermore, the decision spurred action in the South Carolina Legislature with the introduction of various bills seeking, in essence to overturn Crossmann Communities and make sure that insurance companies doing business in South Carolina provide liability insurance coverage to contractors and subcontractors for unintentional defective construction and/or faulty workmanship.

The opinion, of course, elicited a Petition for Rehearing, as well as, numerous amicus briefs in opposition to and in support of the petition. The amici included the (a) Ledgestone Court Residents of York County; (2) Coastal Carolina University Student Housing Association, (3) American Subcontractors Association of the Carolinas, (5) Mechanical Contractors Association of South Carolina, (6) Riverwalk at Arrowhead Country Club Property Owners Association, (7) Medical University of South Carolina, (8) Home Builders Association of South Carolina, (9) National Association of Nome Builders, (10) Community Associations Institute, (11) South Carolina Chapter of the Community Associations Institute, (12) Associated General Contractors of America, Inc., (13) Carolinas AGC, Inc., (14) Cincinnati Insurance Company, (15) Charleston County School District, (16) School District of Greenville County, (17) Associated Builders and Contractors of the Carolinas, Inc., and (18) Leading Builders of America. In the spirit of full disclosure, I filed an amicus brief on behalf of the Property Casualty Insurers Association of America.

Apparently, based at least in part on the uproar, including the legislative action, on March 9, 2011, the Supreme Court granted the Petition for Rehearing and scheduled re-argument of the case for Monday, May 23, 2011. In addition to the unusual Monday scheduling, the Supreme Court has specifically granted all of the amici oral argument time. This should prove to be an interesting day.

No Magic In Internet Evidence

2011-03-18T16:30:00.001-04:00

By Gary Beaver

The N.C. appellate courts have been slow to issue opinions on the subjects of e-discovery and the internet. Practitioners in the N.C. trial courts have had to rely upon the existing rules and make arguments for those rules to be applied similarly to leading federal court decisions (such as the five Zubulake opinions) and or as suggested by authoritative sources like the guidelines issued by the Sedona Conference and the Conference of Chief Justices (for the state appellate courts). The development of those areas of law in the N.C. courts will likely be incremental as the N.C. appellate courts typically do not engage in the comprehensive opinions providing treatise-type treatment of internet and e-discovery issues that some federal district court judges have entered. The closest to such opinions in the N.C. state courts came from Judge Tennille, in the

N.C. Business Court,

when he provided two non-precedential but influential decisions on e-discovery issues back on November 1, 2006. We have seen little guidance since then. In Rankin v. Food Lion, decided March 1, 2011, the N.C. Court of Appeals had the opportunity to address the use of evidence found on the internet but limited its opinion to addressing the narrow issue before it without providing a lot of discussion about the methods for admitting such evidence. The Rankin court affirmed the trial court's grant of summary judgment for the defendant. In doing so, the court also affirmed the trial court's rejection of the plaintiff's evidence printed out from the internet due to the failure of the plaintiff to properly authenticate it. The plaintiff had submitted printouts from internet websites -- a page from the N.C. Secretary of State and an internet posting about the ownership of Food Lion. The plaintiff failed to provide any sworn testimony by affidavit or live witness or to use a means of self-authentication to identify and authenticate those internet printouts. While this decision did not tell us anything new, it did remind trial lawyers that the internet does not magically make authentic or reliable information found on the internet; one must always comply with the rules for authenticating documents and establishing hearsay exceptions. If you want extensive advice on admitting internet evidence, look at Lorraine v. Markel American Insurance Company, 242 F.R.D. 534 (2007) -- a 100-page opinion by Magistrate Judge Paul Grimm.

Gary Beaver is a member of Nexsen Pruet's Technology Law team. Visit www.nptechlaw.com to learn more about how ever-changing technology is impacting your business and how our attorney can help you solve problems that might arise.

Those 14 pages at the beginning of your brief? Yeah, they count.

2011-03-15T08:25:00.001-04:00

By Kirsten E. Small

I do a CLE program called "The Ten Commandments of Appellate Brief Writing," in which I tell my audience that a key goal of an appellate brief (other than persuading the court, of course) is not to hack off the judges. (Depending on the crowd and the proximity of my presentation to cocktail hour, "hack off" may be replaced by a more colorful term, but you get the point.)

A case out of the Seventh Circuit gives us a sterling example of how not to achieve that key goal: exceed the word limit and then offer a flimsy excuse when you get caught.

John Caudill, the attorney for two former hospital employees appealling a grant of summary judgment for Scott Memorial Hospital on the employees' qui tam action, certified that his brief to the Seventh Circuit contained 13,877 words. The Hospital counted over 18,000 words, and so informed the court in a footnote to its response brief. In response to the court's order to show cause, Caudill's response was basically, "Oops! I didn't know rule 32(a)(7) required me to count the statement of facts! And 'citations within parentheticals'--I didn't count those either. My bad." And anyway, he continued, the case was so complex that "it was impractical to competently express [the facts and issues] within the prescribed word limit." And plus, the Hospital must have told the court about this in an ex parte communication." (As the Seventh Circuit noted, Caudill either did not read the Hospital's brief, or promptly forgot it once he did.)

The Seventh Circuit, not surprisingly, was unimpressed with Caudill's explanation. Rule 32(a)(7)(B)(iii), after all, is not exactly unclear: every word of your brief counts except the table of contents, table of authorities, statement regarding oral argument, and addenda. So, for example, the statement of facts (14 pages of Caudill's brief) counts. So do citations, even those in parentheticals.

The Seventh Circuit struck the Appellant's brief but did not dismiss the appeal; it was so clearly meritless, the court said, that it would summarily affirm instead.

The order--written by Judge Posner, exercising uncharacteristic restraint--can be found here.

Women's (Legal) History, Part 2: Where are we now?

2011-03-11T09:01:00.000-05:00

By Kirsten E. Small

I had planned to do a timeline of female attorneys today--I'd done all my Googling and was all set to go. But I decided to go a diffferent direction after I got my morning feed from Law360. The feed included an article titled "Not So Sweet 16," by Patricia Gillette.

Why is 16 not so sweet? Because, as Pat points out, roughly 50 percent of law school graduates are women, but only about 16 percent of law firm partners are women. (Actually, the studies I've seen show that the number is more like 14.5 percent.) The percentage is about the same for female general counsels.

The numbers raise two questions: (1) Why? (2) What can/should we (meaning the legal communty writ large) do about it? Pat's article touches briefly on both subjects. As to the "why," Pat doesn't shy away from the reality that it's not all about the "old boys network." Female lawyers do, as she points out, engage in self-limiting behaviors: we tend not to claim credit where it is due, we don't like to make our demands known, we are, on the whole, a risk-averse bunch.

But none of us--men or women--can take comfort in the platitude that the lack of women partners and GCs is due to our own choices (having children, working part-time, not being interested in power). Bias, conscious and unconscious, is real and must be addressed.

Women's (Legal) History Month, Part One: Chief Justice Toal makes history (again!)

2011-03-01T17:20:00.000-05:00

By Kirsten E. Small

Just as I was casting about for my first post about the history of female lawyers in this country, the South Carolina Bar's weekly e-newsletter arrived in my box with the news that South Carolina Supreme Court Chief Justice Jean Hoefer Toal has been named the first recipient of the Sandra Day O'Connor Award for the Advancement of Civics Education. The award, given by the National Center for State Courts recognizes Chief Justice Toal for her leadership in the SC Supreme Court's "long history of supporting civics education." The press release is here.

The civics programs sponsored by the Court are described here.

Of course, this is not the first time Chief Justice Toal has made history. She was the South Carolina Supreme Court's first female justice and currently serves as the first female Chief Justice. As her official bio notes, when she was admitted to the bar in 1968, fewer than one percent of the state's lawyers were women.

Builders Beware

2011-02-28T11:04:00.000-05:00

by Gary Beaver

North Carolina law has long held that corporate officers could be held personally liable by piercing the corporate veil or for torts, including negligence, in which they personally participated. Most commercial litigators have seen many cases in which the plaintiff stretches to allege a tort against the officer of a corporate defendant in order to use the specter of personal liability to drive a better result in the case (such as the in terrorem effect of personal liability to up the ante in settlement negotiations).

Until now, there have been no reported N.C. cases applying individual tort liability on corporate officers in a construction context. In January 2011, in White v. Collins Building, Inc., the N.C. Court of Appeals reversed the dismissal of negligence claims against a construction company president finding them adequate to survive pleading requirements. Specifically, the plaintiff alleged that the president "oversaw and personally supervised the day-to-day construction of [plaintiffs'] residence and was negligent in "failing to properly supervise the construction of the residence, including, but not limited, failing to properly supervise the installation of the doors and windows, the flashing around the doors and windows, and the house wrap" and in "fail[ing] to properly supervise the design and installation of the plumbing system, including the hot water lines and other system components."

One wonders if the plaintiffs actually have any evidence that the president did more than occasionally visit the worksite to check on progress. In any event, builders should expect that if they are playing any role in on-site work, they will be named as defendants in lawsuits involving claims of negligent construction. There are many aggressive lawyers who will provide a sufficient level of detail in the pleadings to get them into discovery whether or not they initially have any evidence to support those specific allegations. It remains to be seen if the courts will allow similar allegations to pass if they are based only on "information and belief."

Answer Up Or Face The Consequences

2011-02-25T10:35:00.000-05:00

By Gary Beaver

The North Carolina Court of Appeals has addressed the sanctioning of parties for discovery failures in two recent cases. In December 2010, in Lovendahl v. Wicker, 702 S.E.2d 529, the court upheld sanctions ordered against a defendant in a civil case for failing to answer questions at a deposition. The sanctions were imposed under Rule 37(b) of the North Carolina Rules of Civil Procedure which are imposed only for failure to comply with a court order. Defendant had a criminal case pending and was trying to avoid answering questions while the criminal case proceeded. Defendant had asserted two affirmative defenses in the civil case -- contributory negligence and gross contributory negligence -- which the plaintiff had to investigate. Defendant argued that sanction were not appropriate because the plaintiff never moved to compel. However, she had sought a protective order and in denying that motion, the court had ordered her to "submit" to the deposition. Failing to answer questions violated that order and supported the sanction of striking the affirmative defenses.

In January 2011, in First Mount Vernon Industrial Loan Assovication v. Prodev XXII, LLC, the court affirmed a finding that a nonparty witness was in contempt of court for failing to appear for a deposition after being properly served with a subpoena. However, the court reversed the trial court's imposition of monetary sanctions based on Rule 37(d) of the North Carolina Rules of Civil Procedure because that rule applies to parties. The court noted that if the motions against the witness had been motions to compel, the trial court could have granted those motions and imposed attorneys' fees and expenses under Rule 37(a)(4). Rule 45(e)(2) provides for attorney fees against a witness who opposes a subpoena and the opposition is unreasonable or for improper purposes such as delay but the witness never objected to or moved to quash the subpoena. The court suggested that the General Assembly may want to address this situation to allow imposition of fees and expenses where a witness remains opposes only by not showing up for the deposition.

The courts will act with their full authority to require discovery but they will not exceed the specific authorization they have to impose sanctions.

Fourth Circuit rejects South Carolina's definition of "direct contempt"

2011-02-25T08:44:00.000-05:00

By Kirsten E. Small

Last Friday, the Fourth Circuit affirmed a grant of habeas relief in favor of Donald Brandt. A South Carolina court summarily convicted Brandt of "direct" criminal contempt and sentenced him to six months' imprisonment, based on Brandt's use of a forged letter in a deposition. Brandt appealed his conviction, arguing that "direct" contempt applies only to conduct occurring in the presence of a judge. The South Carolina Supreme Court agreed with this proposition but held that the "presence" of the judge encompasses "all elements of the judicial system," including a deposition.

Not so much, says the Fourth Circuit. Y'all can do what you want as a matter of due process under the state Constitution, but the federal Constitution* allows a conviction for direct criminal contempt only when the judge actually sees the contemptuous conduct. Because that was not the case with Brandt (the contempt was proved to the court, in part, with expert testimony that the document was forged), direct criminal contempt was improper.

You might wonder if this decision is a hallmark of a more "liberal" Fourth Circuit, which one lawyer once referred to as a "black hole" of habeas jurisprudence. I don't think so. For one thing, the authoring judge (Agee) is a Bush appointee. For another, the decision was really a no-brainer. The law on what constitutes direct contempt is abundantly clear, and the South Carolina Supreme Court clearly applied the wrong definition.

*Any grammar gurus out there: what's the capitalization rule for the word "constitution" when combined with the modifiers "state" or "federal?" I know that constitution should be capitalized when referring to "the Constitution" (as in, the federal one), but beyond that, I'm lost. (Incidentally, Blogger's spell check seems to think that "constitution" should always be capitalized. Hmm.)

Great Moments in Appellate Advocacy

2011-02-15T09:33:00.000-05:00

By Kirsten E. Small

132 years ago today, President Rutherford B. Hayes signed special legislation compelling the United States Supreme Court to admit Belva Ann Lockwood to its bar.

I'll be blogging more about the history of female attorneys in March (Women's History Month), but I thought I'd share that little tidbit today.

Appellate Ethics Tip of the Day: Quit While You're Ahead.

2011-02-08T07:41:00.000-05:00

By Kirsten E. Small

So let's say you and your client decide to file a securities lawsuit even though the statute of limitations is way, way past. As in, it expired 15 years ago. When the district court sanctions you $95,000 for bringing a frivolous suit, what do you do?

The Second Circuit suggests that you do not bring a frivolous appeal. As reported here, that court imposed an additional sanction on plaintiff John Libaire and his attorney, Mitchell Stein, for filing a frivolous appeal.

Oops.

Doing the removal two-step in the Fourth Circuit

2011-01-28T08:42:00.000-05:00

by Kirsten E. Small

In an en banc decision yesterday, the Fourth Circuit adhered to the so-called "McKinney Intermediate Rule" for removal in cases involving more than one defendant. Barbour v. International Union (No. 08-1740).

Under the McKinney rule, the first-served defendant must remove (if at all) within 30 days of service, as required by 28 U.S.C. § 1446. Any later-served defendant must join the notice of removal (if at all) within 30 days of service on it.

Exciting times in the Fourth Circuit

2011-01-27T08:29:00.003-05:00

by Kirsten E. Small

Two items of note in my inbox this morning:

(1) South Carolina district court judge Henry F. Floyd has been nominated to the Fourth Circuit. Press release here. Once Judge Floyd is confirmed, the Fourth Circuit will have a full complement of judges, with all 15 of the available seats filled.

(2) The Fourth Circuit has granted expedited hearing in Virginia's challenge to the "minimum coverage" provision health care reform law (a/k/a the "individual mandate"). Argument will be during the court's May 2011 session, which runs from May 10-13. The panel (which is unknown and will not be announced until the morning of argument) will hear two cases back-to-back: Virginia v. Sebelius (No. 11-1057, Virginia's challenge to the minimm coverage requirement), and Liberty University v. Geithner (No. 10-2347, challenging both the employer mandate and the individual mandate).

Is It Flip-Flopping Or Flop-Flipping? Clarifying Construction Defects Law In South Carolina

2011-01-11T11:33:00.005-05:00

By Stephen P. Groves, Sr.

Crossmann Communities of North Carolina v. Harleysville Mutual Ins. Co., ___ S.C. ___, ___ S.E.2d ___ (2011)
(Sup.Ct. Opinion No. 26909, filed 7 January 2011)

By 3:30 p.m. in the afternoon of Friday, 7 January 2011, many of the attorneys practicing construction defects law in this State had left their offices and headed home for what they thought would be a quiet weekend. Needless to say, it did not turn out to be as quiet as they anticipated. At approximately 3:44 p.m. that day the South Carolina Supreme Court issued its decision in Crossmann Communities v. Harleysville – the latest and, possibly the greatest, installment in the Supreme Court’s jurisprudence involving litigation over the application of commercial general liability insurance coverage to construction defect claims. All-in-all, things look a bit differently now than they did before Friday afternoon.

Harleysville issued a commercial general liability insurance policy (the “CGL Policy”) to Crossmann Communities providing liability coverage to several condominium projects in Myrtle Beach, South Carolina. As seems to be the norm, the condominiums suffered from significant faulty workmanship and negligent construction. Eventually the homeowners sued Crossmann Communities for negligence, breach of express warranties, breach of implied warranties; unfair trade practices; and breach of fiduciary duty. They sought actual and punitive damages, diminution in value, and loss of use. Crossmann Communities settled the underlying actions for approximately $16.8 million and then sought coverage under the CGL Policy. After Harleysville denied the claim Crossmann Communities filed an insurance coverage declaratory judgment action seeking coverage. Crossman Communities prevailed at the trial level but, on appeal, the Supreme Court reversed, concluding there was no "occurrence" under the CGL policy.

The Supreme Court first discussed the history of the standard CGL Policy, noting “CGL policies are not intended to insure business risks that are the normal, frequent, or predictable consequences of doing business . . .[and, therefore,] . . . the policies do not insure the work itself, but rather, they generally insure consequential risks.” Crossmann Communities v. Harleysville, Slip Op., p.3 (citing Century Indemnity Co. v. Golden Hills Builders, Inc., 348 S.C. 559, 565-66, 561 S.E.2d 355, 358 (2002) (quoting Rowland H. Long, LL.M., The Law of Liability Insurance, § 3.06[1] (2001)). Additionally, the Supreme Court recognized that the standard CGL Policy was revised in 1986 to include the so-called “subcontractor exception” to the “Your Work” Exclusion. Crossmann Communities v. Harleysville, Slip Op., p.3. This provision has been interpreted by a number of courts to provide liability insurance coverage to a general contractor for a subcontractor’s faulty workmanship and/or defective construction. See generally U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So.2d 871 (Fla. 2007); Lamar Homes, Inc. v. Mid-Continent Casualty Co., 242 S.W.3d 1 (Tex. 2007). See also generally Auto Owners Insurance Co., Inc. v. Newman, 285 S.C. 187, 684 S.E.2d 541 (2009).

While Crossmann Communities argued that the "subcontractor exception" applied to provide it coverage under the CGL Policy, the Supreme Court concluded the “ ‘subcontractor exception’ [wa]s relevant only if there [wa]s a finding of initial coverage. [Therefore], any property damage for which [Crossmann Communities sought] coverage must have been caused by an occurrence before the [CGL] [P]olicy [wa]s triggered.” Crossmann Communities v. Harleysville, Slip Op., pp.3-4.

In a candid appraisal of the struggles courts across this county have faced when interpreting CGL policies in general, and the "subcontractor exception" to the "your work" exclusion, in particular, the Supreme Court found that the several different approaches courts have used effectively “result[ed] is an intellectual mess.” Crossmann Communities v. Harleysville, Slip Op., p.4. Seeking to lend clarity to this muddled mess, the Supreme Court concluded any inquiry in this area must initially focus on the term "occurrence" in the CGL Policy.

The Court acknowledged that the term "occurrence" necessarily carries with it some important fortuity underpinnings, notwithstanding the fact the CGL Policy specifically defines the term “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Crossmann Communities v. Harleysville, Slip Op., p.4. Nevertheless, the Supreme Court noted this “fortuity” notion must be viewed through the lens of “faulty workmanship” in the construction defects context. The Supreme Court went on to discuss the “majority” rule (i.e.; claims of faulty workmanship and/or defective construction, standing alone, do not constitute occurrences which trigger coverage under a CGL policy, but damage to a third-party’s property triggered coverage) and the “minority” rule (i.e.; claims of faulty workmanship and/or defective construction constitute an occurrence, regardless of what property is damaged, as long as the insured did not expect or intend the resulting damage). Crossmann Communities v. Harleysville, Slip Op., pp.4-5. (As an aside, regardless of which “rule” is applied there is no coverage for the costs associated with replacing and/or repairing a defective component of the project since those claims do not constitute "property damage" under a CGL policy.).

After discussing general construction defects law, the Supreme Court acknowledged it had “recently addressed issues involving CGL coverage and faulty workmanship in L-J, Inc. v. Bituminous Fire and Marine Ins. Co., 366 S.C. 117, 621 S.E.2d 33 (2005)[,] and Auto Owners Ins. Co., Inc. v. Newman, 285 S.C. 187, 684 S.E.2d 541 (2009).” Crossmann Communities v. Harleysville, Slip Op., p.6. On the one hand, in L-J, the Supreme Court addressed a situation where the insured sought coverage solely for damages to repair faulty workmanship and defective construction. Conversely, in Newman, the insured’s claims involved damages for both the faulty workmanship and defective construction and for damages to other property resulting from the same faulty workmanship and defective construction. The Supreme Court concluded there was no coverage in L-J, but there was coverage in Newman.

Looking to the necessary “fortuity” underpinnings of the term “occurrence”, the Supreme Court unequivocally admitted that its finding of an “occurrence” in Newman “without regard to the fortuity component of an ‘accident’ was error.” Crossmann Communities v. Harleysville, Slip Op., p.7. Nevertheless, the Court concluded the “analytical framework of "property damage" in Newman remain[ed] sound, provided there [wa]s in the first instance an ‘occurrence’.” Crossmann Communities v. Harleysville, Slip Op., p.7. See generally National Underwriter Co., Fire, Casualty & Surety Bulletins, Public Liability, A 3-14 (2001) (providing examples of situations where faulty workmanship causes an "occurrence," which results in "property damage" only to the project itself).

Furthermore, the Supreme Court then revisited L-J and Newman, reaffirming its position from L-J that faulty workmanship does not constitute an "occurrence" in a CGL policy. The Court, however, looking to the examples cited the National Underwriter Company, concluded that “faulty workmanship can cause an ‘occurrence’ under a CGL policy.” Crossmann Communities v. Harleysville, Slip Op., pp.8-9. Given this basis, the Court faced the question: “When faulty workmanship directly causes further damage to non-defective components of an insured's project, does this necessarily constitute an occurrence?” Crossmann Communities v. Harleysville, Slip Op., p.8.

Recognizing the fortuity principles incumbent in an “occurrence”, as well as the CGL Policy’s stated definition of an “occurrence” ("an accident, including continuous or repeated exposure to substantially the same general harmful conditions."), the Supreme Court turned its attention to the term “accident”. The Court noted that while the CGL Policy did not define “accident”, the Court had long defined the term “ ‘as an unexpected happening or event, which occurs by chance and usually suddenly, with harmful results, not intended or designed by the person suffering the harm or hurt.’ " Crossmann Communities v. Harleysville, Slip Op., p.8 (citing Collins Holding Corp. v. Wausau Underwriters Insurance Co., 379 S.C. 573, 578, 666 S.E.2d 897, 900 (2008) (citing Green v. United. Insurance Co. of America, 254 S.C. 202, 205, 174 S.E.2d 400, 402 (1970)). The Court also cited other cases and authorities which noted an “unexpected” or “unforeseen” nature of an “accident”.

Applying this new definition of an "occurrence" to the homeowners’ various construction defect claims, the Supreme Court concluded the damages alleged therein were not caused by and/or the result of an "occurrence" under the CGL Policy. The Court concluded that:

The natural and expected consequence of [the subcontractor’s faulty workmanship] in negligently installing siding to [the] condominiums [wa]s water intrusion and damage to the interior of the units. There [wa]s no fortuity element present under this factual scenario. We hold that where the damage to the insured's property is no more than the natural and probable consequences of faulty workmanship such that the two cannot be distinguished, this does not constitute an occurrence.

Crossmann Communities v. Harleysville, Slip Op., p.9.

Additionally, the Supreme Court took the opportunity to clarify its holding in L-J, by finding that the term “work product” “encompasse[d] only the alleged negligently constructed component and not the non-defective components” (i.e.; not the entire building and/or project as some cases have held and as Justice Pleicones suggested in his Newman dissent). Crossmann Communities v. Harleysville, Slip Op., p.9.

In conclusion, the Supreme Court summed up its present view of the applicability of liability insurance coverage to construction defects claims as follows:

In . . . analyzing whether a claim is covered under a CGL policy, we first focus on whether there has been an "occurrence." Damage that does not arise from a fortuitous event is not an occurrence. Damages to the insured's project that are the natural and probable consequences of faulty workmanship do not constitute an "occurrence." For faulty workmanship to give rise to potential coverage, the faulty workmanship must result in an occurrence, that is, an unintended, unforeseen, fortuitous, or injurious event. If there has been an occurrence, then we will look to whether there has been "property damage" as defined by the policy.

Crossmann Communities v. Harleysville, Slip Op., pp.9-10. The Court overruled Newman “to the extent it permitted coverage for faulty workmanship that directly causes further damage to property in the absence of an "occurrence" with its fortuity underpinnings.

Amendments to Federal Appellate Rules Effective Today

2010-12-01T08:23:00.006-05:00

by Kirsten E. Small

Quite a few amendments to the federal court rules became effective today, but since this is an appellate blog I'm only going to discuss the changes to the Rules of Appellate Procedure.

(1) "Housekeeping" Amendments

Rule 1 is amended to make clear that the definition of "state" includes the District of Columbia, federal territories, and commonwealths (i.e., Kentucky, Massachusetts, Pennsylvania, and Virginia.)*

Rule 4 is amended to replace references to Civil Procedure Rule 58(a)(1) with references to Rule 58(a).

(2) Amicus Disclosure Rules Let's suppose you are not satisfied with the 14,000-word limit for a principal brief (Rule 32(a)(7)(B)) and you either don't want to ask for extra pages or your request has been denied. What's a lawyer to do? Engage an amicus, of course! The federal courts of appeal have long suspected "that amicus briefs are often used as a means of evading page limitations on a party's briefs." Glassroth v. Moore, 347 F.3d 916, 919 (11th Cir. 2003).

As one commenter aptly noted, "A court is entitled to know whether a brief is submitted by a friend of the court or the friend of a party." Amendments to Rule 29 aim to curtail the improper use of amicus briefs by mandating certain disclosures.

New Rule 29(c)(5) requires "a statement that indicates whether:

(A) a party's counsel authored the brief in whole or in part;
(B) a party or party's counsel contributed money that was intended to fund preparing or submitting the brief;
(C) a person--other than the amicus curiae, its members, or its counsel--contributed money that was intended to fund prparing or submitting the brief and, if so, identifies each such person."

The revised rule is modeled on Supreme Court Rule 37.6, enacted in 1997.

*I got that list by Googling "States that are Commonwealths." I kid you not.

Get Back to Where You Once Belonged: Fourth Circuit Upholds Application of Forum Selection Clause

2010-11-30T08:30:00.007-05:00

by Kirsten E. Small

The Fourth Circuit yesterday affirmed a district court order remanding a case to the state courts of Virginia. FindWhere Holdings, Inc. v. Systems Environment Optimization, LLC (No. 09-2155)

FindWhere, a seller of global positioning systems, entered into a distribution contract with Homeland Security Systems. The contract included a forum selection clause, which provided that venue any suit under the contract "shall lie exclusively in, or be transferred to, the courts of the State of Virginia." After FindWhere sued Homeland in Loudoun County, Virginia, Homeland removed the action to the Eastern District of Virginia on the basis of diversity jurisdiction. The district court granted FindWhere's motion to remand, holding that the forum selection clause allowed suits only in state court. Homeland appealed.

The Fourth Circuit first held that it had jurisdiction over the appeal, holding that the general prohibition of appellate review of remand orders does not include remands based upon forum selection clauses. In so holding, the court joined every other circuit that has considered the issue.

The court then affirmed the remand order. Homeland argued that the "or be transferred to" language of the forum selection clause established that venue in federal court was proper, because only a federal court can "transfer" a case to another jurisdiction. In rejecting this argument, the court first applied the "widely accepted rule" that when a forum selection clause uses the phrase "of [a state]," venue is exclusively in state court; only the phrase "in [a state]" indicates an intent to allow suit in state or federal court.

The Fourth Circuit then rejected Homeland's argument that the reference to "transferring" a case was evidence of an intent to permit suits in federal court. Although the language of the opinion is not crystal clear, the court appeared to hold that a proper reading of the word "transfer" includes not just district-to-district transfers under 28 U.S.C. § 1404(a), but also remands from federal to state courts in Virginia.

A Tale of Two Doctrines (Res Judicata and Differing Capacities)

2010-11-22T08:46:00.003-05:00

By Kirsten E. Small

On Friday, the Fourth Circuit issued a helpful primer on the differing capacities doctrine and its application in employment litigation. Brooks v. Arthur (No. 09-1551)

Virginia corrections officers Donald Hamlette, James Brooks, and Samuel St. John were fired by Lieutenant Howard Arthur, allegedly because they complained of discrimination by Arthur and Major Randal Mitchell. In administrative proceedings, the Department of Employee Dispute Resolution (EDR) reinstated each officer with back pay, concluding that the officers' misconduct (consisting of various instances of dereliction of duty) did not warrant termination. The EDR also found that none of the officers had established a connection between the protected activity and the termination.

Thereafter, the officers sued Arthur and Mitchel in their individual capacities, alleging civil rights violations (discrimination and witness intimidation) and tortious interference with contract. The district court dismissed, holding that because Arthur and Mitchell were in privity with the Department of Corrections, the EDR proceedings were res judicata as to the civil suit.

The Fourth Circuit reversed. Describing the problem as one of "transitive capacity," the court explained that the EDR proceedings could have preclusive effect only if Arthur and Miller in their individual capacities were in privity with the Department of Corrections, a state entity. Privity could exist only if (1) the Department was in privity with Arthur and Mitchell in their official capacities, and (2) Arthur and Mitchell in their official capacities were in privity with themselves in their individual capacities.

Relying on Andrews v. Daw, 201 F.3d 521 (4th Cir. 2000) ("Daw II"), the court concluded that the analysis failed at the second step: under the doctrine of differing capacities, Arthur and Mitchell could not be in privity with themselves. If sued in their official capacities, Arthur and Mitchell would serve as proxies for the Department of Corrections, the real party in interest. When sued in their individual capacities, however, Arthur and Mitchell would be personally liable for any damages. Additionally, the theories of liability and defenses would differ--for example, the Department of Corrections could claim sovereign (but not qualified) immunity, while Arthur and Mitchel could claim qualified (but not sovereign) immunity.

The court remanded for further proceedings.

An advocacy tip from the Ninth Circuit: Brief your issues!

2010-11-19T07:52:00.006-05:00

By Kirsten Small

The Fourth Circuit hasn't published any decisions this week, so instead I'm going to borrow from the Ninth which this week issued a vivid reminder that if you don't brief an issue, you can't win on it--because the court won't consider it.

The case is a familiar one: The Christian Legal Society's suit against Hastings College of Law. CLS alleged that Hastings's "all comers" policy violated CLS's First Amendment rights, a position it advocated all the way to the Supreme Court. Then, in a single sentence in its reply brief, CSL alleged that "the peculiarity, incoherence, and suspect history of the all-comers policty all point to pretext." The Supreme Court affirmed the Ninth Circuit's First Amendment ruling and remanded the pretext claim, stating that the Ninth Circuit could consider that claim if it was preserved. CLS then moved for a remand from the Ninth Circuit back to the district court for consideration of the pretext claim.

On Wednesday, the Ninth Circuit denied the motion. Noting that appellate courts "review only issues that are argued specifically and distinctly in a party's opening brief," the court admonished that all claims "must be articulated" in the statement of issues, the summary of argument, and the argument itself. CLS did not raise the pretext argument in any portion of its Ninth Circuit briefs, nor did it allude to the claim during oral argument.

The court rejected as insufficient references to "pretext" and "selective enforcement" appeared in CLS's opening brief. "[A] bare assertion in the fact section of the opening brief will not preserve a legal argument that is never made."

"Judges are not like pigs, hunting for truffles buried in briefs," the court concluded. Claims that are not clearly articulated will not be considered by the court.

Two plaintiffs and a petitioner walk into a courthouse...

2010-11-11T08:02:00.003-05:00

by Kirsten E. Small

The Fourth Circuit issued three published opinions yesterday. Let's get to 'em.

The Plaintiff
For my money, the most noteworthy of the bunch is Coleman v. Maryland Court of Appeals. Former procurement officer Daniel Coleman alleged that the Court of Appeals violated the Family and Medical Leave Act by terminating him after he requested sick leave for "a documented medical condition." The Fourth Circuit held that the Eleventh Amendment barred the claim.

The court began its analysis by discussing Nevada Dep't of Human Resources v. Hibbs, 538 U.S. 721 (2003), in which the Supreme Court held that Congress validly abrogated states' sovereign immunity when it enacted the family-care provision of the FMLA (which entitles employees to leave to care for a spouse, child, or parent with a serious health condition). The Hibbs Court held that the family-care provision was a proper exercise of Congress' power to enforce the 14th Amendment because that provision was a necessary remedy for gender discrimination.

The Fourth Circuit recognized that Hibbs requires separate constitutional evaluation of each of the four FMLA entitlements (childbirth, adoption, family care, and self-care). Joining the 5th, 6th, 7th, and 10th Circuits, the Fourth Circuit held that there is no discrimination-based justification for the self-care provision, and hence Congress did not validly abrogate sovereign immunity in enacting the self-care provision.

The Other Plaintiff
JTH Tax, Inc. v. Frashier concerns the amount-in-controversy requirement. JTH Tax, owner of Liberty Tax franchises (the ones who put people on the side of the road in Statue of Liberty costumes), sued a former franchisee in federal court alleging $80,000 in damages. At summary judgment, JTH claimed damages of about $60,000, whereupon the district court dismissed for lack of subject matter jurisdiction. The Fourth Circuit reversed, noting first that there was no allegation of bad faith in JTH's original allegation. Second, the Court held that the actual damages claims, when combined with the value to JTH of injunctive relief, satisfied the jurisdicational threshold. No new law here, but a good walk-through of the relevant principles.

The Petitioner
Finally, in Barnes v. Holder, the Court held that the BIA has properly interpreted immigration regulations to require "an affirmative communication attesting to the alien's prima facie eligibility" before removal proceedings may be terminated.

"It's not fair" is not one of the canons of statutory construction.

2010-11-09T08:10:00.004-05:00

by Kirsten E. Small

The Fourth Circuit issued one published opinion yesterday: West Va. Highlands Conservancy v. Huffman, No. 09-1474.

Coal miners in West Virginia (well, everywhere really) are required by the Clean Water Act to control acid mine drainage. When they fail to do so, the West Virginia Department of Environmental Protection forfeits the mine owner's performance bond and starts remediating the drainage itself.

Or at least, that's the theory. In actuality, WVDEP was allowing acid mine drainage to continue at 18 bond forfeiture sites. The West Virginia Highlands Conservancy sued, claiming that WVDEP was required to obtain a permit for such discharges. The district court agreed based on the very broad language of the CWA, which covers "any addition of any pollutant ... from any point source" by "any person" (defined to include states and municipalities).

The district court held that WVDEP was required to obtain a permit under the plain statutory language. On appeal, WVDEP resorted to playground rhetoric, arguing that the CWA shouldn't apply to it because: (1) it's a state agency ("the rules don't apply to me"); (2) it didn't cause the discharges in the first place ("he did it"); and (3) application of the CWA to it would produce "absurd" results ("it's not fair").

The Fourth Circuit rejected these "policy" arguments and affirmed.

4th Circuit creates "lost child" exception to warrant requirement

2010-11-05T09:06:00.003-04:00

by Kirsten E. Small

May 1, 2009 was a bad day for Melvin Taylor, but it could have been a worse day for the 4-year-old daughter of Taylor's girlfriend. A cab driver found the child wandering on a busy street in Richmond, Virginia, and contacted the police. Officer Anthony Ratliff responded, and the girl took him to a nearby--and apparently empty--row house. Ratliff followed her inside, shouting "hello" periodically as he looked for an adult who might be responsible for the child.

The adult Ratliff found was Taylor, who was sleeping in an upstairs bedroom. The bag of bullets on the bedside table gave Ratliff some pause as to the "responsible" part, so he asked Taylor his name (he gave a false one) and if he knew the address of the house he was in (he claimed not to). Ratliff's concerns not having been allayed, he performed a protective sweep and found a handgun under Taylor's mattress.

About that time, Taylor's cell phone rang with a call from "Baby's Mama," who helpfully provided Ratliff with the name "Orlando Taylor," which Ratliff then traced back to Melvin Taylor, who turned out to have a prior felony which made his possession of the gun illegal.

Taylor appealed his subsequent conviction, arguing that Ratliff was required to have a search warrant, or at least probable cause, before entering the house. The Fourth Circuit rejected this argument, holding that a warrant was unnecessary because there was no criminal investigation afoot--just an attempt to reunite a lost child with her parents. Aside from the warrant requirement, the court concluded that the search was reasonable, in its occurrence and its scope, in light of the exigent circumstances.

The case is United States v. Taylor.

Fifth Circuit Tells District Court It Has No “Inherent Authority” To Impose Sanctions For Actions Arising Out Of An Arbitration Proceedings

2010-10-20T09:47:00.003-04:00

By Stephen P. Groves, Sr.

In Positive Software Solutions, Inc. v. New Century Mortgage, et. al. v. Camina, ___ F.3d ___ (5th Cir. 2010) (Docket No. 09-10355, filed 13 September 2010), the United States Court of Appeals for the Fifth Circuit concluded a Federal District Court did not have the “inherent authority” to impose monetary sanctions for actions allegedly occurring during an arbitration proceeding, even though the District Court had ordered the arbitration to take place.

Positive Software Solutions sued New Century Mortgage for allegedly infringing on certain software patents associated with telemarketing software licensed to New Century. Camina, a partner in Susman Godfrey, LLP, represented New Century in a court-ordered contractual arbitration even though Positive Software opposed the proceeding.

During the arbitration Camina advised New Century on discovery issues. After an award was rendered, the District Court vacated due to an alleged undisclosed relationship between Camina and the arbitrator. In an initial appeal, the Fifth Circuit reversed the vacatur and remanded the case. After remand, New Century declared bankruptcy. Positive Software ultimately settled its dispute with New Century and, as an interesting part of the settlement, “New Century waived and assigned to Positive Software its attorney-client and work-product rights.” The District Court later ordered Susman Godfrey LLP to turn over its files to Positive Software for sanctions investigation purposes.

Positive Software subsequently moved for sanctions against Camina and other under, Rule 37, F.R.Civ.P., 28 U.S.C. § 1927 (counsel’s liability for excessive costs, expenses, and attorneys’ fees), and the District Court’s “inherent authority”. In February 2009, the District Court sanctioned Camina $10,000.00 via the District Court’s “inherent authority”.

On appeal, the Fifth Circuit recognized that a District Court had the “inherent authority” to impose sanctions in order to (a) control the litigation before it, (b) sanction conduct in direct defiance of the sanctioning court, and (c) sanction conduct which constitutes disobedience to court orders. Nevertheless, the Court of Appeals noted such “inherent authority” must only be used when essential to preserve the court’s authority.

The District Court had imposed the sanctions on Camina based upon a theory that the arbitration proceeding was an “annex” to litigation. The District Court believed, since it had ordered the arbitration to proceed, it retained the authority to impose sanctions for conduct occurring during the arbitration. The Fifth Circuit easily dismissed this theory, noting arbitration is an alternative means of dispute resolution – separate from litigation. In fact, the Court of Appeals concluded if the District Court was correct and arbitration was a mere “annex” of litigation, then the very purpose of such private (i.e.; non-judicial) ADR/arbitration would be completely undermined. Consequently, the Court of Appeals acknowledged “[p]arties agree to avoid litigation; they voluntarily surrender judicial remedies in favor of an extrajudicial process.” (Emphasis in original).

Interestingly, Positive Software argued that the sanctions were appropriate in a court-ordered arbitration, but agreed that sanctions would not have been proper had the parties voluntarily entered into the arbitration. The Fifth Circuit found this to be an unjustifiable “significant and perverse asymmetry”.

Additionally, the Court of Appeals concluded the sanctions order likely violated the Federal Arbitration Act, 9 U.S.C. §§ 1, et. seq., which significantly limits a court’s ability to interfere with an arbitration proceeding. Furthermore, the Fifth Circuit did not want a District Court to “become a roving commission to supervise private method[s] of dispute resolution and exert authority that is reserved, by statute, caselaw, and longstanding practice, to the arbitrator.”

To Heir Is Human, To Do It Too Late Is Fatal

2010-10-14T12:33:00.002-04:00

By Stephen P. Groves, Sr.

In a series of four cases, released on 16 August 2010, the South Carolina Supreme Court affirmed the Court of Appeals’ prior decisions to uphold a summary judgment in four 2005 actions to set aside a 1966 quite title decision. See Robinson v. Estate of Harris, ___ S.C. ___, ___ S.E.2d ___ (2010) (Four cases) (Opinion Nos. 26862, 26863, 26864, and 26865).

Simeon B. Pinckney died intestate in 1921. He was survived by his wife, Laura, and his two sons, Herbert and Ellis. At the time of his death he owned 20 acres of land on James Island in Charleston County. For various reasons, not important herein, the relevant property was “whittled down” to 4.3 acres and deeded to Mr. Pinckney’s son, Herbert Pinckney, in 1946. After Herbert passed his wife, Laura Pinckney Heyward, filed a quiet title action in 1966. None of the appealing parties to this action or any of their predecessors-in-interest responded to the 1966 action and the title was resolved in Ms. Heyward’s favor.

Due to a number of subsequent conveyances, the 4.3-acre tract was eventually divided into four separate lots owned by (a) The Converse Company, (b) Martine A. Hutton, (c) David Savage and Lisa M. Shogry-Savage, and (d) Debbie (Shogry) Dinovo. Each lot owner was a Defendant-Respondent in one of the four Robinson v. Estate of Harris cases.

In February 2005, Sara Mae Robinson and others (“Petitioners”) filed their own quiet title action involving several tracts of land located on James Island, including the 4.3-acre tract. They sought “ ‘to establish their legitimate relationship as lineal descendants and heirs’ " of Mr. Pinckney. The first 25 named Petitioners claimed they were Mr. Pinckney’s heirs and “the remaining Petitioners claimed they purchased interests in the property and were the legitimate owners of those interests.”

In bringing the cases, the Petitioners asserted the 4.3 acre tract was fraudulently transferred to Herbert and, in turn, Ms. Heyward fraudulently obtained the property deed through the 1966 action. Moreover, the Petitioners asserted they did not learn of the 1946 deed or the 1966 quiet title action until 2004. After the issues were joined the Lot Owners all moved for summary judgment. The Petitioners countered with several detailed affidavits delineating their alleged evidence of extrinsic fraud. The Trial Court granted the Lot Owners’ motion and the Court of Appeals affirmed. On certiorari appeal, the Supreme Court agreed.

In order to resolve these cases, the Supreme Court was required to determine if S. C. Code Ann. § 15-67-90 constituted an "absolute bar" to Petitioners' action or whether their claim of extrinsic fraud superseded the applicable statute of limitations set forth therein. This provision contains a three year statute of limitations after which a court is prohibited from setting aside a quiet title action “for any reason”.

The Supreme Court agreed with the Petitioners that S. C. Code Ann. § 15-67-90 gave either the trial court and/or the appellate courts “the inherent authority to set aside the 1966 quiet title action and the underlying 1946 cross-deeds if in fact they were procured as the result of extrinsic fraud.” Nevertheless, since the Petitioners waited 39 years to challenge the 1996 action, the doctrine of laches applied to bar their claims. Moreover, notwithstanding the laches bar, the Supreme Court, in a “it just ain’t fair” moment, noted the innocent purchasers would be significantly prejudiced since they had (a) purchased the lots for significant monetary consideration, (b) generally been in possession of the property for a number of years, and (c) some of the Respondents had even constructed family residences thereon.

The united Supreme Court affirmed the Court of Appeals in all four cases.

Water, Water Everywhere, but not a Drop to Drink

2010-10-11T16:51:00.003-04:00

By Stephen P. Groves, Sr.

In M & M Corporation of South Carolina v. Auto-Owners Insurance Company, ___ S.C. ___, ___ S.E.2d ___ (2010) (Sup. Ct. Op. No. 26883, filed 11 October 2010), a divided South Carolina Supreme Court (3-2), answered several certified questions from the United States District Court for the District of South Carolina. The Supreme Court determined Auto-Owners was required to provide property damage insurance coverage to its insured hotel for damages caused by overflowing water.
Auto-Owners issued M&M Corporation a commercial all-risk insurance policy for its hotel property located in Blythewood, South Carolina. In August 2006, the South Carolina Department of Transportation (“SCDOT”) initiated a road improvement project near the hotel which involved, in part, installation of a new underground stormwater drainage system. Before the system could be completed the Blythewood area sustained a significant rain event during which more than four inches of rain fell in a single day. As noted by the Supreme Court:

The incomplete stormwater drainage system comprised 1,600 feet of pipes and collected water from an area of approximately 15.9 acres, terminating at an exposed, above-ground [30]-inch pipe [50’] from the edge of the hotel property line and [150’] from [the] hotel building. The total volume of water discharged from the pipe on the day at issue was over 830,000 gallons at a rate of 6.3 feet per second.

Unfortunately, the discharged water filled the hotel’s parking lot to a level sufficient to allow water to enter into the interior of the hotel building and, in turn, cause significant property damage. M&M Corporation sued Auto-Owners for the damages. Auto-Owners denied and defended the claim on the basis of the insurance policy’s “flood” and “surface water” exclusions. After the parties filed their respective cross-summary judgment motions, the District Court certified three questions to the Supreme Court.
1. Under an all-risk Commercial Property Policy of insurance, does "surface water" encompass rainwater collected and channeled in a stormwater collection system?

The Supreme Court noted that since the insurance policy did not define either the term “surface water” or “flood water” then it was free to use the “plain, ordinary, and popular meaning[s]” of those terms. Moreover, the Supreme Court noted insurance policies are construed in favor of coverage with all exclusions, such as those asserted by Auto-Owners, interpreted against the insurer.

Looking to a definition of “surface water” reached in 1901, the Supreme Court concluded that “[o]nce surface water is deliberately contained, concentrated, and cast onto an adjoining landowner's property, it is no longer naturally flowing, diffuse water. Water spewing in an unnatural concentration from a stormwater drainage system lacks the identifiable characteristics of surface water . . . .” . The Supreme Court therefore answered the first certified question with a rather emphatic “No”.
2. If the answer to Question I is no, can such non-surface water reacquire its classification as surface water upon exit from the stormwater collection system and, if so, under what circumstances?

Following, in essence, the same 100+ year old definition, the Supreme Court also answered the second certified question with a similar rather emphatic “No”. The Court stated once the rampaging waters had lost their “surface water” characteristics when expelled from the pipe, the unnatural flow cannot be transformed back into “surface water”.
3. Under an all-risk Commercial Property Policy of insurance, does "flood water" encompass water discharged from a stormwater collection system in concentrated form, pooled, and that thereafter enters a building?

Finally, interpreting Auto-Owners’ “flood water” exclusion, the Supreme Court noted South Carolina had not yet defined the term. Looking to an Idaho case, the Supreme Court impliedly approved a definition reading “ ‘[f] waters are waters which escape, because of their height, from the confinement of a stream and overflow adjoining territory; implicit in the definition is the element of abnormality.’ ” See Milbert v. Carl Carbon, Inc., 406 P.2d 113, 117 (Idaho 1965). Since the waters in this case did not “breach” the containment of a stream or other natural land formation, but was intentionally channeled, then the waters cannot be defined as “flood waters”.

Chief Justice Toal authored the opinion and was joined by Justices Beatty and Kittredge. Justices Pleicones authored a dissenting opinion joined in by Justice Hearn.

1. See Lawton v. South Bound Railroad Co., 61 S.C. 548, 39 S.E. 752 (1901). The Supreme Court defined “surface water” as:

waters of a casual and vagrant character, which ooze through the soil or diffuse or squander themselves over the surface, following no definite course. They are waters which, though customarily and naturally flowing in a known direction and course, have nevertheless no banks or channels in the soil, and include waters which are diffused over the surface of the ground, and which are derived from rains and melting snows . . . .

Lawton v. South Bound Railroad Co., 61 S.C. 548, 552, 39 S.E. 752, 753.

The limits of public nuisance: North Carolina v. TVA

2010-08-20T08:17:00.003-04:00

by Kirsten E. Small

About a month ago, the Fourth Circuit vacated an injunction that required the Tennessee Valley Authority to immediately install emissions controls at four of its plants. The Court determined that the "defined standards of the Clean Air Act" preempted a common law public nuisance claim--"an ill-defined tort of last resort." (Judge Wilkinson is a poet, and he didn't even know it.) The Court also concluded that the district court had erred in applying North Carolina law extraterritorially.

I know next to nothing about environmental law, but evidently this decision is kind of a big deal. Law360 yesterday published an article explaining that the decision is significant because of how thoroughly it responds to the arguments in support of the tort of public nuisance for environmental claims.

Happy weekend, everyone!

Fourth Circuit holds that lay opinion testimony must be based on the witness' own perception

2010-08-17T17:54:00.002-04:00

by Kirsten E. Small

Federal Rule of Evidence 701 permits lay opinion testimony when, among other things, the opinion is "rationally based on the perception of the witness." In United States v. Johnson,the Fourth Circuit held that a DEA agent's "training and experience" did not provide a basis for Rule 701 opinion testimony not based on the agent's own perceptions.

At Johnson's drug trafficking trial, the government presented testimony from DEA Agent Randy Smith regarding the meaning of certain words used by Johnson during recorded telephone conversations. Smith's interpretations were based on his "training and experience" as a DEA agent, not on his participation in surveillance of Johnson's alleged drug dealing activities.

The Fourth Circuit reversed Johnson's conviction, holding that because Smith did not personally participate in the investigation of Johnson, his testimony was not "based on the perception of the witness" as required by Rule 701.

The Court also rejected the government's argument that the error was harmless because Smith could have testified as an expert under Rule 702. Although Smith had the requisite qualifications, he provided no methodology or guiding principles for his interpertation of the phone calls, and therefore did not meet Rule 702's requirement that expert testimony must rest on reliable principles and methods.

Fourth Circuit rejects First Amendment challenge to SC's "sore loser" statute

2010-07-21T08:42:00.003-04:00

by Kirsten E. Small

One of the things I love about being a lawyer is that I learn something new every day. Yesterday, I learned two things: (1) A candidate who appears on the ballot for more than one party (e.g., the Green Party and the Constitution Party) is a fusion candidate, and (2) a "sore loser" law prohibits a defeated primary candidate from appearing on the general election ballot for another party. South Carolina is one of only eight states that permit electoral fusion. All but three states prohibit failed primary candidates from appearing on general election ballots.

The Fourth Circuit yesterday rejected a constitutional challenge to South Carolina's sore loser law, S.C. Code Ann. § 7-11-10, by the South Carolina Green Party. SC Green Party v. SC State Election Comm'n, No. 09-1915 (July 20, 2010). In 2008, Eugene Platt sought the nomination for SC House seat 115 from the Democratic Party, the Green Party, and the Working Families Party. After the Green and Working Families Parties had selected Platt as their nominee for the seat, Platt was defeated in the Democratic Party primary election. As a result, the sore loser law prohibited Platt from appearing on the ballot for the Green and Working Families Parties.

The Green Party sued, claiming that Platt's removal from the ballot violated its First Amendment right to freedom of association.

The Fourth Circuit rejected this challenge, holding first that the burden on the Party's associational rights was only "moderate" (as opposed to "severe") because, while the Party was deprived of its ability to nominate a particular candidate, the SC sore loser law does not permit members of one political party to select the candidate of a rival party (as was the case with the "blanket primary" law struck down by the U.S. Supreme Court in California Democratic Party v. Jones, 530 U.S. 567 (2000)). Second, the court held that SC's sore loser statute is a reasonable, nondiscriminatory restriction that is justified by important regulatory interests. These interests, the court said, are in minimizing factionalism, avoiding voter confusion, and ensuring orderly, fair, and efficient procedures for the election of public officials.

One interesting procedural note: Judge Barbara Keenan, who has been on the court for all of four months, was the lead judge on the panel (the other two judges were Senior Judge Clyde Hamilton and District Judge Samuel Wilson).

Just don't drop it on your foot--U.S. files 268-page brief in public corruption case

2010-07-15T14:21:00.006-04:00

by Kirsten E. Small

Update 7/21/10: The Third Circuit has directed to reduce the length of its brief to 42,000 words, about a 20 percent cut. --KES

There's an aphorism that you'll sometimes hear from appellate judges: "The longer the brief, the worse the argument." Lengthy briefs tend to appear when (1) counsel take the "kitchen sink" approach, raising every conceivable issue instead of focusing on the two or three (or maybe four) issues that have a decent chance of success, or (2) counsel fail to take the time to present a clear, concise argument.

I am guessing that both issues are at play in the 268-page, 53,500-word opening brief filed by the United States in its appeal of the sentences imposed on Pennsylvania State Senator Vincent Fumo and his aide, Ruth Arnao. That's nearly four times longer than the presumptive length of 14,000 words for a party's opening brief.

What's more, the government's appeal is directed solely to claims of procedural error at sentencing (e.g., that the court should have imposed an obstruction-of-justice enhancement based on Fumo's perjurious trial testimony). The brief is not available online, but according to the goverment's motion to file the brief, it challenges seven specific guidelines rulings and "multiple, additional procedural errors made by the district court."

In fairness to the government, the trial lasted four months and involved testimony of 108 witnesses and roughly 26 hours of closing arguments. But I'm still not buying that 268 pages is really necessary. If nothing else, I'm willing to bet that a good many of the "multiple, additional procedural errors" are not worth raising to the Court, either because they are not well supported by law or because they didn't affect the outcome of the sentencing proceeding.

The really frightening thing is that Fumo and Arnao have cross-appealed their convictions, which means that the government (as Appellee instead of Appellant) will have to file another primary brief. The judges and clerks of the Third Circuit are going to have to start eating their Wheaties.

Plaintiffs are not required to name all co-tortfeasors under the Tort Claims Act

2010-07-14T18:02:00.003-04:00

by Manton Grier, Jr.

In Chester v. South Carolina Dept. of Public Safety, Op. No. 26833 (S.C. July 12, 2010), the Supreme Court of South Carolina held that a plaintiff is not required to join other co-tortfeasors for purposes of determining proportionate liability under Section 15-78-100(c) of the Tort Claims Act.

In that case, the plaintiff’s estate sued three state agencies after the decedent died in a multiple-vehicle accident on I-95 allegedly caused by heavy smoke from a controlled fire conducted by the Forestry Commission. The state agencies argued that Section 15-78-100(c) of the Tort Claims Act required the plaintiff’s estate to name all potential co-tortfeasors, even those that previously settled with the plaintiff’s estate. In actions under the Tort Claims Act, Section 15-78-100(c) provides that “when an alleged joint tortfeasor is named as a party defendant, the trier of fact must return a special verdict specifying the proportion of monetary liability of each defendant against whom liability is determined.”

The trial court read this statute as requiring the plaintiff to name all co-tortfeasors in order to determine proportional liability. It then dismissed the action under Rule 19 because the necessary parties had already settled. The Supreme Court reversed. It stated that “a plaintiff has the sole right to determine which co-tortfeasor(s) she will sue.” Requiring a plaintiff to name co-tortfeasors at the request of a defendant agency violates this principle. The statute does not “force the plaintiff to choose between settling with some parties and thereby forego her right to sue a [Tort Claims Act] defendant, or going to trial against all co-tortfeasors.” The Court also noted that the defendants still have a remedy, as any party liable will be entitled to an equitable set-off against the settlements the plaintiff has already received.

SC Supreme Court clarifies amount of time an offender may be punished for violating terms of release

2010-07-12T11:53:00.001-04:00

Manton Grier, Jr.

In State v. Picklemeiser, Op. No. 26831 (July 6, 2010), the Supreme Court of South Carolina clarified the amount of time an offender may be incarcerated or required to participate in a community-supervision program after violating the terms of parole or release. Although the Department of Probation, Parole, and Pardon Services had refused to impose an additional sentence for a probation violation beyond the unsuspended portion of the original sentence, the Supreme Court held that the maximum amount of time that may be imposed for parole violations includes both the unsuspended and suspended sentence. In other words, when an offender violates probation or another condition, a trial court may impose a longer term of incarceration or extend community service or probation, so long as the aggregate period of service does not extend beyond the period of the total sentence, which includes both the unsuspended and suspended portions.

Bad Settlement Decisions And Failure To Make Statutory Demand Result In Pyrrhic Victory

2010-07-09T11:18:00.004-04:00

by Gary Beaver

In Brooks Millwork Co. v. Levine, the plaintiff won its breach of contract claim at trial but the jury awarded plaintiff only $25,575.61 -- over $10,000 less than defendants highest settlement offer. Both sides moved for attorney fees – plaintiff on the basis of contract under NCGS § 6-21.2 and defendant under NCGS § 44A-35, which allows a judge to award reasonable attorneys’ fee to the “prevailing party . . . upon a finding that there was an unreasonable refusal by the losing party to fully resolve the matter. . .” A prevailing party is a plaintiff who recovers more than 50% of the amount claimed or a defendant found liable for less than 50% of the amount claimed. Plaintiff had initially claimed over $98,000 but acknowledged partial satisfaction of its lien reducing the principal amount owed to $63,358.48.

The Court of Appeals held on June 15, 2010, that plaintiff was not entitled to contractual attorney fees because it had not complied with the mandatory provision in NCGS § 6-21.2(5) requiring it to give the defendant 5 days to pay the principal amount owed to avoid the attorney fees. Plaintiff never made that demand before filing the lawsuit. Very big “OOPS.” The court then granted attorney fees and costs to defendant as the prevailing party under § 44A-35. The trial court used the $98,000 figure rather than $63,358.48. [Note: the Court of Appeals did not give a satisfactory explanation of what claimed damages number it considered and noted that “excluding contractual attorneys’ fees – to which plaintiff is not entitled. . . – from plaintiff’s calculation, the final judgment totals less than half of plaintiff’s claimed amount.” So did the plaintiff claim attorney fees as part of the $98,000 or of the $63,358.48? Did the court then exclude those claimed fees? What number did the court use as the claimed amount? Inquiring minds want to know.] The attorney fees and costs awarded to defendant totaled about $21,000 which was only about $4600 less than the damages plaintiff won at trial. It got worse. Plaintiff’s counsel was also ordered to pay sanctions to defendant in the amount of twice the printing costs of the appeal for his many violations of the appellate rules. The court listed 7 specific violations – 6 of them involving the brief.

This is a reminder to counsel your clients to be reasonable in settlement discussions and not hold out for the homerun. There is not enough detail in the decision about the merits of the breach of contract claimed damages to know if that is what happened here but, regardless, rolling the dice with the jury obviously did not work out. Also, obey the appellate rules or bear the consequences; plaintiff’s counsel was lucky the appeal was not dismissed or the consequences could have been even worse for him.

The “Sovereignty of the People” Prevails

2010-07-07T12:23:00.003-04:00

by Gary Beaver

On June 17, 2010, in State Employees Ass’n of NC, Inc., v. NC Dep’t of State Treasurer, the N.C. Supreme Court reversed the decision of the NC Court of Appeals affirming a trial court’s dismissal of a complaint seeking public records under the Public Records Act, NCGS §§ 132-1 to 132-10. The plaintiff sought records regarding the investment decisions and performance of the Retirement Systems Division of the Department of State Treasurer. Plaintiff began investigating after reading a February 2007 article in Forbes magazine about “pay-to-play” issues involving state retirement pension funds. The defendant had produced hundreds of pages of documents in several installments over the course of a year but plaintiff believed that defendant had not produced all it had.

The lower court had dismissed under Rule 12(b)(6) for failure to state a claim. The Supreme Court held that the allegations were based on reasonable inferences drawn by plaintiff from the documents that were produced. For example, one produced email referred to another email not produced. The Court rejected defendant’s contention that “possession” of the sought information is a necessary element of a Public Records Act lawsuit. The Court noted that NCGS § 132-9(a) provides the cause of action and it makes no mention of a possession element. The defendant can raise that as a substantive defense but it cannot act as the final authority in deciding possession or custody of the requested public records. To allow it to do so would undermine the strong public policy favoring release of public records to increase transparency in government.

This is a sound and needed decision. Given what we have seen in recent years from Jim Black and other “public servants” while our media sat idly by not, or belatedly, investigating or reporting misfeasance and malfeasance by elected and appointed officials, the Public Records Act is the public’s last, best hope at ferreting out and preventing corruption in government.

Fourth Circuit upholds county furlough against Contract Clause challenge

2010-07-06T08:20:00.003-04:00

by Kirsten E. Small

As the slow economy continues to put state and municipal governments under pressure to fund necessary services while maintaining balanced budgets, furloughs of government workers are increasingly common. In areas where local government workers are unionized, a furlough may run afoul of the Constitution's Contract Clause, which provides that "[n]o State shall ... pass any ... Law impairing the Obligation of Contracts." U.S. Const. art. I, § 10, cl. 1.

The Fourth Circuit addressed such a challenge in Fraternal Order of Police v. Prince George's County, No. 09-2187 (June 23, 2010). Nexsen Pruet represented the County; yours truly wrote the brief and the case was argued by William "Billy" Wilkins.

Faced with declining revenues and unable to raise taxes, Prince George's County declared a two-week furlough of all County employees during fiscal year 2009. The County acted pursuant to § 16-229 its Personnel Code, which allows furloughs when "required" by "an ascertained shortfall in revenue."

Approximately 80-95% of county employees are union members; the Unions challenged the furlough on the basis that the County was impairing its own contractual obligations (specifically, the wage and hour provisions of collective bargaining agreements) in violation of the Contract Clause. The Unions also argued that (1) the furloughs violated a county ordinance providing that specific terms of CBAs override contrary county law, and (2) the furloughs were not "required."

The district court rejected the Unions' claims under county law, holding (1) that the CBAs did not specifically prohibit furloughs, and therefore § 16-229 was incorporated into the CBAs as a matter of law; and (2) that the County properly determined that a furlough was "required."

However, the court held that the furlough violated the Contract Clause because (1) it impaired the County's obligations under the CBAs to pay certain wages, (2) the impairment was substantial, and (3) the impairment was not "reasonable and necessary to serve an important public purpose." U.S. Trust Co. v. New Jersey, 431 U.S. 1 (1977). The County argued on appeal that there could be no impairment because (as the district court held) § 16-229 was a term of the Unions' contracts. Alternatively, the County argued that the furlough was reasonable and necessary. A key dispute between the parties--and the aspect of the case most watched by locoal governments and unions across the country--was the degree of deference to which the County was entitled in making this determination.

The Fourth Circuit accepted the County's first argument, that the CBAs were not impaired because the furlough ordinance was, by operation of law, a term of the collective bargaining agreements. Because the CBAs therefore gave the County the right to furlough union employees when "required," and because the Unions had not cross-appealed the district court's holding that the furlough was "required" within the meaning of county law, the Fourth Circuit reversed the district court.

While this is a big win for Prince George's County, it is unclear how much help the decision will provide to other local governments facing budget shortfalls. The Court addressed only the narrow question of the impact of county law, and did not reach the larger question of when a furlough of union employees may be "reasonable and necessary" and, most importantly, the degree of deference to which a local government is entitled in making this determination.

N.C. Supreme Court Teaches Interesting Ethics Lesson

2010-07-02T10:51:00.004-04:00

by Gary Beaver

Rule 4.3 of the N.C. Revised Rules of Professional Conduct provides in pertinent part:

In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not:
. . .
(b) state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyers’ role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding.

On June 17, 2010, in Sisk v. Transylvania Community Hospital, Inc. et al., the N.C. Supreme Court reversed the Court of Appeals and upheld a trial judge who had revoked pro hac vice status for two out-of-state attorneys for their conduct in a matter in another state that was inconsistent with Rule 4.3 (Note: not “a violation of” but rather merely “inconsistent with fair dealings as reflected in Rule 4.3”). The N.C. lawsuit involved a medical malpractice claim. The two attorneys had represented a plaintiff in Kentucky in a similar lawsuit and had sued Abbott Laboratories, Inc. (among others) in that case. Abbott had a consulting expert in the Kentucky case. The out-of-state lawyers contacted that expert as the Kentucky case was settling but before it was dismissed and asked him to assist on a second Kentucky lawsuit with a similar medical issue but in which they had not sued Abbott. However, at the time they contacted the expert, they knew that they were likely to add Abbott as a defendant. The expert had a contract with Abbott to assist in all cases involving the medical issue at stake in both Kentucky cases and the N.C. case. In the second Kentucky case, Abbott moved to disqualify the two attorneys for failing to advise the expert that Abbott was a potential expert and depriving Abbott of its expert. The Kentucky court denied the motion. Abbott tried again to disqualify the lawyers in the N.C. case. The N.C. court granted the motion. The N.C. Supreme Court ultimately affirmed the trial court due to the lawyers admitted intent to keep the expert “in the black” about Abbott’s potential as a defendant.

The ruling is a strong one in favor of lawyers ensuring that they are not misleading potential witnesses in any way about the lawyers’ status and the possible parties in a case. We should all give this decision some thought in the context of all witnesses, not just expert witnesses. Infrequently (but once is too often), you may have seen instances where you know other attorneys mislead or suspect other attorneys of having mislead a witness when they question that witness while investigating a case. This decision may prove to be a big stick to use in such instances.

As for the pro hac vice aspect, the Court of Appeals had correctly noted that an attorney is not subject to discipline under the NC Rules of Professional Conduct if the attorney’s conduct conforms to the rules of the jurisdiction in which the lawyer reasonably believes the predominant effect of that conduct will occur. RPC 8.5. However, though it appears that the predominant effect may have been in Kentucky, the NC Supreme Court held that the trial court did not abuse its discretion under NCGS Section 84-4.2 to revoke the pro hac vice status because it has inherent power to control trials and discipline attorneys and the fact that Rule 4.3 may not apply to this conduct does not limit the trial court from taking some guidance from the rule in exercising such discretion.

South Carolina Supreme Court holds that County Councils may directly engage professionals to conduct investigations

2010-07-01T11:44:00.002-04:00

By Manton Grier, Jr.

The Supreme Court of South Carolina recently held that a county council may bypass the council administrator and directly engage professionals when investigating members of the council. Bradshaw v. Anderson County, Op. No. 26830 (S.C. June 28, 2010). In that case, voters in Anderson County elected a new county council in November 2008. After the election, but prior to the installation of the new council, the former council declared an anticipatory breach of the county administrator’s contract and awarded him over $1 million.

When the new council was sworn into office, it voted to investigate several transactions by the former council and elected several accountants and lawyers to lead the investigation. Three Anderson County taxpayers brought an action to enjoin the investigation and sought a judgment declaring that the investigation violated the Home Rule Act. The trial court dismissed the Complaint under Rule 12(b)(6), and the plaintiffs appealed.

On appeal, the Supreme Court held that the Home Rule Act authorizes the Council to conduct an investigation and engage professionals to carry it out. Although the Home Rule Act states that “the council shall deal with county officers and employees . . . solely through the administrator,” it is prefaced with the limiting language of “[e]xcept for the purposes of inquiries of investigations.” S.C. Code Ann. § 4-9-660. Thus, the Court held that because the council engaged investigators “for the purpose of inquiries and investigations,” the unambiguous language allowed the council to retain outside professionals. Further, the Court stated that it would be absurd to require the administrator to investigate himself.

Failure To Give Notice To All Parties, Including Non-appealing Parties, Results In Dismissal Of Appeal

2010-06-30T11:58:00.008-04:00

by Gary Beaver

North Carolina Rule of Appellate Procedure 3(a) requires an appellant to serve all other parties with a notice of appeal. In case anyone thinks that it is not mandatory, the NC Court of Appeals made it clear on May 18, 2010, in Lee v. Winget Road, LLC, that it is. There were originally eight plaintiffs and eight defendants in the lawsuit until plaintiffs voluntarily dismissed two of the defendants. Subsequently, the trial court granted summary judgment to the remaining defendants. Five of the Plaintiffs filed a notice of appeal as to the remaining six defendants but, thereafter, withdrew the appeal as to one of the defendants. The appellants served the five remaining defendants but did not serve the three non-appealing plaintiffs or the two previously dismissed defendants.

Citing in support Dogwood Dev. & Mgmt. Co. LLC v. White Oak Transp. Co., 362 N.C. 191, 657 S.E.2d 361 (2008) and Hale v. Afro-American Int’l, 335 N.C. 231, 436 S.E.2d 588 (1993), the Lee court held that the failure to serve the notice of appeal on the three non-appealing plaintiffs or to obtain a waiver of service from them violated Rule 3(a) and that the violation was a “significant and fundamental” one and a “’gross violation’ of the [appellate] rules which ‘frustrates the adversarial process’” requiring dismissal of the appeal. The court did not reach the issue of whether failure to serve previously dismissed defendants was a similar egregious violation. Bottom line: follow the appellate rules to a “T” or run the risk of dismissal. [Note: the appellants’ brief was submitted by their counsel but not signed by him. I wonder what is up with that?]

A mom tomato and a dad tomato are walking down the street ...

2010-06-17T09:13:00.006-04:00

Kirsten E. Small

Time to play a little "ketchup." While I have been busy vacationing and brief writing (thankfully, not at the same time), the Fourth Circuit has been busy issuing published opinions. Most of them have not been terribly noteworthy, but there are a few worth pointing out, to wit:

United States v. Richardson: Holds that AOL was not acting as a government agent when it reported (pursuant to a mandatory reporting statute) information it had acquired by use of an internally-developed, non-mandatory filtering program. The panel distinguished Skinner v. Railway Labor Execs. Ass'n, 489 U.S. 602 (1989), on the basis that Skinner involved a regulatory scheme that dictated certain procedures by the railway that were designed to preserve evidence for government use. The regulatory scheme challenged by Richardson was entirely passive ("If you find something, do please let us know") and thus did not create the kind of government involvement that sparks Fourth Amendment protections.

United States v. Joshua: Holds that a person is "in the custody of the Bureau of Prisons" for purposes of 18 U.S.C. § 4248 (authorizing indefinite civil commitment of sexually dangerous persons) only when in the BOP's legal custody. Joshua, who was convicted by a military tribunal and merely housed at a BOP facility as a "contractual boarder," was not in the BOP's legal custody and therefore not subject to civil commitment under § 4248.

In Norfolk Southern Railway v. City of Alexandria, the court held that the Interstate Commerce Commission Termination Act (ICCTA) preempted the City's attempts to regulate Norfolk Southern's transport of bulk ethanol. At least, I think that was the holding. It was kind of hard to stay awake all the way through.

Did you know there is a statute that provides a damages remedy for the wrongful conviction of an innocent person in federal court? Neither did I. The Fourth Circuit considered the application of the statute in United States v. Graham. Interesting stuff.

Supreme Court Rolls Over Myrtle Beach’s Attempt To Regulate Motorcycle Rallies By Requiring All Riders To Use Helmets And Protective Eyewear

2010-06-08T11:43:00.005-04:00

by Stephen P. Groves, Sr.

In a unanimous opinion released today, Aakjer v. City of Myrtle Beach, the South Carolina Supreme Court struck down Myrtle Beach’s long-running attempt to curtail motorcycle rallies in the Grand Strand city. After a number of annual and/or semi-annual bike rallies reportedly “placed a heavy burden on the local medical community, police, and other emergency responders” in Myrtle Beach, the City enacted several ordinances and/or amended existing ordinances (the “Motorcycle Ordinances”) which, among other things, required “any person riding a motorcycle [to] wear a protective helmet and eyewear” (the “Helmet Ordinance”). During a subsequent rally, a number of individuals (the “Petitioners”) were cited for violation of the Helmet Ordinance.

Since a violation of the Helmet Ordinance was considered an "administrative infraction", Myrtle Beach established an administrative hearing system to hold trials on citations charging violations of various municipal ordinances, including the Helmet Ordinance. After the administrative hearing system was later repealed, Myrtle Beach then issued each of the Petitioners a Uniform Ordinance Summons requiring them to appear before a municipal court judge.

The Petitioners brought an action in the original jurisdiction of the Supreme Court seeking “a declaratory judgment finding the Helmet Ordinance and the Motorcycle Ordinances invalid and a writ of prohibition barring the municipal court from exercising jurisdiction over the alleged violations of the Helmet Ordinance.” The Supreme Court accepted the case in its original jurisdiction before any Petitioners’ charges were adjudicated.

A. Implied Preemption

The Supreme Court noted that the South Carolina Legislature had previously “addressed motorcycle helmet and eyewear requirements in S.C. Code Ann. §§ 56-5-3660 and 56-5-3670 (2009), respectively [which] generally require all riders under age [21] to wear a protective helmet and utilize protective goggles or a face shield.” On the other hand, the Supreme Court noted the “Helmet Ordinance . . . require[d] all riders, regardless of age, to wear a helmet and eyewear.” Furthermore, even though S.C. Code Ann. § 56-5-30 (2009) later “authorized local authorities to act in the field of traffic regulation if the ordinance [at issue did] not conflict with the provisions of the [South Carolina] Uniform Traffic Act”, such authorization did not save the Helmet Ordinance. The Supreme Court concluded the Helmet Ordinance was impliedly preempted by State law, noting both the important and pragmatic “need for uniformity [wa]s plainly evident in the regulation of motorcycle helmets and eyewear.” The Supreme Court further stated:

Were local authorities allowed to enforce individual helmet ordinances, riders would need to familiarize themselves with [all of] the various ordinances in advance of a trip, so as to ensure compliance. Riders opting not to wear helmets or eyewear in other areas of the state would be obliged to carry the equipment with them if they intended to pass through a [municipality] with a [local] helmet ordinance. Moreover, local authorities might enact ordinances imposing additional and even conflicting equipment requirements. Such burdens would unduly limit a citizen's freedom of movement throughout the State [of South Carolina].

B. Implied Repeal

Additionally, the Supreme Court struck down the Motorcycle Ordinances as a whole based upon the previous repeal of the ordinances establishing the so-called “administrative hearing system”. The Supreme Court concluded that since the sole enforcement of the Motorcycle Ordinances, as an “administrative infraction”, was so tied to and intertwined with the administrative hearing system, its abolition impliedly repealed the Motorcycle Ordinances themselves.

Scalia on Kagan: You got it half right, Your Honor.

2010-06-07T08:01:00.004-04:00

Kirsten E. Small

This item is getting a bit long in the tooth, but I think it's still worth comment. On May 26, Justice Scalia spoke at an event in D.C. and commented that he is "pleased" that Elena Kagan is not a member of the judiciary; he basically praised President Obama for taking a chance on a non-judge nominee.

I'm with Scalia to a point. It matters not one whit to me that Ms. Kagan has never been a judge. She's been a law clerk (Judge Mikva, Justice Marshall), an academic (Chicago, Harvard), a policy wonk (Clinton administration), an administrator (Dean of Harvard Law), and the nations chief appellate lawyer (Solicitor General). All of these things make her thoroughly qualified for the essential work of a Supreme Court justice: research, analysis (of law and policy), debate and defense of positions, and coalition building.

I think Justice Scalia got it wrong, however, when he favorably compared Ms. Kagan's route to nomination to the civil law system in Europe, where "[p]eople who have never been in private practice ... [or] been on the other side of a case are judges." Private practice--particularly litigation--is precisely the experience Ms. Kagan--and every other justice except Justice Sotomayor--lacks.

What bothers me about Ms. Kagan's nomination is that she has never been "on the other side of the case." There isn't much information on her brief stint in private practice, but at the very least, it appears she spent little or no time inside a courtroom. Certainly she never tried a case.

The Supreme Court deals with a lot of big, important questions, but it also deals with the nitty-gritty of litigation--witness yesterday's decision in Krupski v. Costa Crociere, construing Rule 15(c). Theory will only get you so far in these cases; equally necessary is a familiarity with the actual, in-the-trenches practice of law. Currently, the only justice who has such experience is Justice Sotomayor.

As litigation becomes more and more complex, it becomes more important that appellate judges, and the Supreme Court in particular, are able to understand the practical consequences of their decisions for lawyers, their clients, and trial court judges. The current, all-but-mandatory path to a Supreme Court seat eschews litigation experience in favor of academic credentials, creating a Court so high up in the ivory tower that the realities of the practice of law seem tiny and insignificant.

A Pinkerton instruction is not a constructive amendment, says the Fourth Circuit

2010-06-01T19:02:00.005-04:00

Kirsten E. Small

The Fourth Circuit issued two published opinions today. In United States v. Ashley, the Court rejected Ashley's various challenges to his convictions for witness tampering, retaliation against an informant, and possessing a weapon in furtherance of a crime of violence. Of particular note is the court's holding--joining every other circuit to have considered the issue--that "a district court does not constructively amend an indictment by giving a Pinkerton instruction when Pinkerton liability has not been charged by the grand jury." Slip op. at 13.

In United States v. White, the court addressed the defendant's argument that his conviction under 18 U.S.C. § 922(g) for possession of a firearm after a misdemeanor domestic violence was invalid because his prior offense--for assault and battery of a family member--did not involve "physical force." See 18 U.S.C. § 921(a)(33)(A) (defining "misdemeanor crime of domestic violence" as requring the use of physical force). In support of White's conviction, the government argued that any intentional physical contact constitutes "physical force" within the meaning of the statute. This is the view of the First, Eighth, and Eleventh Circuits.

To make a long opinion short, the Fourth Circuit disagreed, joining the Seventh, Ninth, and Tenth Circuits in holding that common law battery is not "physical force." The court concluded that the outcome was determined by Johnson v. United States, 130 S. Ct. 1265 (2010), in which the Supreme Court held that "physical force" (there, under the Armed Career Criminal Act) means "violent force ... capable of causing physical pain or injury" and therefore excluded common law battery which may be accomplished by even the slightest offensive touching.

The guidelines are advisory, except not really--Fourth Circuit holds the Ex Post Facto Clause still applies

2010-05-28T08:21:00.003-04:00

Kirsten E. Small

The Fourth Circuit issued two published opinions yesterday. In United States v. Roe, No. 08-5203, the majority found sufficient evidence to support Roe's conviction for impersonating a federal police officer, even though he was a federal security officer with arrest authority (albeit one out of his jurisdiction at the time of the alleged impersonation). Judge Gregory dissented.

Although Roe is certainly worth a perusal, the far more intersting case is United States v. Lewis, No. 09-4343, in which Judge King, joined by Judge Gregory, held that the Ex Post Facto Clause applies to the post-Booker advisory guidelines. Judge Goodwin dissented.

Those familiar with federal sentencing law will recall that in 2000, the Supreme Court held in Apprendi v. New Jersey that all facts necessary to the imposition of a certain sentence must be admitted by the defendant or proved to a jury beyond a reasonable doubt. Subsequently, in United States v. Booker, the Court held that a mandatory guidelines regime was inconsistent with the Sixth Amendment as interpreted by Apprendi, and declared them advisory.

Now, back to Lewis. Mr. Lewis was arrested for felon-in-possession in May 2006, at which time the applicable guideline range for his offense was 21-27 months. By the time Lewis was sentenced in 1998, however, the guidelines had been amended and the applicable guideline range was 41-51 months. Concluding that application of the amended guidelines would result in a retroactive increase in punishment, in violation of the Ex Post Facto Clause, the district court sentenced Lewis to 27 months imprisonment. The government appealed.

The majority affirmed, concluding that even though the guidelines are no longer "law," they "represent the crucial starting point, as well as the initial benchmark, for the regimented sentencing process." Slip op. at 10. Therefore, there was a "significant risk" that application of the amended guidelines would result in increased punishment, and therefore their application would violate the Ex Post Facto Clause. Judge Goodwin dissented, noting that if the guidelines do not have the force of law, then application of an amended guideline cannot possibly violate the Ex Post Facto Clause.

The majority cannot possibly be correct. If the guidelines are not "law" for the purposes of the Sixth Amendment, how then can they be "law" for purposes of the Ex Post Facto Clause? Of course they cannot, but the majority does not seriously dispute this. Instead, the majority ignores the clear limitation of the Clause to "laws" that retroactively increase punishment, holding that the controlling criterion for the Ex Post Facto analysis is whether there is a significant risk of increased punishment.

The case the majority relies on for its "significant risk" test, Garner v. Jones, 529 U.S. 244 (2000), does not support such a fundamental change in the jurisprudence of the Ex Post Facto Clause. Garner involved an extension of time (from 3 to 8 years) between parole hearings for certain offenders. The Court held that whether such an extension on its face violated the Ex Post Facto Clause depended upon whether it created a significant risk that an inmate's punishment would be increased. Significantly, the Court did not back off of the premise that before the Clause applies, the change must be a law, or have the effect of law--as the rule change extending the time between parole hearings unquestionably did.

In reaching this holding, the Fourth Circuit joined the D.C. Circuit and rejected the position of the Seventh Circuit. I imagine a cert. grant will be coming on this issue sooner or later.

Nominees Diaz and Wynn continue to wait

2010-05-27T09:58:00.002-04:00

Kirsten E. Small

I was excited to see a hopeful line of text pop up in my Google Alert this morning: "[Senator] Kay Hagan says North Carolina judges Albert Diaz and James Wynn are on the next tier of judicial nominees who could come up for a full vote in the Senate." Unfortunately, the article as a whole is not so hopeful; you can read it here (scroll down to the bottom).

The essence of the piece is that Diaz and Wynn are still stuck in a "political logjam," with no estimated date of escape.

One could argue that, for the moment at least, there is no particular urgency to confirming Diaz and Wynn. The Fourth Circuit has completed its last sitting for the current term and will not again convene in Richmond until September. On the other hand, I imagine that Judges Wynn and Diaz would far prefer to get settled in their Fourth Circuit digs while activity at the court is relatively light, rather than during the rush of new business that precedes the September sitting.

SC Supreme Court holds that what a jury might do is irrelevant to summary judgment analysis.

2010-05-25T21:55:00.002-04:00

by Kirsten E. Small

Earlier this month, the South Carolina held that the Court of Appeals improperly applied a jury-focused standard in reviewing a grant of summary judgment by the circuit court. Hoard v. Roper Hospital, Inc. (S.C. May 3, 2010).

Neonatologist Marshall Goldstein directed the placement of an umbilical vein catheter (UVC) as part of his treatment of newborn Jamia Hoard for respiratory distress. One risk of a UVC is that it will be improperly placed, piercing the right atrium. Radiologist Robert Smith reviewed an x-ray and noted in his report that the catheter had pierced Jamia's atrium. Aware of this information, Dr. Goldstein decided not to reposition the catheter. As a result of the improper placement of the UVC, Jamia suffered a cardiac arrest that resulted in significant brain damage.

All defendants except Dr. Smith settled. The circuit court granted summary judgment to Dr. Smith, concluding that even if Dr. Smith was negligent, Dr. Goldstein's decision not to adjust the UVC was an intervening and independent proximate cause of the injury. This conclusion was based in large part upon Dr. Goldstein's deposition testimony regarding his decision not to adjust the UVC, which was uncontradicted by any other record evidence.

The Court of Appeals reversed on the basis of the established rule that a jury is not required to accept even uncontroverted testimony. The Supreme Court reversed the Court of Appeals, noting that while a jury may reject uncontroverted testimony at trial, this rule does not apply on summary judgment, where the burden rests on the plaintiff to "affirmatively demonstrat[e] the presence of a genuine issue of material fact." It was therefore irrelevant, and counter to the very purpose of summary judgment, to consider how a jury might view the evidence.

The 4th Circuit holds that district courts should not employ "lodestar" analysis in contingency-fee cases.

2010-05-18T17:28:00.008-04:00

by Kirsten E. Small

Only one published opinion from the Fourth Circuit yesterday (there were none Monday). In In Re Abrams & Abrams, P.A., the court vacated and remanded a district court order that reduced an award of attorney's fees from $6 million to $600,000. Primarily, the panel concluded that the district court had erred in calculating a "lodestar" hourly fee when the plaintiff and counsel had agreed to a 33% contingency fee.

Mark Pellegrin was severely brain damaged when a co-worker, driving a company truck while intoxicated, ran into him. Pellegrin's father ("Mr. Pellegrin"), as his guardian, sued the co-worker with the aid of two law firms. The firms and Mr. Pellegrin agreed to a 33% contingency fee, to be divided equally between the firms.

Counsel obtained a $75 million verdict after the company's insurer denied coverage and refused to provide a defense. Thereafter, counsel sought a declaration from the court that the insurer was liable for the entire amount pursuant to North Carolina law. The insurer removed the action to federal court, and the parties eventually reached a mediated settlement of $18, of which $6 milllion was intended to satisfy the 33 percent contingency arrangement between plaintiff and counsel.

Because the plaintiff was incompetent, the district court was required to approve the settlement. During the hearing, Mr. Pellegrin specifically approved the amount of the settlement allocated to counsel. Unimpressed, the court reduced the fee to $600,000, reverting the remaining $5.4 million to Pellegrin.

The Fourth Circuit reversed. Initially, the court rejected counsel's contention that fee awards in contingency cases should be enforced unless the resulting fee is "clearly excessive." Instead, the court adhered to the traditional standard of reasonableness, on the theory that if it ain't broke, don't fix it. (Judge Wilkinson did not phrase it quite that way, but that's the jist.)

Nevertheless, the panel concluded that the district court had abused its discretion, holding that "[t]he chief error in the district court's analysis was its failure to recognize the significance of the contingency fee in this case." The panel noted that contingency fee arrangements provide plaintiffs access to court they would not be able to afford if charged on an hourly basis; they do so by transfering the risk to the attorneys, who would be disinclined to accept such a risk if compensated on only an hourly basis. The court compared the attorney in a contingency-fee case to the realtor on commission, who knows that not every effort will result in a commission.

The panel next concluded that the district court had discounted the various difficulties involved in the merits of the case (including a strong contributory negligence defense) and the value of the results obtained (an $18 million settlement where the insurer had a $21 million policy limit). Further, the district court should have considered Mr. Pellegrin's satisfaction and specific approval of the award (an approval he felt so strongly about that he hired his own lawyer to seek reversal of the district court's fee decision on counsel's behalf).

Finally, the panel concluded that the district court erred in deciding that the "customary fee" for the case should be based on an hourly rate. Rather, the panel said, the proper analysis required the court to consider whether the 33% contingency fee arrangement was reasonable. In this vein, the panel noted that several North Carolina lawyers had submitted affidavits stating that they would have insisted on a 40% contingency fee for the case.

The panel did not specifically approve the fee as reasonable but rather vacated and remanded for "a more rigorous analysis" of the applicable factors, including a recognition of the value of contingency-fee arrangements.

Commentary: This decision surprises me a bit, especially given that the opinion was written by Judge Wilkinson. However, I think the panel got it entirely right. Lawyers who practice plaintiff-side personal injury work take cases knowing that they will lose some cases and win others, and that the fees in the cases that they win must be sufficient to offset their losses. This requires prudent case selection on the part of the attorneys, but it also mandates that courts respect reasonable fee arrangements between clients and counsel. Were it not for the fact that Pellegrin was rendered incompetent by the accident, the court would not have had a say in the reasonableness of the fee; that being so, the court should have given greater respect to Mr. Pellegrin's adamant support of the award.

Fourth Circuit continues to chip away at Carter

2010-05-12T09:45:00.003-04:00

by Kirsten E. Small

In this post I summarized United States v. Hernandez, in which a panel of the Court relaxed U.S. v. Carter's apparently stringent requirements for explanation of within-Guideline sentences.

Yesterday, in United States v. Boulware, the Court further blunted Carter's force by holding harmless an inadequate explanation.

Boulware pleaded guilty to false statements in a bankruptcy proceeding and sought a below-guidelines sentence on the basis of family obligations. The district court rejected this request and imposed a sentence at the bottom of the advisory guideline range, noting in the process that it had "taken into account all the factors requied of me by Section 3553(a)."

Assuming that this explanation was inadequate and thus constituted a procedural flaw in the sentence (the panel did not cite Hernandez), the panel concluded that the error was harmless, i.e., it did not substantially and injuriously affect the outcome of the proceedings. Contrasting the facts before it to U.S. v. Lynn, 592 F.3d 572 (4th Cir. 2010), the panel found the error harmless because "the record ... leaves us with no doubt that the district court considered [Boulware's] argument for a below-guidelines sentence" and because Boulware's arguments for such a sentence "were very weak."

In short, the panel held that a Carter error is harmless so long as it appears from the record that the district court actually considered a defendant's arguments, even if it made no mention of them in the course of its sentencing decision.

It seems to me that this decision has the potential to substantially undermine Carter; we'll have to see how it plays out.

Deposition Testimony From Another Case Can be Used in Summary Judgment Filings in N.C.

2010-05-04T17:43:00.006-04:00

by Gary Beaver

On 4/6/10, in First Gaston Bank of North Carolina v. City of Hickory, et. al., a bank sued Hickory and others when a storm drain collapsed on property owned by the bank. The bank appealed after the trial court granted the city summary judgment on the bank’s claim for negligence and inverse condemnation. The NC Court of Appeals affirmed holding:

(1) deposition testimony from another case, if it meets the requirement of an affidavit, may be used in summary judgment proceedings even if the party against whom it is used was not present or represented at the deposition;

(2) plaintiff’s inverse condemnation claim against the city failed because of lack of evidence of a taking; and

(3) plaintiff’s negligence claim against city failed because city did not owe a duty to the bank to inspect, maintain, and repair a collapsed storm drain or to warn the bank of the condition of the pipe which ran across property that the bank purchased.

The holding on the use of the deposition testimony makes eminent good sense as, in summary judgment proceedings, parties cannot stop the use of affidavits from witnesses to which the opposing party had no access. The lack of access to the deponents in the prior case is logically no different. The court reviewed leading commentators and federal court opinions interpreting and applying Rule 32(a) of the Federal Rules of Civil Procedure, which rule is similar to North Carolina’s Rule 32(a), and agreed with them in allowing the use of the deposition testimony.

4th Circuit extends rule on curing improper removals.

2010-05-04T08:26:00.004-04:00

by Kirsten E. Small

The Fourth Circuit issued one published opinion on May 3, holding in Moffit v. Residential Funding Company, LLC that the establishment of federal jurisdiction cures an improper removal even when the issue is brought to the court's attention before final judgment.

Plaintiffs filed this case in Maryland state court in 2003. In 2009, plaintiffs notified defendants by letter of their intent to file an amended complaint containing allegations that would establish jurisdiction in federal court under the Class Action Fairness Act. Defendants removed to federal court pursuant to 28 U.S.C. § 1446(b). Following removal, plaintiffs filed the amended complaint; they then sought remand on the basis that federal jurisdiction did not exist at the time of removal.

On interlocutory review, the Fourth Circuit affirmed the district court's denial of the motion to remand. Under settled authority, an erroneous removal is cured by the plaintiff's subsequent voluntary amendment of the complaint to allege facts giving rise to federal jurisdiction.

Plaintiffs acknowledged this authority but argued that the rule applies only after final judgment. The Fourth Circuit disagreed, holding that "this line of precedent is grounded not only in the interest of 'finality' but also in larger considerations of 'judicial economy.'" Because defendants would have had the right to remove even if the district court had granted the motion to remand, judicial economy favored application of the rule that an erroneous removal is cured by subsequent amendment of the complaint.

Review Your CGL Policy's False Advertising Coverage

2010-04-29T09:13:00.003-04:00

by Gary Beaver

In Harleysville Mutual Insurance Company v. Buzz Off Insect Shield, LLC, et. al., plaintiff insurer filed a declaratory judgment action to determine if it owed coverage and a defense for defendants in a federal lawsuit in which claims were made alleging defendants made false ads. The trial court and NC Court of Appeals held that coverage existed. The N.C. Supreme Court reversed on April 15, 2010.

The defendants made insect-repellent clothing and were sued by a competitor for alleged false ads. The NC Supreme Court reviewed the CGL policies’ language and noted that they provided coverage for injury resulting from some false statements made in ads, but not injury caused by false statements an insured makes about its own products. The court then made a detailed analysis of the complaint in the false advertising lawsuit to determine whether the alleged false ads were covered and held that they were not.

The opinion provides a good application of the “comparison test” by which a court reviews the policies and complaint at issue “side-by-side….to determine whether the events as alleged are covered or excluded.” It is also an example of when defendants probably would have preferred that its competitor had overstated its claims, i.e., stated them more broadly rather than with the detail and specificity actually used so that the court might have found that coverage was at least a possibility which, in turn, would have given rise to the insurer’s duty to defend in the federal lawsuit even if a later determination was made that coverage did not exist.

Fourth Circuit tolls service period for IFP plaintiffs.

2010-04-28T14:34:00.003-04:00

by Kirsten E. Small

The Fourth Circuit held today that a magistrate judge's order prohibiting issuance and service of process by the court clerk until instructed otherwise by the court tolls the 120-day service period unter Rule 4(m). Robinson v. Clipse, No. 08-6670 (April 28, 2010).

The issue arose as a result of the court's application of the "relation back" rule of Rule 15(c). Robinson named the wrong defendant (the South Carolina Highway Patrol) in a § 1983 action alleging excessive force by Trooper Joseph Clipse. The magistrate judge directed the district court clerk not to serve the complaint until further order* and recommended to the district court that the complaint be dismissed. Robinson moved to add Clipse as a defendant but the court denied the motion and dismissed the complaint on the basis that Clipse was entitled to qualified immunity.

After the Fourth Circuit reversed, Robinson sought to file an amended complaint naming Clipse. Rule 15(c)(1)(C) allows such amendments provided the new party has knowledge of the complaint "within the period provided by Rule 4(m) for serving the summons and complaint." The district court authorized service on July 3, 2007.

The district court dismissed the complaint, holding that the amended complaint did not relate back because Clipse did not have notice of the complaint "within the limitation period" for Robinson's claim, i.e., by November 14, 2005. As the Fourth Circuit noted in reversing, Rule 15(c)(1)(C) requires that the party have notice within the 120-day service window of 4(m), not within the statute of limitations for the claim.

The Court further held that because IFP plaintiffs are at the mercy of the court for service, entry of an order prohibiting service tolls the 120-day service period. Thus, Rule 15(c)(1)(C) only required Robinson to show that Clipse had notice within 120 days of July 3, 2007, the first time the court authorized service. Because Clipse had actual notice well before the expiration of this period, the amendment related back and dismissal was improper.

Commentary: This seems like a pretty common-sense ruling to me. Magistrate judges routinely forbid service of IFP complaints pending an initial evaluation of the claim. As the Court noted, it is manifestly unfair to place the burden of this pre-service review on the litigant, who has no control over its length. Moreover, the holding is consistent with the federal courts' general policy of leniency to pro se litigants (as IFP filers almost universally are)--it is hardly surprising that Robinson would name Clipse's employer, rather than Clipse himself, as the entity responsible for paying damages. The tolling rule adopted by the Fourth Circuit provides some protection from mistakes like Robinson's.

*Because Robinson was proceeding in forma pauperis, the complaint was to be served by the U.S. Marshals Service.

Fourth Circuit clarifies Carter; Holds escape under SC law is not a per se violent felony.

2010-04-27T17:59:00.003-04:00

by Kirsten E. Small

The Fourth Circuit issued two published opinions today, both in criminal cases. In United States v. Hernandez, the rejected (on plain error review) the defendant's argument that the district court inadequately explained the reasons for imposing a sentence at the bottom of the guidelines range. Specifically, Hernandez contended that the explanation was inadequate under the Court's prior decision in United States v. Carter, 564 F.3d 325. Carter held that "Regardless of whether the district court imposes an above, below, or within-Guidelines sentence, it must place on the record an 'individualized assessment' based on the particular facts of the case before it. This individualized assessment need not be elaborate or lengthy, but it must provide a rationale tailored to the particular case at hand and adequate to permit 'meaningful appellate review.'" 564 F.3d at 330. Carter has been the subject of substantial litigation.

Hernandez clarifies (some might say "narrows") Carter by stating that a district court sufficiently explains a within-guidelines sentence by, essentially, recognizing the wisdom and experience embodied in the Sentencing Guidelines and concluding that the case is a typical one.

The second decision, United States v. Bethea, addressed the question of whether escape under South Carolina law is categorically a violent felony for purposes of the Armed Career Criminal Act. The Court concluded that it was not, reasoning that because the statutory term "escape" encompasses a failure to report--a non-violent felony under the ACCA--the decision of the Supreme Court in United States v. Chambers, 129 S. Ct. 687 (2009), required the Fourth Circuit to hold that the South Carolina escape statute did not necessarily constitute a violent felony. The Court further concluded that Bethea's offense could not be considered a violent felony under the modified-categorical approach because the charging documents and sentencing sheet simply identified the offense as "escape." The court therefore vacated Bethea's sentence and remanded for resentencing.

Chapter 75 Does Not Apply to Breaches of Fiduciary Duties Between Partners in N.C.

2010-04-27T14:46:00.004-04:00

by Gary Beaver

On April 5, 2010, White v. Thompson, the N.C. Supreme Court held that NCGS §§ 75-1.1 (NC’s unfair and deceptive trade practices act) does not extend to a partner’s breach of his fiduciary duty owed to his partners within a single business. The Court ruled that such misconduct is not “in or affecting commerce.” This holding serves as a reminder that Chapter 75 claims are supposed to be directed at stopping bad business behavior between competing businesses and not designed to regulate purely internal business operations.

Fourth Circuit holds forced medication not appealable after guilty plea.

2010-04-23T15:31:00.002-04:00

by Kirsten E. Small

It was a quiet week in the Fourth Circuit--by my count, there were only two published decisions, and only one of them is particularly notable.

That "one" is United States v. Bowles. Bowles was charged on drug and weapons charges but found incompetent and committed for treatment. After four years of treatment for paranoid delusions, the district court granted the government's motion to forcibly medicate Bowles in order to render him competent to stand trial.

Bowles pleaded guilty, then sought to have his conviction vacated on the basis that the forcible medication was improper. The Fourth Circuit today dismissed the appeal, holding that forced medication is a "nonjurisdictional defect" that is waived by a guilty plea. The Court noted that Bowles could have obtained review of the medication order through an interlocutory appeal.

Third Circuit grants ADA protection for side effects of medication; the U.S. Senate has nothing on Ms. Stucky's fourth graders.

2010-04-15T09:38:00.004-04:00

by Kirsten E. Small

This morning I visited my son's fourth grade class to talk about the Supreme Court and the process for confirming a new justice. The students had a great time questioning the "nominee" (their teacher, Ms. Stucky), and then had a rigorous debate over her qualifications, ability to be fair, and whether or not she had a hidden agenda (seriously!). In the end, the "Senate" narrowly confirmed Mrs. Stucky to the Supreme Court. Would someone please get the President on the line for me? ...

In other (some would say "actual") news, the Third Circuit on Monday ruled that side effects from a medication can constitute a "disability" under the Americans with Disabilities Act and the Rehabilitation Act, even if the condition for which the medication is prescribed is *not* a disability. The ruling, in Sulima v. Tobyhanna Army Depot, can be accessed here. The Third Circuit joins the Seventh Circuit in explicitly holding that side effects from medication (in this case, gastrointestinal disress from a weight-loss drug, which required the plaintiff to take long bathroom breaks during work hours) can constitute a "disability" under the ADA and the RA. The Eighth Circuit and the Eleventh Circuit have indicated that they, also, would treat side effects from medication as a possible disability.

The Third Circuit adopted the Seventh Circuit's three-part test for determining whether side effects of a medication may constitute a disability: "(1) the treatment is required “in the prudent judgment of the medical profession,” (2) the treatment is not just an “attractive option,” and (3) that the treatment is not required solely in anticipation of an impairment resulting from the plaintiff’s voluntary choices." Applying this test, the court concluded that Sulima was not disabled because his doctor changed the medication after Sulima reported his work problems, indicating that the treatment was not "required."

Which came first, Daubert or class certification? 7th Circuit says Daubert.

2010-04-14T08:32:00.002-04:00

by Kirsten E. Small

Class action practitioners will want to take a look at American Honda Motor Co. v. Allen (No. 09-8051), decided by the Seventh Circuit last week.

Richard Allen sued Honda on behalf of a putative class, claiming that a design defect in the company's Gold Wing GL1800 motorcycle made it, and I am not kidding here, too wobbly. Allen's theory was supported by Mark Ezra, whom Allen offered as an expert in motorcycle engineering. Honda challenged Ezra's opinion under Daubert, arguing that his opinion was deficient in a number of respects. Honda further argued that the admissibility of Ezra's opinion had to be decided before class certification because absent the opinion, Allen could not establish that common issues predominated, as required by Rule 23(b)(3).

The district court agreed with Honda, sort of. It concluded that Ezra's opinion was shaky (pun intended), but nevertheless admitted it and certified two classes of consumers who had purchased GL1800s.

The Seventh Circuit accepted Honda's petition for review and reversed in a per curiam opinion that reads very much like something Judge Posner would write. The heart of the ruling is as follows: "[W]hen an expert's report or testimony is critical to class certification ... a district court must conclusively rule on any challenge to the experts qualifications or submissions prior to ruling on a class certification motion." Slip op. at 6. The court did not address when the Daubert analysis might be "critical to class certification," but presumably that is a common-sense determination.

It will be interesting to see what kind of play this decision gets in other design defect cases, particularly the glut of Toyota sudden acceleration claims.

Fourth Circuit Update: April 8, 2010

2010-04-09T09:10:00.002-04:00

by Kirsten E. Small

"They" tell you never to do this, but I'm starting with an apology: I've got a brief due in the Fourth Circuit today, so there will be no scintillating analysis of yesterday's Fourth Circuit decisions. Maybe I'll get back to y'all over the weekend, or maybe I'll sleep and play with my kids.

The Fourth Circuit published two decisions yesterday:

In United States v. Ayala, the court affirmed RICO and VICAR convictions against several MS-13 gang members.

Westmoreland Coal Co. v. DOWCP may warrant more comment over the weekend (sorry, kids). The court affirmed an award of black lung benefits (no biggie there) but vacated the award of attorney's fees because--even though the award was "not unreasonable in sum"--the the ALJ failed to identify a specific hourly rate after rejecting the hourly rate proposed by claimant's counsel.

Fourth Circuit holds that authority to hire/fire is not essential to a finding of supervisor status.

2010-04-02T12:07:00.003-04:00

by Kirsten E. Small

Employment lawyers should take note of Whitten v. Fred's, Inc. (09-1265) decided yesterday by the Fourth Circuit. The case is chock-full of important rulings. Although the court was addressing state law claims, South Carolina discrimination law mirrors federal law, and the court applied federal case law in its holdings. Therefore, it would seem that these holdings would apply to federal Title VII claims.

Whitten was allegedly sexually harrassed by the store manager (Green) of the Belton store where she worked. The harrassment occurred on Whitten's first two days working at the store, a Friday and Saturday. Whitten informed the district manager, who told Whitten she was "overreacting." Feeling otherwise, Whitten quit.

Whitten subsequently filed a complaint with the EEOC and requested that the complaint also be filed with the South Carolina Human Affairs Commission (SHAC).
The EEOC issued a right-to-sue letter, and Whitten subsequently filed suit. Because her federal claims were time-barred (more on this anon), Whitten pleaded a hostile environment claim only under state law.

The district court granted summary judgment to Fred's, concluding that Green's conduct was not imputable to Fred's because Green was not Whitten's supervisor. This was so, the court reasoned, because Green did not have the authority to hire or fire Whitten.

The Fourth Circuit reversed and remanded in an opinion written by Chief Judge Traxler.

1. Authority to hire/fire is not essential to a finding that an employee is a supervisor. The court held that the test for whether an employee is a supervisor is whether the employee's harrassing conduct is "aided by the agency relation." While this is always the case when an employee has hiring and firing authority, such authority is not a requirement because an employee can be a supervisor even when lacking such authority.

Here, Green was the highest ranking employee in the store, bore the formal title of store manager, and directed Whitten's activities and work schedule. The Court determined that this evidence established that Green was a supervisor.

2. State administrative remedies are exhausted when the EEOC forwards a complaint to a state agency. Fred's argued that Whitten had failed to exhaust administrative remedies because she filed her complaint with the EEOC rather than the SCHAC. The EEOC then forwarded the complaint to the SCHAC, which acknowledged receipt. The Court held this sufficient, reasoning that nothing in the statute requires that a complainant personally file with the SCHAC.

3. Untimeliness under federal law does not establish untimeliness under state law. A federal discrimination complaint must be filed within one year of the discrimination or 120 days of EEOC dismissal, whichever comes first. Whitten's federal claims were time-barred because she failed to file her complaint within 120 days of the EEOC's right-to-sue letter (although she filed within one year of the discrimination). Fred's argued that this time bar was also fatal to Whitten's state claims, which are subject (as a matter of state law) to the same limitations period. The Court disagreed, holding that the state statute refers only to the SCHAC, not to the EEOC. Since the SCHAC never dismissed Whitten's complaint, her federal suit was timely.

NC Court of Appeals Addresses Public Policy Exception To "At-Will" Employment Doctrine

2010-04-01T09:17:00.003-04:00

by Gary L. Beaver

Normally, a fired at-will employee in North Carolina has almost no chance of a successful wrongful discharge claim against his or her former employer. An employer can usually terminate an at-will employee for any reason whatsoever or even for no reason at all. However, there is a very narrow public policy exception to the at-will employment doctrine that allows such claim if the termination was done for an unlawful reason or purpose that contravenes public policy. The court applied the exception here. The discharged employee (Combs) claimed he was fired for reporting to the management of his employer, City Electric Supply Company, that the company had engaged in illegal and fraudulent activity by stealing from its customers' accounts. Apparently, there were times when customers overpaid and their accounts would then reflect a negative balance. Combs noted, and City Service admitted at trial, that City Service did not apply the negative account balances against later bills incurred by the customers. After Combs reported to a head supervisor (Smith) that the Combs's immediate supervisor was ordering him to take such actions, Smith denigrated Combs in an employment review and reduced Combs's salary. Then Combs was fired and Smith told him it was for job performance issues. Combs sued, among others, City Electric and Smith, and the trial court granted a directed verdict on the wrongful discharge claim against both City Service and Smith and on a tortious interference with contract claim against Smith.

City Service boldly contended that there was nothing wrong with its handling of the negative balances so the plaintiff had no basis for asserting the public policy exception. On March 16, 2010, the Court of Appeals agreed with Combs that taking the evidence as true and in the light most favorable to Combs, City Electric's withholding of negative balance statements, transfers of the overpayments to a separate account, and sending later statements that did not reflect the negative balances so that the customers paid the new balances without getting any credit for the prior overpayments were evidence of obtaining property by false pretenses. The Court of Appeals reversed the directed verdict as to the wrongful discharge claim. The case opinion is useful to give one a sense of what the courts will look for in applying the public policy exception. The Court also reversed the directed verdict as to Smith's alleged tortious interference with Combs's employment contract because the forecasted evidence of Smith's conduct was enough to defeat a non-outsider's qualified privilege to interfere with a contract.

On a personal note, one of the customers that had been allegedly ripped-off was Wilbur's BBQ & Restaurant. That alone gets my dander up as Wilbur's, located on US 70 in Goldsboro, has the best commercial BBQ and hushpuppies in North Carolina (note that I said commercial as my father makes the best BBQ in NC) and, in my humble opinion, does not deserve to be mistreated by anyone. I would have to drop the hammer on anyone who cheats Wilbur's. Go get 'em Mr. Combs.

N.C. Court of Appeals Allows Charlotte To Withhold Documents - Were They Prepared For Reasonably Anticipated Litigation Or For Speculative Litigation?

2010-03-24T16:15:00.008-04:00

by Gary L. Beaver

On March 16, 2010, in Wallace Farm, Inc. v. City of Charlotte, the North Carolina Court of Appeals affirmed the Mecklenburg County Superior Court's order preventing the plaintiff from inspecting certain public records held by the City of Charlotte. The City had produced over 21,000 pages of documents but withheld about 225 documents consisting of about 500 pages on grounds that they were protected from discovery because they were attorney work product materials prepared in reasonable anticipation of litigation. The lower court conducted an in camera review and agreed with the City.

Charlotte zoning inspectors had used an administrative warrant to search the plaintiff farm after complaints were made of odor from the farm's composting facility and allegations that the farm had grown beyond limits set in 1999 zoning regulations. The farm owners requested all public records from 1998 to 2008 referring to the farm. The City said it would comply but the plaintiff impatiently filed the lawsuit to compel production of the public records. The City asserted in a letter that the documents were prepared in anticipation of a legal proceeding that had yet to commence that being if the City was to take action against the farm pursuant to the complaints, the litigation that was reasonably anticipated to follow. At a hearing, the City added that the materials related to the City's research and consideration of legal strategies related to possible zoning enforcement. Despite the fact that the Public Records Act (in Chapter 132 of the NC General Statutes) provides for liberal access to public records and exceptions and exemptions to the Public Records Act must be construed narrowly, the appellate court, after its own in camera review, agreed with the City withholding the documents using an abuse of discretion standard.

These kinds of cases are difficult to evaluate because the courts necessarily cannot provide much detail about what is in the documents reviewed in camera. One would think that, in light of the Public Records Act's bias toward disclosure, a public agency would have to make stronger arguments than were presented here. For example, one does not see this type of leeway given by the courts to insurance companies withholding documents in reasonable anticipation of litigation that has much greater likelihood of occurring and where the Public Records Act does not provide a bias favoring disclosure. Why treat a public agency's work product claims with greater deference than a private insurer? However, without knowing what was in the documents, one cannot know whether the court's decision here was sound. Regardless, this case is likely to be cited by every public agency in NC that withholds a document based on work product claims further driving up the cost for private citizens to obtain public information.

A Tale of Two Airports

2010-03-22T08:22:00.003-04:00

by Kirsten E. Small

Over a strong dissent by Judge Davis, the Fourth Circuit recently ruled that a total ban on newspaper racks by the Raleigh-Durham International Airport violates the First Amendment. News & Observer Publishing Co. v. Raleigh Durham Airport Authority, No. 09-1010 (Mar. 12, 2010).

The Publisher has its newspapers for sale in airport shops, which are required to be open before the first flight leaves in the morning and until after the last flight arrives. Nevertheless, some 30-odd flights arrive each evening after the shops have closed, depriving arriving passengers of the ability to purchase that day's paper. The majority also noted that papers were sometimes unavailable when the shops opened, or sold out before the end of the day.

The Airport does not allow any newspaper racks in the terminals, citing four concerns: aesthetics; preserving revenue for airport shops (particularly, revenue from incidental purchases made by those buying papers); preventing congestion (studies show that a newrack in a corridor reduces traffic flow by 42 people per minute when closed, and by 110 people per minute when open); and security (including the need to screen delivery persons and the possibility that a newsrack could be used as a hiding place for an explosive). Relying on Multimedia Publishing Co. v. Greenville-Spartanburg Airport, 991 F.2d 154 (4th Cir. 1993), the majority affirmed the district court's grant of summary judgment to the newspaper, concluding that the Airport's interests did not outweigh the "significant" restriction on the Publisher's protected expression.

Judge Davis' dissent challenged the majority's conclusion that there was no issue of fact for the jury to resolve, chastising the majority for "answer[ing] the wrong inquiry"--i.e., whether the Airport's interests outweighed the Publisher's rights, rather than whethere there was a material question of fact for trial. Judge Davis noted the strange procedural posture of the case: The district court first denied summary judgment, then sua sponte reversed itself a year later, without any intervening briefing by the parties.

Judge Davis then identified numerous facts tending to contradict the majority's conclusions regarding the significance of the restriction on the Publisher's rights; the similarity of this case to the prior litigation involving the Greenville-Spartanburg Airport; and the strength of the Aiport's interests in restricting newspaper sales to shops.

As is often the case with dissenting opinions, the pictures painted by the majority and the dissent are in sharp contrast. More than pointing out factual differences, however, Judge Davis challenges the majority's juridical approach to review of summary judgment, asserting that the majority decided the case on the merits rather than simply determining whether there was a genuine issue of material fact.

Supreme Court of South Carolina finds expert testimony must be beyond the ordinary knowledge of the jury

2010-03-18T09:38:00.005-04:00

By Manton Grier, Jr.

In Watson v. Ford Motor Co., et al., Op. No. 26786 (S.C. Sup. Ct. March 15, 2010), the Supreme Court of South Carolina reversed a jury award of $20 million and held that two of the plaintiffs’ experts should never have been qualified. The case involved an allegedly defective cruise-control system that caused a Ford Explorer to accelerate suddenly off the highway and roll over four times. The crash killed one passenger and severely injured another.

Importantly, the Court held that, as a gatekeeping function, the trial court must first find that the expert’s subject matter “is beyond the ordinary knowledge of the jury, thus requiring an expert to explain the matter to the jury.” As to the individual experts, the Court first found that the trial court erred by admitting the testimony of an expert on cruise-control systems. The Court reasoned that the expert had no “knowledge, sill, experience, training or education specifically related to cruise control systems.” Instead, the expert simply studied the system before trial and taught himself the system. Nevertheless, the Court held that this expert testimony, standing alone, did not prejudice Ford.

The Court then held as unreliable expert testimony theorizing that alternative designs and electromagnetic interference caused the sudden acceleration. The expert had no experience with automobiles or with cruise-control systems. Further, the Court stressed that his theory had not been peer reviewed, had never been published by him, and he had never tested the theory. Indeed, the theory was impossible to test. Although the Court noted that scientific evidence may be admitted even when lacking general acceptance in the scientific community, the theory was not only not accepted but also rejected by the scientific community.

Justice Pleicones concurred in result but disagreed that the first gatekeeper function of the trial court is to determine whether the subject matter is beyond the jury’s knowledge. Pleicones argued that while some issues are almost always beyond the understanding of a lay jury, other issues such as medical malpractice, sanity, and intoxication are examples where both lay and expert testimony may be presented. Thus, Pleicones disagreed with the majority to the extent “that expert testimony is now admissible only when it is ‘required’ or ‘necessary’ for the jury to understand evidence or an issue.”

"May it please the Co--" (Or, making the most of limited argument time).

2010-03-04T08:22:00.004-05:00

By Kirsten Small

I ran across an interesting article by Tony Mauro of the National Law Journal. Mr. Mauro notes that while Chief Justice Rehnquist was a stickler for keeping attorneys to their alloted argument time, Chief Justice Roberts is more flexible, allowing lawyers to finish their thought and event allowing additional time when necessary.

Does this mean the Chief has turned the henhouse over to the foxes? Hardly. While my experience has been that there is often a vast difference between the amount of time an appellate lawyer thinks he needs to argue his case, and the amount of time that he actually needs, it is also true that quite often, the time alloted (30 minutes per side in the Supreme Court, 20 minutes per side in the Fourth Circuit, with some exceptions) is insufficient for counsel to address all of the issues on his agenda and to respond to issues from the court. When this happens,the presiding judge must decide whether to allow additional argument time.

Appellate advocates should take this into account when preparing for oral argument. Triage your arguments--or have a disinterested colleague do it for you--and focus only on those that (a) have the best chance of prevailing, and/or (b) are likely to need explaining beyond what is already in your brief. Bear in mind that you do not need to argue a point just because it is in your brief--indeed, more than one lawyer has snatched defeat from the jaws of victory by failing to leave well enough alone.

Accommodating the time limitations of appellate argument requires an agility that comes from knowing your case and the law inside out. If the court grills you on issue C, such that you are short on time for issues A and B, you are going to need to jettison one or the other, or truncate both, on the fly. Having a plan in mind before you step to the podium will make this an easier decision. Plus, the court's questions may indicate to you a particular area of concern that needs to be addressed, and you should be sufficiently knowledgeable and flexible to do so.

Machiavelli* once wrote, "I am writing you a long letter because I do not have the time to write you a short one." So it is with oral argument--the ability to be brief requires intense, time consuming preparation. The best advocates recognize the value of this investment of time.

*Actually, I have seen this statement attributed to numerous people. Since I first heard it attributed to Machiavelli, that's what I'm going with here.

Congratulations, Judge Keenan

2010-03-03T08:04:00.003-05:00

Yesterday, the United States Senate voted next-to unanimously (99-0) to confirm Virginia Supreme Court Justice Barbara Keenan to the Fourth Circuit. The story from the Richmond Times-Dispatch can be found here.

Judge Keenan's confirmation brings the total number of judges on the court to 12, still three short of the authorized 15 judgeships. However, two additional nominations to the court--those of Albert Diaz and James Wynn--are awaiting Senate confirmation.

Judge Keenan is the fourth woman to be confirmed to the court and will be the third on its current roster, joining judges Diana Motz and Allyson Duncan. Karen Williams, former Chief Judge and the first woman to serve on the court, retired last year.

No word yet on when Judge Keenan will be sworn in.

Congressional Reaction to Citizens United

2010-02-12T14:46:00.007-05:00

by Gary L. Beaver

Democrats in Congress, led by Senator Chuck Schumer and Representative Chris Van Hollen, are pushing for rapid action to pass legislation intended to create new requirements for corporations spending money on political speech in light of the Citizens United v. FEC decision by the U.S. Supreme Court on January 21, 2010. The Citizens United Court held that there was no distinction between corporations and individuals with respect to political speech and struck down certain statutory limitations placed on corporate political speech. These Congressman believe that the Citizens United decision will open the floodgates to organizations spending money on political speech to influence election outcomes.

If publicized descriptions of the proposed new requirements are accurate, most appear to be reasonable. They would apply to corporations (including S-corporations) and labor unions and would require detailed disclosures to the FEC of who is funding the political speech, including requiring almost contemporaneous posting of information about the spending on the company's website. In addition, companies that are more than 20% owned by foreign interests or whose board of directors is more than half foreigners and companies receiving TARP money would be banned from spending on political speech (reportedly the ban on the TARP recipients would be lifted if the TARP money was already repaid). There is reportedly some language similarly banning political speech by companies receiving money through federal contracts. The scope of that provision will have to be closely examined. There is already a statute barring federal contractors from engaging in political activities (2 U.S.C. Section 441c) so adding this provision must be for some other purpose such as expanding the scope of the prohibitions in the existing statute. Perhaps it is intended to expand the ban from what is currently defined as the federal contractor to other companies that may be parents, subsidiaries, or affiliates of the contractor in order to add restrict additional corporations from political speech as many large corporations have subsidiaries receiving at least a small amount of revenue from federal contracts. In addition, there is one restriction being floated that is plainly biased against corporations. Some representatives, including Barney Frank, are pushing for language requiring publicly traded companies to receive shareholder approval before spending on political speech. That restriction, which apparently does not require unions to obtain member approval, appears to be unduly restrictive as it would be difficult to impossible to timely obtain such approval for political speech that may have to be shaped and aired quickly in the last days of a campaign. Another interesting requirement is for the CEOs of the companies paying for the ads to appear on camera to say that they stand by the ad similar to the "stand by your ad" requirements for politicians in the ads they run. Finally, a controversial provision would require candidates and political parties to be given the lowest unit rate for advertising to counter corporate and union advertising. Giving one speaker a leg up on another does not appear to be required by the First Amendment so the viability of that provision is questionable.

The pols are on the right track with the disclosure requirements and foreign investment restrictions which appear to be reasonable and appropriate. There are rational bases for restricting foreign interests in the amount of influence they can have on American elections and one would hope that the Supreme Court will agree. Likewise, there are good reasons for requiring timely and complete disclosures so that voters know exactly who or what is backing a candidate and those requirements would not restrict political speech but rather would enhance it by providing information about who is making the speech. Such requirements should easily withstand judicial scrutiny. However, I predict political fights over some of the other provisions which appear to place barriers designed to stifle corporate political speech and, if they are enacted, their ultimate demise in the courts for unduly restricting political speech.

Fourth Circuit extends Mohawk Industries v. Carpenter to appeals from civil contempt citations.

2010-02-03T08:41:00.003-05:00

by Kirsten E. Small

Last week, the Fourth Circuit made a moderate and logical extension to the recent ruling of the United States Supreme Court that orders to produce attorney-client privileged material are not immediately appealable under the collateral order doctrine of Cohen v. Beneficial Industrial Loan Ass'n, 337 U.S. 541 (1949). United States v. Myers, No. 09-1212 (4th Cir. Jan. 28, 2010).

This procedurally complex case involves allegations that former West Virginia attorney Heidi Myers engaged in fraudulent billing for services to the state public defender. The grand jury investigating the case issued a subpoena duces tecum directing Myers to produce all closed case files not already seized pursuant to a search warrant. Myers produced some items but retained others, then moved to quach the subpoena as to the retained items on the basis that they were protected by her Fifth Amendment right against self-incrimination. Simultaneously, the government moved for a contempt citation against Myers as to the retained documents.

Myers was eventually cited for civil contempt for failing to obey production orders issued pursuant to the subpoenas. Myers attempted to appeal, acknowledging that she had refused to obey the orders (and thus, that the contempt citation was proper) but maintaining that the orders themselves were improper.

The Fourth Circuit held that it lacked jurisdiction. First, because the contempt order was civil, Myers could not avail herself of the rule that criminal contempt orders are immediately appealable. Second, the Court held that a civil contempt citation for refusal to produce allegedly privileged documents is not immediately appealable under Cohen. Noting that in Mohawk Industries the appellant sought review of the production order, not of a contempt citation, the Court nevertheless concluded that Mohawk Industries "clearly control[led]" and rendered the Court without jurisdiction.

Commentary: This ruling is not so much an extension of Mohawk Industries as it is a "dotting of the i" of that decision. A contempt citation is the procedural vehicle by which a production order may be challenged on appeal before resolution of the case on the merits. It is only logical, then, that if the underlying order is not immediately appealable, then neither should a contempt citation resting on that order.

South Carolina Court of Appeals holds that violating mandatory seatbelt law is not evidence of negligence.

2010-02-02T11:10:00.003-05:00

By Manton Grier, Jr.

In Sims v. Gregory, Opinion No. 4649 (Ct. App. Jan. 28, 2010), the Court of Appeals held that violating a mandatory seatbelt statute was not evidence of negligence. In that case, a minor child was injured when the car her father was driving was hit by a third party. The child’s mother sued the father. Although the father was not responsible for the wreck, the mother argued that the father was responsible for some of the damages because he failed to ensure that his daughter was secured by a shoulder harness in addition to a lap belt.

The case was decided strictly on the basis of statutory interpretation. Although Section 56-5-6520 requires a driver to secure with proper seatbelts all passengers under 18, Section 56-5-6540(C) states that a “violation of this article is not negligence per se or contributory negligence, and is not admissible as evidence in a civil action.” The court further held that the duty to apply a seatbelt to a minor is only a statutory, and not common-law, duty. Thus, the clear meaning of Section 56-5-6540(C) precludes private right of actions under the mandatory seatbelt law.

Filling in the Fourth Circuit: Diaz and Wynn nominations proceed to full Senate.

2010-02-01T08:03:00.003-05:00

by Kirsten Small

The Senate Judiciary Committee voted to send the nominations of Albert Diaz and James A. Wynn, Jr., both of North Carolina, to the Senate for a floor vote. Diaz, a former Marine with degrees from the Wharton School (B.A. Economics), NYU (J.D.), and Boston University (MBA), currently serves as one of three judges on the state's business court, a position to which he was appoined by the North Carolina Supreme Court.

Wynn is a decorated Naval officer who, like Diaz, holds three degrees: a B.A. in Journalism from UNC Chapel Hill, a J.D. from Marquette University, and an LLM in Judicial Process from UVA. Wynn has been a member of the North Carolina Court of Appeals since 1990. For Wynn, the third time may be the charm: he was nominated to the Fourth Circuit by President Clinton in 1999 and 2001. The 1999 nomination was blocked by Senator Jesse Helms, and the 2001 nomination was returned by President George W. Bush after he took office.

Wynn and Diaz join Barbara Keenan, a member of the Supreme Court of Virginia whose nomination to the Fourth Circuit was approved on October 29, 2009.

Assuming Wynn, Diaz, and Keenan are all confirmed by the full Senate, Obama nominees will hold four of the fifteen seats on the Fourth Circuit (the other Obama nominee is former U.S. District Court Judge Andre M. Davis, who was confirmed on November 9, 2009). And, the Court will be "short" only one judge, a situation that has not occurred since 1994, when the Court had 13 judges for its 15 available seats.

At this time, the nominations of judges Wynn, Diaz, and Keenan have not been scheduled for a vote on confirmation.

U.S. Supreme Court Erases Bar to Funding Political Attack Ads

2010-01-28T16:01:00.005-05:00

by Gary Beaver

If you think you have seen dirty political campaigns in the past, I opine that “you ain’t seen nothing yet.” On January 21, 2010, in the case of Citizens United v. Federal Election Commission (FEC), the U.S. Supreme Court changed the rules that restricted corporations (profit and non-profit) and unions from funding political ads. The change is likely to result in more money being spent on political advertising, which, in turn, is likely to result in more negative advertising.

Under § 203 of the Bipartisan Campaign Reform Act of 2002 (2 U.S.C. § 441b), corporations and unions were barred from using their general treasury funds to pay for an “electioneering communication” or speech that expressly advocates the election or defeat of a candidate, through any form of media. “Electioneering communications” included any broadcast that referred to a clearly identified candidate for federal office and was made within 30 days of a primary or 60 days of a general election. They could provide funds indirectly through political action groups (“PACs”) but funds into PACs had to come from donations from stockholders or employees of the corporation or members of the union.

The case involved efforts in the 2008 presidential campaign by Citizens United (a conservative non-profit) to distribute a movie entitled “Hillary: The Movie” more widely by offering it through a free video-on-demand channel called “Elections “08.” The 90-minute movie painted an unflattering picture of Hillary Clinton. Citizens United feared running afoul of 2 U.S.C. § 441b and sought declaratory and injunctive relief arguing that the law was unconstitutional as applied to the movie and ads promoting the movie. The District Court denied Citizens United relief and, instead, granted summary judgment to the FEC. The Supreme Court agreed that the movie and ads were “electioneering communications” but applied the First Amendment to invalidate 2 U.S.C. § 441b and hold that corporations and unions are free to spend as much as they want on such speech. Importantly, corporations and unions remain required to identify themselves as the sources of funding the advertisements and to include disclaimers in the ad, and remain barred from making direct contributions to the candidates. In making its holding, the Court overruled Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990), that political speech may be banned based on the speaker’s corporate identity.

The internet was immediately filled with the howls of many, mostly from the left and the public interest advocates, who fear that corporations will greatly outspend the unions and, thereby, influence voters to choose candidates who are business-friendly and not necessarily worker- and consumer-friendly. For example: Ralph Nader called for a constitutional amendment to prevent corporate campaign contributions (note: he also called for a similar restriction on union funds); Senator Leahy (D-Vt. and chair of the Senate Judiciary Committee) blasted the decision in a press release calling the decision a victory for Wall Street at the expense of Main Street; and, President Obama criticized the decision and announced that his administration would work with Congress to pass legislation to vitiate the holding. In contrast, conservative groups praised the decision (e.g., U.S. Chamber of Commerce, Cato Institute). Not surprisingly, the U.S. Supreme Court followed that same pattern in its 5-4 vote in the case with the more conservative judges in the majority. Justice Stevens was especially incensed by the decision and wrote a 90-page dissent.

Another criticism of the decision seen frequently on the internet is that foreign corporations, individuals, and governments can own corporations in the U.S. and use them as vehicles to influence American politics and government.

Obviously, many observers believe (or at least say) that this decision will profoundly affect future political races. We shall see. I am reminded of what happened in the 2008 senatorial campaign in North Carolina when Ms. Dole used an unseemly ad attacking the religious beliefs of Ms. Hagan. The backfire was heard round the country. Perhaps liberal and public interest observers are not giving the voters enough credit for being able to evaluate political speech and determine what constitutes valid positions and arguments and what is unfair or inaccurate criticism. If voters are inundated with heavy-handed advertising campaigns funded by corporations for one candidate or by unions for another, such advertising may have the opposite of its intended effect. American voters do not like to be told what to think, do not like bullying, and may react negatively to a candidate receiving too much support from a particular group, whether corporation or union. American voters are likely to find particularly repugnant political ads from corporations owned by non-Americans. The voters’ political sophistication and ability to look behind canned messages grows with each day the Internet exists. The difficulty remains in gleaning the truth from the many assertions on the Web.

U.S. Supreme Court allows Duke Energy and Catawba River Water Supply Project to intervene in South Carolina v. North Carolina

2010-01-25T08:34:00.005-05:00

by Manton Grier, Jr.

This past Wednesday, the United States Supreme Court granted motions to intervene filed by Duke Energy and Catawba River Water Supply in South Carolina v. North Carolina, No. 138, an original action filed by South Carolina seeking an equitable apportionment of the Catawba River waters. The opinion was written by Justice Alito for a five-justice majority; the Chief Justice concurred in the judgment in part and dissented in part.

In intra-state disputes brought in the original jurisdiction of the Supreme Court, the Court demands a “compelling interest” before allowing a non-state party to intervene in what is otherwise a sovereign dispute between two states. The Court held, however, that “any equitable apportionment of the river will need to take into account the amount of water that Duke Energy needs to sustain its operations and provide electricity to the region, thus giving Duke Energy a strong interest in the outcome of this litigation.” As to Catawba River Water Supply Project, the Court held that it had unique interests because half of its customers are North Carolina residents and half South Carolina residents. The Project also relies on authority granted by both states to draw water from the Catawba River. The Court rejected the motion to intervene of the City of Charlotte, North Carolina, reasoning that its interest was not sufficiently unique that it could not be effectively represented by North Carolina.

The Chief Justice concurred in the denial of Charlotte's motion to intervene but dissented from the grant of intervention to Duke Energy and the CRWSP on the basis that the Court has never before granted intervention to a non-sovereign entity in an original action for equitable enforcement of water rights.

Fourth Circuit applies Iqbal to affirm dismissal of another complaint

2010-01-22T15:33:00.008-05:00

By Gary Beaver

On December 29, 2009, in Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., the Fourth Circuit again applied the heightened standard for adjudicating a Rule 12(b)(6) motion to dismiss set forth by the United States Supreme Court in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). In Nemet, the defendant was a website that allowed consumers to comment on the quality of businesses, goods, and services. Plaintiff Nemet took offense to 20 of the comments posted on the website and sued Consumeraffairs.com for defamation and tortious interference with a business expectancy. Consumeraffairs.com countered that the complaint was barred by § 230 of the Communications Decency Act of 1996 (“CDA”), which protected interactive computer service providers liable for the publication of information created and developed by others.

Nemet asserted that the defendant was not protected by the CDA immunity because it was also an “information content provider.” The court reviewed the plaintiff’s complaint to decide whether the allegations plausibly showed that the defendant was an “information content provider.” Nemet alleged that Consumeraffairs.com was involved in creating or developing the posts in four ways: (1) through the structure and design of the website as found in Fair Housing Council v. Roommates.com, LLC, 521 F.3d 1157, 1174 (9th Cir. 2008); (2) by asking the consumer questions about the complaint; (3) by helping the consumer draft or revise the complaint; and (4) by drafting 8 of the 20 posts itself.

The Fourth Circuit distinguished the Roommates.com case by holding that Consumeraffairs.com had not encouraged illegal content and not required consumers to input illegal content. In Roommates.com, the court had adopted a definition of “development” that included “materially contributing” to a piece of posted information’s “alleged unlawfulness. 521 F.3d at 1167-68.

Next, the Court noted that asking questions of the consumer did nothing to “develop” or “create” the posts on the website so those allegations were insufficient. As to the third category, the court held that Nemet had “not pled what Consumeraffairs.com ostensibly revised or redrafted or how such affected the post,” i.e., the allegations were “threadbare and conclusory.” In addition, under Zeran v. America Online, Inc., 129 F.3d 327, (4th Cir. 1997), Nemet was required to, but did not, plead facts to show that alleged drafting or revision was more than the usual editing that website operator performs.

The Fourth Circuit found the last allegation – that Consumeraffairs.com had itself fabricated 8 of the 20 complaints – to be merely Nemet’s speculation because the sole basis for the allegation was that Nemet could not identify the author of those 8 posts. Nemet wanted to take discovery prior to a dismissal but the Fourth Circuit quoted Iqbal in holding that Rule 8 requires “more than conclusions” to “unlock the doors of discovery for a plaintiff.”

This case comes on the heels of the Fourth Circuit’s application, on December 3, 2009, of Iqbal’s heightened pleading standard to affirm dismissal of the complaint in Francis v. Giacomelli. These decisions should make it easier to obtain dismissals of speculative claims – at least in the federal courts of the Fourth Circuit.

There's no place like your principal place of business: 4th Circuit rules that an LLC is an "unincorporated association" under CAFA.

2010-01-19T07:54:00.003-05:00

by Kirsten Small

Affirming the District of South Carolina (Matthew Perry, Senior District Judge), the Fourth Circuit ruled last week that a limited liability company should be treated as an "unincorporated association" for purposes of the minimal diversity provisions of the Class Action Fairness Act. Ferrell v. Express Check Advance of SC

Express Check is an LLC organized under the law of Tennessee; its sole member is QC Financial Services, Inc., a Missouri corporation with its principal place of business in Kansas. QC Financial is owned, in turn, by QC holdings, a Kansas corporation with its principal place of business in Kansas. With the exception of four officers (who are in Kansas), all of Express Check's employees are in South Carolina.

Ferrell, a South Carolina citizen, brought a class action in South Carolina state court alleging that Express Check's "payday loan" business violated SC consumer protection statutes. Express Check removed the action to federal court, invoking the "minimal diversity" standard of CAFA, 28 U.S.C. § 1332(d)(2)(A). Under this provision, diversity jurisdiction is available in a class action when the amount in controversy exceeds $5 million and "any member of a class of plaintiffs is a citizen of a State different from any defendant." For purposes of this provision, CAFA provides that an "unincorporated association" is a citizen of the state in which it is organized and the state in which it has its principal place of business, see 28 U.S.C. § 1332(d)(10).

Express Check asserted that the term "unincorporated association" referred only to business entities lacking a distinct corporate identity under state law. Because the law of Tennessee gave Express Check a corporate form (as an LLC), the company argued that its citizenship--under traditional rules applicable to non-corporate entities--was that of its member, i.e., Tennessee and Kansas, rendering jurisdiction in federal court proper under the minimal diversity standard. The district court disagreed and remanded, holding that § 1332(d)(10) applied to all non-corporate business forms regardless of their status under state law.

In affirming the district court, Judge Niemeyer (joined by Chief Judge Traxler and Judge Agee) traced the history of § 1332(d)(10) and concluded that Congress' purpose in enacting the provision was "to respond to the categorical distinction" between corporations (treated as persons for purposes of diversity jurisdiction) and unincorporated associations (i.e., every other business form), created by the Supreme Court. There was not, as Express Check contended, a third category for non-corporate business forms recognized by state law.

Having concluded that Express Check was a unincorporated association under CAFA, the Court turned to the question of Express Check's principal place of business, argued by Ferrell to be South Carolina (using the "place of operations" test) and by Express Check to be Kansas (using the "nerve center" test). The panel stated that "the nature of the business determines which test is the more appropriate to apply"; when a company has physical operations the "place of operations" test is more appropriate, while the "nerve center" test better suits a company without a specific geographic nexus, such as an investment company. In light of Express Check's business as a payday lender with numerous stores in South Carolina, the court concluded that the "place of operations" test was the more appropriate one and that, under it, Express Check was a citizen of South Carolina. The court therefore affirmed the district court's order of remand.

On the Bench: Kaye Hearn, South Carolina Supreme Court

2010-01-14T16:30:00.001-05:00

"On the Bench" is a periodic feature of On the Docket in which we profile an appellate judge from the Carolinas or the Fourth Circuit.

by Kirsten Small

Kaye Hearn was sworn in today as a Justice of the Supreme Court of South Carolina, replacing retiring Justice John Waller. She comes to the Supreme Court bench with a wealth of judicial experience, having served on the South Carolina Court of Appeals, ten of those years as the court's Chief Judge. Prior to that, she was a family court judge for the 15th Judicial Circuit (Georgetown and Horry Counties). Justice Hearn is the second woman on the five-member Supreme Court. She joins Chief Justice Jean Toal and Associate Justices Costa Pleicones, Donald Beattie, and John Kittredge.

Judge Hearn graduated cum laude from Bethany College in 1972 and earned her J.D., cum laude, from the University of South Carolina School of Law in 1977. In 1998, she earned an L.L.M. degree from the University of Virginia.

My first appearance at the South Carolina Court of Appeals was before a panel that included Judge Hearn. I found her to be well prepared, insightful, and fair. I am sure she will be an asset to the Court.

No need to kiss and tell: Second Circuit says defendant not required to tell probation office of "significant romantic relationship"

2010-01-08T09:17:00.004-05:00

By Kirsten Small

Citing Mozart, Jane Austen, and Rob Reiner, the Second Circuit on Thursday overturned a sentence that included a condition of supervised release requiring the defendant, upon entry into a “significant romantic relationship,” to inform the probation office and to tell the other party about his conviction for possession of child pornography. United States v. Reeves, No. 08-2966 (2d Cir. Jan. 7, 2010).

Applying a “relaxed plain error” standard of review because Reeves failed to object to the condition but had not received prior notice of it, the court ruled that the condition was both unconstitutionally vague and not reasonably related to the purposes of sentencing.

A district court has discretion to impose additional conditions of supervised release provided those conditions are “reasonably related” to the purposes of sentencing and involve no greater deprivation of liberty than reasonably necessary. Additionally, the Due Process Clause requires that conditions of supervised release be “sufficiently clear to give the person of ordinary intelligence a reasonable opportunity to know what is prohibited.”

The Second Circuit determined that the condition failed on both counts. First, the Court ruled that the condition was impermissibly vague because “people of common intelligence (or, for that matter, of high intelligence) would find it impossible to agree on the proper application of a release condition triggered by entry into a ‘significant romantic relationship,’” noting the varying definitions of such relationships offered by The Marriage of Figaro, Mansfield Park,* and When Harry Met Sally.

The Second Circuit further held, albeit in a less entertaining manner, that the condition was not reasonably related to the purposes of sentencing, in that there was no indication in the record that Reeves was a threat to any romantic partner or a predator towards children, and the condition did not serve a rehabilitative purpose.

*While I would not go so far as to suggest that the parties seek rehearing on this point, my personal view is that Emma would have been a better choice from the Jane Austen oeuvre. See also, e.g., Clueless (Paramount Pictures 1995).

Mohawk Industries-U.S. Supreme Court prohibits interlocutory appeals of discovery orders piercing attorney-client privilege

2010-01-06T14:16:00.011-05:00

By Gary Beaver

On December 8, 2009, in Mohawk Industries, Inc. v. Carpenter, the U.S. Supreme Court (in Justice Sotomayor's first opinion) restricted the methods by which an appellant could have the federal appellate courts immediately review a discovery order through which a federal district court overrules the appellant's claim of attorney-client privilege as a basis for withholding discovery information and orders the production of such information. The appeal in Mohawk was taken under the collateral order doctrine of 28 U.S.C. Section 1291 -- an avenue that is now unavailable for interlocutory appeal of such prejudgment discovery orders. In essence, the Mohawk Court held that discovery orders piercing the attorney-client privilege would not imperil "a substantial public interest" or "some particular value of a high order" -- the usual tests for allowing interlocutory appeal of a collateral order. The Court noted that there are other methods of making an interlocutory appeal of a discovery order including: (1) obtaining the district court's certification and appellate court's acceptance of a "controlling question of law" the prompt resolution of which "may materially advance the ultimate termination of the litigation;" (2)petitioning for a writ of mandamus; (3) defying the order and being held in contempt as contempt orders are immediately appealable if the level of a criminal punishment; and (4) defying the order and having your pleadings or defenses stricken. Big dice to roll in using those last two methods.

It is not clear what, if any, impact the ruling will have on state courts as the Mohawk appeal was taken under a federal statute. However, the logic of the Court likely could be applied by state appellate courts. The question of "would be applied" is more difficult to answer. In North Carolina, the Court of Appeals has not shown any reluctance to dismiss appeals of decisions on discovery issues because they are interlocutory and do not deprive an appellant of a substantial right that would be lost unless immediately reviewed. However, there is a line of precedents holding that interlocutory discovery orders like that in Mohawk requiring a party to produce to the opposing party material purportedly protected by attorney-client privilege and/or attorney work product immunity are immediately appealable. The N.C. Court of Appeals rarely dismisses such an appeal. It dismissed such an appeal in Stevenson v. Long, 558 S.E.2d 215 (2002) but only because it concerned refusing to answer deposition questions and the appellant failed to provide the questions to the lower court for review and a decision on the application of the claimed privilege, i.e., the appellant did not carry its burden of showing the privilege applied. I would not expect the NC appellate courts to reject that line of cases and follow the Mohawk Court's lead any time soon.

Mission Statement

2009-12-15T14:29:00.003-05:00

Each day there are developments in appellate courts that could affect business in the Carolinas and beyond.

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2009-12-10T17:21:00.000-05:00

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