LITIGATION NEWS \I5B PUBLISHED BY THE LITIGATION SECTION OF THE VIRGINIA STATE BAR FOR ITS MEMBERS.

VOLlTME IX NUMBER 1 ' . WINTER 2002

Supreme Court Defines Customer's Duty to

Discover and Report Payment of Forged

Checl{s by Kevin P. Oddo

Despite the prevalence of check fraud, there have been few decisions from Virginia courts concerning those sections of the

Uniform Commercial Code pertaining to the rights of an account holder to recover from its bank for improper payment of a check. In particu­lar, the rules governing a customer's duty to

( •.. ~. \ review its monthly bank statements for forged or Lj altered checks had never been addressed by the

Supreme Court of Virginia until this past June,

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when it issued its opinion in Halifax Corporation v. First Union National Bank, 262 Va. 91, 546 S.E.2d 696 (2001).

Halifax Corp. presented a typical case of employee embezzlement. Between August 1995 and January 1997, Halifax's comptroller, Adams, wrote at least 88 checks on Halifax's account at Signet Bank, which was subsequently acquired by First Union. The checks were made payable to Adams, who without authorization used facsimile signatures on the checks. The checks were deposit­ed by Adams in her personal account at Wachovia B~tnk. Each check was paid by First Union and charged against Halifax's account.

First Union sent monthly statements to Halifax reflecting the unauthorized checks. Halifax, how­ever, failed to notify First Union of the unautho­rized signatures within one year after the statements were sent to Halifax.

Kevin P. Oddo is a partner with Flippin, Densmore, Morse & Jessee in Roanoke, Virginia.

1

Halifax discovered the embezzlement in January 1999, by which time Adams had stolen in excess of $15,000,000 from the company. Halifax then filed suit against First Union, alleging inter alia (1) a violation of Virginia Code § 8.4-401 (for charging against its account checks that were not authorized and therefore not properly payable), and (2) breach of its deposit agreement. The circuit court granted summary judgment to First Union, and Halifax appealed.

On appeal, the Supreme Court addressedsev­eral issues under articles 3 and 4 of the DCC (cod­ified in Titles 8.3A apd 8.4 of the Virginia Code). First, the Court analyzed § 8.4-406(£), which pro­vides, in pertinent part:

Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the state­ment or items are made available to the cus-

Check Fraud - contJd on page 6

Table of Contents ~.

Supreme Court Defines Customer's Duty to Discover and Report Payment of Forged Checks . . . . . . . . . . . . . . . . . . . . . 1

by Kevin P. Dddo

Letter from the Chair . . . . . . . . . . . . . . .... 2

The "Runaway Jury:" Current Issues in Punitive Damages ........ 3

by Harry M. Johnson, III

Code §30-5: A Legislator's Shield and Sword ........... 5

by Randolph C. Du Vall

Recent Law Review Articles . . . . . . ....... 9

Litigation Section Board of Governors .... 18

Young Lawyers Committee ............. 19

Ethics at a Glance: Ethics in the Information Age. . . . . back cover

by Thomas E. Spahn

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LITIGATION NEWS WINTER 2002

Letter from the Chair

Is a.Farewell to Contributory Negligence in Sight?

V irginia is one of only four states, plus the District of Columbia, that still retains common law contributory negligence.

. Most states have abolished the doctrine by statute; other jurisdictions have done so by judi­cial fiat. At the Boyd -Graves Conference last October, the prevailing sentiment of those in attendance was that contributory negligence

recover unless her negligence is greater than 50%. (A minority of jurisdictions employ a "49% Rule" which allows a plaintiff's recovery as long as the plaintiff is less than 50% negligent.) .

Cases involving multiple defendants can be problematic. An area that poses particularly diffi­cult decisions is the future of joint and several liability in a comparative negligence framework.

should be on its last legs in Virginia. The problem, how­ever, was finding a consensus as to the negligence scheme that should replace it.

Advocates for change in Virginia argue the inherent concept behind contributory negligence is unfair: a party that is found to be 2% negli­gent cannot recover from a wrongdoer who is 98% negli­gent. Those who oppose any change in the system, howev­er, point out that juries gener­ally get such cases "right" despite the fears of philoso­phers, and that revamping the

Advocates for change in Virginia argue the

inherent concept behind contributory negligence is

unfair .... Those who oppose any change in the

system, however, point out that juries generally get

such cases llrighf' despite the fears of philosophers, and that revamping the

law will create many new headaches.

For example, if joint and sev­eral liability is abandoned, a

"'defendant might be responsi-ble only for its share of the negligence; i.e. a deep pocket defendant that is only 10% negligent in a million dollar verdict would be able to cap . its liability at $100,000 (10% ~' of $1,000,000). This might .... leave deserving plaintiffs without a means of recover-ing jury awards. On the other hand, if joint and several lia­bility is retained, a defendant that is only 5% negligent could find itself responsible for all of the same million

law will create many new headaches. The ques­tion of whether these potential headaches can be ironed out will likely determine whether revi­sions to the system will go forward.

At the outset, it seems unlikely Virginia will move toward "pure comparative negligence," i.e. a system by which a plaintiff who is 90% neg­ligent in causing a car crash can still collect 10% of his damages from a defendant who was 10% negligent. The majority of "comparative negli­gence" states employ a "50% Rule," where the plaintiff can recover unless her negligence i"s greater than the combined negligence of all other parties - in other words, a plaintiff may

2

dollar verdict if the other defendants are insol­vent.

Other states that have done away with con­tributory negligence have faced unexpected dilemmas from which Virginia reformers can learn. Certainly the Bar will need to consider the effects comparative negligence will have on the future of handling contribution, mixed tort/contract/warranty claims, and a variety of other issues. Change looms before us. Let the Litigation Section Board know how you feel about it.

Frank K. Friedman Chair, Litigation Section

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WINTER 2002 . LITIGATION NEWS

The "Runaway Jury": Current Issues in Punitive Damages

by Harry M Johnson, III

Introduction The law of punitive damages remains one of the most persistently controversial, and fluid, subjects in civil practice throughout the country.! The United States Supreme Court has decided five significant punitive damages cases during the past ten years, all involving allegations of runaway punitive damages awards.2 Although other states have felt far greater immediate impact from these decisions than Virginia, the Supreme Court of Virginia is begin­ning to see cases that must be decided in the con­text of this evolving federal constitutional law. The Supreme Court of Virginia recently granted a peti­tion for appeal in one of these cases,3 the decision of which should provide some insight into our court's current views on large punitive damages awards.

This article examines the United States Supreme Court cases and the potential impact they may have on Virginia law and practice. Specifically, the author believes that the Supreme Court of Virginia will undertake an even more detailed analysis of large punitive damages awards (even after the statutory cap is applied), and may show less deference to circuit court findings, perhaps even reviewing punitive damages awards de novo.

United States Supreme Court Cases Critics of punitive damages long contended that the Fifth, Eighth, and Fourteenth Amendments of the United States Constitution placed limits on the imposition of punitive damages. There were many arguments. Among others, the critics attacked the criteria for awarding punitive damages as being impermissibly vague and standardless, thus failing to

Henry M. Jobnson, III is a partner in the Litigation, Intellectual Property and Antitrust Team in the Richmond, Virginia office of Hunton & Williams. He is a member of the Virginia State Bar Litigation Section Board of Governors.

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provide fair notice. They further argued that jury awards of punitive damages were so arbitrary and capricious that defendants were denied equal pro­tection. And, they asserted that the cOurts were pro­viding. inadequate oversight and review of the size of the awards. In 1991, the Supreme Court began to address these challenges.4

Pacific Mut. Lifelns. Co. v. Haslip, 499 U.S. 1 (1991) TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443 (1993) The Supreme Court affirmed large punitive dam­ages awards in Pacific Mut. Life Ins. Co. v. Haslip and TXO Prod. Corp. v. Alliance Res. Corp. But, the Court ruled in both cases that the Constitution, and specifically due process, con­strains the discretion of courts to award punitive damages in private litigation:

One must concede that unlimited jury discre­tion - or unlimited judicial discretion for that matter- in the fixing of punitive dam­ages may invite extreme results that jar one's constitutional sensibilities. We need not, and indeed we cannot, draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. We can say, however, that general concerns of reasonableness and adequate guidance from the court when. the case is tried to a jury properly enter into the constitutional calculus. With these concerns in mind, we review the constitutionality of th~ punitive damages awarded in this case.5

In Haslip, the Court approved an Alabama state court punitive damages award of $840,000 against an insurance company, although it acknowledged that the award may be "close to the line":

We are aware that the punitive damages award in this case is more than 4 times the amount of compensatory damages, is more than 200 times the out"of-pocket expens­es ... and, of course, is much in excess of the fine that could be imposed for insurance fraud under [Alabama statutes.] .... While the monetary comparisons are wide and, indeed, may be close to the line, the award here did not lack objective criteria. We conclude, after careful consideration, that in this case it does not cross the line into the area of constitu­tional impropriety.6

Punitive Damages .,..- cont'd on page 4

LITIGATION NEWS ' Q WINTER 2002

Punitive Damages contJd from page 3

Likewise, the Court affirmed an award from a West Virginia state court in YXo. The jury's puni­tive damages award was $10 million, which was a stunning 526 times the compensatory damages awarded. The Court, however, "eschewed an approach that concentrates entirely on the relation­

.ship between actual and punitive damages." In upholding the award, the Court noted that the appellate court in West Virginia had properly found egregious conduct and a pattern of fraud, trickery, and deceit potentially affecting many other victims.7

In both cases, the Court considered and expressly rejected mathematical, objective, or rigid approaches. The potential circumstances in cases warranting punitive damages are simply too diverse for simple formulas. Nevertheless, the Court left no doubt that the Constitution constrains the lati­tude of trial courts to inflict "excessive" punish­ments. Rather than focusing on a specific objective test or formula to determine excessiveness, the Court focused heavily on the procedural protec­tions afforded the defendants.8

Honda Motor Co. Po

Oberg, 512 U.S. 415 (1994) The Court continued its focus on the procedural safeguards of appellate review in Obc1lJ. An Oregon state court had awarded punitive damages of $5 million in a products liability case. The Supreme Court of Oregon construed its guarantee of a jury trial to prohibit any excessiveness inquiry and declined to review the award on that basis. The Supreme Court ruled that "Oregon's denial of judi­cial review of the size of punitive damages awards violates the Due Process Clause of the Fourteenth Amendment."9 On remand, the Supreme Court of Oregon again upheld the $5 million punitive dam­ages award as within the range that rational jurors would be entitled to award, and this time the Supreme Court denied review. 10 The Supreme Court clearly was looking in these first several cases to encourage careful appellate review as the safe­guard to protect against unconstitutionally excessive awards'! 1

4

BMWv. Gore, 517 U.S. 559 (1996) . BMW v. Gore is the most significant in this line of 6 cases. It was the first Supreme Court decision find­ing an award of punitive damages to be excessive and to violate due process. In this case, BMW had not disclosed that it had re-touched the paint on a $40,000 car before selling it as new. The Alabama jury awarded $4,000 in compensatory damages and $4 million in punitive damages. On appeal, the Alabama Supreme Court, without providing a detailed basis for selecting a new amount, ordered a remittitur to $2 million.

The United States Supreme Court premised its reversal of the award on fair notice grounds: "Elementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment but also of the severity of the penalty that a State may impose. "12 Most important, BMW articulated for the first time fac­tors or "guideposts" that courts must consider when conducting a substantive review of the consti­tutionality of a punitive damages award. 13 The -guideposts are as follows: (1) the reprehensibility of t . the conduct; (2) the ratio of punitive damages to the harm to the plaintiff; and (3) the difference between the award and civil or criminal penalties for comparable misconduct.14 A court must undertake a "detailed examination" of these factors to ensure that the punishment is not excessive.l5 Analyzing the award against these three factors, the Court concluded that the "grossly excessive" $2 million punishment was unconstitutional.

Since the BMW decision, these three guideposts have been debated' and applied in a number of cases, both state and federal. It is beyond the scope of this article to address all the varying and divergent inter­pretations of the' guideposts, which undoubtedly will continue to be litigated for years to come. Rather, the significance here is that there is now a judicially-sanctioned framework for analyzing the outer limits of a trial court's discretion to inflict punishment through punitive damages. How those guideposts will be used by the Supreme Court of Virginia is an open issue, since that Court has not yet cited BMW in any decision. ~

Punitive Damages - contJd on page 13

WINTER 2002 ' LITIGATION NEWS

Code §30-5: A Legislator'S

Shield and Sword by Randolph C. Du Vall

Code §30-51 is a long standing part of Virginia jurisprudence .. Originally designed as a shield to protect members of the

General Assembly, and clients who had employed lawyers who were members of the General Assembly, the statute has evolved over the years and can now be wielded as sword by lawyer/legislators of a mind to do so. Where once the statute sought to make certain there was a level playing field, the statute now tilts the playing field in favor of clients whose attorney is a member of the General Assembly. That the statute has not been the subject of more reported decisions is surprising.

Code §~0-5 was first enacted in 1906.2 The statute originally allowed a continuance of a court proceeding as a matter of right when the General Assembly was in session if a party to that action had employed a member of the General Assembly to represent him in such action prior to the begin­ning of the session. Through a number of subse­quent amendments, the statute has been significantly broadened. The statute was first amended in 1919. The last amendment occurred in 1987. Today's version of Code §30-5 bears little resemblance to its first incarnation.

Code §30-5 is written in three sentences. Although it would be logical to assume that the three sentences must be read in conjunction with one another, the statute as applied has been read as if the sentences bore little relationship to one another. The first sentence contemplates a pending matter and provides that when a party "prior to or during the session of the General Assembly" has employed a lawyer/legislator as counsel, that party "shall be entitled to a continuance as a matter of right" during the period beginning 30 days prior to the commencement of the session and ending 30 days after the adjournment thereof or during a

Randolph C. Du Vall is a partner with the firm Breeden, Salb, Beasley & DuVall in Norfolk, Virginia.

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period beginning one day prior to any reconvened or veto session of the General Assembly or any committee or subcommittee meeting thereof and ending one day after the adjournment thereof. The second sentence provides that any pleading or the performance of any act relating thereto required to be filed or performed by any statute or rule during the period beginning 30 days prior to the com­mencement of the session and ending 30 days after the adjournment of the session shall be extended until not less than 30 days after such session. The third sentence of the statute provides that the fail­ure of any court to grant a continuance "when requested so to do" shall constitute reversible error.

The Supreme Court of Virginia has held that the language of the statute is clear, absolute and unequivocal. 3 The Supreme Court has stated the statute requires no construction nor any interpre­tation. It is a peremptory statute "designed to pre­vent embarrassment and conflict to a member of the General Assembly in the performance of his public and private duties."4 As anyone who has ever encountered the statute knows, the language is anything but clear and 'unequivocal in certain circumstances. The use of the statute has also become divorced from the need to prevent embar­rassment and conflict to a member of the General Assembly. 5

The most basic use of the statute is to continue a hearing or trial. Where a matter is set down for hearing or trial on a date that falls within 30 days of the start of the General Assembly or any later date up to 30 days after the adjournment of the session, the matter must be continued when the lawyer/legislator requests that it be continued. There is no time constraint on when the motion for the continuance must be made in order to be timely made. See Rice v. Commonwealth.6 In that case, a criminal defendant requested that a matter be continued because his counsel was a member of the General Assembly. The trial court did not grant the continuance request on the ground that it was not timely made. The Supreme Court of Virginia reversed and remanded for a new trial. Quoting the third sentence bf the statute, the

Code §30-S - contJd on page 8

LITIGATION NEWS WINTER 2002

Check Fraud contJd from page 1

to mer (subsection (a» discover and report the customer's unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration.

Finding this statute to be plain and unambigu-0us' the Court held that Halifax's admitted failure to notify First Union of the unauthorized checks within one year after the monthly statements reflecting the checks were sent to it barred its claim against First Union for the unauthorized sig­natures. The Court characterized a customer's compliance with § 8 .4-406( f) as a "condition precedent" to the customer's right to recover loss­es caused by the unauthorized signature or alter­ation. Rejecting Halifax's argument to the contrary, the Court ruled that the preclusion of § 8.4-406(f) applies regardless of whether the bank paid the item in good faith. This is so, said the Court, because § 8 .4-406( f) does not contain any language indicating that the bank's failure to act in good faith limits the preclusion in any way.!

The Court then disposed of Halifax's breach of contract claim. Halifax's contention was that the deposit agreement imposed certain obligations on First Union regarding recognition of signatures. The Court, affirming the circuit court, held that a claim for common law breach of contract is pre­empted by the UCC. Specifically, § 8.1-103 pro­vides, in relevant part:

Unless displaced by the particular provisions of this act, the principles of law and equity, including the law merchant and the law rela­tive to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its prov1sions.

The Court held that Title 8.4 displaced princi­ples of contract law with regard to the rights of a customer against its drawee bank for the improper payment of checks drawn on the customer's account. This result helps "promote uniformity,. predictability, and finality in certain types of com­mercial transactions." Thus, any action by a cus­tomer against its bank for improper payment of checks can only be brought under § 8.4-401.

6

The Court's decision clearly is correct in all respects. Section § 8.4-406(f) unambiguously pre­cludes any recovery by a customer who fails to report a forgery or alteration within one year after the bank statement or checks are made available to it, without regard to the conduct or good faith of the bank. Any other result would have required the Court to rewrite the statute, which is not per­mitted.

Likewise, § 8.1-103 allows common law prin­ciples to supplement the UCC only if the uce has not displaced the common law. In making this determination, courts hold that if the uec pro­vides an alternative remedy for a factual situation, the common law is displaced on that same point. See Stefano v. First Union, 981 F.Supp. 417, 420 (E.D.va. 1997). In the case of a bank that charges its customer's account for checks bearing alter­ations or a forged drawer's signature, § 8.4-401 provides the customer with a means of full recov­ery. There simply is no room for the common law in this factual situation.

Halifax Corp. should lay to rest several issues that were frequent points of contention in bank-customer litigation. There remain, however, other issues that ultimately will require clarification by the Supreme Court, including issues where case law from other jurisdictions is not consistent. For example, the one year period in § 8.4-406(f) is almost universally reduced to a 14 or 30 day peri­od in account agreements. Such "cut down" claus­es are generally recognized as being effective, and courts in Virginia have upheld them. SeeJ e.g.) National Title Ins. Corp. Agency v. First Union, Law No. 184753 (Fairfax Co. Oct. 19, 2000). A minority of courts in other jurisdictions, however, have limited these provisions under certain circum­stances. The National Title Insurance case is now pending in the Supreme Court.

Another unresolved question in Virginia is when the bank statement should be deemed to have been "sent" or "made available" to the cus­tomer so as to trigger the one year period in § 8.4-406(f) and the time periods in § 8.4-406(d)(2). Is it the date the statement is mailed? Received? What if the statement is lost by the post office and never delivered? Courts in other jurisdictions generally hold that the date of mailing starts the clock run-

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WINTER 2002 . . LITIGATION NEWS

ning. See, e.g., Stowell v. Cloquet Co-op Credit Union, 557 N.W.2d 567, 571 (Minn. 1997). And, the court in Stowell held that the bank fulfills its obligation of sending the statement to its customer when it mails the statement, even if the statement is lost and never delivered. Id. at 571-72. In other words, the risk of loss is on the customer.

Finally, what rules govern those check fraud cases that do not involve forgeries or alterations? By its plain language, § 8.4-406 covers only cases of forgery or alteration, and courts in other juris­dictions have recognized this limitation in uee § 4-406. See, e.g., Bank of Southern Maryland v. Robertson's Crab House, Inc., 389 A.2d 388, 397 (Md. Ct. Spec. App. 1978). In today's hi-tech world, the traditional means of accomplishing check fraud are giving way to other types of schemes that do not involve forgery or alterations, such as counterfeit checks. What is the customer's obligation to discover and report the fraud in those cases? How will the development of elec­tronic banking, with electronic drafts and instantly available account information, affect the cus­tomer's duty?

There are no clear answers to these questions as in many respects case law has not caught up to modern technology. Halifax Corp. resolves signifi­cant issues in the area of bank-customer relations, confirming the customer's duty of care and the primacy of the commercial code. However, in the rapidly changing environment of modern banking, there remain important questions to be answered, and new law to be made.

1 Note that §8.4-406(f) is not a statute of limitations. It does not require that suit be commenced within one year, only that the customer discover and report the forgery or alteration within one year as a condition to recovery. The statute of limitations is three years, Virginia Code § 8.4-llI, and the cause of action accrues when the bank charges the customer's account for the amount of the check.

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Ethics at a Glance (conf'dj

raises the thorny problem of l(l.HHH\_~ and other affiliates.

ethics purposes (mostly involving conflicts of interest) and privilege issues, courts and bars sometimes have to determine if corpo­rate affiliates are considered "one client." Most courts hold that communications between relat­ed companies will be protected by the attorney­client privilege. However, some courts require that the corporations share a common legal interest before protecting communications between them .. -.. essentially applying the same test that governs communications between unrelated corporations.

Because this is the minority view, in most states it would be safe to communicate with a corporate subsidiary. To be cautious, it might make sense to contemporaneously articulate the common legal interest so that the communica­tions would receive privilege protection in any state.

Therefore, the best answer to this hypotheti­cal is PROB.A1JLY YES.

LITIGATION NEWS is published by the Virginia State Bar Litigation Section.

Newsletter Editor R. Lee· Livingston

Statements or expressions of opinion or comments appearing herein are those of the editors, authors and contributors and not necessarily those ~f the Virginia State Bar or its Litigation Section.

LITIGATION NEWS' WINTER 2002

Cocle §:JO-5 contJdjrom page 5

court held that the refusal of the continuance was reversible error.7

The third sentence of the statute is a direct response to the decision of the Supreme Court of Virginia in Rosenbe1lJer v. Commonwealth.s In that case, the trial court had refused to grant a continu­ance under the then-existing statute. The Supreme Court of Virginia reviewed the case on an abuse of discretion standard. The Supreme Court found that the trial court had not abused its discretion in that case. The General Assembly changed the result in Rosenberger by amendment in 1934. From that time onward, failure of the trial court to grant a continuance when requested to do so was reversi ble error as a matter of law. The 1934 amendment is simply one example of the General Assembly broadening Code §30-5 to meet ever­changing circumstances. It is also an example of how the General Assembly has continued to expand the statute to accomplish its purposes of protecting clients who employ lawyer/legislators. The corollary is that the statute has continually been broadened to protect lawyer/legislators and perhaps give them advantages over lawyers who are not members of the General Assembly.

The second sentence of the statute was the subject of discussion in Hartsock v. Powell.9 In that case, one of the defendant's attorneys was a state senator. The trial court heard evidence ore tenus and entered a decree for the plaintiffs on July 7, 1956. At that time, Rules 5:1 and 5:4 required that within 60 days of the entry of the final decree, a Notice of Appeal and Assignments of Error be filed. The Governor convened a special session of the General Assembly on August 27, 1956. The Notice of Appeal and Assignments were not filed by the defendant until September 17, 1956, more than 60 days after entry of the final decree. The General Assembly did not adjourn its special ses­sion until September 26, 1956. Relying on Code §30-5, the Supreme Court held that the Notice of Appeal and Assignments of Error were timely filed. The Supreme Court took jurisdiction over the appeal and ultimately reversed and entered a final decree. The Court held that the filing of the

8

Notice of Appeal and Assignments of Error fell ( squarely within the second sentence of the statute. Accordingly, the time for filing the Notice of Appeal and Assignments of Error was automatical-ly extended until 30 days after the General Assembly adjourned. The filing of the pleadings with the Supreme Court on September 17, 1956, more than 60 days after entry of the decree in the trial court, but within the time period prescribed by statute, did not divest it of jurisdiction.

It is interesting to note that in Hartsock, an affidavit was filed by the state senator involved. The affidavit recited that the state senator was "active in preparing the case for trial and expected to participate in the trial but was prevented by ill­ness from doing so." Would the case have been decided differently in the Supreme Court if the state senator had not participated in preparing the case for trial? The "language of the statute" which is "clear, absolute and unequivocal" would seem to compel the conclusion that the state senator's par­ticipation was irrelevant. If the appellant had hired the state senator following the expiration of 60 '.' days from the date of entry of the decree, would • not the appellant have been entitled to the same consideration under the statute? The second sen­tence is silent as to when the lawyer/legislator must be employed or retained in order to take advantage of the statute. The first sentence of the statute indicates that the advantages of the statute are available to a client who "prior to or during the session of the General Assembly, employed or retained to represent him in such action or pro­ceeding an attorney who is ... member of the General Assembly .... " The author is of the opinion that had the appellant employed the state senator more than 60 days after entry of the final decree but before the General Assembly had adjourned, the result would have been the same. The statute could have been employed as a sword to preserve the appeal if the appellant's original counsel had blown the 60-day time limit but thereafter imme­diately counseled his client to hire a member of the General Assembly to prosecute the appeal. The client would then have employed a member of the , I

General Assembly "during the session" and that ~

Code §30-S - contJd on page 10

WINTER 2002 LITIGATION NEWS

- -

, Recent low Review ~rticles " _ _ _ _ _ _ _ _-< _, _ J _ _ ~ _

by R. Lee Livingston

The following are recently published Law Review articles that may prove useful to you in your practice:

Commercial Law Woods, Judy L. Survey of Recent Developments of the Law Concerning the Uniform 90mmercial Code and a Brief Introduction to Revised UCC Article 9. 34 IND. L. REv. 1099- 1113 (2001).

Contracts Crespi, Gregory Scott. Selling Structured Settlements: The Uncertain Effect of Anti-assign­mentClauses. 28 PEPP. L. REv. 787-817 (2001).

Employment Practice Bovee, Stephanie C. Note. The Family Medical Leave Act: State Sovereignty and the Narrowing of Fourteenth Amendment Protection. 7 WM. & MARy 1. WOMEN & L. 1011-1037 (2001).

Gilbert, Justin S. Prior History, Present Discrimination, and the ADA's ((Record of)) Disability. 31 U. MEM. L. REv. 659-676 (2001).

Hancock, Jonathan C. and John B. Starnes. Revisiting Kolstad v. American Dental Association: Reform of Punitive Damages Awards in Employment Discrimination Cases Since the Supreme Court Adopted the Standard of Malice or Reckless Indifference. 31 U. MEM. L. REv. 641-658 (2001).

Hart, Tomeka R. Comment. Employment Law: Tennessee Holds Employers Vicariously Liable for Sexual Harassment by their Supervisors. (Parker v. Warren County Util. Dist., 2 S.W.3d 170, Tenn. 1999.) 31 U. MEM. L. REv. 709-725 (2001).

Reynolds, Sidney Charlotte. Comment. Closing a Discrimination Loophole: UsingTitle VIPs Anti­retaliation Provision to Prevent Employers from

(j' Requiring Unlawful Arbitration Agreements as Conditions of Continued Employment. 76 WASH. L. REv. 957-989 (2001).

9

Evidence Cobb, J. Allan. Evidentiary Issues Concerning Online ((Sting)) Operations: A Hypothetical Based Analysis Regarding Authentication, Identification, and Admissibility of Online Conversations - A Novel Test for the Application of Old Rules to New Crimes. 39 BRANDEIS L.1. 785-846 (2001)~

Coleman, Barbara L., Michael 1. Stevens and Glenn D. Reeder. What Makes Recovered Memory Testimony Compelling to Jurors? 25 LAW & HUM. BEHAV. 317-338 (2001).

Densley;" Steven' T;- Admissibility· of Evidence That a . Spouse Has Remarried in a Wrongfol Death Action in Utah. 3 J.L. & FAM. STUD. 145-160 (2001).

Duncan, Jason G. Note. ((A Pig)s Breakfast)): Judicial Gatekeeping For Scientific and Specialized Expert Testimony. 6 SUFFOLK J. TRIAL & ApP. ADvoc. 21-35 (2001).

Gatowski, Sophia I. et al. Asking the Gatekeepers: A National Survey of Judges on Judging Expert Evidence in a Post-Daubert World. 25 LAW & HUM. BEHAV. 433-458 (2001).

McFarland, Douglas D. Present Sense Impressions Cannot Live in the Past. 28 FLA. ST. U. L. REv. 907-933 (2001).

Sanchirico, Chris William. Character Evidence and the Object of Trial. 101 COLUM. L. REv. 1227-1311 (2001). .

Sandler, David. Expert and Opinion Testimony of Law Enforcement Officers Regarding Identification of Drug Impaired Drivers. 23 U. HAWAI'I L. REv. 151-181 (2000).

Insurance Law Cox, Lynnette L. Note. Defamation or Vexatious Refusal to Pay? (Overcast v. Billings Mut. Ins. Co., 11 S.W.3d 62, Mo. 2000.) 69 UMKGL. REv. 927-942 (2001).

Law Review Articles - cont'd on page 16

LITIGATION NEWS WINTER 2002

Code §:JO-5 cont'd from page 8

attorney would have been entitled, under sentence two, to file the Notice of Appeal and Assignments of Error in an untimely fashion.

The issue before Judge Ledbetter in Andrews v. Paramount Parks, Inc,lO concerned the terms of a self-executing dismissal order. An order had been entered on December 16, 1998 providing that the case would be dismissed with prejudice for failure of the plaintiff to provide discovery responses

privilege of Code §30-5 rendered the finality of ( the self-executing dismissal order immaterial since .. the time for responding must be extended by rea­son of the statute.

In Andrews, the lawyer/legislator representing the plaintiff had been hired prior to the entry of the self-executing dismissal order. The author is· of the opinion that this fact would be immaterial to a literal application of the statute. If the plaintiff had been represented by lawyer X, who was not a member of the General Assembly, who found him­self on the short end of the self-executing order,

and the plaintiff had then within ten days. The tenth day fell on a Saturday. On Monday, December 28, 1998, plaintiff's counsel, a lawyer/legislator, notified the court that he would invoke the provisions of Code §30-5. The issue before the court then became whether or not Code § 3 0 - 51 extended the time for providing discovery responses beyond the date set forth in the self-executing order entered on December 16, 1998. Judge Ledbetter held that Code §30-5 did indeed extend the time limit set forth in the self-executing dismissal order. Judge Ledbetter held that the filing of discovery responses was "the performance of any act ... required to be per­formed" and that the plaintiff

Where once the statute hired the lawyer/legislator before the 1999 session of

sought to make certain there was a level

playing field, the statute now tilts th~ playing

field in favor of clients

the General Assembly had adjourned, the result would

.- have been the same. That is, plaintiff could have hired the lawyer/legislator after the effective date of the self-exe­cuting order and that lawyer/legislator could still , have taken advantage of the ~

extension privilege in the statute to circumvent dis­missal.

whose aHorney is a member of the Cieneral

Assembly. That the statute has not been the

In Ellis v. Lupica (Ellis I),ll Judge Poston of the Norfolk Circuit Court held that Code §30-5 trumped the provisions of Rule 1: 1 regard­ing the finality of judgments. In that case, the plaintiff had

subjed of more reported decisions is surprising. been injured in an automo­

bile accident on December was entitled to additional "time. Without setting aside the order of December 16, 1998, Judge Ledbetter held that the deadline set forth in the order was extended until not less than 30 days after the adjournment of the 1999 General Assembly. Judge Ledbetter's decision was actually rendered while the General Assembly was still in session. Judge Ledbetter gave plaintiff 40 days after adjournment of the 1999 session within which to meet the terms of the self-executing order entered the previous December. Judge Ledbetter held that the invocation of the extension

10

22, 1996. Suit was originally filed on December 28, 1998 but service of process was never obtained. Without notice to the defendant, the Clerk issued a notice on December 29, 1999 indi­cating that the case would be dismissed with preju­dice on January 21,2000 for failure of the plaintiff to comply with Rule 3:3, requiring service of process within one year. Plaintiff was at that time represented by a lawyer/legislator. No request to continue the matter was submitted by the ~ lawyer/legislator. On January 24, 2000, the . Norfolk Circuit Court entered an order dismissing

WINTER 2002~· LITIGATION NEWS

the lawsuit with prejudice. The order entered on January 24, 2000 was not vacated, suspended or modified within 21 days of the date of its entry.

On February 25, 2000, plaintiff's counsel, without notice to the defendant, appeared and had the matter reinstated to the active docket of the Norfolk Circuit Court on the basis of Code §30-5. Shortly thereafter, the suit was nonsuited and a second Motion for Judgment filed. The defendant moved to dismiss the second lawsuit on the ground that the matter was res judicata by reason of the final, unappealed order dated January 24, 2000.12

Judge Poston denied the Motion to Dismiss. While acknowledging that the provisions of Rule 1:1 are jurisdictional, Judge Poston held that Code §30-5 overrides the finality provisions of Rule I: l. Judge Poston held that the provisions of Code §30-5 allowed the performance of any act required by any rule to be extended. Judge Poston held that it would be illogical to hold that the statute did not extend the time within which a lawyer/legislator could move to modify, suspend or vacate a final judgment order. As Judge Poston noted, in Hartsock the Supreme Court of Virginia held that it was not divested of jurisdiction by rea­son of the late filing of the Notice of Appeal and Assignments of Error. Since the Supreme Court agreed that it still had jurisdiction to hear the appeal in Hartsock, Judge Poston held that the final order of dismissal remained within the breast of the Norfolk Circuit Court for more than 21 days where plaintiff's counsel was a lawyer/legisla­tor. Judge Poston held that it would be "inconsis­tent to hold that the statute could be applied to one jurisdictional rule," Hartsock, but not to another jurisdictional rule since the language of the statute grants an extension to the performance of any underlying act required to be performed under any Rule.

What if the plaintiff had waited more than 21 days after entry of the final order of dismissal to hire the lawyer/legislator? Would the result have been any different? The answer would seem to be a resounding "no." Had Ellis hired the lawYer/legislator more than 21 days after entry of the dismissal order, the lawyer/legislator could have employed the same argument in support of

11

his right to have the final order vacated and the case reinstated to the docket. The triggering event is the employing or retaining of a lawyer/legislator prior to or during the General Assembly session. Even though the 21-day jurisdictional deadline had run, a person in the position of the plaintiff in Ellis I would not be out of options in the trial court since the plaintiff could have employed a lawyer/legislator after the fact.

Judge Poston had a second issue before him in Ellis v. Lupica (Ellis II).1 3 That issue was whether or not the original Motion for Judgment had been timely filed. The original Motion for Judgment was filed six days after the statute of limitations would ordinarily have expired. Was the action time barred? The answer given by Judge Poston was "no." Plaintiff's counsel argued, that as a lawyer/legislator, he was entitled to invoke the extension provisions of Code §30-5 to extend the statute of limitations. Counsel argued that where the statute of limitations would ordinarily expire within 30 days prior to the beginning of the General Assembly session, the statute of limitations would automatically be extended until a date not less than 30 days after adjournment of the session. Consistent with the ruling in Ellis I, Judge Poston sustained plaintiff's position in Ellis II. Relying on the statement from Hudgins that the language of the statute is clear, 'absolute and unequivocal, Judge Poston held· that the statute of limitations would be extended under the circumstances since plaintiff's counsel was a lawyer/legislator. Accordingly, even though suit was filed six days more than two years after the cause of action accrued, the Motion for Judgment was timely filed because the statute of limitations expired less than 30 days prior to the beginning of the 1999 General Assembly.

In dicta, Judge Poston addressed whether the date on which counsel was retained made a differ­ence. In Ellis II, the lawyer/legislator had been retained well prior to the time that the statute of limitations expired. Judge Poston stated "Common sense dictates the conclusion that retaining an attorney who is a General Assembly member after the statute of limitations had

Code §30-5 - contJd on page 12

LITIGATION NEWS, WINTER 2002

Code §JO-5 contJd from page 11

expired would not trigger the prOVISlOns of Virginia Code §30-S."14 There is no support for this statement in the statute. Defense counsel in Ellis II had argued that holding that Code §30-S extended the statute of limitations would allow a party whose statute of limitations had expired to hire a lawyer/legislator for the express purpose of irvoking Code §30-S to save his claim. If the holding in Ellis II is good law, then it is the opin­ion of this author that the statute could be used by a person whose statute of limitations had expired to save his claim if that plaintiff hired a lawyer/leg­islator to represent him. Neither the decision in Ellis I or Ellis II was appealed to the Supreme Court of Virginia and it cannot be said whether or not the decisions actually represent the law of the Commonwealth.l5

Code §30-S has coined a new verb in Tidewater. The verb is used in sentences like "you've been thirty dash five'd" or "he's going to thirty dash five you." The verbs are usually employed to mean that a hearing or, trial must be continued to accommodate the privilege granted lawyer/legislators by Code §30-S. The author sug­gests that the verb can be employed to refer to other procedural tools available to lawyer/legisla­tors that are not available to most members of the Bar.

1 §30-5. Continuance or time for filing pleading, etc., where party or attorney is connected with General Assembly or Division of Legislative Services. - Any party to an action or proceeding in any court, including the Court of Appeals and the Supreme Court of Virginia, commission or other tri­bunal having judicial or quasi-judicial powers or jurisdiction, who is an officer, employee or member of the General Assembly, employee of the Division of Legislative Services, or who has, prior to or during the session ot the General Assembly, employed or retained to represent him in such action or proceeding an attorney who is an officer, employee or melJlber of the General Assembly, or employee of the Division of Legislative Services, shall be entitled to continu­ance as a matterofdght(i) during the period beginning thir­ty days prior to the commencement of the session and ending thirty days after the adjournment thereof, and (ii) during a period beginning one day prior to the meeting date, of any reconvened or veto session or of any commission, council,

'1

committee or subcommittee created by the General Assembly at which such officer, employee or member is scheduled to attend and ending one day after the adjournment of such meeting; provided no continuance need be granted under (ii) unless it shall have been requested at least three days prior to the first day for which such continuance is sought. Any plead­ing or the performance of any act relating thereto required to be filed or performed by any statute or rule during the period beginning thirty days prior to the commencement of the ses· sion and ending thirty days after the adjournment of the ses­sion shall be extended until not less than thirty days after any such session. The failure of any court, commission or other tribunal to allow such continuance when requested so to do or the returning of such filing or act during the period here­inabove specified shall constitute reversible error; provided that this section shall not prevent the granting' of temporary injunctive relief, or the dissolution or extension of a tempo­rary injunction, but the right to such relief shall remain in the sound discretion of the court or other such tribunal. (Code 1919, §298; 1926,p. 18; 1934,p. 370; i940,p. 363; 1952, c. 234; 1960, c. 147; 19"'73, cc. 242, 322; 1984, c. 703; 1987, c. 192.)

2See Hudgins v. Hall, 183 Va. 577, 32 S.E.2d 715 (1945).

3Id. 41d. '183 Va. at 583,32 S.E.2d at 718. 5There is no requirement that the continuance is needed

so that a lawyer/legislator can attend to his public duties. The statute can be used, and often is in Tidewater, to contin­ue a matter scheduled in one Circuit Court so that an attor­ney can handle a more pressing or lucrative matter in a different city.

6212 Va. 778, 188 S.E.2d 196 (1972). 7212 Va. at 779, 188S.£. 2d at 196. 8159 Va. 953, 166 S.E. 2d 464 (1932). 9199 Va. 320,99 S.E. 2d 581 (1957).

1048 Va. Cir. 232 (1999). 1154 Va. Cir. 375 (2001). 12Defendant argued that the January 24,2000 order had

become final by reason of Rule 1:1 and that the order entered on February 25, 2000 and the nonsuit order were void for lack of jurisdiction.

13Slip opinion issued July 30, 2001 in At Law No. LOO-1130.

14Slip opinion at p. 4. 15The Final Order of dismissal was entered on October

19,2001 following settlement.

('

WINTER 2002 LITIGATION NEWS

@r",,,,,,punitiveDamages . contJd from page 4

Cooper Inds., Inc. v. Leatherman Tool Group, 121 S. Ct. 1678 (2001) The United States Supreme Court recently addressed the proper standard of review for an fed­eral appellate court considering a punitive damages award challenged as excessive. This decision is sig­nificant because it reaffirmed the BMW guide­posts, and because the de novo standard of review probably will apply in state courts deciding whether punitive damages awards are excessive under the Fourteenth Amendment.

In Cooper, a federal jury in Oregon had awarded $50,000 in compensatory damages and $4.5 million in punitive damages on a state law unfair competi­tion chiim. The trial court considered and rejected the defendant's post-verdict challenge to the puni­tive damages as excessive. On appeal, the Ninth Circuit applied an abu$e of discretion standard in reviewing the trial court's ruling. Finding no abuse, it affirmed.

The Supreme Court ruled that federal appellate courts must consider de novo whether a punitive damages award is unconstitutionally excessive. Independent appellate review fosters uniformity, consistency of treatment of litigants, and a more coherent development of the BMW factors.l6 The Court further held that a jury's award of punitive damages does not constitute a finding of fact, and therefore the Seventh Amendment does not pre­clude de novo appellate reexamination of the quan­tum of punitive damages. Nonetheless, Cooper was clear that an appellate court should not disregard the factfinder's findings or substitute the court's judgment for the factfinder's. Rather, an appellate court must review the record de novo to determine whether the amount comports with due process, regardless of whether the court believes the amount is more than the appellate court would itself award.l7

Cooper did not address whether state appellate courts must provide de novo review when a defen­dant challenges a punitive damages award as uncon­stitutionally excessive. Indeed, the opinion does not discuss whether de novo review is constitutionally mandated. However, since Cooper, the several state

13

courts addressing the issue have interpreted it to require de novo review,l8 Moreover, the Supreme Court hinted that it may consider Cooper to require such review in state court when it granted certiorari in a California state court case, vacated the judg­ment, and remanded for further consideration in light of Cooper. 19 On remand, the California court assumed that it was required by the Supreme Court's action to apply de novo review to the puni­tive damages award at issue.2o Thus,although not yet settled, it appears that de novo review is likely to apply in state appellate courts in punitive damages cases where constitutional challenges are raised.

The Law in Virginia

General Considerations Two primary factors have combined to keep puni­tive damages awards in check in Virginia. First, Virginia generally does not favor awards of punitive damages because they are in the nature of a penalty and should be assessed "only in cases involving the most egregious conduct. "21 Second, Virginia has adopted a cap on the total amount of punitive dam­ages that can be awarded in any case, regardless of the number of parties.22 Except for a limited num­ber of cases involving federal causes of action, the cap of $350,000 has generally prevented the mas­sive awards that create the most constitutional con­cern. Nonetheless, th~ BMW guideposts will certainly be litigated in reviewing punitive damages awards in Virginia cases where the ratio of punitive damages to compensatory damages is high, as well as in those limited types of cases where the cap does not apply.

When punitive damages are appropriate, there is no rigid standard for measuring them; the amount of such an award is largely a matter within the dis­cretion of the fact finder.23 The general purpose of punitive damages is to punish the wrongdoer and deter others from similar conduct.24 As noted earli­er, the Supreme Court of Virginia has not yet addressed the constitutional limits of punitive dam­ages. However, there is a substantial body of case law about the closely related common law concept of "excessiveness":

Punitive Damages - contJd on page 14

LITIGATION NEWS . WINTER 2002

Punitive Damages contJd from page 13

It is an ancient and accepted doctrine of the common law, that judges have the power and are clearly charged with the duty of set­ting aside verdicts where the damages are either so excessive or so small as to shock the conscience and to create the impression that the jury has been influenced by passion or prejudice, or has in some way misconceived or misinterpreted the facts or the law which should guide them to a just conclusion.25

Indeed, the excessiveness test followed by the Supreme Court of Virginia for punitive damages is very similar, albeit not identical,26 to the federal due process analysis:

Review of the amount of punitive damages includes consideration of reasonableness between the damages sustained and the amount of the award and the measurement of punishment required, whether the award will amount to a double recovery, the proportion­ality between the compensatory and punitive damages, and the ability of the defendant to pay.27

Standard of Review for Punitive Damages Awards in Virginia The issue whether a jury's award of punitive dam­ages is excessive is a legal question.28 The standard of review for punitive damages has generally been abuse of discretion:

Ordinarily, a damage award fixed by a jury after a properly conducted trial and approved by the trial judge is held to be inviolate against disturbance by the appellate court .. There is no rigid standard for measuring puni­tive damages; the amount of such an award is largely a matter within the discretion of the fact finder. 29

The Supreme Court of Virginia expressly adopted the abuse of discretion standard in Philip Morris) Inc. v. Emerson:

In deciding whether a reasonable ratio exists between the compensatory damages and the punitive damages ... , we apply the standard for granting a new trial based on an excessive award of damages we set forth in Modaber, 232 Va. at 69, 348 S.E.2d at 238. We have reviewed the record on this issue in both cases, and we cannot say on the evidence before it that the jury abused its discretion in these awards.30

14

The Court has carved out an exception for _ ..... defamation cases, where an "independent review" .., is applied to awards of punitive damages.3 l

What Do the Constitutional Cases Mean for Punitive Damages in Virginia? The Supreme' Court of Virginia may have had the opportunity to shed light on the issues of large punitive damages last year in Nationwide Mutual Insurance Company v. HOME.32 The circuit court had approved a jury verdict of $500,000 compen­satory damages and $100 million in punitive dam­ages in a case involving racial discrimination (the punitive damages cap did not apply because the cause of action was based on a federal statute that preempted Virginia's cap). Initially, the Supreme Court reversed an,.d entered final judgment on grounds that the plaintiffs lacked standing, thus the majority did not reach the issue of the size of the punitive damages award.33 Justice Hassell dissented from the majority opinion on standing, and his dis­senting opinion addressed the issue of punitive dam­ages. Justice Hassell would have reversed and remanded on grounds that the punitive damages f were "shocking" and excessive.34 After the decision was announced, the Court granted a motion to rehear the case and withdrew its majority opinion. The stage was thus potentially set for a full examina­tion of the punitive damages issue. The Court, though, never reheard the case because it settled before further proceedings.

The Court now has another opportunity to address the constitutional issues regarding punitive damages. It recently granted a petition for appeal in PTS Corp. v. Bruckman. This case involves a $175,000 punitive damages award and a $490 com­pensatory damages award, a ratio of 357 to 1. The appellant has specifically challenged the constitu­tionality of the punitive damages award under BMW and its three guideposts, in addition to a tra­ditional challenge to the award as excessive;35

In light of the United States Supreme Court decisions over the past ten years and the body of Virginia case law on punitive damages, we can expect several things in this appeal and future a~Pthealsofpulni~ve .dalmagfes awalrlds. Firs~, consistent" WI genera prmcip es 0 appe ate reVIew, we can , anticipate that the Supreme Court will probably

WINTER 2002 LITIGATION NEWS

begin with the traditional excessiveness inquiry before reaching the constitutional issues.36 If the Court determines that the award satisfies the exces­siveness inquiry (i.e. it does not "shock the con­science"), then it can be expected to apply the BMW guideposts in a systematic fashion. In keeping with BMW, the Court will engage in a "detailed examination" of the evidence of reprehensibility adduced at trial, the relationship of punitive dam­ages to compensatory damages, and the relative size of any civil or criminal penalties for comparable con­duct. This may not appear to differ significantly from the traditional excessiveness analysis, but one would predict that the analysis will be expressly demarcated according to the BMW factors.

Further, the Supreme Court will have to decide whether to review the punitive damages award de novo, at least for the constitutional analysis. The abuse of discretion standard of Philip Morris and its progeny is not likely to be applied to constitutional challenges. As noted earlier, Cooper seems to man­date de novo review· to satisfy due process. The

_.. Supreme Court of Virginia's standard may therefore (llJ ev~lve to o.ne .more aki?- to the "independent

'dY revlew" apphed 111 defamatlon cases. One might logically ask whether a court is ever

likely to find that a punitive damages award is not "excessive" under traditional standards, but never­theless violates due process. That is, will adding a separate constitutional analysis to the traditional excessiveness inquiry have any effect on the out­come of an appeal? This is a good question, and one that remains to be answered. In Cooper, the Supreme Court of the United States addressed this same question in connection with the practical impact of a de novo standard replacing an abuse of discretion standard. That Court recognized that the new standard of review may "affect the result .. .in only a relatively small number of cases. ;'37 Yet, the Court continued, the different result in only a few cases justifies the heightened review.38

One thing is certain - the law will not remain static in this area, and practitioners must remain alert to changes in the law.

1 See, e.g., In re the Exxon Valdez, No. 97-35191 (9th Cir. November 7, 2001) (overturning $5 billion punitive damages award against Exxon arising from Exxon Valdez oil spill).

15

2The Court has addressed other aspects of punitive dam­ages as well. See, e.g., Kolstad v. American Dental Assn., 527 U.S. 526 (1999) (standard for imposing punitive damages for job discrimination under Title VII).

3PTS Corp. v. Bruckman, Record No. 011396 (appeal granted October 16, 2001).

4In fact, the Supreme Court decided in 1989 that the Eighth Amendment's Excessive Fines Clause does not apply to

punitive damages awards in cases between private parties. Browning-Ferris Industries ofVt., Inc. v. Kelco·Disposal, Inc., 492 U.S. 257 (1989). The Court, however, ruled that a broader due process challenge had not been properly preserved below and could not be considered. Yet, all nine justices expressed some level of concern about punitive damages, and thus Browning-Ferris foreshadowed the attention that the Supreme Court was to give the subject of punitive damages.

5Haslip, 499 U.S. at 18-19 (citations omitted), quoted in TXO, 509 U.S. at 459.

6Id. at 23-24. 7 TXO, 509 U.S. at 460-6l. 8 See, e.g., Haslip,499 U.S. at 18-24. 9512 U.S. at 432.

10 See Obergv. Honda Motor Co., 888 P.2d 8 (Or. 1995), cert. denied, 517 U.S. 1219 (1996).

11 In emphasizing the importance of appellate review, the Court noted: "more than half of those [punitive damages awards] appealed resulted in reductions or reversals of the punitive damages," and that this statistic understated the importance of appellate review because so many awards are reduced by the trial court or settled for less pending appeal. Oberg, 512 U.S. at 433 n.ll.

12517 U.S. at 574, 585-86. 13Id. at 575-83. 14Id. 15Id. at 596 (Breyer, J., concurring). 16532 U.S. at _, 121 S.Ct. at 1685. 17532 U.S. at _, 121 S.Ct. at 1684-85. 18 See, e.g., Horton Homes, Inc. v. Brooks, 2001 wt 792730

(Ala. July 13,2001); Campbell v. State Farm Mut. Auto. Ins. Co., 2001 WL 1246676 (Utah Oct. 19,2001); Simon v. San Paolo U.S. Holding Co., 2001 WL 138036 (Cal. App. Nov. 7, 2001).

19 See San Paolo U.S. Holding Co. v. Simon, 121 S. Ct. 2190 (2001).

20 Simon v. San Paolo U.S. Holding Co., 2001 WL 138036 (Cal. App. Nov. 7,2001).

21 Bowers v. Westvaco Corp., 244 Va. 139, 150,419 S.E.2d 661,668 (1992).

22Va. Code Ann. Sec. 8.01-38.1 (Rep!. va!. 2000). 23Philip Morris Inc. v. Emerson, 235 Va. 380,414, 368

S.E.2d 268, 287 (1988). 24Smith v. Litten, 256 Va. 573, 578, 507 S.E.2d 77, 80

(1998), cited in Flippo v. CSC Associates III, L.L.C., No. 002183 (Va. June 8,2001).

25 Bassett Furniture Inds. P. McReynolds, 216 Va. 897, 912 n. *,224 S.E.2d 323, 333 n. * (1976).

26The United States Supreme Court has minimized the value of the "excessiveness" inquiry employed by most states'

Punitive Damages - contJd on page 16

LITIGATION NEWS . WINTER 2002

Punitive Damages cont)d from page 15

appellate courts, characterizing it as a "gentle rule." Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974) ("In most juris­dictions, jury discretion over the amounts awarded is limited only by the gentle rule that they not be excessive. Consequently, juries assess punitive damages in wholly unpr\!­dictable amounts bearing no necessary relation to the actual harm caused.")

27 Poulston v. Rock, 251 Va. 254, 263, 467 S.E.2d 479,484 (1996) (citations omitted). The Court in Poulston noted that the defendant had not challenged the constitutionality of the punitive damages award, and thus the Court was not analyzing the due process issues. Id. at 263 n.3, 467 S.E.2d at 484 n.3. Likewise, in the recent Flippo decision, the constitutionality of a $350,000 punitive damages award (compensatory damages under $13,000) was apparently not contested, although "excessiveness" of the punitive damages award was a focal point of the appeal. Flippo v. CSC Associates III, L.L.G., No. 002183 (Va. June 8, 2001).

28 Bassett Furniture, 216 Va. at 913,224 S.E.2d at 333. 29 Hamilton Devel. Co. v. Broad Rock Club, 248 Va. 40,. 45-

46,445 S.E.2d 140, 144 (1994) (citations omitted); quoted in Nationwide Mut. Ins. Co. v. HOME, 259 Va. 8, 45, 523 S.E.2d 217, _ (2000) (Hassell, J., dissenting), rehg granted and opinions withdrawn.

30Philip Morris, Inc. v. Emerson, 235 Va. 380, 414, 368 S.E.2d 268, 287 (1988).

31 Poulston, 251 Va. at 262-63, 467 S.E.2d at 484, citing Williams v. Garraghty, 249 Va. 224, 455 S.E.2d 209, cert. denied, _ U.S. _,116 S. Ct. 66 (1995). This "independent review" is far stricter than the deferential abuse of discretion standard, but less than de novo because some minimal deference is still paid to the factfinder's decision. Id.

32 See Nationwide Mut. Ins. CO. P. HOME, 259 Va. 8,45, 523 S.E.2d 217, _ (2000), (Hassell, J., dissenting), rehggranted and opinions withdrawn.

33Id.

34Id. (Hassell, J., dissenting). Justice Hassell's discussion of punitive damages did not discuss the constitutional due process issues, presumably because he would have remanded on tradi­tional excessiveness grounds, thus obviating the need to reach the constitutionality of the award.

35 See Petition for Appeal, PTS Corp. v. Bruckman, Record No. 011396 (appeal granted October 16, 2001).

~6See Schar/v. United States, 606 F. Supp. 379 (E.D. Va. 1985) (noting the "deeply rooted doctrine" that a court ought not to pass on questions of constitutiOli.a1ity unless such adjudi­cation is unavoidable.)

37 Cooper, 532 U.S. at _, 121 S.Ct. at 1688. 38Id.

16

Law Review Articles cont)d from page 9

Giddings, Katherine E. and J. Stephen Zielezienski. Insurance Defense in the Twenty-First Century: The Florida Bar's Proposed Statement of Insured Client's Rights - A Unique Approach to the Tripartite Relationship. 28 FLA. ST. U. L. REv. 855-905 (2001).

Partnerships Jacobson, Kenneth M. Fiduciary Duty Considerations in Choosing Between Limited Partnerships and Limited Liability Companies. 36 REAL PRoP. PROB. & TR. J. 1-3692001).

Practice and Procedure Greene, Edith, David. Coon and Brian Bornstein. The Effects of Limiting Punitive Damage Awards. 25 LAw & HUM. BEHAV. 217-2,~4 (2001).

Horowitz, Irwin A. and Lynne Forster Lee. The Effects of Note-taking and Trial Transcript Access on Mock Jury Decisions in a Complex Civil Trial. 25 LAW & HUM. BEHAV. 373-391 (2001).

Marlowe, Christopher M. Comment. Forum Non Conveniens Dismissals and the Adequate Alternative Forum Question: Latin America. 32 U. MIAMI INTER-AM. L. REv. 295-320 (2001).

McMahon, Jaime. Comment. Q;tit Tam Can, Qui Tam Can't: An Analysis of ... (Vtwmont Agency of Natural Resources v. United States Ex. Rei. Stevens, 529 U.S. 765, 2000.) 17 GA. ST. U. L. REv., 1119-1161 (2001).

Roberts, Holly M. Casenote. Signatories ((Can't Have It Both Ways))- Non-signatories to a Contract Agreement Now Have Standing to Compel Arbitration. (Grigson v. Creative Artists Agency, L.L.G., 210 F.3d 524, 5th Cir., reh'g en banc denied, 218 F.3d 745, 5th Cir., cert. denied, 121 S.Ct. 570, 2000.) 47 LoY. L. REv. 963-979 (2001).

Tacha, Deanell R., Bruce D. Black and Robert A. Johnson. How to Try a Case in Order to Effectively Appeal. 31 N.M. L. REv. 219-228 (2001).

Teply, Larry L. The Elderly and Civil Procedure: Service and Default, Capacity Issues, Preserving and Giving Testimony, and Compulsory Physical or ( Mental Examinations. 30 STETSON L. REv. 1273-1292 (2001).

WINTER 2002 - LITIGATION NEWS

Wolff, Judge Michael A From the Mouth of a Fish: An Appellate Judge Reflects on Oral At;gument. 45 ST. LOUIS U. L.J. 1097-1107 (2001).

Products Liability Henderson, James A, Jr. and Aaron D. Twerski. Drug Designs Are Different. 111 YALE L.J. 151-181 (2001).

Mills, Brian James. Football Helmets and Products Liability. 8 SPORTS LAW. J. 153-180 (2001).

Wallace, Chad E. and Andrew T. Wampler. Comment. Skimming the Trout from the Milk: Using Circumstantial Evidence to Prove Product Defects Under the Restatement (Third) of Torts: Products Liability Section 3, Tennessee and Beyond. 68 TENN. L. REv. 647-703 (2001).

Professional E thies Fajans, Elizabeth and Mary R. Palko Shooting from the Lip: United States V. Dickerson, Role {Imlmorality, and the Ethics of Legal Rhetoric. 23 U. HAWAI'I L. REv. 1-65 (2000).

Kirkey, Jeffrey E. Legal Ethics in Cyberspace: Keeping Lawyers and their Computers out of Trouble. 18 T.M. COOLEY L. REv. 37-51 (2001).

Owens, John B. Grisham's Legal Tales: A Moral Compass for the Young Lawyer. 48 UCLA L. REv. 1431-1442 (2001).

Rubinson, Robert. Attorney Fact-Finding, Ethical Decision-making and the Methodology of Law. 45 ST. LOUIS U. L.J. 1185-1242 (2001).

Torts Coale, David S. and Jennifer Evans Morris. Personal Torts. 54 SMU L. REV. 1555-1594 (2001).

Dean, Amber E. Comment. Lead Paint Public Entity Lawsuits: Has the Broad Stroke of Tobacco and Firearms Litigation Painted a Troubling Picture for Lead Paint Manufacturers? 28 PEPP. L. REv. 915-939 (2001).

Fischer, David A Tort Recovery for Loss of a Chance. 36 WAKE FOREST L. REv. 605-655 (2001).

17

Govan, Dara Aquila. Note. ((Hazing Out" the Membership Intake Process in Sororities and Fraternities: Preserving the Integrity of the Pledge Process Versus Addressing Hazing Liability. 53 RUTGERS L. REv. 679-714 (2001).

Grant, Noreen M. Comment. Psychiatrists Have No Duty to Warn Third Parties of Patients' Threats: Tarasoff is Kicked Out of Texas ... Finally! (Thapar V. Zezulka, 994 S.W.2d 635, Tex. 1999.) 7 TEX. WESLEYAN L. REv. 157-182 (2001).

Gurwin, Robert S. and Nicole D. Milos. Bench Memorandum: Whether the Information Disseminated by the Defendant Invaded the Plaintiff's Privacy As Defined By The Restatement (Second) of T,orts Governing Public Disclosure of Private Facts and Whether Defendant's Use of Cookie Technology To Gather the Information Displayed About the Plaintiff Constituted an Invasion of Her Privacy. 19 J. MARSHALL J. COMPUTER & INFO. L. 207-223 (2000).

Hickel, Douglas G. Comment. Losing in the Tax System After You Win in. the Court System: Should Contingent Fees Paid to the Attorney Be Included in the Taxpayer-Client's Gross Income? 20 ST. LOUIS U. PUB. L. REv. 477-501 (2001).

Kuzur, Laureen K. Casenote. Torts - Defamation - Compelled Self-Publication. (Sullivan V. Baptist Mem'l Hosp., 995 S.W.2d 569, Tenn. 1999.) 68 T~NN. L. REv. 395-407 (2001).

Markesinis, Basil and Adrian R. Stewart. Tortious Liability for Negligent Misdiagnosis of Learning Disabilities: A Comparative Study of English and American Law. 36 TEx. INT'L L.J. 427-473 (2001).

Morgan, Patrick T. Note. Unbundling Our Tort Rights: Assignability for Personal Injury and Wrongful Death Claims. (Lingel V. Olbin, 8 P.3d 1163, Ariz. Ct. App. 2000.) 66 Mo. L. REv. 683-707 (2001).

Richardson, Katherine R. Note. Parental Liability and the Criminal Misconduct of Children in the Wake of an Unregulated Internet: Who Should Pay? 7 CARDOZO WOMEN'S L.J. 29-58 (2000).

" - - --~ ---

LITIGATION NEWS WINTER 2002

Virginia State Bar Litigation Section Board of Governors

Frank Kenneth Friedman Chair Woods, Rogers & Hazlegrove, PLC 10 St. Jefferson Street, Suite 1400 P.O. Box 14125 Roanoke, VA 24038-4125

540/983-7692 Fax: 540/983-7711

Thomas E. Albro Vice Chair Tremblay & Smith, L.L.P. 105-109 East High Street P.O. Box 1585 Charlottesville, VA 22902-1585

434/977-4455 Fax: 434/979-1221

Paul Markham Black Secretary Wetherington Melchionna, et aI. 310 First Street, Suite 1100 Roanoke, VA 24011

540/982-3800 Fax: 540/342-4480

Glenn Walthall Pulley Immediate Past Chair Clement & Wheatley, P.C. 549 Main Street P.O. Box 8200 Danville, VA 24'543-8200

434/793-8200 Fax: 434/792-8200

Susan Carol Armstrong Past Chair Troutman, Sanders, Mays & Valentine 1111 East Main Street P.O. Box 1122 Richmond, VA 23218-1122

804/697-1220 Fax: 804/697-1339

Vicki Hansen Devine Furniss, Davis, Rashkind, et al. P.O. Box 12525 Norfolk, VA 23541-0525

757/461-7100 Fax: 757/461-0083

Jacqueline G. Epps Morris and Morris, P.C. P.O. Box 30 Richmond, VA 23218-0030

804/344-8300 Fax: 804/344-8359

Philip G. Gardner Gardner, Gardner & Barrow 1st Citizens Bank Building, 4th Floor 231 East Church Street Martinsville, VA 24112-2840

540/638-2455 Fax: 540/638-2458

Harry Margerum Johnson, III Hunton & Williams 951 East Byrd Street Richmond, VA 23219-4074

804/788-8200 Fax: 804/344-7999

Samuel W. Meekins, Jr. Wolcott, Rivers, Wheary, et al. One Columbus Center, Suite 1100 Virginia Beach, VA 23462

757/497-6633 Fax: 757/497-7267

Michael G. Phelan Cantor, Arkema & Edmonds, P.C. 823 East Main Street PO Box 561 Richmond, VA 23218-0561

804/644-1400 Fax: 804/644-9205

Robert Emmett Scully Rees, Broome & Diaz, P.C. 8133 Leesburg Pike, Ninth Floor Vienna, VA 22182

703/790-1911 Fax: 703/848-2530

Hon. Mosby Garland Perrow III Ex-Officio Judicial Lynchburg Circuit Court Twenty-fourth Judicial Circuit 900 Court Street Lynchburg, VA 24504

434/847-1490 Fax: 434/847-1864

Hon. Lydia Calvert Taylor Ex-Officio Judicial . Norfolk Circuit Court Fourth Judicial Circuit 100 St. Paul's Boulevard Norfolk, VA 23510-2721

757/664-4593 Fax: 757/664-4581

18

R. Lee Livingston Newsletter Editor Tremblay & Smith, L.L.P. 105-109 East High Street P.O. Box 1585 Charlottesville, VA 22902

434/977-4455 Fax: 434/979-1221

Kevin Walker Holt Co-Chair - Litigation TLC Gentry, Locke, Rakes & Moore 10 Franklin Road S.E. P.O. Box 40013 Roanoke, VA 24022-0013

540/983-9300 Fax: 540/983-9400

Kevin Wayne Mottley , Co-Chair - Litigation TLC Troutman, Sanders, Mays & Valentine 1111 East Main Street P.O. Box 1122 Richmond, VA 23218-1122

804/697-1263 Fax: 804/697-1339

Ann Kiley Crenshaw Computer TaskForce Liaison Suite 103 160 Exeter Drive Winchester, VA 22603

540/665-0050 Fax: 540/722-4051

William H. Shewmake Chair - Appellate Practice Subcommittee Shewmake & Baronian, P.C. 5413 Patterson Avenue, Suite 101 Richmond, VA 23226

Patricia Sliger Liaison

804/282-8800 Fax: 804/285-4542

Virginia State Bar 707 East Main Street, Suite 1500 Richmond, VA 23219-2803

804/775-0576 Fax: 804/775-0501

( /\ .... ~

WINTER 2002 LITIGATION NEWS

Virginia State Bar Litigation Section Young Lawyers Committee

Kevin W. Holt Co-Chair - Litigation YLC Gentry, Locke, Rakes & Moore 10 Franklin Road S.E. P.O. Box 40013 Roanoke, VA 24022-0013

540/983-9421 Fax: 540/983-9400

Kevin Wayne Mottley Co-Chair - Litigation YLC Troutman, Sanders, Mays & Valentine 1111 East Main Street P.O. Box 1122 Richmond, VA 23218-1122

804/697-1263 Fax: 804/697-1339

Megan E. Burns Williams, Mullen, Clark &

Dobbins, P.C. 900 One Columbus Center Virginia Beach, VA 23462

757/473-5352 Fax: 757/473-0395

Sandra Chinn-Gilstrap 520 Piney Forest Road Danville, VA 24540-3352

434/797 -9681 Fax: 434/797-1488

Mary Catherine H. Gibbs Hart & Calley, P.C. 307 North Washington Street Alexandria, VA 22314

703/836-5757 Fax: 703/548-5443

Christopher J. Robinette Tremblay & Smith, L.L.P. 105-109 East High Street P.O. Box 1585 Charlottesville, VA 22902-1585

434/977-4455 Fax: 434/979-1221

C'!Jvin Spencer Harris, Matthews & Crowder Post Office Box G Kenbridge, VA 23944

434/676-2405

If you are a young trial lawyer under the age of

36 and are interested in joining the litigation

Section Young lawyers Committee, please contact

either Kellin Wayne Mottley or Kellin W. Holt,

Co-Chairs,. l.i~rg'~ti()n 'YlC, at their respective "( ~J j I , _~ -.~ I' ;;-. J -, • i '. 1 ",' rl - i '\

" i ;. ~ji'-1j .f:

addresses above..""\\"')Ci., ".1

; "" r.· j '~'.;' ~" .> •• ", ~_, " :', _ .- \ <

19

.. WINTER 2002 LITIGATION NEWS . 0

IQ]IQ]IQ]~IQ]~IQI~IQ]~~IQIIQ]IQ]~~ IQ]. k ~ IQ] Publish Your Wor IQ] I[jl .I[jl I!.!J Litigation News welcomes the sub- I!.!J IQ] mission of litigation-oriented articles. If IQ] IQ]. you have researched or argued an [QJ IQ] interesting point of Virginia law, or (QJ IQ] have practice tips' to share, consider IQ] IQI condensing them into an article for IQ] IQI Litigation News. The contact for sub- IQ] .. IQ] mission of these articles is: . IQI [QJ R. Lee Livingston, Esq. [QJ IQ] Tremblay & Smith, L.LP.. [QJ IQ] 105-109 East High Street [QJ IQI PO Box 1585 IQ] IQ] Charlottesville, VA 22902 IQ] IF'1l 434/977-4455 [QJ l!J fax 434/979-1221 [QJ IS] .. e-mail lee.livingston@tremblaysmith.com 8 IQIIQ][QJ[QJ(QJ(QJ(QJIQ]IQ](QJ(QJ(QJIQ](QJIQIIQ]

~~!!?ta~!~ON NEWS Eighth &: Main Building . 707 E. Main Street, Suite 1500 Richmond, VA 23219-2803

.Ethics at a Glance'

Ethics in the Information Age

by Thomas E. Spahn .

represents a large multi-national any. You occasionally find it neces­

sary to communicate with representatives of overseas subsidiaries. Although you do not always represent these subsidiaries, you some­times require infOl:mation that only they can supply. .

Are your communications with these over­seas subsidiaries protected by the attorney-client privilege?

(Analysis inside on page 7)

PRST STD U.S. POSTAGE

PAID PERMIT NO. 709

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