A Virginia Supreme Court case that struck a noncompete clause used by a pest control company – the same clause upheld by the high court over 20 years ago – caused the most buzz during 2011 among Virginia lawyers who track legal developments through their blogs.
Court watchers were charmed by the facts in Home Paramount Pest Control Cos. v. Shaffer (VLW 011-6-121). How often do we get to see an appellate court test the precise language of a particular contract clause against 20 years’ worth of jurisprudence? To watch a court with a new chief justice and two new junior justices grapple with stare decisis?
It gets even better. The same lawyer who won the case for the pest control company in 1989 was back in court in 2011, appearing for the employee accused of violating the noncompete. Fairfax lawyer Charles W. Sickels won again, which might just make him “the best appellate lawyer in Virginia,” according to Virginia Beach appellate law specialist Steve Emmert.
Beyond its rule and result, Home Paramount fascinated lawyers for “what it shows about the court’s approach to judging” and its realistic, straightforward look at the application of its standard of “reasonableness” over time, said Bristol lawyer Steve Minor.
In many cases, the high court is applying the same principles over and over. In some lines of cases, there may be a sort of “precedent creep” that’s not overtly accounted for in the lawyers’ arguments or the court’s opinions, according to Minor.
But “this time, because of the facts, the court had to address it head-on” and really confront the meaning of stare decisis for these parties and for the court, Minor said.
Roanoke lawyer Jay O’Keeffe has watched Virginia’s law on noncompete clauses develop over the last decade. “You see the incremental steps, the public policy concerns that undergird it all,” and it begins to look as though “some of this stuff can’t be reconciled anymore,” he said. Then Home Paramount forces “the contradictions to the forefront” for the court to make tough choices.
Process and product, the end result of a conflict in court, and the route taken to reach that result. These are the elements lawyers like to mull over as they think about a year’s worth of court cases.
This year, instead of poring over the thousands of opinion digests we’ve published online and in print since January, we decided to throw the floor open to the commonwealth’s community of legal bloggers. We surveyed lawyers in a number of practice areas to get their top picks for the cases that mattered most in 2011.
BUSINESS LAW: The Home Paramount case stood out because noncompetes have become so pervasive in everyday business life and noncompete law has evolved so much, according Williamsburg lawyer John Tarley Jr. For instance, he’s seen fierce competition among time-share companies that operate in Central Virginia and use noncompete clauses to try to get a lock on customers when employees jump ship. This is one of the first cases to show it’s up to employers to prove the restriction they want relates to a legitimate business interest.
“The table is tilted a little bit to the employee” now, Tarley said. “Employers who decide to draft their own noncompetes, without adult supervision, do so at their own risk.” Lawyers can’t just field a request to draft up a noncompete clause and email it back to the client. “You have to know more about the business and how to specifically protect the employer’s interest.”
Tarley also cited Comtois v. Rogers (VLW 011-6-102), for its guidance on dissolution of professional partnerships. Comtois involved a law firm, but Tarley says it has wider application, as he currently is using the Supreme Court decision “laying out the rules” with doctor clients who want to dissolve a practice group.
Vienna lawyer Jim Kinsel also has his antennae up for noncompete cases. It’s “not just because there’s so much noncompete litigation,” but noncompetes are also “so much a part of business tort litigation.” A “victim company” may be suing over “a mass exodus” of employees or clients, and noncompete clauses can come packaged in different kinds of documents. Kinsel said we’re seeing greater “categorization” in analysis of noncompetes. For instance, for a noncompete clause in a settlement agreement McClain & Co. v. Carucci (VLW 011-3-244), a Western District federal court used a standard like the one use for a noncompete that’s part of a business sale. Kinsel also cited two Eastern District cases, ForceX v. Technology Fusion LLC (VLW 011-3-352) and Hard Drive Productions v. John Does 1-30 (VLW 011-3-574) for their lessons on how to get expedited discovery to capture online information.
REAL ESTATE: Continued “Chinese drywall” litigation over the past year has revealed how few remedies are available to homeowners or builders. Tarley said his firm has handled some of those cases and watched as federal and state courts in Norfolk have knocked out claims. He cited Builders Mut. Ins. Co. v. Dragas Mgmt. Corp. (VLW 011-3-322) for its denial of insurance coverage to a builder who responded to threats of lawsuits by undertaking repairs, but then had no coverage under its own commercial insurance policies.
Richmond lawyer Chris Hill, who specializes in construction law, mentioned another Chinese drywall case, Dragas Mgmt. Corp. v. Hanover Ins. Co. (VLW 011-3-454), holding that the pollution exclusion applied to bar coverage for drywall damages. Hill also cited a Miller Act case, U.S. ex rel. Thyssenkrupp Safway Inc. v. Tessa Structures LLC (VLW 011-3-219) for its ruling that a general contractor on a project at the FBI’s Quantico facility could not use a recoupment defense against a scaffolding subcontractor’s bond payment claim Hill said Safway is continuation of a trend in Virginia federal courts that stands in contrast to how a payment defense works under Virginia mechanic’s lien law.
INTELLECTUAL PROPERTY: Sure, patent practice is pretty rarified, but a lot of IP litigation involves issues faced by many businesses, big and small. The Eastern District of Virginia has a heavy IP docket, and it’s hard to ignore the rulings on hot e-discovery issues and high-dollar damages in this year’s IP cases. Richmond lawyer Dabney Carr points to DuPont v. Kolon Industries (VLW 011-3-641), involving a Korean company accused of stealing trade secrets related to DuPont’s bullet-proof Kevlar products, which produced a record $919 million verdict. Verizon v. Active Video pitted a little-guy video company suing for patent infringement involving Verizon’s video on demand service, for a $115 million verdict for the little guy. Just last month, social media top-brand Twitter successfully defended a patent infringement case in Norfolk federal court against an entrepreneur who claimed he was the first to come up with the idea for an “interactive celebrity patent.”
APPELLATE PRACTICE: In so many kinds of appeals, lawyers have to reckon with the abuse of discretion standard’s slant toward the party who wins in the trial court. In order to shape an argument to get across that threshold, lawyers should look at Landrum v. CJW (VLW 011-6-129), according to Steve Emmert.
In Landrum, missteps by a Missouri lawyer cost a Virginia medical malpractice plaintiff the chance to prove her claim against a Richmond hospital. The Supreme Court set out a three-part test for abuse of discretion and applied it to uphold a Richmond trial court’s decision to exclude a plaintiff’s expert and dismiss the med-mal claim. Landrum offered another important practice pointer, lawyers said: Be careful about tinkering with your assignments of error after the high court has granted a writ. The Supreme Court struck four of the five assignments of error it had agreed to hear, after Landrum made substantive changes.
Landrum “offers a great lesson for trial lawyers,” especially when they’re associated by out-of-state – or even out-of-town – lawyers, according to O’Keeffe. Even with your “genius from out-of-town, you still have to ride herd on them” in order to protect the client.
Emmert also flagged Smith v. Commonwealth (VLW 011-6-046). The high court said the Court of Appeals had jurisdiction to consider a defendant’s appeal, even though he did not timely file a transcript of the suppression hearing. Criminal law blogger Ken Lammers also liked Smith as a break from common expectations that the “appellate courts still are kicking things out on a strict adherence to the rules.”
CRIMINAL: Lammers represented criminal defendants before taking his current position as a Deputy Commonwealth’s Attorney for Wise County/City of Norton. He says lawyers who picked up on the Supreme Court’s controversial decision in Hernandez v. Commonwealth (VLW 011-6-002) should be sure to follow up with two cases decided later in the year by the Court of Appeals. In Taylor v. Commonwealth (VLW 011-7-215) and Epps v. Commonwealth (VLW 011-7-346), which describe variations on the theme of taking a matter under advisement, after a trial court finding of guilt, in Taylor, and when a defendant already has pleaded guilty, in Epps. This series of cases has been a “pretty big change to the ways courts have worked” for the past 20 years, Lammers said. “Taking that power away from the judges is a pretty big step.”
Turning to federal cases, Lammers said the 4th U.S. Circuit Court of Appeals has been tightening up on the standard for reasonable suspicion to justify a brief detention or pat down, refusing to automatically endorse a police officer’s invocation of whatever facts are at hand to justify the intrusion. The federal cases will indirectly show Virginia state courts where to draw the line, but it’s getting harder “to nail down exactly where the line is.”
TORT: Medical malpractice litigation has not slowed, with lots of cases still going to trial, according to Richmond lawyer Josh Silverman. He says Chalifoux v. Radiology Associates of Richmond (VLW 011-6-062) is an important case for med-mal plaintiffs because it “expands the continuing treatment rule in the right direction” by saying a radiologist who reads a series of MRIs for the same patient over a period of years is a treating physician who can be sued after the patient discovers the radiologists misread the tests.
Silverman also cited CNH America LLC v. Smith (VLW 011-6-007) as an important products liability case. The Supreme Court set aside a $1.75 million award for a 72-year-old farmer who sued after his disc mower exploded and injected burning hydraulic fluid into his hand, because the trial court erred in admitting opinion testimony from Smith’s two experts on an alleged defect in a hose and on hydraulic systems. For lawyers on either side of a products case, they “need to insure their expert testimony is based on the particular facts arising out of that case,” Silverman said. Smith “didn’t go as far as Daubert” in its demands on expert testimony, but it did indicate the expert’s testimony has to have a particularized foundation.
Fairfax lawyer Zachary Kitts sues for government fraud, hoping to win big for his whistleblower client and ultimately, the taxpayer. His life got a little easier this year when the 4th Circuit said in ACLU v. Holder (VLW 011-2-064) that the government can keep claims filed under the False Claims Act under seal. Having the suit stay secret in the beginning makes it easier for the private client, or relator, and the government to investigate before the whole suit blows up in the public arena.
LOCAL GOVERNMENT LAW: With the economic downturn, “there’s not a lot of development going on,” and land use issues are not in the forefront, according to Richmond lawyer Andrew McRoberts. For local government lawyers, the big cases this year involved tax issues. In a closely watched case that carried over from last year, 100 localities joined together to resist Verizon’s application to the State Corporation Commission to correct an erroneous tax assessment, McRoberts reported. With up to $40 million in local revenue at stake, local governments heaved a sigh of relief in August when Verizon voluntarily dismissed its application for a tax refund. McRoberts also cited Ford Motor Credit Corp. v. Chesterfield County (VLW 011-6-032), a case involving an auto-financing company’s local branch. The Supreme Court of Virginia said a county could not include in its local business, professional and occupational license tax for a local branch of a larger business gross receipts attributable to services performed outside the county, clearing the way for the company to claim a refund of 93 percent of the $1.5 million in BPOL taxes.
McRoberts also mentioned the “quieting effect” on public discussion of Isle of Wight County v. Nogiec (VLW 011-6-003), the Virginia Supreme Court decision upholding a defamation award against an assistant county administrator who criticized the former parks and rec director in a meeting before the board of supervisors. The high court said the administrator did not have immunity because the county was not acting as a legislature when the comments were offered. Public meetings, especially on something like a zoning application, can be pretty free-wheeling. Nogiec “changed the view about where the line was drawn” for protection of local government employees, McRoberts said.