4th Circuit Rejects Challenge To MD Occupational Licensing Scheme

On Friday, in Brown v. Hovatter, the Fourth Circuit rejected constitutional challenges to a Maryland law that restricts licenses for morticians and funeral homes. The statute prohibits corporate ownership of a mortician's license or funeral home; and it prohibits unlicensed individual ownership of funeral homes. The libertarian Institute for Justice, which frequently challenges anti-competitive licensing schemes around the nation, challenged the Maryland law under the equal protection, due process, and dormant commerce clauses. The suit contended that "Maryland funeral industry members profit handsomely from the most blatantly anti-competitive funeral regulation in the nation, [effectively] add[ing] nearly $800 to the cost of a funeral in Maryland." The district court held that the statute violates the dormant commerce clause. The Fourth Circuit disagreed.

Today's NC Supreme Court Decisions

Today the NC Supreme Court issued orders and opinions.

The Court granted discretionary review in one case, it appears.

And the Court issued decisions (opinions or per curiams) in nine cases, four of them criminal cases (I'm not counting the two additional cases where the Court ruled that discretionary review was improvidently allowed). In two of the nine cases, the Court deadlocked 3-3 after Justice Martin recused himself, meaning the Court of Appeals was affirmed in both cases.

And that includes the biggest decision of the day, a 3-3 split in a constitutional challenge to the Lottery Act. Because of the tie, the 2-1 decision of the Court of Appeals is affirmed (Judge Calabria dissented below), so the Act is upheld. For a story on today's non-decision, see here.

In another 3-3 deadlocked vote, the Court failed to resolve a debate over dram-shop liability--i.e., the responsibility of bars and restaurants to keep drunk drivers off the road. This was the well-publicized case against Torero's restaurant. As a result of the 3-3 split, the Court of Appeals' decision is affirmed, and Torero's walks away with a victory in this one.

4th Circuit Issues SCA Ruling On Employer's Access Of Employee's Personal Email Account

Yesterday in Van Alstyne v. Electronic Scriptorium Ltd. the Fourth Circuit addressed the Stored Communications Act (SCA), 18 U.S.C. 2707, and held that a plaintiff suing under the SCA must prove actual damages to be eligible for statutory damages. The Court held, however, that a plaintiff need not prove actual damages to recover punitive damages or attorney's fees.

The SCA imposes criminal liability and a civil cause of action against one who "intentionally accesses without authorization a facility through which an electronic communication service is provided" or "intentionally exceeds an authorization to access that facility," and by doing so "obtains, alters, or prevents authorized access to a wire or electronic communication while it is in electronic storage in such system." In yesterday's case, the president of the plaintiff's former employer accessed her personal email account repeatedly while the plaintiff was employed there and for a year after she left the company. Against the president and the company, the jury awarded, in the aggregate, $175k in statutory damages and $100k in punitive damages. She was permitted to recover these damages (and attorney's fees) without proving actual damages.

The Fourth Circuit interpreted the SCA just as the Supreme Court has interpreted the Privacy Act: as requiring proof of actual damages as a prerequisite to recovering statutory damages. See Doe v. Chao, 540 U.S. 614 (2004). This result is contrary to the conclusion reached by several district courts under the SCA.

The Fourth Circuit did hold, however, that a prevailing plaintiff under the SCA need not prove actual damages in order to recover punitive damages. The prevailing rule is that punitive damages aren't recoverable absent proof of actual damages--unless a statute so authorizes. The Court concluded that the SCA does provide such authorization: the SCA says that "[i]f the violation [of the SCA] is willful or intentional, the court may assess punitive damages"; the Court found no limiting language in that phrase that would require proof of actual damages.

Yesterday's COA Decisions

For this blog's purposes, there isn't much noteworthy in yesterday's stack of cases. There are some zoning cases and some contributory negligence cases. There's a discovery case holding (consistent with the so-called "Sporck doctrine") that a lawyer's selection of information from documents (including verbatim notes) may be entitled to opinion work product protection even though the underlying documents themselves aren't protected work product. And there's a preliminary injunction case holding that an agreement's language that “[e]ach party hereto acknowledges that it has no adequate means to protect its rights . . . other than by securing an injunction” supports a showing of "irreparable harm" to get the PI. That type of language is boilerplate in many agreements such as employment agreements.

In the "unusual" category, there's an unpublished decision affirming the dismissal of a suit against the Cleveland Draft House (in Garner, NC) by a woman who became paralyzed after drinking there one night. The plaintiff showed up to the bar at 11:30 p.m., ordered mixed drinks, and got drunk. She left at 2:23 a.m., drove her car to the front of the bar, and got out; the car then moved and hit her, rendering her paralyzed. So she sued the bar, claiming negligence, product liability, and unfair and deceptive trade practices--for serving her drinks while she was drunk and for allegedly serving her mixed drinks that contained more than one serving of alcohol (the alleged "deception" was not disclosing to her that the drinks were stronger than usual). The tort claims were dismissed on the basis of contributory negligence: even if the drinks were stronger than she expected, she was fully aware she was drinking and could become drunk, the Court held. As for her deceptive trade practice claim, the Court held that her allegations (that "she was served drinks stronger than the recommended dosage") didn't support the claim.

Today's COA Decisions

Today the NC Court of Appeals released 22 published decisions (in 21 cases; two opinions arise from the same case). Nine are in criminal cases. More on these cases later.

4th Circuit Repudiates NLRB, Rules For Employer In Case Of Employee Dismissed For Profane Remark About Company VP

Yesterday the Fourth Circuit issued a significant decision repudiating the NLRB. The NLRB had ruled that an employer had unlawfully discharged an employee for making a profane remark about the company's VP during a period when the union was renegotiating a collective bargaining agreement. A split Fourth Circuit panel disagreed. Judge Duncan wrote the majority decision; Judge King dissented. The case is Media General Operations, Inc. v. NLRB.

The case involved the dismissal of an employee for making a profane, derogatory remark about the company's VP, during work hours and in the work place, in connection with the renegotiation of a union collective bargaining agreement. He referred to the VP as an "f***ing idiot" or a "stupid f***ing moron." He made the comment to supervisors because he was upset about a letter the VP had written to employees about the renegotiation process--a letter that was neither unlawful nor inaccurate and that the employee hadn't read. The NLRB concluded that the National Labor Relations Act (Act) protected the employee's use of profanity about his employer and that his dismissal was unlawful. The Fourth Circuit disagreed.

A preliminary issue the Court had to confront was whether the NLRB was correct in concluding that the employee's statement was "concerted activity" within the meaning of the Act. The NLRB concluded that his statement was "concerted activity" because "it was part of an ongoing collective dialogue between [the VP] and the unit employees about the substance and process of the contract negotiations" and was "a logical outgrowth of the prior collective and concerted activity." The Fourth Circuit found no error in that conclusion, though the Court noted that "the conduct in question skirts the outer bounds of that which can be considered concerted activity under the Act’s auspices." Why? Because his derogatory comment "was part of a conversation he individually initiated; it was not temporally associated with the actual negotiations in question or the actions that prompted it; and it could not have been directly responsive to the [the employer's] negotiating positions, since [the employee] prefaced the remark by stating that he had not yet read [the VP's] letter."

The Court observed, however, that an employee may forfeit the Act's if the conduct is "egregious or flagrant." The Court held that the employee forfeited the Act's protections. The Court so held after applying one of the NLRB's balancing tests, which examines: "(1) the place of the discussion; (2) the subject matter of the discussion; (3) the nature of the employee’s outburst; and (4) whether the outburst was, in any way, provoked by an employer’s unfair labor practice." While the first two factors favored the employee and the last factor favored the employer, the focus was on the third factor. Here the Court held that the NLRB "overreached as a matter of law in finding that the conduct in question was not so egregious as to forfeit the protection of the Act." The Court added: "This was not a spontaneous outburst in response to an illegal threat [by the employer] but an ad hominem attack made in the context of a discussion [the employee] initiated with two supervisors. It was a response to an undisputedly legal letter issued in exercise of the company’s rights. In addition, [the employee] had not even read the letter in question, which further divorces his derogatory remark from the context of the ongoing labor dispute and thus makes the remark of a nature less eligible for protection."

In response to what it deemed "the inexplicably hyperbolic tenor of the dissent," the Court hastened to note that it wasn't holding that employee conduct is protected only at the physical site of labor negotiations. Rather, the decision was based on the facts of this case, involving an employee's profane remark about his employer, directed to his supervisors, during work hours and in the work place,in a conversation the employee himself initiated regarding an accurate and legal letter he had never read, in setting that was physically and temporally removed from the site of ongoing collective bargaining negotiations.

4th Circuit Upholds Large FMLA Judgment Against Pfizer

This week in Dotson v. Pfizer the Fourth Circuit upheld a massive judgment in a Family and Medical Leave Act (FMLA) case involving adoption-related leave by an employee who took time off to adopt a child from Russia and who was later fired. Dotson claimed FMLA retaliation. He prevailed in a jury trial, and the district court awarded him over $660k in damages (compensatory and statutory liquidated) plus $389k in attorney fees and costs--a total judgment topping $1 million.

Pfizer made three arguments on appeal, none of which carried the day. First, it argued that the FMLA doesn't provide for the type of intermittent adoption-related leave that Dotson took (he took pre-adoption intermittent leave, and Pfizer claimed it didn't approve that). Second, Pfizer argued that a rational jury couldn't hold Pfizer liable for retaliating against Dotson for exercising his FMLA rights, because Dotson didn't request FMLA leave. On that issue, the Fourth Circuit held that employees don't need to invoke the FMLA in order to benefit from its protections. Third, Pfizer argued that Dotson couldn't show retaliatory animus by the persons who decided to fire him and that there was no evidence that the firing was pretextual.

Dotson is actually going to collect even more money, because he prevailed on his cross-appeal to recover pre-judgment interest (the district court had denied pre-judgment interest).

4th Circuit Reiterates: Don''t Transform Contract Actions Into UDTPA Claims, Particularly In Disputes Between Sophisticated Businesses

This past week the Fourth Circuit reiterated this principle: a case that at its core is a dispute over contractual performance shouldn't give rise to a claim under N.C.'s unfair and deceptive trade practices act, G.S. 75-1.1 ("UDTPA"). The case is PCS Phosphate Co. v. Norfolk S. Corp., and the opinion was written by Judge Wilkinson.

Plaintiff PCS is a mining company operating a phosphate mine. PCS relies on rail transportation to ship materials to and from the mine. The defendant, Norfolk Southern, is the railroad carrier that serves the mine. Years ago, Norfolk Southern had agreed to relocate the rail line to the mine at its own expense should that need arise. The need arose because PCS needed to mine under the rail line. But Norfolk Southern refused to relocate the line because it was unsuccessful in securing funding to do so. Not only did Norfolk Southern refuse to relocate the line, it told PCS that if PCS wouldn't fund the relocation itself, Norfolk Southern would seek permission from the Surface Transportation Board to abandon the line--knowing that abandonment would destroy PCS's ability to continue operating the mine, since rail access was necessary to ship raw materials and products to and from the mine. In an effort to mitigate its damages, PCS began constructing the relocated line at its own expense.

PCS then sued Norfolk Southern for breach of contract. PCS also asserted a UDTPA claim based on Norfolk Southern's threat to abandon the line. PCS prevailed on the contract claim. But the Fourth Circuit balked at the UDTPA claim, stating: "This claim is simply an attempt to multiply the damages for an ordinary breach of an agreement by re-characterizing the breach as a violation of the UDTPA. North Carolina law forbids this. It does not permit a party to transmute a breach of contract claim into a tort or UDTPA claim for extraordinary damages because awarding punitive or treble damages would destroy the parties' bargain and force the defendant to bear a risk it never took on. * * * The basis for PCS’s claim therefore is nothing more than two companies fighting over the enforceability of an agreement. Although we hold that the agreement is enforceable, we will not re-write the parties’agreement by awarding treble damages for the breach thereof."

The Court added that Norfolk Southern's relocation agreements "are far from the reach of the UDTPA because they are wholly divorced from the context of consumer transactions." The Court stressed that the UDTPA "'was intended to benefit consumers,' see Dalton v. Camp, 548 S.E.2d 704,710 (N.C. 2001), but this dispute is between two sophisticated business entities: a rail carrier and a mine owner." This passage is somewhat difficult to square with N.C. appellate decisions which routinely allow UDTPA claims to proceed in disputes between businesses.

COA: Damages and Attorneys' Fees Cannot Be Obtained Through Rule 60 Motion or Tax Foreclosure Action

Today the COA held that a Rule 60 motion for relief from a judgment cannot be used to assert claims for damages or attorneys' fees. The case is County of Durham v. Daye.

The Dayes owed back property taxes to the City and County of Durham. The Dayes died in the late 1990s, and Mr. Daye's brother took possession of the property. Plaintiffs attempted to collect the back taxes - but tried to contact the deceased Dayes instead of Mr. Daye's brother. Plaintiffs then obtained a default judgment and the property was sold. The Dayes' heirs, assignees, and devisees filed a Rule 60 motion for relief from the judgment. The trial court set aside the default judgment and awarded defendants damages and costs.

The COA held that a Rule 60 motion can only be used to have a judgment or order set aside, and not to assert a claim for damages. Thus, the trial court had no authority to award damages to defendants. The COA noted that the award of damages was also invalid because claims for damages cannot be asserted in tax foreclosure actions.

The COA further explained that the proper course of action for defendants would have been to file a Rule 60 motion in the cause to set aside the default judgment, and then file an independent action seeking damages resulting from plaintiffs' actions.

Today's COA Decisions

The NC Court of Appeals released 15 published decisions today. Four are criminal cases; eleven are civil cases. More on these decisions later.