Richmond & Fishburne's Legal Blog

Bowling with the Bar

2012-01-26T10:00:00.000-05:00

Yesterday was the Charlottesville Albemarle Bar Association's fantastic Bowling for Barristers / Possible Annual Bowling Tournament.

Who knew that there are so many stellar bowlers practicing law on the side?!

A big thanks to Jeff Fogel for organizing the event, to Bar President Steve Rosenfield for inspiring it, and to Kegler's for hosting the group.

Private Roads and Prescriptive Easements: The Supreme Court of Virginia's Decision in Dykes v. Friends of the CCC Road

2012-01-24T14:44:00.001-05:00

In the midst of an abnormally warm winter (there was finally a scattering of snow over the weekend), the Supreme Court of Virginia has issued its first batch of opinions for 2012.

The Court's decision in Dykes v. Friends of the CCC Road (January 13, 2012) caught our attention. You can read Justice Koontz's opinion here.

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Property law in Virginia generally distinguishes between private roads and public roads.

The effect of a road being classified as "public" is what you'd expect: the public (taxpayers) are responsible for paying to maintain the road.

Private roads, on the other hand, are maintained by the affected property owners, either by informal agreement or in accordance with the terms of a road maintenance agreement recorded in the County courthouse.

Another important distinction relates to the right to use a road: in the case of a private road, the right to drive (or walk, or bicycle) on the road can be limited to the owners of property served by the road. Public roads are -- you guessed it -- open to the public.

Road-building circa 1935

Dykes v. Friends tells the story of a Highland County road built in the 1930's by the Civilian Conservation Corps.

Several of the property owners along the road erected gates that blocked the public's access to the road, and a group called "Friends of the CCC Road" filed a lawsuit requesting an injunction to compel the removal of the gates (perhaps the friends had friends at the far end of the road, and the gates made friendship more difficult?).

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The Circuit Court of Highland County determined that the road had not been expressly or impliedly dedicated for public use. There were no records of the road's adoption into the County's road system, and the County had never paid for its upkeep.

Nevertheless, the Circuit Court granted the injunction compelling the removal of the gates. The Circuit Court reasoned that a public right-of-way can be created over private property by virtue of the government's recognition of "long and continuous use" by the public.

According to the Circuit Court, "recognition" can occur even though the public cannot satisfy the normal prescriptive easement requirement of exclusivity (more on this point below).

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The Supreme Court of Virginia reversed the Circuit Court.

Justice Koontz starts by stating that "long and continuous use" of a road by the general public, plus government recognition, do not, in and of themselves, prove an implied dedication of the road to public use. Private property enthusiasts will cheer Justice Koontz's strong words: "The law of this Commonwealth simply does not allow for a conversion of private property to public property solely by public use."

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Justice Koontz then turns to the interesting theoretical question of whether the public can, over time, acquire prescriptive rights to a road.

A refresher on prescriptive easements: In order to establish the existence of a prescriptive easement, an owner must prove that his use of another person's property satisfies each of the following tests:

The use must have been adverse and under a claim of right.
The use must have been exclusive.
The use must have been continuous for a period of at least 20 years.
The owner of the servient estate (the property over which the easement is alleged to run) must have had knowledge of it and acquiesced in its use.

In Dykes v. Friends, the general public may well have been able to satisfy requirements #1, 3 and 4 above (adverse use of the road, with the knowledge of the owner, for a period of 20+ years).

But can the general public ever really claim "exclusive use"? Isn't the whole idea of "public" the opposite of "exclusive"?

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Justice Koontz solves the riddle by stating that past Supreme Court decisions have alluded to the public acquiring the right to use a road "by prescription", but only in circumstances when the government has taken an affirmative action to accept the road as public:

While on occasion we have discussed the conversion of a private road into a public road 'by prescription,' it has always been clear in the context of those cases that the elements of prescription were being used to establish that an implied dedication of the property had been made.

As we explained in Tazewell County v. Norfolk & Western Railway (1916), 'when the dedication is implied from the long and continuous use by the public for the prescriptive period of twenty years, and there has been acceptance by competent authority, title to a right-of-way for a public road may be obtained by prescription' (second emphasis added).

Since the Supreme Court found no evidence of an affirmative "acceptance" by Highland County or another government authority, the CCC road remains private and the property owners retain the right to install the gates.

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The Court's opinion in Dykes v. Friends seems right. It seems fair that a private road can become public over time, but not without some kind of overt action by the government authority. Without the requirement of overt action, evaluating the facts could become too tricky for even our most discerning jurists.

And now that you are up to speed on the latest from the halls of justice, it's time for a snow dance to see if we can't get a little bit more winter around here...

Very Low Interest Rates and a Proposal to Encourage Refinancings

2012-01-10T06:16:00.002-05:00

Interest rates on 15- and 30- year mortgage loans remain at historic lows, and Ezra Klein argues in this morning's Washington Post (here) that President Obama should adopt policies that would enable more homeowners to refinance.

In particular, Klein thinks the Federal Housing Finance Authority (which oversees Fannie Mae and Freddie Mac) should re-write its rules "so that anyone (!) with a loan backed by Fannie and Freddie and current on their payments for six months would be automatically approved for refinancing."

Klein says that Obama (and the FHFA) could make this change without Congressional authorization.

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Klein acknowledges that there would be opposition to such a move from investors (including many pension funds) that hold the current (higher interest rate) mortgage-backed securities.

He does not address an even larger problem: declining home values.

If a mortgage is backed by a home that is worth 20% less than it was when the original loan was made, it's hard to imagine lenders agreeing that six months of on-time payments should be the sole criteria for approving a refinance. I gather that Klein's point is that the lenders won't be making the decision — Fannie and Freddie will be doing so, in their role as mortgage guarantors.

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Given the supercharged political environment of an election year, it will be interesting to see whether President Obama takes steps to more proactively intervene in the housing market.

General Assembly 2012: Let's Get Ready to Legislate!

2012-01-04T06:27:00.001-05:00

Virginia Tech fans are disappointed (again) this morning, following last night's Sugar Bowl defeat to Michigan.

Legislative geeks, on the other hand, are jazzed: the Virginia General Assembly convenes just one week from today.

It should be an interesting year in Richmond, with the Senate split 20-20 between Republicans and Democrats and a Governor with possible national aspirations (see our post here).

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Matt Deegan of C-Ville Weekly has an interview (here) with our colleague at the Bar (and neighbor across High Street), Delegate David Toscano.

Toscano, who was recently selected as the Democrats' House Minority Leader, predicts that the Assembly's allocation of education funding could be particularly contentious in 2012.

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Toscano's new leadership role, along with Delegate Rob Bell's recently announced intention to seek the Republicans' nod for Attorney General in 2013, mean that Charlottesville's and Albemarle's representatives will be in the spotlight in 2012.

Del. David Toscano

Welcoming the New Year at First Night Virginia

2012-01-02T09:27:00.001-05:00

The organizers of First Night Virginia did a terrific job on Saturday evening! The Downtown Mall was bustling with revelers, and the performances were outstanding.

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2012 will be a particularly special year locally, as the City of Charlottesville celebrates its 250th anniversary (the official website is here).

First Night incorporated several events kicking off the year-long birthday party — we enjoyed the photography exhibition at City Space about transportation in Charlottesville through the years.

I'm looking forward to learning more about the city's history -- and particularly looking at all the old pictures of "the way we were." To-wit, here's a superb shot from Neighborhood Development Services:

Here's to a happy and peaceful New Year...

Merry Christmas!!

2011-12-20T17:33:00.001-05:00

It's that time of year...

the happiest day of the year at Richmond & Fishburne...

the day when Pat Durrer brings in her incomparably scrumptious Christmas cookies!!!

Thank you Pat! Somehow you managed to top yourself again ... we LOVED the cookies!

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Wishing you and yours a safe and joyful holiday.

LLC Membership Interests: The Supreme Court of Virginia's Decision in Ott v. Monroe

2011-12-15T06:50:00.001-05:00

November 2011 was notable for a couple of reasons:

First, the Virginia Cavaliers football team reeled off a string of impressive victories. Coach Mike London has the team on the right track (let's ignore that little episode with the Hokies on Thanksgiving Saturday). GO HOOS!!
Second, the Supreme Court of Virginia issued a rare -- and important -- opinion interpreting the Virginia Limited Liability Company Act.

The case is Ott v. Monroe (November 4, 2011), and, when you take a break from preparing for UVa's upcoming Peach Bowl battle against Auburn, you can read Justice Mims's opinion here.

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As a general matter, the Limited Liability Company Act (the provisions of which you can peruse here) establishes a default framework for the rights and obligations of limited liability company members.

Usually (but not always!), the members of an LLC can "override" certain of the statutory provisions by agreeing otherwise in the LLC's Operating Agreement. Indeed, one of the attractive characteristics of an LLC is the flexibility that it gives the members to design a framework that suits their particular needs.

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Ott v. Monroe addresses questions related to the death of an LLC member.

Admiral Dewey Monroe owned an 80% membership interest in L&J Holdings, LLC. Dewey died in 2004, and his will left his entire estate (including the membership interest) to his daughter Janet.

The remaining 20% membership interest in the LLC was owned by Admiral Monroe's wife Lou Ann, and the Operating Agreement between Dewey and Lou Ann appointed Lou Ann as the Managing Member of the LLC.

When Janet inherited the 80% interest from her father, she promptly notified Lou Ann that she was removing Lou Ann as the Managing Member (adding insult to injury, the proposed replacement Managing Member was none other than Janet - ouch!).

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Janet filed a declaratory judgment in the Circuit Court of Stafford County, asking the Court to affirm her authority to remove Lou Ann as the LLC's Managing Member. The Circuit Court held in favor of Lou Ann, and Janet appealed to the Supreme Court of Virginia.

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In its opinion, the Supreme Court addresses the question: What happens to an LLC membership interest upon the death of a member? In arriving at an answer, the Court analyzed the relationship between the general ("default") rule in the Limited Liability Company Act and the specific rule set forth in the L&J Holdings Operating Agreement.

The Act establishes a general rule for transfers of membership interest (whether at death or during life), as follows:

An assignment does not entitle the assignee to participate in the management and affairs of the limited liability company or to become or to exercise any rights of a member. Such an assignment entitles the assignee to receive, to the extent assigned, only any share of profits and losses and distributions to which the assignor would be entitled.

This language means that the assignee of a membership interest only receives the assignor's economic rights in the LLC unless and until the other members choose to accept the assignee as a member of the LLC, in which event the assignee also receives the management rights previously held by the assignor.

In Ott v. Monroe, however, Dewey and Lou Ann had signed an Operating Agreement that seemed to override the statute by incorporating the following language:

Except as provided herein, no Member shall transfer his membership or ownership, or any portion or interest thereof, to any non-Member person, without the written consent of all other Members, except by death, intestacy, devise, or otherwise by operation of law.

Janet argued that this language (in particular, the phrase "except by death") means that Dewey's will transferred all of his LLC rights (the economic rights and the management rights) to Janet.

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The Supreme Court of Virginia disagreed with Janet's position. Justice Mims writes that the management (or "control") interest of an LLC member "is personal to the partner and cannot be bestowed on another by the unilateral act of a partner even if the words of a partner do not expressly limit its scope."

The most significant part of the opinion comes next.

Justice Mims initially states that the L&J Holdings Operating Agreement did not contain language superseding the statutory rule —seeming to imply that the inclusion of such language would have enabled Dewey to transfer his entire LLC interest (including the management rights) to Janet if he had used more specific language in the Operating Agreement.

Then, however, he states that alternative language in the Operating Agreement would not have mattered, because the statute prohibits any unilateral transfer of an LLC management interest:

Even if [the L&J Operating Agreement] had superseded dissociation under Code § 13.1-1040.1, it is not possible for a member unilaterally to alienate his personal control interest in a limited liability company …

Code § 13.1-1023(A) provides that an operating agreement may not contain provisions inconsistent with the laws of the Commonwealth. Thus it was not within Dewey’s power under the Agreement unilaterally to convey to Janet his control interest and make her a member of the Company upon his death because the Agreement could not confer that power on him.

This language appears to preclude any direct transfer of LLC management rights, without the approval of other LLC members.

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The reason that Ott v. Monroe is so significant is that the L&J Holdings boilerplate provision regarding transferability is very common in LLC operating agreements in Virginia. For that reason, the take-away practice point is clear: clients should be made aware of their limited ability to transfer LLC management rights (during life or upon death) absent the consent of other members.

And when you are finished reviewing your LLC Operating Agreement, give a shout-out to the ACC Coach of the Year: UVa's Mike London!

Tis The Season: Monticello's Holiday 5K Classic

2011-12-05T10:09:00.005-05:00

The holiday season is in full swing in Charlottesville!

This weekend Monticello hosted the Holiday 5K Classic, a fun and festive affair.

Liz Blaine and Mark Lorenzoni started the race from the east side of the house. We wound around the West Lawn and gardens and down the mountain, then we ran a portion of the Saunders-Monticello Trail and finished at the Visitor Center.

While running down the mountain, the simultaneous views up to Montalto (in front) and down to Charlottesville (to the side) were fantastic. What a great way to get in the holiday spirit!

Lewis and Clark's Expedition to the Supreme Court

2011-11-28T06:48:00.003-05:00

Charlottesville's own Meriwether Lewis will take center-stage on this year's docket at the United States Supreme Court.

In PPL Montana v. Montana, the Supreme Court will examine the question of whether portions of three Montana rivers are owned by a power company (PPL Montana) or the state itself. In addition to the legal ramifications, there is a significant sum of money at stake: if the state owns the riverbeds, then the company owes the state back-rent of $53 million.

The case turns on whether the rivers are "navigable".

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Supreme Court precedent holds that the riverbeds of rivers that were navigable at the time of statehood are owned by the states.

Now, the Court must decide whether the existing rule applies to portions of rivers that were navigable (Montana's position) or only if the entire river was navigable (the power company's position).

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Meriwether Lewis is relevant to the dispute because his journals from the watershed expedition of 1803 (pun intended?) include several entries describing the Great Falls of the Missouri -- and the extent to which the waterfalls inhibited the expedition's progress (thereby making the river unnavigable). Interestingly, attorneys on both sides of the case argue that Lewis's journals support their position.

Robert Barnes's article about the case, in this morning's Washington Post (A River Runs Through It, and So Might Lewis and Clark), is here.

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And speaking of Messrs. Lewis and Clark: the Lewis and Clark Exploratory Center (their website is here) has broken ground on its new building at Darden Towe Park, and the Center anticipates the building will open in 2012.

The Lewis and Clark Statue at the Intersection of Main and Ridge Streets

Happy Thanksgiving 2011!

2011-11-21T07:28:00.002-05:00

This Thursday is Thanksgiving, and at Richmond & Fishburne we are thankful for each other, our families, our friends, and our colleagues. We're thankful for our work and our lives outside of work.

Three of us have welcomed grandchildren into the world this fall (and more are on the way!), so we are especially thankful for new life and the enthusiasm of kids and grandkids.

We thought this would be a good chance to share some of our favorite Thanksgiving traditions and memories.

Marcelle

When my four children were growing up, rather than having the standard turkey dinner our tradition was to let each member of the family choose one food item for our Thanksgiving dinner. For a couple of weeks before the Big Day, dinnertime discussion often centered on the pros and cons of potential choices. This tradition made for some unusual but memorable dinner menus. For example, we always had homemade pizza (my youngest son’s favorite food). Generally more than one dessert was featured. Once “candy” was on the menu. Since my husband and I also got to choose an item, we made sure that vegetables and salad were represented. Interestingly, the meals most often turned out to be vegetarian, except for those who liked pepperoni on their part of the pizza. The children not only enjoyed eating the dinner, but they looked forward to helping with the preparation.

Terri

In Lewis’ family, they begin Thanksgiving by having oyster stew for breakfast, which we are now doing with our children.

Debbie

Thanksgiving is a time to give thanks for family and friends in my life. I remember sitting in a circle of family and friends at my Aunt’s home in Florida years ago and she asked us to go around the circle one by one sharing one thing that we were each thankful for. That activity allowed each of us to take a moment to give thanks for things that we sometimes take for granted. That activity is now a part of Thanksgiving at my home where many family and friends gather together. We remember to give thanks together and we enjoy lots of laughter, fun and food.

Wendall

Usually, on Thanksgiving evening (after a great meal), my Dad would take my brother and me down to the hunting club to spend the night and duck hunt for two days. As a teenager there was nothing I enjoyed more than being with my Dad on an adventure. He would cook steaks on the grill and we always had apple turnovers with vanilla ice cream for dessert. It was hard to sleep that night because I was so excited. The next day we would get up before dawn, load our gear and the dogs into a boat and set out for the deep water blind. We would set out the decoys as the sun was rising and then hustle to get into the blind before the first flight of ducks appeared. Whether or not the hunt was successful in terms of ducks in the larder, just being out there on the water with Dad was a wonderful feeling that I will never forget.

Rick

I really enjoy the blessing of the hounds at Grace Church Cismont. It's a service where the hounds are blessed in church, with riders on horseback, followed by a fox hunt.

Pat

For Thanksgiving, my family usually comes to my house and I do most of the cooking. I try to prepare one favorite dish for each of them. I remember one year when one of my guests wanted to bring the stuffing. Unfortunately when we sat down and started eating, we realized she had put cinnamon, not sage, in the stuffing! She was really upset at the time, but now the memory gives us a good laugh.

Walker

When I was young we spent each Thanksgiving in Harrisburg, Pennsylvania, where my Mom grew up. I loved staying at my grandparents' rowhouse on Brigg Street. A highlight of the weekend was playing touch football with our large clan of cousins in the vacant lot across the street. I was one of the younger of the cousins and it was always a thrill to try to keep up with the others.

We hope that you have a wonderful holiday!!

What Sort of Training Should a Law School Provide?

2011-11-20T07:52:00.003-05:00

Today's New York Times has a front-page piece about the lack of practical training that attorneys-to-be receive during their three years in law school.

David Segal's article, What They Don't Teach Law Students, is here.

Although Segal includes quotes from both critics and supporters of the current law school paradigm, the critics fire the strongest shots:

“The fundamental issue is that law schools are producing people who are not capable of being counselors,” says Jeffrey W. Carr, the general counsel of FMC Technologies, a Houston company that makes oil drilling equipment. “They are lawyers in the sense that they have law degrees, but they aren’t ready to be a provider of services.”

Some large firms are developing their own educational programs, which are designed to provide the hands-on skills and practical "how-to" that is not emphasized in law school. According to Segal, the programs are partly a response to client push-back against -- in the clients' view -- subsidizing the training of young attorneys.

Segal also cites to the growing presence of clinical programs in law schools, but he says that schools are reluctant to emphasize clinical education too much for fear it could hurt their academic reputation.

Helpfully, Segal provides the historical context for law schools' decision to focus on theory rather than the practice. Harvard's Christopher Langdell, credited with developing the case method in the 1870's, was a pivotal figure.

Governor Bob McDonnell: A Potential Nominee for Vice-President?

2011-11-10T06:51:00.007-05:00

This blog usually focuses on legal rather than political stories, but an interesting article — with a Virginia angle — caught my attention this morning on The New Republic's website.

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Alec MacGillis argues (here) that Republicans' success in Tuesday's Virginia Senate elections may, paradoxically, hurt rather than help Governor McDonnell's chances of becoming the Republican vice presidential nominee next year.

MacGillis's theory is that the Democratic-controlled state Senate has so far prevented controversial conservative legislation from ever reaching McDonnell's desk. As a result, the Governor hasn't had to choose between not signing controversial bills (thereby angering conservative Republicans) and signing them (thereby decreasing his attractiveness to moderates and swing voters).

Here is an excerpt:

McDonnell has kept himself in the mix of potential GOP running mates by projecting the image of a business-minded right-of-center executive ... Key to this new image is that McDonnell has been able to keep distance between himself and the religious right and Tea Party elements in the legislature. How? By relying on the Democrats controlling the Senate to keep the most extreme legislation from reaching his desk.

With Senate Democrats running interference, McDonnell has stayed above the fray, aided further by arch-conservative Attorney General Ken Cuccinelli, who has served as a convenient foil for McDonnell.

Following Tuesday's elections, says MacGillis, state Republicans may be emboldened to pass increasingly conservative legislation. If McDonnell elects to sign the legislation, then Mitt Romney or another Republican nominee may view him as less helpful in attracting moderates in the 2012 general election.

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MacGillis's analysis is interesting, and he could be correct that McDonnell will someday rue Tuesday night's results.

The more I think about it, though, the more I conclude that next summer McDonnell will be in the top tier of prospective Republican vice presidential candidates (along with Marco Rubio and Chris Christie), particularly if (1) Virginia retains its status as a critical swing state and (2) McDonnell further burnishes his image as a broken-budget-repairman.

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At the local level, Albemarle County politics got even more interesting on Tuesday night, with Chris Dumler's election to succeed Lindsay Dorrier portending a more consistent 3-3 split on critical Board of Supervisor decisions.

Public Nuisance in Virginia

2011-11-08T07:16:00.001-05:00

A nuisance occurs when a property owner unreasonably uses his property in a manner that "substantially interferes" with the enjoyment or use of another individual's property.

A nuisance differs from a trespass because the nuisance-creator does not physically enter onto the other property owner's land. Nuisances include loud noises that unreasonably disturb a neighbor and foul smells that do the same: neither the ruckus nor the stench physically (or bodily) enters the neighbor's property, but they nevertheless interfere with the neighbor's ability to enjoy his property.

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In Virginia, most nuisances are private nuisances, which means that one landowner brings a civil claim against another landowner. In these claims, the general public's interest is not represented by the Commonwealth attorney participating in the lawsuit.

However, there is a provision in the Code of Virginia (Section 48.1, accessible here) that enables five citizens to petition a court to bring a public nuisance claim against a property owner whose actions negatively impact a broader swath of the public.

When a petition is brought under Section 48.1, the judge summons a grand jury to investigate the complaint and, if sufficient evidence of a public nuisance is found, then the nuisance-creator may be held liable and fined up to $25,000.00.

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Now comes a fascinating front-page Washington Post story about a group of church-goers in Fairfax County who have petitioned under Section 48.1. The petitioners allege that a neighboring golf range has created a public nuisance by virtue of the 2,637 golf balls (!) that have crossed onto the church's property, in some cases damaging property and injuring individuals.

You can read Justin Jouvenal's account of the dispute here.

According to Jouvenal, the range owners contend that they have (1) taken reasonable steps to prevent the golf balls from leaving their property and (2) cooperated with the church in attempting to devise mutually agreeable solutions. Nevertheless, the grand jury concluded that there is a reasonable basis for a charge of public nuisance, and the case could head to trial in January.

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If the matter does go to trial, it will be interesting to see whether a judge concludes that the 100+ foot protective netting installed by the golf range is a sufficient accomodation to defeat the claim of nuisance.

Lawyers Supporting Movember

2011-11-02T06:31:00.001-04:00

The "Movember" movement aims to raise awareness of prostate cancer, to fund research, and to support survivors. The idea was hatched in Australia in 2006, and it has grown exponentially over the last five years with $81 million raised in 2010 alone.

You can read about Movember, and make a donation if you are so inclined, here.

An old friend called me last week and asked me to participate. I'll be growing a moustache (or at least attempting to do so!) during the next 30 days to support this excellent cause.

I can think of lots of actors, athletes, and rock stars over the years with great moustaches.

But this is a legal blog, so let's give a shout out to one of the great juridical stache-growers of history: the inimitable Oliver Wendell Holmes, Jr., pictured below (let's see Justices Scalia or Breyer top that!):

And here's a video to help pump you up for Movember:

Snowfall in October and a Law Firm at Wal-Mart ... Stange Things are Afoot

2011-10-30T08:19:00.013-04:00

Imagine an afternoon trip to a Wal-Mart: You pick up socks, a flat-screen television and a microwave meal. After checking out, you stop in the photo studio for a family portrait, and then shift one booth over to a lawyer, who drafts your will or real estate contract.

The concept may not be that far-fetched. (The New York Times, October 29, 2011)

Really?!!

Please, do explain.

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One reason that it is difficult to imagine a law firm at Wal-Mart is that the existing rules of professional ethics make such an arrangement impractical if not impossible.

In Virginia (as in 48 other states), non-lawyers are prohibited from sharing legal fees with lawyers.

In other words: an administrative assistant, paralegal, accountant, real estate broker, or any other "non-lawyer" is not allowed to own an equity stake in a law firm and thereby share legal fees with the firm's partners.

This also means that outsiders could not invest the capital into a law firm that would (presumably) be a pre-requisite to opening storefront offices in retail outlets like Wal-Mart.

The Virginia rule is set forth in VSB Rule of Professional Conduct 5.4 (the full text is here).

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Among the rationales for Rule 5.4 is concern that an attorney's independence -- and his commitment to the client's best interest -- might be compromised if he were also considering the interests of non-attorney shareholders.

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John Eligon writes in yesterday's New York Times (here) about a potential game-changing shift in the "lawyer // non-lawyer" ownership paradigm.

First, Eligon cites to England's new law that permits individuals other than lawyers to own a piece of a law firm. Second, he reports that the ABA will soon release a draft rule of similar import:

An ethics commission of the American Bar Association is expected to circulate by early November a draft proposal recommending that ethics rules be amended to allow other professional service providers — like accountants, economists and social workers — to partner with lawyers and own up to 25 percent of a law firm.

Advocates of the new model believe that a benefit of allowing non-lawyer ownership could be better-capitalized law firms capable of offering cheaper legal services to more people.

In the same way that H&R Block offers accounting and tax preparation services at low-cost, "chain" law firms could increase people's access to legal advice and services.

It will be interesting to track the receptivity of the Virginia State Bar to the alternative rule. I anticipate that there will be lawyers arguing both sides (aren't there always?!) as to whether non-lawyer ownership is an idea whose time has come.

Hope you enjoyed yesterday's surprising dose of winter weather! The photo is by Todd Heisler, from this morning's Times.

Drumhellers, Critzer's Farm, and Carter's Mountain: Autumn in Charlottesville

2011-10-24T07:09:00.002-04:00

The past couple of weekends have been gorgeous, and central Virginia offers no shortage of perfect places to spend a fall afternoon.

As they say in the law books: to-wit:

Critzer's Family Farm (pumpkins galore!)

Drumheller's Orchard (the pie tastes even better than it looks!)

Carter's Mountain Orchard (there's no picture of the apple doughnuts because I ate them too quickly for the camera!)

We hope that you are having a wonderful October!

The "Occupy" Protests Come to Town

2011-10-20T15:04:00.003-04:00

We have new neighbors in downtown Charlottesville: Occupy Charlottesville has taken root across the street in Lee Park.

The number of protesters camping out in the park has increased steadily throughout the week, notwithstanding the rain and cooler temperatures.

While the protesters object to the role of money in politics, others are complaining (at the Progress and Hook websites) about the alleged special treatment the Occupy group received when the City expedited its review of their request for a special "overnight use" permit for the park.

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For an insightful legal perspective on the rights and obligations of the Occupy protesters and the governments they'd like to reform, check out Dahlia Lithwick's article at Slate, "Rules of Occupation"(here).

And for an interesting examination of whether sleeping overnight in a public park might be Constitutionally-protected "expressive conduct", see Christopher Dunn's article in the New York Law Journal (here) and the US Supreme Court's 1984 decision in Clark v. Community for Creative Non-Violence (here).

Perhaps the question of public sleeping will "re-awaken" in the coming weeks, right here in Charlottesville?

The Supreme Court of Virginia on Exclusive Easements: McCarthy Holdings, LLC v. Burgher

2011-10-17T07:09:00.094-04:00

Happy fall!

It was a beautiful weekend in central Virginia, but as the work-week begins it's time to hit the law books. And what better place to dive back in than the always-fascinating world of easements?!

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In McCarthy Holdings, LLC v. Burgher (September 16, 2011, Record No. 10-1031), the Supreme Court of Virginia addressed whether the grant of an exclusive easement transfers a fee simple interest to the easement-grantee. You can read Justice Goodwyn's decision (and Justice Mims's pointed dissent) in McCarthy, here.

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When a property owner conveys an easement to someone, the landowner grants the easement-holder the right to use property that the easement-holder does not own (for a discussion of the subtle differences between an easement and a license, see our post about the 2010 Supreme Court decision Station #2 LLC v. Lynch, here).

As with all-things-legal, the particular language in the easement is critical. For instance, if Bob grants a utility easement to Acme Electric for the installation, maintenance and repair of power lines, but later Bob becomes angry because Acme's heavy equipment ruins Bob's azaleas while repairing the lines, the question of whether or not Acme is legally obligated to reimburse Bob for the azaleas will depend on the specific provisions in the instrument that created the easement.

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The vast majority of easements limit the easement-holder to using the eased-property in particular ways. For instance, an electric company may have the limited right to install power lines, or a neighbor may have the limited right to drive across the easement-grantor's property in order to reach his house. In these instances, the electric company does not have the right to to dig a well in the easement-grantor's front yard, and the neighbor does not have the right to park his Chevy Silverado on the easement-grantor's driveway.

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Additionally, most easements are non-exclusive, which means that the person granting the easement reserves the right (1) to use the property himself and (2) to give other individuals the right to use the eased property as well.

Sometimes, however, an easement states that the easement-holder has the exclusive right to use the property that he does not own. In McCarthy Holdings, the Supreme Court of Virginia examined the question: just how exclusive is an exclusive easement?

The facts in McCarthy Holdings are relatively straightforward.

Burgher granted an easement, to McCarthy's predecessor-in-interest, to use 488 square feet located on Burgher's land in Alexandria. The easement agreement included the following language: "The Grantee shall have exclusive use of the land set forth in the Easement Area."

A dispute arose because McCarthy believed that the easement gave him the right to prohibit Burgher from using the 488 square feet for any purpose at all. McCarthy's position seems logical: exclusive use means exclusive use, which means that no one (including the property owner) should have the right to use the 488 square feet without McCarthy's permission.

Alas for McCarthy, the Supreme Court said that the analysis is not quite so straightforward. In particular, the Court cited its opinion in Walton v. Capital Land, Inc. for the proposition that "the term 'exclusive' in an easement agreement does not deny the servient estate its right to use the easement area, unless such use unreasonably interferes with the use and enjoyment of the easement." Unfortunately, the Court arrives at its conclusion without providing a great deal of insight into why the word "exclusive" does not retain its plain language meaning when used in a legal instrument.

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The Court is more convincing when it states that easement conveyances that "effectively transfer a fee ... are not favored." In other words, if McCarthy had intended to obtain the right to exclude Burgher from the easement area, then McCarthy should have insisted on a fee simple conveyance, rather than merely an easement. By agreeing to accept an easement rather than the fee simple, McCarthy (or, more precisely, its predecessor-in-interest) acknowledged that Burgher retained some rights to use the 448 square feet.

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The practical take-away from McCarthy seems relatively clear: if an individual intends to obtain true exclusivity with respect to the use of property, then he or she needs to obtain a fee simple interest -- or at least an easement grant that clearly prohibits any use by the servient estate.

And if you can't get an exclusive easement, then you might try a bouncer and a rope line...

An Earthquake in Central Virginia

2011-08-24T07:58:00.004-04:00

Yesterday afternoon I was reviewing a deed when the earthquake hit.

It was a surreal 30 seconds ... there was a loud rumbling, and Queen Charlotte Square was definitely shaking, yet it came as such a surprise that it took me at least 10-15 seconds to realize this was more than just a low-flying airplane or a bulldozer on High Street.

Marcelle, Pat and I quickly evacuated the building, along with colleagues from other offices. We were hapy to learn that no one was hurt, although news reports this morning show some relatively serious property damage in Louisa County and surrounding areas.

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The New York Times has front page coverage (here) from Mineral. I knew almost nothing about Mineral prior to yesterday, and I was particularly surprised to learn that in the late 19th century there were fifteen gold mines in the town's immediate vicinity.

The courthouse in Louisa is one of my favorites, and the next time I'm there I will have to take a drive down the road to Mineral.

The Louisa County Courthouse

Who "Owns" the Jackson River? Attorney General Cuccinelli Declines to Take a Position

2011-08-22T16:24:00.001-04:00

Virginia Lawyers Weekly reports that fishermen in Alleghany County are very disappointed with Attorney General Ken Cuccinelli's decision not to intervene on their behalf in a property dispute about ownership of the Jackson River.

Peter Vieth's article is here, and the comment thread at the bottom of the page includes some pointed criticism of the AG's office.

Questions about the ownership of riverbeds, along with other questions of riparian rights, can be quite tricky.

Landowners along a river or stream often believe that they own the portion of the riverbed adjacent to their property -- and that other individuals do not have the right to enter onto the riverbed to fish, swim, or simply find a rock on which to bask in the warm summer sun.

However, in Virginia (as in many states) the general public has long had common law and/or statutory rights to use certain riverbeds. And if a private riverside landowner attempts to block those rights, certain members of the public believe that the government has an obligation to step-in to defend the public's rights.

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There's been a long simmering dispute in Alleghany County between fishermen who wade into the Jackson River and neighboring property owners who argue that the fishermen are trespassing on their property.

Now, some landowners have brought a $10,000 trespassing suit against the fishermen, and the defendants asked the Attorney General's office to defend their right -- as members of the general public -- to enter into the riverbed.

Interestingly, the Lawyer's Weekly points out that the Commonwealth's Department of Game and Inland Fisheries has long taken the position that the streambed of the Jackson River "belongs to the people of the state."

However, a spokesman for the Attorney General has stated that the state government need not be a party to the case in order for the court to determine the relative rights of the public and the property owners.

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The property owners allege that, notwithstanding the general presumption that the Commonwealth owns riverbeds, they can trace their claim to ownership to two grants, from King George II (in 1743) and the Commonwealth (in 1785).

Beau Beasley has a good summary of the issues at www.midcurrent.com, here.

Oh, to be rollin' on the Jackson River, on a warm August day...

Summertime Musical Aside: John McCutcheon Sings About Alternative Dispute Resolution

2011-07-20T07:09:00.002-04:00

In the world of children's music, there is no one better than John McCutcheon. McCutcheon lived for a time in central Virginia, though I do not know if he still calls the area home.

It has been a thrill to re-discover McCutcheon as a parent (his website is here).

McCutcheon used to visit my elementary school once a year, and I always looked forward to his shows. His clever stories and lyrics are the absolute best: funny, evocative, and meaningful, all at the same time. The magical sound of the hammer dulcimer takes me right back to being 7-years old.

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This past weekend I discovered McCutcheon's album from 1997, Bigger Than Yourself.

The album has a number of gems (I love "Whatchagonnabe" and "Friendship"), but the song that put me in mind of lawyering is "Let Someone Else Decide."

Although mediation has its detractors, I think it can be a valuable mechanism for resolving disputes (or at least getting the parties on-track towards a resolution).

Whether intentionally or not, McCutcheon gives mediation a plug in Let Someone Else Decide; I like the song's message that a disinterested third party can help each side-to-a-dispute see things from the other person's point of view. The "someone else" can help the disagreeing parties reach a solution that -- even if not perfect -- both people can live with.

The lyrics without the music probably won't do it justice, but here is an excerpt from Let Someone Else Decide (to listen to the song, check out Rhapsody or another music streaming site):

"I am right"

"You are wrong"

"I am not"

"Yes you are."

Dad and I just couldn't agree; though we'd written it down, we went round and around

I was getting mad and so was he.

"It means this"

"It means that"

"Are you nuts?"

"Same to you."

We could see things were going down fast

So we talked to my mother and Stuart my brother, who had a good solution at last:

When your argument goes fuss fuss

Find someone who you both trust

Let him listen to each side, and let that someone else decide.

The Supreme Court of Virginia on Fixtures: The Taco Bell Decision

2011-07-13T17:03:00.010-04:00

It's a steamy summer day in Charlottesville, so grab yourself a zesty burrito and an ice-cold Coke, and let's talk property law!

In Taco Bell v. Commonwealth Transportation Commissioner (June 9, 2011), the Supreme Court of Virginia examined the sometimes vexing question of the legal status of restaurant fixtures. For anyone who has been involved with the lease or sale of a restaurant, Taco Bell proves an engaging read. You can link to Senior Justice Lacy's opinion here.

First, the background:

Property law distinguishes between real property (the land and certain immovable structures located on the land (the structures are known as "improvements")) and personal property (moveable items, such as furniture, books, vehicles, etc.).

Ambiguity can arise with respect to fixtures. Fixtures are initially-moveable objects which can, over time, become literally or figuratively "attached" to the land or to improvements. In the eyes of the law, a fixture is real property, even though it began its life as personal property.

For instance, consider a sink, a stove, or a kitchen cabinet: although each of these items is moveable at the time it is installed in a house or a restaurant, the sink/stove/cabinet is secured to the immoveable real estate and thereafter becomes, in the eyes of most beholders, part of the real estate (for this reason, a house-seller who intends to keep the kitchen sink after conveying the property should make very clear in the contract that the sink will be removed prior to settlement).

In Virginia, whether or not an item is a fixture (and is, therefore, classified as real property rather than personal property) is determined using the following three-part test:

Has the item been actually or constructively "annexed" to the site?
Is the item appropriate to the purpose for which the land is being used?
Did the owner of the real property intend to make the item part of the real property?

Critics of this three-part test might point out that question 3 is quite subjective, because determining a person's intent is considerably more difficult than determining whether a stove is physically attached to a wall. Nonetheless, the three-part test has guided Virginia courts since the Supreme Court articulated it in the 1941 decision Danville Holding Corp. v. Clement.

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Now, turning our attention to the facts in Taco Bell:

Using its eminent domain power, the Commonwealth of Virginia initiated a taking of a Taco Bell restaurant located on Route 29 in Fairfax County. The purpose of the take was to widen and repair Route 29. Because the restaurant owners and the Transportation Commissioner could not agree on the value of compensation to be paid by the state to the property's owners, the Commissioner initiated a condemnation proceeding.

During the condemnation proceeding, the question arose whether Taco Bell's owners should be compensated not only for the building but also for certain items that the owners considered to be fixtures. The items in dispute included a refrigerator, a freezer, sinks, ovens, pans, frying baskets, and a "drive thru" neon sign.

The Circuit Court of Fairfax County held that the disputed items were "purely personal property" and that there was no need for a factual determination by the jury because the evidence conclusively showed that the items could be removed from the property. Since the items could be removed, they were not fixtures, and the owners were not entitled to compensation from the state for them.

The Taco Bell owners appealed, and the Supreme Court of Virginia reversed the Circuit Court. In her opinion, Justice Lacy states that the Circuit Court incorrectly applied only one of the three prongs from the fixture test articulated in Danville Holding Corp. The Circuit Court focused exclusively on the moveability of the items, when it should have also focused on (1) the owners' intent and (2) the appropriateness of the items. Lacy writes:

"Taco Bell presented testimony that it intended that the items remain on the property for the life of the business or ... there was an 'intent to make such machinery and equipment a permanent accession to its realty' ... Considering the evidence in the light most favorable to Taco Bell, as we must on appellate review, we conclude that the evidence on the issue whether the items in question were fixtures or personalty for condemnation purposes was sufficient to submit to the jury."

The decision in Taco Bell is surprising in that it leaves open the possibility that certain items not generally considered fixtures (in particular, the pans and the frying baskets) may actually be fixtures in certain situations, depending on the parties' intent and the context in which those items exist.

One interpretation of the decision is that, when it comes to questions about what constitutes a fixture, the Supreme Court of Virginia believes that juries should have the opportunity to assess the particular facts at issue.

OK, that's enough law for today --- now it's time to eat some tacos!!!

Happy Fourth of July!

2011-07-04T15:29:00.002-04:00

It's been a beautiful Fourth of July weekend in central Virginia (with a couple of fierce evening thunderstorms), complete with a fantastic parade and Independence Day celebration in Stanardsville this morning.

Greene County's Courthouse is one of the many beautiful old courthouses in this part of Virginia - and a perfect place to celebrate our nation's birthday.

To Whom Should President Obama Look for Legal Analysis?

2011-06-28T06:46:00.000-04:00

The Obama Administration has recently come under fire for contending that the War Powers Act does not apply to the United States intervention in Libya, thus permitting the President to continue the effort without Congressional authorization. (Stephen Colbert sarcastically defended the Administration by arguing that American bombs are not hostilities but merely "laser-guided constructive criticism" and that the US effort is rightly viewed as a "heavily-armed semester abroad"!)

On Slate's excellent year-end Supreme Court wrap-up (here), Walter Dellinger focuses his criticism less on the substance of the President's decision than on the process by which it was reached.

Dellinger argues that the President should look to the Justice Department (in particular, the Office of Legal Counsel) for legal advice on significant matters such as the Libya intervention. He says that lawyers at the Office of Legal Counsel are positioned to provide more sound (and less political) legal guidance to the President because of their institutional detachment from day-to-day political considerations. In light of the legalistic stretch that the President had to make on the Libya/War Powers question, the point is well-taken.

Here is an excerpt from Dellinger's argument:

I am distressed that the White House press secretary keeps saying it was a fine process because the White House counsel had informal opinions from lawyers from all the relevant departments and the president signed off on the final decision.

That would be a fundamentally flawed process. A president should get his primary direction on major questions of domestic law from the Department of Justice, not from the White House counsel or from any of the operational departments of the government. And within the Department of Justice, the dispositive role should be played by the Office of Legal Counsel.

It may not be immediately obvious why it matters so much which lawyers decide. But it matters greatly. The Justice Department is a far superior place to make legal decisions. I served for a few months (in 1993) in the White House counsel's office and for a few years (1993 to 1996) as head of the Office of Legal Counsel in the Department of Justice. In my experience, the difference in institutional setting makes a significant difference. It is much easier to get legal questions right at OLC.

Everyone in the White House is a political appointee. The lawyers serving there swim in a pool that is dominated by policy and politics. There is no shame in that: Politics is the way we govern ourselves in a democracy. But it is not now and never has been a proper place for making legal decisions binding on the executive branch.

I can attest that OLC in administrations of both political parties has many times said "no" to requests urgently pressed upon the office by officials from the White House or other agencies. The institutional constraints on OLC are highly conducive to sound legal judgment. The OLC lawyers do their work in a setting that is full of career attorneys who are (or should be) consulted on every major legal decision. And OLC is guided by both institutional precedent and a long tradition of careful process. None of these critical elements exist in any White House counsel's office, in any administration.

There are outstanding lawyers in the White House, at the State Department, and in the Pentagon. Their views are properly sought out and given great weight by OLC. But in the end it is the Justice Department that should decide questions of domestic law. The Justice Department does not tell the State Department how to conduct diplomacy or the Defense Department how to conduct military operations. And those departments and the White House counsel's office, all of which have operational responsibilities other than getting the law right, should not be telling the Justice Department and OLC how to decide legal questions.

Stephen Colbert, Legal Commentator and All-Around Funny Person

LawyerUp: Legal Service As Fast As Pizza Delivery?!

2011-06-17T06:27:00.009-04:00

An image from LawyerUp's Facebook page

A couple of years ago we wrote (here) about a website called "Who Can I Sue.Com" that drew criticism as distateful from some attorneys.

Now comes word of a similarly innovative and/or distasteful legal service (depending on one's perspective) called "LawyerUp," which enables individuals to pay a monthly fee for the ability to have a lawyer available, within 15 minutes, at all times of the day and night! (I've just done a search for LawyerUp and have not been able to locate their website, but their Facebook link is here.)

The New York Times has the LawyerUp story, here. According to the Times's John Schwartz, company co-founder Chris Miles explains his thinking as follows:

“If I want a pizza, I can get a pizza in 15 minutes,” he says. “I can get a plumber in the middle of the night. Why can’t I get a lawyer?” Miles co-founded the company in February, and started full operations this month in Massachusetts, Connecticut and Rhode Island, having built a roster of criminal lawyers who do not mind getting late-night calls.

The service works as follows:

The service’s personal plan, aimed at young people, costs $4.95 a month. Those who do not have a subscription can pay a flat fee of $100 for the first call, which the company calls its “pay-in-a-pinch plan.” For all clients, an operator checks contact information and processes the lawyer’s initial fee of $250 on a credit card for the first hour of service. Perhaps inevitably, there is an app for that, already available on Android phones and under development for the iPhone. It is basically a panic button, speed-dialing the service.

It's hard to envision a huge potential customer base for the LawyerUp service, but perhaps if one views it as an old-fashioned retainer arrangement -- but with pizza-delivery-like speed! -- it makes a little more sense.

Perhaps a legal document to go with your pepperoni pie?

The American Society of Legal Writers' Supreme Court Interviews

2011-06-09T07:20:00.001-04:00

The American Society of Legal Writers recently published a fascinating series of interviews with eight of the nine Supreme Court Justices. You can link to the full interviews at the Society's website "Scribes" (here).

The Scribes interviews are a great opportunity to peer inside the heads of the Justices. I particularly enjoyed the verbatim transcriptions; this allows the reader to trace the Justices' thought-processes as they think about the art (and science) of rhetoric and prose.

One theme that arises in the interviews is the Justices' preference for written and oral arguments that are (1) concise and (2) clear. This would seem to be stating-the-obvious, but in a profession where a seemingly simple contract can stretch to 10 or 20 pages of legalese, the advice is well-taken.

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Here are some highlights:

When asked if grammatical errors bother him, Chief Justice Roberts analogized to listening to music and hearing a misplayed note:

I’m not going to stop in the middle and say someone’s used a wrong bit of grammar. No ... But it’s like music. If you’re listening to music and somebody hits the wrong note, it kind of detracts from it, and you hear it. It’s the same way there. If they’re making a point, and they just . . . You notice it, and if you notice it, you’re not noticing the argument; you’re noticing the words. And that’s unfortunate.

Justice Ginsburg thinks everyone would benefit from minimizing the legalese:

Any profession has its jargon. The sociologists have lots of fancy words, and some of them think somehow that puts them on a higher plane. I can’t bear it. I don’t even like legal Latin. If you can say it in plain English, you should. For one thing, you would have much shorter documents than we now do. For another thing, the public would understand what lawyers do, what judges do, better. They might understand it even from reading an opinion or from reading a brief instead of getting it filtered through the lens of a journalist.

Justice Scalia concurs with Ginsburg and provides specific examples of legal terminology that would be better-off lost:

Avoid legalese ... A good test is, if you used the word at a cocktail party, would people look at you funny? You talk about the instant case or the instant problem. That’s ridiculous. It’s legalese. This case would do very well. Another one of my bêtes noires of legalisms is nexus. Yeah, nexus. What is it? It’s Latin for “connection.” You don’t make it more scientific at all by calling it a nexus ... And avoid trendiness. That’s probably the other extreme of legalese. I never use, ever use, nor let my law clerks use such trendy expressions as “the First Amendment informs our consideration of this.” The first time that was used, that was very nice. It was a nice metaphor. But it has lost all of its vividness, and it’s just cant. Another example of the same is “Marbury v. Madison and its progeny.” That was wonderful the first time it was used. It is trite now. Terribly trite. Get some other expression.

The Supreme Court of Virginia's Decision in Condominium Services v. First Owners' Association

2011-05-18T09:09:00.002-04:00

It's been raining cats and dogs in Charlottesville this week, but the law library remains dry and cozy.

So put away your umbrella, grab a cup of hot cocoa, and enjoy the Supreme Court of Virginia's recent opinion in Condominium Services, Inc. v. First Owners' Association (April 21, 2011). You can read Justice Goodwyn's opinion here.

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Among other issues, Condominium Services examines the tricky phenomenon of contracts referring to other contracts (and other contracts, and other contracts).

This phenomenon can lead to a maze-like inquiry into the way in which the various documents and agreements are intended to relate to each other. For instance, if Contract A makes a reference to Contract B, but certain provisions of Contracts A and B are contradictory, which document governs the parties' rights?

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In Condominium Services, a dispute arose between a condo owners' association and the management company that the association had hired to collect assessments and maintain the property. The association and management company entered into a contract that provided for termination by the association upon 30 days notice to the management company.

The contract included a statement that "the documents governing this relationship consist of" (1) the contract itself, (2) the Virginia Condominium Act, and (3) the association's bylaws and the condominium declaration.

The association's bylaws contained the following provisions:

"The Owners’ Association shall not change Management Agents or undertake self-management, without the prior affirmative vote of members representing three-fourths (3/4ths) of the votes of the Residential and Commercial Unit owners present at any meeting of the members duly called for such purpose."

Alas, the relationship between the association and management company did not work out, and the association sent a notice of termination for cause, alleging that the management company failed to provide the association with correct financial records or to file tax returns on its behalf. Notwithstanding the termination, the company continued to collect assessments and to pay itself from the association's bank account.

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The company argued in Alexandria Circuit Court (and later at the Supreme Court) that the association's termination of the management contract was ineffective because the association never convened a meeting of the owners or obtained the 3/4 vote required under the bylaws. Since the bylaws were mentioned in the management contract, argued the company, the association needed to comply with the 3/4 vote requirement in order to effectively terminate the contract.

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The Supreme Court rejected the company's argument. The Court's reasoning provides (limited) guidance into the way in which Virginia law interprets agreements that reference other agreements.

Under these facts, said the Supreme Court, the management contract merely referred to the bylaws -- it did not incorporate them by reference. Justice Goodwyn writes, "the indicated purpose of the reference to the bylaws ... was to identify documents that [the management company] needed to be aware of and comply with in performing its duties and responsibilities under the Management Agreement."

In other words, the reference to the bylaws was not intended to compel the parties to actually abide by their requirements in carrying out the management agreement. The Supreme Court states that interpreting the two documents this way "harmonizes" the reference to the bylaws with the express terms of the management contract (in particular the ability of the association to terminate for cause upon 30 days notice).

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A shortcoming of the Court's opinion in Condominium Services is its lack of clarity (or a "bright line rule") as to how the bylaws could have been "incorporated by reference" into the management contract, if that had been the parties' intention.

To-wit: if the parties had included the phrase "the condominium bylaws are incorporated by reference" (rather than the phrase "the documents governing this relationship consist of"), would this different language have altered the Court's decision? If so, then doesn't the Court's opinion elevate form over substance?

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Notwithstanding the unanswered questions, Condominium Services clearly stands for the proposition that if Contract A's reference to Contract B is intended to actually incorporate the substantive requirements and provisions of Contract B, then the parties should be doubly clear as to that intention.

Are your documents harmonized?

Is That a Pocket Listing in Your Pocket?

2011-05-03T16:22:00.002-04:00

The New York Times ran an article last week about the increasing phenomenon of "pocket listings." Marc Santora's piece is here.

According to Santora, a growing number of sellers are choosing to not formally list their property for sale, opting instead to work through informal, word-of-mouth channels. Sellers' motivations vary, from a concern that the failure to quickly sell a listed-property could "tarnish" its reputation to an aversion to having to keep the property spic-and-span for showings.

The article alludes to (without fully examining) the attitudes of Realtors towards pocket listings and the potential legal and/or ethical ramifications of the practice, including the historical (one hopes) phenomenon of not listing properties as a means of racial discrimination.

Good Faith Estimates: More Changes to Come?

2011-03-29T06:35:00.025-04:00

On Sunday, the New York Times reported on some of the challenges arising in connection with HUD's revised Good Faith Estimate form. Lynnley Browning's article is here.

The federal government's rationale for mandating use of the new GFE form was to clarify borrowers' closing costs -- and to minimize last-minute changes to those costs.

As Browning reports, the real estate industry is still adjusting to HUD's new requirements. One example:

A growing number of lenders have been furnishing consumers with their own custom “work sheets” as a supplement to — or in a few cases, in lieu of — the required disclosures, according to Brian Sullivan, a spokesman for the federal housing department. They were being used “to weed out window shoppers and borrowers who haven’t provided enough information for the lender to be required to furnish a G.F.E.,” he said. But these work sheets may differ from the Good Faith form, further adding to the confusion.

The kicker comes at the end of Browning's article, when she reports that possible changes are in the works: "The Consumer Financial Protection Bureau has said that it is considering revising the revised G.F.E. form to make all costs clearer to the consumer."

Downtown Charlottesville in the Spring

2011-03-24T06:46:00.000-04:00

It's springtime in Charlottesville, which means that my favorite tree in town -- the cherry tree in Lee Park -- is looking especially beautiful. I took these pictures earlier this week...

Copy Machines and the Law: Deep in the Details

2011-03-23T07:04:00.001-04:00

One criticism of lawyers is that we have a tendency to obsess about details -- and, by doing so, we sometimes obscure the more important "big picture."

In some instances, the critique is accurate (although, to be fair, details matter, and many misunderstandings stem from miscommunication about the details; a good transactional lawyer helps clarify the important details "up-front," so that ambiguity does not lead to disputes later).

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Now comes a report from Ohio (the Cleveland Plain Dealer has the story here) about a lawsuit in which the lawyers dug (very) deep into the detail-weeds.

At issue was whether real estate deeds kept at the County Clerk's Office should be readily available, to the public, at a reasonable cost. During a pre-trial deposition, the question arose of whether the Clerk's Office had a photocopier that enabled members of the public to make copies of deeds.

You'd think the question "Does the office have a photocopier?" doesn't suffer from lack of clarity, but in this case you'd be wrong.

Here's a portion of the deposition transcript, as published by the Plain Dealer:

What follows is a transcript of the deposition of Lawrence Patterson, acting head of information technology for the recorder's division of the county fiscal office. The questioner is attorney David Marburger, who filed the lawsuit on behalf of title companies. Another attorney, Matthew Cavanagh, represents the county and raises objections.

Patterson: When you say "photocopying machine," what do you mean?

Marburger: Let me be -- let me make sure I understand your question. You don't have an understanding of what a photocopying machine is?

Patterson: No. I want to make sure that I answer your question correctly.

Cavanagh: Dave, I'll object to the tone of the question. You make it sound like it's unbelievable to you that he wouldn't know what the definition of a photocopy machine is.

Marburger: I didn't ask him to define it. I asked him if he had any.

Patterson: When you say "photocopying machine," what do you mean?

Marburger: Let me be clear. The term "photocopying machine" is so ambiguous that you can't picture in your mind what a photocopying machine is in an office setting?

Patterson: I just want to make sure I answer your question correctly.

Marburger: Well, we'll find out. If you can say yes or no, I can do follow-ups, but it seems -- if you really don't know in an office setting what a photocopying machine is, I'd like the Ohio Supreme Court to hear you say so.

Patterson: I just want to make sure I answer your question correctly.

Cavanagh: It's not a fair question. A photocopy machine can be a machine that uses photostatic technology, that uses xerographic technology, that uses scanning technology.

...

Marburger: Not in my judgment. Do you have photocopying machines at the Recorder's office? If you don't know what that means in an office setting, please tell the court you don't know what it means in an office setting to have a photocopying machine.

Patterson: I would like to answer your question to the best of my ability.

Marburger: I'm asking you to answer that.

Patterson: So if you could explain to me what you mean by --

Marburger: I'm not going to do that because I want you -- I want to establish on the record that you really don't know what it is. I want to establish that. Now, do you know what it is or do you not know what it is? Do you understand what that term means in common parlance or not?

Patterson: Common parlance?

Marburger: Common language.

Patterson: I'm sorry. I didn't know what that meant. I understand that there are photocopying machines, and there are different types of them just like --

Marburger: Are there any in the Recorder's office?

Patterson: -- there are different cars. Some of them run under gas power, some of them under electric power, and I'm asking if you could help me out by explaining what you mean by "photocopying machines."
Marburger: That's a great point.

Patterson: -- instead of trying to make me feel stupid.

Marburger: If you feel stupid, it's not because I'm making you feel that way.

The Supreme Court of Virginia and Rights of First Refusal: Fairfax v. Riekse

2011-03-16T07:07:00.001-04:00

Many a real estate lawyer's day has taken a turn to the interesting when a title examination reveals a right of first refusal (or "ROFR" in electronic shorthand) in the chain of title.

Although rights of first refusal can (and do) vary in their particulars, the basic idea is that a person or entity obtains the right to purchase property before it can be transferred to a third party. The ROFR is often recorded in the County Clerk's Office, which puts potential purchasers on constructive notice of its existence.

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In its recent opinion in Fairfax Redevelopment & Housing Authority v. Riekse (March 4, 2011), the Supreme Court of Virginia examined the particular issue of whether a right of first refusal is enforceable by specific performance, against the original ROFR-grantor, when the property has changed hands not by sale but by foreclosure. You can read Justice Mims's opinion in Riekse, here.

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When the Fairfax Redevelopment & Housing Authority conveyed property to a married couple in 1989, the deed of conveyance included a 30-year right of first refusal to repurchase the property if the couple died or "determined to sell the land."

The property was subsequently transferred to a new owner by foreclosing trustees, and the Housing Authority argued that its ROFR should still be enforceable against the original owners, since it was a covenant running with the land. The new third party owner, not surprisingly, objected to the Housing Authority's position.

In its decision, the Supreme Court held that the Housing Authority could not obtain specific performance against the original owners, because the original owners no longer owned the property. However, the Court did leave open the possibility -- which had been suggested by the Fairfax trial court -- that the Housing Authority could bring an action of ejectment against the current owner.

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The result in Riekse strikes this observer as fair to the current owner. That said, the Housing Authority may have a valid complaint that "constructive notice" (via the recorded chain of title) is not worth much unless the rights granted to prior owners can be enforced in court. For that reason, it will be intersting to see whether the Housing Authority pursues (and utlimately prevails on) a claim for ejectment.

MERS in the News: Is the Agard Decision a Harbinger or an Outlier?

2011-03-08T07:20:00.040-05:00

During his presentation about foreclosures at last week's Advanced Real Estate Seminar, Ron Wiley discussed In re: Agard, a February 10 decision by the U.S. Bankruptcy Court for the Eastern District of New York.

A transcript of Agard is available here.

The Bankruptcy Court in Agard held that the Mortgage Electronic Registration System (MERS) did not have the authority to assign a borrower's mortgage document to a trust which held a large number of mortgage-backed securities. And the kicker is this: since MERS could not assign its interest in the mortgage, the mortgage-servicer lacked legal standing to foreclose against the borrower's property.

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The potential ramifications of Agard, if its reasoning were to be widely adopted by courts in other jurisdictions, are huge. That's because MERS is listed as the owner of record (or "nominee," in its terminology) on approximately 50% of the outstanding mortgages in the United States.

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However, as Ron Wiley pointed out in his presentation, Agard may be an outlier. Other courts have disagreed with the New York court's reasoning in Agard and concluded that MERS does have the authority to assign its interest in mortgages. Yesterday, Moody's Investor Service predicted that there's only a "slim" chance of a significant number of other courts agreeing with the Agard holding (see the HousingWire report here).

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Regardless of how the courts analyze the technical question of MERS's status in foreclosure proceedings, the company appears likely to continue to receive widespread media attention, such as a Times article on Saturday (MERS? It May Have Swallowed Your Loan (here)).

The Advanced Real Estate Law Seminar: Education and Collegiality in Williamsburg

2011-03-06T08:57:00.016-05:00

The annual Advanced Real Estate Seminar was held this past Friday and Saturday at the Kingsmill in Williamsburg. It was an excellent event.

I especially enjoyed the broad assortment of topics (including ethics, easements, water law, and the latest developments in foreclosures).

Kudos to the Real Property Section of the Virginia State Bar, the folks at Virginia CLE, Larry McElwain, and the other individuals involved in organizing the seminar.

Highlights of the weekend included:

During his presentation about foreclosures, Ron Wiley facilitating an interesting discussion about who, in Virginia, does have the legal standing (and who should have the legal standing) to demand to see the originals of the promssory note and security intrument (and the assignments (and assignments, and assignments, and assignments) thereof).
William Amhrein's historical overview of water law in Virginia, and the sometimes ambiguous overlap of statutes and case law in determining the extent of a riparian owner's rights to the water and the land beneath it.
Gus Bauman's animated summary of Justice Scalia's concurring opinion in last year's Supreme Court decision in Stop the Beach Renourishment v. Florida. Try as he might, Scalia couldn't get either Breyer or Kennedy to rise to the bait of his pointed critiques on the issue of judicial takings!
At Friday night's scrumptious dinner: talking with Barbara Goshorn and learning about her work on the invaluable Virginia Forms books. I loved hearing Barbara talk about how she came to the project and how it has evolved through the years.

And it always feels good to be on the banks of the James River...

Real Estate Law in the News: E-Mail, Binding Contracts, and Naldi v. Grunberg

2011-03-01T07:24:00.005-05:00

In New York, trial and intermediate courts have recently held that e-mail correspondence can satisfy the Statute of Frauds requirement that real estate transactions be in writing in order to be enforceable.

The New York Times has a story summarizing the decision, in Naldi v. Grunberg, here.

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In Naldi, the New York trial court and intermediate appellate court agreed that a real estate contract can be both offered and accepted by e-mail. Now, the case is pending review by New York's Court of Appeals (the state's highest court).

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While the Supreme Court of Virginia has not explicitly addressed the question of whether e-mail satisfies the Statute of Frauds in the real estate context, Virginia has adopted the Uniform Electronic Transactions Act, on which the lower New York courts relied in reaching their decision.

The applicable statute in Virginia is Code §59.1-485 ("Legal recognition of electronic records, electronic signatures, and electronic contracts"), which provides as follows:

(a) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form (emphasis added).

(b) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.

(c) If a law requires a record to be in writing, an electronic record satisfies the law.

(d) If a law requires a signature, or provides for certain consequences in the absence of a signature, an electronic signature satisfies the law.

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In the absence of clear guidance from Virginia courts, the New York ruling is a reminder that parties negotiating a real estate transaction by e-mail would be wise to include disclaimer language, in order to head-off an argument that an enforceable contract has been agreed-upon.

For instance, an e-mail could state as follows: "This e-mail shall not be deemed an offer or an acceptance of a contract. No offer or acceptance shall be binding until documents are executed by hand-written signature."

A Cogent Argument Against the Billable Hour

2011-02-15T07:06:00.003-05:00

Jay Shepherd, an employment lawyer in Boston, writes a very good blog (The Client Revolution, here) that focuses on the attorney/client relationship.

In Shepherd's words, his blog is "dedicated to helping clients get value from their law firms."

In a recent post (here), Shepherd forcefully argues that there are only two types of law firm fees: time-based pricing and solution-based pricing.

Shepherd says that the endless articles and seminars about "alternative fee arrangements" needlessly blur the fundamental reality that attorneys can really only charge (1) by the hour or (2) by the "solution":

Time-based pricing is what nearly every law firm does, where the price of the legal services depends on the time spent doing the work and the rate of the "timekeeper."

(In truth, I'm being generous here, because it's not really "pricing" at all. Pricing is when you tell the client what something will cost them before they buy it; time-based law firms don't do that at all.)

Under the time-based-pricing model, invented in 1919, every activity is worth the same amount on a minute-by-minute (or really, six-minute-by-six-minute) basis, regardless of how important the task is. With few exceptions, every client is charged the same per hour, regardless of their differing needs. The only measurement of value is the amount of sand that has dropped in the hourglass.

Solution-based pricing is when a law firm sets a price based on the value of the solution to the client. It's that simple. I'm not saying it's easy, because it's not. It takes a lot of thought and preparation and understanding and empathy and experience to figure out how much this particular client values this particular solution at this particular moment. But that's OK because we're professional knowledge workers, not pieceworkers in a pin factory.

Shepherd's post is one of the best summaries I've come across of why lawyers -- and more importantly, their clients -- would be well-served by an accelerated transition to "solution-based pricing."

Real Estate Law in the News: How Do You Measure "Square Feet"?

2011-02-12T08:18:00.004-05:00

Yesterday's New York Times has the fascinating tale of real estate litigation that could turn -- literally -- on the (measuring) tape.

Christine Haughney reports (here) that Rishi Bhandari discovered, prior to closing, a discrepancy between the actual square footage of the "living area" in his new apartment and the square footage that had been disclosed by the apartment's seller. In his suit against the seller, Bhandari alleges that he is entitled to a purchase price reduction that is proportionate to the "missing" square feet.

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Disputes about square footage are not unusual, in part because there is no standardized system for measuring the size of a home. What is unusual, though, is for such a dispute to go to trial, since most parties opt to settle such disputes out-of-court.

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Bhandari's case highlights one reason that each party to a real estate transaction is wise to involve a Realtor in the process: a Realtor can provide the insight and guidance of an experienced professional on questions which can (or should) affect the purchase price -- and which may not be readily apparent to the untrained eye.

Virginia General Assembly: Land Preservation Credits

2011-02-11T09:54:00.025-05:00

Earlier this week, Todd Hochrein of Virginia Conservation Credit Exchange (their website is here) sent out the following excellent summary of the status of pending legislation related to conservation easement donations and Land Preservation Credits:

Crossover was yesterday. Here is my impression of the current legislative proposals affecting the land preservation tax credits:
HB1445 – Imposes limit of $10MM in credits per year to any taxpayer for donations recorded in Calendar Year 2012 and beyond. Passed finance sub-committee 5-0. Seems to have support. Update: This was incorporated into HB1820, but then gutted – there is no longer a per taxpayer limit.

HB1820 – Has 3 important factors: (1) It takes any credits from prior years that have been disallowed or invalidated and rolls them into the current year cap (2) It allows the TAX Dept to commission a second appraisal for “good cause” on any applications requesting > $1MM in credits. If the second appraisal is more than 15% different, then the easement value is changed (post-recording). (3) It allows credits to sold post-mortem through an estate. If this bill could be de-coupled, I think there would be full support for items 1 and 3. Item 2 will create a level of uncertainty on the tax benefits received. Furthermore, Item 2 is problematic since it could adjust the value after the donation has been recorded (timing issue). Passed finance sub-committee 5-0. Update: Item 1 is still the same. Item 2 threshold was increased to $2.5MM. item 3 was removed (IRS complications). Passed House in block vote.

SB979 – Lowers the DCR review threshold to $500k in credits from $1MM in credits. I don’t think this is an issue that needs to be changed. No vote yet. Update: This has been gutted.

SB1087 – This is interesting – it requires brokers or other transfer agents to be licensed if transferring credits to non-individual taxpayers. It requires licensed agents to use standards established by the tax department to review proposals for transferring credits. Fees, penalties and levies may be imposed for unclear reasons. This is the stuff that gives gov’t a bad name. No vote yet. Update: This has been incorporated into SB1232, but effectively gutted.

SB1088 – Provides a tax refund to easement donors for 90% of the face value of credits, up to $100,000 face value. Remaining 10% is placed in a PDR grant fund. This would accelerate the cost of the program to the state (and remove lots of credits from the market), but provide quick liquidity to easement donors. It is written so that you would have to request the refund prior to selling any credits. No vote yet. Update: This bill has been tabled indefinitely.

SB1232 – Deeds Bill - Basically the senate version of 1820. Update: The bill has been simplified. Says the tax commissioner can notify the donor that a second appraisal is warranted within 30 days of the application. No $ threshold or any other changes.

Virginia General Assembly: Senator Petersen's Mortgage Assignment Bill (SB 838) is Defeated

2011-02-10T07:01:00.006-05:00

There was disappointing news from Richmond yesterday: the Senate rejected Chap Petersen's bill to require the recordation of mortgage assignments. The vote was 26 to 14 against the bill.

Senator Petersen's bill was an attempt to bring some order to the legal framework that governs mortgage transfers -- a framework which, according to critics, is insufficiently regulated and may have contributed to the housing industry crisis.

SB 838 would have provided for public notice (by virtue of requiring the recordation of a "certificate of assignment" in the County Clerk's Office) as a prerequisite for a bank or other lending entity to transfer a promissory note to another institution.

Petersen's bill makes good sense, for the same reason that requiring recordation of the original deed of trust makes sense: public notice provisions facilitate order and structure by enabling all interested parties to search the public records and determine the status of a real estate-backed loan.

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According to the Virginia Lawyers Weekly (here), Petersen did not mince words in arguing for the bill: “This is a bill whose time has come. The mortgage-backed security industry damned near bankrupted this country.”

The defeated bill would have amended the current statute as follows:

§ 55-66.01. Duty of assignee of debt secured by real estate to record certificate of assignment; form.

Effective July 1, 2011, whenever a debt or other obligation, or partial interest therein, that is secured by a deed of trust, mortgage or vendor's lien on real estate is assigned, the assignor or the assignee of the debt or other obligation shall (rather than "may") cause a certificate of assignment to be recorded in the clerk's office of the circuit court where such deed of trust, mortgage or vendor's lien is recorded ...

Albemarle County's Circuit Court: The Clerk's Office and its helpful staff are on the second floor -- but you won't find any mandatory certificates of assignment, there or elsewhere.

Estate Planning for the Digital Ever-After

2011-01-10T17:06:00.005-05:00

We talk to our estate planning clients about the various types of property that constitute an individual's "estate," in particular (1) tangible personal property, (2) intangible personal property, and (3) real property.

Default rules govern the disposition of each type of property, and it is important for a client to consider particular ramifications and issues that may affect a house differently than a car, or a bank account differently than a copyright.

ALAS!! Word arrives in this weekend's New York Times Magazine that we have been failing to discuss an entire, increasingly important type of property: the various digital records that people are accumulating more and more. Rob Walker's fascinating article, "Cyberspace When You're Dead," is here.

Walker frames the issue as follows:

It’s now taken for granted that the things we do online are reflections of who we are or announcements of who we wish to be. So what happens to this version of you that you’ve built with bits? Who will have access to which parts of it, and for how long?

Not many people have given serious thought to these questions. Maybe that’s partly because what we do online still feels somehow novel and ephemeral, although it really shouldn’t anymore. Or maybe it’s because pondering mortality is simply a downer. (Only about a third of Americans even have a will.) By and large, the major companies that enable our Web-articulated selves have vague policies about the fate of our digital afterlives, or no policies at all. Estate law has only begun to consider the topic...

Nevertheless: people die. For most of us, the fate of tweets and status updates and the like may seem trivial (who cares — I’ll be dead!). But increasingly we’re not leaving a record of life by culling and stowing away physical journals or shoeboxes of letters and photographs for heirs or the future. Instead, we are, collectively, busy producing fresh masses of life-affirming digital stuff: five billion images and counting on Flickr; hundreds of thousands of YouTube videos uploaded every day; oceans of content from 20 million bloggers and 500 million Facebook members; two billion tweets a month ...

We pile up digital possessions and expressions, and we tend to leave them piled up, like virtual hoarders. At some point, these hoards will intersect with the banal inevitability of human mortality. One estimate pegs the number of U.S. Facebook users who die annually at something like 375,000. Academics have begun to explore the subject (how does this change the way we remember and grieve?), social-media consultants have begun to talk about it (what are the legal implications?) and entrepreneurs are trying to build whole new businesses around digital-afterlife management (is there a profit opportunity here?).

It turns out that some tech-savvy individuals are starting to designate a "digital executor" in their estate planning documents to tend to all those photos and tweets; meanwhile, start-up companies (including the cleverly-named Legacy Locker, The Digital Beyond, and Entrustet) are sprouting up and offering to help in the digital estate planning process.

Meanwhile, disputes about post-mortem digital property rights are finding their way into the courts. For instance, Walker cites in his article to cases of deceased soldiers whose parents are demanding that technology companies, such as Yahoo and Google, turn over internet passwords to the estate's executor (or administrator); in theory, since those passwords were the property of the deceased individual, they should be transferred to the executor.

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There is no doubt that -- at least for this group of estate planning attorneys -- the Times' article has raised an issue about which we have not previously given much thought... but that is likely to become more significant with each passing blog post!!

As Congress Re-Convenes, an Administration Switch on End-of-Life Planning

2011-01-05T15:19:00.004-05:00

As the new Congress is sworn in, end-of-life planning is back on the front pages of America's newspapers (see, for example, today's Washington Post article here).

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Late in 2010, the Obama Administration announced the implementation of a new federal regulation providing that doctors' discussions with Medicare patients about their end-of-life options would be eligible for Medicare reimbursement.

The Administration's announcement provoked an outcry from opponents who said that the regulation would have an effect similar to the infamous "death panels" that were withdrawn from Obama's health care legislation prior to passage; the opponents complained that the Administration was trying to accomplish by regulatory fiat what it could not accomplish through Congressional approval.

Today's big development is that the Administration has reversed course and removed the short-lived regulation from the Federal registry. The Post reports that the Administration is blaming an insufficient notice-period, but it seems clear that the political backlash also played a role.

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Leave aside the question of whether you think the federal government should be "involved" (via Medicare reimbursement) with end-of-life planning and other matters of political ideology: whether you are a Fox News conservative or an MSNBC liberal, discussing your care options -- and taking the step of clarifying your wishes to your medical and legal advisors and to the individuals to whom you want to entrust decision-making authority -- is an important step for everyone to take.

Greetings, Speaker Boehner...

Fare thee well, Speaker Pelosi...

WOW, that is a large gavel!

Jeffrey Toobin's Powerful Account of Nicholas Marsh

2011-01-02T16:05:00.006-05:00

Jeffrey Toobin writes some of the best long-form legal pieces of any contemporary journalist, and he has a powerful article in the current issue of The New Yorker (Casualties of Justice, here (a subscription is required to read the entire article)).

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Toobin's article is about Nicholas Marsh, a 37-year old federal prosecutor who committed suicide this past September. Marsh was a member of the Justice Department's Public Integrity Section who was involved in the corruption investigation that ultimately led to the conviction of then-Alaska Senator Ted Stevens.

Nicholas Marsh

The Stevens conviction was tossed out by federal judge Emmet Sullivan because of alleged prosecutorial misconduct by Marsh and his Public Integrity colleagues, and a criminal investigation of the prosecution team remains ongoing.

Toobin is convinced that Marsh and his colleagues did not play fair in pursuing Stevens (in particular, potential exculpatory evidence was withheld in violation of discovery requirements), but he is also quite critical of the government's failure to reach closure in the subsequent investigation of the prosecutors. In particular, Toobin states that Marsh's inability to cope with the "extraordinary delay" (Toobin's phrase) in the third party investigation led by Henry F. Shuelke III likely contributed to Marsh's decision to end his life.

Although the article is well-written and provides a glimpse into the inner workings of a high-level federal prosecution, this is one of the most depressing legal stories I have ever read. Utlimately, one comes away from Toobin's piece feeling sad for everyone involved.

Ted Stevens

Merry Christmas!!!

2010-12-21T20:11:00.001-05:00

It's that time of year...

the happiest day of the year at Richmond & Fishburne...

the day when Pat Durrer brings in her legendarily delicious Christmas cookies!!!

Thank you Pat! They were as delicious as ever.

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Wishing you and yours a safe and joyous holiday (including special wishes this year from Elvis!)...

Is The Roberts Court More "Pro-Business" Than Its Predecessors?

2010-12-19T15:39:00.013-05:00

There's an interesting piece in today's New York Times (by Adam Liptak, here) about whether the Supreme Court under Chief Justice John Roberts is more "pro-business" than its predecessors.

Liptak cites to a new study by professors at Northwestern and the University of Chicago that argues that the Roberts Court is more likely to favor business interests:

The Roberts Court, which has completed five terms, ruled for business interests 61 percent of the time, compared with 46 percent in the last five years of the court led by Chief Justice William H. Rehnquist, who died in 2005, and 42 percent by all courts since 1953.

Liptak states that a reason for the trend may be the advocacy efforts of the Chamber of Commerce's "National Chamber Litigation Center," which files amici briefs in an increasing number of cases. He also says that retiring solicitors general are more likely to move from their government positions to lead the commercial litigation units at major firms.

Surprisingly, Liptak does not tackle the seemingly central question of whether the judicial philosophies of Justices' Roberts, Alito, et als. are more oriented towards "free market outcomes" than previous conservative Justices including Rehnquist and Sandra Day O'Connor.

Liptak provides a helpful list of cases before the Court during the current term that could affect businesses small and large:

A challenge to an Arizona law that imposes penalties on companies that hire illegal workers (according to Liptak, the challenge was actually brought by the US Chamber of Commerce)
A sex-discrimination class action against Wal-Mart
A suit by eight states against power companies, centered on the regulations that govern carbon emissions
A suit to allow companies to use standard-form contracts that prevent consumers from bringing class action suits

A Change in the Estate Tax is Imminent (Perhaps!)

2010-12-12T15:59:00.000-05:00

Big news for estate planners and their clients this past week: President Obama's omnibus tax compromise includes a per person exemption from federal estate tax of $5 million (rather than $1 million, as scheduled under President Bush's sunset provision) and a top rate of 35% (rather than the scheduled 55%).

As proposed, the new exemption and rate apply only for 2011 and 2012 (with a reversion to the $1 million / 55% framework in 2013). This means ongoing long-term uncertainty for planners and clients. Also, media outlets are reporting that the Democrats in the House of Representatives are very angry with the President's willingness to agree to a higher exemption and lower rate, so the coming week will include crucial (and potentially fascinating!) negotiations between the House and Senate.

There's no shortage of coverge of the recent legislative developments:

The State of the Estate Tax (Wall Street Journal, December 11, here):

"A deal by President Barack Obama and top Republicans, which seems likely to pass Congress before Christmas, has a double dose of good news for the wealthy: a low 35% top rate on estate taxes and a high $5 million exemption per individual—plus new ways to plan around the tax. The gist: Estate planning is about to get easier for taxpayers—with more benefits for heirs. "It seems estate planners got everything they wanted and nothing they didn't," says estate expert Ronald Aucutt of McGuireWoods LLP. Washington insiders say the terms aren't likely to change much from here, although the road to passage in the House may be bumpy."

Estate Tax Could Be More Generous (Washington Post, December 10, here):

"Relatively few tax filers would be affected by the estate tax under the proposed deal - just 3,600, according to the Tax Policy Center. They would pay a total of $11.3 billion in estate taxes. Under the estate tax preferred by many Democrats, 6,500 estates would be taxed, raising $18 billion for the government. A who's who of progressive organizations, including key labor unions, blitzed lawmakers with letters this week arguing against the more generous estate tax."

Estate Tax Cutoff Draws Fire (New York Times, December 10, here):

"Republicans who have long opposed the estate tax, deriding it as the “death tax” and complaining it amounted to double taxation, have said little publicly about it in recent days. Privately, however, many acknowledge that it is a far better deal than they ever expected. The White House has made no effort to defend the estate tax provision or suggest that there is any economic merit to the proposal. Aides said that Mr. Obama had agreed to it only reluctantly to secure the overall deal."

Adverse Possession in the News: A Phenomenon of the Great Recession?

2010-11-10T17:32:00.005-05:00

Monday's New York Times has a fascinating article about individuals in Florida who are using (or claiming the right to use) the law of adverse possession to assert ownership over abandoned homes.

The article ("At Legal Fringe, Empty Houses Go To The Needy"), by Catharine Skipp, is here.

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Skipp reports that the Florida entrepreneurs (or criminals, depending on one's perspective, since Skipp states that some of these individuals are facing prosecution for trespassing) will generally proceed as follows:

Locate properties that are abandoned and falling into disrepair;
Write to the owners-of-record to notify them that they intend to claim ownership;
Rpair and maintain the house and yard;
Pay the real estate taxes; and
Lease the property to third-party tenants.

The possessors'/trespassers' legal theory is that if they occupy and maintain the property for the period of time required under the Florida law of adverse possession, then title to the property will ultimately be vested in them.

Skipp's article provides a nice summary of the legal and practical arguments for and against the practice.

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In Virginia, acquiring title by adverse possession requites a purported owner to satisfy the following six requirements (our prior post with additional details is here):

An individual claiming ownership by adverse possession must prove actual possession of the disputed property.
An individual claiming ownership by adverse possession must prove visible (or, to put it more colorfully, notorious) possession of the disputed property.
An individual claiming ownership by adverse possession must prove exclusive possession of the disputed property.
An individual claiming ownership by adverse possession must prove hostile possession of the disputed property.
An individual claiming ownership by adverse possession must prove that he or she asserted a "claim of right" to use of the property.
An individual claiming ownership by adverse possession must prove that he or she satisfied all of the other requirements continuously for a period of at least 15 years.

The Supreme Court of Virginia and the Merger Doctrine: Abi-Najm v. Concord Condominium

2010-11-07T09:53:00.011-05:00

In Abi-Najm v. Concord Condominium, LLC (September 16, 2010), the Supreme Court of Virginia tackled the doctrine of merger. In particular, the Court built-on a line of prior decisions that limit the extent to which warranties, covenants, and other agreements are merged (and thereby extinguished) in the deed of conveyance.

You can read Justice Lemons's opinion in Abi-Najm, here.

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The doctrine of merger holds that the provisions in an "instrument of higher dignity" supersede conflicting provisions in a prior instrument. Merger most often applies to scenarios in which a real estate deed contains provisions that are arguably in-conflict with the language of the underlying purchase contract.

Ever since the Supreme Court's decision in Woodson v. Smith (1920), the extent to which merger applies to a given deed (and the antecedent contract) has actually been relatively circumscribed.

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In Woodson, the Court held that "distinct and unperformed stipulations in a contract for sale will not be merged in or discharged by deed where that instrument is silent upon the subject of such stipulations" (emphasis added). In subsequent decisions, a key issue in determining whether merger applies has been whether the deed explicitly addresses the warranties/covenants/etc. which are alleged to have been merged.

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For instance, in Beck v. Smith (2000), a property-seller argued that the seller's warranty that utility easements would not materially affect the purchaser's use of the property was not merged into the deed -- even though the purchase contract contained the language that the seller's warranties "SHALL BE DEEMED MERGED INTO THE DEED AT SETTLEMENT AND SHALL NOT SURVIVE SETTLEMENT." From the Court's perspective, the deed failed to accomplish the merger because it only contained standard language about transfer of title to the property; language that the warranties were extinguished was not included in the deed. The seller had the proper language in its contract but not in its deed, and therefore the purchaser was entitled to the benefit of the warranty.

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In Abi-Najm, the purchasers of certain condominiums in Arlington County had included, in their purchase contracts, a provision for certain high-end hardwood flooring. When they discovered after settlement that the condos actually contained run-of-the-mill hardwood floors, they sued the seller for (among other things) breach of contract.

The Circuit Court granted the seller/defendant's demurrer on the breach of contract claim, holding that the provision for alternative hardwood flooring had been merged into the deed that the purchasers accepted at closing. In other words, by proceeding to closing without objection, the purchasers had waived their opportunity to object to the floor.

The Supreme Court of Virginia reversed, holding that merger does not apply because the issue of the flooring was not addressed in the deed; therefore, the language of the contract still applied:

"The flooring agreement is a distinct agreement, does not affect the validity or nature of the title conveyed, is not addressed in the deed, and does not conflict with the terms of the deed [citing Beck v. Smith]. Accordingly, we hold that the representations [about the flooring] are collateral to the transfer of title, they are not merged into the deed, and therefore they survive delivery of the deed."

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Abi-Najm should serve as a cautionary tale to both purchasers and sellers: do not assume that contract provisions will be merged into the deed, even if the contract specifically provides for a merger. Instead, ensure that the deed itself addresses the critical provisions and is clear as to whether or not they survive the transfer of title.

Now that is some sweet hardwood flooring!

Real Estate Law in the News: A Foreclosure Moratorium Amid Paperwork Problems

2010-09-23T17:15:00.020-04:00

The Washington Post has had a fascinating series of articles this week (here, here and here) about administrative shortcuts that are throwing the status of thousands of foreclosure proceedings into legal limbo.

The Post's articles focus on Ally Financial, the nation's fourth largest mortgage lender. Although you may not have heard of Ally, you've probably heard of its predecessor -- GMAC, which was originally established for the purpose of making automobile loans but which over time became a major player in the mortgage industry as well.

(In a mind-bending twist to a mind-bending tale, Ally is owned by you -- the US taxpayer -- courtesy of the financial industry bailout. Although there are private-sector stockholders as well, the majority stake in Ally is owned by the US Treasury.)

According to the Post's Ariana Cha, Ally's foreclosure document processing team was responsible for swearing out affidavits -- to be used later in judicial foreclosure proceedings -- which attested to the accuracy of lenders' allegations that homeowners had defaulted on their loans.

Alas, Ally's team was so overloaded with cases (one individual was hand-signing 10,000 documents a month!) that they stopped verifying the documents or signing the affidavits in the presence of a notary public, as required by law. The fallout is that Ally has ordered a moratorium on evictions in 23 states until it sorts out whether its shortcuts were merely "technical" in nature -- or could provide legal grounds for challenging the foreclosures.

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Ally's shortcuts raise the question of how important "dotting all the i's and crossing all the t's" is to achieving a truly just result in a dispute.

According to the Post, judges involved in foreclosure proceedings have expressed mixed opinions about the degree to which technical failures, like Ally's, could/should affect the legal result:

Arthur M. Schack, a Kings County Supreme Court judge in Brooklyn, said it's clear those involved in the foreclosure process are taking the legal requirements too lightly. They forget, he said, that there's a bigger picture to think about: People are losing their homes. Schack has become infamous among some of the nation's most powerful banks for rejecting foreclosure motions that come across his courtroom - about half of the hundreds of files that he has reviewed over nearly three years. He said Ally's document-processing violations shouldn't be dismissed lightly. "There are procedures to be followed in order to get a foreclosure, and you either get it right or not. Either you're pregnant or not. There's no in-between," he said.

But Judge Isaac Garb, a retired trial judge in Bucks County, Pa., who has heard many foreclosure cases and still oversees mortgage mediations, had a different view. He said that because foreclosure files contain standard language, document processors such as Stephan do not need to review every page. He added that the signers are verifying only that the information in the file is "true and correct to the best of his/her knowledge, information and belief." Often, homeowners are using minor problems in the documents simply to stall the foreclosure process as long as possible, Garb said.

The difference in opinion between Judge Schack and Judge Garb is striking. Judge Schack, emphasizing how much is at stake for the homeowners, is critical of Ally's willingness to take shortcuts. Judge Garb, on the other hand, seems willing to forgive administrative shortcuts so long as "justice" is ultimately served.

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The judges' differing perspectives raise the question of how courts and society should respond to the ongoing crisis of all those outstanding "I.O.U.'s" that can't (or won't) be repaid.

Estate Planning in the Popular Press: Software for Writing a Will

2010-09-14T17:09:00.003-04:00

Last week's New York Times has an interesting article ("In Using Software to Write a Will, a Lawyer Is Still Helpful," here) about estate planning software.

The Times's Tara Siegel Bernard tested four different software programs that enable a person to "write" his or her own will by answering a series of questions and inputting financial and personal data.

Bernard found that the software programs, which included "WillMaker," "Legacy Writer" and "BuildaWill," produced a surprisingly varied set of documents. She says she needed to talk with a good-old-fashioned human being to actually understand some of the legalese -- and to appreciate the decisions she was being asked to make about disposing of her property.

Bernard also learned through her will-writing exercise that there are particular requirements for executing a valid will. She reports that certain programs are better than others in explaining these requirements.

The conclusion of Bernard's article captures the essence of why talking to an attorney makes sense when it comes time to prepare your estate plan:

Of course, humans are also fallible, and some lawyers said they had seen poorly written wills drafted by professionals. But a computer program can’t ask you about your family relationships or tease out complex dynamics, like your daughter’s rocky marriage. Still, the biggest risk might be summed up by Phillip J. Kenny, a lawyer in McLean, Va., who said that one client came back to him after looking at a software package and said, “I don’t know what I don’t know.”

Holographic Wills in Virginia: Schilling v. Schilling

2010-09-10T15:47:00.002-04:00

Wills (or, more broadly, testamentary instruments) are special: they are governed by a different set of rules than other legal documents. This reality was highlighted in Schilling v. Schilling (June 10, 2010), in which the Supreme Court of Virginia (a) examined the General Assembly's amended statute regarding holographic wills and (b) reiterated the rule that a will "speaks" (or takes legal effect) on the date of the testator's death, not the date of the will's execution. Most legal documents, on the other hand, become effective upon the date of their execution by the party or parties.

You can read Justice Mims's opinion in Schilling, here.

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First, some background on holographic wills:

Generally, Virginia law requires that for a will to be valid, it must be signed in the presence of two competent witnesses, who also must sign the will in the presence of the testator (the requirement of witnesses is in addition to other requirements including those governing the age and competence of the testator).

There is an exception for a will that is entirely in the testator's own handwriting. Such a will is known as a holographic will and is valid even without any witnesses (though there is a requirement that two witnesses who are familiar with the testator's handwriting testify that the alleged will is authentic).

Until 2007, the Virginia statute governing holographic wills, Code of Virginia Section 64.1-49 (you can read the text here), mandated that a holographic will be "wholly" in the testator's handwriting. If the testator's relative or friend had added certain words or sentences to the document, those "extra" words or sentences were not deemed to be part of the will -- they were excluded by Section 64.1-49.

In 2007, however, Section 64.1-49.1 (the text is here) modified the rule slightly, so that additions by others are now permitted (and read as part of the will), if a proponent of the will can establish by clear and convincing evidence that the testator intended the document - including the extra words - to constitute his or her will.

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The question arose in Schilling of how to interpret a holographic will that was signed prior to the 2007 law but not probated (because the testator did not die) until after enactment of the 2007 law.

In particular, Ms. Schilling's son had added certain important words to the will that was otherwise entirely in her handwriting (and which left her entire estate to the same son!), and certain of her other heirs argued that those portions of the will should be invalidated, since it was signed prior to the 2007 law.

The Supreme Court of Virginia reversed the Circuit Court for the City of Hampton (which had granted the protesting heirs' demurrer), holding that Ms. Schilling's will did not take legal effect until her death on September 23, 2008. This is the rule that makes wills special: most documents are governed by the laws in effect at the time they are signed.

The import of the Court's ruling is that Ms. Schilling's son will now have the opportunity to prove, in Hampton Circuit Court, that his mother intended his additions to the document to be part of her will.

"Luke, I said 'Show me your holographic will --- not your hologram of Leia!'"

Andy McDonel, the Gadsden Flag, and the Authority (or not) of Homeowners Associations

2010-09-03T14:08:00.045-04:00

In a January post (here), we wrote about the significant influence that homeowners' associations sometimes play in deciding what a person can and cannot do on his property. We said that clients are as likely to object one way as the other to the rules established and enforced by their homeowner's association:

It is not uncommon to hear clients complain about their association being either too intrusive or not intrusive enough in terms of regulating their -- and their neighbors' -- rights. It can certainly be a difficult line to draw, as neighbors try to be good neighbors but also express their own preferences for what is or is not reasonable.

Now, word arises from the West of a fascinating homeowners' association struggle with a property owner who objects to the association's rule against flying certain kinds of flags.

Marc Lacey has the story in Monday's New York Times, here.

According to Lacey, homeowner Andy McDonel received a notice from his association - the Avalon Village Community Association - demanding that he stop flying the Gadsden Flag on his property.

FLAG HISTORY INTERLUDE: In case you haven't recently studied the historical flags of the United States, the Gadsden Flag (which includes an image of a coiled snake and the phrase "Don't Tread On Me") was used by certain Continental naval forces during the American Revolution. It was named for Colonel Christopher Gadsden from South Carolina. More recently, it has taken on a renewed political importance as a symbol, for some people, of the Tea Party Movement. It association with the Tea Party is, no doubt, the reason that McDonel's story has received national attention. For property law junkies, it's just a good debate-starter!

According to Lacey, the Avalon Village Community Association has taken the position that it is within its rights to prohibit its members from flying the Gadsden Flag because that flag was not included by the Arizona legislature in a law that listed several flags that all property owners have the explicit right to display.

Avalon's argument is based on the idea that the Arizona statute, by including a particular list of flags, necessarily excludes all flags which are not listed; in other words, a homeowners association logically has the right to prohibit its members from flying the flags that are not listed in the Arizona statute, including the Gadsden Flag. This interpretation is rooted in the legal theory of "expressio unius est exclusio alterius" (now there's some Latin to spice up your Friday!), which means that items excluded from a statute were intentionally excluded by the legislators who voted for the law.

Interestingly, the Code of Virginia includes a provision similar to Arizona's, stating that property owners have the right to display the American flag, which cannot be infringed by a homeowners association. The difference is that Virginia's statutory provision is even more limited than Arizona's, as it references only "the flag of the United States."

"No association shall prohibit any lot owner from displaying ... the flag of the United States whenever such display is in compliance with ... the United States Code." (Code of Virginia Section 55-513.1)

The Avalon Village Community Association's lawyer has made the point that Andy McDonel should have been aware of the prohibition against flying the Gadsden Flag, particularly since he was formerly an officer of the association. On this point we can certainly agree: potential owners would be wise to spend a couple extra hours reviewing their association's bylaws and other governing documents, to be sure that they agree and are comfortable with the neighborhood's rules. And if you are an adamant flag-displayer -- be it the Gadsden, the Parrothead, the Soviet, or the Cavalier Football Flag! -- be sure you have the right to fly your flag before signing your purchase contract.

Tenancy by the Entirety and the Debts of an Estate: The Virginia Supreme Court's Decision in Dolby v. Dolby

2010-08-27T15:52:00.002-04:00

In Dolby v. Dolby (June 10, 2010), the Supreme Court of Virginia concludes that the sole debt of a deceased husband is the obligation of his estate, notwithstanding that the debt was secured by real estate owned by the husband and his wife as tenants by the entirety.

You can link to the full-text of Justice Millette's opinion in Dolby here.

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In 2002, Mr. Dolby acquired title to a house in Fairfax County, with a promissory note in his name alone secured by a deed of trust on the property. In 2006, Mr. Dolby married Mrs. Dolby and transferred the Fairfax real estate to himself and his new wife as tenants by the entirety.

Mr. Dolby did not, however, have Mrs. Dolby assume the existing promissory note (or sign an amended one). In other words, he remained at all times the sole obligor on the loan, even though the real estate was now owned by both spouses as tenants by the entirety.

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Mr. Dolby's 2006 last will and testament included the following relevant provision:

I hereby expressly empower my Executor to pay such debts and expenses ... My Executor shall not be required to pay prior to maturity any debt secured by mortgage, lien or pledge of real or personal property owned by me at my death, and such property shall pass subject to such mortgage, lien or property.

The question addressed by the Supreme Court was whether, in light of the provision in Mr. Dolby's will, the debt secured by the Fairfax real estate (a) was a liability of his estate (and must be paid now) or (b) passed to Mrs. Dolby along with the property (with the possibility of delaying payment until maturity).

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Several of Mr. Dolby's children from a prior marriage argued that Mr. Dolby had (effectively, if not in writing) "assigned" the debt secured by the Fairfax real estate and, further, that his will evidenced an intent that the debt not be paid immediately on his death but instead pass with the property.

The Fairfax Circuit Court ruled for the children.

The Supreme Court overruled and said that Mr. Dolby's estate was liable for payment of the promissory note.

The Court reasoned, first, that Mrs. Dolby had never assumed the existing promissory note (or signed a new one) and that it was therefore a valid debt of Mr. Dolby's estate. Second, since Mr. Dolby's estate did not own the property secured by the note (it having passed to Mrs. Dolby by operation of law, by virtue of the TBE ownership), the provision in his will which provided for the Executor not paying off debts until their maturity was inapplicable.

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It is unclear based on the stated facts of the case whether Mr. Dolby would have intended the result reached by the Supreme Court: namely, that Mrs. Dolby now owned the real estate free of the prior debt.

The practice lesson, however, is clear: if a re-marrying spouse intends for a sole debt to become a debt of both spouses, then the loan document must be accordingly amended.

George Steinbrenner and the Federal Estate Tax

2010-07-18T13:29:00.002-04:00

When he died in early July, George Steinbrenner quickly leapfrogged Walter Shorenstein, Glenn Bell, and Dennis Hopper as the most famous beneficiary of the 2010 lapse (unless a new law is made retroactive) in the federal estate tax.

[More precisely, the beneficiaries of Steinbrenner's estate became the most famous beneficiaries of the current law.]

Steinbrenner's estate, which is variously estimated between a half-billion and 1.1 billion dollars, will pass free of the federal estate tax, although the large portion of his personal wealth stemming from his stock in the Yankees will not receive a step-up in basis (as it would have in prior years) upon transfer to his heirs.

Here's a sampling of some of the commentary and analysis of Steinbrenner and the estate tax:

Ruth Marcus at the Washington Post - George Steinbrenner and Estate Tax Insanity (here)
Wall Street Journal Editorial Page - How George Steinbrenner Saved His Family a $600 Million Tax Bill (here)
Dave Carpenter of the Associated Press - George Steinbrenner's Death Saves Heirs Money (here)
Kevin McCormally at Kiplingers - Did 'The Boss' Trump The Ben? (here)

It will be interesting to see whether the increasing number of billionaire beneficiaries of the lapse in the estate tax might prompt Congress to action during the remainder of 2010.

Scams

2010-07-07T18:11:00.003-04:00

There's an extremely depressing article in today's Washington Post about the increase in financial scams against elderly people. The report, by Dan Morse, is here.

Experts interviewed by Morse predict that the number of scams will continue to increase as America's population ages during the next several decades.

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Although the most famous recent scams have been internet-based (including the ubiquitous requests to provide your bank account information so that untold millions can be wired to you right away), there are also a number of "door-to-door" operators who take advantage of older people with offers to do non-existent repairs -- so long as payment is up-front.

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One step with which an estate planning attorney can assist in the effort to avoid becoming a victim of financial fraud is a discussion about the process of selecting an agent or agents under a durable power of attorney. As Morse points out in his article, choosing an agent who does not have one's best interest at heart can be a costly mistake.

The Difference Between a License and an Easement: Station #2, LLC v. Lynch

2010-06-29T17:42:00.007-04:00

In Station #2, LLC v. Michael Lynch, et al. (June 10, 2010), the Supreme Court of Virginia distinguishes between the applicability of the Statute of Frauds to easements and its non-applicability to licenses.

You can link to the full-text of Justice Mims's opinion in Station #2 (which also addresses claims of fraudulent inducement to contract and statutory conspiracy) here.

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The plaintiff in Station #2 -- the tenant of the first floor of a multi-use building in Norfolk -- alleged that its upstairs neighbors breached an oral agreement permitting Station #2 to enter the building's upper floor for the purpose of installing soundproofing material (yes, reading this decision immediately put us in mind of the long-running Charlottesville controversy regarding the sound emanating from certain establishments located in Belmont).

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The upstairs neighbors countered that the breach of contract claim was barred by the Statute of Frauds -- namely, Code of Virginia §11-2(6), which provides that "any contract for the sale of real estate, or for the lease thereof for more than a year" must be in writing in order to be enforceable.

Rejecting this contention (and reversing the Circuit Court), the Supreme Court determined that permission to install the soundproofing constituted a license ("permission merely to enter the real property of another without ... continuing use") rather than an easement (which "concerns the continuing use of real property") and therefore was outside the ambit of the Statute of Frauds. As such, the oral grant of the license was enforceable.

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The practice lesson here: always consider the specific nature of the property right you are getting or giving when applying a Statute of Frauds analysis (then, if you are the fretful type, put the agreement in writing either way!)

Turn down that infernal noise!!!

Katy Butler's Powerful Reminder of the Importance of Talking (Beforehand) with Your Decision-Makers

2010-06-28T18:28:00.006-04:00

In the June 14 edition of the New York Times Magazine, Katy Butler writes a powerful account of her family's struggle with end-of-life issues.

Butler's article, What Broke my Father's Heart, is here.

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Butler's article can be read as a searing indictment of certain characteristics of the fee-for-service model of medical care that predominates in the US (and which, according to critics, the recently enacted federal legislation will do little to change).

The article can also be read as one person's (specifically, one daughter's) examination of an ethical dilemma we'd all hope never to confront - and her attempt to grapple with questions that are often left undiscussed precisely because they are so hard to talk about.

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From an estate planning perspective, the article serves as a reminder of the importance of putting one's end-of-life preferences into a legally enforceable document.

And -- as Butler discovered -- even aside from end-of-life issues, it is important to sign a document that delegates medical decision-making authority to someone (or to someones) and then to communicate with the individual(s) to be sure that he or she understands your wishes.

Albemarle County's New Website

2010-06-23T09:02:00.003-04:00

Albemarle County has done a great job on their website overhaul. The new site, like the old one, is at www.albemarle.org (here).

The site presents a ton of information -- policy summaries, document templates, the Code, the Comp Plan, calendars, the GIS-web, etc. -- in a layout that is both understandable and "easy on the eyes."

As the general internet trend seems to be towards websites that are overly cluttered - sites that try to do too much and thereby become difficult to navigate - the County's new design finds the right balance between comprehensiveness and accessibility. As someone who uses the site nearly as often as I check the Post and ESPN, this is good news!

Catherine Rampell on Law Schools and Grade Inflation

2010-06-22T18:16:00.003-04:00

Catherine Rampell has a fascinating article in yesterday's New York Times (In Law Schools, Grades Go Up, Just Like That, here) about several law schools that have categorically raised all of their students' grades.

According to Rampell, this phenomenon of miraculously rising grades stems largely from disgruntled alums.

In particular, as the job market for attorneys has tightened dramatically during the recession, graduates from law schools with tougher grading standards are complaining to their schools' career services offices that they suffer, in the competition for jobs, from employers' perception that their grades are lower than new attorneys from other (less stringently-graded) schools.

Here's an excerpt:

In the last two years, at least 10 law schools have deliberately changed their grading systems to make them more lenient. These include law schools like New York University and Georgetown, as well as Golden Gate University and Tulane University, which just announced the change this month. Some recruiters at law firms keep track of these changes and consider them when interviewing, and some do not.

Law schools seem to view higher grades as one way to rescue their students from the tough economic climate — and perhaps more to the point, to protect their own reputations and rankings. Once able to practically guarantee gainful employment to thousands of students every year, the schools are now fielding complaints from more and more unemployed graduates, frequently drowning in student debt.

Is Rampell's explanation -- that the schools are motivated largely by protecting their reputations and rankings -- overly cynical? Or are the schools, like their graduates, simply doing all they can to survive in the increasingly competitive reality of 2010?

Real Estate Law and Summer Reading: Jane Smiley's "Good Faith"

2010-06-21T20:57:00.003-04:00

If you are looking for a (relatively) light, fun summer read with a dose of real estate law (!), check out Jane Smiley's Good Faith.

Smiley won the Pulitzer Prize for an earlier novel A Thousand Acres (which also revolves around real estate).

She wrote Good Faith in 2003, but the story is set in the early 1980's -- and Smiley captures the heady optimism and go-go capitalism of that time brilliantly.

The protagonist is Joe Stratford, a Realtor who joins with local big-shot businessman Gordon Baldwin and mysterious ex- IRS agent Marcus Burns in a plan to purchase an estate property from a couple in their 80's, mortgage it to the hilt, develop it into high-end lots -- and make millions on the re-sales.

Smiley's story has tons of fun details about real estate contract negotiations and the "ins and outs" of working with builders, zoning officials, and bank officers. The dialogue is witty and the first half of the book is particularly well-plotted (about halfway through, the story became a bit far-fetched for my taste).

In the acknowledgments at the back of the novel, Smiley says that several real estate lawyer friends assisted her with the details as she wrote the book -- and it shows. She vividly captures the various relationships involved in "the deal," and she creates characters who are believable (for the most part!) and a story that keeps you guessing.

Reader Beware: Good Faith is not appropriate for younger readers or those who prefer their fictional relationships be portayed in "PG" rather than "R" -- there are a couple of romantic subplots which contain rather graphic details.

Senior Law Day is Tuesday, May 4 at City Council Chambers!

2010-04-30T16:24:00.005-04:00

Next Tuesday, May 4, the Charlottesville Albemarle Bar Association is presenting a fantastic Senior Citizens Law Day Seminar. The seminar is free and open to the public, and we'd love to see you there.

Rick chaired the committee that organized the seminar, and he anticipates that it will be a valuable opportunity for area seniors to learn about a range of legal issues that directly affect and impact them, from social security benefits to medical decision-making and "aging in place."

The program runs from 9:30 AM to 1:30 PM in Charlottesville City Council Chambers. Speakers will include the Legal Aid Justice Center's Clair Curry, Hospice of the Piedmont's Dr. Timothy Short, Ned Sledge from the local Social Security Adminstration office, and JABA's Gordon Walker.

A free lunch is included for registered participants, and it's not too late to register by contacting Kate Callender at 817-5222.

The Daily Progress has additional information about the seminar in their write-up here.

We'd love to see you at the event on Tuesday!

Elena Kagan for the Supreme Court?

2010-04-28T07:47:00.006-04:00

Yesterday Tom Goldstein posted his prediction that President Obama will nominate Elena Kagan to fill retiring Supreme Court Justice John Paul Stevens's seat on the Court. Goldstein's analysis is at The New Republic, here.

We took notice of the post because Goldstein, the founder of SCOTUS blog (here), frequently provides some of the most enlightening analyses of the Court's jurisprudence -- and its dynamics and personnel.

Goldstein argues that the Administration's three primary candidates remain Kagan, Diane Wood, and Merrick Garland, who he says are being accurately "located" on the liberal-to-conservative spectrum as follows: Wood (most liberal), then Kagan, then Garland (most conservative).

Then, Goldstein explains why Kagan is the President's most likely choice from both jurisprudential and political perspectives. Among other factors, Goldstein cites to Kagan's greater experience off-the-bench: "she held two significant positions in the White House—deputy counsel and deputy domestic policy advisor—that directly involved her in significant policy- and legislation-related decisions" (emphasis added). Of course, Kagan's off-the-bench experience is limited compared to "real world politician" candidates Janet Napolitano and Jennifer Granholm.

Anticipating the major candidates' possible effect on the Court's interpersonal dynamics - and in particular their ability to persuade Anthony Kennedy's critical swing vote - Goldstein writes:

On the ability of the three to persuade a conservative member of the Court such as Justice Kennedy, all have significant strengths as well. Merrick Garland almost certainly has the greatest level of personal respect among the existing Justices, and as a consequence I believe (as I said yesterday) that he would have the most immediate impact on the Court. But part of that relates to his own centrism, and there is little reason to believe that he would emerge as the intellectual leader of the left. Diane Wood is not only personally charming but has gone toe to toe with Judges Easterbrook and Posner and persuaded them on significant issues. Elena Kagan has significant demonstrated success in working with conservatives at Harvard Law School, which is an exceptionally challenging environment, and has parallels to the relationships at the Court. But she has never been a judge, and would as a consequence presumably take longer than the others to adapt to the new role.

My thought is that Goldstein may be underestimating the potential conservative opposition to a Kagan nomination. At any rate, the announcement is expected by the end of May, and for those not interested in Dancing with the Stars re-runs during the hot summer days, the Senate hearings should provide some interesting moments regardless of the nominee.

Arlen Specter Argues for Cameras at the Supreme Court

2010-04-22T16:38:00.003-04:00

According to Tony Mauro at The National Law Journal (here), Senator Arlen Specter continues to argue that Supreme Court oral arguments should be televised.

The issue of facilitating the public's ability to see and hear what happens inside the Supreme Court has percolated for a number of years.

Advocates say that televising oral arguments would be consistent with the (generally) open nature of the American judiciary, while opponents (not least among them, several current Justices who adamantly oppose cameras) argue that they would demean and possibily delegitimize the process.

Certainly the trend is toward increased access for the public: voice-recordings of an increasing number of oral arguments are now made available, with the Justices' tones and sentence structure analyzed everywhere from NPR to Fox News. It will be interesting to see how long the Court will be able to buck the societal trend of everything -- and everyone -- being on television.

Here's a portion of Specter's argument:

"I believe Congress has the authority, should it choose to do so, to direct the Supreme Court to permit its proceedings to be televised ... The Supreme Court, in a series of cases, has said the public has a right to know what is going on inside the courtroom ... well, in an electronic era, where the public gets so much of its information via television or via radio, there ought to be that access."

The Supreme Court of Virginia on Prescriptive Easements: Hafner v. Hansen

2010-04-22T15:30:00.009-04:00

In Hafner v. Hansen (April 15, 2010, Record No. 09-0972), the Supreme Court of Virginia addressed whether or not a property owner whose property is served by an underground sewer line has a prescriptive easement for the line across his neighbor's property. You can read Justice Keenan's decision in Hafner here.

Prescriptive easement cases often include similar analyses as adverse possession cases, about which we have previously written here and here.

In order to establish the existence of a prescriptive easement, an owner must prove that his use of another person's property satisfies each of the following tests:

The use must have been adverse and under a claim of right.

The use must have been exclusive.

The use must have been continuous for a period of at least 20 years.

The owner of the servient estate (the property over which the easement is alleged to run) must have had knowledge of it and acquiesced in its use.

In Hafner, the critical issue was whether Hafner's predecessor-in-interest had knowledge that a sewer line lay 11 feet underground his property and served an apartment building on Hansen's property. Hafner claimed that the prior owners most certainly did not know about the sewer line -- after all, the line was (1) underground and (2) not referenced in the deeds conveying the property.

The Arlington Circuit Court disagreed, holding that the prior owners should have known about the sewer line based on plumbing records (this raises the question of how many of us have reviewed our neighbors' plumbing records!).

The Supreme Court reversed, stating that the existence of the plumbing records were insufficient to establish knowledge of the previous owners and that -- in any event -- the maximum period that such knowledge could have existed based on the evidence was 17 (rather than the required 20) years.

The analysis in Haffner suppports a proposition that we often repeat to clients who believe that they may have a prescriptive easement over the property of another: establishing such an easement in court may not be impossible, but it certainly is not easy.

The People of Richmond & Fishburne: Debbie Hall

2010-04-15T13:58:00.013-04:00

Richmond & Fishburne is truly fortunate to have Debbie Hall as part of our team.

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Debbie, who joined Richmond & Fishburne in 1989, is our Trusts and Estates Administrator and our Office Manager.

In her role as T&E Administrator, Debbie works closely with Rick, Wendall and Marcelle in assisting clients in administering trusts and estates. She has developed excellent relationships with local Clerks, Commissioners, accountants, and bank and brokerage officers in order to facilitate the many important details involved in handling T&E matters.

In her role as Office Manager, Debbie keeps the operation at 214 East High Street humming smoothly. She's proven especially adept at addressing the computer problems that ocassionally arise in our increasingly digitalized practice -- and, with the help of the good folks at OFM, keeping the server running at maximum-efficiency!

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Debbie was born in Charleston, West Virginia. Her family moved to Fluvanna County in the 1970's, where she met and later married her high school sweetheart, Tim.

Prior to joining Richmond & Fishburne, Debbie worked at State Farm and then for ten years at Bank of America on the Downtown Mall. Throughout her career she has remained interested in continuing education, and she completed courses in trust administration at Campbell University and obtained a Business and Management Certificate from Piedmont Virginia Community College.

Debbie's priorities in her life are church and family. She is an active member of Effort Church in Palmyra and the proud mother of Jennifer (an RN in Martha Jefferson Hospital's Emergency Room) and Samantha (who is obtaining her degree in Veterinary Medicine in St. Kitts). She also loves a quiet walk in the woods near her home in Fluvanna.

Debbie Hall's warm, smiling presence is a bright light at Richmond & Fishburne, and her work ethic is an inspiration to us all.

Attorney General Cuccinelli's Challenge of the Patient Protection and Affordable Care Act

2010-04-06T16:53:00.012-04:00

There have been few debates as contentious as the one surrounding President Obama's health care legislation.

Now that the Patient Protection and Affordable Care Act has been enacted, the discussion has shifted from the political arena to the legal arena.

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Virginia immediately assumed a prominent place in the evolving legal wrangling, as Attorney General Ken Cuccinelli filed suit alleging that the Act's "individual mandate" (the requirement that almost all individuals purchase health insurance or else face a penalty in the form of an additional federal tax) is unconstitutional.

You can read the Attorney General's suit -- styled as a Complaint for Declaratory and Injunctive Relief, and filed in the federal court for the Eastern District of Virginia -- here.

Thirteen other state attorneys general filed a separate lawsuit in Florida challenging the constitutionality of other aspects of the health care legislation (their Complaint is here).

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Legal commentators have quickly penned a variety of analyses of the Virginia and consolidated lawsuits. A key question is whether the constitutional objections will carry water.

One of the best summaries of the legal issues involved, which helpfully includes arguments on both sides of the issue, is at the New York Times's Room for Debate blog, here. A sampling of the perspectives:

Jack Boykin argues that the law is a constitutional exercise of Congress's taxing power:

"The Constitution gives Congress the power to tax and spend money for the general welfare. This tax promotes the general welfare because it makes health care more widely available and affordable. Under existing law, therefore, the tax is clearly constitutional ... Many important and popular government programs are based Congress’s ability to give incentives through taxation and redistribute tax revenues for public purposes. To strike down the individual mandate the Supreme Court would have to undermine many years of precedents justifying these programs that stretch back to the New Deal (and in the case of the rules for direct taxes, to the very founding of the country)."

Randy Barnett begs to differ, and he argues that the affirmative requirement to purchase health insurance (or face a penalty in the form of a tax) is qualitatively different than any prior legislation:

"Congress has never before mandated that a citizen enter into an economic transaction with a private company, so there can be no judicial precedent for such a law. Telling someone how they must do something is one thing; commanding that they must do something is entirely different."

James Blumstein is more circumspect in predicting the legal outcome than either Boykin or Barnett. Blumstein emphasizes the multiple layers of constitutional analysis that the courts will need to consider when addressing the individual mandate:

"The states’ constitutional challenges to health reform are serious and should not be treated dismissively. But given the expansion of federal power since 1937, one should review the states’ claims with some healthy skepticism. For the states to succeed in having the law declared unconstitutional, the Supreme Court would have to modify significantly existing analysis and doctrine surrounding the Commerce Clause. It is fair, however, to ask whether the required purchase of insurance is a regulation of commerce. Previous cases have all involved negative prohibitions on private conduct, such as restrictions on growing wheat for home consumption and on growing and using marijuana for medical purposes. Is the affirmative mandate substantially different from a negative prohibition? In the abstract, perhaps, but Congress can enact legislation that is necessary and proper for implementing permissible legislation."

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As these cases wind their way through the system, it will be interesting to see how both liberal and conservative jurists frame their analyses: we've heard from the professors and commentators, now let's hear from the judges and justices.

The Supreme Court of Virginia and the Statute of Frauds: Vaughan v. Catholic Diocese of Richmond

2010-03-08T17:17:00.010-05:00

Last June we wrote about Virginia's Statute of Frauds as applied to real estate transactions. Our post (here) examined the Supreme Court of Virginia's decision in Moorman v. Blackstock, in which the Court held that draft, unsigned versions of a purchase contract did not satisfy the Statute of Frauds requirement of a "memorandum or note ... in writing."

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In its recent opinion in C. Porter Vaughan, Inc. v. The Catholic Diocese of Richmond (Record No. 090110, February 25, 2010), the Supreme Court re-visited the Statute of Frauds. On this set of facts, the Court concluded that the Statute did not act as a bar to a potential claim.

Justice Lemons wrote the Court's opinion, the full text of which you can read here. The facts of Vaughan are nothing-less-than fascinating.

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C. Porter Vaughn, a real estate brokerage, alleged that it was owed a real estate commission of $242,400 for services performed by its agent Marie Beitz on behalf of the Catholic Diocese.

Vaughan alleged (1) that it had marketed on the Diocese's behalf certain buildings located in Richmond's Fan District and (2) that Vaughan and the Diocese entered into an oral agreement for Vaughan to act as the Diocese's broker and to be paid a commission in the event of a sale.

Aha!, said the Diocese: Code of Virginia § 11-2(7) (not to be confused with §11-2(6), the provision examined in Moorman v. Blackstock) states that the Statute of Frauds applies to "any agreement or contract for services to be performed in the sale of real estate." Since the agreement between Vaughan and the Diocese was an oral agreement, argued the Diocese, it was not enforceable in Virginia's courts.

The trial court upheld the Diocese's demurrer on the grounds that the Statute of Frauds indeed bars Vaughan's claim for the real estate commission.

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The Supreme Court, however, reversed the demurrer and remanded the case to the trial court for consideration on its merits. The Court's reasoning was as follows:

Vaughan had been able to produce several written documents bearing the signature of representatives of the Diocese. Those documents included a ratified purchase contract for a sale of the property which eventually fell through -- but which contained language stating that Marie Beitz would be paid a 4% commission, by the Diocese, from the sale proceeds.

In a well-crafted and thoughtfully reasoned opinion, Justice Lemons found that the prior contract -- together with the other written documents -- served to remove the bar of the Statute of Frauds.

Addressing the Diocese's argument that the prior contract should not be used in connection with a claim on a later transaction, Justice Lemons reasoned as follows:

When the bar [of the Statute of Frauds] is removed, it is the oral contract which is subject to enforcement, not the memorandum. Because the memorandum serves only to remove a bar to the enforcement of the oral contract, the validity of the oral contract may be established by other evidence.

The "other evidence" included the other written documents that tended to establish the existence of a brokerage agreement.

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A particularly interesting aspect of the the opinion in Vaughan is its emphasis on justice (as opposed to technicalities) as the primary objective of the law -- and its implication that Beitz/Vaughan may have had a duly-earned fee wrongfully withheld by the Diocese:

The object of the statute of frauds is to prevent frauds and perjuries, and not to perpetrate them, so that the statute is not enforced when to do so would cause a fraud and a wrong to be perpetrated.

Virginia General Assembly: Updates on the Rob Bell Budget Amendment and Other Items

2010-03-01T16:50:00.011-05:00

The 2010 session of the General Assembly adjourns on March 13.

SO, if you want to watch your legislators in action, it's time to turn off the computer and get moving towards Richmond -- you've only got a couple of weeks left!

Here is the latest on some of the legislation that we've been tracking:

The bill to abolish adverse possession (our post is here) has been continued to the 2011 session and referred to the Virginia Bar Association for comment.

In the House of Delegates, a subcommittee recommended tabling the bill to prohibit homeowners' associations from completely banning the use of clotheslines (our post is here). This means that the odds of the bill passing are very low.

Delegate Rob Bell's proposal for adjusting the composite index to reflect payments under the revenue-sharing agreement from Albemarle to Charlottesville was included in the budget bill approved by the House of Delegates. Bell's amendment was included in the "Unified Amendment," the full text of which you can read here. The Daily Progress reported on February 25 (here) that County and City leaders have announced an April 24 meeting to discuss funding issues and "future collaborative efforts."

After passing the Senate, the controversial bill to raise court fees (our post is here) has been referred to the House's Courts of Justice Committee.

Just today, the House Finance Committee has tabled Senator Hanger's bill to expand the reach of the sales tax to online transactions (our post is here).

Virginia General Assembly: House Bill 778 and Legislators' Voting Records

2010-02-24T16:39:00.020-05:00

The Virginia Legislative Information System website (here), which is funded by the Commonwealth, provides a wealth of information about both (1) the content and (2) the status of pending and approved legislation.

From the perspective of this commentator, the LIS site holds up quite well (in terms of user-friendliness) when compared with other states' legislative databases and with "database websites" more generally.

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LIS does not provide, however, an easy mechanism for reviewing all of an individual legislator's votes. Instead, assembling a list of a legislator's votes requires downloading the roll-call votes for each bill -- in other words, doing the legwork oneself.

Two freshmen members of the House of Delegates -- Republican Jim LeMunyon (from Chantilly) and Democrat Mark Keam (from Vienna) -- have proposed House Bill 778 to mandate that the state make the legislative database searchable by individual legislator.

It is difficult to object to HB 778's goal of increasing the transparency of the legislative process.

That said, Richmond Sunlight's excellent site (here) currently enables users to generate a spreadsheet -- with the push of one button -- that lists all of a legislator's votes for that session (or prior years' sessions), in addition to each bill's title, committee assignment, and status. In fact, Waldo Jaquith tells me that one of the reasons he created Richmond Sunlight was to offer the individual-legislator-functionality that's lacking at the LIS site.

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The text of HB 778 reads in part:

The Legislative Support Commission ... shall publish on the legislative electronic information system a record, organized by member name (emphasis added) of the recorded committee, subcommittee, and floor votes of each member of the House of Delegates and the Senate on all legislation acted upon by each house. Electronic access to this information shall be made available to all agencies of the Commonwealth, its political subdivisions, and the public.

Delegates LeMunyon and Keam articulated the rationale for improving access to individual legislators' voting histories in a Washington Post editorial yesterday, here.

HB 778 passed the House of Delegates by a vote of 86-13 last week, and it's now been referred to the Senate's Rules Committee.

Justice Scalia Responds to a Letter Writer and Concludes There's No Right to Secede

2010-02-21T18:23:00.013-05:00

Eric Turkewitz's Personal Injury Law Blog (here) has been listed on the ABA's "Blawg 100" each of the past two years.

Last week, the blog included a fascinating story about Justice Scalia (Turkewitz's post is here).

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There's a long-simmering debate among legal scholars about whether states retain, under the US Constitution, the right to secede from the union.

Remember this map from your American history class?

The national media periodically examine the secession debate. Most recently, Texas Governor Rick Perry asserted last April that Texas has the right to secede (you can reminisce about Perry's claim here).

More recently, certain Tea Party members have argued that secession remains a viable, legal option.

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On Turkewitz's blog, he explains that his brother (Dan) wrote a comedic screenplay about Maine's decision to secede from the United States and join Canada.

Dan wanted some insight into the legality of secession, and he aimed big by writing a letter to the Supreme Court Justices asking for their opinions.

Amazingly, Justice Scalia wrote back, and his response was not just a generic "thanks for your correspondence."

Instead, Scalia actually addressed the secession question:

I am afraid I cannot be of much help with your problem, principally because I cannot imagine that such a question could ever reach the Supreme Court. To begin with, the answer is clear. If there was any constitutional issue resolved by the Civil War, it is that there is no right to secede. (Hence, in the Pledge of Allegiance, "one Nation, indivisible.") Secondly, I find it difficult to envision who the parties to this lawsuit might be. Is the State suing the United States for a declaratory judgment? But the United States cannot be sued without its consent, and it has not consented to this sort of suit.I am sure that poetic license can overcome all that -- but you do not need legal advice for that. Good luck with your screenplay.

It is interesting that Scalia argues the secession question was settled by the Civil War's result, rather than being settled in a pre- or post-War text.

His letter to Dan Turkewitz surely will not be the last word on the controversy, but here is a bravo to Dan for his effort at particpatory democracy -- and to Justice Scalia for taking the time to respond!!

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You can read our previous posts about the always-fascinating former Cavalier (Justice Scalia taught at UVa's School of Law in the 1970's) here and here.

Virginia General Assembly: The "Amazon Tax" on Online Sales Passes the Senate

2010-02-17T13:25:00.020-05:00

When you purchase a book at amazon.com, a DVD at overstock.com, or a comfy new dog bed at petco.com, should you be required to pay sales tax on the transaction? Should the online retailer be required to charge for and collect the sales tax?

In Virginia (as in most states), online retailers have long-benefited from an exception to the requirement that bricks-and-mortar stores must register with the state and remit sales tax collected on all transactions.

Some states -- including New York and North Carolina -- have enacted laws that extend the reach of their sales tax to online transactions. New York's law was protested vigorously by certain online outlets but ultimately was upheld by the state's courts.

The legal rationale for excluding online retailers from the sales tax is that they have no physical presence in the state, and the policy rationale for excluding them is that customers are not used to conducting business online and that they need to be incentivized as they become accustomed to doing so.

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Now, there is legislation pending in the General Assembly -- sponsored by a Republican, to the surprise of some -- that would require any online retailer which does more than $10,000 in Virginia business per year to collect and remit sales tax. If enacted, expanding the sales tax is esimated to generate $18 million per year, initially, for the state.

The legislation -- Senate Bill 660, the full text of which you can read here -- was introduced by Senator Emmet Hanger, Jr. and would amend Code of Virginia Section 58.1-612.

Senator Hanger represents the 24th Senate District, which is primarily in the Shenandoah Valley but also includes a portion of Albemarle.

Currently, the relevant portion of Section 58.1-612 reads as follows:

C. A dealer ["dealer" is the statutory term for those individuals and entities from whom sales tax is collectible] shall be deemed to have sufficient activity within the Commonwealth to require registration under § 58.1-613 if he:

1. Maintains or has within this Commonwealth, directly or through an agent or subsidiary, an office, warehouse, or place of business of any nature;

2. Solicits business in this Commonwealth by employees, independent contractors, agents, or other representatives.

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Senator Hanger's bill would change the phrase "solicits business in this Commonwealth" to "solicits or transacts business in this Commonwealth," and it would add the following presumption:

A dealer is presumed to be soliciting or transacting business by an independent contractor, agent, or other representative if the dealer enters into an agreement with a resident of the Commonwealth under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet site or otherwise, to the dealer if the cumulative gross receipts from sales by the dealer to purchasers in the Commonwealth who are referred to the dealer by all residents with this type of agreement with the dealer are in excess of $10,000 during the preceding four quarterly periods.
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Yesterday, SB 660 passed the Senate by a vote of 28-12, with a mix of bipartisan support and bipartisan opposition.

Its supporters say that the change in law would (1) level the playing field (between traditional and online retailers) and (2) provide revenue that the state desperately needs, but its detractors argue that it would make Virginia less business-friendly than the majority of states which still do not tax online transactions.

Now the bill heads to the House of Delegates, where it is expected to face greater opposition. You can track its progress on the Legislative Information System's website, here.

Virginia General Assembly: A Bill to Raise Fees in General District and Circuit Courts

2010-02-12T16:09:00.008-05:00

This week, Senate Bill 329 was voted out of the Finance Committee, 13-2. It now awaits action by the full Senate.

SB 329 revises the fees charged in connection with filing actions in Virginia's general district and circuit courts. You can read the full text of the proposed bill at the Legislative Information System's website, here.

The fee increases are significant:

The cost of filing unlawful detainers, warrant in debts, garnishment, and a number of other actions in general district court would rise from $27 to $75.

The cost of filing a claim for less than $1 million in circuit court would rise from $60 to $500 (an increase of 1,200%!).

The cost of filing a claim for more than $1 million in circuit court would rise from $160 to $1,000.

Under the proposed legislation, all of the revenue from the increased general district court fees would be earmarked towards the funding of sheriff's offices, and the revenue from the increased circuit court fees would be earmarked 85% to sheriff's offices and 15% to Commonwealth's attorneys offices.

Sheriff's and Commonwealth's attorneys offices have been hit with significant funding decreases recently (as have Clerk's offices -- their funding is addressed in other proposed legislation), and SB 329 is one proposed remedy to the lack of funding.

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Interstingly, former Democratic gubernatorial candidate Creigh Deeds and current Republican 5th district candidate Robert Hurt both voted against an early draft of SB 329 in the Courts of Justice Committee.

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If SB 329 garners enough support to pass in the Senate and then the House of Delegates, it will then be up to Governor McDonnell to determine whether raising fees to fund the sheriff's and CA's offices is consistent with his January pledge not to raise taxes on Virginians during the recession.

Rosalind Helderman had a good piece in the January 24 edition of The Washington Post (here) that examines the difficulty in drawing a clear (and consistent) line that distinguishes a "fee" from a "tax."

Virginia General Assembly: Rob Bell's Budget Amendment Pits Albemarle Versus Charlottesville

2010-02-09T16:24:00.007-05:00

There's no doubt about which proposal in this year's General Assembly is receiving the most attention in Charlottesville and Albemarle during the snowy winter of 2010: the clear winner is Delegate Rob Bell's budget proposal for tweaking (or -- depending on one's perspective --significantly revising) the state's composite-index education funding formula.

Delegate Bell's proposal would have the effect of transferring $2.6 million in state funding from the City to the County in fiscal 2012.

Rachana Dixit and Brandon Shulleeta have a good summary of the debate surrounding the proposal in last Saturday's Daily Progress, here.

Delegate Bell's position is that that Albemarle County is unfairly losing out on state education funding because the composite index fails to account for the yearly amounts that are transferred from the County to the City under the 1982 revenue sharing agreement. In the most recent year, for instance, Albemarle transferred more than $18 million to the City -- but for purposes of the composite formula, that $18 million was deemed to be available to the County, not the City.

The stakes are high, as both the County and City (along with localities nationwide) are experiencing significant declines in revenue from real estate and transfer taxes and a range of other fees.

For the legislative process buffs out there, Delegate Bell's budget amendment reads as follows:

On Page 79, after line 24, insert:
"11. In recognition of Albemarle County and the City of Charlottesville being in an active annexation and revenue sharing agreement that requires a revenue transfer from Albemarle to Charlottesville, with a maximum transfer amount capped at ten percent of the applicable real estate tax base year for Albemarle, Albemarle shall have an equal percentage amount excluded from the local true property value total amount used in calculating Albemarle's composite index for the 2010-2012 biennium. For the purposes of the composite index updates for the 2010-2012 biennium, Albemarle's true property value shall be reduced by ten percent from $19,007,534,323 to $17,106,780,891. The City of Charlottesville shall have its Standards of Quality Basic Aid payment reduced by an amount equal to the increase provided to Albemarle pursuant to the local composite index adjustment."

The controversial part of Delegate Bell's amendment is the portion highlighted in red, which provides for a decrease in Charlottesville's funding comparable to the increase in Albemarle's.

Delegate David Toscano has offered an alternative proposal that would acknowledge the revenue transfer from Albemarle (thereby decreasing the County's "true property value" and increasing their share of funding from the state) but without "punishing" the City of Charlottesville by reducing its aid payment by an equal amount.

Delegate Bell argues that Delegate Toscano's proposal would be wonderful in an "everybody wins" world but that in the budget-cutting reality of 2010 it does not have any chance of garnering the necessary support in Richmond.

It will be very interesting to see how this issue evolves at both the local and state levels and, in particuar, whether the City and County are able to arrive at a compromise position that both can live with.

Virginia General Assembly: No Thanks to Internet Notices

2010-02-01T17:29:00.012-05:00

Last week, the Virginia General Assembly pushed back against the increasing use of the internet as a mechanism for mass communication.

More specifially, the House of Delegates' Committee on Counties, Cities and Towns rejected a bill (HB 586, the full text of which you can read here) which would have permitted local governments to advertise a range of public matters online and by other "non-traditional" means.

The traditional statutory mechanism for a publication is via a "newspaper of general circulation."

A broad range of matters would have been covered by the change in law, including (1) hearings about real estate tax assessments and licensing taxes, (2) advertisements for public sales of unclaimed property, and (3) notices regarding the proposed adoption of local ordinances.

HB 586 mandated that at least two of the following five alternative mechanisms be used in each case:

A newspaper of general circulation in the locality, including such newspaper's online publication

Any website of the locality
Any public access channel operated by the locality
Any automated voice or text alert systems used by the locality
Posting at the local public library

The bill, which was co-sponsored by Delegate Toscano and which strikes this blogger as recognizing the public's increasing reliance on forms of communication other than just the local paper of record, was voted down in Committee, 8-3.

Virginia General Assembly: Homeowners' Associations and Clotheslines

2010-01-28T17:49:00.011-05:00

As we wrote about in a post last November (here), homeowners' associations often play a significant role in regulating what people can and cannot do with and on their property.

The Code of Virginia includes a number of provisions (though not as many as you might expect) that govern the relative rights of the associations and their members.

In the current General Assembly session, State Senator Linda Puller (Democrat - Fairfax) wants to restrict one aspect of association govenance: Puller is the sponsor of Senate Bill 221, which would prohibit associations from establishing outright bans against the use of "natural drying devices" (in common parlance, clotheslines and the like). Associations would be permitted to establish reasonable restrictions on the use of the devices.

You can read the entire text of SB 221 on the Legislative Information Website, here. It reads, in part:

Effective July 1, 2010, no community association shall prohibit an owner from installing or using a natural drying device on that owner's property. However, a community association may establish reasonable restrictions concerning the size, placement, and manner of placement of such natural drying device.

It is not uncommon to hear clients complain about their association being either too intrusive or not intrusive enough in terms of regulating their -- and their neighbors' -- rights. It can certainly be a difficult line to draw, as neighbors try to be good neighbors but also express their own preferences for what is or is not reasonable.

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It will be interesting to see whether Senator Puller's bill makes it through the House of Delegates; it passed the Senate by a vote of 37-3. Perhaps granting a glimpse into his political philosophy (or just a glimpse into his attitude about natural drying devices?), potential 5th District Congressional candidate Robert Hurt was one of the three Senators to vote against Senator Puller's legislation.

Have you done your laundry today?

Virginia General Assembly: A Bill to Abolish Adverse Possession

2010-01-26T18:15:00.004-05:00

Last February we wrote about the (often fascinating) law of adverse possession — and the Supreme Court of Virginia's decision in Helms v. Manspile — here.

Adverse possession is a common law cause of action, which means that it is rooted in judicial precedent rather than a statute passed by the General Assembly.

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Now comes an update: at the start of this year's General Assembly session, Donald McEachin (Democrat - Henrico) introduced Senate Bill 67, which would abolish the common law cause of action for adverse possession.

SB 67 would add to the Code of Virginia new Section 8.01-218.1, as follows:

No action or defense shall lie or be maintained in the Commonwealth for adverse possession upon which the action or defense arose on or after July 1, 2010.

The bill has been referred to the Senate's Courts of Justice Committee. You can track its progress on the Legislative Information System website, here.

Changing Federal Government Policies Could Soon Change Mortgage Rates

2010-01-25T18:32:00.009-05:00

This morning's Washington Post has a front-page article about the impending drawdown of federal government support for the home mortgage market.

The article, by David Cho, Neil Irwin, and Dina ElBoghdady, is here.

Since the onset of the financial crisis in fall 2008, the federal government has purchased an enormous quantity of mortgage-backed securities: $220 billion by the Treasury Department and $1.25 trillion by the Federal Reserve. The policy stemmed from concern that the lack of private purchasers of the securities would cause skyrocketing mortgage rates and thereby exacerbate the downturn in the housing market.

The policy has had its intended effect, as the average rate for a 30-year fixed-rate mortgage declined from 6 percent in November 2008 to 4.7 percent in November 2009.

Now, though, the federal government has announced that it is likely to end its infusion of cash at the end of March.

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Proponents of the de-funding decision applaud it as a necessary removal of the federal government from private markets, but critics warn that it could stop (or reverse) the recovery in the housing market.

Regardless of one's political philosophy, the practical effect of the change in policy is almost certain to be an increase in mortgage rates (barring, of course, a significant renewal of private sector purchases of mortgage-backed securities).

That being the case, owners who want to refinance are well-advised to begin the process now, as there is likely to be a rush of refinancings as more people learn about the change in policy.

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Meanwhile, the Post's website has a late-day story (here) that existing home-sales fell by 16.7% from November to December -- the largest month-on-month decline in 40 years. On the other side of the ledger, overall sales of existing homes increased by 4.9% from 2008 to 2009.

Conservation Easements in US Tax Court: Simmons v. Commissioner

2010-01-19T17:01:00.000-05:00

Logan Circle in Washington, DC

In Simmons v. Commissioner of Internal Revenue Service, the US Tax Court held (1) that the taxpayer was entitled to the charitable donation deduction for two conservation easement donations but (2) reduced the value of the donations.

Simmons was decided on September 15, 2009, and you can read the full opinion by Judge Goeke here.

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Dorothy Jean Simmons donated historic preservation easements on two properties that she owned in Washington, DC (one in Logan Circle and the other on Vermont Avenue). Such easements are often referred to as "façade easements," because the deed restrictions focus on retaining the existing façade of the building.

Ms. Simmons's appraiser valued the Logan Circle easement donation at $162,500 and the Vermont Avenue donation at $93,000.

The IRS challenged the donations on several grounds:

First, the IRS argued that no charitable purposes described in IRC Section 170(h) were served by the easements, because the deeds permitted the easement donee (the L'Enfant Trust) to consent to future changes to the buildings' façades notwithstanding the deed restrictions.

Second, the IRS argued that the deeds of easement did not satisfy the subordination requirements of the Treasury Regulations (both properties were mortgaged; as we tell our easement-considering clients: if your property is subject to a mortgage/deed of trust, then contact your lender early in the process in order to make them aware of the contemplated easement and to obtain their package of subordination requirements!).

Third, the IRS argued that Ms. Simmons's appraisals were not "qualified appraisals" for purposes of Treasury Regulation 1.170A(13)(c)(3).

Fourth, the IRS argued that Ms. Simmons did not obtain the required "contemporaneous written acknowledgment" from the donee, L'Enfant Trust.

The Tax Court rejected each of the IRS's contentions and, in doing so, essentially followed a "substantial compliance" framework in evaluating the donations (and reporting thereof).

The adoption of a substantial compliance framework distinguishes Simmons from several earlier cases (not surprisingly, the decision is being hailed in the land trust community). The opinion means that clearer guidance awaits a future easement decision by a higher court.

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Taking the above-arguments in order, the Simmons Court reasoned as follows:

With respect to "conservation purposes": the Court stated that Treasury Regulation 1.170A-14(d)(5) expressly permits an easement donation to satisfy the "conservation purposes" test even if future development is allowed, so long as that development is subject to local, state and federal laws and regulations (and Ms. Simmons's deeds provided that future alterations were subject to such laws and regulations). Unfortunately, the Court does not delve into this issue other than to reference the terms of the deed, thus the opinion does not provide a great deal of guidance on "closer calls" that could arise with respect to the conservation purpose requirement in other easements.

With respect to subordination requirements: the Court said that the requirements were met because both easement deeds contained paragraphs with specific references to the mortgages. Interestingly, the Court made this finding notwithstanding the IRS's contention that the deeds did not themselves contain subordination language. Without reviewing the Simmons deeds, it is difficult to know the basis for the IRS's argument (was the word "subordinate" omitted? Did the banks' trustees not sign?) and why the Court found it wanting.

With respect to whether the appraisals were "qualified appraisals": the Court held that they were -- even though they did not, for instance, include a statement that they were prepared for income tax purposes and did not include the dates of the donations. In the discussion of the "qualified appraisal" question, the Court is most clearly adopting a "substantial" (rather than "strict") standard of compliance.

With respect to the "contemporaneous written acknowledgment": the Court held that the deed of easement itself satisfies the acknoweldgment requirement. This is a particularly interesting holding because it rejects the IRS position that prior case law supports a standard of strict compliance with the contemporaneous written acknowledgement requirement.

In the second part of its holding, the Simmons Court reduced the value of the claimed donations -- more on that analysis in a future post.

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The Simmons decision is certain to receive significant attention in light of the IRS's continuing scrutiny of conservation easement donations. Notwithstanding the Court's opinion -- and until additional opinions provide further clarity -- we believe that taxpayers are well-served to assume that the IRS (and the courts) will insist on strict, rather than substantial, compliance with Code and Treasury Regulation requirements.

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Though most of our conservation easement work focuses on open space easements in Albemarle and surrounding counties, Richmond & Fishburne has also represented clients in connection with several historic preservation easements in central Virginia.

Real Estate and Income Taxes in the Popular Press: The Principal Residence Exclusion

2010-01-18T15:22:00.009-05:00

In last Saturday's Washington Post, Benny Kass emphasizes the importance of understanding the details in the exclusion from federal income tax of proceeds from the sale of a principal residence.

You can link to Kass's article here.

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In addition to the mortage interest deduction, a significant tax advantage of owning rather than renting a home (and a cause for much critique by policy scholars on both sides of the political spectrum) is the ability to exclude from income tax the proceeds from the sale of one's home -- in an amount up to $250,000 for a single filer and $500,000 for a married couple.

In order for the exclusion to apply, the house must have been your "principal residence" for at least 2 of the 5 years immediately preceding the sale.

Alas, as Kass explains in his piece, there are two ambiguities in the phrase "principal residence": (1) whether the house is indeed a "residence" and, even if so, (2) whether it was your "principal" residence.

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As Kass points out, there is no guidance on the "principal residence" question within the Internal Revenue Code itself.

There is, however, a wealth of guidance in the form of IRS memoranda, letter rulings, Tax Court cases, etc. Not surprisingly, the determination depends on all the facts and circumstances (there's that phrase again!) in a particular taxpayer's case.

If you have questions about your own (and your home's) facts and circumstances, a good starting point is IRS Publication Number 523 ("Selling Your Home"; you can link to the February 2009 version here).

In light of the importance of knowing whether the exclusion applies, a home-seller with lingering questions is well-advised to follow-up on Publication 523 with a discussion with his or her tax advisor or attorney.

The Virginia General Assembly's 2010 Session; HB 22 and Texting While Driving

2010-01-15T12:03:00.012-05:00

The 2010 session of the Virginia General Assembly opened on Wednesday, and the list of proposed bills is growing (rapidly!)by the day.

You can track each day's new bills on the Assembly's Legislative Information System, here. The LIS also includes an excellent status feature that enables you to keep track of a bill's progress as it wends its way through the Capitol's halls and committee rooms.

Meanwhile, in the executive branch, Governor McDonnell's inauguration takes place tomorrow on the steps of the Capitol.

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Much of the Assembly's time and energy will be devoted to addressing the budget shortfall, however a number of "high visibility" issues are sure to generate controversy of their own. One of those issues has become a perennial focus of attention: the degree to which the state should regulate cell-phone and mobile device use by drivers.

Currently, Virginia (like a number of other states) prohibits texting-while-driving.

The applicable statute is Code of Virginia Section 46.2-1078.1 (you can read the entire section here), which includes this language:

A. It shall be unlawful for any person to operate a moving motor vehicle on the highways in the Commonwealth while using any handheld personal communications device to:

1. Manually enter multiple letters or text in the device as a means of communicating with another person; or

2. Read any email or text message transmitted to the device or stored within the device, provided that this prohibition shall not apply to any name or number stored in the device nor to any caller identification information.

The currently-effective prohibition loses some its sting, though, because Section 1078.1 also includes language that prevents enforcement unless a driver has been otherwise stopped -- ie, for a reason other than the texting ban:

C. No citation for a violation of this section shall be issued unless the officer issuing such citation has cause to stop or arrest the driver of such motor vehicle for the violation of some other provision of this Code or local ordinance relating to the operation, ownership, or maintenance of a motor vehicle or any criminal statute.

Delegate Algie D. Howell has introduced HB 22, which would amend Section 1078.1 in two ways that would make it significantly more restrictive.

First, HB 22 would delete subparagraphs 1 and 2 from paragraph A, which means that the ban would become a general ban on the use of hand-held mobile devices:

Second, HB 22 would delete paragraph C, and that would mean a police officer could pull over and cite a driver solely on the basis of violating the hand-held ban.

To date, we have not located any analysis of HB-22's chances of passage. It reflects a nationwide trend of stricter regulation of cell-phone use and texting while driving, and it will be interesting to see whether Virginia remains on the leading edge of that trend.

Charlottesville Tomorrow's List of the 10 Biggest Development Stories of 2009

2010-01-07T17:01:00.010-05:00

Charlottesville Tomorrow's website at www.cvilletomorrow.com is the go-to site for news and analysis related to growth and development issues in central Virginia.

Brian Wheeler and the staff at Charlottesville Tomorrow have been putting together an annual "Top 10 Growth and Development Stories" for several years. The list for 2009 came out earlier this week, and you can link to it here.

Topping the list are (1) the Biscuit Run / Commonwealth of Virginia donation-transaction, (2) the stop-and-go progress on the Meadowcreek Parkway, and (3) the changing local political landscape as highlighted by the November elections.

Looking ahead, Charlottesville Tomorrow predicts that the ongoing discussions related to the fifty-year water supply plan will be the biggest local development story in 2010.