Fourth Circuit: We're Not Philosopher-Kings Or Legislative Aides

Earlier this week the Fourth Circuit issued a "mootness" decision, dismissing as moot an appeal by an inmate who brought a First Amendment challenge to the South Carolina Department of Correction's alleged policy of barring inmates in the maximum security unit (MSU) from receiving publications by mail. The case is Incumaa v. Ozmint.

The inmate, represented by Arnold & Porter, had been transferred out of the MSU two years earlier, and because he won't return there unless he engages in bad behavior, the MSU publications policy no longer applies to him and may never apply to him again. While his current unit has a similar publications policy, it's not identical to the MSU policy; because his complaint challenged only the MSU policy, he could not challenge either policy in this case.

The Fourth Circuit's opinion, written by Chief Judge Karen Williams, ended with this observation: "Federal courts are not comprised of philosopher-kings or legislative aides, and the Constitution forbids us from pontificating about abstractions in the law or merely giving advice about the potential legal deficiencies of a law or policy when no ongoing controversy exists with respect to that law or policy."

Hmm. No philosopher-kings pontificating about abstractions in the law? Tell that to the U.S. Supreme Court!

The Court's last line about "giving advice about the potential legal deficiencies of a law" is particularly interesting, coming as it does one week after Justice Ginsburg delivered a lecture on the role of dissenting opinions. In her lecture she discussed her Ledbetter dissent last Term, which she read from the bench. (Ledbetter involved the statute of limitations under Title VII.) In her lecture she described this "genre of dissent" as "one aiming to attract immediate public attention and to propel legislative change." She gloated that several members of Congress "responded within days" with proposed legislation, and she acknowledged that "[t]he response was just what I contemplated when I wrote [my dissent.]" (For a critique of Justice Ginsburg's attempt to influence legislation, see Orrin Kerr's article in the Wall St. Journal here.)

Fourth Circuit Rules For Employer In WARN Act Case

Earlier this week the Fourth Circuit handed down a WARN Act decision in favor of the employer. The case is Long v. Dunlop Sports Group Americas, Inc. The WARN Act requires that certain employers provide their employees with written notice 60 days before a plant shutdown causes the employees an employment loss. In Long the Fourth Circuit agreed with the employer that there need not be 60 days between the notice and the shutdown (i.e., 60 days before the stoppage of work) so long as the employees are paid for 60 days after the notice. That is, there's no employment loss until the employer stops paying them. So an employer can give notice contemporaneously with the shutdown so long as it pays the employees for the 60-day period, regardless of whether they are actually performing work.

Fourth Circuit Upholds FDIC's $161M Fraud Judgment

Today the Fourth Circuit issued a decision upholding a $161 million civil verdict on behalf of the FDIC, which brought suit as receiver for a defunct bank, alleging that the defendant fraudulently induced the bank to invest hundreds of millions of dollars in a securitized loan scheme. But news of today's adverse ruling won't bother him. The defendant, who had fled the U.S. for Norway to avoid prosecution after he was indicted, died while this appeal was pending.

Fourth Circuit: Appropriations Acts May Effectuate Implied Repeals Of Substantive Legislation

In an interesting decision today written by Judge Wilkinson, Last Best Beef LLC v. Dudas, the Fourth Circuit reversed a district court's holding that a congressional appropriations act couldn't effect an implied repeal or suspension of existing legislation.

In this case the existing legislation is the Lanham Act, which states that "[n]o trademark ... shall be refused registration on the principal register on account of its nature." A rider in a 2006 appropriations act, however, prohibited the use of federal funds to register any trademark of the phrase "The Last Best Place." The U.S. Patent and Trademark Office (USPTO) complied with the rider and refused to register the trademark at the request of a business organization (whom the rider apparently was designed to frustrate). The district court held that the appropriations act couldn't permissibly effectuate an implied repeal of substantive legislation (and therefore the USPTO was required by the Lanham Act to register the trademark).

The Fourth Circuit rejected that categorical rule, and held that when a later appropriations act irreconcilably conflicts with a preexisting substantive law, the appropriations act controls. Judge Wilkinson's opinion concluded,"Where, as here, reconciliation [between the two congressional acts] is not possible, courts have no choice but to give effect to the later enactment. To adopt [the district court's] position would be to construct artificial obstacles to the efforts of current democratic majorities to enact their views into law."

Fourth Circuit Issues Important Copyright, Claim Preclusion Case

Today the Fourth Circuit closed the final chapter on the Bouchat litigation, the copyright infringement saga arising out of the design and use of the Baltimore Ravens' logo. Bouchat v. Bon-Bon Dep't Stores, Inc.

The prior round of infringement litigation was brought against the Baltimore Ravens football franchise and the NFL. In that round, Bouchat prevailed on liability for infringement, but didn't recover damages. This round of litigation was brought against several hundred downstream licensees that used the infringing logo in various endeavors.

In a significant application of the doctrine of claim preclusion which is sure to be cited many times, the Fourth Circuit held that the doctrine prevents Bouchat from obtaining actual damages from the licensees, since in the prior case against the team and NFL he had not recovered actual damages. The Court also held that Bouchat's failure to register his copyright before infringement began rendered him ineligible for statutory damages. What makes that ruling significant is that the downstream licensees' infringement began after the copyright registration; the Fourth Circuit relied on the fact that the Baltimore Ravens and NFL began their infringement a month before the registration, and the Court used that date as the commencement date with respect to the downstream licensees.

Judge Niemeyer wrote a provocative concurring opinion discussing the problems inherent in applying the Copyright Act in the case when multiple infringements by multiple parties arise from a single work. For example, must a copyright owner join all related infringers? He predicted these issues will arise with increasing frequency in an age of advanced technology for copying and transmitting data. He called on Congress to consider the matter and develop a more workable balance

COA Rejects Lawsuit Challenging Economic Development Incentives

Today, in Blinson v. State, the Court of Appeals (COA) rejected a lawsuit challenging the constitutionality of economic development incentives. The suit trained on incentives used by the State, Forsyth County, and Winston-Salem to lure Dell to open a new manufacturing facility in N.C. But the theory of the case was so expansive, so sweeping, it would have called into question the legality of nearly every economic incentive issued by the State and local governments, as well as an indeterminate number of tax exemptions and credits.

Today's unanimous opinion was written by Judge Geer.

My colleagues and I represented Dell in this case, and frankly, there was no other legitimate outcome than dismissal of this case. The constitutional challenges were largely foreclosed by precedent. And the plaintiffs had no workable standard by which courts could, in as-applied challenges, sift through economic incentives to determine which ones should be deemed unconstitutional and which ones should pass muster.

More fundamentally, this is a quintessential political controversy. It's a public policy and economic dispute about the wisdom of using public resources to create jobs and stimulate the economy. We have a proud tradition of separation of powers in this State, one expressly reserved in the State's Constitution. Our Supreme Court, faithful to principle of judicial restraint, has long emphasized that the legislature is the policy-making agent of the People and that the Court will not intervene in policy disputes even if it believes the legislature has made a bad bargain or otherwise acted contrary to the best interests of the State and its citizens. Today's decision is faithful to that tradition of judicial restraint. As Judge Geer's opinion reaffirms today, it's "the role of the General Assembly and the Executive Branch -- and not the courts -- to determine whether such incentives are sound public policy."

There is an ongoing and lively public debate on the scope and propriety of economic incentives. The General Assembly has held hearings, the newspapers are editorializing, gubernatorial candidates are staking out positions on the issue, and Gov. Easley even vetoed certain incentive legislation this summer, which drew great public attention and intensified the political debate. This as it should be in a democracy. Public debate belongs in the political arena, not in the judicial branch.

NC COA Decisions Today

Today the NC Court of Appeals (COA) released 22 published opinions--11 criminal, 11 civil. More on these cases later.

Fourth Circuit: Novell's Antitrust Claims Against Microsoft Can Go Forward

Today the Fourth Circuit, ruling on an interlocutory appeal, affirmed District Judge Motz's order which granted in part and denied in Microsoft's motion to dismiss antitrust claims filed against it by Novell. The case is Novell, Inc. v. Microsoft Corp. The claims allege anticompetitive conduct in the PC operating-systems market, as well as monopolization or attempted monopolization of markets for office-productivity applications (e.g., Word Perfect). The Court, in an opinion by Judge Duncan, agreed that some of Novell's claims were time barred. As for the other claims, the Court rejected Microsoft's arguments that Novell didn't have antitrust standing (applying Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519 (1983)).

This is a noteworthy decision on antitrust standing, although the Court emphasized that its decision is limited to Novell's standing on these facts and shouldn't be viewed as "unduly expanding the universe of private antitrust plaintiffs."

Fourth Circuit Issues Significant Arbitration Decision

On Friday the Fourth Circuit issued a significant arbitration decision arising from the Middle District of N.C. The case is In re: Cotton Yard Antitrust Litigation. Judge Traxler wrote the majority opinion. The other panel members dissented from various parts of his opinion.

The case was brought by business-purchasers of cotton and poly-cotton yarns. They alleged that manufacturers of the yarns had engaged in a price-fixing conspiracy in violation of the Sherman Act.

The manufacturers moved to dismiss, contending that plaintiffs were bound by arbitration clauses. Judge Beaty disagreed. He concluded the arbitration clauses couldn't be enforced because they prevented plaintiffs from effectively vindicating their statutory antitrust claims.

The Fourth Circuit reversed, issuing three key holdings, discussed below.

1. Arbitration Agreement May Be Implied Into Oral Agreement By Usage Of Trade

The first issue the Fourth Circuit confronted was this: one of the defendant manufacturers (Frontier) had reached oral agreements over the phone with customers, and arbitration was never discussed. Frontier sent written confirmations after the conversations, and those writings contained an arbitration clause. But Judge Beatty held that the arbitration clause in those confirmations materially altered the oral contracts, and therefore the arbitration clause wasn't binding.

On appeal, Frontier argued that arbitration was automatically part of the oral agreements reached by the parties by "usage of trade," because arbitration of disputes is well established in the textile industry. See N.C.G.S. 25-2-201 (usage of trade is part of agreements under U.C.C.). Chief Judge Williams dissented as to this holding.

2. Arbitration Agreements Are Enforceable Despite Prohibition On Joinder

The arbitration agreements prevent joinder -- a single plaintiff bring claims against multiple defendants in a single proceeding. The plaintiffs argued, and Judge Beaty agreed, that because they allege the existence of a price-fixing conspiracy, the inability to join all defendants in a single proceeding prevents plaintiffs from vindicating their statutory rights.

The Fourth Circuit found the argument unpersuasive. The Court observed that co-conspirators aren't necessary parties: a plaintiff can prove the existence of a conspiracy in an action against just one of the members of the conspiracy; nothing prevents the plaintiffs from presenting evidence about the actions of non-party defendants in order to establish the existence of the alleged price-fixing conspiracy. While individual proceedings may be less efficient, the inefficiency, the Court held, is a function of Congress's preference for resolution of disputes by arbitration. (The Court also deemed it important to note that some defendants had settled, leaving only two defendants remaining, with the consequence that each plaintiff would have to pursue, at most, two arbitrations.) The Court suggested that in another case it might be possible for a plaintiff to develop an evidentiary record to prove that the cost of pursuing individual proceedings would be prohibitive and thwart the plaintiff's ability to vindicate statutory rights. Finally, the Court found unpersuasive the fact that discovery against third parties is limited in arbitration, meaning discovery against non-party co-conspirators would be limited.

3. Contractual Shortening Of Limitations Period Not Per Se Invalid

The federal antitrust statutes have a four-year statute of limitations. The arbitration agreements in this case, however, establish a one-year limitations period. Plaintiffs argued that the shortening of the limitations period rendered the arbitration agreements unenforceable. The Fourth Circuit disagreed.

First, the Court held that the one-year period wasn't unreasonably short.

Second, the Court held that the statutory limitations period isn't substantive but instead is procedural; therefore, the contractual shortening of the limitations period didn't run afoul of the Supreme Court's admonition that arbitration agreements may not dispossess plaintiffs of the substantive rights established by the statute under which they are suing.

Third, the Court addressed plaintiffs' argument that, even if a portion of their claims are timely under the one-year limitations period, they nonetheless can't effectively vindicate their rights because the one-year period could substantially reduce the amount of damages recoverable. The Court rejected the notion that an agreement is unenforceable simply because less damages are available than would be available in a judicial forum.

(The latter two holdings drew a dissenting opinion by the district judge who sat on the panel by designation. He would invalidate the one-year limitations period and sever it from the arbitration agreements.)

The Court remanded for the district court to determine whether plaintiff's claims were timely filed under the one-year limitations period. If the district court on remand concludes that the claims were not timely filed (i.e., that they are entirely barred by the one-year limitations period), the district court must consider whether severance of the limitations provisions, rather than invalidation of the arbitration agreements, would be the appropriate remedy.

Supreme Court Addresses Rule Violations In Two Cases

On Friday the N.C. Supreme Court issued two per curiam decisions (no opinions) in cases where the appeals had been dismissed by the Court of Appeals (COA) for purported rule violations. Each case had to do with proof of service of a notice of appeal. The first case is Blevins v. Town of West Jefferson (for the underlying COA decision, see here). The second case is In re C.T. & B.T. (for the underlying COA decision, see here). Blevins got to the Supreme Court based on Judge Geer's dissent. C.T. got to the Supreme Court based on Judge Wynn's dissent.

The split COA decisions in Blevins and C.T. reflect the controversy in recent years spawned by the Supreme Court's 2005 decision in Viar v. N.C. Dep't of Transportation. With Friday's decision in Blevins, this makes three times in the past five months that the Supreme Court reversed COA decisions that had dismissed appeals for rule violations. (The other two cases are State v. Hart and Walsh v. Town of Wrightsville Beach.)

If the Supreme Court is trying to send a signal to the COA in these cases, it may be this: don't go overboard in looking to dismiss appeals.

Blevins

The purported rule violations in Blevins were these: (1) the notice of appeal in the record on appeal didn't have the superior court file stamp showing it was filed; (2) the record on appeal didn't contain the certificate of service for the notice of appeal.

Judge Tyson's majority opinion deemed each violation a "fatal" defect requiring dismissal. Indeed, he deemed them jurisdictional defects.

Judge Geer disagreed. As for the lack of a file stamp, she deemed it inconsequential because the record on appeal (to which the appellee stipulated) contained a statement that the notice of appeal had been timely filed. As for the lack of a certificate of service for the notice of appeal, she deemed this inconsequential because appellee didn't raise any issue about service of the notice of appeal. Because the appellee didn't take issue with service of the notice of appeal and participated in the appeal, Judge Geer urged, this meant the appellee waived the appellant's failure to include a certificate of service. See Hale v. Afro-Am. Arts Int'l, Inc. 335 N.C. 231 (1993). Judge Geer accused the majority of misapplying and improperly seeking to overrule Supreme Court precedent. She deemed it particularly inappropriate to dismiss the appeal sua sponte without notice to the appellant and without any opportunity to correct the purported error by moving to amend the record on appeal.

On Friday the Supreme Court vindicated Judge Geer by reversing. The reversal presumably means the following.

(1) First, the majority erred in concluding that the absence of a file stamp on the notice of appeal (in the record on appeal) is a jurisdictional defect requiring dismissal. So long as the record on appeal somewhere establishes that the notice of appeal was timely filed (e.g., by way of a statement to that effect in a stipulated record), there should be no dismissal.

(2) Second, the failure to include a certificate of service for the notice of appeal isn't a jurisdictional defect. Rather, it may be waived by the appellee--waived by participating in the appeal without taking issue with service of the notice of appeal. If the appellee participates in the appeal and doesn't complain about service of the notice of appeal, the COA shouldn't raise the matter sua sponte and dismiss the appeal.

C.T.

The latter point is demonstrated by C.T., also decided Friday.

In C.T. the appellant failed to attach a certificate of service to the notice of appeal when it was filed in the trial court. The appellees objected immediately, moving to trial court to dismiss the appeal. And, when the case was docketed on appeal, they again moved to dismiss the appeal on this basis. The COA, in an opinion by Judge McGee, held that the failure to attach a certificate of service to the notice of appeal was fatal. The Supreme Court affirmed.

By affirming C.T. while reversing Blevins, the Court appears to have adopted not only Judge Geer's views in Blevins but also her distinction of C.T. as a waiver case. For as Judge Geer explained in her Blevins dissent, the problem with C.T. (which distinguished it from Blevins) was that in C.T. the appellees took issue with the appellant's failure to include proof of service of the notice of appeal; therefore there was no waiver of the certificate of service issue.

The Upshot

The upshot of all of this: If you're appealing, make sure you attach a certificate of service to your notice of appeal. And include it in the record on appeal (although a stipulation in the record on appeal that the notice of appeal was timely served should do the trick of the appellee joins the stipulation and participates in the appeal).

SCT Reverses PC Workers' Comp.

In Plott v. Bojangles Restaurants, Inc., the NC Supreme Court reversed per curiam a then-Judge Hudson majority based on a Judge Tyson dissent in a workers' comp. case.

In Plott, the Industrial Commission cited a doctor who testified that the injured worker had a 10% permanent partial disability and awarded the worker only temporary total disability and medical compensation, determining that the worker was not entitled to ongoing benefits because he refused work.

The COA majority remanded for further findings, and also held that N.C. Gen. Stat. sec. 97-32 suspends and restores benefits and does not apply where the benefits are disputed. Judge Tyson dissented and would have affirmed, underscoring in his dissent that the IC didn't need to make findings not crucial to its award. Judge Tyson suggested that the IC didn't need to make findings relating to what general compensation the worker would be entitled to receive for his permanent partial disability had he not refused work because he indeed refused work.

The per curiam reversal would seem to indicate that 97-32 does not only suspend and reinstate those benefits already acknowledged or being paid. And given the text of the statute, rather than just its title, that would seem to be correct. (The statute states in full "If an injured employee refuses employment procured for him suitable to his capacity he shall not be entitled to any compensation at any time during the continuance of such refusal, unless in the opinion of the Industrial Commission such refusal was justified.") But 97-32 would also seem to indicate that if the injured worker stops refusing to work and takes a job, 97-32's bar regarding his benefits would be lifted. Therefore, it would make sense if the IC had included, or been forced to include, language as to the worker's disability and what the general compensation for the disability would be, should the worker take a job in the future.

NC SCT Splits Over Case Using Lease And Purchase Agreements To Reach Workers' Comp. Coverage

The NC Supreme Court split in Masood v. Erwin Oil Co. and thereby affirmed without precedential value a COA opinion applying workers' comp. law to purchase and lease agreements.

At the COA, now Justice, then Judge, Hudson held that broad marketing language in a gas purchase contract made a gas wholesaler a contractor regarding the purchased gas, that maintenance and hours requirements in a lease between the gas wholesaler, which also leased stations, and its tenant made the tenant the gas wholesaler/lessor's subcontractor, and therefore the gas wholesaler/lessor was the statutory employer of the tenant's injured worker and liable for workers' comp. benefits under N.C. Gen. Stat. sec. 97-19. Judge Bob Hunter dissented, indicating that the majority was expanding section 97-19 and the definition of statutory employers (who are subject to workers' comp. when then don't ensure that their subcontractors have workers' comp. insurance) beyond their intended scope.

Seems like a good idea to check contracts up and down to see if, whatever the contracts' primary purposes, they could conceivable make one a contractor and a subcontractor. If so, checking for others' workers' comp. certificates would also seem like a good idea.

Affirmative Defenses Need Not Be Pled in Small Claims

In Setliff v. Subway Real Estate Corp., the NC Supreme Court per curiam affirmed a COA opinion holding that affirmative defenses do not need to be pled to be preserved and presented at appeals in the form of District Court de novo trials. The underlying COA case indicated, among other things, that Rule 8(c), which requires that affirmative defenses be pled, applies only to cases arising in district or superior court, and that the small claims statute which makes a defendant's failure to answer a general denial covers even affirmative defenses.

Supreme Court Decisions Today

The Supreme Court issued 11 decisions today -- all summary per curiam affirmances and reversals with no opinions. The 11 cases consisted of 3 criminal cases and 8 civil cases, 3 of which are workers' comp cases, another 2 of which concern appellate procedure.

Seven cases were civil cases arising from dissents in the Court of Appeals. Of these, there were three reversals. The vindicated dissenters: Judges Geer, Tyson, and Hunter. The dissenters who didn't carry the day: Judges Wynn, Stroud, Hunter, and Levinson.

We'll have more on these cases later.

The Supreme Court also issued orders on petitions today. A quick review indicates that no petitions for discretionary review were granted.

NC SCT Decisions Today

We hear that the NC Supreme Court will issue decisions today--the first since August. We hope to have more later.

Fourth Circuit: Potential Variation In State Laws Thwarts Nationwide Class Certification

Yesterday the Fourth Circuit affirmed the denial of nationwide class certification in an insurance coverage case. The case is Ward v. Dixie National Life Insurance Co., and it arose from South Carolina (S.C.).

The district court allowed certification of a class of S.C. residents but not a nationwide class, relying on S.C.'s "door-closing" statute. Rather than deciding whether the door-closing statute forecloses non-resident class membership in suits heard in a S.C. federal court sitting in diversity and not just in state court (which is now an open issue), the Fourth Circuit went down a different track, holding that plaintiff failed to show that common issues would predominate over individual issues in a nationwide class action.

Some plaintiffs don't appreciate the burden they bear in moving for certification of a multistate class. They must demonstrate to the trial court that common issues will predominate over individual issues, and this includes legal issues, which produce variations in factual issues. In a multistate class, where multiple states' laws may apply, variations in state law naturally lead to individualized issues; and these individualized issues tend to predominate over common questions in many cases, particulary when many states are involved, as is the case with a proposed nationwide class.

As the Fourth Circuit underscored yesterday, the burden is on the plaintiff: (1) to identify all the state laws that may apply to the claims of the proposed class members (often this will be the laws of the states in which the class members reside or sustained their injuries); and (2) to compare any variations in those states' laws (charts are often used) to demonstrate that their respective laws don't vary materially:

"In a class action potentially governed by the laws of multiple states, identifying the applicable body or bodies of state law is critical because variations in state law may swamp any common issues and defeat predominance. [The named plaintiff] has the burden of showing that common questions of law predominate, and [she] cannot meet this burden when the various laws have not been identified and compared.... Ward failed to identify and compare applicable state laws. When a plaintiff seeking certification fails to provide this analysis, it is not possible for the district court to determine whether any variations in state law pose insuperable obstacles to certification of a multistate class." (Internal quotation marks omitted)

This is a substantial burden. As Judge Posner has held in this context, even the law of negligence varies materially across the nation. Matter of Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995) ("The law of negligence, including subsidiary concepts such as duty of care, foreseeability, and proximate cause, may as the plaintiffs have argued forcefully to us differ among the states only in nuance, though we think not . . . . But nuance can be important, and its significance is suggested by a comparison of differing state pattern instructions on negligence and differing judicial formulations of the meaning of negligence and the subordinate concepts.").

Split COA Refuses Stay Pending Bankruptcy

Today the Court of Appeals (COA), in yet another split decision, rejected a stay pending a defendant's bankruptcy proceeding. The case is Park East Sales, LLC v. Clark-Langley, Inc.

After one of defendants filed for bankruptcy and instituted an adversary proceeding in the Bankruptcy Court, other defendants in the state court action moved the trial court per N.C.G.S. 1-75.12 to stay further proceedings pending final disposition in the bankruptcy action. (Section 1-75.12 authorizes a trial judge to stay an action to avoid substantial injustice.) When the trial court denied the stay, defendants appealed. In a majority opinion by Judge Tyson, the COA rejected the appeal on the ground that, under 1-75.12's text, review of a stay denial may be had only by petition for writ of certiorari. Defendants hadn't filed a cert petition, but instead a notice of appeal. The majority refused to treat the appeal as a petition for a writ of certiorari.

Chief Judge Martin dissented. He would exercise discretion to treat defendants' assignment of error as a cert petition. He added that the trial court abused its discretion in denying the stay because the bankrupt party was a necessary party whose rights and obligations were at the center of the state court action, and because the bankruptcy court was a more convenient and efficient forum since all parties already had been joined in the adversary proceeding there. The majority responded that Judge Martin's position would set a "dangerous precedent" that would "compel a stay to be entered in any pending multi-party state action where only one party later files bankruptcy." Judge Martin deemed that an overstatement of his position.

Split COA Reverses Durham's Tax Valuation Of IBM Property

Today the Court of Appeals (COA) handed IBM a victory by holding that Durham's Property Tax Commission (Durham) misapplied the burden of proof when IBM challenged Durham's valuation of 49,000 pieces of leased computer equipment. The COA held that Durham erroneously placed the burden of persuasion on IBM. The case is In the Matter of Appeal of IBM Credit Corp.

Ad valorem tax assessments are presumed correct, but NC Supreme Court case law holds that a taxpayer may rebut this presumption by producing competent evidence tending to show that the taxing authority's appraisal is based on arbitrary (or illegal) valuation methods. Once a taxpayer produces that evidence, the burden of proof and persuasion then shifts to the taxing authority to prove that its valuation methods in fact produce true values. The burden-shifting rule was announced in In re Appeal of Southern Railway Co., 328 S.E.2d 235 (N.C. 1985).

In today's case the COA held that Durham put the burden of persuasion (not just production) on IBM, and that was error. The COA remanded so Durham can apply the proper burden of proof framework. Judge Geer wrote the majority decision, joined by Judge Elmore.

Judge Tyson dissented.

Split COA Orders New Trial In OPHSCA Case

Today the Court of Appeals (COA) reversed a jury verdict which imposed strict liability under North Carolina's Oil Pollution and Hazardous Substances Control Act (OPHSCA). The case, Ellison v. Gambill Oil Co., arose when Plaintiff's well water was contaminated with gasoline leaked from underground storage tanks at a nearby mini mart.

OPHSCA is a strict liability statute. It provides a cause of action for damages to person or property, without regard to fault, against any person with control over oil or other hazardous substances discharged into State waters. However, OPHSCA contains an exception to strict liability when the person subject to liability proves the discharge was caused by the act or omission of a third party, whether or not the third party was negligent. The problem with today's case: the jury wasn't instructed on this "third-party exception" to strict liability; and there was proof that the gas leak was caused by a bad clamp installed by a third party several years earlier. Thus, the COA ordered a new trial. Judge Hunter wrote the majority opinion.

Judge Jackson dissented on the ground that the "third party exception" should be treated as an affirmative defense, which she would deem waived by those defendants who failed to plead it. She relied on other federal and state cases from outside NC holding that exceptions to strict liability environmental statutes (e.g., CERCLA) are affirmative defenses. The majority would have none of that, dismissing those authorities as "not controlling" and choosing not to follow them.

COA Decisions Today

Today the Court of Appeals (COA) released 18 published decisions: 8 criminal cases, 3 domestic cases, and 7 non-domestic civil cases. Remarkably, 5 of those 7 civil cases generated a dissenting opinion. Looks like the Supreme Court will (by virtue of the automatic right of appeal from COA dissents) have its work cut out for it. We'll post on today's COA decisions later.

Fourth Circuit Holds VA's Open Primary Law Unconstitutional

Today the Fourth Circuit affirmed a ruling that Virginia's open primary law is unconstitutional as applied to a state senatorial district Republican Committee and enjoined the state from requiring an open primary in that district in 2007. The case is Miller v. Brown. The gist: the open primary law, as applied, burdened the Committee's First Amendment associational rights, by forcing it to use a nomination process that prevented it from excluding voters with whom it didn't wish to associate, namely Democrats. (The freedom of association, of course, includes the freedom not to associate.) The Fourth Circuit rejected the state's argument that the open primary law, as applied, is narrowly tailored to serve a compelling state interest.

Fourth Circuit Writ of Mandamus: Right To Jury Trial In Admiralty Action

Last Thursday the Fourth Circuit issued a writ of mandamus in a dispute between Lockheed Martin and its insurer with respect to a Lockheed-owned ship damaged at sea. Lockheed requested a jury trial on its counterclaims. Admiralty claims generally don't garner a jury trial. The district court struck Lockheed's request for a jury trial on the ground that the case fell within the court's admiralty jurisdiction. But Lockheed filed a petition for writ of mandamus. The insurer first argued that mandamus was an improper remedy, because Lockheed could raise the issue later on appeal from a final judgment. Citing cases from 1964 and 1959, the Fourth Circuit held that "[i]n this circuit, a petition for a writ of mandamus is the proper way to challenge the denial of a jury trial." Then, after analyzing the bizarre and complex framework for determining whether or not a right to a jury trial applies in an admiralty action (including the so-called "savings-to-suitors" clause), the Fourth Circuit held that Lockheed had a right to a jury trial.

Needless to say, most of us don't do admiralty work, but if you ever do, you might want to read this case to determine whether or not a jury trial may be had.