Statutory waiver of insurer's late notice defense in Virginia

I've previously posted about Va. Code § 38.2-2226, which states that in order to disclaim coverage based on an insured’s breach of a policy condition, an insurer has to give notice to the claimant or claimant’s counsel within 45 days after discovery by the insurer of the breach of the condition. Failure to give such notice within 45 days will result in a statutory waiver of the defense. 

The importance of compliance with this statute cannot be overstated in a Virginia claim involving a potential late notice defense. 45 days has a way of slipping past.

This same statute came up in a relatively recent decision from the Virginia Supreme Court, Dabney v. Augusta Mutual Insurance Co., which is discussed here.

The Dabney opinion was also usefully discussed in Zalma on Insurance, from a different perspective. 

Plaintiff's bankruptcy filing may create defenses in civil litigation

A search should be conducted early in every case to determine if the plaintiff has filed for bankrtupcy. There are a number of good reasons to do so.

DRI published a recent article on its website concerning the defense of judicial estoppel arising from the plaintiff's failure to disclose his or her claim as an asset in the bankruptcy proceedings.  There is quite a bit of case law on judicial estoppel arising from bankruptcy. 

Another way in which bankruptcy proceedings can negatively impact a plaintiff's suit was recently illustrated by the case of Kocher v. Campbell, a decision of the Virginia Supreme Court that came out last June.  In Kocher, the Court considered the issue whether the plaintiff in an action to recover damages for personal injuries had standing to maintain his action after filing a petition for bankruptcy, causing his claim to become an asset of his bankruptcy estate.  The Court held that the plaintiff lacked standing, and dismissed the case.

The plaintiff was involved in a motor vehicle accident, and before filing a lawsuit the plaintiff filed a voluntary Chapter 7 petition in bankruptcy.  His petition failed to disclose his personal injury claim as an asset in Schedule B, and failed to list it on Schedule C as an exempt property.  About three months later, plaintiff received a standard discharge in bankruptcy.

The plaintiff then filed his civil action based on the motor vehicle accident.  This was nonsuited then refiled and served.  The defense filed a motion for summary judgment on the grounds that the plaintiff lacked standing to bring the action.  During the hearing on the motion, the plaintiff nonsuited the action again.

The plaintiff then persuaded the bankruptcy trustee to file a motion in bankruptcy court to reopen his bankruptcy case, which was granted.  Then the plaintiff obtained leave to file amended schedules, listing the personal injury action and claiming it as exempt property.  The bankruptcy court ruled that the plaintiff had properly exempted the cause of action.

Next, the plaintiff filed his civil suit for the third time. The defense again moved for summary judgment, asserting the lack of standing and the statute of limitations.  The trial court denied the motion, but certified the issue for an interlocutory appeal pursuant to a Virginia statute, and the Virginia Supreme Court awarded the defendant an appeal.

The Virginia Supreme Court reversed, holding that the action was a nullity at the time of its filing and the statute of limitations had run before it was refiled the third time, and dismissed the case.

The Court reasoned first that as a result of the plaintiff's filing a petition for bankruptcy, his inchoate personal injury claim passed to his bankruptcy estate.  Thereafter, the cause of action was one that could only be asserted by the trustee in bankruptcy, unless and until it was restored to the plaintiff by the bankruptcy court.  Here, the cause of action remained a part of the bankruptcy estate until the bankruptcy court ordered it exempted over five years after the motor vehicle accident.  All three complaints were filed during the period when the plaintiff lacked standing to assert the cause of action because it remained in the bankruptcy estate, enforceable only by the trustee. 

The Court rejected the plaintiff's argument that the final order closing the reopened bankruptcy case had the effect of abandoning all property remaining in the estate, and that abandonment causes the abandoned property to revert back to the debtor retroactively, as if the bankruptcy had never occurred.  The Court reasoned that the exemption that preceded the final order had already removed the plaintiff's cause of action from the bankruptcy estate.  Second, under Virginia law concerning standing, an action filed by a party who lacks standing is a legal nullity.  Standing acquired after the statute of limitations has run cannot be retroactively applied to cure the lack of standing that existed when the action was filed.

How a similar scenario would play out in other States would depend on the State law where the action is pending.  The most important step, however, is to run the search, and find out whether there has been a bankruptcy filing. 

Trouble and how not to meet it: Landrum v. Chippenham and Johnston-Willis Hospitals

As a young associate, I once read an ABA pamphlet on how to manage a law practice, and one of the recommendations was to have a regular meeting of all attorneys, at which one of the agenda items would always be "trouble and how to meet it."   The idea is that usually you can see trouble coming at you from down the road, and that's precisely when an attorney needs the collective wisdom and experience of the firm.  Trouble and how NOT to meet it is illustrated by the recent decision of the Virginia Supreme Court in Landrum v. Chippenham and Johnston-Willis Hospitals, Inc.

Landrum was a Virginia medical malpractice case in which the plaintiff was represented by an out-of-state counsel from Missouri, with Virginia local counsel.  The Virginia Supreme Court affirmed the trial court's exclusion of the plaintiff's expert witness designations for failure to have them signed by local counsel, and the summary judgment in favor of the defense based on the plaintiff's lack of expert testimony.

The trouble was coming down the road for a couple months before the end.  Plaintiff's intial effort at expert witness designations failed to state the substance of the facts and opinions to which the experts were expected to testify and a summary of the grounds for each opinion.  The defense moved to exclude the expert witnesses and for summary judgment.

Plaintiff then attempted to cure the deficiency by providing the expert witnesses' reports, but failed to supplement the designation.

There was a hearing before the Circuit Court on the defense motions, in which the Court warned:

THE COURT: . . . I will give you seven days from today, and I'm going to give you a time that you file your answer to these interrogatories and you file a copy of it in the clerk's office and you do it in the proper manner. I'm not going to sit here and lecture how you're supposed to do it.
. . . .
I will tell you, sir, if you fail to do that, I will dismiss the case after that.

Plaintiff's next effort at filing an expert witness designation also did not comply with the Virginia Rules, as it was not signed by Plaintiff's local counsel, and the defense again moved to exclude the plaintiff's expert witnesses and for summary judgment.

This time, the trial court granted the motions, and dismissed the case with prejudice. 

About two full months passed between the first effort at filing expert witness designations, and the last.  The trial judge gave the plaintiff a week to file a compliant expert witness designation, after delivering a clear warning to comply with the Virginia Rules.  There was time to reread the Virginia Rules, and conference with Virginia counsel. 

Unfortunately, this was a very harsh result in a medical malpractice case, and the Virginia Supreme Court granted an appeal -- a rare and golden opportunity for claim repair.  However, as noted here, plaintiff failed to comply fully with the Virginia appellate rules as well, and the appeal did not go well.  Now it is big trouble.

The reason why in Virginia, local counsel must sign all the pleadings, is that being local counsel in Virginia is not regarded as a pro forma responsibility.    As the Virginia Supreme Court has stated:

The purpose of the Rule is to facilitate the efficient administration of court business by permitting a court to deal exclusively with local counsel, upon whom all notices and processes may be served. It is necessary that our courts have access to attorneys of record who are personally subject to their supervisory control rather than risk delays in communicating with foreign attorneys who may be inaccessible, uncooperative or unfamiliar with the rules and statutes governing the trial of cases in Virginia.

Ortiz v. Barrett, 278 S.E.2d 833 (Va. 1981). 








Removal to federal court before forum defendant is served

There was an interesting post on Ron Miller's blog, The Maryland Injury Lawer Blog, on the recent case of Robertson v. Iuliano, No. 10-1319 (D. Md. Feb. 4, 2011). Robertson v. Iuliano illustrates that in a case filed in state court, where diversity jurisdiction would exist but for the presence of forum defendants, and the forum defendants have not yet been served, the non-forum defendant can, in many jurisdictions including Maryland, still remove the action to federal court.

In fact, in the Robertson case, the non-forum defendant removed the case to federal court before he or any of the other defendants were served.

Under the unanimity rule reaffirmed by the 4th Circuit in its recent en banc opinion, where there are multiple defendants, it is necessary for the other defendants in the case to consent to the removal within 30 days of their being served. Here they apparently did, because they filed oppositions to the motion to remand. The District Court denied the plaintiff's motion to remand.

In a medical malpractice case, removal would result in the application of the more stringent Daubert standard for the admissibility of expert testimony, which would be reason enough to do it.

I can understand why this result could be viewed by the plaintiffs' bar as unfair, but on the other hand, I've seen many cases where a forum defendant was joined in a complaint for no apparent reason other than to destroy diversity.

There was a recent article on this topic in DRI's journal, For the Defense, in April, 2010, which among other things provided citations to other jurisdictions where this is the rule. See Tiffany Reece Clark, Removal Before the Forum Defendant Is Served - The Plain Language of 28 U.S.C. sec. 1441(b). Here are some other perpectives on this issue, one from the defense side, one from the plaintiffs' side, and one giving more extensive background on pre-service removal.

In sum, in the Robertson case the defense used a combination of two rare procedures -- removal before service of the forum defendants, and removal even before service on the client -- to steal a march on the plaintiff and gain a tactical advantage that may turn out to be decisive.




Lack of diversity jurisdiction can be raised at any time

A recent D.C. Circuit opinionreminds us that the lack of diversity jurisdiction can be raised at any time, even on appeal. IN RE: LORAZEPAM & CLORAZEPATE ANTITRUST LITIGATION was an appeal of a $77 million judgment in an antitrust suit.  On appeal, the defendants moved to dismiss for lack of diversity jurisdiction. 

Plaintiffs were four health insurers who brought suit against two drug manufacturers.  Plaintiff brought suit for themselves and as claim administrators for self-funded customers, which are corporations which pay their employees health benefits out of their own funds.  On appeal, a motion was filed for the first time to dismiss due to lack of diversity jurisdiction, on the bases that one or more of the self-funded customers destroyed complete diversity:

After the parties had filed their briefs, and a few days before oral argument, defendants filed a motion to dismiss, arguing for the first time that the district court lacked jurisdiction because at least one (Minnesota Mining and Manufacturing Corporation (3M))—and potentially more—of plaintiffs' self-funded customers were from the same state as at least one of the defendants. The existence of these customers, defendants argued, destroyed "complete diversity" and stripped the court of power to hear the case.

The Court decided the appeal based on long-standing principles of diversity jurisdiction:

  • The absence of jurisdiction can be raised for the first time on appeal even by the party who invoked federal jurisdiction.
  • Parties cannot confer jurisdiction by consent. A corollary, long established, is that a party does not waive a jurisdictional objection by failing to raise it, at least so long as the jurisdictional defect appears on the face of the record.
  • Under the diversity statute (now 28 U.S.C. § 1332), "diversity jurisdiction does not exist unless each defendant is a citizen of a different state from each plaintiff." Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978). Thus the presence of just one nondiverse plaintiff destroys diversity jurisdiction under § 1332.
  •  Mollan v. Torrance, 22 U.S. (9 Wheat.) 537, 539 (1824), holds that the court's jurisdiction "depends upon the state of things at the time of the action brought . . .."
  • Ordinarily a finding that the district court lacked jurisdiction would lead the appellate court to vacate the court's judgment and remand for dismissal. See, e.g., LoBue v. Christopher, 82 F.3d 1081, 1082 (D.C. Cir. 1996).

Rather then dismiss the appeal, the Court invoked Rule 21, and remanded to the district court for consideration of whether the jurisdictional spoilers could be dismissed:

Rule 21 of the Federal Rules of Civil Procedure provides that "[o]n motion or on its own, the court may at any time, on just terms, add or drop a party." Fed. R. Civ. P. 21. This Rule allows the district court to dismiss so-called "jurisdictional spoilers"—parties whose presence in the litigation destroys jurisdiction—if those parties are not indispensable and if there would be no prejudice to the parties. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830-32 (1989).

Hit tip to Barry Bennett's Blawgletter and to Litigation World for pointing to this case.

Fourth Circuit, in en banc decision, addresses timing for removal where there are multiple defendants

In an en banc decision, the Fourth Circuit in Barbour v International Union, reaffirmed the rule in that Circuit for the time window for removal to federal court in a case in which there are multiple defendants.  The notice to removal must be filed within the 30 day window after the first defendant is served, but later served defendants have a 30 day window to join in the notice of removal.  If the later served defendants do not join in the notice of removal, the case has to be remanded to state court for lack of unanimity among the defendants.

To be sure, it seems eminently reasonable that, in drafting § 1446(b), Congress intended for the first-served defendant to decide within his thirty-day window whether to remove the case to federal court or allow the case to remain in state court. Such routine removal decisions are made day-in and day-out in courts all across the Nation. If the first-served defendant decides not to remove, later-served defendants are not deprived of any rights under § 1446(b), because § 1446(b) does not prevent them from removing the case; rather, it is the rule of unanimity that does. In other words, once the firstserved defendant elects to proceed in state court, the issue concerning removal is decided under the rule of unanimity. Alternatively, if the first-served defendant does file a notice of removal, the later-served defendants dictate whether the case remains in federal court, either by joining the notice or declining to do so.

Hat tip to Deborah Elkins of the Virginia Lawyers Weekly Blog.

Further information is available here.




Upcoming amendments to the Federal Rules of Civil Procedure

The following is a summary of amendments to the Federal Rules of Civil Procedure that will become effective in December, 2010:

The proposed amendments to Rule 8 delete the reference to “discharge in bankruptcy” from the rule’s list of affirmative defenses that must be asserted in response to a pleading.

The proposed amendments to Rule 26 extend work-product protection to the discovery of draft reports by testifying expert witnesses and, with three important exceptions, to the discovery of communications between testifying expert witnesses and retaining counsel. The amendments also provide that a lawyer relying on a witness who will provide expert testimony but is not required to provide a Rule 26(a)(2)(B) report – because the witness is not retained or specially employed to provide expert testimony and is not an employee who regularly gives expert testimony – must disclose the subject matter of the witness’s testimony and summarize the facts and opinions that the witness is expected to offer.

The proposed amendments to Rule 56 are intended to improve the procedures for presenting and deciding summary judgment motions, to make the procedures more consistent across the districts, and to close the gap that has developed between the rule text and actual practice. The amendments are not intended to change the summary judgment standard or burdens. The amendments include (1) requiring that a party asserting a fact that cannot be genuinely disputed provide a “pinpoint citation” to the record supporting its fact position; (2) recognizing that a party may submit an unsworn written declaration, certificate, verification, or statement under penalty of perjury in accordance with 28 U.S.C. § 1746 as a substitute for an affidavit to support or oppose a summary judgment motion; (3) setting out the court’s options when an assertion of fact has not been properly supported by the party or responded to by the other party, including considering the fact undisputed for purposes of the motion, granting summary judgment if supported by the motion and supporting materials, or affording the party an opportunity to amend the motion; (4) setting a time deadline, subject to variation by local rule or court order in a case, for the filing of a summary judgment motion; (5) explicitly recognizing that “partial summary judgment” may be entered; and (6) clarifying the procedure for challenging the admissibility of summary judgment evidence.

 See Summary of Proposed Amendments to Federal Rules.

Here are the relevant Rules with the amendments incorporated.

Under the amended Rule 26, hybrid fact/expert witnesses who have not been retained to testify, such as treating physicians, do not have to write reports, but the Rule requires expert witness disclosures concerning any expert opinions they intend to offer.

Under the amended Rule 56, the undisputed material facts justifying the motion for summary judgment will need to be supported by pinpoint cites to the record.  

Failure to order complete trial transcript results in dismissal of Virginia appeal of $8.3 million verdict

A simple clerical error -- failing to order the complete trial transcript -- resulted in the dismissal of the Virginia appeal of a $8.3 million verdict and also spawned two other lawsuits.  These events and their consequences are worth reviewing, as many lawyers will have to admit "there but for the grace of God . . . ."

A 17 year old girl sustained severe injuries, including brain injuries, when skiing in Virginia.  Essentially she collided with a snow grading machine that was being driven up the intermediate slope to reach a snow tubing run.  On July 16, 2004, after a week long trial, a jury returned a verdict in the amount of $8.3 million against the resort.   

The defendant and its insurer certainly anticipated a possible bad result, as they retained  prominent appellate counsel shortly before the trial had even begun.

An appeal was noted to the Virginia Supreme Court.  Somehow, someway, at least one trial transcript was apparently not timely filed on the appellant's behalf.  For that reason, the Virginia Supreme Court ultimately dismissed the appeal in July 2005.

Subsequently, the insurer of the ski resort filed a legal malpractice suit against the trial defense counsel in the Circuit Court for the City of Richmond in July, 2007.  Shortly thereafter, the case took on political overtones, as it was revealed in a newspaper story that one of the attorneys involved in the failed appeal was under nomination to the U.S. Court of Appeals for the Fourth Circuit.

On September 10, 2008, one of the defendants in the legal malpractice case filed his own suit against the involved insurers and their counsel, for defamation, abuse of process, and conspiracy to injure the plaintiff in his business.  Essentially, he claimed that he had no involvement in the post-trial matters in the skiing accident case, since it was all turned over to appellate counsel.

The latter suit was recently dismissed on Jan. 6, 2009 by U.S. District Court Judge Norman K. Moon, in part due to the absolute litigation privilege and the statute of limitations.

An appeal was taken to the Fourth Circuit concerning the latter ruling.  Apparently while on appeal, a settlement was worked out, and as part of the settlement it was agreed that there would be a vacatur of Judge Moon's opinion.  Judge Moon, however, denied the request for vacatur. 

Meanwhile, the legal malpractice suit arising from the failed appeal was non-suited on March 30, 2009.



Defamation per se in Virginia arising from summary of a judicial opinion

In Vaile v. Willick, 2008 U.S. Dist. LEXIS 53619 (W.D. Va. July 14, 2008), a law student's defamation action against two lawyers survived the defendants' motion for summary judgment.

The defendants practiced family law in Nevada, and represented the plaintiff law student's ex-wife.  The defendants represented the ex-wife and their children in a series of lawsuits in state and federal courts in Nevada to recover damages from Vaile's removal of the children from their mother's custody without her consent.

The plaintiff, who was in law school, decided to cease his defense to one of the civil actions in Nevada federal court, and as a result, the federal judge found against him and awarded compensatory damages of $688,500 and attorneys' fees and costs of $272, 255.

One of the defendants subsequently wrote to the plaintiff's law school to advise that had been found guilty of multiple violations of State and Federal law, including kidnapping, passport fraud, felony non-support of children and violation of RICO.  The letter requested the law school to reconsider the plaintiff's fitness for continued enrollment, and attached a copy of the federal court's decision.

When the law school seemingly took no action, the co-defendant, who was an attorney with the same firm, sent a letter to the ABA to inform it of the law school's recalcitrance, repeated the summary of the Nevada decision, and attached a copy of the Nevada opinion.  The letter called for the ABA to rescind the law school's accreditation as a result of the law school's failure to act.

The plaintiff filed an action for defamation, on the grounds that the letters were false and defamatory.

On cross-motions for summary judgment, the plaintiff argued that the letters were sent with malice and an intent to defame.  Plaintiff argued that he has never been convicted of criminal offenses under state or federal law, and the letters were false and defamatory because they suggested that he was.

Defendants argued that the letters were true or at worst, substantially true, do not necessarily suggest a criminal conviction, and that when read as a whole with the attached judicial opinion, cannot be construed as defamatory per se.

The Court found that the letters were defamatory per se, because they impute the commission of a crime upon the plaintiff that he did not commit.  Further, the letters were defamatory per se as a whole because they suggested that the plaintiff is unfit to continue at law school or lacks the integrity to continue in the study of the law or to perform the duties of a lawyer.

The Court found that the absolute privilege to publish matters of public record applied to the letters.  The publication of public records to which everyone has a right of access is absolutely privileged in Virginia.  The privilege is not lost if the record is incorrect or if it contains falsehoods.  The privilege exists so long as the published account of the public record is a fair and substantially accurate account of the public record or proceeding.  If the publication substantially departs from the proceeding or record, then the privilege is lost.

The Court found that the issue whether the letters substantially departed from the Nevada opinion, such that the privilege was lost, is a question left for the jury, because reasonable people could disagree whether the letters are an impartial and accurate account of the opinion.

Impact of Medicare liens on settlements

An article on Medicare Reimbursement Problems was recently published in For the Defense.  One of the authors has a copy of the article posted on his firm website.  The article details the issues, but unfortunately no easy solution is offered.  The authors say that for now, the "only workable solution" is to put money in reserve for the estimated Medicare reimbursement.