Is an employee entitled to a copy of his or her personnel file? (Expand/Collapse)
March 24, 2014
Two questions about employee personnel files:
Are Virginia employees entitled to a copy of their personnel files?
No, with respect to employees of private sector employers. Most employees mistakenly believe that because a file has their name on it, it is their file. In fact, a personnel file is like any other company record and, unlike many other states, including Massachusetts (Mass. Gen. Laws Ann. ch. 149, § 52C) and California (Cal. Lab. Code § 1198.5), Virginia does not have a statute requiring that private sector employers permit employees access to their personnel file information. Thus, a private sector employer may refuse to give an employee a copy of or even access to the employee’s personnel file.
However, there are good reasons to permit an employee access to or a copy of the file. First, allowing review of the file is good employee relations. Denying the employee access fuels an inherent distrust and suspicion many employees already have toward their employers. Second, allowing review prevents the employee from later claiming that he or she never saw or was never given negative performance documents that have been placed in the file.
It is worth noting that an employee should never be left alone with his or her personnel file and should be permitted to review the file in the presence of a company representative to ensure that certain documents do not become “missing.” This is particularly true of restrictive covenants signed by the employee, and counsel may want to advise clients to consider maintaining a separate copy of such documents in a separate location. Of course, personnel files should be kept in a secure, limited access location.
Public sector employees do have a right in Virginia to review their files. See Va. Code § 2.2-3705.1 (pertaining to exclusion from FOIA rules. “The following records are excluded from the provisions of this chapter but may be disclosed by the custodian in his discretion, except where such disclosure is prohibited by law: .... 1. Personnel records containing information concerning identifiable individuals, except that access shall not be denied to the person who is the subject thereof.”
May an employer put negative documentation in an employee’s personnel file without telling the employee or giving the employee a copy?
Yes. Many human resources professionals have been taught erroneously that negative personnel documentation cannot be placed in a personnel file unless a copy is furnished to the employee first. There is no prohibition against a private sector employer in Virginia placing negative personnel documents in an employee’s personnel file without having first given a copy to the employee or having told the employee. This misconception probably arises from fundamental notions of fairness, with some employers believing it would not be “fair” to place such documentation in the employee’s file without having first given the employee a copy.
While there may be some fairness element in providing the employee a copy of such documentation, there is no legal prohibition against doing so. It should be noted, however, that while it may not be required or prohibited, providing an employee with a copy of any negative documentation going in the employee’s personnel file may be wise. Such a practice will prevent the employee from accusing the employer at a later stage of having made up such documentation. Of course, when providing an employee with such documentation, an employer should request that the employee acknowledge receipt of the document on the document itself. Should the employee refuse to do so, the employer should document that fact by signing the document stating that the employee had received the document and by noting the exact date and time when the document was provided to the employee.
This information is derived from the written materials for the Virginia CLE® seminar 35 Questions About Employment Law Every Practitioner Should Know, now available as an online seminar.
What if your client’s deceased spouse had brought home a machine gun as a war souvenir after World War II? (Expand/Collapse)
March 4th, 2014
A World War II veteran dies, and his widow finds a war trophy in the attic that appears to be a rifle. Either she or the executor consults a gun expert, who advises that it is a German MP-44, which is a fully automatic assault rifle. It has considerable value to collectors, but it is defined as a “machine gun” under federal and Virginia law. Possession is a felony unless it is registered with the federal ATF and the Virginia State Police. No registration document can be found. The wife or executor consults an attorney.
Counsel is aware that, to be in violation, one must know that the firearm in question has the characteristics that make it restricted – in this case that it is a machine gun. Staples v. United States, 511 U.S. 600 (1994). Counsel is also aware that if any vagueness exists in the definition of a restricted firearm, the rule of lenity mandates that the definition be construed narrowly in favor of the possessor and against the government. United States v. Thompson/Center Arms Co., 504 U.S. 505 (1992). Here, the wife does have knowledge that the firearm is indeed a machine gun. What alternatives exist that counsel may ethically advise the client to get into compliance with the law without incriminating herself?
Since the prohibition on possession is written in the present tense, a “twilight zone” exists for the widow for the period between when she is advised that the item is a machine gun and when she disposes of it. Indeed, for all she knows, the firearm may well be registered, although a court may not consider lack of knowledge of the registration status to be a defense.
Then again, at least one circuit has held that the law may allow immediate steps to come into compliance and does not impose strict liability. United States v. Smith, 217 F.3d 746, 751 (9th Cir. 2000) (where just-bought rifle fired automatically, and was thus a machine gun obtained by accident or mistake, defendant was entitled to a jury instruction that he “promptly initiated action to have the firearm modified to a semiautomatic firearm”). The possibility of a prosecution with a nice jury instruction provides little consolation.
There are several alternatives that may or may not be viable depending on the circumstances. The alternatives may vary depending on the client, who may not be as sympathetic as in the above scenario. For instance, the client may be a felon who sawed off the barrel of a shotgun to less than 18 inches in length. What advice may counsel give without recommending or participating in any unlawful activity?
What follows is a list of possible actions counsel can share with the client. Of course, not every action is available in every circumstance. These are discussed in detail in materials for Guns: The Latest Laws Affecting Firearms in Virginia:
- Seek to determine whether the restricted firearm is registered.
- Abandon the firearm to ATF or the State Police.
- Donate the firearm to a State or Federal government entity, such as a State or Federal Museum or State or Local Law Enforcement.
- Remove the characteristic causing the item to be an NFA firearm.
- Destroy the receiver of a machine gun.
- Assignment of Serial Number.
The above are choices counsel may discuss with a client who may possess an unregistered firearm. Avoid recommending destruction of evidence or obstructing justice. If the firearm is the subject of an investigation or indictment, counsel may not recommend anything that could be construed as destruction of evidence or obstruction of justice.
This information is derived from the November 2013 Virginia CLE® seminar Guns: The Latest Laws Affecting Firearms in Virginia, now available as an online seminar or as a USB flash drive video seminar.
What parties may counsel and a guardian ad litem talk to when a minor child has a GAL? (Expand/Collapse)
January 9, 2014
Legal Ethics Opinion 1870, published on October 4, 2013, looks at three questions regarding communications by attorneys involving guardians ad litem for children and by government attorneys working with social workers performing investigative functions. The Committee reached the following conclusions:
1) May an attorney representing a parent or guardian in a matter communicate with a minor child for whom the court has appointed a guardian ad litem (“GAL”) without the GAL’s consent or legal authority?
When a lawyer has been appointed to serve as a GAL for a child in a civil proceeding, Rule 4.2 applies and prohibits counsel for another party in that proceeding from communicating ex parte with the child about the subject matter of that proceeding, unless the GAL consents to such communication or unless the law or court order authorizes that lawyer to communicate ex parte with the represented child.
2) May a GAL representing a minor child in a matter communicate with a parent or other person represented by an attorney in the matter without that person’s attorney’s consent or legal authority?
The lawyer serving as GAL for the child is bound by Rule 4.2 and may not have ex parte communications with another represented party in that proceeding, unless counsel for that party consents, or unless the GAL is authorized by law or court order to have such communication.
3) May a government attorney communicate with a represented person, including a child for whom a GAL has been appointed, or request or direct social workers and others performing investigative functions regarding the matter to do so without the GAL’s or other attorney’s consent or legal authority?
Rule 4.2 also applies to lawyer-directed communications with a represented person by non-lawyers. However, a government lawyer does not violate Rule 4.2 merely by requesting a social worker or investigator to communicate with a represented person, including a child for whom a GAL has been appointed, if the law entitles or charges the investigator or social worker to have such communication. While the government lawyer may request that the social worker or investigator contact and interview a represented person, and advise generally what information the lawyer seeks, the lawyer may not “mastermind” or “script” the interview or dictate the content of the communication. Such conduct would be viewed as circumventing Rule 4.2 through the actions of another. Rule 8.4(a).
Counsel are advised to read the entire opinion to see the Committee’s discussion and reasoning in full, since this is only a summary of the Committee Opinion.
This information is derived from the upcoming new edition of Virginia CLE®’s Juvenile Law and Practice in Virginia.
What’s the law on texting while driving in Virginia? (Expand/Collapse)
November 18, 2013
Section 46.2-1078.1 prohibits the operating of a moving motor vehicle “while using any handheld personal communications device” to either:
“Manually enter multiple letters or text in the device as a means of communicating with another person”
“Read any email or text message transmitted to the device or stored within the device.”
Section 46.2-868(C) was amended in 2013 to impose a mandatory minimum fine of $250 for persons convicted of reckless driving who were also in violation of § 46.2-1078.1.
Exceptions: The prohibition on reading an email or text message does not apply “to any name or number stored within the device nor to any caller identification information.” And there are exceptions for parked or stopped vehicles, emergency vehicles, use in an emergency, and GPS and dispatch devices.
It’s now a primary offense and the penalties have increased: Section 46.2-1078.1 was amended in 2013 by Chapter 752 (and by Chapter 790, which is identical) to remove the requirement that the officer must have cause to stop or arrest the driver for violating some other Code section or local ordinance relating to motor vehicles or any criminal statute. The same act increased the penalties as well.
What about cell phones?
The passage of the 2013 amendments described above prompted the following question to the Attorney General:
“You seek to clarify whether someone who was driving while using a cell phone in a manner not made illegal under this provision could nevertheless be convicted of reckless driving pursuant to § 46.2-852 for driving ‘a vehicle on any highway recklessly or at a speed or in a manner so as to endanger the life, limb, or property of any person[.]’”
The Attorney General responded in Opinion 13-059 as follows:
“[I]f a driver operates a vehicle on a highway recklessly or at a speed in a manner so as to endanger the life, limb, or property of any person, while using a hand held personal communication device, that driver can be charged and convicted of reckless driving regardless of whether there are grounds to support a violation of § 46.2-1078.1.”
The opinion further states that “Virginia case law makes clear that the mere happening of an accident or use of a hand held personal communication device likely would be insufficient, standing alone, to support a conviction of reckless driving.”
This information is derived from Virginia CLE®’s Defending Serious Traffic Cases 2013: Strategies and Tactics in Representing Clients Seminar Materials. The seminar is available as a USB flash drive video seminar and as an online seminar.
What is trust decanting? (Expand/Collapse)
November 4, 2013
Trust Decanting. Decanting is the act of a trustee exercising its power to distribute trust principal to or for the benefit of a beneficiary by distributing the assets to a new trust. The best way to understand trust decanting is to visualize the physical act of decanting wine, which involves the pouring of wine from one vessel to another for the purpose of removing unwanted sediment and adding oxygen to the wine. In the trust context, practitioners can view decanting as a trustee pouring the assets of an old trust into a new trust, with the less useful provisions (the so-called “sediment”) left behind, while the “oxygen” of modern trust provisions breathes life into the trust.
Reasons to Decant an Older Trust. In many cases, it may be necessary to modify or change the terms of the trust to more accurately reflect the settlor’s intent, to respond to beneficiary needs and circumstances, to address changes in law, to optimize tax consequences, or to correct errors in the trust instrument. There are a number of mechanisms to modify an irrevocable trust including judicial reformation and modification, trust combinations and divisions, removal and substitution of trustees, non-judicial settlement agreements, the use of “trust protectors” or “trust advisors” to modify the terms of a trust, and now, with increasing popularity, decanting. To date, seventeen states including Virginia have adopted statutes which authorize decanting. Virginia enacted Virginia Code § 64.2-778.1, which became effective on July 1, 2012.
Exercise of Special Power of Appointment. A decanting power is often thought of as the exercise of a special power of appointment, held by the trustee, to distribute assets for the benefit of a beneficiary. Trust decanting generally refers to the distribution of property from one trust to another trust pursuant to a trustee’s discretionary power to distribute property to or for the benefit of the trust’s beneficiaries. The rationale behind decanting is that if a trustee has the discretionary power to distribute property to or for the benefit of one or more beneficiaries, then the trustee has, in effect, a special power of appointment that should enable the trustee to distribute property to a second trust for the benefit of one or more of such beneficiaries.
Tax Consequences. Decanting assets from one domestic trust to another should not affect the income taxation of the trust because (i) the old trust and the new trust are treated as the same trust for income tax purposes or (ii) in the alternative, the transfer of assets merely carries out the original trust’s distributable net income (“DNI”), resulting in income to the new trust with a corresponding distribution deduction for the old trust. In most cases, there should be no income tax consequences associated with the transfer of assets from one trust to another through the process of decanting. It is important, however, that practitioners consider the capital gain implications of Cottage Savings Ass’n v. Comm’r, 499 U.S. 554 (1991), and the negative basis implications of Crane v. Comm’r, 331 U.S. 1 (1947). In addition, it is important to consider whether the tax attributes of the old trust are carried forward into the new trust under the distributable net income (DNI) rules.
This information is derived from the Virginia CLE® seminar materials for Decanting Comes of Age (May 2013). These materials are available as a download for $30.
Test your knowledge of Virginia laws about wild and domestic animals. (Expand/Collapse)
October 23, 2013
My husband and I got a puppy. It was supposed to be “his” dog, but I ended up taking care of it. Then he walked out on me, and now, six months later, he wants “his” dog back. I think it is in the best interests of the dog to stay with me. Won’t a judge let me keep the dog?
A. The dog’s legal status is that of “personal property,” per Va. Code § 3.2-6585, which provides in part that, “All dogs and cats shall be deemed personal property and may be the subject of larceny and malicious or unlawful trespass. Owners, as defined in § 3.2-6500, may maintain any action for the killing of any such animals, or injury thereto, or unlawful detention or use thereof as in the case of other personal property. The owner of any dog or cat that is injured or killed contrary to the provisions of this chapter by any person shall be entitled to recover the value thereof or the damage done thereto in an appropriate action at law from such person.”
B. There is an argument that your husband walked out on you and the dog. Pursuant to § 3.2-6504, “No person shall abandon or dump any animal. Violation of this section is a Class 3 misdemeanor. Nothing in this section shall be construed to prohibit the release of an animal by its owner to a pound, animal shelter, or other releasing agency.”
C. You are now the “owner” of the puppy, pursuant to § 3.2-6500: “Owner” means any person who: (i) has a right of property in an animal; (ii) keeps or harbors an animal; (iii) has an animal in his care; or (iv) acts as a custodian of an animal.
D. Because dogs are personal property, the “in the best interests of” standard does not apply.
E. Conclusion: If this case gets in front of a judge, either as part of a divorce proceeding or on an action in detinue brought by the husband to recover possession of the dog, then the wife will likely end up being able to keep the dog.
Can my homeowners or renter’s insurance refuse to cover me if I have a “dangerous breed” dog?
A. The short answer is no – not based on the “breed” of the dog.
B. Under the provisions of Va. Code § 38.2‐2108, the terms of homeowner or renter policies need to meet certain provisions. Notwithstanding, under § 38.2‐2128, an insurer may exclude coverage for any liability which arises from injuries caused by a “dangerous” or “vicious” animal owned by, or in the custody or control of, the insured if the dog has bitten, attacked, or injured a person or a companion animal. The insurer may only do so with the permission of the insured – this consent needs to be in writing and notarized or witnessed. The assumption is that if the insured does not so agree, the insurer can refuse coverage. The insurer needs to keep the information on the specific threat caused by the animal available to the State Corporation Commission in its capacity to regulate the insurance industry in Virginia.
C. Section 3.2‐6540 defines a “dangerous dog” and a “vicious dog.” The definition is for purposes of that section of the Code which regulates the control of “dangerous” or “vicious” dogs. No mention is made of other animals in this definition. This section also specifically states that no dog shall be found to be a “dangerous” dog simply because of the breed of the canine. This section goes into a great deal of detail of what it takes to consider a dog a dangerous or vicious dog, the requirements for registration of the dog, the consequences for failure to register, the consequences of the dog injuring a person or other animal. No specific mention is made of insurance in this section. So is the insurer restricted to dogs described in that section in its request to exclude the animal from coverage? Probably not, since the insurance section does not limit the exclusion provision to dogs to begin with and does not reference this section of the Code with respect to dogs, but simply says an animal that has bitten, injured, or attacked a person or companion animal. But it still appears that it cannot base an exclusion on a breed but rather only on the specific animal.
I found an injured hawk in my yard. Can I bring it back to my home and try to nurse it back to health? Is there someone I should call?
A. The answer is a big NO. Under Va. Code § 29.1-521 you cannot “hunt, trap, take, capture, kill, attempt to take, capture or kill, possess, deliver for transportation, transport, cause to be transported, by any means whatever, receive for transportation or export, or import, at any time or in any manner, any wild bird or wild animal or the carcass or any part thereof, except as specifically permitted by law.”
B. Injured raptors are specifically dealt with under federal law. No one is permitted to handle raptors unless they have the proper permits from both the state of Virginia AND from the U.S. Fish and Wildlife Service or are a government employee. That is for the safety of the birds and people. Raptors can be large and dangerous, even if injured. If you run across a raptor that you think is injured, ill or orphaned, you need to call one of the licensed wildlife recovery groups. Often what the layman may see as injured or sick may just be normal behavior for the bird.
C. In Central Virginia, a great resource for any injured wildlife is the Wildlife Center of Virginia, in Waynesboro, and there are others located throughout Virginia.
This information is derived from the seminar materials for The Top 20 Animal Law Issues That Every Virginia Practitioner Should Know.
How can the attorney-client privilege be lost through a subject matter waiver? (Expand/Collapse)
October 14, 2013
Subject Matter Waiver Defined.
The subject matter waiver doctrine sometimes requires the privilege’s owner who has waived the privilege to disclose all privileged communications on the same subject. At its heart, the doctrine rests on the concept of fairness. A litigant should not be allowed to rely at trial on a privileged communication between a litigant and his lawyer, without allowing the adversary to review other privileged communications dealing with the same subject. Absent such a disclosure obligation, the litigant could “cherry pick” privileged communications to manipulate the trial’s result. Similarly, fairness would prohibit a litigant from asserting an “advice of counsel” defense without disclosing both the advice and the client’s communication to the lawyer providing the factual background about which the lawyer provided that advice.
Necessity of a Waiver. The subject matter waiver doctrine can apply only if there has been a waiver. This axiom provides an opening for imaginative court discovery remedies, as well as occasionally triggering an odd situation in which the producing party claims that its documents did not deserve privilege protection while the receiving adversary argues that the privilege protected the documents, so their disclosure caused the subject matter waiver. There are several ways that a litigant can argue that the disclosure of a communication or document did not or could not cause a waiver. For instance, the litigant might argue that the document was never privileged ab initio. Similarly, a litigant might argue that whatever he or she disclosed was not specific enough to cause a waiver.
Reversal of Positions. These basic principles can result in a strange situation involving the reversal of parties’ normal arguments. If a litigant produces an arguably privileged document, the producing party might find itself in the position of arguing against application of the privilege to that document, while the receiving party could find itself vehemently arguing that the document was privileged. The battle would not involve the document, which has now been disclosed, but rather the subject matter waiver implications. Interestingly, at least one court has wrestled with the question of who has the burden of proof in such an unusual fight. Because the burden of proof normally falls on the party claiming privilege, the court held that the receiving party had the burden of showing that the document received from the adversary deserved privilege protection—even though both the document and the attorney-client privilege that might protect it belonged to the producing party. Sinclair Oil Corp. v. Texaco, Inc., 208 F.R.D. 329, 332 (N.D. Okla. 2002). In some situations, a litigant’s loss in a privilege dispute saves the litigant from a subject matter waiver.
This information is derived from the upcoming 2013 edition of the Virginia CLE® deskbook The Attorney-Client Privilege and the Work Product Doctrine: A Practitioner’s Guide.
Where did the privilege against self-incrimination come from? (Expand/Collapse)
September 25, 2013
One of the nation’s most enduring and yet controversial privileges, the privilege against self-incrimination, can be summarized as follows: In any official proceeding, including before a grand jury, the holder of the privilege may not be compelled to give testimonial evidence unless he or she has waived the privilege or been given immunity. Because of its historical development and justifications, the scope of the Fifth Amendment privilege is significantly greater than the strict wording of the privilege, that “no person ... shall be compelled in any criminal case to be a witness against himself.”
Origins in English History. The privilege against self-incrimination is the result of over 400 years of English history during which compulsory self-incrimination was significantly involved in the struggle by the Crown to wrest control of the state from the church, the conflict between common law and ecclesiastical and civil law, and, finally, the ultimate conflict between the individual and the state.
1236: Incriminatory Questions under the “Oath Ex Officio.” The issue first arose in a significant fashion in 1236 when the church in England began requiring that people answer incriminatory questions under what was to be known as the oath ex officio, at first to inquire into the morality of individuals and then, more importantly, as a critical tool in the effort to stamp out heresy.
1600s: Issuance of Writs against Use of the Oath. By the early 1600s, the impropriety of requiring a person to testify against himself or herself was repeatedly urged, based in large part on either interpretation or misinterpretation of an old Latin maxim, and the common law courts often issued writs against the Crown’s ecclesiastical court’s use of the self-incriminatory oath.
1637: John Lilburne’s Refusal to Take the Oath. In 1637, John Lilburne, charged with shipping seditious books into England, was turned over to the Crown’s major prerogative court—the Star Chamber—for prosecution. Lilburne refused to take the oath ex officio and in the process became a public hero and a symbol of resistance to what was viewed as oppression by the Crown. As a result, the self-incriminatory oath was abolished in Parliament in 1641. Curiously enough, Lilburne was later tried by Oliver Cromwell for sedition. At trial, Lilburne refused to answer incriminating questions, claiming that his privilege to do so had been previously established, and he was acquitted. Banished from England notwithstanding his acquittal and summarily imprisoned upon his return, Lilburne died in 1657 having successfully made the privilege against self-incrimination a basic right of the English people.
Development of the Privilege in the United States. Because of the different histories of the various American colonies, there were a number of different approaches to the privilege against self-incrimination in the formative years of the United States. By the time of the Revolution, however, a number of states, including Virginia, had adopted the basic privilege. The privilege itself was, of course, enshrined in the Fifth Amendment to the United States Constitution. In its original formulation, the privilege, as drafted by James Madison, was: “nor shall [he] be compelled to be a witness against himself.” At the request of John Laurence of New York, the present limitation to “any criminal case” was added.
This information is derived from the upcoming 2013 edition of the Virginia CLE® deskbook Defending Criminal Cases in Virginia, newly updated through the 2013 session of the General Assembly.
How do you plan for depositions? (Expand/Collapse)
September 3, 2013
Sequencing. No rule requires the plaintiff to be deposed before the defendant or for depositions to follow written discovery. Generally, the parties may sequence discovery in any manner they elect. Give some thought to whether you want key witnesses deposed out of the gate before they are thoroughly prepared and aware of your case or near the end of discovery when you’ve learned more.
The Home Court. You may feel more comfortable in your own office taking depositions, but keep in mind that if you take a deposition of your adversary in his facility, you may learn something from the building, from corporate messaging on the walls, or even from the books in his conference room. The deponent may also have more ready access to his materials and documents there.
Formulate a plan:
This information is derived from the seminar materials for the Virginia CLE® online seminar Depositions 101: Exploring the Basics.
- What do you want to get out of this witness? How are you going to get it?
- Is there anything critical you need from this witness? For example, will this witness ultimately be needed to provide an evidentiary foundation or to give testimony about an element of a claim or defense? If so, you need to be dogged about obtaining this information.
- In discovery depositions, the witness should be doing most of the talking. The attorney should be asking open-ended questions to gain information, and then exploring the information learned even further. The attorney should constantly be asking “why?”
- End areas of inquiry with a catch-all, such as—“have we discussed the entirety of your knowledge about this incident?” “Is there anything else we haven’t talked about?” These questions may not always elicit an additional response, but you’ll often be surprised by some of the additional information you get.
- Ask about others with knowledge of the subject matter—for instance, if the witness states he doesn’t know the answer to a question, ask whom he would go to in his company to find the answer.
- For depositions that may need to be used at trial—figure out questions beforehand. The attorney needs to craft questions that are not objectionable. Otherwise, critical parts of the deposition may not be usable at trial.
Employee or independent contractor? (Expand/Collapse)
August 23, 2013
Why Would Employers Misclassify Employees as Independent Contractors?
Employers misclassify employees as independent contractors for a host of reasons. An employer who misclassifies an employee as an independent contractor does so attempting to avoid the costs associated with employment, such as:
- paying minimum wages
- paying overtime;
c. paying the payroll tax (5.75% or less in VA);
- paying worker’s compensation;
- paying unemployment;
- paying social security;
- offering or subsidizing employee health benefits;
- offering paid leave; and
- offering Federal Family and Medical Leave Act (FMLA) unpaid leave.
It is more expensive to employ employees rather than hire independent contractors, and misclassification eliminates a lot of filings and expenses that employers would prefer to avoid if possible.
What Is the Downside?
Under the Fair Labor Standards Act (FLSA), employees may file a private action against employers who fail to pay them properly. Virginia’s Wage Acts do not authorize private actions, save for overtime actions initiated by certain law enforcement personnel under Va. Code § 9.1-700 et seq. See the Virginia Payment of Wage Law, § 40.1-29, and the Virginia Minimum Wage Act, § 40.1-28.8 et seq. Claims are instead processed by the Virginia Department of Labor and Industry. Any investigation or relief is discretionary. As for the Minimum Wage Act, any employee covered by the FLSA is specifically exempted from the state statute’s coverage. § 40.1-28.9(12).
The federal act provides for liquidated damages, which an employee is entitled to receive if he or she brings a successful claim. The liquidated damages are defined by the FLSA as being double the unpaid wages due to the employee. Thus, if an employee is awarded $10,000 in unpaid wages, he or she may be entitled to get an additional $10,000 as liquidated damages, bringing the total recovery to $20,000. These damages are essentially awarded instead of lost interest.
Good Faith Exception
An employer can avoid paying liquidated damages only if it shows that it acted in good faith and that it had a reasonable basis to believe its practices complied with the law. “Good faith” has a special meaning under the FLSA, and it requires that employers have made specific investigation into the application of the FLSA to the particular situation.
Attorney’s Fees and Costs and IRS Penalties
The statutory remedy provides for an award of reasonable attorney’s fees and costs for a prevailing employee, and this award can often far exceed the unpaid wage award to the employee. Moreover, the IRS may assess penalties for employee misclassification stemming from an employer’s nonpayment of federal employment taxes and failure to withhold income taxes. See, e.g., http://www.irs.gov/businesses/small/article/0,,id=99921,00.html.
Court Guidance on Classification of Independent Contractors
The Fourth Circuit addressed the issue of who is properly an employer under the FLSA in Schultz v. Capital International Security, Inc., 466 F.3d 298 (4th Cir. 2006). In Schultz, the Fourth Circuit clearly laid out the analysis that should be followed in cases where there is any question as to whether an employment relationship exists under the FLSA:
An employee is defined as “any individual employed by an employer,” § 203(e)(1), and an “employer” includes “any person acting directly or indirectly in the interest of an employer in relation to an employee,” § 203(d). In addition, the Act “defines the verb ‘employ’ expansively to mean ‘suffer or permit to work.’” Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992) (quoting 29 U.S.C. § 203(g)). These definitions broaden “the meaning of ‘employee’ to cover some [workers] who might not qualify as such under a strict application of traditional agency [or contract] law principles.” Id. In determining whether a worker is an employee covered by the FLSA, a court considers the “economic realities” of the relationship between the worker and the putative employer. Henderson v. Inter-Chem Coal Co., 41 F.3d 567, 570 (10th Cir. 1994) (citing Bartels v. Birmingham, 332 U.S. 126, 130, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947)).
The focal point is whether the worker “is economically dependent on the business to which he renders service or is, as a matter of economic [reality], in business for himself.” The emphasis on economic reality has led courts to develop and apply a six-factor test to determine whether a worker is an employee or an independent contractor. The factors are (1) the degree of control that the putative employer has over the manner in which the work is performed; (2) the worker’s opportunities for profit or loss dependent on his managerial skill; (3) the worker’s investment in equipment or material, or his employment of other workers; (4) the degree of skill required for the work; (5) the permanence of the working relationship; and (6) the degree to which the services rendered are an integral part of the putative employer's business. Herman v. Mid-Atlantic Installation Servs., Inc., 164 F.Supp.2d 667, 671 (D.Md. 2000). These factors are often called the “Silk factors” in reference to United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947). No single factor is dispositive; again, the test is designed to capture the economic realities of the relationship between the worker and the putative employer.
This information is derived from Virginia CLE®’s 22nd Annual Employment Law Update Seminar Materials.
Why are limited liability companies used so frequently? (Expand/Collapse)
August 5, 2013
Flexible Starting Date. Under the Virginia Limited Liability Company Act, an LLC is formed by filing articles of organization with the Virginia State Corporation Commission (SCC). Virginia Code section 13.1-1010 permits one or more persons to file the articles of organization but does not require that these persons be members of the LLC after it is formed. Many attorneys who organize LLCs sign the articles of organization themselves. The Act does not require a Virginia LLC to have any members at the time of formation, so a Virginia LLC can be organized and kept “on the shelf” before beginning operations. While there is no express statutory provision in the Act providing for a “shelf” LLC, this conclusion is based on the deletion in the Act of the requirement for members from the definition and the dissolution provisions and the inclusion of a number of provisions addressing how action is taken in an LLC that has no members.
Qualifications of Members. The Act does not impose any qualifications on becoming a member of an LLC. Under the Act, an individual, estate, corporation, unincorporated association, business trust, partnership, other trust, or governmental entity may become an LLC member. Section 13.1-1002 of the Virginia Code contains the definition of a “member” and a “person” for purposes of the Act. The LLC in this respect contrasts with another popular entity that enjoys pass-through treatment for income tax purposes, the Subchapter S corporation. Corporations (other than 100-percent S corporation parents), partnerships, other entities, most trusts, and nonresident aliens cannot be shareholders of an S corporation. See I.R.C. 1361. Because it allows ownership by business and other entities, the LLC is often used in joint ventures among businesses, as well as by investment entities such as private equity and hedge funds.
Contributions and Interests. The Act has very flexible rules about contributions by members in exchange for their membership interests. Contributions may be in cash, property, or services rendered. In addition, a promissory note or any other binding obligation to contribute cash or property or to perform services is recognized as a valid contribution. A contribution can be conditioned on the happening of a future event. For example, a required capital contribution could be conditional on the LLC obtaining a commitment for bank financing or identifying an acquisition target.
An LLC may admit a person as a member and issue a membership interest to that person without that person either making a contribution or being obligated to do so. The Act also does not prohibit an LLC from establishing through its articles of organization or operating agreement one or more classes of membership interests with different economic rights, such as distribution rights and rights to net assets on liquidation of the LLC. For example, venture capital and “angel” investors often require they be issued “preferred” membership interests with distribution and liquidation rights to the founders’ “common” membership interests.
This information is derived from the 2012 edition of the Virginia CLE® deskbook Limited Liability Companies in Virginia.
What are the Virginia discovery rules regarding electronically stored information? (Expand/Collapse)
August 1, 2013
Overview. Virginia Rule 4:8 states that, in responding to interrogatories, if the answer can be found from business records, a party may specify “electronically stored information” (ESI) in addition to other documents from which the requesting party can locate the requested information with substantially the same effort as the producing party. With respect to ESI, Rule 4:8 requires that such information “be made available in a reasonably usable form or forms.”
Form of Production. Amended Virginia Rule 4:9(a) similarly reflects that ESI may be requested for production in discovery from parties, moving portions of the former rule relating to non-parties into new Rule 4:9A. The text of Rule 4:9 mirrors provisions found in Federal Rule of Civil Procedure 34, so federal court interpretations of that rule may be helpful to Virginia practitioners. The party requesting the production of ESI may specify the form or forms in which it desires the information to be produced. In receipt of a request for ESI, the responding party may object to the requested forms of production. If such an objection is made, or if the request did not specify the desired form of production, then the responding party must specify in its response the form in which it intends to produce the ESI. This is an affirmative duty to disclose the form of intended production. Virginia Rule 4:9(b)(iii)(B) incorporates Virginia Rule 4:1(b)(7) and its provision for the allocation of production costs in the event that requested ESI is determined not reasonably accessible because of undue burden or cost. Rule 4:9(b)(iii)(B)(2) requires that, if a request does not specify the form or forms in which ESI should be produced, the producing party must produce such information as it is ordinarily maintained, if it is reasonably usable in that manner, or in another form that is reasonably usable. A party is not required to produce ESI in more than one form.
Requests from Non-Parties. Virginia Rule 4:9A reflects the provisions and intent behind Federal Rule of Civil Procedure 45 and addresses production of documents, tangible things, and ESI from non-parties through a subpoena duces tecum. As in Rule 4:9, the party issuing the subpoena may specify the form in which any ESI should be produced. A non-party receiving a subpoena for ESI may move to quash or modify the subpoena or the specified production form in which the discovery is sought if compliance with the subpoena would otherwise be overly burdensome or expensive. The court may conditionally deny a motion to quash if the requesting party advances some or all of the costs of compliance to the producing non-party. Rule 4:9A(c)(2)(A) also contains identical provisions as those in Rule 4:1(b)(7) regarding the re-allocation of reasonable costs and the permissible forms for production of ESI.
This information is derived from the new 2013 edition of the Virginia CLE® deskbook Civil Discovery in Virginia.
What is a “no-look” fee in a Chapter 13 bankruptcy case? (Expand/Collapse)
July 24, 2013
For attorneys who handle only one or two Chapter 13 cases at a time and routinely track time, they often don’t understand the need for consistent no-look flat fees. But counsel who handle even a small volume of cases understand that the systems and staff necessary to efficiently and properly process and handle numerous Chapter 13 cases require efficiency which is much better served through a no-look fee.
No-look fees improve the efficiency of the bankruptcy courts in general. As Judge Anderson wrote in In re Clark, “No-look fees are also necessary for efficiency reasons. If no-look fees were not used, courts would be required to monitor fee applications. Doing so would consume an inordinate amount of court time. During 2010 alone, 1481 Chapter 13 petitions were filed with the Clerk of the Court in the Lynchburg Division. If the court could review and process one fee application every 30 minutes, monitoring fees would consume no less than 92 days per year, or 35% of the court’s time.” In re Clark, 2012 Bankr. LEXIS 4842 (Bankr. W.D. Va. March 8, 2012), aff’d, Stephens, Boatwright, Cooper & Coleman, PC v. Beskin, 2012 U.S. Dist. LEXIS 147453 (W.D. Va. Oct. 12, 2012).
What Are the Local Practices in Virginia’s Bankruptcy Courts?
In the Western District of Virginia no local rules address limitations on fees. However, the Western District has an unwritten rule that a presumptive no-look fee is approved if less than $2,750.00. The unofficial presumptive no-look fee following BACPA was $2,500.00, and it inched to $2,750.00 about three years ago. The courts do allow post-petition fees upon application, but amounts vary based on divisions and judges. Additionally, the base no-look fee can vary according to division and trustee. The Western District had 8,191 total active Chapter 13 cases as of Jan. 1, 2012 (Resource: US Trustee Audit Data).
In the Eastern District, Virginia Standing Order 08-1 established a cap of $3,000.00 as the standard for legal services as a no-look flat fee and allows an additional $300.00 toward expenses in Chapter 13 cases. The courts do allow supplemental fee applications for post-confirmation representation and have set no-look fees for a variety of matters. The fees, although higher than the Western District’s even now, have not been raised since March of 2008. The Eastern District had 23,294 total active Chapter 13 cases as of Jan. 1, 2012.
Summary of Recent Virginia Cases
Application of Factors Under 11 U.S.C. § 330 and Johnson
Stephens, Boatwright, Cooper & Coleman, PC v. Beskin, 2012 U.S. Dist. LEXIS 147453 (W.D. Va. Oct. 12, 2012). Chapter 13 counsel appealed a bankruptcy court’s decision on their supplemental fee application for services rendered in a bankruptcy case. Counsel requested $9,572.50 in attorney fees and $429.00 in costs. The bankruptcy court had determined that the no-look fee of $2,750.00, adjusted upward by $250.00 would be appropriate. The district court held there was nothing improper about the bankruptcy court’s reliance on the no-look fee, and it did not give the no-look fee a disproportionate amount of weight in its analysis. The bankruptcy court applied the relevant 11 U.S.C.S. § 330 and Johnson factors and as such, the lower court’s decision was affirmed.
Hourly Rate in Motion to Sell and Adversary Proceeding
Goodbar v. Beskin, 2013 U.S. Dist. LEXIS 42675 (W.D. Va. Mar. 26, 2013). The district court upheld the bankruptcy court’s decision limiting fees for a Motion to Sell and Adversary Proceeding and reducing a requested hourly rate from $450.00 to $250.00 per hour, given experience and skill of counsel in the matter at hand.
Excessive Attorney Fees and Expenses Under Agreement for Prepetition Attorney Fee and Hourly Billing
In re Slater, 2011 Bankr. LEXIS 5525 (Bankr. W.D. Va. Sept. 6, 2011). The debtors filed a Chapter 13 petition and schedules which disclosed that the debtors’ counsel had received $2,500.00 from the debtors prepetition and that counsel had agreed to accept $300.00 per hour for legal services rendered. Counsel later filed a motion for supplemental compensation seeking additional fees in the amount of $3,950.30 and expenses in the amount of $266.70. Despite the standard no-look fee used in the Western District, counsel sought compensation on the basis of the lodestar method. In reviewing the case, the Court noted that as of the date of filing, the standard no-look fee was $2,500.00, an amount that included expenses such as copying, etc. The Court noted the requested hourly rate at 300.00 per hour was significantly more than the court would allow and that the fee was excessive for the applicant’s experience. Upon review of the application and disallowance of entries or reduction in their value, the court concluded that the no-look fee of $2,500.00 would be appropriate.
Partial Disallowance of Expenses
In re Wyche, 425 B.R. 779 (Bankr. E.D. Va. 2010). The Boleman Law Firm filed applications for compensation for reimbursement for expenses in the amount of $655.71 and $435.63, above the $3,000.00 no-look fee approved in the Eastern District of Virginia. After a thorough review of the applications and detailed testimony regarding the office procedures and necessities of certain copies, the Court approved expenses reimbursements in the amount of $536.31 and $338.54, ruling that a portion of the cost sought to be recovered was not necessary within the meaning of 11 U.S.C. § 330.
This information is derived from The Dirty Dozen: 12 Hot Topics in Chapter 13 Bankruptcy Practice Seminar Materials, published by Virginia CLE®. The program is also available as an online seminar.
What creates “articulable suspicion” of an attempt to avoid a roadblock? (Expand/Collapse)
July 15, 2013
A Hunch Isn’t Enough
The police frequently will post a police vehicle in a location in front of a roadblock to stop vehicles that take action to avoid the roadblock. A driver confronted with a roadblock may execute legal driving maneuvers that result in reversing the driver’s direction without providing articulable suspicion to stop. Virginia courts have opined that the reasons for a driver to make such maneuvers “are legion in number.” Bass v. Commonwealth, 259 Va. 470, 525 S.E.2d 921 (2000). In Bass, all the officer was able to articulate concerning what the driver intended was a “hunch.” Likewise, the action of the vehicle in avoiding the roadblock by a legal right turn into a dead-end street was not conduct justifying a detention upon articulable suspicion. Murphy v. Commonwealth, 9 Va. App. 139, 144, 384 S.E.2d 125, 128 (1989).
Slowing Down and Stopping on Approach
But other suspicious conduct has been held to rise to the level of articulable suspicion. The officer must be able to state a basis for a reasonable suspicion that the driver was trying to avoid the roadblock. Commonwealth v. Wells, Rec. No. 1869-06-3 (2007). This unpublished opinion of the Commonwealth’s pretrial appeal on a suppression motion gives some insight into what evidence the police officer must give in order to justify the stop. For example, a stop was upheld in a case where an officer testified that, as the defendant’s car got more or less directly in front of the officer’s, the car seemed to slow down and eventually came to a stop. The car stayed in the road a second or two, the driver looking at the checkpoint, and then took a left into a private driveway. The driveway was semicircular with an entrance and an exit. The officer testified that, other than an apparent attempt to evade the checkpoint, he did not see the driver commit a violation, nor did he observe an excited or panicked look on the defendant’s face. The court held that the circumstances observed by the officer afforded him a reasonable suspicion that the defendant was attempting to evade the roadblock. Lovelace v. Commonwealth, 37 Va. App. 120, 554 S.E.2d 688 (2001).
Making an Abrupt U-Turn and Driving Away
The stop is lawful if the avoiding motorist made an abrupt U-turn within 100 to 150 feet of the roadblock and drove away. Stroud v. Commonwealth, 6 Va. App. 633, 370 S.E.2d 721 (1988).
Turning Into a Driveway “in a Hesitant Fashion” Within View of the Roadblock
A driver who, within view of a roadblock, turned into the driveway of a private residence “in a hesitant fashion” while watching the police provided articulable suspicion for a lawful stop. Bailey v. Commonwealth, 28 Va. App. 724, 508 S.E.2d 889 (1999).
This information is derived from the 2012 edition of the Virginia CLE® deskbook Defense of Serious Traffic Offenses in Virginia.
May an agent under a power of attorney make gifts of the principal’s property? (Expand/Collapse)
June 27, 2013
If the DPOA includes a statement that the agent may “do all acts that a principal could do” provision, the agent “shall have the authority to make gifts in any amount of any of the principal’s property to any individuals or to organizations described in §§ 170(c) and 2522(a) of the Internal Revenue Code or corresponding future provisions of federal tax law, or both, in accordance with the principal’s personal history of making or joining in the making of lifetime gifts.” See § 64.2-1622(H).
Principal’s Objectives or Best Interests Control
Section 64.2-1638 allows an agent to “make a gift of the principal’s property only as the agent determines is consistent with the principal’s objectives if actually known by the agent and, if unknown, as the agent determines is consistent with the principal’s best interest based on all the relevant factors, including:
How About Gifts to the Agent?
- The value and nature of the principal’s property;
- The principal’s foreseeable obligations and need for maintenance;
- Minimization of taxes, including income, estate, inheritance, generation-skipping transfer, and gift taxes;
- Eligibility for a benefit, a program, or assistance under a statute or regulation; and
- The principal’s personal history of making or joining in making gifts.”
Further, even if there is a gift power in the DPOA, the permissible donees do not include the agent unless “self-dealing” is explicitly permitted for the agent. See §§ 64.2-1622, 64.2-1638.
Risks and Benefits
There are risks and benefits to such a gifting clause. For example, giving the agent the authority to make gifts can be an invitation for abuse. But, precluding a gift clause would prohibit any type of public benefits planning that requires gifting or divesting of the assets of the principal.
Many gift clauses in the DPOA are used in order to deal with estate tax questions. For example, the gifting clause may limit the gifts to the annual exclusion amount. These clauses preclude gifting that would exceed the annual exclusion amount and gifting of “future interest” gifts, such as transfers with retained life estates. If the lifetime exemption will absorb any gifts without generating a tax liability to the principal, and the principal may need to qualify in the future for public benefits, then the drafting attorney needs to consider an unlimited gifting power.
Gifting powers are sometimes limited in order to provide tax benefits to the donor or his or her estate. In the Medicaid context, there may not be any tax benefits, but there may be tax detriments such as the capital gains tax arising from carry-over basis.
The Donor’s Past Gifting Pattern
Some gifting powers limit the gifting to the donor’s past pattern. Again, in terms of Medicaid, if the donor limited him or herself to small holiday or birthday gifts over time, this clause may preclude divestiture of assets.
What if the Gift Clause Is Limited to All Persons of the Same Generation?
The gift clause is occasionally limited to all persons of the same generation. But, if the “bad” child is in the same generation, a gift to that person may not be desirable. If a child of the same generation is already receiving public benefits or is very likely to receive public benefits, then the gift could have a detrimental impact on the child’s ability to qualify for such benefits.
This information is derived from the seminar materials for the Virginia CLE® telephone seminar Top 10+ Mistakes Non-Elder Law Attorneys Make.
Can this purchase transaction be closed? (Expand/Collapse)
June 17, 2013
You are closing a purchase transaction involving real estate owned by a decedent. Mary Smith owned the subject property in her own name and died intestate in 2009. Mary’s mother, Matilda, qualified as administrator of the estate and recorded a list of heirs, indicating that she was Mary’s sole surviving heir. Matilda is now preparing to sell the real estate, and you discover that Mary was married to John Dillinger in 2007, and that the parties had been involved in bitter domestic issues resulting in a separation. However, the parties had never divorced. You further discover that John and Mary signed a prenuptial agreement prior to their marriage, and that no one knows of John’s whereabouts. You are reluctant to accept a deed from Matilda as Mary’s administrator, but Matilda’s counsel provides a copy of the prenup which evidences that Mary owned the property since 2005, and advises that “only an idiot” would refuse to close the transaction with a deed from Matilda.
What do you do?
Refuse to close. The prenuptial agreement is a contract between the parties only: the parties may have intended that John would have no interest in property that Mary purchased before their marriage under the terms of their prenuptial agreement, but trying to force a perceived correct solution (based on the intent of the parties) is not a viable remedy. When Mary died intestate, her property passed to her spouse pursuant to Virginia Code § 64.2-200, vesting title in John. John either has to sign the deed or a court has to divest him of title to the property pursuant to proper notice and a hearing.
The scenario is loosely based on Austin v. City of Alexandria, 265 Va. 89 (2003). James M. Duncan III had established a 1993 Living Trust, and conveyed valuable real estate to himself as trustee. In August of 1999, Duncan executed a second deed purporting to convey the property previously conveyed to the Living Trust to the “James M. Duncan, III, Trustee for the J. M. Duncan, III Charitable Remainder Unitrust.” However, although the subsequent deed was signed by Duncan, it did not specify the capacity in which he executed it. In October of 1999, Duncan in his capacity as trustee of the Unitrust, contracted to sell the property for $2,200,000. Duncan died in 2000, and William Austin became the sole successor trustee of the Living Trust. In the present case, Austin sought a declaratory judgment that he was vested with legal and equitable title to the property as trustee of the Living Trust. The court agreed. Because Duncan never effectively caused the reversion of the title of the property to himself individually after 1993, he did not convey the title of the property to the trustee of the Unitrust in 1999. We can all argue Duncan’s intent, but that does not obviate the need for proper documentation.
This hypothetical is derived from Virginia CLE®’s 31st Annual Real Estate Practice Seminar Materials.
When must counsel raise an objection to expert opinion not properly presented? (Expand/Collapse)
June 10, 2013
It is not usual for the outcome of complex cases to be driven by expert witnesses, and there is an important issue to consider. Experts are required to state their opinions “to a reasonable degree of probability” in their fields. If an expert testifies without these “magic words,” has the proponent made out a suitable case? This issue arose in a medical-malpractice context in Bitar v. Rahman, 272 Va. 130 (2006). Attorneys who handle these cases know that the plaintiff must ordinarily have expert opinions on standard of care and on causation, and this plaintiff offered such a witness, but omitted the magic words during direct examination.
The defendant’s lawyer recognized the omission, and when the plaintiff rested the next day, the defense moved to strike, since the plaintiff hadn’t provided suitable evidence to support the claim. The trial court ruled that the objection came too late, and the Supreme Court affirmed that ruling:
[A]n objection based on the fact that a medical expert’s opinion is not stated to a reasonable degree of medical probability, lacks an adequate factual foundation, or fails to consider all the relevant variables challenges the admissibility of evidence rather than the sufficiency of evidence. As this Court, however, has stated, “[a]n objection to the admissibility of evidence must be made when the evidence is presented. The objection comes too late if the objecting party remains silent during its presentation and brings the matter to the court’s attention by a motion to strike made after the opposing party has rested.”
272 Va. at 139.
In order to avoid this trap, the practitioner must object when the challenged evidence is offered instead of waiting until the motion-to-strike stage. Keeping silent waives the issue for appeal. Of course, raising the issue when the evidence is offered may spoil the objection, since the forgetful opposing lawyer may simply add, “Dr. Johnson, do you hold these opinions to a reasonable degree of medical probability?” But the Supreme Court won’t allow counsel to prevail by saving the objection until the close of the evidence; it rejected exactly such an argument in Bitar. Id. at 140, n.9.
This information is derived from Virginia CLE®’s Preventing Nightmares: Preserving Issues and Avoiding Waiver — Trial Techniques That Lead to Successful Appeals Seminar Materials. This program is available for purchase as an online seminar (which includes a downloadable audio version).
What are the disadvantages of a buy-sell agreement for a family-owned business? (Expand/Collapse)
June 3, 2013
Estate Cannot Retain Business Interest. If shareholders agree to enter into a buy-sell agreement, by definition the shareholder’s estate will not include the business interest itself but only the value thereof. From a shareholder’s perspective, the estate could retain the business interest and receive a value for that interest if, instead of entering into a buy-sell agreement to be funded by life insurance, each co-owner obtained the desired amount of life insurance on his or her own life, and made his or her spouse the beneficiary, or assigned the ownership of the policy to an irrevocable life insurance trust so as to exclude the proceeds from the estate. When the co-owner dies, his or her beneficiaries hold both the business interest and the insurance proceeds. The primary problem associated with this approach is that the co-owners have not fixed the valuation of their individual business interests for estate tax purposes. In addition, the surviving owners may be uncomfortable with the fact that the decedent’s beneficiaries now own a portion of the business.
Owner’s Lifetime Rights May Be Restricted. One purpose of entering into a buy-sell agreement is to fix the valuation of the business interests for estate tax purposes. But in order for this valuation to be binding on the IRS, the owner’s lifetime right to transfer his or her ownership in the business must be restricted. The buy-sell agreement must provide that no owner can sell his or her interest without first offering that interest to the corporation or the co-owners at a price not greater than the price fixed at the death of an owner.
Price May Become Unrealistic. An additional disadvantage of buy-sell agreements is that even if the agreement sets a realistic purchase price, that price may become unrealistic at the time of the owner’s death based on changes in the company, the industry, the economy, or other factors. In addition, the parties to the agreement may not be able to amend the agreement because they may not be able to agree on a new fixed price.
Liquidation Is Precluded. In some circumstances, business owners may prefer to liquidate the business, rather than have a buy-sell agreement where one owner must buy out the others. For example, if a business was begun by two individuals who were both indispensable to the business, and one dies, the remaining owner may want to have the option to liquidate the business.
Nevertheless, an owner must be sure that liquidation is desired, because the tax consequences associated with liquidation can be significant. If the corporation sells its assets at a gain, the corporation is taxed on that gain, and then the surviving shareholder will, in reality, be doubly taxed because the value distributed to the shareholder in excess of his or her stock basis will be taxed as gain at the individual shareholder level. The decedent’s estate does not recognize further gain on the distribution of the assets of the estate, because at death the stock receives a fair market value basis.
Family Members Cannot Retain Business Interest. A buy-sell agreement would not be appropriate for an owner who wishes to allow his or her business interest to continue for the benefit of a family member. Instead of entering into a buy-sell agreement, an owner in this situation could give or sell the interest in the business to the family member either during the owner’s lifetime or at death.
Minority Discounts on Estate Tax Return May Be Precluded. If the decedent held a minority position in the corporation, the executor is often able to argue successfully for a discount in the stock value for estate tax purposes. The formula used to establish value for buy-sell purposes rarely takes this into account. Thus, in the family situation, the business owner’s estate may actually be harmed by the buy-sell valuation.
This information is derived from the just-published 2013 edition of the Virginia CLE® deskbook Estate Planning in Virginia.
Are domestic property settlements dischargeable in bankruptcy? (Expand/Collapse)
May 29, 2013
Under the Bankruptcy Code, certain debts are excepted from discharge, among them domestic support obligations, under 11 U.S.C. § 523(a)(5). But what about property settlement obligations? They are nondischargeable in Chapter 7 and Chapter 11 cases. The situation is somewhat different in Chapter 13 cases.
Chapter 7 and 11 Cases
The 2005 Amendments to the Bankruptcy Code by BAPCPA identified certain property settlement obligations as an exception to discharge in Chapter 7 and 11 cases. Such obligations arise from divorce or separation or pursuant to a property settlement agreement, but are not in the nature of support.
The exception is codified in § 523(a)(15), which now provides an exception to the discharge for a debt “to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit.” 11 U.S.C. § 523(a)(15).
Prior to the 2005 Amendments, § 523(a)(15) contained a balancing test, under which a debtor could discharge property obligations under a property settlement agreement if the debtor could show that he or she did not have the ability to pay the obligation, or if the discharge of the debt would provide a benefit to the debtor that would outweigh the detrimental consequences to the spouse.
BAPCPA eliminated the balancing test, and such property obligations, even though not technically “domestic support obligations,” are nondischargeable in Chapter 7 and Chapter 11 bankruptcy cases so long as such obligations satisfy the requirements of § 523(a)(15).
Property Settlement Obligations May Be Dischargeable in Chapter 13 Unless Clearly Intended to Be “Support”
Property settlement agreements are not excepted from discharge in Chapter 13 as they are in Chapter 7 and Chapter 11 bankruptcy cases. See 11 U.S.C. § 1328(a)(2). Accordingly, pure property settlement obligations may be discharged in a Chapter 13 plan, even though domestic support obligations that are excepted from discharge pursuant to § 523(a)(5) are listed as nondischargeable under § 1328(a)(2).
Section 523(a) includes two separate provisions dealing with debts arising out of divorce. Section 523(a)(5) covers domestic support obligations, which must be “in the nature of alimony, maintenance, or support,” while § 523(a)(15) covers debts other than domestic support obligations that are due to a spouse, former spouse, or child of the debtor and that arise during the course of a divorce, usually referred to as property settlements.
Chapters 7, 11, 12, and 13 each dictate which types of debts are nondischargeable under their respective chapters. Under Chapters 7, 11, and 12, any type of debt listed in § 523(a) is nondischargeable, so both domestic support orders and divorce-related property settlements are nondischargeable. Chapter 13, however, makes only some types of § 523(a) debts nondischargeable, including § 523(a)(5) domestic support orders, but not including other types of divorce debts under § 523(a)(15).
How Do Courts Determine Whether a Debt Is a Property Settlement or a Nondischargeable Domestic Support Obligation?
The key inquiry in classifying the debt is whether the parties intended at the time of the divorce for the debt to be in the nature of support. Tilley v. Jessee, 789 F.2d 1074, 1078 (4th Cir. 1984); In re Pagels, 2011 WL 577337, at *9; In re Crosby, 229 B.R. 679, 681 (Bankr. E.D. Va. 2001). This analysis is done on a case by case basis and tends to be very fact specific.
Various factors are utilized by courts in the Fourth Circuit in making this determination, with a focus on the following: “(1) the language and substance of the agreement; (2) the financial situation of the parties at the time of the agreement; (3) the function served by the obligation at the time of the agreement; and (4) whether there is any evidence of overbearing at the time of the agreement.” Nicolae v. Mirea (In re Mirea), Adv. No. 11-1294, 2012 WL 3042239, at *6 (Bankr. E.D. Va. July 25, 2012) (citing In re Pagels, 2011 WL 577337, at *10); Catron v. Catron (In re Catron), 164 B.R. 912, 919 (E.D. Va. 1994), aff’d, 43 F.3d 1465 (4th Cir. 1994) (noting that these factors make up the “unofficial” test for the intent inquiry and noting that the Fourth Circuit has not ruled out the use of other formulae).
This information is derived from Virginia CLE®’s 29th Annual Advanced Family Law Seminar Materials.
What does “portability” mean under the new federal tax laws? (Expand/Collapse)
May 20, 2013
Changes to the Law
Prior to 2011, each spouse was allowed to use his or her own applicable exclusion amount, but unless an estate plan was drawn to protect any part that was not used during the lifetime of the first spouse to die, it was simply lost. Recent changes to the federal estate tax statutes created an option allowing the “portability” of the unified credit between the spouses. Portability permits a surviving spouse to claim the unused portion of the predeceased spouse’s applicable exclusion amount and add it to the surviving spouse’s unified credit. The unified credit now allows each person to shelter up to $5.25 million (as indexed for inflation in 2013) combining both testamentary and lifetime gifts. Portability of the estate tax exemption offers useful planning opportunities after the death of the first spouse to die. It enables both spouses’ estate tax exemptions to be fully used and achieves a step-up in basis for the combined assets when the second spouse dies.
Portability does have limitations, however. Its use requires the filing of a federal estate tax return at the first spouse’s death regardless of whether such a filing would otherwise be required. Furthermore, the deceased spouse’s unused estate tax exemption amount is not indexed for inflation and none of the appreciation is sheltered from tax on the second death. Also, the first spouse’s Generation Skipping Tax (GST) exemption is not portable, and portability is not currently available for state estate tax purposes in states that currently impose estate tax. (Virginia currently does not.) Portability of the estate tax exemption permits a surviving spouse to apply the unused estate tax exemption of the first spouse to die to the surviving spouse’s own lifetime or testamentary transfers. The surviving spouse must file a federal estate tax return at the first spouse’s death and calculate the amount of the deceased spouse’s unused exclusion to be transferred. The maximum estate and gift tax rates have increased to 40% beginning in 2013. The GST tax rate, which is keyed to the maximum estate tax rate, is also set at 40%.
One of the challenges to the implementation of the portability regime has been to make it work in the context of multiple marriages. Under current law, portability can no more than double a surviving spouse’s own applicable exclusion and is limited to the unused exclusion of the survivor’s last deceased spouse. Someone who has been widowed more than once can only use the exclusion of the most recently deceased spouse. Furthermore, no one can use the exclusion of a deceased spouse that was acquired by the deceased spouse surviving a predeceased spouse.
This information is derived from the upcoming 2013 edition of the Virginia CLE® deskbook Estate Planning in Virginia, scheduled for release in late May.
What’s ethical (and what’s not) in representing clients in traffic cases? (Expand/Collapse)
May 13, 2013
Test your knowledge of the ethics of representing clients in traffic cases with these hypotheticals:
HYPOTHETICAL #1. You are a great traffic law lawyer and win a lot of cases. In order to attract clients you offer the following fee structure: a very low flat fee, but if the case is reduced to a non-criminal offense, you charge an additional (and much higher) “success fee”; and if you win an acquittal, you charge an additional (and even higher) “success fee.” Clients like this because you have a financial incentive to go for an acquittal and the defense is cheap if you are unsuccessful. Is it ethical?
A. Yes. In fact, this arrangement is preferred because it best aligns the interests of the attorney and the client.
B. No. A lawyer cannot charge contingent fees for criminal fees.
ANSWER: B. (No). Contingent fees in criminal cases are unethical. Rule 1.5 (c).
HYPOTHETICAL #2. You recommend that your client, who is charged with Speeding 78 mph in a 55 mph zone, have her speedometer tested for calibration. A week later she sends you a calibration from a nearby auto repair shop that indicates that the speedometer was off—but in the wrong direction! It was reading 5 miles per hour faster than the actual speed. You point out that this will, obviously, not be a defense. Your client, however, doesn’t give up. She gives you a second calibration report a week later from an out-of-town auto repair shop. This certificate reports that the reading was 5 miles per hour slower than the actual speed. Do you use the new calibration, without presenting the “bad” calibration?
A. Yes. You are not a mechanic. If the second shop is comfortable with their opinion, so are you.
B. No. You cannot shut your eyes to the obvious.
ANSWER: B. (No)—Probably. This is not a clear-cut answer, however. Rule 3.3 (a) (1) says that “A lawyer shall not knowingly make a false statement of fact or law to a tribunal.” Rule 3.3 (a) (2) proscribes failure to disclose a fact when necessary to avoid assisting a criminal or fraudulent act by the client, subject to Rule 1.6. However, Rule 1.6 (c) (2) requires a lawyer to reveal information which “clearly establishes” that the client has perpetrated a fraud upon a tribunal.
The best practice would be to either offer both calibrations or do further investigation to see if the “good” calibration is the correct calibration.
HYPOTHETICAL #3. You have a Reckless Driving case in Fairfax early in the morning and an Arlington DUI case later that morning. This doesn’t concern you because the first case is sure to be a quick plea. Unfortunately, the prosecutor unexpectedly demands a jail sentence—apparently your client urinated on the trooper’s car as he was writing the summons. You didn’t know this fact so you didn’t prepare your client for the possibility of jail. Unfortunately, you cannot get a continuance on this case because it has been continued too many times previously. The prosecutor’s offer is probably consistent with what the judge will do. If you don’t take the offer, you will be late to Arlington—and they show cause late lawyers there! You present the offer to your client and advise him of the judge’s predilections, but he won’t take the offer. Do you ...
A. Seek leave of court to withdraw because the client insists upon a course of conduct that would cause you to violate the ethical rules (i.e., he may get a worse sentence from the judge and you cannot stand to see that happen).
B. Seek leave of court to withdraw because you now have a conflict of interest—your client’s interest in having his trial and your interest in not drawing a show cause order.
C. Try the case as the client insists and have your office contact the Arlington court to explain the circumstances and seek a continuance of that case.
D. Have your office call the Arlington court to say that you are sick—the fear of a show cause is, after all, truly making you nauseous.
ANSWER: C. (Fall on your sword). The decision to plead guilty or defend the case belongs to the client, not the lawyer. Rule 1.2 (a). The lawyer does not violate Rule 3.1 in a criminal proceeding by defending the case so as to require the government to prove every element of the crime. You can defend even a frivolous case. Threatening to withdraw or attempting to withdraw is not proper because there is no good cause for withdrawal as the client has the right to plead not guilty and withdrawal cannot be accomplished without material adverse effect on the client. Rule 1.16.
HYPOTHETICAL #4. A woman from Maine calls you to say that she was charged with Reckless Driving in a rural Virginia county on her way to visit a friend in North Carolina. She was speeding 98 mph in a 55-mph zone. You know that the judge there regularly imposes jail at those speeds. However, if an out-of-state driver fails to appear, he will not issue a capias. Instead, he will do a trial in absence. The woman is most concerned about a possible jail sentence. Can you tell the woman about the court’s proclivities knowing that she will skip the court appearance?
A. Yes. This is a legitimate legal strategy.
B. No. You cannot advise a person to avoid a court appearance.
ANSWER: A. (Let her know her options). Rule 1.2 (c) reads, “A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client ....” Rule 1.2, Comment 6, reads, “... a lawyer may not knowingly assist a client in criminal or fraudulent conduct. There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity.”
HYPOTHETICAL #5. In negotiating your client’s Driving on Suspended case, the prosecutor offers a week in jail. You reject the plea agreement out of hand and tell the prosecutor that you’ll go to trial. You tell your client that the prosecutor “was not offering anything reasonable.” The plea was so outrageous it didn’t even merit repeating to the client. Should the attorney have told his client the plea agreement even though it was outrageous?
A. Yes. A client has a right to know all plea offers.
B. No. This is a strategy question best left to the lawyer.
ANSWER: A. Yes. (Reveal the plea offer). Rule 1.4, Comment 1, reads, “A lawyer who receives from opposing counsel . . . a proffered plea agreement in a criminal case should promptly inform the client of its substance unless prior discussions with the client have left it clear that the proposal will be unacceptable.” However, Rule 1.4, Comment 4 reads, “In some circumstances, a lawyer may be justified in delaying transmission of information when the client would be likely to react imprudently to an immediate communication.” However, it also says, “A lawyer may not withhold information to serve the lawyer’s own interest or convenience.”
HYPOTHETICAL #6. You negotiate a great plea agreement—DUI reduced to Reckless Driving. Part of the agreement mandates that your client enters and complete VASAP. The prosecutor presents the plea to the judge, who accepts the plea and recommended sentence. Upon taking your client to the clerk’s office, the clerk notes that VASAP is NOT required because the judge mistakenly did not check the box on the warrant requiring it. The clerk says that if the box is not checked, it is not required. Your client does not want you to “upset the apple cart.” Do you ...
A. Do nothing and let your client reap this “windfall.” After all, the clerk must know what she is doing.
B. Tell the clerk to put the matter back before the judge so that the judge can correct this obvious error.
C. Tell the prosecutor about the error and let him fix it or not.
D. Tell the clerk that, since the case is now over, that you wish to withdraw from the case.
ANSWER: A—As long as the lawyer did nothing to cause this error, he cannot report it. See Rules 1.2 (c), 1.6, and 3.3 (a); LEO 1400 (1991) and LEO 1622 (1995). Rule 1.6 prohibits, absent client consent, the disclosure of information obtained in the course of representing a client that, if revealed, would be detrimental or embarrassing to the client.
These hypotheticals were presented in DUI Defense in Virginia, originally presented in September 2012, and now available from Virginia CLE® as a USB flash drive video seminar.
When do Supreme Court decisions in criminal cases have retroactive effect? (Expand/Collapse)
April 30, 2013
For nearly four decades, the United States Supreme Court struggled with the problem of whether and to what extent its decisions should be given retroactive effect. For many years, the Court analyzed each case in terms of the purpose to be served by the “new rule,” the extent of law enforcement reliance on old standards, and the effect on the administration of justice of a retroactive application of the new rule. See Linkletter v. Walker, 381 U.S. 618 (1965).
Ultimately, however, the Supreme Court agreed upon a seemingly coherent means of resolving these difficult questions. A “new rule,” even one representing a clear break with the past, will be applied to all decisions, state or federal, not yet final on direct review. Griffith v. Kentucky, 479 U.S. 314 (1987). A “new rule” will not be applied to cases that are final on direct review and are only being collaterally reviewed, subject to two exceptions: a “new rule” will be applied in collateral review proceedings when: (i) the decision places the primary conduct beyond the reach of the criminal law; and (ii) the decision is necessary to guarantee fundamental fairness, “without which the likelihood of an accurate conviction is seriously diminished.” Teague v. Lane, 489 U.S. 288, 311-13 (1989). A decision constitutes a “new rule,” and, thus, will generally be applied only to those cases still pending on direct review, when it “breaks new ground or imposes a new obligation” on the government or when the result was not dictated by precedent existing at the time the defendant’s conviction became final. The states may choose to give broader effect to a “new rule” than is required by the federal Constitution. Danforth v. Minnesota, 128 S. Ct. 1029 (2008).
One example of cases where the decision was given full retroactive effect would be the United States Supreme Court’s right to counsel cases: Gideon v. Wainwright, 372 U.S. 335 (1963), and Argersinger v. Hamlin, 407 U.S. 25 (1972), were given full retroactive effect. Thus, a person incarcerated on the basis of a conviction obtained in the absence either of counsel (when required) or of a valid waiver of counsel is entitled to release. Criminal convictions, however, may have significant collateral consequences, and the collateral impact of an uncounseled conviction has created a variety of problems. In the case of the right to counsel in felony cases, the collateral consequences have been relatively easy to deal with. The Supreme Court has held that a prior uncounseled felony conviction may not be used later for purposes of sentencing under a recidivist statute, nor may it be used as a factor in determining sentencing on a subsequent charge.
This information is derived from the Virginia CLE® deskbook Defending Criminal Cases in Virginia.
What is the difference between “interpreting” and “construing” a contract? (Expand/Collapse)
April 22, 2013
When construing or interpreting any contract, Virginia courts will first attempt to discover the intentions of the parties and then give effect to these objectives. However, they will not implement them if the parties intended their contract to commit a “fraud on the law.”
The Virginia Supreme Court has held that the “polestar for the construction of a contract is the intention of the contracting parties as expressed by them in the words they have used.” It has similarly ruled that the “guiding light in the construction of a contract is the intention of the parties as expressed by them in the words they have used, and [that] courts are bound to say that the parties intended what the written instrument plainly declares.”
Hence, the true intentions of the parties are revealed within the four corners of the contract, and courts will attempt to harmonize conflicting provisions to reflect what the parties themselves had originally intended. Two terms the courts commonly use when examining contracts are “construction” and “interpretation.” The common meanings of these words are quite different, and in theory, this distinction should provide valuable insight into the judicial process.
The word “interpretation” depicts a fairly passive procedure whereby courts give meaning and shape to the contractual language expressing the intentions of each party. In contrast, “the province of construction lies wholly within the domain of ambiguity.” A court thus may take a more active role when “construing” ambiguous contract provisions by examining both the facts and the surrounding circumstances to ascertain the parties’ intentions. See, e.g., Jackson v. Fidelity & Deposit Co., 269 Va. 303, 310, 608 S.E.2d 901, 904 (2005) (“A court has no authority to interpolate words into a will. It is the duty of the court to construe the will which the testator has made and not to speculate as to its intention, or to make a will for him.”).
Recent decisions suggest, however, that this may merely be a matter of semantics, and it is debatable whether “interpretation” or “construction” is the more intensive process. In practice, Virginia courts use the words “interpretation” and “construction” interchangeably to describe a systematic framework of common-law rules. For example, the Court of Appeals of Virginia has referred to the “same rules of construction and interpretation applicable to contracts generally,” while the Virginia Supreme Court has held that when “interpreting” ambiguous real estate contracts, courts will “construe” contracts to sell land by the acre, not by the tract. Circuit courts in Virginia have also used these terms interchangeably.
This information is derived from the Virginia CLE® deskbook Contract Law in Virginia.
Can an unlicensed contractor recover under Virginia’s mechanic’s lien statutes? (Expand/Collapse)
April 15, 2013
Even if a mechanic’s lien claimant has given substantial performance within the terms of the contract in good faith, the lack of licensure is a bar to the suit if the claimant had actual knowledge that a license was required to perform the work.
Section 54.1-1103 of the Virginia Code provides, in pertinent part, that “[n]o person shall engage in, or offer to engage in, contracting work or operate as an owner-developer in the Commonwealth unless he has been licensed or certified under the provisions of this chapter.” The statutes in Title 54.1 governing the licensure of contractors were enacted as an exercise of the commonwealth’s police power. The licensure statutes are in derogation of common law and, under the well-established rule of construction, must be strictly construed. The licensure acts are also penal and, in applying a penal provision or giving effect to its sanctions, strict construction is required.
Section 54.1-1115(C) of the Virginia Code provides that “[n]o person shall be entitled to assert the lack of licensure or certification as required by this chapter as a defense to any action at law or suit in equity if the party who seeks to recover from such person gives substantial performance within the terms of the contract in good faith and without actual knowledge that a license or certificate was required by this chapter to perform the work for which he seeks to recover payment.”
The Virginia Supreme Court and lower courts have consistently held that the critical date for determining whether a contract is unenforceable due to the failure of a contractor to have a license is the date the contract was made. As the Supreme Court noted, the legislative history and the statutory amendments indicate an attempt to strike a balance between protection of the public from unlicensed contractors while ensuring payment for contractors who have performed their contracts but inadvertently violated licensure requirements.
A mechanic’s lien, although a statutory creation, necessarily has its foundation in a contract, and it is a contractor’s performance under the contract that gives rise to the inchoate mechanic’s lien. If the contract underlying the mechanic’s lien is determined to be void due to the failure of the claimant to have a contractor’s license as required under Virginia law, the mechanic’s lien is necessarily void and unenforceable. An unlicensed contractor whose contract has been declared invalid cannot circumvent the licensure statute by seeking recovery under quantum meruit.
However, the regulations of the Board for Contractors and Laws Governing Contractors in Virginia have been revised to provide that a contractor who reinstates his or her license or certificate is regarded as having been continuously licensed or certified without interruption. See 18 VAC 50-22-180.
This information is derived from Virginia CLE’s Real Estate Transactions in Virginia.
What are the differences between nonjoinder and misjoinder? (Expand/Collapse)
April 11, 2013
“Nonjoinder” means that a party has been omitted from the litigation who ought to be joined with an existing party rather than one who should be substituted for a party. Failure to join a necessary party is subject to objection because complete relief cannot be granted unless all necessary parties are before the court. Va. Code § 8.01-7. The court has the power to add or drop parties “as the ends of justice may require.” Va. Code § 8.01-5. Although this may occasionally end the litigation, the court must determine whether the person who is alleged to be a necessary party can be served and made a party to the litigation; if this is not possible, the court has the power to dismiss the matter. Rule 3:12 of the Rules of the Virginia Supreme Court requires a motion to join an additional party to be filed with the clerk within 21 days after service of the complaint and to be served on the party sought to be joined.
Under Rule 3:12(c), courts must consider four factors in making a determination on this objection: (i) whether the absence of the party will prejudice the rights of that party or of those who are already involved in the litigation; (ii) whether the prejudice can be lessened or avoided by protective measures in the judgment such as tailoring the relief to accommodate the parties who are already participating or other measures; (iii) whether any judgment rendered in that party’s absence will be adequate; and (iv) whether the plaintiff will have an adequate remedy if the case is dismissed because of the nonjoinder. Under Rule 3:14, new parties can be added at any stage of the proceedings to cure this defect. Section 8.01-7 states that the court may, by order, direct the clerk to issue process to join the new parties so the matter can be heard.
The mirror image of the failure to join a necessary party is the “misjoinder” of a party who does not actually have an interest in the litigation or who is not properly before the court in the context of the case. This type of objection may be appropriately made when an opposing party cannot bring or participate in the action, when a defendant incorrectly impleads a third party, or, sometimes, when a third party independently attempts to intervene in the matter. This type of objection may be made by motion rather than by demurrer because it is not always a fatal flaw. Misjoinder may also apply to causes of action, and this type of misjoinder should be raised by demurrer. Powers v. Cherin, 249 Va. 33, 452 S.E.2d 666 (1995).
This information is derived from Virginia CLE’s new 2013 edition of Objections: Interrogatories, Depositions, and Trial.
Who has liability for the repetition of defamatory statements? (Expand/Collapse)
April 8, 2013
Those publishing defamatory statements must be concerned about more than just their own statements. In Virginia, as in most states, defamers face liability for a third party’s republication of a defamatory statement that the defamers authorize or that arises as the natural and probable consequence of their original defamation. On the other hand, if a third party makes an independent and unauthorized republication, the third party might face liability, but the original defamer will not.
Those who repeat defamatory statements not only place the original defamer at risk, but they also risk liability themselves. The central analysis depends in large part on whether or not the person who repeats the defamatory statement: (i) cites the original source; and (ii) explicitly or implicitly endorses the truth of the defamatory statement. The first issue involves one of logistics as much as substance. Someone repeating a defamatory statement without citing its source might face liability. Tracing the liability back to the original defamer obviously requires some extrinsic facts to be uncovered in prelitigation investigation or in discovery.
Someone who repeats a defamatory statement without citing its source (or at least mentioning that there is an original source) clearly cannot rely on the argument that he or she was not endorsing the truth of the defamatory statement but was simply accurately repeating what he or she heard. On the other hand, someone making a statement such as “Boss, I think you should know for purposes of management that Fred is passing along unfounded rumors that Mary has embezzled money” clearly can argue that he or she is passing along the defamatory statement without endorsement and for an independent purpose that provides a defense. Thus, determining whether the person repeating the defamation faces liability depends on whether the person explicitly or implicitly endorses the original defamation.
Virginia courts have dealt with several specific situations implicating these basic principles. The original defamer might face liability for a foreseeable media report about the defamation. On the other hand, a plaintiff cannot rely on this principle by pointing to a media report about the plaintiff’s own lawsuit even though the report might repeat the alleged defamation. The Virginia Supreme Court has held that neither the original defamer nor a deponent who repeats the defamation in testimony may be held liable for deposition testimony that repeats an allegedly defamatory statement made after the statute of limitations has run on the original statement, demonstrating the power of the absolute privilege afforded testimony during litigation.
This information is derived from The Virginia Lawyer: A Deskbook for Practitioners (includes the newly published 2013 Supplement).
May an employee suing an employer take work-related documents supporting the employee’s case? (Expand/Collapse)
March 25, 2013
A common scenario on the plaintiff side: plaintiffs who want to take work-related documents with them that support their case. Documents do disappear and defendants may not voluntarily fully respond to similar discovery requests. There is no easy answer.
JDS Uniphase Corp. v. Jennings, 473 F. Supp. 2d 697, 702 (E.D. Va. 2007) (Ellis, J.), involved the interpretation of a confidentiality agreement under California law and whether the plaintiff had misappropriated documents by taking them for use in litigation. The Court held a substantial number of the documents at issue were “proprietary under the meaning of the [proprietary information agreement] between the parties.” Id. at 701. However, the Court recognized that “some cases have recognized that an employee might be justified in retaining documents, or ‘surreptitiously copying’ them if there were a sufficiently persuasive showing that documents would be destroyed.” Id. at 704. But, what does that mean and is it sometimes impossible for the plaintiff to know that at the outset?
If a defendant were to bring a counterclaim without any proof of misuse or other damages, it may be possible for the plaintiff to add this conduct (a baseless counterclaim) to a pending retaliation claim. In Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53 (2006), the Court held that a Title VII retaliation plaintiff need not allege or prove an ultimate adverse employment action, because “[t]he scope of the anti-retaliation provision extends beyond workplace-related or employment-related retaliatory acts and harm.” Title VII's anti-retaliation provision prohibits a broad range of employer conduct. See generally Burlington, 548 U.S. at 53. This includes employer action that “well might have ‘dissuaded a reasonable worker from making or supporting a [discrimination] charge.’” Id. at 68. In fact, the Fourth Circuit has long recognized that conduct that arises following the separation of employment, and even during litigation, can constitute retaliation. See Darveau v. Detecon Indus., 515 F.3d 334, 342 (4th Cir. 2008) (holding that defendant’s filing a baseless lawsuit against the plaintiff in Fairfax Circuit Court after the plaintiff filed FLSA claims in the Eastern District constituted retaliation).
This information is derived from the materials for the Virginia CLE® seminar Employment Law Ethics Update. A Webcast/telephone presentation of this 2-hour seminar will be held on Thursday, March 28.
Must an attorney foreclosing on real estate comply with the Fair Debt Collection Practices Act? (Expand/Collapse)
March 18, 2013
Although the court made it clear that its decision was “not intended to bring every law firm engaging in foreclosure proceedings under the ambit of the Act,” the better practice may be to treat residential foreclosures as debt collection and to comply with the FDCPA during the foreclosure process. In Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006), the Fourth Circuit held that foreclosing “trustees, including attorneys, acting in connection with a foreclosure can be ‘debt collectors’ under the Act.” It appears that an attorney/trustee could chart a course that involved only the foreclosure of property, appropriately protecting the equity of redemption without demanding reinstatement or engaging in other typical debt collection procedures, and reunite legal and equitable title without post-foreclosure collection efforts and remain exempt from the FDCPA. In Wilson, however, the defendant invoked the FDCPA but disavowed that it was recovering a debt, demanded payment to reinstate, not redeem, the defaulted loan, and established itself as an intermediary for payment of the reinstatement.
The majority opinion in the Wilson case concluded that “a trustee’s actions to foreclose on a property pursuant to a deed of trust are not ‘incidental’ to its fiduciary obligation. Rather, they are central to it. Thus, to the extent Defendants used the foreclosure process to collect Wilson’s alleged debt, they cannot benefit from the exemption contained in § 1692a(6)(F)(i).” In reaching this conclusion, the majority relied in part on the FTC Official Staff Commentary on the Fair Debt Collection Practices Act. The court held that “Defendants’ foreclosure action was an attempt to collect a ‘debt,’ Defendants were not excluded from the definition of ‘debt collector’ under 15 U.S.C.A. § 1692a(6)(F)(i) merely because they were acting as trustees foreclosing on a property pursuant to a deed of trust, and Defendants can still be ‘debt collectors’ even if they were also enforcing a security interest.”
This information is derived from Virginia CLE®’s Debt Collection for Virginia Lawyers: A Systematic Approach, 2013 edition.
Can you communicate directly with a represented party who contacts you? (Expand/Collapse)
March 4, 2013
You are representing Overbearing Olga in a contested divorce case against Manny Milquetoast (who is represented by Mr. Hot-Shot). This case involves many complex financial and custody issues. The Complainant has been served, discovery has been issued, and both parties have been deposed. You receive a telephone call on your direct line. When you pick up the receiver you are told:
“I can’t get in touch with Mr. Hot-Shot. I need you to help me because this divorce is taking an emotional toll on me and I cannot stand any more of these legal proceedings. I am done. I am completely stressed out. Olga can have the children, all the property, and I will pay her 80% of my future income. Just draw up the papers AND GET ME OUT OF THIS MESS!!!!!!!!!!!” (this is a 60-second telephone call).
(A) What do you do? And when?
ANSWER: Rule 4.2, Communication With Persons Represented By Counsel, controls. As soon as you realize that Manny is a represented party in a matter you are working on, you must hang up immediately. Here, after Manny’s first sentence, you should realize who is on the phone.
The applicable disciplinary rule governs communication with persons represented by counsel. If you know that a person is represented by another lawyer in the matter, you “shall not” communicate about the subject of the representation with that person. Comment  to the rule states that this rule applies even though the represented person is the one that initiates communication or consents to communication. The timing is also essential—“A lawyer must immediately terminate communication with a person if, after commencing communication, the lawyer learns that the person is one with whom communication is not permitted.” The only exception is if you have the other lawyer’s consent or are authorized by law to do so.
In this scenario, if you wait to hang up after Manny is finished talking and have already realized who he is, you are in violation of the rule.
In a recent case, Zaug v. Virginia State Bar (Va. S.Ct., decided Feb. 28, 2013), an attorney answered the phone to an emotional tirade by an opposing party who the attorney knew was represented by counsel. The entire conversation lasted approximately a minute, when the attorney realized with whom she was speaking and told the individual that she could not help her and she needed to contact her own attorney. Although the district committee found the attorney to be in violation of Rule 4.2 and disciplined with a dismissal de minimus, the Virginia Supreme Court reversed. The Court found, on the narrow facts of this case, that there was no evidence that the attorney deliberately or affirmatively prolonged the phone call. Although Rule 4.2 forbids an attorney from participating in a communication with a represented party, Justice Mims said that “the Rule does not require attorneys to be discourteous or impolite” when they disengage from such communications.
(B) What can an attorney do to prevent this from happening to him/her?
ANSWER: Screen calls before communicating with individuals on the phone. Also, if you are unable to screen calls, be alert and be prepared to hang up in the event you realize you are speaking on the phone with a represented party.
(C) What if Mr. Hot-Shot files a motion to disqualify you because of your contacts with Manny Milquetoast? Will this motion be granted?
ANSWER: Not necessarily. Whether you may have violated a Rule of Professional Conduct does not govern whether a Judge will find that you should be disqualified from a case. In the case where the attorney had a sixty-second phone call, the Judge did not grant a motion to disqualify the attorney.
In another case, a law firm failed to perform a conflict check and represented an individual in his worker’s compensation claims against his former employer; subsequently, the individual was unhappy with the results and sued his former employer and his local union. The same attorney that was representing him was hired to represent the local union. The individual sought to disqualify the attorney, but the court found that “there was no suggestion the firm had obtained any confidential information relating to the current case, or that [the individual] had suffered any prejudice ... [and that] disqualifying the firm would deprive the union local of expert counsel of its choice and potentially delay the case.” Instead, the Court found that the appropriate sanction was a referral to the VSB for violations of Rules of Professional Conduct. Reese v. Virginia Int’l Terminals, Case No. 2:11cv216, (E.D.Va. Aug. 2, 2012).
This information is derived from the seminar materials for Virginia CLE’s 31st Annual Family Law: Challenging Issues in Today’s Family Law Practice (available in print or electronic format for $90), and from Virginia CLE® editorial staff research.
What are the differences between the Virginia and federal sentencing guidelines? (Expand/Collapse)
February 18, 2013
Here is an opportunity to compare and contrast the Virginia Criminal Sentencing Guidelines and the United States Sentencing Guidelines by seeing the different results when the facts of the same case are evaluated in the context of these two systems. Virginia’s sentencing guidelines are “descriptive,” meaning that the outcomes are based on statistical models derived from actual historical sentences in the Commonwealth. The federal guidelines, on the other hand, are “prescriptive,” created under a mandate to eliminate sentencing disparity and to promote crime control. The federal guidelines plotted 258 combinations between 43 offense levels and 6 criminal history categories with a sentence range stipulated for each combination. Each crime was assigned a base offense level. Elaborate scoring systems were invented for adding to or subtracting from the base offense levels, and for numerically scoring criminal histories.
Imagine that there are two presentencing reports prepared for a single count of conspiring to distribute marijuana (or “marihuana” as it’s called in the U.S. Code): one for a federal charge in the Western District of Virginia and one for a state charge in the 25th Judicial Circuit of Virginia.
The facts of our hypothetical situation are as follows: the defendant has been caught in a reverse buy. He has purchased three pounds of marijuana from an informant for $12,000. The defendant has also confessed to “sporadically” buying one to three pounds of marijuana over the past two years. (If he bought an average of 2 pounds every two months, this confession would inculpate him for 24 pounds, or 11 kilograms.) The defendant also has a long history of petty crimes. In 1999 and in 2001, he received Virginia felony convictions for distributing more than one-half ounce of marijuana, but served no time for either conviction.
When comparing the federal and Virginia guidelines, keep in mind that the Virginia indictment is for the defendant’s actual purchase of three pounds (1.4 kg), while the federal indictment is for 50–100 kg (110–220 lb.) based on the defendant’s confession. The federal plea bargain signed by the defendant ups the relevant conduct to 80–100 kg of marijuana.
The defendant’s federal counsel apparently failed to note that his client’s 1999 and 2001 convictions were both felony convictions — presumably because the quantities sold by his client were very small and the defendant did not serve an active sentence for either charge. (The Virginia VCC codes that were implemented as part of Virginia’s sentencing data base in 1984 designate felonies “F” and misdemeanors “M”.)
The defendant may not have known when he accepted the plea bargain that he would be categorized as a career offender under the federal sentencing guidelines. Arguably, if this mistake is not remedied at sentencing, the defendant will have no remedy at all because in his plea bargain, he agreed to waive his rights of appeal and habeas corpus.
The Virginia guidelines, based upon statistical models of actual sentences, recommend an active sentence of up to 3 months. The defendant is recommended for straight probation by Virginia’s model of the risk of recidivism for nonviolent offenders. “Recidivism” is defined as a new felony conviction within three years of release from custody.
If the defendant had been charged in Virginia with the weight of marijuana that the federal sentencing guidelines require (176 lb./80 kg. of marijuana), the guideline recommendation would have been 12 to 27 months, and he would still be recommended for straight probation. This weight would represent 59 purchases at 3 lb. each with a total purchase price of $708,000. The statutory sentence range would be from 5 to 30 years. It is likely, however, that a Virginia judge would deviate from the guidelines and impose a sentence far above the guideline range for 176 pounds.
If the defendant had sold his alleged 176 pounds of marijuana in ounces on the street at a 100% mark-up then, he would have cleared over $700,000 in untaxed income over two years. Yet he owns no property, owes $8,000 in back child support, $1,215 in judgments, $2,000 in collection accounts, and $5,200 in past due debts.
If the defendant had been charged and convicted for three pounds of marijuana in federal court, the federal guidelines would recommend an active sentence 6–12 months, and the defendant would be eligible for straight probation. But because the defendant has two prior felony convictions, the federal sentencing guideline figure for 80 kg would be 57–71 months, with no probation.
The two prior Virginia felonies for the sale of 0.5 oz. to 5 lb. of marijuana classify the defendant as a career offender in the federal system. The U.S. guideline recommendation leaps to 151–188 months, with no probation. A downward departure would be authorized if the criminal history category substantially over-represents the seriousness of the defendant's criminal history or the likelihood that the defendant will commit other crimes.
This information is derived from the seminar materials for the Forty-Third Annual Criminal Law Seminar (2013), presented jointly by the Virginia State Bar and Virginia CLE®.
What is important in preparing a witness for litigation? (Expand/Collapse)
February 11, 2013
No normal conversation begins with an oath to tell the truth. That may be the moment at which it really sinks in with a client that a trial or a deposition is something strange and different from his prior experiences. This is a conversation in which volunteering information will more often than not lead to bad things. In a normal conversation, providing details tends to make a person feel she has established more credibility with the listener. In a trial or a deposition, volunteering usually just leads to more questions or even damage to the case.
One of the most important things to explain to a client who is about to be deposed is that the deposition is under oath, being taken by an opposing attorney who is not really friendly, with the objective of making the client look like a liar at some point. Every word spoken under oath is a word that the opponent will weigh as a potential weapon to be turned against the client. Mistakes can result in a loss in court or a weaker settlement position.
Witnesses must come to understand that there is no “truth” unless it is proved in court by persuasive evidence. An online definition of “finding of fact” reads, “the determination of a factual question vital (contributing) to a decision in a case by the trier of fact (jury or judge sitting without a jury) after a trial of a lawsuit, often referred to as findings of fact.” And yet, the definition of a “fact” is variously “the quality of being actual,” “an actual occurrence,” or “a piece of information presented as having objective reality.” A person limiting herself to presenting Sergeant Friday’s “Just the facts, ma’am” will be presenting subjective observations as perceived by her, not unassailable truths.
That, at the highest level, is the answer to why preparation for testimony under oath is essential. The process invites and perhaps even requires a competition of “facts” to determine which prevail, and thereby dictate the outcome of the hearing. Witnesses have to understand how they must tell the truth as they know it, of course, but the attorneys working with the witness must go deeper and analyze other questions:
- Do other witnesses corroborate this witness’ version of events?
- Are there documents or things supportive of this witness’ version of events?
- Do the witnesses who have a different perspective in telling their version of the facts seem more persuasive, consistent, detailed, or accurate?
An attorney cannot affect the first two of those factors by preparing a particular individual to testify. But as to the third, attorneys can do things to increase the likelihood that a witness will be understood as more “truthful” and therefore more likely to have his facts adopted by the trier of fact. And that is the reason to prepare a witness.
This information is derived from the seminar materials for Virginia CLE’s Prepare to Succeed: How to Get Your Client Ready for Litigation.
Are covenants not to compete tucked into employee handbooks enforceable? (Expand/Collapse)
February 7, 2013
Some employers have attempted to institute restrictive covenants by including them in employee handbooks or other benefits materials. Such a covenant was at issue in James, Ltd. v. Saks Fifth Ave., Inc., in the Circuit Court of Arlington, 67 Va. Cir. 126 (Arlington 2005), in which the employer distributed to all employees an employee handbook that contained a preface that states “THIS IS NOT A CONTRACT OF EMPLOYMENT,” but which also included a covenant not to compete. As consideration for executing a document agreeing to all the handbook’s provisions, the employees were given a cash bonus and a clothing allowance, and continued employment. The restrictive covenant in the handbook stated:
“By agreeing to work for JAMES, an employee agrees also that upon leaving the employment of JAMES, for any reason, he or she will not own, operate or be employed by a retail men’s clothing store, or men’s clothing sales department of a store, which is located within a one (1) mile radius of any JAMES store, for a period of three (3) years following termination of employment with JAMES.”
The circuit court upheld the covenant as valid and enforceable and issued an injunction against the former employee. The subsequent damages award in the James
case was later reversed by the Virginia Supreme Court, see James, Ltd. v. Saks Fifth Ave., Inc.
, but the lower court’s ruling regarding the enforceability of the restrictive covenant was left undisturbed. Thus, while an argument could be made under Persinger & Co. v. Larrowe
that a covenant included in a handbook is not enforceable because there was not “knowing” acceptance, James
represents the view of at least one judge that such a covenant is enforceable. It should be noted that in that case there was separate consideration given for the execution of the document agreeing to the provisions of the handbook.
This information is derived from Virginia CLE®’s Covenants Not to Compete and the Duty of Loyalty in Virginia Seminar Materials. The 2012 seminar is now available as an on-demand online seminar.
Are all beneficiary appointments automatically revoked by entry of a divorce decree? (Expand/Collapse)
January 28, 2013
The short answer is no. Subsection (D) of Virginia Code Section 20-111.1 attempts to create a constructive trust that would preserve the true beneficiary’s interest and bar a former spouse from receiving payment when the parties’ divorce decree or property settlement agreement (PSA) requires that result, but the language is not always effective. If federal preemption applies, beneficiary designations made under certain federal plans are enforceable unless some action has been taken by the owner-spouse to change the designation and conform it to the terms of the divorce decree.
The General Assembly has attempted to address this problem by adding a new subection (E) to Section 20-111.1, requiring that every decree of annulment or divorce from the bond of matrimony entered on or after July 1, 2012, contain the following notice in conspicuous, bold print:
“Beneficiary designations for any death benefit, as defined in subsection B of § 20-111.1 of the Code of Virginia, made payable to a former spouse may or may not be automatically revoked by operation of law upon the entry of a final decree of annulment or divorce. If a party intends to revoke any beneficiary designation made payable to a former spouse following the annulment or divorce, the party is responsible for following any and all instructions to change such beneficiary designation given by the provider of the death benefit. Otherwise, existing beneficiary designations may remain in full force and effect after the entry of a final decree of annulment or divorce.”
The purpose of the required notice is to make certain parties to divorce actions are made aware of the potential that some beneficiary designations may not be automatically revoked or changed by entry of a final decree unless they follow through with the necessary amendments to the beneficiary designation as required by the federal plan’s procedures and instructions.
This provision was enacted in response to recent decisions by both the U.S. Supreme Court in Kennedy v. DuPont Savings and Investment Plan, 555 U.S. 285 (2009) and the Virginia Supreme Court in Maretta v. Hillman, 283 Va. 34 (2012). Both cases held that federal preemption controls any conflict arising between the records of beneficiary designation held by a federal plan and any contrary provisions contained in a final divorce decree or PSA incorporated in the decree. When the plan’s owner had failed to change the designated beneficiary in accordance with federal plan provisions, the record designation will be enforced, even if it means that a former spouse whose interest was terminated under the divorce decree remains the taker. A provision in the decree or the parties’ agreement holding the funds in trust or constructively for the benefit of someone else was found void and unenforceable due to federal preemption. In Maretta, even the saving provision contained in section 20-111.1 (D) could not defeat the purpose Congress had in enacting the federal legislation: the Supremacy Clause of the federal constitution preempts conflicting state laws, so the former wife kept the proceeds of the policy.
This information is derived from Virginia CLE®’s 28th Annual Advanced Family Law Seminar Materials.
May an attorney file a time-barred claim? (Expand/Collapse)
January 14, 2013
HYPOTHETICAL: Three years ago, one of your business clients asked that you investigate a fraud action against another company. Your client ultimately decided not to proceed. Relations apparently have soured again between the companies, and your client has now asked you to file the fraud action. You have determined that the action would be barred by the two-year statute of limitations for fraud.
- May you nevertheless file the action?
- Must you advise the court of the statute of limitations issue?
- Must you advise your adversary of the statute of limitations issue?
This scenario involves the lawyer’s duty of honesty (Virginia Rule 8.4(c)
). It might also implicate Virginia Rule 3.1
, under which a lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that is not frivolous, which includes a good faith argument for an extension, modification, or reversal of existing law.
However, the important point in this situation is that the statute of limitations is an affirmative defense that may or not be raised by your opponent. This apparently is a dispositive distinction.
In Virginia LEO 491 (9/3/82), the Virginia Bar ruled that a lawyer may file an action even after the statute of limitations has run, since the statute of limitations is an affirmative defense that is effective only if raised.
More recently, the Virginia Bar took an equally liberal view of what a lawyer could do. In Virginia LEO 1224 (3/9/89), the Virginia Bar held that a lawyer could ethically file an action asserting a cause of action that had previously been dismissed in a similar case by the same court. Furthermore, the lawyer could ethically refrain from telling the court of the earlier action (but of course would have to honestly answer any questions from the court about the prior ruling). The Virginia Bar appeared to be influenced by the fact that the earlier decision was being appealed, so the lawyer could be making a good faith argument for an extension, modification, or reversal of existing law.
BEST ANSWERS: The best answer to question (a) is YES and the best answer to questions (b) and (c) is NO.
This information is derived from “The Ethics of Litigation,” part of the materials for Virginia CLE®’s Annual National Trial Advocacy College.
Is a non-capital defendant entitled to severance from death-qualified co-conspirators? (Expand/Collapse)
January 7, 2013
In U.S. v. Dinkins, 691 F.3d 358 (2012), Goods, a defendant who was not subject to the possibility of receiving the death penalty, argued that the joinder of his cases with those of death-qualified co-defendants was prejudicial and that the trial court had abused its discretion by failing to order that he be tried separately. See Fed. R. Crim. P. 14(a).
The case involved separate murders that were not attributable to all defendants in what the defendant’s brief called a “blizzard of violence.” Goods suggested that the risk of prejudice to him arose from the exclusion of sympathetic jurors from a death-qualified jury. To be “death-qualified,” jurors must be able to fairly consider the imposition of the death penalty versus life in prison and to render the death sentence in an appropriate case. All of the potential jurors are questioned about their attitudes toward the death penalty, and those who are not able to give that verdict when the facts of the case require it are excused. Goods also argued that clear prejudice resulted from his adverse position to his co-defendants because he had joined the prosecution in seeking admission of the hearsay statements of one of the murder victims.
The Fourth Circuit affirmed the trial court’s decision not to grant a separate trial, stating that it adhered to the general principle that defendants who are indicted together should be tried together. Severance should only be granted, the court opined, when there would be a serious risk that a joint trial could compromise a specific trial right of one of the defendants or prevent the jury from making a reliable judgment about guilt or innocence. Absent a showing by the defendant of clear prejudice, no reversal is required. The court further held that mutually antagonistic arguments were not necessarily prejudicial. Prejudice would not arise unless the defendant could show that, in order to believe the core of one defense, the jury had to disbelieve the other, or that the jury would unjustifiably infer from the evidence that this conflict alone demonstrated that both defendants were guilty.
This information is derived from Trial of Capital Murder Cases in Virginia, and from Virginia CLE® editorial staff research.
Is registration of an Internet domain name a basis for personal jurisdiction? (Expand/Collapse)
January 2, 2013
Specifically, what Internet activity falls within the reach of Virginia’s long-arm statute and forms a basis for personal jurisdiction? Recent federal cases in Virginia help define the scope of jurisdiction.
The Eastern District laid out an analysis in Alitalia-Linee Aerea Italiane S.p.A. v. Casinoalitalia.com, 128 F. Supp. 2d 340 (E.D. Va. 2001), in which it reasoned that, for the purposes of performing the minimum contacts analysis, there are essentially three categories of Internet websites:
“At one end of the continuum lie businesses or persons who clearly conduct business over the Internet and have repeated contacts with the forum state such that the exercise of in personam jurisdiction is proper. Thus, for example, if the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. At the other end of the continuum are defendants who have done nothing more than post information or advertising on a website that is accessible to users in the forum jurisdiction. The middle ground between the two poles is occupied by the interactive Websites where a user can exchange information with the host computer, and, there, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site.”
Id. at 349 (citing Zippo Mfg. Co., 952 F. Supp. at 1124).
In the Alitalia-Linee Aerea Italiane case, an Italian airline brought a trademark infringement action in Virginia against an online gambling company established under the laws of the Dominican Republic. The plaintiff claimed that the defendant’s domain name “casinoalitalia.com” was easily confused with its own name, “Alitalia,” and that it gave the false impression that the plaintiff was promoting the business of online gambling. The Court concluded that the defendant’s conduct fell within the reach of Virginia’s long-arm statute. The act of using “casinoalitalia.com” on the defendant’s servers in the Dominican Republic was a tortious act which, although committed outside Virginia, caused confusion, mistake, and deception of Virginia consumers, resulting in harm to the plaintiff’s business reputation with Virginia consumers. The Court also found that the exercise of jurisdiction based on the defendant’s maintenance of an Internet website was constitutional under the due process clause.
The Eastern District reached a different result in Int’l BanCorp, LLC v. Société Des Bains De Mer Et Du Cercle Des Etrangers à Monaco, 192 F. Supp. 2d 467 (E.D. Va. 2002). Five non-resident corporations owned by Claude Levy, a French national residing in Belgium, sought a judicial declaration that their use of certain domain names did not infringe upon defendant’s trademark rights. The defendant filed counterclaims against Levy. Levy challenged the jurisdiction of the Court, claiming that he had no contacts with Virginia other than the registration of the domain names. The Court agreed, observing that “it is well-established that personal jurisdiction cannot be based solely on the registration of a domain name ....” The defendant then argued that Levy was the alter ego of the corporations, and that the exercise of jurisdiction over Levy was proper because the corporations came voluntarily to Virginia to invoke the forum’s jurisdiction, but the Court concluded, however, that there was no basis for veil-piercing and, as such, the counterclaims against Levy were dismissed.
Two other cases involved the federal Anti-Cybersquatting Consumer Protection Act (“ACPA”).
In America OnLine, Inc. v. Huang, 106 F. Supp. 2d 848 (E.D. Va. 2000), plaintiff sued to recover for trademark infringement and for a violation of the ACPA. The Court declined to exercise in personam jurisdiction over a defendant whose only contact with the forum was the registration of a domain name in Virginia. The Court acknowledged that whether the registration of a domain name amounted to “transacting business” under the long-arm statute was a “close one.” The Court elected to “skip over” that question and concluded that the exercise of jurisdiction under the long-arm statute, based solely on the registration of a domain name, would be unconstitutional. The Court reasoned that the registration agreement was simply a contract, and that “it is well-settled that a contract between a resident of the forum state and a nonresident defendant does not, by itself, provide sufficient minimum contacts for personal jurisdiction.”
In Heathmount A.E. Corp. v. Technodome.com, 106 F. Supp. 2d 860 (E.D. Va. 2000), plaintiff sued a non-resident under the ACPA, claiming that personal jurisdiction existed over a defendant whose only contact with the forum was the registration of a domain name in Virginia. The Court agreed with the earlier AmericaOnline decision, that the registration of a domain name, by itself, did not confer personal jurisdiction under the “single act” provision of the Virginia long-arm statute, or under the due process clause, concluding that there must be “something more” than domain name registration to create a basis for personal jurisdiction.
This information is derived from The Rocket Docket: Trying Cases in the Eastern District of Virginia Seminar Materials.
What is the “Fugitive Disentitlement Doctrine”? (Expand/Collapse)
December 17, 2012
If an appellant is a fugitive from justice, a court has the inherent authority to dismiss his or her appeal under the “Fugitive Disentitlement Doctrine,” which was first addressed by the United States Supreme Court in Smith v. United States, 94 U.S. 97 (1876). Although the doctrine was traditionally applied to criminal cases, it can apply to civil cases as well and is often argued in immigration cases. The doctrine is based on the principle that a fugitive cannot seek relief from the judicial system whose authority he or she evades.
The Supreme Court of Virginia adopted the governing principles for the application of the “Fugitive Disentitlement Doctrine” in Sasson v. Shenhar, 276 Va. 611, 667 S.E.2d 555 (2008), an international custody matter in which the husband had taken the parties’ son back to Spain, refusing to obey the Virginia court’s order to return the child to his mother here. The Supreme Court held that “the following elements are required: (1) the appellant must be a fugitive, (2) there must be a nexus between the current appeal and the appellant’s status as a fugitive, and (3) dismissal must be necessary to effectuate the policy concerns underlying the doctrine .... Moreover, when deciding to apply the doctrine, courts must exercise ‘restraint,’ and its use must ‘be a reasonable response to the problems and needs that provoke it.’” Id. at 623, 667 S.E.2d 561.
Virginia has also recognized the application of the doctrine in criminal cases. In Reid v. Commonwealth, 57 Va. App. 42, 698 S.E.2d 269 (2010), the doctrine was applied to dismiss the appeal of an appellant who failed to appear at a docket call, failed to comply with other terms of the appeal bond, failed to remain in communication with his attorney, and could not be located by an investigator.
28 U.S.C. § 2466 is the federal statutory statement of the law. If the case is appealable in the federal system, the status of a fugitive who is being denied access to the courts changes when that fugitive is once again either in custody or subject to the court’s jurisdiction depending on which federal circuit controls the case. The Second, Third, Seventh, Eighth, Ninth, Tenth, and Eleventh Circuits take the position that the former fugitive becomes eligible to pursue an appeal again. The Fifth and Sixth Circuits disagree, holding that the fugitive’s subsequent arrest is irrelevant; these courts do not permit appeals by the former fugitive. The Fourth Circuit has not ruled on the issue.
This information is derived from the Virginia CLE® handbook, Defending Criminal Cases in Virginia, and from Virginia CLE® editorial staff research.
When does the attorney-client privilege apply to in-house counsel? (Expand/Collapse)
December 10, 2012
In-house counsel may wear many hats and communicate on a wide array of topics in the course of a business day. Sorting out which are privileged and how best to protect that privilege is a challenge.
THE GENERAL RULE:
While the attorney-client privilege applies to communications between the corporation and in-house counsel, see, e.g., Jonathan Corp. v. Prime Computer, Inc., 114 F.R.D. 693 (E.D. Va. 1987), it does not protect business advice provided by the attorney, see, e.g., In re Grand Jury Subpoena Duces Tecum Dated Sept. 15, 1983, 731 F.2d 1032 (2d Cir. 1984).
IN-HOUSE COUNSEL OFTEN PERFORM OTHER FUNCTIONS:
This may present an issue for in-house counsel, who may often perform multiple functions during their day-to-day activities. For example, where an in-house attorney is also a corporate officer with some managerial function, it may be necessary to show that the attorney’s advice was given only in a professional legal capacity. See In re Grand Jury Subpoena, 599 F.2d 504 (2d Cir. 1979) (investigation conducted by management under general counsel’s supervision not within the attorney-client privilege).
TESTS APPLIED BY THE COURTS:
In making the determination of whether the advice was legal or business advice, courts will often examine whether the attorney was doing something that is distinctively within the professional competence of an attorney. Courts may also look to whether the attorney was performing tasks beyond those traditionally performed by attorneys. Courts apply different tests to determine whether privilege claims should be sustained in these situations.
One test is the predominant or primary purpose test, which looks at whether the principal purpose of the communication was to provide legal or business advice. See, e.g., Neuder v. Battelle Pacific Nw. Nat’l Lab., 194 F.R.D. 289 (D.D.C. 2000) (“Where business and legal advice are intertwined, the legal advice must predominate for the communication to be protected.”) (citation omitted). Under this test, the incorporation of business advice with the legal advice will not necessarily destroy the privilege, as long as the legal advice is merely incidental.
Some courts may effectively apply a dual or mixed-purpose test, but some courts purporting to do so fail to recognize any mixed purposes and decline to uphold privilege claims for any document that serves both purposes. See, e.g., In re Vioxx Prods. Liab. Litig., 501 F. Supp. 2d 789 (E.D. La. 2007).
Other courts may apply a presumptive test, applying a presumption of privilege if the advice is given by an attorney in the general counsel’s office. See, e.g., Boca Investerings P’ship v. United States, 31 F. Supp. 2d 9 (D.D.C. 1998). But if the advice is from a lawyer in another department and appears to be business advice, then the advice is much less likely to be ruled legal advice. Id. This is a rebuttable presumption and the lawyer’s place on the organizational chart is not always dispositive. Id.
STEPS THAT CAN HELP PROTECT THE PRIVILEGE:
While it may be impractical, if not impossible, to separate the legal and business roles that in-house counsel may play, steps can be implemented to increase the likelihood that legal communications will be determined to be privileged. The following are some examples:
This information is derived from the Virginia CLE® seminar, Attorney Privilege Issues: Avoiding the Problems (telephone seminar with live Q&A on Wednesday, December 12). Downloadable seminar materials are also available separately for purchase.
- Communications requesting or transmitting legal advice should only be sent to those individuals who need to receive the request or advice, and the communication should state that it is not to be forwarded to others without the permission of the legal department;
- Communications requesting legal advice should list the attorney to whom the request is being made as a direct recipient, and the other recipients on the email should be listed as “cc” recipients;
- If it is practical, business and legal issues should be addressed in separate communications;
- If it is not practical to address the issues in separate communications, the communication should make it clear how the business issues being addressed underlie and are essential to the legal advice being provided;
- The communication should have a header expressly stating that it contains privileged and confidential legal advice;
- That header should be reserved for only those communications containing legal advice and should not be used for other communications from in-house counsel;
- If legal advice is sought by an email communication, a separate email response should be sent or the response should only contain the email to which it is responding; it should not contain all prior emails on the email chain, many of which may relate to business or other non-privileged issues; and
- If the document is from an in-house attorney who is not in the general counsel’s office and who performs legal functions for the company, consideration should be given to a header or footer that states the legal function that attorneys in that department perform.
When is a third party “entitled” to funds held by the lawyer? (Expand/Collapse)
December 3, 2012
LEO 1865, published November 12, 2012, revisits this question. Rule 1.15(b) of the Rules of Professional Conduct requires that a third party be “entitled” to funds in the lawyer’s possession. Although the rule does not make the third party a “client” of the lawyer, the lawyer’s duty with respect to the third party’s entitlement is the same as if the person were a client. As Comment 4 to the rule states, a third party must have a valid claim to an interest in the specific funds held by the lawyer. In the absence of a valid third-party interest in the funds, the lawyer owes no duty to a creditor of the client and must act in the best interests of the client. The mere assertion of an unsecured claim by a creditor does not create an “interest” in the funds held by the lawyer. Therefore, claims unrelated to the subject matter of the representation, though just, are not sufficient to trigger duties to the creditor without a valid assignment or perfected lien.
A third party’s interest in specific funds held by the lawyer is created by some source of obligation other than Rule 1.15 itself. Whether they create binding contractual obligations, assurance of payment from the lawyer may also create ethical duties to third parties under Rule 1.15. The basis for such duties is the fundamental duty of lawyers to deal honestly with third parties found in Rules 4.1 and 8.4(c). Before the lawyer may give a third party an assurance of payment, the lawyer should discuss the matter with the client, because it is ultimately a matter for the client to decide. If the lawyer is asked to sign a document assuring payment, the lawyer should explain to the client the ramifications, including the lawyer’s potential ethical and civil liability, ensure that the client is competent to understand the explanation, and obtain the client’s informed consent.
All ethics opinions and legal authorities agree that an “interest” in the funds held by the lawyer include a statutory lien, a judgment lien and a court order or judgment affecting the funds. For example, a judgment lien creditor of a client may garnish funds held in a lawyer’s trust account. Marcus, Santoro & Kozak v. Wu, 274 Va. 743, 652 S.E.2d 777 (2007) (lien of a writ of fieri facias validly executed against lawyers’ trust accounts by client’s judgment lien creditor to whom lawyers directed to pay funds). Likewise, agreements, assignments, lien protection letters or other similar documents in which the client has given a third party an interest in specific funds trigger a duty under Rules 1.15 (b)(4) and (5) even though the lawyer is not a party to such agreement or has not signed any document, if the lawyer is aware that the client has signed such a document. See, e.g., Virginia State Bar v. Timothy O’Connor Johnson, CL 09-2034-4 (August 11, 2009) (while Respondent did not sign the agreement, his client did, and Respondent was aware that his client had directed that his chiropractor be paid directly out of settlement proceeds administered by his lawyer). See also LEO 1747 and Comment 4 to Rule 1.15.
The opinion recognizes that there will be occasions when a lawyer may not be able to determine whether a third party is entitled to funds held by the lawyer, for example, when there exists a dispute between the client and the third party over the third party’s entitlement. Legal and factual issues may make the third party’s claim to entitlement or the amount claimed uncertain. Rule 1.15(b)(4) and (5) does not require the lawyer to make that determination. When faced with competing demands from the client and third party the lawyer must be careful not to unilaterally arbitrate the dispute by releasing the disputed funds to the client. Conversely, a lawyer should not disburse the client's funds to a third party if the client has a non-frivolous dispute with the third party. When the client and a third party have a dispute over entitlement to the funds, the lawyer should hold the disputed funds in trust for a reasonable period of time or interplead the funds into court. To avoid or reduce the occurrence of such conflicts, the opinion recommends that at the outset of the representation, preferably in the engagement letter or contract, the lawyer clearly explain that medical liens will be protected and paid out of the settlement proceeds or recovery. Rules 1.15(b)(4) and (5) and Comment 4 appear to require that a lawyer have “actual knowledge” of a third party’s interest in funds held by the lawyer.
This information is derived from LEO 1865. The full text of this opinion and all of Virginia’s Legal Ethics Opinions are available on the Virginia CLE® legal research and links page.
What is due diligence when trying to locate a person to be served? (Expand/Collapse)
November 19, 2012
Under § 8.01-329, service of process may be made on the Secretary of the Commonwealth of Virginia when the person being served is either a nonresident or cannot be located. The party, his agent, or his attorney must file an affidavit with the court, stating either (i) that the person to be served is a nonresident or (ii) that, after exercising due diligence, the party seeking service has been unable to locate the person to be served.
Similar due diligence requirements govern service of nonresident motor vehicle operators under § 8.01-308 and service of a nonresident aircraft operator or owner under § 8.01-309. See §§ 8.01-310 and 8.01-313.
So, how much effort does it take to satisfy the due diligence requirement?
Dennis v. Jones, 240 Va. 12, 393 S.E.2d 390 (1990), an automobile accident case with a nonresident defendant, discusses the due diligence standard. Dennis involved service on the Commissioner of the Department of Motor Vehicles. Plaintiff’s attorney, after obtaining a return of no service from the sheriff, made some inquiries, and then served the debtor, claiming that she was a nonresident of the Commonwealth. Default judgment was entered. On a motion to rehear, the court found that (i) the attorney’s efforts were minimal, (ii) the defendant was not, and had never been, a nonresident, and (iii) due diligence had not been exercised. The Supreme Court of Virginia set aside the judgment and found that it was not based on valid process. Because more than a year had passed since the filing of the case, the case was dismissed with prejudice. This is a harsh result, apparently a punishment for not using due diligence at the outset. But it is an excellent case to study to determine what should be done before executing the affidavit.
In Valois v. Parrish, 67 Va. Cir. 40 (Fairfax 2005), the attorney took a number of steps to ensure long-arm service but missed an error in the file made by the sheriff. In setting aside the default judgment, the judge stated: “I recognize that the requirement of due diligence does not and cannot mean that the plaintiff must expend huge efforts, time and money exploring every possible means of obtaining a current address. [Citations omitted.] Nonetheless I find that this plaintiff’s efforts were not sufficiently ‘devoted and painstaking’ to constitute the due diligence required for service via the Secretary of the Commonwealth.”
In Jamerson v. Laub, 74 Va. Cir. 347 (Rockbridge 2007), the plaintiff’s special process server delivered a summons one day before the statute of limitations had run by handing it to a housekeeper who was not a family member of the defendant instead of posting it. The defendant received the papers after the statute had run. The court sustained a statute of limitations plea for lack of due diligence.
Robic v. Nicola of London, Inc., 78 Va. Cir. 123 (Fairfax 2009), might serve as a study in due diligence for service of process on the Secretary of the Commonwealth. The plaintiff obtained as much information as she could from defendant’s former place of business; checked with the licensing authorities in two states; performed an internet search and called everyone she found with the same name; and hired a private investigator. The court found that the plaintiff had exercised due diligence when she served the defendant through the Secretary of the Commonwealth and served the defendant at her last known business address in Virginia.
The Jamerson and Robic cases represent polar extremes in the demonstration of due diligence for service of process.
Practice tip: Counsel should document all efforts to locate the debtor. Often the court will require proof of those efforts. If the efforts were not diligent, the court might dismiss the case with prejudice.
This information is derived from the Virginia CLE® publication, Debt Collection for Virginia Lawyers: A Systematic Approach.
How does the new constitutional amendment affect Virginia’s eminent domain law? (Expand/Collapse)
November 12, 2012
Last week, Virginia’s voters passed an amendment to the Commonwealth’s constitution that adds new language to Article I, Section 11 declaring that ownership of private property is a fundamental right. By preserving the protections in a constitutional amendment rather than as part of a statute, the ability of the General Assembly to redefine public uses in the future is limited.
In the wake of Kelo v. City of New London, 545 U.S. 469 (2005), the General Assembly had already acted to place clear and specific limits on the use of the power of eminent domain in Virginia. The amendment to Article I, Section 11 of the Constitution of Virginia restates the protections already in the Code of Virginia and includes additional protections such as requiring condemnors to prove that a use is public and, for the first time, making lost profits and lost access compensable. The defined terms “lost profits” and “lost access” will become part of section 25.1-100 of the Virginia Code on January 1, 2013.
The Virginia General Assembly’s changes to the law of eminent domain in 2007 following Kelo had significantly redefined and limited the constitutional breadth of the definition of “public use.” Virginia Code section 1-219.1 applies to property for which a petition or certificate of take has been filed after June 30, 2007, and the limits of that section preempt any broader definition of public use found elsewhere in the Code. Section 1-219.1 begins by defining the term “public uses” mentioned in Article I, Section 11 of the Constitution of Virginia
... to embrace only the acquisition of property where:
This information is derived from the Virginia CLE® publication, Eminent Domain Law in Virginia, and from editorial staff research.
- the property is taken for the possession, ownership, occupation, and enjoyment of property by the public or a public corporation;
- the property is taken for construction, maintenance, or operation of public facilities by public corporations or by private entities provided that there is a written agreement with a public corporation providing for use of the facility by the public;
- the property is taken for the creation or functioning of any public service corporation, public service company, or railroad;
- the property is taken for the provision of any authorized utility service by a government utility corporation;
- the property is taken for the elimination of blight provided that the property itself is a blighted property; or
- the property taken is in a redevelopment or conservation area and is abandoned or the acquisition is needed to clear title where one of the owners agrees to such acquisition or the acquisition is by agreement of all the owners.
Where is the line between permissible and impermissible actions by nonlawyers? (Expand/Collapse)
November 5, 2012
While you chose to attend law school, your sister decided to obtain a degree in social work and devote her life to helping the Navajo in New Mexico. Your sister just called to ask whether she can help needy folks without engaging in the unauthorized practice of law.
Without engaging in the unauthorized practice of law, may your sister undertake the following activities in connection with needy folks’ small claims court proceedings:
- Provide legal advice to the litigant about the best strategy to follow in small claims court?
- Describe the small claims court process and timing?
- Complete small claims court form documents by typing (verbatim) into the form a narrative supplied by the litigant seeking her assistance?
- Review and revise the litigant’s narrative before typing it into the small claims court forms?
- Select the proper form for the litigant to use when filing in small claims court?
- No (Probably)
- No (Probably)
As one would expect from the remarkably vague and unhelpful definitions of the “practice of law,” whichever state bureaucracy enforces unauthorized practice of law rules often finds it almost impossible to distinguish between permissible and impermissible actions by nonlawyers.
For example, in 2002 the ABA had to carefully explain why nonlawyer mediators may safely assist mediating parties in writing up whatever agreement the mediator has successfully arranged.1 Otherwise, even the societally beneficial mediation process could result in the mediator engaging in criminal misconduct.
Well-known Stanford Law School professor Deborah Rhode has humorously noted that even Ann Landers could easily be accused of unauthorized practice of law.2
(1)-(5) This hypothetical comes from a Virginia unauthorized practice of law opinion and a legal ethics opinion. In Virginia UPL opinion
the Committee concludes that the preparation of warrants in debt and other forms necessary for pro se representation (“legal instruments of any character”) in Small Claims Court by a non-attorney social worker would be the unauthorized practice of law if the non-attorney social worker selects the forms for the litigant or advises the litigant as to which forms are appropriate based on the litigant’s particular case; or provide[s] any legal advice to the litigant. The social worker may assist the litigant with completion of the form document using language specifically dictated by the litigant.
Virginia UPL Op. 207
(8/26/05) (emphasis added).
In a parallel ethics opinion, the Virginia Bar addressed an inquiry from an attorney who indicated that she “would be training social workers to assist members of the public in filling out forms for use in small claims court, usually to obtain payment of back wages from employers.” Virginia LEO 1792 (1/10/06).
The Virginia Bar found that a lawyer could not assist the social worker in how to help their clients in completing the forms.
Comment One to Rule 5.5 states that the rule is not intended to prohibit lawyers “from providing professional advice and instruction to nonlawyers whose employment requires knowledge of the law.” Examples cited in that comment are claims adjusters, employees of financial or commercial institutions, and social workers. The critical distinction here is between employment that “requires knowledge of the law” and employment that actually is the practice of law. A nonlawyer’s employment may well entail a necessary understanding of pertinent law; that knowledge, however, does not provide authority to provide legal services based on that understanding. Comment One is intended to allow lawyers to provide training on the law needed for performance of a job; it does not provide the receivers of that training an exception to the Unauthorized Practice Rules. To reiterate, this attorney cannot instruct these social workers in the unauthorized practice of law.
Virginia LEO 1792 (1/10/06).
1/ ABA Section for Dispute Resolution, Resolution of Mediation & the Unauthorized Practice of Law (adopted Feb. 2, 2002) (“When an agreement is reached in a mediation, the parties often request assistance from the mediator in memorializing their agreement. The preparation of a memorandum of understanding or settlement agreement by a mediator, incorporating the terms of settlement specified by the parties, does not constitute the practice of law. If the mediator drafts an agreement that goes beyond the terms specified by the parties, he or she may be engaged in the practice of law. However, in such a case, a mediator shall not be engaged in the practice of law if (a) all parties are represented by counsel and (b) the mediator discloses that any proposal that he or she makes with respect to the terms of settlement is informational as opposed to the practice of law, and that the parties should not view or rely upon such proposals as advice of counsel, but merely consider them in consultation with their own attorneys.”).
2/ Jeffrey S. Klein, Making a Practice of Friendly Advice, Los Angeles Times, Feb. 14, 1985 (“Rhode, who authored a well-known study on the subject in 1981 ... points out that even some of the advice of syndicated columnist Ann Landers could be construed as the unauthorized practice of law.”).
This information is derived from the seminar materials for Virginia CLE®’s recent seminar, Tom Spahn on Unauthorized Practice of Law and Multi-Disciplinary Practice: Defining What Lawyers Do and Where They Can Do It.
What are the different kinds of fraud? (Expand/Collapse)
October 29, 2012
Actual Fraud: In order to recover in an action for actual fraud, a plaintiff must prove (i) a false representation; (ii) of a material fact; (iii) made intentionally and knowingly by the defendant or the defendant’s agent; (iv) with intent to mislead; (v) upon which the plaintiff reasonably relied; (vi) resulting in damage to the plaintiff. Sales v. Kecoughtan Hous. Co., 279 Va. 475, 481 (2010).
Constructive Fraud: Just like actual fraud, a successful cause of action for constructive fraud requires proof of a false representation of a material fact relied upon by the damaged party to his detriment. Only the intent of the misrepresenting party distinguishes constructive fraud from actual fraud. In a case of actual fraud, the misrepresenting party makes a false statement with the intent to mislead another through the information provided or omitted. By contrast, in a case of constructive fraud, the injured party need only prove that a misrepresentation of a material fact was made innocently or negligently, with the intent of inducing the other to rely upon the information provided. SuperValu, Inc. v. Johnson, 276 Va. 356, 367 (2008).
Although constructive fraud and actual fraud are distinct torts with, at least in theory, incompatible requirements of proof, it is permissible to plead both in the same action. Under no circumstances, however, will a promise of future action support a claim of constructive fraud. SuperValu, 276 Va. at 368 (overruling Eden v. Weight, 265 Va. 398, 578 S.E.2d 769 (2003) “to the extent that [that decision] implies that an action for constructive fraud may lie if the evidence demonstrates a present intent not to fulfill a promise of future action”). Depending on the facts, however, fraud in the inducement might.
Fraud in the Inducement: Fraud in the inducement of a contract is a tort action, which arises from the relationship between the parties before the formation of the contract. In order to state a cause of action for fraud in the inducement of a contract, a party must allege that the misrepresentations were positive statements of fact, made for the purpose of procuring the contract; that they are untrue; that they are material; and that the party to whom they were made relied upon them, and was induced by them to enter into the contract. While failure to perform a term of a contract clearly does not constitute fraud, when a defendant makes a promise, intending not to perform, his promise is a misrepresentation of present fact, and if made to induce the promisee to act to his detriment, is actionable as actual fraud. In other words, “‘[T]he state of the promisor’s mind at the time he makes the promise is a fact, and ... if he represents his state of mind ... as being one thing when in fact his purpose is just the contrary, he misrepresents a then existing fact.’” Abi-Najm v. Concord Condominium, LLC, 280 Va. 350, 362-363 (2010). Moreover, the general rule holds that one cannot, by fraud and deceit, induce another to enter into a contract to his disadvantage, then escape liability by saying that the party to whom the misrepresentation was made was negligent in failing to learn the truth.
This information is derived from the seminar materials for Virginia CLE®’s FRAUD—The Most Used and Least Understood Cause of Action: Allegations, Defenses, and Practice Tips.
Are lawyers considered “debt relief agencies” under bankruptcy law? (Expand/Collapse)
October 24, 2012
The term “debt relief agency” is defined in 11 USC § 101(12A) to include (subject to certain exceptions) “any person who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration.”
So, if attorneys are no different from non-attorney businesses that provide the pre-filing service defined as a “debt relief agency,” the possibility existed that an attorney’s advertising and also the representation of clients before their filings were being unconstitutionally restrained by the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act. The U.S. Supreme Court has answered the question.
In Milavetz, Gallop & Milavetz, P.A., et al. v. United States, 130 S. Ct. 1324 (2010), the plaintiffs, including Milavetz, Gallop & Milavetz, P.A. (“Milavetz”), filed a suit seeking declaratory relief, arguing that attorneys (i) should not be bound by certain debt relief agency provisions, (ii) may advise clients to incur more debt, and (iii) need not make certain disclosures required of “debt relief agencies” in advertisements of their bankruptcy-related services.
The District Court had initially concluded that the definition of “debt relief agency” in 11 U.S.C. § 101(12A) did not apply to attorneys and that sections 526 and 528 were unconstitutional as applied to such professionals. The Eighth Circuit Court of Appeals affirmed this ruling in part and reversed in part, disagreeing with the District Court’s decision that attorneys did not fit within the definition of debt relief agencies, finding that section 528’s disclosure requirements did apply to attorneys. The Court further held that section 526(a)(4) was unconstitutional because it broadly prohibits debt relief agencies from advising clients to incur any additional debt in contemplation of bankruptcy even if the advice would be considered valid bankruptcy planning.
On appeal, the Supreme Court held, first, that attorneys who provide legal assistance to assisted persons are debt relief agencies under the Bankruptcy Code. Second, section 526(a)(4) only prohibits an attorney from advising a debtor to incur more debt because that person is filing for bankruptcy relief. The Court held that, if there is a valid reason to incur more debt, the attorney may advise the debtor to do so even on the eve of bankruptcy. According to the Court, the question to consider is why counsel is advising the person to incur additional debt. Finally, the Court stated that section 528’s disclosure requirements are considered valid because the rights to advertise are adequately protected because the disclosure requirements are reasonably related to the State’s interest in preventing deception of consumers.
This information is derived from Virginia CLE® editorial staff research and publications.
How are impeachment and bias covered in the new Rules of Evidence? (Expand/Collapse)
October 15, 2012
A unique feature of the new Virginia Rules of Evidence is Rule 2:607, a “roadmap” rule, identifying all of the various impeachment devices available in Virginia, and referring users to the specific Rule of Evidence that applies to each. This was conceived by the Boyd-Graves Evidence Committee and adopted by the Supreme Court.
Rule 2:607(a) states the general rule that the credibility of a witness may be impeached “with any proof that is relevant to the witness’s credibility.” It then lists eight, non-exclusive methods by which a witness may be impeached. Some derive from other rules and some from the caselaw on witness examination. By identifying and listing the methods in a single section, the Rules of Evidence provide a quick and convenient reference to practitioners and judges to help decide what impeachment methods are or are not appropriate for a particular witness. No other state has such a provision.
The eight methods are:
- introduction of evidence of the witness’s bad general reputation for the traits of truth and veracity, as provided in Rule 2:608(a) and (b)
- evidence of prior conviction, as provided in Rule 2:609
- evidence of prior unadjudicated perjury, as provided in Rule 2:608(d)
- evidence of prior false accusations of sexual misconduct, as provided in Rule 2:608(e)
- evidence of bias as provided in Rule 2:610
- prior inconsistent statements as provided in 2:613
- contradiction by other evidence
- any other evidence which is probative on the issue of credibility because of a logical tendency to convince the trier of fact that the witness’s perception, memory, or narration is defective or impaired, or that the sincerity or veracity of the witness is questionable.
Virginia is also unique in the nation for having an express provision on one of the most important topics in all of Evidence law, the doctrine that bias of a witness is a core issue of credibility and an assured topic for cross-examination. It is almost always relevant and almost always permitted in Virginia to explore bias, since it bears on the integrity and accuracy of the entire trial process.
Rule 2:610 states: “A witness may be impeached by a showing that the witness is biased for or prejudiced against a party. Extrinsic evidence of such bias or prejudice may be admitted.”
The Guide to the Rules of Evidence in Virginia explains the incredibly powerful nature of the right to offer evidence of bias in Virginia in its Notes.
This information is derived from the seminar materials for Virginia CLE®’s Fifth Annual Advanced Business Litigation Institute.
What is “just compensation” in an eminent domain taking? (Expand/Collapse)
October 8, 2012
Eminent domain is in the public eye in Virginia this year. On November 6th, Virginia voters will decide on a proposed constitutional amendment that would prohibit eminent domain from being used for private enterprise, job creation, tax revenue generation, or economic development, thereby restricting it to only being invoked to take private land for public use. Other states have taken similar action following the U.S. Supreme Court’s decision in Kelo v. City of New London, which approved the city’s use of eminent domain to acquire property for economic development purposes.
At the heart of any eminent domain case is the issue of just compensation for the property owner. Article I, Section 11 of the Constitution of Virginia prohibits the General Assembly from passing any law “whereby private property shall be taken or damaged for public uses, without just compensation,” but provides no definition of “just compensation.” Because “just compensation” is a constitutional requirement, the final arbiter of what constitutes just compensation is the Virginia Supreme Court, not the General Assembly. Unlike the Fifth Amendment of the United States Constitution, Article I, Section 11 of the Constitution of Virginia provides that property can be neither taken nor damaged without just compensation.
The two components of just compensation are the value of the property taken and the damages (reduction in value), if any, to property not actually taken. Fair market value is the standard for measuring both elements of just compensation. The land taken is valued at fair market value. Damages to the residue in partial take cases are also determined by a fair market value valuation: the fair market value of the residue immediately before the take, less the fair market value of the residue immediately after the take.
Fair market value is not the land’s value to the owner or to the condemnor. This basic concept is sometimes difficult for the average juror or commissioner. That the condemnor is in need of the property is irrelevant. That the owner may be unwilling to sell is also irrelevant. Fair market value is objective value based on market data, not the owner’s plans or the condemnor’s planned project. Valuation must be made as if the owner had voluntarily placed the property for sale and as if the condemnor had no compulsion or necessity to buy. Just compensation is fair market value as of the date of valuation, not value after future development of the property or other property in the vicinity.
Evidence of gross sales of a business conducted on the premises is not admissible. Net income, unlike gross income, may be admissible in some instances to show the value of income-producing property under the income capitalization method, but such income must relate to the intrinsic value of the land. Business profits are generally too speculative to be considered; however, income generated by a business on the premises that relates to the intrinsic value of the real estate may sometimes be admitted. The question of exactly when business income relates to the intrinsic value of the land and when it does not has yet to be resolved by the Virginia Supreme Court.
This information is derived from Virginia CLE®’s new handbook, Eminent Domain Law in Virginia.
How do you present and argue damages for personal injury? (Expand/Collapse)
September 28, 2012
While trial courts typically instruct the jury that the amount sued for is not evidence, Philips v. Fulghum, 203 Va. 543, 547 (1962), Virginia law permits either party to inform the jury of the amount of damages sought by the plaintiff in opening, closing, or both. § 8.01-379.1. The plaintiff may also request an amount less than the ad damnum in the complaint. § 8.01-379.1.
What are the mechanics of admitting medical bills?
Ordinarily, proof of medical expenses is shown by introduction of the plaintiff’s medical bills. The authenticity and reasonableness of medical bills is presumed. § 8.01-413.1. Likewise, medical bills are not considered hearsay. Walters v. Littleton, 223 Va. 446 (1982).
However, introduction of the bills is not guaranteed. McMunn v. Tatum, 237 Va. 558 (1989), held that if a defendant contests the medical necessity or causal relationship of medical bills and “further represents to the court that the defense will offer evidence on those issues, the bills will be insufficient in themselves to create a jury issue, and expert foundation testimony will be prerequisite to their admission.” A plaintiff with no expert medical testimony then faces an uphill burden getting her medical bills before the jury if the defense follows McMunn and contests the medical necessity or causal relationship of the bills and offers its own evidence on those issues.
In that circumstance, the medical bills contested by the defense expert cannot be admitted for the purpose of proving financial damage. However, even in the face of a McMunn challenge, the bills are admissible to show that a plaintiff was treated for physical injuries and that she endured pain and suffering over a period of time. Parker v. Elco Elevator Corp., 250 Va. 278, 280 (1995). Thus, when bills are contested as specified in McMunn, and the plaintiff has no expert to establish their medical necessity and causal relationship, the bills are nevertheless admissible to show physical injury and pain and suffering but not to show medical expense damages.
How do you argue damages to the jury?
Per diem arguments that present mathematical formulas for calculating damages along the lines that “the pain is worth $50 per day and plaintiff has been suffering for 1000 days so award $50,000” are not permissible. Certified T.V. & Appliance Co. v. Harrington, 201 Va. 109 (1959).
But this does not foreclose merely breaking down each element of damages and suggesting an amount to award for each element. In Wakole v. Barber, 283 Va. 488 (2012), plaintiff’s counsel presented a chart that provided a mathematical equation using as a line item each element of damages from the model jury instruction on damages (Virginia Model Jury Instruction 9.000). Counsel then suggested an amount for each particular element of damages. The Court held that a plaintiff is permitted to request a fixed amount for each element of damages claimed, rejecting defense objections that this not only violated the ban on per diem arguments but also violated § 8.01-379.1, which, the defense argued, limited that party arguing damages to only one total amount.
This information is derived from the written materials for Virginia CLE®’s Tort-Related Damages.
What is this formula? (Expand/Collapse)
September 21, 2012
This image is a graphic representation of the “Cosine Effect” angle. For radar or ladar to measure speed accurately, the angle between the microwave or laser beam used to measure motor vehicle speed and target (alpha in the figure above) must be small. In the defense of traffic cases, excessive speed can be a factor in several different contexts, but it most often will play into charges of reckless driving, attempting to elude a police officer, or aggressive driving. Understanding how speed-measuring devices work and being able to competently cross-examine the police officer or an expert about them can be critical in establishing a defense in some cases.
Radar is the acronym for RAdio Detection And Ranging technologies. The police traffic radar unit emits an unmodulated continuous wave (CW) and measures reflections or “echoes” from moving vehicles. The angle pictured above is referred to as the Cosine Effect angle because measured speed is directly proportional to the cosine of this angle; the larger the angle is, the lower the measured speed will be. For this reason, the radar should be located as close to the road—or, more accurately, the projected target path that is to be measured—as is practical to minimize Cosine Effect errors in the readout. The Cosine Effect on moving-mode radar is slightly more complicated and may measure target speed higher than the vehicle’s actual speed under certain conditions.
If an officer is operating a laser or microwave radar at some distance off the road, the Cosine Effect could be so severe that the radar would only measure a relatively small percentage of the actual target speed. In this situation, it is also quite possible the corrected target speed calculates excessively high, which indicates the radar was tracking some other target or signal. For example, if the cosine angle is 60°, the radar-measured speed is only half of the true target speed. If the officer states that, based on observation, the estimated target speed was about the same as the radar-measured speed (in this example only half of the true speed), one could argue that the officer’s judgment was biased by the radar’s readout. If the officer’s estimated target speed conflicts with the speed indicated by the radar unit as corrected for Cosine Effect, which one is correct? The true answer is that perhaps neither one is right!
Learn more about the science behind these devices and how to use it in effective cross-examination. This information is derived from Virginia CLE®’s just-published 2012 edition of Defense of Serious Traffic Offenses in Virginia.
When can you sue for personal injuries in General District Court? And should you? (Expand/Collapse)
September 14, 2012
With juries in many jurisdictions having reputations as being very conservative and defense oriented, Plaintiffs should consider filing suit in the General District Court in appropriate cases.
General District Court is a good forum for cases involving soft tissue injuries with relatively small medical bills or where the cost of presenting expert medical testimony in person or by video deposition exceeds the medical bills or the likely recovery. The admissibility of medical bills and records in actions in the General District Court without the necessity of testimony from a physician may be accomplished by complying with the requirements of § 16.1-88.2. Plaintiff’s counsel must obtain an affidavit of the treating or examining health care provider stating that the Plaintiff was treated, the information contained in the report is true and accurate and fully descriptive as to the nature and extent of the injury, and that the statement of costs is true and accurate. To be admissible at trial such affidavit and the accompanying report must be provided to defense counsel at least ten (10) days prior to trial.
Plaintiff needs to be sure that the procedures of § 16.1-88.2 are followed so that medical bills and records may be introduced. Having a witness other than the Plaintiff who can testify as to pain and suffering is helpful.
Section 16.1-88.2 allows either a Plaintiff or Defendant the opportunity to summon the health care provider to trial, with costs of the appearance to be determined by the Court. Furthermore, if the health care provider is not subject to subpoena for examination, the Court has discretion to allow the party an opportunity to obtain such testimony as “the ends of justice may require”.
Plaintiff should sue for the maximum jurisdictional limit of $25,000.00. In General District Court, the maximum limit of claims for personal property, breaches of contract, debt and fines and personal and property injury, exclusive of interest and attorney fees, is $25,000.00. § 16.1-77. Claims above $25,000.00 must be brought in the Circuit Court. General District Courts have original exclusive jurisdiction of claims up to $4,500.00. General District and Circuit Courts share concurrent jurisdiction of claims between $4,500.00 and $25,000.00.
What about appeals to Circuit Court?
For the defense attorney who prefers to have the case heard in Circuit Court and wants the quickest way to get there, a “de facto” removal still exists: the defendant can simply confess judgment and then appeal the case to the Circuit Court. Of course, this approach can only be utilized if the defendant can post bond in the amount of the judgment and pay the fees of appeal or provide irrevocable confirmation of indemnity coverage through a policy of liability insurance sufficient to satisfy the judgment in the amount of the judgment. § 16.1-107.
This information is derived from seminar materials for Civil Practice in the General District Court: Tips for Practicing in an Often Overlooked Forum.
What duty do prosecutors have to disclose exculpatory evidence? (Expand/Collapse)
September 7, 2012
This hypothetical is derived from Legal Ethics Opinion 1862, published July 23, 2012:
In a pending criminal prosecution, the prosecutor knows of exculpatory evidence: witness statements accusing another individual of the offense with which the defendant is charged. The prosecutor is also aware that the primary inculpatory witness, an eyewitness to the offense, has died and therefore will not be available to testify in future proceedings in the case. A preliminary hearing is scheduled in the case, although the prosecutor has offered a plea bargain in which the defendant would plead guilty to a lesser offense and waive the preliminary hearing. The prosecutor has not disclosed either the exculpatory evidence or the death of the primary witness.
- Is the “timely disclosure” of exculpatory evidence, as required by Rule 3.8(d), broader than the disclosure mandated by Brady v. Maryland, 373 U.S. 83 (1963), and other case law interpreting the Due Process clause of the Constitution?
- If so, what constitutes “timely disclosure” for the purpose of Rule 3.8(d)?
- During plea negotiations, does a prosecutor have a duty to disclose the death or unavailability of a primary witness for the prosecution?
- Under Brady, a prosecutor has the legal obligation to disclose material exculpatory evidence to a defendant in time for the defendant to make use of it at trial. Cases interpreting this legal obligation have noted that the prosecutor’s ethical duty to disclose exculpatory evidence is broader than the legal duty arising from the Due Process clause. “Although the Due Process Clause of the Fourteenth Amendment, as interpreted by Brady, only mandates the disclosure of material evidence, the obligation to disclose evidence favorable to the defense may arise more broadly under a prosecutor’s ethical or statutory obligations.” See Cone v. Bell, 129 S. Ct. 1769, 1783 n. 15 (2009) (noting that Brady “requires less of the prosecution than” Rule 3.8(d)).
Rule 3.8(d) does not refer to or incorporate, in the language of the Rule or its comments, the Brady standard for disclosure. The standard established by the Rule is also significantly different from the Brady standard in at least two ways: first, the Rule is not limited to “material” evidence, but rather applies to all evidence which has some exculpatory effect on the defendant’s guilt or sentence; second, the Rule only requires disclosure when the prosecutor has actual knowledge of the evidence and its exculpatory nature, while Brady imputes knowledge of other state actors, such as the police, to the prosecutor. These differences from the Brady standard raise the further question of whether Rule 3.8(d) requires earlier disclosure than the Brady standard, which requires only that the evidence be disclosed in time for the defendant to make effective use of it. Thus, the prosecutor has complied with Brady’s legal disclosure requirement if the evidence is disclosed in the midst of trial so long as the defendant has an opportunity to put on the relevant evidence.
This conclusion is largely based on the response to Read v. Virginia State Bar, in which the Supreme Court of Virginia reversed the Virginia State Bar Disciplinary Board’s order revoking a prosecutor’s license. The court found that the prosecutor had complied with his legal obligations under Brady and therefore had complied with the correlative ethics rule in force at that time. The disciplinary rule in effect at that time was DR 8-102 of the Virginia Code of Professional Responsibility, which read, “The prosecutor in a criminal case or a government lawyer shall ... [d]isclose to a defendant all information required by law.” Following this decision, the Bar rewrote the relevant rule, replacing the Brady standard with the standard now found in Rule 3.8(d), clarifying that the prosecutor’s ethical duty under that rule is not coextensive with the prosecutor’s legal duty under Brady.
- LEO 1862 provides that the duty of timely disclosure of exculpatory evidence requires earlier disclosure than the Brady standard, which is necessarily retrospective. In light of the conclusion that Rule 3.8(d) requires earlier disclosure than the Brady standard, the meaning of “timely disclosure” is defined as “occurring at a suitable or opportune time” or “coming early or at the right time.” Thus, a timely disclosure is one that is made as soon as practicable considering all the facts and circumstances of the case. The duty to make a timely disclosure is violated when a prosecutor intentionally delays making the disclosure without lawful justifiction or good cause. Where the disclosure of particular facts at a particular time may jeopardize the investigation or a witness, the prosecutor should immediately seek a protective order or other guidance from the court in order to avoid those potential risks. This is not a bright-line rule: the opinion does not give a definitive answer to the question of whether the prosecutor must immediately turn over the exculpatory evidence at issue in the hypothetical; however, the opinion did say that a prosecutor may not withhold the evidence merely because his legal obligations pursuant to Brady have not yet been triggered.
- Assuming that the witness’s unavailability does not come within the scope of Rule 3.8(d), other rules might obligate the prosecutor to disclose this information during plea negotiations or when the plea bargain is being presented to the court. Rule 4.1(a) generally prohibits making a false statement of fact or law, and Rule 8.4(c) specifically forbids any misrepresentation that “reflects adversely on the lawyer’s fitness to practice law.” Both of these provisions would apply to any misrepresentation or false statement made in the course of plea negotiations with the defendant/his lawyer. Rule 3.3(a)(1) specifically forbids any false statement of fact or law to a tribunal, which includes any statements made in the course of presenting a plea agreement to the court for approval and entry of the guilty plea. Accordingly, the prosecutor may not make a false statement about the availability of the witness, regardless of whether the unavailability of the witness is evidence that must be timely disclosed pursuant to Rule 3.8(d), either to the opposing lawyer during negotiations or to the court when the plea is entered.
Opinions of the Committee are advisory only based upon the facts as presented and not binding on any court or tribunal.
This information is derived from Virginia CLE® editorial staff research.
What’s the most common reason arguments on appeal are not heard on the merits? (Expand/Collapse)
August 31, 2012
If a Virginia appellate decision cites Rule 5:25 or Rule 5A:18, there’s a good chance that the court has declined to consider an issue because the error wasn’t preserved for appeal. Both rules require that objections be stated with “reasonable certainty” at the time of the ruling.
What about the exceptions in both rules for good cause shown or to “attain the ends of justice”? Counsel should not count on the appellate courts’ applying this exception. The lesson is clear: a trial attorney should never rely on the exception but instead should specifically identify the objection to the trial court.
Even if an error has been properly preserved in the trial court, it can still be waived if the appellant fails to include an error in a proper assignment of error, in which case the point will be deemed waived even if it was preserved in the trial court. The assignment of errors is a particular aspect of appeals that requires careful attention. Counsel must not only assign the error in the appropriate brief, he or she must ensure the assignment is crafted broadly enough to cover every argument to be made on appeal.
Some practice pointers for preserving error, from the new edition of Appellate Practice — Virginia and Federal Courts:
Move for a pretrial order: Always consider moving under Rule 1:18 for a pretrial order so that the pretrial order can set deadlines for objections to exhibits to be made before trial, for motions in limine regarding admissibility of disputed evidence, etc. In so doing, counsel will ensure that important objections are on the record before trial. Moreover, counsel generally has more time to deliberate on the objections prior to and at a pretrial conference, rather than in the heat of trial.
Object to jury instructions before trial: Ensure that objections to instructions are preserved either (1) by filing a pleading before trial stating any objections (if instructions are exchanged before trial pursuant to a pretrial order) or (2) by ensuring that any refused or granted objections are marked and put in the record, and having a court reporter present at the final pretrial conference or jury instruction conference to transcribe the arguments offered in favor of rejected instructions, or against instructions to which you objected but which have been granted. Most experienced advocates realize that reversals are more likely to result from errors in jury instructions than other errors in the pretrial and trial process, but only if the errors are preserved.
Note your objections in the final judgment order: Although pointing to places in the record where an objecting party made its position known to the trial court is sufficient, the safer practice is either (1) to restate objections in the Final Judgment Order, or (2) to specifically include in the Final Judgment Order cross-references to the parts of the record that reflect the party’s objections and arguments.
Proffer excluded testimony and exhibits for the record: One of the least understood practices essential to preserving error concerns proffers. If testimony is excluded, the appellate court generally cannot address an appeal on that point unless the party offering the testimony proffers the testimony so that it is part of the record. Likewise, exhibits that are excluded need to be marked “excluded” and included in the record, and the offering party must demonstrate in the record not only an objection to the exclusion but the reasons supporting the objection.
This information is derived from Virginia CLE®’s just-published 2012 edition of Appellate Practice — Virginia and Federal Courts.
When may attorney fees be recovered? (Expand/Collapse)
August 24, 2012
Many attorneys believe that attorney fees will not be awarded by the court, but they may be overlooking an opportunity to recover this expense for their clients. Virginia generally follows the “American Rule” for recovery of attorney fees: parties are responsible for bearing the costs of their own attorney fees. Absent a specific contractual or statutory provision to the contrary, attorney fees are generally not recoverable by a prevailing party. Although trial courts possess inherent power to supervise the conduct of attorneys practicing before them and to discipline an attorney who engages in misconduct, they do not have the power to impose as a sanction the award of attorney fees to opposing parties absent statutory authorization. A number of Virginia statutes allow an award of attorney fees in some cases. Additionally, parties to a contract may choose to adopt provisions that shift the responsibility of attorney fees to the losing party in disputes involving the contract. When a contract provides for fee recovery in a specific type of dispute, an attorney’s request for fees must indicate exactly what services the attorney provided on each separate issue. Otherwise, there is no recovery.
A court may also determine that an award of attorney fees is equitable in situations involving divorce/domestic support, common-law fraud, malicious prosecution, false imprisonment, third-party suits, and trustees defending a trust. Rule 3:25 of the Rules of the Virginia Supreme Court governs claims for attorney fees.
The general approach to awarding attorney fees when statutorily or otherwise available is set out in Chawla v. Burgerbusters. A party who wishes to recover attorney fees must establish as a part of the prima facie case that the fees are reasonable. The court may consider, among other things, any of seven listed factors to determine what a reasonable fee award should be. The seven factors are:
- The time and effort expended by the attorney;
- The nature of the services rendered;
- The complexity of the services;
- The value of the services to the client;
- The results obtained;
- Whether the fees incurred were consistent with those generally charged for similar services; and
- Whether the services are necessary and appropriate.
Likewise, the prevailing party in federal litigation generally is not entitled to an award of attorney fees because traditionally, the “American Rule” controls. However, courts will award reasonable attorney fees when there is explicit statutory authority or a fee shifting provision in a contract. The party requesting attorney fees and costs bears the burden of demonstrating the reasonableness of the fees that it seeks to recover.
This information is derived from from Virginia CLE®’s newest handbook, Attorney Fees and Sanctions—Virginia and Federal Courts.
What advantages does an LLC provide as a business entity? (Expand/Collapse)
August 10, 2012
When choosing the form of a business entity, the practitioner and the client often find themselves sacrificing entity flexibility in order to protect the entity's owners from personal liability for the obligations and debts of the entity. One of the primary advantages of an LLC formed under the Virginia Limited Liability Company Act (Va. Code § 13.1-1000 et seq.) is that it offers owners, managers, and agents of the LLC limited liability and pass-through tax treatment without restricting the flexibility of the entity. Section 13.1-1019 of the Act provides: "no member, manager, organizer or other agent of a limited liability company shall have any personal obligation for any liabilities of a limited liability company, whether such liabilities arise in contract, tort or otherwise, solely by reason of being a member, manager, organizer or agent."
Similar benefits can be obtained by the use of an S corporation or limited partnership, but there are restrictions, and ongoing corporate formalities must be followed. An S corporation is subject to corporate formalities and restrictions on stock ownership; for example, a nonresident alien may not be a shareholder, and the maximum number of shareholders that an S corporation can have is 100. A "family" is counted as one shareholder. The ability to have limited liability and own and actively participate in management activities is one of the primary distinctions between an LLC and a limited partnership. Under the Virginia Revised Uniform Limited Partnership Act (Va. Code § 50-73.1 et seq.), a limited partner who participates in the management and control of the business may become personally liable for partnership obligations unless the limited partnership is a registered limited liability partnership. With an LLC, owners may actively participate in the management and control of the business while enjoying limited liability.
Under the Virginia Act, a member may waive limited liability if expressly provided in the articles of organization. The articles of organization or operating agreement could also require or provide for capital calls. A practitioner representing a potential member of an LLC should carefully review the LLC organizational documents for these issues. Additionally, a member may have personal liability arising out of contractual obligations or tort liability. For example, a member has contractual personal liability if he or she personally guarantees a bank debt of the LLC. A member or manager may also be held liable in tort for damages resulting from his or her own negligence or wrongful act, even if the negligence arose in the course of performing his or her duties for the LLC.
Finally, a member may be held personally liable under various statutes or by operation of law in the following instances: (i) for wrongful distributions that the LLC makes to the member; (ii) for any obligations to contribute cash or property to the LLC or to perform services; (iii) for breach of an agreement with the LLC; (iv) as a "responsible person" under federal, state, and local tax laws; (v) as an "operator" under the Comprehensive Environmental Response, Compensation and Liability Act or similar environmental laws; and (vi) for certain securities law violations.
This information is derived from the Virginia CLE® handbook Limited Liability Companies in Virginia, 2012 edition.
When are absent employees protected and when are they not? (Expand/Collapse)
August 3, 2012
The short answer? There isn’t one. It depends (of course) on which statutes apply and on the facts. Consider the federal Family and Medical Leave Act (29 U.S.C. § 2601 et seq.).
First, a brief overview of notice requirements, then the scenario in a 2012 decision from the Western District of Virginia.
What does the employee need to tell the employer? And what are the employer’s obligations?
In 2009, the Labor Department clarified what constitutes sufficient information from the employee to trigger the employer’s obligations to consider FMLA eligibility. Still, no magic words are required (i.e., the employee need not state “I need FMLA leave” to trigger the Company’s obligations).
For example, the employee needs to inform the employer of the anticipated duration of the leave. The employee must also let the employer know  that he or she is unable to perform the functions of the job (or that a covered family member is unable to participate in regular daily activities), or  whether the employee (or family member) intends to visit a healthcare provider or is receiving continuing treatment.
Thirty days’ notice is required for foreseeable leave. If the employee fails to give this notice, the employee must explain his or her failure to do so if the employer requests it (and the employer can delay FMLA coverage if there is no response).
Employees may be required to follow established call-in procedures in connection with an FMLA leave request, absent unusual circumstances. Failure to follow such procedures would result in a delay or denial of FMLA protection, and discipline for failure to follow normal call-in procedures is allowed. “As soon as practicable” now means the same or the next business day. See 29 C.F.R. § 825.302 and § 825.303.
In a 2012 decision, Brushwood v. Wachovia Bank, N.A., et al., 2012 U.S. Dist. LEXIS 24867, 2012 WL 642216, No. 7:10-cv-00565 (W.D. Va. Feb. 28, 2012), a bank employee was terminated from her position as a personal service representative for excessive absenteeism. The bank had a system that deducted points for unscheduled absences and tardiness. An employee with negative 41 points triggered an informal warning and negative 57 points triggered termination. Although the employee had 62.5 points, the bank gave her a warning instead of terminating her.
The employee had an accident at home involving a cut to her foot, which required her to miss work. She tried to get an additional excused absence beyond one day, but the hospital doctor would not provide her with an additional excused day based on the injury. Her supervisor told her that, if she did not show up for work the next day, the bank would likely fire her.
The supervisor encouraged her to go to her personal doctor to see if she could stay out longer than one day so she could qualify for short-term disability and FMLA. The employee insisted her doctor “would not override what the emergency room doctor had told her.”
When she did not show up for work the next day, the bank fired her for “attendance point violation[s].”
The court rejected the employee’s claim that her employer interfered with her right to take protected leave by firing her when she failed to show for work without a medical excuse. The court found that she failed to provide sufficient information to the bank that she was taking protected medical leave.
The court also rejected her claim that the bank had an obligation to inquire further after receiving adequate notice. The court found that her notice was not sufficient to trigger the FMLA obligations of further inquiry.
Lastly, the court was not persuaded by the employee’s claim that it should have been obvious to her employer that she had a serious medical condition when she returned to the office to collect her belongings on crutches. The court concluded that “notice that comes after an alleged interference with an employee’s FMLA rights is ineffective, even if the content would have been sufficient.”
This information is derived from the forthcoming telephone seminar Absent Employees: AWOL or Protected?
How reliable is eyewitness testimony? (Expand/Collapse)
July 27, 2012
Two recent U.S. Supreme Court opinions have dealt with issues surrounding eyewitness identifications: Perry v. New Hampshire and Smith v. Cain. In both cases, a single eyewitness claimed to identify the defendant as the perpetrator of the crime. In each case, however, the single eyewitness was unable to make subsequent identifications of the defendant. In the end, the single eyewitness’s identification was the primary evidence used in the defendant’s conviction.
In Perry, the eyewitness claimed to have seen a “tall, African-American man” breaking into cars and pointed at the defendant who was already being detained by a police officer at the scene. A month later, this witness failed to identify the defendant from a photographic array. At trial, defense counsel attempted to suppress the witness’s identification on the night of the incident, arguing that it amounted to a “one person showup” since the defendant was alone in the parking lot and under detention by the police when the eyewitness identified him. The trial court denied the motion, finding that the suggestive nature of the identification was not created or manufactured by the police, and the defendant was convicted.
Perry’s argument on appeal centered on reliability, contending that improper actions by the police were not necessary for the exclusion of an eyewitness identification because the element of suggestiveness was still present. The Court, however, reasoned that the jury is charged with the duty to determine the reliability of evidence presented, adding that the “fallibility of eyewitness evidence does not, without the taint of improper state conduct, warrant a due process rule requiring a trial court to screen such evidence for reliability before allowing the jury to assess its creditworthiness.” The Court concluded that the various “other safeguards” already in place, including the right to counsel, to confrontation and cross examination, and to specific jury instruction, would adequately protect a defendant.
In Smith v. Cain, an opinion released the day after Perry, the defendant was convicted on five counts of first-degree murder that occurred during an armed robbery. The only eyewitness to the crime identified the defendant as one of three gunmen and claimed to have come “face to face” with the defendant. This testimony was the sole piece of evidence linking the defendant to the crime. After conviction, the defendant obtained police files that included notes and a report written by the lead detective stating that the eyewitness to the crime could not identify any of the gunmen other than to say that they were “black males.” Neither these notes nor the report had been turned over to the defense by the prosecutor.
The Supreme Court overturned this conviction for a violation of the state’s duty to disclose exculpatory evidence under Brady v. Maryland, because the police files were both favorable to the defendant and material to the verdict. The Court touched on the issue of eyewitness identification only briefly, saying that the materiality of impeachment evidence for an eyewitness depends on the facts and circumstances of the case. The central focus in this discussion was whether there was other evidence strong enough to “sustain confidence in the verdict.” In this case, there was no other evidence and the undisclosed evidence actually directly contradicted the eyewitness’s identification and testimony.
There are several differences that, apparently, are integral to the Court’s analysis. First, the circumstances were not manufactured by the police in Perry, whereas there was misconduct by the state in Smith. Second, the eyewitness in Perry made a positive identification initially and was unable to make a second identification a month later. The eyewitness in Smith, however, was never able to make any positive identification and actually had made statements that he could not do so, until he walked into court to testify. Finally, the other evidence against the defendant in Perry was more damaging than in Smith. Perry was met by an officer in the parking lot, holding car audio equipment, standing near a metal bat, which had been heard crashing through car windshields, and standing next to a car with a broken windshield. Smith, on the other hand, was not linked to any of the murders except by the eyewitness’s testimony.
Therefore, the Court seems to be content with eyewitness identification as long as:
- There is no blatant misconduct by the police or the state;
- There is some other evidence presented against the defendant;
- The jury has a chance to weigh the evidence; and
- The “other safeguards” of the adversarial process remain intact.
When may you object during an opening statement? And should you? (Expand/Collapse)
July 20, 2012
Counsel frequently learn of objectionable evidence before trial through discovery or at motions hearings. A motion in limine can be used to exclude such evidence. A successful motion in limine will ensure that the objectionable material will never be heard by the jury. This is particularly important for material that is so prejudicial that even a carefully crafted cautionary instruction by the court would not completely remove the taint caused by exposing the jury to it.
Inevitably, some objectionable evidence gets through, and into opposing counsel’s opening statement. If opposing counsel mentions an area of potential objection in the opening statement, the question becomes whether to object or instead address or minimize its effect in counsel’s own opening statement.
Though an objection during opening statement is considered proper, the potential disadvantages to this tactic must first be evaluated before using it. Most importantly, courts are not as receptive to objections during opening statement. Each side is allowed some flexibility to present an overview of its perspective on the case. Counsel must weigh the potential damage from the objectionable material against the risk that the objection will be overruled, perhaps with an admonishment to objecting counsel that will give the negative evidence even more importance in the jurors’ minds. But when serious harm is threatened, an objection should be made.
And keep in mind, whenever weighing a decision to object, that at trial you are building the record for appeal. Rule 2:103 of the new Virginia Rules of Evidence (effective July 1, 2012) states:
Rule 2:103 OBJECTIONS AND PROFFERS
(a) Admission or exclusion of evidence. Error may not be predicated upon admission or exclusion of evidence, unless:
(1) As to evidence admitted, a contemporaneous objection is stated with reasonable certainty as required in Rule 5:25 and 5A:18 or in any continuing objection on the record to a related series of questions, answers or exhibits if permitted by the trial court in order to avoid the necessity of repetitious objections; or
(2) As to evidence excluded, the substance of the evidence was made known to the court by proffer.
(b) Hearing of jury. In jury cases, proceedings shall be conducted so as to prevent inadmissible evidence from being made known to the jury.
This information is based on the 2012 edition of the Virginia CLE® handbook Objections: Interrogatories, Depositions, and Trial.
When are sales taxes imposed on Internet sales? (Expand/Collapse)
July 13, 2012
The 2012 General Assembly amended § 58.1-612 to require Internet retailers with a physical presence in the Commonwealth to start collecting sales tax from their Virginia purchasers. The purpose is to close a loophole for Internet vendors who have not previously been required to collect Virginia sales tax.
The amendment creates a rebuttable presumption that an out-of-state dealer has sufficient activity in Virginia to require the dealer to register if a “commonly controlled person” maintains a distribution center, warehouse, fulfillment center, office, or similar location in Virginia that facilitates the delivery of tangible personal property that is sold by the out-of-state dealer.
This presumption may be rebutted by demonstrating that the activities are not significantly associated with the dealer’s ability to establish or maintain a market in the Commonwealth.
Effective date: The amendment becomes effective on the earlier of September 1, 2013, or the effective date of federal legislation authorizing states to require remote sellers to collect taxes on goods shipped to in-state purchasers. If the federal legislation is enacted prior to August 15, 2013, and the effective date of the federal legislation is after September 1, 2013, but on or before January 1, 2014, the bill would be effective on January 1, 2014.
Fiscal impact: According to the March 5 Fiscal Impact Statement for Senate Bill 597, which discusses several aspects of this legislation, the amendment will generate an “unknown revenue increase for Virginia,” but a survey of the total revenue generated by affected retailers indicates that Virginia could realize as much as an additional $18 million in FY2014 and $24 million in FY 2015 and beyond.
Constitutional analysis: Collection of taxes from out-of-state retailers is restricted by the Commerce Clause. Under Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977), a tax does not violate the Commerce Clause when it is applied to an interstate activity with a substantial nexus with the taxing state, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the state. Under Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the Commerce Clause barred a state from requiring an out-of-state mail-order company to collect use tax on goods sold to customers located within the state when the company had no outlets, sales representatives, or significant property in the state.
Federal legislation: Three proposed federal acts would aid the effort to collect sales taxes from out-of-state sellers. The “Main Street Fairness Act” would allow collection of state and local sales taxes by states that have joined in the Streamlined Sales and Use Tax Agreement. The “Marketplace Fairness Act” and the “Marketplace Equity Act” also would allow collection from out-of-state dealers, and would require simplification of state sales and use tax laws. For further discussion of the proposed federal acts, see the Fiscal Impact Statement.
This information is derived from Virginia CLE® editorial staff research.
What is the law of unintended relationships (and consequences)? (Expand/Collapse)
July 6, 2012
Most online social networking is informal, but informational advice on a blog or website may create the impression of giving legal advice that will be relied upon by a visitor to the site. And online postings have universal reach. So giving friendly online advice to potential clients in states where you are not licensed can easily amount to the unauthorized practice of law under Rule 5.5.
Ask yourself whether the online resource you’ve created does anything to create client expectations. Clear disclaimers can be helpful in resolving this potential problem.
More tricky than creating unintended client relationships is stumbling into confidentiality and conflict issues. Virginia State Bar LEO 1842 explains that communications with web site users are governed by the same Rules as any other communication with potential clients.
Hypothetical #1: A law firm’s “passive website” lists contact information for each of the firm’s attorneys, and one of the firm’s domestic attorneys receives and reads an unsolicited email from a woman describing the demise of her marriage including her affair with another man. When the attorney realizes she already represents the husband in this matter, what can the attorney do with the information she has learned from this email? Does she owe any duty to keep the wife’s secret?
The Ethics Committee concluded that the attorney owes no duty to the wife, since her detailed email was unsolicited and because the wife used “mere contact information provided by the law firm on its website,” which does not create a “reasonable expectation that the information contained in the email will be kept confidential.”
Key to this analysis is (1) whether the firm’s website “creates a reasonable belief that the law firm is specifically inviting or soliciting the communication of confidential information” and (2) “whether it is reasonable for the person providing the information to expect that it will be maintained as confidential.”
Hypothetical #2: A firm runs afoul of this test by including a form on its website that specifically asks potential clients to share the details of their claims in exchange for an evaluation of the case. When a firm receives information via these communications, even where the firm declines to represent the potential client, Rule 1.6 imposes a duty of confidentiality with respect to any information gleaned from the form.
Just as with a live interview of a prospective client, a lawyer has a duty to protect the confidences of prospective clients who submit information via the firm’s website. What’s more, Rule 1.7(a)(2) imposes a material limitation conflict on the lawyer, who will not be able to represent any adverse parties due to the duty of confidentiality owed to the potential client who contacted him online.
The Committee’s simple solution? A “click-through” disclaimer that requires website visitors to agree to disclaimer terms before being allowed to submit any information through an online form. A lawyer should clearly inform online visitors that no attorney-client relationship will result from this communication and that the lawyer cannot guarantee that information shared via the website will be kept confidential.
What is proper jurisdiction for modification of an interstate spousal support order? (Expand/Collapse)
June 29, 2012
The Virginia Court of Appeals recently had occasion to answer this question: section 20-88.43:2 in Virginia’s version of the Uniform Interstate Family Support Act controls and only the issuing tribunal is permitted to modify the original order.
In O’Neil v. O’Neil, 60 Va. App. 156 (May 12, 2012), a formerly married couple were parties to a contested motion filed by the husband to amend his spousal support obligation. Their original spousal support order was entered by the circuit court of the City of Williamsburg and County of James and was transferred by the final divorce decree to that jurisdiction’s juvenile court for resolution of all future issues. In husband’s appeal of his motion to amend, which was denied by the juvenile court, the circuit court declined on its own motion to exercise jurisdiction and transferred the matter to a Louisiana state court where both the parties and their witnesses resided based on a finding of forum nonconveniens under section 8.01-265 of the Virginia Code. This appeal followed.
The Virginia Court of Appeals reviewed the case de novo as a pure question of law. Unlike the complex rules under the Uniform Interstate Family Support Act (UIFSA) that govern the proper jurisdiction for a child support matter, the Court found that section 20-88.43:2 of the Virginia Code allows only one court to maintain continuing, exclusive jurisdiction to modify an existing spousal support order, and that is the court that entered the original order. Given the conflict between the two statutes, the UIFSA prohibition, which specifically addresses the issue, must prevail over the more general language of section 8.01-265.
Although Virginia’s General Assembly has not adopted the official comments to the uniform act, the Court found that they are an appropriate aid in determining how the code applies. The official comment to UIFSA § 211 distinguishes the UIFSA’s treatment of spousal support from child support and provides that “[t]he issuing tribunal retains continuing, exclusive jurisdiction over an order of spousal support throughout the entire existence of the obligation.” It further explains that the prohibition against modification of a spousal support order by a non-issuing tribunal is consistent with the principle that local law should apply to these cases to ensure efficient handling and minimize choice of law problems which would be almost impossible if spousal support orders were subject to modification in a second state.
This information is derived from Virginia CLE® editorial staff research.
Can an attorney represent both sides in a short sale? (Expand/Collapse)
June 15, 2012
For several months Gibbs, Harmon and McGee, P.C., has been assisting a homeowner in negotiating a short sale with Big, Bigger, Biggest Bank (a/k/a B4), but the lender has not yet agreed to the purchase price on the contract. The purchaser asks GHM to act as settlement agent on their behalf. GHM speaks with their seller client, and agrees, after written disclosure and agreement by the parties, to handle both sides of the settlement.
- Can the attorney represent both sides in this situation? How is this distinguished from a standard dual settlement transaction?
- Can proper disclosure cure any potential conflict-of-interest problems?
No Virginia Legal Ethics Opinion currently addresses the issue of short sale negotiation by an attorney who represents multiple parties in a real estate transaction. The issue of simultaneous representation of the purchaser and seller in a short sale transaction has not yet been formally addressed in Virginia. Some attorneys believe that full disclosure to both parties will work as well in this situation as in any other real estate transaction. Others believe that when the lender has not yet agreed to the purchase price, it is impossible to solve the conflict of interest expressed in Rule 1.7 (b), “the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client.” The seller wants to be able to sell the real estate and have the smallest deficiency obligation possible if the lender plans to pursue collection. The purchaser wants to be able to purchase the real estate for the lowest possible price, or conversely, it may be the purchaser’s dream house which they want to purchase at any price. The lender wants to maximize the amount it recovers in the sale transaction. Theoretically, all parties want the transaction to close.
Non-attorney settlement agents in the same situation may be guided, as an analogy, by UPL Op. 212, Whether a Non-Lawyer Settlement Agent Can Negotiate a Debt on Behalf of a Debtor. Until this issue is resolved for attorneys, a prudent course of action would be to avoid dual representation in cases where the lender has not yet agreed to the contract sales price.
Virginia Rules of Professional Conduct:
These hypotheticals were derived from the 30th Annual Real Estate Practice Seminar Materials.
- Rule 1.1 — Competence
- Rule 1.7 — Conflict
- Rule 7.1 — Communications Concerning a Lawyer’s Services
What is the "eight corners rule"? (Expand/Collapse)
June 8, 2012
What is the duty of an insurer to defend a claim under a commercial general liability (CGL) policy? And how is the “eight corners rule” applied?
In AES Corporation v. Steadfast Insurance Co., in the context of a declaratory judgment action, the Virginia Supreme Court recently held that an insurance carrier had no duty to defend an insured against claims by an Inupiat village in Alaska for damages for global warming, where the insurance policy only protected against accidental occurrences and the complaint alleged that the insured intentionally released carbon dioxide into the atmosphere.
The relevant insurance policies provided coverage for damage resulting from an “occurrence,” and defined an occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful condition.”
In its analysis, the Court stated that even though an insured’s action starting the chain of events was intentionally performed, when the alleged injury results from an unforeseen cause that is out of the ordinary expectations of a reasonable person, the injury may be covered by an occurrence policy provision. In such a context, the dispositive issue in determining whether an accidental injury occurred is not whether the action undertaken by the insured was intended, but rather whether the resulting harm is alleged to have been reasonably anticipated or the natural or probable consequence of the insured’s intentional act.
The Court used the “eight corners rule,” comparing the “four corners” of the allegations contained in the complaint against the “four corners” of the AES’s insurance contract with Steadfast, and found that defense of the claim by Steadfast was not required. It concluded that, because the insured power company’s release of greenhouse gases was alleged to be an intentional act that it knew or should have known could have adverse effects, there was no coverage for this action as an “accident” or “occurrence” under the policy. Allegations of negligence are not synonymous with allegations of an accident.
While acknowledging that the insurer’s duty to defend is broader than the duty to pay the claim, the Court observed that an intentional act of the insured cannot be characterized as either an “occurrence” or an “accident,” and therefore is not an insurable event. As the concurring opinion notes, this case arose in the context of a corporation’s commercial general liability (CGL) policy, so it is not known what effect, if any, this may have on other types of insurance policies that were not before the Court.
This information is derived from the forthcoming Virginia CLE® seminar, Recent Developments in the Law: News from the Courts and General Assembly, and from research by Virginia CLE® editorial staff.
Non-testifying experts: Must you reveal them? May you pay them? (Expand/Collapse)
June 1, 2012
Preparation for a large and complex trial often requires consultation with several experts, some of whom may not end up testifying on behalf of your client. Here are two hypotheticals illustrating two of the ethics questions that may arise. The analysis for Hypothetical #1 is a bit long, so keep scrolling for the second hypothetical.
Hypothetical #1: Discovery of Non-Testifying Experts
You are looking for a testifying expert who will understand a very complicated situation, and provide the type of testimony that will help your client. You have hired two experts as non-testifying consultants. After meeting independently with the consultants, you find that one would actually provide damaging expert testimony if called to the stand, but that the other believes in your theory and is willing to provide favorable expert testimony.
(a) May you designate the helpful expert as a testifying expert without revealing the other consultant's conclusions?
Answer: Yes (Probably)
(b) Must you include correspondence to and from the other consultant on your privilege log?
Answer: No (Probably)
In sharp contrast to the discovery rules governing testifying experts, non-testifying experts are generally immune from discovery.1 Most courts even allow the party hiring such a non-testifying expert to withhold her identity.2 The party generally does not even have to log documents created by the non-testifying expert.3 In Virginia courts, discovery of an expert who is not expected to be called as a witness at trial is covered under Rule 4:1(b)(4)(B), which provides for discovery "only upon a showing of exceptional circumstances under which it is impracticable for the party seeking discovery to obtain facts or opinions on the same subject by other means."
1/ Thuma v. PolyMedica Corp. (In re PolyMedica Corp. Sec. Litig.), 235 F.R.D. 28, 30 (D. Mass. 2006) (assessing plaintiffs' efforts to obtain the production of documents "underlying" a report PriceWaterhouseCoopersLLP ("PWC") prepared for two of its clients, and which the client disclosed to the plaintiffs and to the SEC; noting that the defendants had designated PWC a non-testifying expert; "The protection afforded non-testifying experts is distinct from the work-product doctrine and the attorney client privilege.").
2/ Crouse Cartage Co. v. Nat'l Warehouse Inv. Co., Cause No. IP 02-071 C T/K, 2003 U.S. Dist. LEXIS 478, at *4, *6-7, *8, *9 (S.D. Ind. Jan. 13, 2003) (assessing the plaintiff's retention of a real estate broker before filing the lawsuit; noting that the plaintiff "asserts that the identity and documentation generated by its real estate broker are protected by the work product doctrine since the broker was retained in anticipation of litigation"; noting that the real estate broker was a non-testifying expert under Rule 26(b)(4)(B); explaining that "[t]he underlying rule of nondisclosure invites shopping for favorable expert witnesses and facilitates the concealment of negative test results.... Crouse has the burden of demonstrating that the real estate broker's role was that of a non-testifying expert.... The key inquiry under Rule 26(b)(4)(B) is whether the consultation took place in anticipation of litigation."; finding that the plaintiff had met this burden by showing that it retained the real estate broker one month after retaining a lawyer to file the lawsuit, and hired the real estate broker "specifically for the purpose of evaluating [its] potential damages in anticipation of litigation against Defendants" (internal quotations omitted); noting that the plaintiff "has certified to the Court that he has not determined whether he will utilize the real estate broker as a damage expert at trial"; noting that defendants could not establish the "exceptional circumstances" necessary to undertake discovery of the non-testifying expert).
3/ Ludwig v. Pilkington N. Am., Inc., No. 03 C 1086, 2003 U.S. Dist. LEXIS 17789, at *10-11 (N.D. Ill. Sept. 30, 2003) (finding "that the consultants' documents at issue are exempt from discovery on the ground that they are non-testifying expert information. As a threshold matter, non-testifying expert information is entirely exempt from discovery not on the basis of privilege but, rather, on the basis of unfairness.... Where documents are withheld under a claim that they are exempt from discovery altogether under Rule 26(b)(4)(B), there is no express requirement that a privilege log be produced.... Thus, plaintiffs' contention that PNA's non-testifying expert information is subject to disclosure on a privilege log under rule 26(b)(5) is simply incorrect.").
Hypothetical #2: Paying Non-Testifying Experts
You have hired a non-testifying expert to help you understand the facts of a complicated case, and "vet" several testifying experts whom you are considering hiring.
May the fee you pay the non-testifying expert be contingent on the outcome of the case?
Most authorities allow payment of a contingent fee to a non-testifying expert. Virginia LEO 1047 (3/8/88) (a lawyer may engage a medical consulting firm that receives compensation on a contingent fee basis as long as the lawyer does not share any portion of his fee with a consulting firm and as long as no payments to any expert witness the consulting firm might provide are contingent on the outcome of the case in which the expert testifies); Virginia LEO 449 (4/13/82) (a lawyer may arrange for a medical expert to provide technical assistance on a contingent fee basis, because the ban on contingent fee arrangements applies to expert witnesses, not consultants).
Available from Virginia CLE® Publications:
When may a litigant successfully pierce the corporate veil? (Expand/Collapse)
May 25, 2012
Piercing the corporate veil is the most litigated issue in corporate law. When the corporate veil is pierced, the corporate fiction is ignored and shareholders, officers, and directors can be liable for torts and contractual breaches that appear to be attributable to the corporation. If the shareholders themselves disregard the separation of the corporate enterprise, the law will also disregard it so far as necessary to protect individual and corporate creditors.
Although the concept of piercing the corporate veil sounds straightforward, its application is nebulous at best. The veil protects in two directions and can be pierced in either direction. The shield of the corporate veil limits the liability of shareholders, officers, and directors for wrongs committed by the corporation, but it also shields the corporation from wrongs committed by the shareholders, officers, and directors.
The more standard notion of piercing occurs when a plaintiff is seeking to attack or collect from a shareholder, officer, or director of a corporation for acts or omissions that appear to have been taken by the corporation itself. For example, a corporation breaches a contract to repay borrowed money. The creditor wants to pierce the corporate veil to collect from the corporation’s sole shareholder.
The opposite type of piercing can be described as outsider reverse piercing: a plaintiff seeking to attack or collect from a corporation for acts or omissions that appear to have been taken by a shareholder, officer, or director (or by another entity, such as a sister corporation). For example, an individual breaches a contract to repay borrowed money. The creditor wants to collect from a corporation that is owned and operated by the debtor.
Courts are mindful of the economic justifications for preserving the corporate veil. The Virginia Supreme Court is “very reluctant” to permit veil piercing. See e.g. C.F. Trust v. First Flight, 266 Va. 3, 11 (2003). Veil piercing remains an “extraordinary exception” to standard corporate law. “In Virginia, unlike in some states, the standards for veil piercing are very stringent, and piercing is an extraordinary measure that is permitted only in the most egregious circumstances.”
The Supreme Court of Virginia has cautioned that a freewheeling application of veil piercing would have a chilling effect upon corporate investors, thereby frustrating the fundamental economic policies that undergird the corporate scheme, and has consistently held that only an “extraordinary exception” justifies disregarding the corporate entity and piercing the veil. The same standard is used for both standard and outsider reverse piercing. “There is no logical basis upon which to distinguish between a traditional veil piercing action and an outsider reverse piercing action.” Id. at 16.
Corporate veil piercing is a standard, judged under the totality-of-the-circumstances analysis. There are no dispositive or definitive rules. Each case is sui generis and requires examination of the particular factual circumstances surrounding the corporation and the acts in question.
Under the two-part piercing test, the target of the veil-piercing action must have both:
- Controlled or used the corporation for his own purposes; and
- Perpetuated a fraud or crime, committed an injustice, or gained an unfair advantage.
There is some slight variation in the language courts use to articulate the two-part piercing test. The differences in language, however, may not be substantive.
This information is derived from the 2011 seminar materials for Piercing the Corporate/LLC Veil: The Pursuit and Defense of Shareholder’s Individual Assets (also available as an online or downloadable audio seminar).
Three Virginia Code titles disappear on October 1. (Expand/Collapse)
May 18, 2012
Well, sort of. Titles 26 (Fiduciaries Generally), 31 (Guardian and Ward), and Title 64.1 (Wills and Decedents' Estates) are repealed by Chapter 614, enacted at the 2012 Session, effective October 1, 2012. So are Chapters 10 and 10.1 of Title 37.2 (relating to adult guardianship) and several chapters of Title 55 (those relating to trusts and similar topics). The General Assembly has overhauled Virginia’s wills, trusts, estates, and fiduciary statutes, consolidating the substance of the repealed Code provisions in new Title 64.2, “Wills, Trusts, and Fiduciaries.”
The Code Commission has prepared tables to assist with cross-referencing old and comparable new sections: Title 64.2 to Title 64.1; Title 64.1 to Title 64.2; and Other Titles to Title 64.2.
In addition, the Code Commission’s December 2011 Report summarizes the more significant changes in the enactment of Title 64.2. For example, references to "court of competent jurisdiction," "appropriate court,” or “court,” or the clerk thereof, have been changed to “circuit court” to clearly set forth which court has jurisdiction over the matters in Title 64.2. Among substantive changes, new §§ 64.2-102 and 64.2-103 provide that a paternity judgment entered by any court of competent jurisdiction is sufficient evidence of paternity, so as to include judgments of other states that are entitled to full faith and credit. Under § 31-1, the parents of a legitimate unmarried minor are the joint natural guardians of such child. Under new § 64.2-1700, this provision is expanded to include children born out of wedlock as well.
Chapter 614 contains several savings and transitional clauses. To mention a few:
- Repeals of Virginia Code provisions by Chapter 614 shall not affect the validity, enforceability, or legality of any will, trust instrument, power of attorney, or other instrument or of any fiduciary relationship, or any right established or accrued under such instrument or by such relationship, that existed prior to such repeal.
- References throughout the Virginia Code to former Code provisions shall be construed to apply to the new or renumbered provisions.
- Regulations affected by the Code revisions shall continue in effect to the extent that they are not in conflict with Chapter 614 and are deemed to be regulations adopted under it.
This information is derived from Virginia CLE® editorial staff research.
Can changes be made to a written fee agreement after it is signed? (Expand/Collapse)
May 11, 2012
Although this hypothetical regarding a fee agreement comes from the written materials for the 42nd Annual Criminal Law Seminar, the questions presented below pertain with equal force to a civil fee agreement.
Facts: You agree to charge $1,000 to represent a client in her defense of a charge of domestic assault and battery in juvenile and domestic relations district court. Before she leaves your office, she writes you a check for $1,000.
Question 1. Since your agreement provides for a flat fee, may you deposit the check directly into your operating account?
Question 2. Over the following week, your new client calls your office several times each day and later demands a three-hour trial preparation meeting for what you assumed would be a straightforward misdemeanor trial. May you increase your fee to $2,000?
Question 3. For reasons you cannot comprehend, your client directs that you plead her guilty in the juvenile and domestic relations district court, appeal that conviction to the circuit court, and try the case to a jury. May you increase your fee to $3,000?
Question 4. May you, with your client’s agreement, charge a $500 premium if the charge is nolle prossed in circuit court?
Answer 1. No. [LEO 1606 (11/24/94).] Fees paid in advance for particular legal services not yet performed are advanced legal fees regardless of the terminology used in the employment contract. Advanced legal fees are not violative of the Disciplinary Rules as long as they are properly deposited and identified as belonging to the client until earned. The Ethics Committee has consistently opined that the element of payment for future legal services differentiates advanced legal fees from a retainer. The two terms are not synonymous. [See also LEO 1322; LEO 1178.]
Answer 2. No. [ABA Formal Opinion 11-458 (8/4/11).] Modifications sought by a lawyer that change the basic nature of a fee arrangement or significantly increase the lawyer’s compensation absent an unanticipated change in circumstances ordinarily will be unreasonable. The only specific reference in the Model Rules regarding changes to fee arrangements is a single sentence in Rule 1.5(b), which states: “Any changes in the basis or rate of the fee or expenses shall also be communicated to the client.” Thus, changes in fee arrangements during representations clearly are contemplated, but this single reference does not mean that lawyers are free to change existing fee arrangements simply by giving notice to clients. Other provisions of the Model Rules, particularly Rule 1.5(a), as well as Rules 1.4 and 1.8(a), are relevant to modifications of existing fees.
Answer 3. Yes. [Rule 1.5] An agreement may not be made whose terms might induce the lawyer improperly to curtail services for the client or perform them in a way contrary to the client's interest. For example, a lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is foreseeable that more extensive services probably will be required, unless the situation is adequately explained to the client. Here, however, the client has asked the attorney to provide a defense in a second court on appeal from the juvenile court. This change necessarily will involve different services from what the original agreement to defend the client in the juvenile court entails.
Answer 4. No. [Rule 1.5(d)] Payment of a premium based on a particular result violates the provision in Rule 1.5 that states:
(d) A lawyer shall not enter into an arrangement for, charge, or collect a contingent fee: (1) in a domestic relations matter, except in rare instances; or (2) for representing a defendant in a criminal case.
The preceding information combines the original hypothetical presented in the ethics portion of the 42nd Annual Criminal Law Seminar Materials with additional research by Virginia CLE® editorial staff.
What is lemon laundering? (Expand/Collapse)
May 4, 2012
Lemon laws are nothing new. Virginia’s law, the Virginia Motor Vehicle Warranty Enforcement Act, § 59.1-207.9 et seq., was enacted in 1984. But how are consumers protected against “lemon laundering,” that is, the resale of vehicles previously repurchased by dealers or manufacturers under lemon laws?
Take the following scenario:
Consumer spots a two-year-old, pristine-looking Buccaneer Grand Corsair on the used car lot. The displayed Buyers Guide warning sticker says the dealer warranty is 30 days or 1000 miles. A deal is struck and the happy consumer takes her newly purchased Corsair home. (She even agrees to purchase an after-market extended warranty for an additional fee.)
A week later, the used car manager calls her to learn how she likes the Corsair, and to ask her to come down to the dealership to sign some “more” papers. When she arrives, the used car manager congratulates her on her good judgment in selecting this particular Corsair, and advises of additional good news: the manufacturer, BuccaneerMotorsGroup, has provided a free, additional twelve-month warranty—just sign here (which she does).
That night, upon closer examination of the new Notification form she signed earlier that day, she discovers that she now owns a Corsair “lemon” that BuccaneerMotorsGroup was forced to repurchase in West Virginia for a defective four-wheel drive system evidenced by unrepairable vibration and fluid leakage. Having noticed on the garage floor puddles of oil below the front and rear differentials, she is now outraged. When the general manager at the dealership is confronted with her demand for a refund of their money, she is escorted to the door.
After further investigation, with assistance of counsel, she learns:
- the dealer bought the defective Corsair at auction for considerably less than the price paid by the consumer, and BuccaneerMotorsGroup had disclosed to the dealer the information on the Notice form;
- expert opinion on valuation was that she had overpaid for this “tainted” Corsair by several thousand;
- Virginia’s Warranty Enforcement Act mandated pre-purchase disclosure by the dealership; failure to disclose is a violation of the “lemon” law (among other transgressions);
- BuccaneerMotorsGroup (and all other manufacturers) “launder” thousands of lemon buy-backs though auctions all over the United States, and predictably hope to get top dollar at auction from franchise dealerships;
- these manufacturers, knowledgeable that dealers sometimes fail to provide disclosures, and to keep auction prices paid by dealers high, turn a blind eye to dealer sales and try to wash their corporate hands to dealer fraud; and
- the dealer had slipped in on the back of the Buyers Order an arbitration clause for binding, AAA arbitration, which was enforced by the Arlington Circuit Court.
Dealer liability is relatively straightforward in these cases. The greater challenge, however, is proving fraud against a manufacturer
which has cleverly facilitated the recycling of its junk through the auction process and shady dealers.
At least one court has determined that, for purposes of lemon laundering under Ohio law, a duty of disclosure remains with the manufacturer and is nondelegable. See, e.g., Pearn v. DaimlerChrysler Corp., 772 N.E.2d 712 (Ohio App. 2002) (affirming finding of manufacturer’s nondelegable disclosure duty and liability for lemon laundering). See, generally, Carter v. Chrysler Corp., 743 So. 2d 456 (Ala. Civ. App. 1998) (cert. den. 1999).
Virginia agency law supports the consumer’s argument for mandatory disclosures by the manufacturer. The argument goes as follows: the factory defendant has clothed its dealer-agent with authority to advertise and sell its products, and established certain disclosure obligations in its franchise agreement and dealer policy manual.
Determining a principal’s liability for an apparent agent’s fraudulent conduct is reserved for the trier of fact. See Dudley v. Estate Life Insurance Co. of America, 257 S.E.2d 871 (1979) (relying on Restatement (Second) of Agency and cases outside Virginia regarding a principal’s liability for an agent’s fraud).
The manufacturer will contend that, for proving fraud by silence, one must specifically inquire of a merchant whether he is being cheated by the seller’s concealment of information required to be disclosed. This argument—relying on the absence of any direct contact between consumer and manufacturer—ignores Virginia law assigning liability to principals, and proscribing fraud “which may take the form of silence or the failure to speak.” Nationwide Mut. Ins. Co. v. Hargraves, 405 S.E.2d 848, 851 (1991).
For an excellent summary of Virginia law on fraud by “silence,” also see Hirschberg v. G.W. Motors, Inc., 34 Va. Cir. 55 (Winchester Cir. Ct. 1994).
This information is derived from “Consumer Law Basics: The Lemon Law, Breach of Warranty, and Fraudulent Vehicle Sellers.” Click to view more information on or purchase the Online Seminar, the Downloadable Audio Seminar, or the Downloadable Seminar Materials.
Is it admissible? Test your knowledge. (Expand/Collapse)
April 27, 2012
Test your knowledge of the admissibility of evidence with five questions based on the following scenario:
Phyllis Smith is called as a witness in a criminal case. She was a witness to a fight involving Victim and Defendant, who is charged with assault and battery. The Defendant claims self-defense. Ms. Smith has known both Victim and Defendant for five years. The Victim is available to testify. The prosecution calls Ms. Smith to the stand.
Question 1: The prosecutor asks Ms. Smith whether Defendant intended to hurt Victim during the fight. The defense objects. Should the objection be sustained?
Question 2: The prosecutor asks Ms. Smith whether she saw who struck the first blow. The defense objects. Should the objection be sustained?
Question 3: The prosecutor asks Ms. Smith whether she has an opinion as to the character of Victim for peacefulness. The defense objects. Should the objection be sustained?
Question 4: On cross-examination, defense counsel asks, “Isn’t it true that Victim had a smile on his face when he struck Defendant?” The prosecution objects. Should the objection be sustained?
Question 5: On cross-examination, defense counsel asks, “Isn’t it true that Victim wanted to fight with Defendant?” The prosecution objects. Should the objection be sustained?
Answer 1: Yes. One lay witness cannot know what was in the mind of another person.
Answer 2: No. The witness can answer as to what she saw. This is a fact, not an opinion.
Answer 3: Yes. A Guide to Evidence in Virginia § 404 (a)(2).
Answer 4: No. This is a fact that the witness observed.
Answer 5: Yes. This is another opinion about someone else’s state of mind.
When is a contract “in writing,” and why does it matter? (Expand/Collapse)
April 13, 2012
From law school, we know that the statute of limitations on a written contract is five years [Virginia Code § 8.01-246(2)], but the limitation period is only three years for an oral contract [Virginia Code § 8.01-246(4)].
The issue in Dixon v. Hassell & Folkes, P.C., 283 Va. 456 (2012), was not whether a contract existed between the parties, but whether the contract was “in writing” for purposes of the five-year statute of limitations. The Supreme Court of Virginia held that it was not a written contract.
The plaintiff, Dixon, was the former owner of a commercial parcel who had hired the defendant, Hassell, to survey and mark the boundary lines. Dixon then constructed a concrete slab on the land and sold it to Brat Development in March 2006; Brat began construction of an office building. Soon after the construction began, however, the partnership that owned an adjacent tract brought an action to enjoin the project, alleging that the office building encroached on its land. The circuit court agreed and ordered the removal of the building.
When Brat sued Dixon for constructive fraud and breach of warranty in the deed, Dixon filed a complaint against Hassell in August 2009 for breach of contract because of the mistake in determining the boundary line. Dixon alleged that a written contract existed with Hassell although he had never signed the writing, which was prepared by Hassell. The unsigned writing stated that if Dixon found its terms acceptable, an executed copy would serve as the parties’ agreement. Hassell filed a plea in bar of the three-year statute of limitations barring enforcement of an oral contract. The trial court granted the plea in bar.
On appeal, the court agreed with Dixon, who had argued that his failure to sign was a mere formality and that it did not prevent the formation of a contract. But because the language in the writing itself required an executed copy of the contract from Dixon before the writing could become a written contract, the court held that only an oral contract existed between the parties, and that Dixon’s failure to sign and return the writing as its terms required prevented the writing itself from becoming a written contract as contemplated by Virginia Code § 8.01-246(2). Citing Corbin on Contracts, the court said, “[T]he making of a valid contract requires no writing whatever; and even if there is a writing, there needed be no signatures unless the parties have made them necessary at the time they express their assent.” Arthur L. Corbin (rev. by Joseph M. Perrillo), Corbin on Contracts §§ 31-32 (emphasis added.)
This information is derived from Virginia CLE® editorial staff research.
How could counsel stop a foreclosure with a last-minute bankruptcy filing? (Expand/Collapse)
April 5, 2012
HYPOTHETICAL: Distraught clients arrive at your office and tell you their house will be auctioned at 9:01 a.m. the following day. They say that their mortgage has switched hands four times in the last 18 months, and that the present mortgage company has lost track of all of their payments. The prior mortgage company told them that their mortgage was behind and refused to accept payments. They went through various loss-mitigation programs suggested by the mortgage company but have come to a dead end. The clients want to keep the house, but it is unclear exactly how far behind they are in making their mortgage payments, if at all. Although they have not brought bank statements, they claim that their mortgage has been paid. The prospective clients have $2,000 in cash but have not done the credit briefing required under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the Act), nor do they have anything remotely approaching the necessary prerequisite information incident to a typical bankruptcy filing. This is a true emergency.
Could counsel file a bankruptcy petition for these clients?
ANSWER: It depends. Counsel may be able to file the bankruptcy petition on behalf of the prospective clients by the next day, although selecting which chapter may be a problem. If the petition is to be filed before the foreclosure occurs, counsel will need to: (i) prepare and file a bankruptcy petition, and (ii) file a Motion to Extend Time to File Schedules and Statement of Financial Affairs Pursuant to Rule 1007(c), F.R.B.P. If counsel decides to take the case, the clients should execute a written contract before the filing that clearly and conspicuously explains the services to be provided and the associated fees or charges. Counsel should check to see if the prospective clients have filed before and also get the prospective clients in front of a computer to attend a credit briefing performed by an approved nonprofit budget and credit counseling agency as described in11 U.S.C. § 111(a). The clients must then print out a certificate that this has been completed.
Written notice must be given to the clients, pursuant to 11 U.S.C. § 527(a)(1), that contains (i) descriptions of chapters 7, 11, 12, and 13, (ii) the general purpose, benefits, and costs of filing under each of these chapters, (iii) the types of services available from credit counseling agencies, and (iv) statements specifying that a person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty of perjury under Title 11 will be subject to criminal fine, imprisonment, or both.
Pursuant to 11 U.S.C. § 527(c), the notice must also advise that: (i) information required to be provided with a petition and in the case must be complete, accurate, and truthful; (ii) all assets and liabilities must be disclosed in the bankruptcy filing including the replacement value of each asset; and (iii) current monthly income, net monthly income, monthly expenses, and disposable income must be provided. Information in the case is subject to audit, and failure to provide it may result in dismissal of the case under Title 11 or other sanctions. A written statement as provided for in 11 U.S.C. § 527(b) should also be given to the clients. Counsel should have these types of notices ready to go and should easily be able to meet these requirements.
The dilemma, however, is the absence of any information from the prospective clients. In the hypothetical, the prospective clients have brought no documentation with them. The prospective clients have no option; they must file a list of creditors with their petition. Counsel should explain this to them, and sit with them and develop a list of all creditors with proper addresses. 11 U.S.C. § 521 requires a debtor to file: (a) a list of creditors; and unless the court orders otherwise: (b) schedules of assets and liabilities; (c) a schedule of current income and current expenditures; (d) a statement of financial affairs; (e) copy of all payment advices (stubs) or other evidence of payment received within 60 days before the filing date; (f) a statement of the amount of monthly net income itemized to show how the amount is calculated; and (g) a statement disclosing any reasonably expected increase in income or expenses over the next year following the filing of the petition.
After receiving the necessary information to complete the petition, counsel should ask prospective clients to go home and retrieve all written correspondence they have received for the past 90 days. With respect to the other filing requirements specified in § 521, there is an out provided to the prospective clients: they may seek court approval for an extension of time to file such documents. Current Rule 1007(c), F.R.B.P., provides that if a bankruptcy petition is accompanied by a list of all of the debtor’s creditors and their addresses, then that debtor has 14 days to file the documents requested in 11 U.S.C. § 521(1)—the schedules and statement of financial affairs. It is reasonable to expect that this rule will be expanded to cover a 14-day period to file the documents requested in § 521(a)(1)(B) as long as the debtor does file a list of creditors with the petition.
The foregoing hypothetical is derived from Divorce, Foreclosure, and Bankruptcy Seminar Materials (2011), available from Virginia CLE® for $75.
May defense counsel withhold information from his client in plea negotiations? (Expand/Collapse)
March 30, 2012
When negotiating a plea in a criminal case, may the Commonwealth propose and may defense counsel agree that the name of a certain witness is not to be revealed to the defendant?
Legal Ethics Opinion 1854, “Settlement Negotiations in a Criminal Case,” poses this hypothetical: The Commonwealth’s Attorney (CA) and defense counsel are negotiating a plea agreement. Generally, the CA has no legal or ethical obligation to a particular witness in this case; however, the CA wishes to “protect” Witness X by restricting dissemination of the witness’ identity and involvement. The CA sends a settlement offer to the defense counsel, listing the material witnesses in the case, including the name and involvement of Witness X whom the CA wishes to “protect.” A condition of the proffered plea agreement requires that the defense counsel reveal to the client neither the identity of Witness X nor the scope of Witness X’s involvement in the case. The CA makes it clear to the defense counsel that if the defendant is made aware of Witness X’s identity and involvement, then the plea offer will be withdrawn.
QUESTION 1: May a CA make a settlement offer to the defense counsel, requiring the defense counsel to refrain from providing relevant information to his or her client as a condition of the settlement offer?
QUESTION 2: May defense counsel withhold from the client relevant information if withholding such information results in a desirable plea agreement for the client?
ANSWER 1: The CA is attempting to protect Witness X from possible retribution, but Rule 3.4(h) directly prohibits the CA from requesting a person (the defense counsel) to refrain from voluntarily giving relevant information to another party (the defendant). Alternatively, because the CA is neither obligated to offer a plea agreement nor obligated to provide all inculpatory evidence or witness testimony to the defense, the CA would be permitted to offer a plea based upon a nameless confidential informant for the defense counsel to present to his client. The defense counsel and his or her client would then have to assess the plea offer based upon the limited information available to them.
ANSWER 2: It is unethical for the defense counsel to sequester certain facts from his or her client, as Rule 1.4(c) requires the defense counsel to inform the client of all of the matter’s pertinent facts that will affect the determination of the defendant’s plea. Rule 1.4(c) would permit the defense counsel to withhold such information from the defendant if the defense counsel believes that the defendant has enough relevant information about the pertinent facts to make an informed decision; however, whether Witness X’s identity and involvement is additional information that must be disclosed to the client in order for the client to make an informed decision about accepting or rejecting the plea offer is fact specific and must be determined on a case-by-case basis. Fundamentally, the defense counsel cannot withhold from the defendant salient facts or information that would be pertinent to the defendant’s decision to accept a settlement or plea agreement in his or her matter.
This information is derived from Virginia CLE® Publications editorial staff research.
Must a defendant know what drug he has in his possession to be convicted? (Expand/Collapse)
March 23, 2012
In Virginia, the answer is no. In Sierra v. Commonwealth, decided by the Virginia Court of Appeals on March 20, 2012, the officer who had stopped the defendant for DUI found unidentified pills in the defendant’s pockets during the search incident to arrest. The defendant testified that he had asked someone in the bar where he was performing for Tylenol or aspirin because he had back pain. He claimed that he did not know that two of the pills he received were Concerta, a Schedule II controlled substance generically known as methylphenidate.
After conviction of possession of a controlled substance under Virginia Code § 18.2-250, the defendant challenged the sufficiency of the evidence, arguing that the Commonwealth had failed to prove that he was aware of the character and presence of the particular substance found in his possession.
The court held that the plain language of § 18.2-250 requires only that a defendant know that the substance he possesses is in fact a controlled substance but does not require him to know precisely what the controlled substance is. The court found that the General Assembly has not chosen to insert a mens rea requirement, but rather chose to specify only the general proscription against possessing controlled substances in the first paragraph of subsection (A), and this remains true no matter what the controlled substance turns out to be. Different levels of punishment are imposed by the statute depending on the analysis of the drug that the defendant possesses, even if the defendant is unaware or perhaps mistaken as to the precise identity of the specific substance.
Similar wording in the federal drug distribution statute has been interpreted to mean that a defendant who is in actual possession of a particular controlled substance, although he intends to distribute another, may be punished for the drug that is found in his possession. A defendant’s awareness that he was trafficking in what he believed was a controlled substance, albeit a different type for which he was arrested, is all that is required to satisfy the mens rea portion of the substantive offense.
This information is derived from Virginia CLE® Publications editorial staff research.
What is a motion craving oyer, and when do you use it? (Expand/Collapse)
March 16, 2012
Your client has been served with a complaint mentioning a document. The document is not attached to the complaint, but is, in fact, the centerpiece of the complaint. How do you respond?
One option is to file a motion craving oyer, forcing the plaintiff to file the document with the court. Collinsky Consulting v. Holloway, 57 Va. Cir. 403, 405 (Norfolk 2002). A defendant may crave oyer of all documents that form the basis of the plaintiff’s claim, as “no intelligent construction of any writing or record can be made unless all of the essential parts of such paper or record are produced.” Culpeper Nat’l Bank v. Morris, 168 Va. 379, 382, 191 S.E. 764, 765 (1937). However, the document must serve as more than mere evidence — it must be essential to the complaint. Station # 2, LLC v. Lynch, 75 Va. Cir. 179, 190 (Norfolk 2008).
Motions craving oyer can impact a demurrer as well. When a demurrant’s motion craving oyer has been granted, the court, in ruling on the demurrer, may properly consider the facts alleged as amplified by any written agreement added to the record on the motion. Hechler Chevrolet, Inc. v. General Motors Corp., 230 Va. 396, 398, 337 S.E.2d 744, 746 (1985). Furthermore, a court considering a demurrer may ignore a party’s factual allegations contradicted by the terms of authentic, unambiguous documents that properly are a part of the pleadings. See Fun v. Virginia Military Institute, 245 Va. 249, 253, 427 S.E.2d 181, 183 (1993).
Be aware that Rule 3:8(a) does not include a motion craving oyer in its list of those pleadings deemed responsive to a complaint. Therefore, a motion craving oyer should accompany a Rule 3:8 responsive pleading to avoid default. Typically this is done by joining the motion to crave oyer with a motion for a bill of particulars, which is a responsive pleading.
This information is derived from Virginia CLE®s seminar, Best Practices in Circuit Court: An Interactive Judges’ Forum for Richmond-Area Litigators.
May a lawyer ethically represent multiple parties in a business deal? (Expand/Collapse)
March 12, 2012
Today’s hypothetical explores real-life ethics in the business arena:
Joe, a long-time client, comes in to discuss the formation of a business deal. He brings Sam and Bill with him. They are planning a real estate deal and need some advice. This type of transaction is your specialty, so they want you to represent them. The three are going to share in the deal equally and have done prior business deals together — all have dealt in real estate for years so they are savvy clients.
- Can you form the entity for them?
- Can you represent Joe, Sam, and Bill?
- What if Joe, your longstanding client, has some confidential information he would like you to keep from the others?
- Not without prior agreement.
Lawyers obviously may jointly represent multiple clients on the same matter, and routinely do so in certain circumstances. However, such multiple joint representations involve special duties and risks.
The first issue an attorney should raise with multiple jointly represented clients involves confidentiality rather than conflicts. A lawyer jointly representing clients normally may not keep secret from one client what another client tells the lawyer. Virginia Rule 1.7, Comment  explains that “[w]ith regard to the attorney-client privilege, the prevailing rule is that, as between commonly represented clients, the privilege does not attach.” Absent agreement to the contrary, the lawyer will have to withdraw if one client decides that some matter material to the representation must be kept from the others. The clients can, however, agree at the outset after proper disclosure that the lawyer will keep certain information confidential from the group.
In addition to this confidentiality issue, lawyers jointly representing multiple clients on the same matter must also look down the road to determine the possibility of adversity among them. If adversity already exists, it would be improper for a lawyer to represent all of the clients (absent very unusual circumstances and explicit consent). If future adversity is possible but not likely, lawyers generally may proceed with the representation.
In any multiple joint representation on the same matter, lawyers may: (1) address the possibility of adversity at the beginning of the representation, carefully defining what would happen if adversity develops; or (2) wait until adversity develops. The first approach brings certainty to the representation, but may “spook” clients who do not believe there is any possibility of adversity between them. The latter approach relieves the lawyer of this awkward task at the beginning of the representation, but does not let either client know in advance what will happen to the representation should adversity develop.
If withdrawal is mandated, a single lawyer’s disqualification generally would be imputed to the entire law firm under ABA Model Rule 1.10(a). The same imputed disqualification rule usually applies to law departments, because ABA Model Rule 1.0(c) defines “firm” and “law firm” as including “lawyers employed in ... the legal department of a corporation or other organization.”
Although the hypo doesn’t allude to the form of entity, lawyers representing corporations sometimes must wrestle with an argument by corporate officers or employees that they have a separate attorney-client relationship with the company’s lawyer. Because of these risks, careful lawyers finding themselves in this scenario have always advised the corporate constituents with whom they deal that they represent the corporation as an entity and not the constituents individually.
This information is derived from the 41st Annual Advanced Business Law Seminar Materials, available from Virginia CLE® Publications for $90.
May a bankruptcy trustee who is a lawyer communicate directly with a debtor who has counsel? (Expand/Collapse)
March 2, 2012
On February 21, the VSB’s Legal Ethics Committee published LEO 1861, relating to a Chapter 7 bankruptcy trustee’s communications with a debtor.
Test your knowledge of Virginia’s Rules of Professional Conduct with the hypothetical presented in this LEO.
Hypothetical: A Virginia lawyer is appointed to serve as trustee in a Chapter 7 bankruptcy case. The trustee’s duties are established by 11 U.S.C. § 704, and include investigating the debtor’s financial affairs and, if advisable, opposing the discharge of the debtor. The trustee is authorized to retain counsel to represent the estate, but typically does not do so unless the proceeding becomes contested. The debtor in this case is represented by a lawyer who has not consented to the trustee communicating directly with the debtor.
Question presented: Does Rule 4.2 prohibit a bankruptcy trustee, who is also a lawyer, from communicating directly with a debtor who is represented by counsel?
The Ethics Committee is of the opinion that a lawyer who serves as a bankruptcy trustee in a Chapter 7 proceeding may not communicate with a represented debtor unless the debtor’s lawyer consents or the communication is authorized by law. Rule 4.2 of the Rules of Professional Conduct states: “In representing a client, a lawyer shall not communicate about the subject of representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.”
The Committee’s analysis is based on the purposes of Rule 4.2, and especially the fact that a lawyer/trustee may be in a position to take advantage of a debtor if he is permitted to communicate with the debtor without the presence or consent of the debtor’s counsel. Examples of permissible communications from the trustee directly to the debtor are notices that, by statute or court rule, must be sent to the debtor personally, or a scheduled and noticed proceeding such as a meeting of creditors pursuant to 11 U.S.C. § 341. The opinion contrasts the situation of a Chapter 7 debtor with that in Chapter 13 proceedings, in which a wide variety of communications between Chapter 13 trustees and debtors are authorized by law, pursuant to 11 U.S.C. § 1302(b)(4). Accordingly, Rule 4.2 does not bar a Chapter 13 trustee from communicating with a represented debtor to the extent that the communications are authorized or mandated by the statute.
As always, the VSB's Standing Committee on Legal Ethics reminds counsel that its opinions are advisory only and not binding on any court or tribunal.
This information is derived from Virginia CLE® Publications editorial staff research.
Does Virginia’s Assisted Conception statute bar a known sperm donor from proving his parentage of a child? (Expand/Collapse)
February 24, 2012
In a case of first impression, the Virginia Court of Appeals has answered this question. Breit v. Mason, 59 Va. App. 322, 718 S.E.2d 482 (2011).
An unmarried couple conceived a child through in vitro fertilization. The couple were living together in a romantic relationship at the time that in vitro fertilization was successfully performed and throughout the mother’s pregnancy. They executed an acknowledgment of paternity form the day after the child was born, and the father’s name appeared on the child’s birth record. Both parents announced her birth to friends and family. The father also carried the child on his health insurance, cared for her, and had a relationship with her, as did his extended family.
Shortly before the child’s first birthday, the mother unilaterally terminated the father’s contact with the child. In the parentage action that followed, the trial court granted the mother’s plea in bar and dismissed the petition to establish parentage. The trial court held that it could not reach the issue because Virginia Code § 20-158(A)(3) conclusively barred a person who was a sperm donor from establishing parentage of a child by using the traditional means available under § 20-49.2. This appeal followed.
Section 20-158 of the Virginia Code controls the status of a child conceived by assisted conception and states that the gestational mother is the mother of the child, but the sperm donor is not the father unless he is the husband of the gestational mother.
In this case of first impression, the Virginia Court of Appeals held that under the circumstances of this case, the court could not deny the father’s legal parentage of the child. The court said that Code §§ 20-49.1(B)(2) and 20-158(A)(3), each of which has as its primary purpose ensuring legal parentage of a child by a known mother and known father, should be read together and harmonized. The court concluded that the legislature did not intend to permanently bar a parentage action by a known and intended sperm donor under these facts solely because the mother and sperm donor were unmarried at the time of conception. The court reasoned that such a narrow reading of § 20-158(A)(3) ignores the intent of the legislature to ensure that all children born in the Commonwealth have a known legal mother and legal father.
This information is derived from Virginia CLE® Publications editorial staff research.
How Do You Preserve Redacted Evidence for Appeal? (Expand/Collapse)
February 17, 2012
Assume that you’re offering into evidence one of your opposing party’s internal documents, and it contains several critical admissions that you earnestly want the jury to read. Your opponent objects, but the trial judge sensibly seems inclined to allow you to introduce it. Your opponent then asks the judge if he’ll at least agree to redact paragraph 2, which in your opinion contains the biggest smoking gun of all; the judge inexplicably agrees and orders the redaction. You have argued on the record that paragraph 2 should be presented to the jury, so the judge knows exactly what it is that you want him to do.
The purpose of the contemporaneous-objection rule (Rules 5:25 and 5A:18) is to “afford the trial court an opportunity to rule intelligently on the issues presented, thus avoiding unnecessary appeals and reversals.” Weidman v. Babcock, 241 Va. 40, 44 (1991). You accordingly regard that you’ve done what you need to do in order to preserve the issue for appeal by noting on the record your objection to what the judge has ordered.
On this recitation, it’s quite likely that you’re wrong, and that the issue of paragraph 2 has not been properly preserved. This has nothing to do with the contemporaneous-objection rule; it’s the need for the appellate court to see what it is that was excluded, so it can determine whether the exclusion materially affected the proceedings. Here’s the Supreme Court’s ruling in a case involving just such redacted documents:
[T]he Transportation Commissioner states that the redacted references on exhibits in the landowner’s proffer would have shown the jury that Fairfax County’s zoning classification required that the Target store not be visible from Roberts Parkway, and that the closure of Old Guinea Road was required by the zoning ordinance.
CTC v. Target Corp.
This Court cannot consider the Transportation Commissioner’s arguments. The Transportation Commissioner failed to make all the documents that he claims should not have contained redactions a part of the record.
, 274 Va. 341, 347-48, 650 S.E.2d 92, 96 (2007). In order to preserve for appellate review your objection to a redaction, you must either (1) insert into the record a clean copy
of the challenged exhibit, containing the language that was redacted; or (2) recite into the record the excised language.
This enables the reviewing court to determine whether the exclusion of the redacted material was harmless error, an essential element of most types of appellate review.
This information was derived from the comprehensive, stand-alone seminar materials to Virginia CLE®’s Preventing Nightmares: Preserving Issues and Avoiding Waiver — Trial Techniques That Lead to Successful Appeals, available for purchase as an Online Seminar or as a CD-ROM Seminar. The seminar materials are also available for purchase as a PDF Download for $30.
Where Does Plaintiff Refile After an Appeal to Circuit Court Is Nonsuited? (Expand/Collapse)
February 10, 2012
Expand your knowledge of Virginia procedure, specifically which court has jurisdiction after a district court judgment is appealed to circuit court and then nonsuited there. In ruling on this question, the Virginia Supreme Court overruled its 2007 decision in another case.
In 2007, the General District Court of Fairfax County entered an order declaring a county resident to be an unfit pet owner. The pet owner appealed to Fairfax Circuit Court. The County nonsuited the action in the circuit court and later brought a second petition to declare the pet owner an unfit owner in the general district court. The general district court dismissed the second petition for lack of jurisdiction. The circuit court denied the pet owner’s motion to enforce the nonsuit order, which required the County to return the owner’s animals to her, stating that it lacked original jurisdiction. The County appealed the dismissal of the second petition and the circuit court declared her to be an unfit owner. The Court of Appeals affirmed, holding that when a plaintiff who prevailed in the district court nonsuits in the appeal in circuit court, the suit is nullified as if it had never existed in either court.
The Supreme Court of Virginia, in Davis v. County of Fairfax, 282 Va. 23, 710 S.E.2d 466 (2011), reversed and entered judgment for the pet owner. The nonsuit did not divest the circuit court of its appellate jurisdiction, and Code § 8.01-380 limited the County to refiling its petition there. The circuit court’s jurisdiction is derivative of the district court’s jurisdiction; because the general district court had no jurisdiction over the refiled petition, the circuit court lacked jurisdiction to decide the matter on the merits, even though it would have had jurisdiction if the County had refiled its petition in the circuit court. The Court overruled Lewis v. Culpeper County Dep’t of Social Services, 50 Va. App. 160, 647 S.E.2d 511 (2007), to the extent it is inconsistent with this opinion.
This information is derived from Virginia CLE®’s What’s New at the Virginia Supreme Court? An Overview of Recent Civil Decisions 2011, currently available as an online seminar.
Test your knowledge of opinion and expert evidence. (Expand/Collapse)
February 7, 2012
Test your knowledge of opinion and expert evidence in civil cases with five questions based on the following hypothetical. The answers follow. You may first want to read Virginia Code § 8.01-401.1 and § 8.01-401.3 if you haven’t had this issue in a while. No peeking until you’ve given it a try.
The plaintiff, injured in an automobile accident, claims physical injury and emotional distress arising from the accident. The defense has retained Dr. Peters, a board-certified psychiatrist. Dr. Peters is called to testify as witness for the defendant in a civil case.
- Called by the defense, Dr. Peters is asked whether in his opinion the plaintiff suffered any emotional distress as a result of the accident. Plaintiff objects that Dr. Peters is not competent to testify. Should the objection be sustained?
- Plaintiff also objects that the testimony is on an ultimate issue. Should the objection be sustained?
- Dr. Peters is also asked to testify as to what the plaintiff told him about his claimed emotional distress. Plaintiff objects that the testimony is hearsay and cannot be relied upon. Should the objection be sustained?
- Dr. Peters is asked on cross-examination whether he has ever been charged with malpractice. Defendant objects. Should the objection be sustained?
- Dr. Peters is asked on cross-examination whether he was convicted three years earlier of the felony of filing a false tax return. Defendant objects. Should the objection be sustained?
- No. The doctor has the qualifications necessary to render an opinion and has a sufficient basis for the opinion. See § 8.01-401.3.
- No. See § 8.01-401.3 B.
- No. Anything the plaintiff said is an admission and is not privileged since there was no expectation of confidentiality. The evidence may be relied upon. See § 8.01-401.1.
- Yes. A charge of malpractice is hearsay, and in any event whether the doctor once committed malpractice is inadmissible character evidence if offered to prove that because he once made a mistake he made one in this case. See A Guide to Evidence in Virginia § 404.
- No. The felony conviction is crimen falsi and is admissible impeachment. See A Guide to Evidence in Virginia § 609.
This information is derived from the Virginia CLE®
2008 seminar, Mastering Evidence: What Comes In, What Stays Out?
Available from Virginia CLE® Publications
May child support be enforced after the 20-year statute of limitations has run? UPDATE (Expand/Collapse)
January 27, 2012
In our September 29, 2011, issue of “Did You Know?,” we featured Adcock v. Department of Social Serivices, 56 Va. App. 334, 693 S.E.2d 757 (2010), in which the Virginia Court of Appeals held that there is no limit to how long a party may wait before seeking enforcement of a child support obligation. The court’s reasoning was that, because the amount owed had never been reduced to a liquidated sum by any court, the child support order created an ongoing obligation to which the statutory bar of Virginia Code § 8.01-251 did not apply. The claim had been filed by the mother outside of the twenty-year statute of limitations period counting from the date in 1982 when the parties’ youngest child attained his majority.
In Adcock v. Department of Social Services, 282 Va. 383, __ S.E.2d __ (Nov. 4, 2011), the Virginia Supreme Court reversed, holding the twenty-year statute of limitations did apply to bar the collection of the unpaid child support. The court reasoned that each installment child support payment owed became a judgment by operation of law, specifically under Virginia Code § 8.01-426, on the date it became due but was not paid. The court noted that § 8.01-251(A) does not make a distinction between judgments created by operation of law and those for liquidated damages, nor does the statute create an exception for unpaid child support obligations. Even if there were a practical legal distinction between liquidated and unliquidated judgments, the court stated that the distinction was irrelevant to the application of § 8.01-251(A) because the statute itself does not distinguish between the two.
This information is derived from Virginia CLE® Publications editorial staff research.
Who Must Sign Pleadings? Two Cautionary Tales (Expand/Collapse)
January 20, 2012
In Aguilera v. Christian
, 280 Va. 486, 699, S.E.2d 517 (2010), the plaintiff, acting pro se
, filed a personal injury complaint. While the plaintiff was acting pro se
, he did not sign the complaint himself. Instead, his friend and neighbor, who was an attorney not admitted in Virginia, signed the plaintiff’s name and added her initials above the plaintiff’s name. The plaintiff conceded that the friend had drafted the complaint and signed the plaintiff’s name. The trial court dismissed the complaint under Code § 8.01-271.1
because it was not signed by the plaintiff or by a Virginia attorney.
On appeal, the Supreme Court affirmed, relying on Code § 8.01-271.1 and Rule 1:4(c). Section 8.01-271.1 requires that every pleading, written motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, and that a party who is not represented by an attorney and is proceeding pro se shall sign his pleading, motion, or other paper. Rule 1:4(c) provides that counsel or an unrepresented party who files a pleading shall sign it and state his address. Nothing in this language permits a person other than a licensed attorney to sign a pleading on behalf of an unrepresented party. In this case, the plaintiff’s signature on the complaint was invalid and a nullity because it was not actually signed either by the plaintiff or by an attorney licensed to practice law in Virginia.
In Shipe v. Hunter, 280 Va. 480, 699 S.E.2d 519 (2010), another personal injury case, the plaintiff was represented by a Virginia attorney, but the Virginia attorney’s name was signed by his co-counsel, who was not admitted to practice in Virginia. The Virginia attorney had authorized his co-counsel, a member of the District of Columbia bar, to sign his name. Nonetheless, the trial court ruled that the complaint was a nullity, granted summary judgment to the defendant, and dismissed the complaint with prejudice.
On appeal, the Supreme Court affirmed, relying on the requirements of Code § 8.01-271.1, the purpose of which is protection of the public from harassment by frivolous, oppressive, fraudulent, or purely malicious litigation, by holding attorneys and pro se litigants to a high degree of accountability for the assertions they make in judicial proceedings. The Court has repeatedly held that a pleading, signed only by a person acting in a representative capacity who is not licensed to practice in Virginia, is a nullity. The Court further stated that the omission of a Virginia attorney’s signature to a complaint or other pleading that must be signed cannot be remedied by amending the pleading. In these circumstances, the amendment would not “relate back” to the date of filing. (“Relating back” applies only to correcting a misnomer, adding a party, or adding a claim or defense.)
The information in this email is derived from Virginia CLE®’s What’s New at the Virginia Supreme Court? An Overview of Recent Civil Decisions 2011, currently available as an online seminar.
When Can a Party Use a Prior Consistent Statement at Trial? (Expand/Collapse)
January 13, 2012
With two exceptions, the general rule is that a prior consistent statement is not admissible to enhance the testimony of a witness at trial. The Virginia Supreme Court decided two cases in November 2011 that address these exceptions.
The first exception allows the admission of prior out-of-court statements to counteract the allegation that the witness has a reason to falsify his or her testimony. The reasons typically given are bias, interest, corruption, relationship to a party or to the cause, or that the testimony is a “recent fabrication” due to one of these motives. Under this exception, the prior statement is admissible to show that the witness had made the same statement at a time when the reason to falsify did not exist.
The second exception allows the witness whose credibility has been challenged because of a prior inconsistent statement to show that he or she has made other prior statements consistent with the offered testimony at trial. This exception is not called into question by allegations of a motive to falsify, but simply calls the witness’s trustworthiness into question. As with all hearsay exceptions, the prior statement is only admissible for the fact that it was made, not for the truth or falsity of the statement itself.
In Ruhlin v. Samaan, 282 Va. 371, __ S.E.2d __ (2011), the defense gave the plaintiff, who had been injured by the defendant in an accident, a transcript of an earlier phone conversation the plaintiff had with an adjuster to attempt to refresh his recollection about what he had initially said about his injuries. Although Virginia Code § 8.01-404 prevents the use of such a transcript to impeach the witness in a personal injury case, the prohibition does not extend to its use as a means to refresh his memory. The defense did not introduce the transcript or identify it to the jury. The plaintiff then attempted to introduce testimony from his wife to counter what he perceived as the defense’s charge of recent fabrication regarding injury to his shoulder, but the court refused. The supreme court upheld this ruling because the transcript was used to refresh the plaintiff’s lapse of memory, not to contradict him. It would have been improper to allow the wife’s bolstering testimony to be admitted because there was no argument by the defense that plaintiff’s testimony was a recent fabrication. The defense’s position was that plaintiff’s statements had been inconsistent all along. The court noted the admission of a prior consistent statement would not be triggered merely because the testimony of a second witness calls that of an earlier witness into doubt.
In Anderson v. Commonwealth, 282 Va. 457, 717 S.E.2d 623 (2011), the court addressed the other exception that allows a witness to introduce prior consistent statements when his credibility has been challenged by the proffer of a prior inconsistent statement. The victim of a sexual assault testified that she felt and heard what she thought was a gun during the attack, but the defense questioned her testimony due to inconsistencies in notes taken by the investigating officer, which said that she had seen a gun. Virginia allows the admission of a prior consistent statement to offset the prior inconsistent statement, allowing the fact-finder to consider the circumstances under which each was made and to give appropriate weight to the testimony. In this case, an officer and a couselor were permitted to recount in detail what the victim had told them about the presence of a weapon that she felt but had not seen.
This information is derived from Virginia CLE® Publications editorial staff research.
What Should You Do with Evidence Inadvertently or Intentionally Transmitted to You? (Expand/Collapse)
January 6, 2012
From the beginning of this important case, your client warned you that your adversary and its lawyers were “sleaze balls.” Two recent incidents confirmed your client’s characterization, and created dilemmas for you. How should you respond to these two scenarios?
HYPOTHETICAL 1: This morning you opened up a large brown envelope addressed to you in unfamiliar handwriting. The first page is a short note in the same handwriting saying simply “You need to see these. Don’t tell anyone how you got them.” The envelope contains three documents. From your very quick review, you can see that they are copies of emails from the adversary’s lawyer to her CFO. In the first email you quickly scan, the lawyer chastised the CFO for having destroyed several responsive documents after the litigation began, and advised her of the severe penalties for spoliation. Must you refrain from reading the other emails and using them in the litigation?
HYPOTHETICAL 2: About an hour after you open the plain brown envelope, you received an email from the adversary’s lawyer. When you opened the email, you saw that the lawyer intended it for her CFO. It is marked “privileged and confidential,” and the first line reads: “I just learned that you destroyed more documents even though I told you never to do that again.” Must you refrain from reading the remainder of the email and using it in the litigation?
ANSWER TO HYPOTHETICAL 1: NO (PROBABLY)
Analysis: In ABA LEO 382 (1994), the ABA indicated that lawyers who received unsolicited privileged or confidential materials intentionally sent by a third party should refrain from reviewing the documents, notify the adversary that the lawyer received them, and either return them or ask a court to rule on their disposition. The ABA justified this approach because the documents were not inadvertently sent to the lawyer—but rather were intentionally sent by a third party who might or might not have been authorized to deal with the documents. While the ABA later withdrew LEO 382, the “keep the documents but notify the court” approach follows the new ABA attitude toward inadvertently transmitted privileged communications. See ABA Model Rule 4.4(b). Since the ABA’s promulgation and withdrawal of ABA LEO 382, several state bars have endorsed the ABA approach.
New York LEO 700 (1998): A lawyer who receives an unsolicited and unauthorized communication from a former employee of an adversary’s law firm may not seek information from that person if the communication would exploit the adversary’s confidences or secrets. Where the information communicated involves alleged criminal or fraudulent conduct in which opposing counsel may be assisting, the receiving lawyer should communicate with a tribunal or other appropriate authority to get further direction as to the use of the information.
In Virginia LEO 1688 (promulgated 1996, but later withdrawn), a client suing a former employer receives a letter from a former colleague at the company. The letter is to the employer from its lawyer. The client gives a copy of the letter to the client’s lawyer, who does not read it but instead seals it in an envelope. The client asks the lawyer to destroy the letter, because the client is worried that the former colleague will be punished if the letter is disclosed. The Virginia State Bar held that: the existence and contents of the letter constitute a client “secret”; the lawyer is not required to read the letter, because the “zealous representation” duty is outweighed by the client’s instructions to destroy the letter; the lawyer is under no obligation to disclose the letter’s existence because there is no “ongoing client crime or fraud involved”; the lawyer need not provide a copy of the letter to the employer (unless there is an outstanding discovery request, in which case the lawyer should object to the request but comply with any order to produce the letter); the lawyer need not withdraw from representing the client.
ANSWER TO HYPOTHETICAL 2: MAYBE
Analysis: This scenario involves an inadvertent transmission of privileged communications, but one that confirms clearly improper (if not illegal) conduct. It is unclear how most bars would react to this situation. The ABA would now permit the receiving lawyer to use this inadvertently transmitted email, although the lawyer would have to notify the other side of the inadvertent transmission.
States continuing to follow the old ABA “return unread” policy would have the most difficult time dealing with this scenario. Literal language of some states’ legal ethics opinions would preclude the receiving lawyer’s reading, retention, or use of this email—but common sense and concern for the institutional integrity of the court system would weigh in favor of allowing use of this email.
These hypotheticals are from the recent 12th Annual Virginia Information Technology Legal Institute Seminar—2011, which is now available as an online seminar; in addition, the Seminar Materials are also available for purchase from Virginia CLE®.
Visit our “Did You Know?” Archive for previous “Did You Know?” emails with practice tips, legal news summaries, and quizzes.
When is an indictment fatally flawed? (Expand/Collapse)
December 16, 2011
As a general principle, an indictment citing a criminal statute incorporates the contents of the statute by reference. In Purvy v. Commonwealth (decided last week), however, when the words charged in the indictment and the evidence presented at trial involved completely different fact patterns, the crimes were found to be distinct offenses.
Although the defendant was charged under the correct statute, § 18.2-472.1, the language of the indictment limited the charge to failure to register or reregister as a sex offender, while the Commonwealth’s evidence was that he had given incorrect address information. The limiting language in the indictment could not be treated as mere surplusage. The Court observed that while one crime, the failure to register, was an act of omission, the other crime, affirmatively giving false information on the registration form, was an act of commission. The defendant had completed the registration process as a convicted sex offender, but he had given materially incorrect address information each time.
The case was reversed due to this fatal variance in the indictment, but an interesting discussion follows as the Court anticipated the defendant’s future double jeopardy argument and also discussed whether the acquittal would raise the bar against a future retrial on the correct charge. Viewing the evidence in a light most favorable to the Commonwealth on the defendant’s argument disputing the sufficiency of the evidence, the Court found that the evidence at trial had been sufficient to convict on the charge of giving materially false information on his registration forms.
Web Marketing and Social Media Usage — Test Your Knowledge of Ethical Dos and Don’ts. (Expand/Collapse)
December 9, 2011
Test your knowledge of the ethics of web marketing and social media usage. The response to each hypothetical is “yes,” “no,” or “maybe.” Following the four hypotheticals are “best answers” and analysis.
HYPOTHETICAL NO. 1: MARKETING
Your firm decides to update attorney profiles on its company website. May your firm indicate on its website the following honors:
HYPOTHETICAL NO. 2: TWEETING ABOUT WINNING A CASE
- Attorney A is “AV” listed by Martindale-Hubbell?
- Attorney B was listed in “The Best Lawyers in America” for the past four years?
- Attorney C was listed in “The Best Lawyers in America” (but he was only listed in 1995 and not since then)?
- Attorney D was listed as “Litigator of the Decade” by the Arlington Litigator Lunch Group (composed of eleven members)?
- Attorney E was awarded a “Lifetime Achievement Award” from your law firm?
You are an experienced attorney who has practiced in the area of business litigation for 25 years. You have been working on the “case of a lifetime” for the past three years. You find out today that you have won your case and the jury awarded your client a verdict of 25 million dollars. In your excitement you send out a tweet to all of your followers (restricted group) saying, “I obtained a huge verdict in my case today!” May you ethically tweet this?
HYPOTHETICAL NO. 3: LINKEDIN RECOMMENDATIONS
An attorney has a LinkedIn profile that has a recommendation section. A former client posts on the attorney’s LinkedIn recommendation section, “She’s the best corporate lawyer in town!” Has the attorney violated any ethics rules?
HYPOTHETICAL NO. 4: ATTORNEY GETS PARALEGAL TO “FRIEND” THE OPPOSING PARTY ON FACEBOOK
An attorney is representing the male CEO of a corporation in an employment discrimination case against the CEO. The attorney asks her paralegal to create a Facebook profile of a young attractive male and then to “friend request” the female ex-employee who is suing the CEO so that the attorney can view all of the ex-employee’s pictures and wall posts. Has the attorney violated any ethics rules?
ANSWER TO HYPOTHETICAL NO.1: MARKETING
Analysis: Whether your ad that highlights your specific honor will pass ethical muster will depend on a determination of the legitimacy of the group honoring the attorney, and the completeness and accuracy of the attorney depiction of the honor.
ANSWER TO HYPOTHETICAL NO. 2: TWEETING ABOUT WINNING A CASE
- Yes. For many years Martindale-Hubbell provided the main rating system for lawyers. Courts have recognized an attorney’s ability to boast of a high “AV” rating.
- Yes. Courts have allowed attorneys to note their listing in “The Best Lawyers in America” and “Super Lawyers.” When analyzing the groups, courts look to whether a group is respected by bar leaders and the legitimacy of the methods used to compile the list.
- Yes with an explanation. Many courts have required disclosure as to whether an attorney has been de-listed by the group.
- No. This group would not pass muster under the factors listed in B.
- Possibly. It would depend on the methods used by the firm to choose the attorney and the respectability of the group who chose the attorney.
Best Answer: No. Analysis: Rule 7.2 prohibits advertising specific case results without a disclaimer, and the required disclaimer could not fit in the 140 character limit on tweets. The disclaimer must (i) put the case results in a context that is not misleading; (ii) state that case results depend upon a variety of factors unique to each case; and (iii) further state that case results do not guarantee or predict a similar result in any future case undertaken by the lawyer. The disclaimer shall precede the communication of the case results. When the communication is in writing, the disclaimer shall be in bold type face and uppercase letters in a font size that is at least as large as the largest text used to advertise the specific or cumulative case results and in the same color and against the same colored background as the text used to advertise the specific or cumulative case results.
ANSWER TO HYPOTHETICAL NO. 3: LINKEDIN RECOMMENDATIONS
Best Answer: Yes. Analysis: Virginia does allow client testimonials, endorsements, or recommendations. However, an attorney must closely monitor such statements so as to comply with Rule 7.1. The statement in this hypothetical is a comparative statement that cannot be factually substantiated and is therefore not permitted.
ANSWER TO HYPOTHETICAL NO. 4: ATTORNEY GETS PARALEGAL TO“FRIEND” THE OPPOSING PARTY ON FACEBOOK
Best Answer: Yes. Analysis: See Virginia Rule 8.4(c), which prohibits deception and misrepresentation, and Rule 8.4(a), which states that a lawyer cannot use the agency of another to violate the ethics rules. The Philadelphia Bar Association has held that a lawyer violates Rule 8.4 by employing a third party to go online and gain access to a person’s information on Facebook by asking to be their “friend.”
These hypotheticals are from the recent 4th Annual Advanced Business Litigation Institute (2011), which is now available as an online seminar.
May a Member Unilaterally Assign His Personal Control in an LLC? (Expand/Collapse)
December 2, 2011
The LLC remains the entity of choice when forming a business in Virginia. Virginia Code § 13.1-1039 covers assignment of a member’s interest in this popular form of business entity. In a case of first impression, the Virginia Supreme Court has decided a significant question regarding assignments:
May an LLC, through its operating agreement or articles of organization, impose lesser restrictions for the admission of an assignee as a member than stated in the statute’s default rule?
In Ott v. Monroe, decided November 4, 2011, the court interpreted § 13.1-1039 and answered the question in the negative. The 80-percent owner of an LLC left his daughter his entire estate in a will that had been executed prior to the formation of the closely held LLC. The daughter, assuming that she had received the controlling interest in the company, held a meeting during which she tried to remove the remaining members and appoint herself the company’s new managing member. The case was before the court on the appeal of a declaratory judgment action.
The court held that it is not possible for a member to unilaterally assign his personal control in an LLC regardless of the language of the operating agreement or articles of organization. The court’s reading of § 13.1-1039(A) would only permit the member to assign the right to share in profits, losses, and distribution of the LLC, but not the other incidents of membership without the approval of the other members. Although the plaintiff argued that the terms of the operating agreement allowed her to inherit full membership rights at her father’s death, the court stated that the words “[u]nless otherwise provided in the articles of incorporation or an operating agreement” do not permit the language of an operating agreement to supersede the statutory language of § 13.1-1039, but rather apply only to the first sentence of subsection (A), which states that a membership is assignable in whole or in part. The court further noted that § 13.1-1023(A), which states that no operating agreement could contain provisions inconsistent with the laws of Virginia, controlled.
Counsel may wish to review existing documentation for all clients’ LLCs to ensure that they conform to this more narrow interpretation of the Virginia Limited Liability Company Act.
This information is derived from Virginia CLE® Publications editorial staff research.
Is it hearsay? Test your knowledge. (Expand/Collapse)
November 17, 2011
Test your hearsay knowledge with the following two examples, involving price tags and bar codes. Should the trial court sustain a hearsay objection or overrule it? We've included the answers at the end, as well as links to the opinions in the two cases on which the questions are based.
The loss prevention officer at a retail store saw a customer attempting to sneak out of the store with a coat stuffed under his sweater. He called out to the customer, who just stood there, shaking his head. When the case came to General District Court, the loss prevention officer answered the question, “tell the Court the fair market value of this sport coat on the day you stopped the defendant,” by replying, “the price tag says $201.00.”
Based on: Robinson v. Commonwealth, 258 Va. 3, 516 S.E.2d 475 (1999).
On further reflection, the witness remembered that the coat didn’t have a price tag fixed to it, only a bar code. He’d scanned the bar code and printed a receipt, which showed a $201.00 price.
Based on: Twine v. Commonwealth, 48 Va. App. 224, 629 S.E.2d 714 (2006).
In both cases the hearsay objection would be overruled.
Question 1 is based on Robinson, which recognized a hearsay exception specifically for store price tags in shoplifting cases “permitting the admission into evidence of price tags regularly affixed to items of personalty offered for sale or, in substitution, testimony concerning the amounts shown on such tags when … there is no objection to such testimony on best evidence grounds.” The Virginia Supreme Court reasoned that, “Shoplifting is something that occurs thousands and thousands of times throughout this country every day. It is common knowledge that department and other stores regularly affix price tags to items of merchandise and that the tagged price is what a purchaser must pay to acquire an item, without the opportunity to negotiate a reduced price or to question how the tagged price was reached. Under these circumstances, ‘the inherent unreliability of hearsay is not present.’”
Question 2 is based on Twine, which held that the price tag exception recognized in Robinson extends to a cash register receipt generated by scanning the bar codes on the stolen items of merchandise or, in substitution, testimony concerning the amounts shown on such a receipt when there is no objection to such testimony on best evidence grounds. The Twine court observed that while the stolen items differed from the merchandise shoplifted in Robinson in that they did not have price tags affixed to them by the retailer, they did have individual bar codes on them that, when scanned, revealed their purchase prices. Further, the scan of the shoplifted items produced a receipt that summarized the prices charged by the store for the stolen merchandise. Plainly, such a receipt is no less inherently trustworthy and reliable than the testimonial valuation summaries admitted into evidence in Robinson. The court properly overruled Twine’s best evidence objection to the cash register receipt, since the bar codes would have been meaningless to the fact finder at trial, without a printout of the prices generated by scanning the bar codes on the products at a register.
The hearsay questions in this email are derived from the materials for Virginia CLE®’s 38th Annual Criminal Law Seminar.
Virginia Supreme Court Strikes Down Overbroad Covenant Not to Compete, Overruling 1989 Decision (Expand/Collapse)
November 11, 2011
Last week, the Virginia Supreme Court held that the employer's language in a covenant not to compete was overbroad and, therefore, unenforceable against its former employee. Home Paramount Pest Control Cos. v. Shaffer
(Nov. 4, 2011). This decision expressly overrules a 1989 case where identical language had been upheld on appeal. Ironically, Home Paramount, the appellant in last week’s case, is the successor in interest to Paramount Termite Control Company, the prevailing party from the 1989 case. Paramount Termite Control Co. v. Rector
, 238 Va. 171, 380 S.E.2d 922 (1989).
The Court noted that the law in Virginia governing covenants not to compete has been incrementally changing over the twenty-two years that separate the two decisions. Even though the geographic scope and the duration of the contested clause were arguably reasonable, the employer’s failure to confine the function element to activities in which the business actually engaged proved fatal to its enforcement action. The Court held that the former employer must show that there is a legitimate business reason for restricting a former employee from working in the same business or industry in any capacity beyond what is necessary to protect that employer’s interests. In short, the activity prohibited by the covenant must be the same as the type of work the former employee had performed for that business. The clause at issue attempted to prevent the employee from “engag[ing] indirectly or concern[ing] himself ... in any manner whatsoever” in pest control “as an owner, agent, servant, representative, or employee, and/or as a member of a partnership and/or as an officer, director or stockholder of any corporation, or in any manner whatsoever.” It went beyond protecting the former employer’s business interest and was drafted so comprehensively that it unduly burdened the employee’s attempt to earn a living.
This information is derived from Virginia CLE® Publications editorial staff research.
When There’s a Procedure for Filing a Contract Claim, Follow It (Expand/Collapse)
November 4, 2011
What should a contractor do when the government terminates its construction contract? What if the contract requires written notice of intent to file a claim before filing suit? In TC MidAtlantic Development v. Commonwealth, 280 Va. 204, 695 S.E.2d 543 (2010), a government-construction contract required that (1) before filing suit, the contractor provide timely written notice of its intent to file a claim, and (2) any such claim be filed within 60 days after final payment. Further, it forbade filing suit until the government issued a written decision on the claim (unless more than 90 days had passed after submission of the claim or final payment, whichever was later). These requirements applied to “Phase I” of the project. They did not apply to “Phase II.”
The government issued a letter terminating the contract on February 16, 2007. The letter informed the contractor that it could file a formal claim. The contractor filed suit in April 2007, alleging breaches to agreements relating to both Phase I and Phase II. It failed to allege, however, that it had submitted a timely claim. The Supreme Court of Virginia affirmed the trial court’s dismissal as to Phase I of the project, holding that the contract required that a claim be filed within 60 days of the final payment, and that because no claim was filed, no suit could be filed. Of particular importance was the fact that because the plaintiff had not pled compliance with this requirement, the dismissal on demurrer was proper. However, the Court reversed with respect to Phase II. It held that the notice provisions did not apply to Phase II under the terms of the contract, so the trial court had improperly dismissed that count for failure to provide adequate notice of a claim.
Finally, the Supreme Court rejected the plaintiff’s argument that the trial court abused its discretion in not giving the contractor leave to amend, for the simple reason that nothing in the record indicated that the plaintiff had ever actually asked for leave to amend. Because an order dismissing a case with prejudice does not preclude a request for leave to amend, it was incumbent on the plaintiff to request such relief.
This information is derived from Virginia CLE®’s Recent Developments in the Law Seminar Materials.
How Do Bankruptcy Courts Treat Divorce-Related Claims? (Expand/Collapse)
October 28, 2011
When a former spouse or a child becomes a “creditor” of a bankruptcy debtor based on a domestic support obligation (DSO) owed to them, the DSO receives more favorable treatment under the Bankruptcy Abuse Prevention and Consumer Protection Act (BACPA) than under prior law. A true domestic support obligation has first priority among unsecured claims and must be paid in full in order for a chapter 13 plan to be confirmed. These debts are not subject to discharge under any chapter of bankruptcy, and, in fact, the failure of the debtor to pay post-petition support can result in the court granting the payee’s motion to convert the filing to chapter 7.
But what about domestic obligations that are in the nature of a property settlement or other distribution in the context of a divorce? Domestic debts that are incurred in connection with the debtor’s divorce or separation that are not in the nature of alimony, maintenance, or support are not covered under the statutory definition of a DSO.
These debts would include, for example, a distributive award in an equitable distribution proceeding or a property settlement. Whether a particular debt is a DSO under §523(a)(5) or a non-DSO under §523(a)(15) is especially important in chapter 13 cases. Although a chapter 7 debtor cannot discharge these divorce obligations whether they fall under either section of the code, domestic debts under §523(a)(15) are not excepted from discharge in chapter 13 cases. Thus, a chapter 13 debtor may, by virtue of §1328(a)(2), elect to retain his assets, reorganize his debts through a chapter 13 plan, and still discharge domestic debts falling under §523(a)(15) upon completion of all the plan payments under a confirmed plan.
These debts do not have priority and need not be paid in full under the plan. However, §1325 requires that all chapter 13 debtors file their plans in good faith. Therefore, chapter 13 debtors may be denied confirmation if they appear to be attempting to use chapter 13 to discharge debts incurred as equitable distribution awards or property settlements if the court finds that the debtor is using less than his or her best efforts to repay them.
The intersection of bankruptcy law and family law on the enforcement of domestic debts can be seen in cases like In re Green, 2010 Bankr. LEXIS 319, 2010 WL 396253 (Bankr. E.D. Va. Jan. 27, 2010), where the court refused to confirm husband’s proposed chapter 13 plan that would have paid only 21% of the equitable distribution award made to wife in their divorce. In particular, the court found troubling the unexplained increase in the balance on the parties’ home equity line of credit from $75,041 to $139,000 in the 19 months from entry of the divorce decree to the filing of the bankruptcy case. It therefore held that “a complete failure to provide any accounting, when coupled with the relatively low dividend being paid” to the former spouse, tipped the balance in the case against a finding of good faith.
This information is derived from Virginia CLE®’s Divorce, Foreclosure, and Bankruptcy Seminar Materials.
May a Criminal Defense Attorney Make an Undisclosed Recording of an Interview with a Witness? (Expand/Collapse)
October 21, 2011
One of our recent “Did You Know” emails posed the question of whether counsel may advise a client to “wear a wire.” Now, test your knowledge again with this similar hypothetical from LEO 1814:
A criminal defense attorney represents A, who is charged with conspiracy to distribute controlled substances. An unindicted co-conspirator, B, is not represented by counsel and has information that will prove helpful to A’s defense.
For example, B can corroborate that A’s involvement and participation in the conspiracy was nominal. B has other charges pending against him unrelated to the conspiracy with which A has been charged. A has told his attorney that B has been contacted by law enforcement authorities in regard to their investigation of the charges against A. A’s attorney is concerned that B might change his story to give a less favorable statement about A in order to negotiate a more favorable disposition of the charges against B. A’s attorney wants to record an interview with B after identifying himself to preserve B’s statement in case B considers changing his statement later. At the very least, A’s attorney reasons that such a recorded statement would ensure that B’s credibility could be attacked in the event B later testifies against A if B’s statement is inconsistent with the statement B gave during the recorded interview.
Question 1: Are there circumstances under which a criminal defense attorney or an agent acting under the attorney’s direction in an investigative or fact-finding capacity may ethically record the conversation of a third party, such as a witness, without the latter’s knowledge?
Answer 1: Yes. When a criminal defense attorney or an agent acting under the attorney’s supervision uses lawful methods, such as undisclosed tape-recording, when interviewing witnesses or preparing the case, those methods cannot be seen as reflecting adversely on the attorney’s fitness to practice law; therefore, such conduct will not violate the prohibition in Rule 8.4(c).
Question 2: Must a criminal defense attorney or the attorney’s agent inform the third party that the attorney is the defendant’s counsel or an agent acting for defendant’s attorney?
Answer 2: Yes. When a criminal defense attorney or an agent acting under the attorney’s supervision uses lawful methods, such as undisclosed tape-recording, when interviewing witnesses or preparing the case, the lawyer or agent must ensure that the unrepresented third party is aware of the lawyer's or agent’s role.
As always, the VSB's Standing Committee on Legal Ethics reminds counsel that its opinions are advisory only, based only on the facts presented and not binding on any court or tribunal.
This information is derived from Virginia CLE®’s Recent Developments in the Law Seminar Materials
Pleading to a Lesser Offense Can't Expunge the Original Felony Charge (Expand/Collapse)
October 14, 2011
What happens to the felony original charge when it is reduced to a misdemeanor and the defendant pleads guilty to the lesser offense? May the original charge be expunged under Code of Virginia, §19.2-392.2?
No. A petitioner who pled guilty to lesser offenses cannot expunge the records of his original felony charges under §19.2-392.2. In Necaise v. Commonwealth, 281 Va. 666, 708, S.E.2d 864 (2011), the defendant was arrested for two felonies. Both were reduced to misdemeanors and he pled guilty. The circuit court denied his petition to expunge the felony charges from his records.
On appeal, the Supreme Court of Virginia affirmed, holding that the charges were not “otherwise dismissed” under the language of §19.2-392.2. Expunging the felony charges would distort the record by leaving the misdemeanor convictions without any foundation. Further, the purpose of §19.2-392.2 is to protect innocent persons from false accusations and unjust convictions. A person who pled guilty is not innocent.
This information is derived from Virginia CLE’s “What's New at the Virginia Supreme Court?” telephone seminar.
May Counsel Advise a Client to Wear a Wire? (Expand/Collapse)
October 7, 2011
Test your knowledge with this hypothetical:
Hypothetical: B, a father, sexually abused A, his daughter, for an extended period of time during her childhood. B's sexual abuse of A constituted a felony. As is the case with many victims of sexual abuse, A repressed her memories of this abuse and could not recall its nature or extent until after she received therapy as an adult. As a result of this abuse, A suffers from several substantial psychological disorders and has received extensive therapy including hospitalizations to treat or manage these disorders.
A has contacted a lawyer to consider a possible civil claim against B for damages resulting from his abuse of her. There is little corroborating evidence and the claim is essentially A's word against B's. A has continued to have contact with B, who has freely admitted, in prior conversations with A, his sexual abuse of her.
A's attorney suggests that A arrange a meeting with B and without disclosing it to B, make a surreptitious recording of their conversation. B is not currently represented by counsel.
Question 1: Can the attorney advise this victim to secretly tape her father to get a recorded admission for use in a civil suit against him?
Answer 1: Yes. In LEO 1802, overruling prior LEOs, the Committee opines that an attorney may advise clients to take lawful action to solve legal dilemmas or advance legal claims. A's attorney is not violating or attempting to violate the Rules of Conduct through the actions of A by advising A that she may record conversations with B. Rather, A's attorney is advising A of a legal course of conduct, which may or may not be acted upon by the client. In so doing, A's attorney is discharging her ethical obligation to advise the client of lawful means by which the client's objectives may be achieved.
By analogy, the Committee observes that the drafters of the Rules of Conduct concluded that an attorney should be permitted to advise a client, whom the attorney is representing on a civil claim, of the right to file criminal or disciplinary charges against their adversary without being deemed to have violated Rule 3.4(i) [Prof. Conduct Rule 3.4(i)] indirectly through the actions of the client. To the extent that prior Legal Ethics Opinion 1448 [LE Op. 1448] (1992) is inconsistent with this opinion, it is hereby overruled.
Question 2: Can the attorney invite the father into her office and secretly tape a conversation between counsel and the father, trying to get the father to admit his prior sexual abuse of the client?
Answer 2: No. Gunter v. Virginia State Bar, 238 Va. 617, 622, 385 S.E.2d 597 (1989), and LEO 1448 remain applicable for the proposition that an attorney cannot secretly tape a conversation with a person not represented by counsel in order to gain admissions or “ensnare” an opponent.
This information is derived from Virginia CLE’s “27th Annual Advanced Family Law” and “Recent Developments in the Law” seminar materials.
May child support be enforced after the 20-year period has run? (Expand/Collapse)
September 29, 2011
Does the twenty-year statute of limitations on the enforcement of a judgment apply to unpaid child support? It’s an interesting question because the child support obligation itself terminates when the youngest child reaches the age of 18 or is otherwise emancipated with a few exceptions.
The answer is no: the twenty-year statute of limitations on the enforcement of a judgment created by section 8.01-251 of the Code of Virginia does not apply to unliquidated amounts of child support. Adcock v. Department of Social Serivices, 56 Va. App. 334, 693 S.E.2d 757 (2010).
The parties in Adcock divorced in 1966, and the father was ordered to pay $30 per week for support of their three minor children; the obligation ended in 1982 when the youngest child attained his majority. The wife applied for services from the Division of Child Support Enforcement (DCSE) in 2006, and the agency asked the court to establish the amount of support and interest owed. The trial court denied the father’s motion for summary judgment based on the statute of limitations and awarded the wife $73,629.10, which represented principal and interest owed under the terms of the order.
The court of appeals held that there is no limit to how long a party may wait before seeking the enforcement of a support order unless that amount has already been reduced to judgment for a liquidated sum by a court. Because a child support order creates an ongoing obligation, Virginia Code section 8.01-251 does not apply and the interest continues to grow until a claim is made that reduces the amount to judgment.
This information is derived from Virginia CLE’s “Recent Developments in the Law” seminar.
Avoiding the 21-Day Rule: What Works and What Doesn't? (Expand/Collapse)
September 12, 2011
Under Virginia’s 21-day rule, “[a]ll final judgments, orders, and decrees, irrespective of terms of court, shall remain under the control of the trial court and subject to be modified, vacated, or suspended for twenty-one days after the date of entry, and no longer.” Rule 1:1, Rules of the Supreme Court of Virginia.
But that begs the question: when is a judgment “final”?
The Virginia Supreme Court reaffirmed this year that it is possible to avoid the application of the 21-day time period in Rule 1:1 by including specific language stating that the court is retaining jurisdiction to address matters still pending before the court. Johnson v. Woodard, 281 Va. 403, 409-10, 707 S.E.2d 325, 328 (2011).
Johnson involved a nonsuit order that referred specifically to Rule 1:1, stated that it was “not a final order,” and indicated that the circuit court would “retain jurisdiction of this matter to consider any application for attorney’s fees and costs and such other relief as may be sought.” (Emphasis added.)
It isn’t enough for the order to state that the case shall remain on the docket. Compare Johnson with the Virginia Supreme Court’s earlier decision that the trial court lost jurisdiction over a case 21 days after it entered a nonsuit order despite the statement in the order that “[t]his suit shall remain on the docket for the Court to determine issues concerning attorney fees, costs and expenses”; only an order within the 21-day period that expressly modifies, vacates, or suspends the final judgment will interrupt or extend the running of the time period to permit the court to retain jurisdiction. (Emphasis added.) City of Suffolk v. Lummis Gin Co., 278 Va. 270, 274, 683 S.E.2d 549, 551 (2009).
This information is derived from Virginia CLE’s “Recent Developments in the Law” seminar and from “Recent Developments in Virginia Civil Litigation” downloadable seminar materials.
Virginia Appellate Courts May Now Apply the "Right Result for the Wrong Reason" Doctrine. (Expand/Collapse)
July 19, 2011
Formerly under Virginia law, cases in which a party had failed to present an argument in the trial court were not eligible for the appellate courts to apply the "right result for the wrong reason" doctrine. This was so because the trial court had not had an opportunity to rule on the argument that was being raised for the first time on appeal. In Perry v. Commonwealth, 280 Va. 572, 580, 701 S.E.2d 431, 436 (2010), the Virginia Supreme Court reversed this interpretation of the doctrine and held that a party's failure to present an argument in the trial court does not preclude affirmance under the "right result for the wrong reason" doctrine as long as all of the necessary evidence to support the argument was presented at trial.
The Court stated that consideration of the facts in the record and whether additional factual evidence would be necessary to support the newly advanced reason is the proper focus of the application of the doctrine. The Court further agreed with the U.S. Supreme Court that an appellee may also "urge in support of a decree any matter appearing in the record, although his argument may involve an attack upon the reasoning of the lower court or an insistence upon matter overlooked or ignored by it." (quoting United States v. Am. Ry. Express Co, 265 U.S. 425, 435 (1924)). The application of the doctrine was also addressed in a civil case decided the same day, but the Court reached the opposite result where the facts of the case developed at trial that should have supported the newly stated ground were in conflict. Banks v. Commonwealth, 280 Va. 612, 618, 701 S.E.2d 437, 440-41 (2010).
This information is derived from Virginia CLE's "Recent Developments in the Law" seminar.
New Presumption That an Injury Is Work Related (Expand/Collapse)
June 24, 2011
For over fifty years, Virginia case law has recognized a rebuttable presumption known as the unexplained death presumption that an accident is compensable under the Workers' Compensation Act when a worker is found dead in circumstances that are consistent with the performance of his or her work duties. See Southern Motor Lines Co. v. Alvis, 200 Va. 168, 104 S.E.2d 735 (1958). The presumption, however, did not extend to a worker who was not killed immediately in such an accident but whose physical or mental injuries were so severe that the worker was unable to testify or to provide any details about what happened.
Effective July 1, 2011, new section 65.2-105 of the Virginia Code amends the title by creating a presumption that, in the absence of a preponderance of evidence to the contrary, an injury that occurs on the job is work related. The presumption arises in any claim under the Workers' Compensation Act where an employee is physically or mentally unable to testify about the incident and there is unrebutted prima facie evidence that the injury was work related.
Protective Orders and Dating Relationships (Expand/Collapse)
June 15, 2011
Virginia's protective order statutes now cover persons in dating relationships. The changes will become effective July 1, 2011. The new legislation (enacted by identical Chapters 445 and 480) expands the scope of Chapter 9.1 of Title 19.2 from "Protective Orders for Stalking" to "Protective Orders." Chapter 9.1 of Title 19.2 now applies to "any act involving violence, force, or threat that results in bodily injury or places one in reasonable apprehension of death, sexual assault, or bodily injury," as provided in a new section:
§ 19.2-152.7:1. Definitions. As used in this chapter: "Act of violence, force, or threat" means any act involving violence, force, or threat that results in bodily injury or places one in reasonable apprehension of death, sexual assault, or bodily injury. Such act includes, but is not limited to, any forceful detention, stalking, criminal sexual assault in violation of Article 7 (§ 18.2-61 et seq.) of Chapter 4 of Title 18.2, or any criminal offense that results in bodily injury or places one in reasonable apprehension of death, sexual assault, or bodily injury.
Prior to this new legislation's enactment, protective orders were available only to victims of (1) family abuse or (2) stalking, sexual battery, or a criminal offense resulting in a serious bodily injury.
Originally, the 2011 legislation included a bill that defined the terms "dating relationship" and "dating relationship abuse." That bill [HB 2340] was incorporated in HB 2063, which became Chapter 480. In the process, the two terms relating to dating were dropped for more general language that more broadly covers conduct, not relationships.
The effort to expand protective order coverage to persons in dating relationships goes back at least to the 2002 session, when the Virginia State Crime Commission submitted a report to the General Assembly entitled "Protective Orders in Dating Relationships" which recommended that protective orders be expanded to encompass crimes other than stalking.
Chapters 445 and 480 also make several other changes to protective order provisions of the Virginia Code, including provisions for family abuse protective orders and penalties for violating protective orders.
Use of Credit Cards for Legal Services (Expand/Collapse)
June 3, 2011
Credit cards have become the preferable payment method for legal services by many clients. The Virginia State Bar (VSB) addressed credit card payments in 2009 to cover certain questions not answered by previous opinions:
- May a lawyer legally pass along the transactional/service fees to the client who is using a credit card to pay legal fees?
- Is it ethical for the lawyer to allow those transactional/service fees to be deducted from the lawyer's escrow account?
- Is it ethical for the lawyer to allow the credit card company to "chargeback" the payment against the lawyer's escrow account?
In LEO 1848, issued April 14, 2009, the VSB Ethics Committee concluded that "[A] lawyer may pass along merchant fees associated with credit card use to the client with disclosure and consent. These fees may be deducted from the lawyer's escrow account; however, the Committee continues to caution regarding the risks inherent in permitting a financial institution to debit the lawyer's escrow account. When possible, a lawyer should contract with the financial institution that all debits of fees and costs associated with credit card use, including 'chargebacks,' be made from the lawyer's operating account." In addition, LEO 1848 summarizes previous VSB opinions relating to the use of credit cards.
See the full text of LEO 1848 by visiting Virginia CLE®'s website, which includes a page of legal links to the Virginia Code, legal ethics opinions, and more! Click on Legal Links to access this useful resource.
Family Law Attorneys: New Amendments Affecting Responsibility for Debt (Expand/Collapse)
May 27, 2011
Did You Know? Two New Amendments Significantly Affect the Determination of Responsibility for Debt in Domestic Relations Cases
Pendente Lite Orders
Section 20-103 of the Virginia Code has been amended to empower judges to "order that a party pay secured or unsecured debts incurred jointly or by either party." The change clarifies what had apparently been a difference of opinion among circuit court rulings: Does the court have the authority to order the direct payment of a specific bill or debt under section 20-103 as opposed to just a monetary amount of support?
The amendment, by Chapter 687 [HB 1529], becomes effective July 1, 2011.
Another bill amended section 20-107.3 of the Virginia Code to provide for the specific classification of debts as either marital, separate, or hybrid. The bill was specifically intended to overrule the Virginia Supreme Court's decision in Gilliam v. McGrady, 279 Va. 703, 691 S.E.2d 797 (2010). Gilliam held that since the equitable distribution statute did not specifically address the classification of debts, there would be a presumption that any debt incurred in the sole name of a party would be that party's separate debt, and any joint debt incurred would be a marital debt.
The amendment requires the court first to determine the classification of debts and the amount of said debt as of the date of the last separation of the parties. Debts are defined as separate or marital in newly enacted subsections (A)(4) and (5) of section 20-107.3.
The amendment, by Chapter 655 [HB 1569], becomes effective July 1, 2011.
Virginia CLE®'s website includes a page of legal links to the Virginia Code, legal ethics opinions, and more! Click on Legal Links to access this useful resource.
Estate Planners (Expand/Collapse)
May 20, 2011
A Virginia statute enacted in 2007 relaxes the standards for a document to be admitted to probate as a will in certain circumstances. See section 64.1-49.1 of the Virginia Code for more information.
The proponent of the document or writing is required to establish by clear and convincing evidence that the decedent intended it to constitute:
- the decedent's will,
- a partial or complete revocation of the will,
- an addition to or an alteration of the will, or
- a partial or complete revival of his formerly revoked will or of a formerly revoked portion of the will.
What about wills written before this section became effective? In Schilling v. Schilling
, 280 Va. 146, 695 S.E.2d 181 (2010), the will in question was written in 2005 and the testator died in 2008. The Virginia Supreme Court ruled that this did not constitute a retroactive application of section 64.1-49.1, since the determination of whether a writing offered for probate is a valid will applies the law in effect on the date of the maker's death because a will is not "effective for any purpose" before then.