Fourth Circuit Term Opens Today

Today the Fourth Circuit opened its new term, with the Court fairly evenly split ideologically among the 10 active judges. This is the first term for new Chief Judge Karen Williams. It is the first term in 20 years without Judge Wilkins serving as an active judge, and the first term in 35 years without Judge Widener.

Tomorrow the Fourth Circuit will hear argument in, among other cases, an antitrust suit brought against Microsoft by a competitor. The case is Go Computer Inc. v. Microsoft Corp., and the appeal concerns District Judge Motz's dismissal of the antitrust claims on statute of limitations grounds. Go was founded in 1987, and the claims date back some 20 years. The suit alleges that Microsoft attempted to thwart Go's attempt to enter the PC operating system market and that Microsoft stole Go's technology. A Reuters story about the underlying lawsuit is here, and news story concerning the district court's dismissal is here.

On Wednesday 9/26 the Fourth Circuit will hear oral argument in a case raising the issue of jurisdiction under the Class Action Fairness Act (CAFA). The case is Lanier v. Norfolk Southern. One of the issues is whether the plaintiff or the defendant bears the burden on the issue of federal jurisdiction when a case is removed to federal court under CAFA. CAFA's legislative history indicates that the burden should be on the plaintiff to demonstrate that removal is improvident. In Lanier the district court followed three circuit courts which rejected the argument that CAFA's legislative history alters the rule that a proponent of subject matter jurisdiction bears the burden of establishing federal jurisdiction. A story about the case can be found here on the CAFA Law Blog.

Also on Wednesday 9/26 the Fourth Circuit will hear argument in a trademark, trade dress, and copyright action: Louis Vuitton v. Haute Diggity Dog. In this case Judge Cacheris held, among other things, that consumer confusion was unlikely between the "Louis Vuitton" trademark and the "Chewy Vuiton" mark due to parody. Judge Cacheris began his opinion with this catchy introduction: "This matter comes before the Court on Plaintiff's and Defendants' cross-motions for summary judgment. This 'dog of a case' gave the Court a great amount of facts to chew upon and applicable law to sniff out. Nonetheless, having thoroughly gnawed through the record, this Court finds that no material dispute of fact remains, and summary judgment is appropriate on all counts." A story about the case is here.

We feature on this blog an oral argument calendar for the Fourth Circuit and NC's appellate courts (look to the right), and you can access the Fourth Circuit's oral argument calendar at its official site here.

Fourth Circuit 1983 Decision

Today the Fourth Circuit issued this interesting qualified immunity and Fourth Amendment decision in a section 1983 case where a police officer reached to his holster for his taser but mistakenly pulled his gun instead. Not realizing the mistake, he shot and wounded the man. The Court held that a seizure occurred but remanded to determine if seizure was unreasonable (i.e., that the officer's mistake in using the gun rather than the taser was unreasonable), in which case the officer can demonstrate his entitlement to qualified immunity.

New Fourth Circuit Nomination From MD May Be Imminent

Today's Baltimore Sun reports on a story that's been developing (see 9/13 Washington Post article here). The White House is poised to nominate Maryland's U.S. Attorney, 42-year-old Rod Rosenstein, to a seat on the Fourth Circuit. Today's article says the vetting process has accelerated and is in its final stages. Rosenstein has received good reviews for his performance as U.S. Attorney. The nomination would fill a "MD seat" long ago vacated by the late Francis Murnaghan.

Criminal Happenings

We usually don't say much about criminal cases, given the mission of this blog, but Tuesday's stack of decisions from the Court of Appeals was light, so we mention these three cases below, at least one of which has garnered some press.

1. Armed robbery accomplice scores a win: State v. Cooper involved a criminal, Russell Cooper, who confessed his involvement in an armed robbery of a Raleigh convenience store. Before the robbery Cooper met with another man in the woods by the store and gave the man his (Cooper's) gun to rob the store; Cooper waited for the man to return, which he did, bringing Cooper the gun and a portion of the robbery proceeds. After police were alerted to the robbery, they saw Cooper, and they stopped and frisked him, at which point they discovered the concealed handgun. He then confessed to his role. On appeal, Cooper argued that the evidence should've been suppressed on the basis that the police had no reasonable suspicion to stop and frisk him (a so-called Terry stop) near the convenience store after the police were alerted to the robbery. The trial court had rejected this argument, finding that the police officer had a reasonable articulable suspicion of criminal activity when he stopped and frisked Cooper. The COA, in an opinion by Judge Geer, sided with Cooper, holding the trial court erred. It remains to be seen whether this ruling will enable Cooper to go free.

2. Officer's mistaken belief of speed limit results in suppression of evidence: In State v. McLamb, a police officer pulled over the defendant for speeding for going 30 mph. Trouble was, unbeknownst to the officer, the speed limit was 55 mph. After stopping the defendant, the officer determined he had been drinking. Defendant was charged with DUI. The COA, in an opinion by Judge Steelman, held that the fruits of the stop (the evidence of DUI) had to be suppressed, because the officer didn't have an objectively reasonable belief that a speeding violation had occurred when he stopped defendant's car. The holding: a mistaken belief by a law enforcement officer that a defendant has violated the speed limit can't constitutionally support probable cause to stop a vehicle (probable cause being required for a seizure under the Fourth Amendment).

3. "Hands and water" are deadly weapons: In State v. Smith the COA held that "hands and water" are deadly weapons, and therefore the defendant was properly charged with assault with a deadly weapon on a gov't official. The defendant, Smith, was arrested by a Haywood County officer in connection with other matters. The belligerent Smith escaped from his handcuffs and pushed the officer into the Pigeon River, where defendant jumped on the officer and plunged him under water for 30-45 seconds, and then again for another 15-20 seconds, applying force to keep him submerged. Fortunately, the officer was able to knock defendant down and, after being hit in the head twice with the handcuffs, the officer was able to get him with pepper spray and apprehend him. Defendant argued that he couldn't be charged with assault with a deadly weapon on the basis that "hands and water" are not a deadly weapon. The COA, in an opinion by Judge Stroud, disagreed, because a reasonable juror could find that defendant's submerging of the officer in the river was likely to produce death or great bodily harm.

Fourth Circuit's Judge Widener Passes Away

As reported today, H. Emory Widener passed away yesterday at the age of 83. Judge Widener was a fixture on the Fourth Circuit until he took senior status this summer. Incredibly, he served as an active Fourth Circuit judge for 35 years. He was the nation's longest serving federal appellate judge when he took senior status in July. Before he joined the Fourth Circuit, he was a federal district court judge for a few years, beginning in 1969. He was an honorable man and a very fair judge.

In Second Preemption Case This Week, COA Held County Ordinance Preempted By State Law

In a second county ordinance case, Lamar OCI South Corporation v. Stanly County Zoning Board of Adjustment, the COA held that an ordinance in conflict with state law was preempted.

Lamar is an outdoor advertising company that leases land in Stanly County for a billboard. Several years after the billboard was put up, the County amended a zoning ordinance that would have prohibited Lamar's sign. But the sign was grandfathered in under a special provision and therefore legal. Later, the State decided to widen the road next to the billboard and informed Lamar that the billboard would need to be moved. Lamar moved and repaired the billboard. The County decided that when Lamar moved and repaired the billboard, the billboard lost its legal status.

On appeal, Lamar argued that state law (the NC Outdoor Advertising Control Act and Department of Transportation regulations) essentially completely preempts the field, to the exclusion of local regulation. This argument had, however, already been rejected by the COA, which here again stated that the Outdoor Advertising Control Act does not prohibit local regulation of outdoor advertising.

However, the COA held that the local ordinance here prohibited the billboard relocation that was expressly allowed by state regulations. The COA indicated that when a state law conflicts with a local regulation, the local regulation must yield. The majority held, among other things, that the State regulations allowed for Lamar's billboard to be moved within the sign location/site, or 1/100th of a mile, while the local regulation prohibited any movement at all except to bring the billboard into full compliance with the local ordinance, which Lamar's move did not do. The COA held that the State regulations, which conflicted with the local regulation, ruled.

Judge McGee disagreed and dissented. Judge McGee would have held that the local ordinance is not preempted. Judge McGee focused on the specific state regulations at issue and indicated that those regulations are in part definitional and in any case not clear substantive statements allowing the relocation of a nonconforming sign. As such, the local ordinance would not conflict with state law and there would be no conflict preemption.

COA Holds Federal Aviation Law Does Not Preempt Local Land Use Laws

In Davidson County Broadcasting Inc. v. Rowan County Board of Commissioners filed this week, the COA held that federal regulation of navigable airspace does not preempt a county from enacting local land-use ordinances relating to aviation.

Davidson planned to build a radio tower and got a "no hazard" letter from the Federal Aviation Administration. But the County Board denied Davidson a special use permit to build the tower. The Board found that the radio tower would negatively impact safety relating to a private air port in the area, Miller Air Park.

Davidson claimed that local regulation by land use laws was supplanted by field and conflict preemption. The COA disagreed. The COA did not directly analyze field preemption, i.e., where the U.S. Congress so occupies a field that states are left no room to supplement. The COA suggested, though, that field preemption does not exist, e.g., by citing the FAA's "no hazard" letter stating that the radio tower was still subject to local regulation.

The COA instead focused on conflict preemption, i.e., whether a given state authority conflicts with and is displaced by federal authority. The COA held that no conflict preemption existed here. The COA focused on the "no hazard" letter, which expressly indicated that it did not lift compliance responsibilities relating to state or local regulations. The COA also focused on an FAA letter to the County Board not only permitting but encouraging local regulation to maintain the safety of private use airports, which the FAA indicated it neither regulated nor considered in issuing its "no hazard" letter.

The COA therefore indicated that no conflict preemption existed where the federal regulator not only acknowledged but encouraged local regulation and where otherwise a regulatory loophole would exist.

COA Clarifies Law On Guaranty

Yesterday in Kimbrell v. Roberts the COA clarified the law regarding an alleged failure to comply with a contractual notice-of-claim provision in connection with a guaranty.

Defendant had executed a guaranty which guaranteed to Plaintiff, a shareholder, the corporation's payment of obligations under a stock and debenture purchase agreement. The guaranty had a notice-of-claim provision requiring Plaintiff to notify the defendants in writing, within 30 days of a default by the corporation, that Plaintiff would be pursuing a claim against Defendant under the guaranty. A jury found for Plaintiff. Defendant, the guarantor, contended that she was entitled to JNOV because Plaintiff failed to provide her with the contractually required notice of claim. Specifically, Defendant argued that Plaintiff's failure to comply with the provisions regarding notice caused the guaranty to expire.

There was no NC authority concerning the effect of the failure of a party to give contractually required notice of default under a guaranty. But relying on authority from outside NC, the COA held that a failure to give notice of default doesn't discharge the guarantor from liability unless the guarantor can prove prejudice, i.e., actual loss caused to the guarantor by the lack of timely notice (and, since the failure to give timely notice discharges the guarantor only to the extent the guarantor is prejudiced thereby, if the loss is only partial, the guarantor is discharged only pro tanto). The COA held that the burden of proof is on the guarantor to prove lack of notice and that lack of notice caused prejudice to the guarantor. It's in the nature of an affirmative defense.

In a separate, subsidiary holding, the COA held that a different clause of the guaranty (one dealing with expiration) was ambiguous. The ambiguity arose over the use of "or." The expiration clause said the guaranty "shall expire at such time as [Plaintiff] shall no longer be the owner of the [stock] or all or any part of the Debenture ...." Plaintiff had ceased to own the stock but still owned the debenture. Defendant, the guarantor, argued that the expiration clause was unambiguous: it triggered expiration of the guaranty if Plaintiff ceased to own either the stock or the debenture; since Plaintiff no longer owned the stock, the guaranty expired. Plaintiff countered that the expiration clause was triggered only if Plaintiff ceased to be the owner of both the stock and the debenture -- thus treating the disjunctive "or" as the conjunctive "and." The COA held that the provision was ambiguous, relying principally on the idea that if parties in litigation attach different meaning to text and their conflicting constructions are reasonable, the text is ambiguous.

I have difficulty seeing how an "or" could be construed as "and" in this context, but what's more intriguing is the COA's heavy reliance on this principle: "The fact that a dispute has arisen as to the parties' interpretation of the contract is some indication that the language of the contract is, at best, ambiguous." That principle, if applied too loosely, would be quite problematic (if not circular), for it would create an ambiguity in nearly every case where parties dispute the meaning of a contract term. It's critical, therefore, to connect the foregoing principle to the Court's ultimate holding: each side's proffered construction must nonetheless be reasonable. ("We hold that the two conflicting constructions proffered by the parties are both reasonable constructions of the expiration provision of the guaranty." (emphasis added)) After all, it can't plausibly be the case that one side can create an ambiguity simply by attaching an unreasonable meaning to the text and then using the fact of a conflict as evidence of ambiguity.

Spot Zoning Deuce

Yesterday the Court of Appeals (COA) decided not one, but two "spot zoning" cases, one against Yadkin County, the other against Randolph County. The cases are McDowell v. Randolph County and Childress v. Yadkin County.

What's spot zoning? It's zoning action that singles out and reclassifies a relatively small tract owned by a single entity and surrounded by a much larger area uniformly zoned, to relieve the small tract from restrictions to which the rest of the area is subjected or to impose on the small tract greater restrictions than the rest of the area is subjected.

What's the significance of a finding of spot zoning? In a normal zoning case, the regulation is presumed reasonable and valid, so the burden's on the challenger to show otherwise. In a spot zoning case, the presumption is reversed, so the burden is on the zoning authority to make a clear showing of a reasonable basis for the spot zoning. If the zoning authority fails to carry that burden, the spot zoning will be deemed unreasonable and thus illegal.

How does a court determine whether spot zoning is reasonable? It considers four factors: (1) the size of the tract in question; (2) the compatibility of the disputed action with an existing comprehensive plan; (3) the benefits and detriments for the owner, his neighbors and the surrounding community; and (4) the relationship of the uses of the envisioned under the new zoning and the uses currently present in adjacent tracts. (Hmm. Reminds me of some of the tests that Justice O'Connor used to dream up.)

In yesterday's cases, which involved two separate panels, the COA held that Randolph County engaged in illegal spot zoning by re-zoning a portion of a lumber company's property to a less restrictive classification, but that Yadkin County didn't engage in illegal spot zoning when it re-zoned a property from rural agriculture to restricted residential.

In the Yadkin County case, the COA disagreed with the parties' stipulation that there was spot zoning (and then held that even if there was, it was reasonable). The COA concluded there wasn't spot zoning, because the re-zoned land in question wasn't transformed from a very restrictive zoning classification to a very expansive zoning classification, and there were important similarities between the two classifications.

Anyhow, it was certainly a big day for spot zoning fans.

Today's NC Court of Appeals Decisions

Today the COA released 12 published decisions, half of which are criminal cases. (And the criminal defendants fared pretty well, I might add, successfully suppressing evidence in two cases, and successfully nabbing a retrial in another case.) There were two dissents: Judge McGee dissenting in part in a preemption case, Judge Tyson dissenting in a parental rights case. We'll have more later.

Judge Bryant to Speak in Wisconsin

According to this story, NC Court of Appeals Judge Wanda Bryant will be a keynote speaker on Sept. 29 at a Milwaukee event sponsored by the League of Women Voters of Wisconsin, entitled "Making Democracy Work: A Summit to Restore Clean and Responsive Government in Wisconsin."

NC SCT Hears Peterson Appeal Today

The NS SCT today will hear argument in case against convicted murderer and Durham novelist Michael Peterson. A link to the story is here.

New Fourth Circuit Judge Nominated From Virginia

President Bush has nominated E. Duncan Getchell, Jr., of Virginia, to replace H. Emory Widener, Jr. on the Fourth Circuit. Judge Widener retired recently. Getchell is a partner with McGuire Woods in Richmond and chair of the firm's appellate practice group (his firm bio is here). He's a Duke Law graduate (class of 1974). He's a member of the American Law Institute and the American Academy of Appellate Lawyers (and, as opponents surely will point out, he's a member of the Federalist Society).

Senator Webb (D, Va.) has already issued a press release condemning this nomination.

New Fourth Circuit Judge Nominated From South Carolina

President Bush has nominated Steve Matthews, a Columbia, S.C. attorney, to the seat vacated by Judge Billy Wilkins who retired earlier this year. Matthews is managing partner at Haynsworth Sinkler Boyd who practices corporate and public finance law. His firm bio is here. A Yale Law grad, he's a former president of the S.C. Chapter of the Federalist Society, and he's a board member of the Landmark Legal Foundation (along with former AG Ed Meese, for whom Matthews served as an assistant in the Reagan Justice Department). Landmark Legal Foundation is the organization headed by radio personality Mark Levin.

Fourth Circuit Invalidates Agency Regulation

In Williams v. Gonzales, decided today, the Fourth Circuit, over Chief Judge Williams's dissent, invalidated an agency regulation (of the Board of Immigration Appeals) under step one of Chevron. It's an interesting case of statutory interpretation.

COA: Don't Ignore Request For Admissions Even After Default

In Kniep v. Templeton, decided today, the Court of Appeals (COA) held that summary judgment was properly entered against the defendant based on unanswered requests for admissions, even though the defendant maintained he didn't answer the requests because a default judgment had already been entered against him.

Plaintiffs sued defendant for breach of contract, seeking specific performance and damages. Along with the complaint, plaintiffs served requests for admissions. Defendant failed to file a responsive pleading, so plaintiff got a default judgment. A month later, plaintiff moved for summary judgment on the ground that defendant failed to timely respond to the requests for admissions. Plaintiff argued that the matters in those requests were therefore deemed admitted by operation of law, and that those (silent) admissions were dispositive of liability because they established the elements of plaintiffs' breach of contract claim. The trial court agreed and granted summary judgment to plaintiff.

On appeal, defendant argued that it was improper for the trial court to base a summary judgment ruling on defendant's failure to answer requests for admission when default had already been entered before the deadline for the admission responses. The COA disagreed. The COA emphasized that entry of default only admits the allegations in the complaint but doesn't admit the sufficiency of those allegations to state a cause of action; therefore, a defaulted defendant should serve responsive pleadings to protect his interests. The COA held that the entry of default didn't preclude defendant from responding to the request for admission because defendant was free to contest the sufficiency of plaintiffs' complaint to state a claim for recovery; by not responding to the requests, defendant admitted the matters requested.

The lesson: because a default judgment may be set aside or limited (it doesn't establish that the allegations in the complaint are sufficient to state a claim, and damages may be contested), a defaulted defendant shouldn't stand down when served with discovery requests. Instead the defaulted defendant should proceed as if the default judgment hadn't been entered.

COA Decides Condemnation Case Involving Townhome Development's Common Area

Today the NC Court of Appeals (COA) held that the state must pay more money than the state intended when it condemned a townhouse community's common area. The case is DOT v. Ferwood Hill Townhome Homeowners' Ass'n, Inc.

DOT initiated a condemnation action to acquire (for a highway project) a portion of the common area of a townhouse development. DOT estimated just compensation would be only $5,300, representing just the portion of the common area. The common area is contiguous to the lots with the individually-owned residential units (which DOT didn't seek to acquire).

The homeowners argued that the condemned tract was part of a larger, unified tract -- the individual townhome lots. The COA agreed, holding that the common area and the individual lots have sufficient "unities" (unity of ownership, physical unity, and unity of use) to render them part of a unified tract. Even though the owners of the individual lots didn't own the common area (instead the common area was owned by their homeowner's association), the COA found substantial "unity of ownership," because each individual townhouse owner held not only a fee simple estate in his or her unit, but also (1) an interest in the common area by virtue of a general easement in the entire common area and (2) an interest in the other individual townhouses by virtue of restrictive covenants. The easement and restrictive covenants provided the townhouse owners with sufficient interest in the entire tract to support a substantial unity of ownership. So DOT will now have to pay more in just compensation.

This case obviously could have a significant impact in other condemnation actions involving common areas.

County, Others Had Standing And Denied Due Process In Zoning Case

In Cook v. Union Cty. Zoning Bd. of Adjust. filed today, the COA held that a county and individual land owners had standing to challenge the approval of a Wal-Mart application for a special use permit. The COA also held that the Board denied the petitioners due process in approving a substantially revised application without giving them a chance to present evidence and cross-examine as to the revised application.

In Cook, the Board of Adjustment and Wal-Mart argued that Union County wasn't aggrieved and that the Board was the County's agent and therefore the County had no standing to appeal. The COA disagreed. The COA held that the statute governing challenges to appeals pursuant to county zoning ordinances, 153A-345, does not require a county officer, department, board or bureau to be aggrieved in order to challenge a board of adjustment decision. The COA also noted that a county may be adverse to a board of adjustment, can't reverse the decision of the board of adjustment, and lacks power over a board of adjustment once the County has delegated authority to the board. The COA held that nothing prohibits a county from appealing a decision by its board of adjustment and that Union County had standing here.

The Board of Adjustment and Wal-Mart also argued that all petitioners lacked standing because they were not parties before the Board of Adjustment. The COA rejected that argument, noting that the petitioners participated fully in hearings before the Board and the challenge in superior court. Nothing required the petitioners to become parties, and they had standing to challenge the Board's decision.

The Board of Adjustment and Wal-Mart also argued that the petitioners hadn't preserved their objections to the Board of Adjustment decision. The COA noted that N.C. R. App. 10 requiring objection preservation applies in the appellate division, and nothing required the petitioners here to lodge formal objections in challenging the Board of Adjustment to superior court.

The COA also held that the Board of Adjustment violated the petitioners' due process rights in approving a substantially revised application for a special use permit without, among other things, giving petitioners a chance to cross-examine and proffer evidence on the revised application. The revised application involved moving and reorienting the Wal-Mart store that was the subject of the application to the other side of the tract, reconfiguring traffic patterns, adding a drive-through pharmacy, and changing elevations and parking lots. The COA noted the revised application was substantially different than the initial application, and that while Wal-Mart was allowed to present evidence and roll forward on the substantially different plan, the Board "essentially cut off the rights of the" county and land owners.

COA Decisions Today

The Court of Appeals released 19 published decisions today, 15 of them civil (4 of which involve workers comp). We'll post on them later.