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Appellate Mediation Comes to Virginia

Wednesday, February 14th, 2024

Published with the permission of the Virginia State Bar. Originally published in the Virginia Lawyer, Vol. 67/No. 3.

The Supreme Court of Virginia has approved a pilot program for limited appellate mediation in the Court of Appeals of Virginia and Supreme Court of Virginia beginning January 1, 2019. The Court’s announcement recognizes the importance of expanding the availability of alternative dispute resolution to all levels of Virginia’s court system.

The pilot program will run for two years. It is designed to support mediation in Virginia’s appellate courts so litigants may make informed decisions about resolution of their disputes and fashion creative solutions, even after entry of a final or appealable order.

Appellate mediation will be available in certain civil cases where both parties are represented by counsel. Appeals where one or both parties are pro se are not eligible for appellate mediation through the pilot program. In the Court of Appeals, mediation will be available in equitable distribution and/or related attorney fee disputes. In the Supreme Court, mediation will be available only where a petition for appeal has been granted; motions to vacate criminal convictions and petitions for actual innocence are not be eligible for appellate mediation.

How appellate mediation will work

Appellate mediation is entirely voluntary. In the Supreme Court of Virginia, the parties will be informed of the availability of appellate mediation when a writ is granted. At that time, the clerk of the Supreme Court will send a letter to the parties describing mediation and explaining that if all parties agree to mediation and notify the clerk in writing of their agreement within 14 days, any further appellate deadlines (except the statutorily-required bond deadline) will be stayed for a period of 30 days to allow the parties an opportunity to mediate. The clerk’s letter will attach a list of certified appellate mediators but will explain that the parties may choose any mediator, whether or not the mediator is on the list.

In the Court of Appeals, appellate mediation is not available until the Court receives the record in a domestic relations case. At that time, the clerk of the Court of Appeals will send the parties a letter similar to that sent by the Supreme Court clerk. As in the Supreme Court, if the parties agree to mediate, there will be an automatic stay of the proceedings for 30 days to provide an opportunity to mediate. If the Court of Appeals issues a stay, the clerk will notify the parties of the deadline for filing the next document.

Appellate mediation will promote access to justice

Chief Justice Donald W. Lemons initiated the study of mediation in the appellate courts last year when he asked the Joint Alternative Dispute Resolution Committee to appoint a group to consider the issue. The Joint ADR Committee appointed the Special Committee to Study Appellate Mediation, which includes members of the appellate bench, appellate litigators from the Virginia Bar Association and VSB, and members of the Joint ADR Committee.

Following months of study, the special committee issued a report in June 2018, recommending that the Supreme Court and Court of Appeals undertake the pilot program. According to the special committee’s report, appellate mediation is “a vehicle” to provide “viable appellate mediation for economically disadvantaged litigants” in an effort to promote access to justice at the appellate level of the commonwealth’s court system.

Training and certification of appellate mediators

The special committee also recommended that the Judicial Council of Virginia approve specific training and certification for appellate mediators during the pilot projects. To date, there is no special training in Virginia for mediators regarding the unique aspects of appeals in Virginia’s courts. The special committee hopes to close this gap by offering a new two-hour course focusing exclusively on appellate litigation in Virginia. This course will be required for individuals (except those who have served on the Supreme Court and Court of Appeals) who seek to be certified as appellate mediators.

To become a certified appellate mediator in Virginia, one must be certified as a mediator in Virginia or complete the 20-hour basic mediation course. The special committee has also recommended additional minimum qualifications for certification of appellate mediators in each appellate court to ensure that mediators have the skills necessary to effectively mediate disputes at the appellate level.

The Joint ADR Committee is holding a training program for interested appellate mediators on November 14-16, 2018, in Richmond. For information about the training course, go to the events section of the VSB website. The report of the special committee can be found at: https://cdn.ymaws.com/www.vba.org/resource/resmgr/adr/report-special_cmte_to_study.pdf.

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Supplemental Authority on Appeal: Rules and Considerations

Monday, January 29th, 2024

Despite a set schedule, appellate briefing is not necessarily closed prior to decision.  Even after oral argument, a party may submit “supplemental authorities” by letter to the clerk.  This letter is not limited to just citing the new authority—argument is ok too.

The rules for submitting supplemental authority are similar across the Court of Appeals of Virginia, the Supreme Court of Virginia, and the Fourth Circuit. The “authority” cited must be “pertinent and significant.”  Temporally, it should “come to a party’s attention” (i) after the party’s petition/brief was filed or (ii) after oral argument, but before decision; the letter must then be filed “promptly.  It needs to also explain why the authority is being submitted—including by reference “to the page of the brief or to a point argued orally.” And the body of the letter is limited to 350 words.  See Va. Sup. Ct. Rule 5:6A; Va. Sup. Ct. Rule 5A:4A; FRAP 28(j).

The opposing party has the right to respond.  This response is subject to the same substantive limitations, and must be submitted within 14 days (in the Court of Appeals of Virginia) or “promptly” (in the Supreme Court of Virginia or the Fourth Circuit).

While these are the basic rules, what factors bear on whether a party should submit a supplemental authority letter?  Sometimes the decision is easy—i.e., if there is a new controlling case.  Often, however, it will be a judgment call.  To assist in exercising that judgment, here are a few considerations:

1. Does the material qualify as supplemental authority?

Under the rules, three words (each subject to interpretation) control this threshold inquiry: “authority,” “pertinent,” and “significant.”  In general, “authority” should be limited to legal authorities, not material that would supplement the evidentiary appellate record.  See 21 Moore’s Federal Practice – Civil § 328.60 (with limited exception, “authorities” are things like “statutes, cases, [and] regulations”).

“Pertinent” relates to the requirement to reference where the issue was previously discussed.  In other words, a supplemental authority letter is not a vehicle to introduce additional arguments.  See United States v. Ashford, 718 F. 3d 377, 381 (4th Cir. 2013) (finding that litigants may not use such a letter “as a means to advance new arguments couched as supplemental authorities”); Va. Sup. Ct. Rule 5:6A (the Supreme Court of Virginia “may refuse to consider the supplemental authorities if they unfairly expand the scope of the arguments on brief”); Va. Sup. Ct. Rule 5A:4A (same for the Court of Appeals of Virginia).

As for “significant,” one rule-of-thumb is whether a party would have cited the authority in the relevant filing, had it been aware of the authority at the time.

2. What about timing?

By rule, the supplemental authority should only have “come to a party’s attention” after the party’s last substantive filing or oral argument.  While this is not strictly pegged to when the authority was available, litigants are expected to be aware of pre-existing relevant authorities.  The letter accordingly should explain any disconnect or delay.  See Va. Sup. Ct. Rule 5:6A (supplemental authorities may be rejected if they “raise matters that should have been previously briefed [or], appear to be untimely”); Va. Sup. Ct. Rule 5A:4A (same).

Letters must also be filed “promptly.”  Key here is to avoid the appearance of gamesmanship and to give adequate time for consideration—both by the court and your opponent.  Of course, if a decision is pending and the material is helpful, the supplemental authority should be filed as soon as possible.

Although the rules appear to allow reference at oral argument without first submitting a supplemental authority letter, that would not be good practice (and the supplemental authority may be rejected on the spot).  Rather, a letter should be submitted in advance of a hearing.

3. Can you include argument?

“Argument” used to be expressly forbidden.  In 2002, however, Rule 28(j) of the Federal Rules of Appellate Procedure was amended to remove this prohibition, and now “permits parties to decide for themselves what they wish to say about supplemental authorities.”  FRAP 28, Committee Notes on Rules—2002 Amendment.  The Virginia Rules were adopted in 2015 and likewise contain no restriction on argument.

4. What will your opponent likely say?

A supplemental authority letter can be a great opportunity: litigants have 350 words to introduce new authority and argue its significance to the appeal.  But any evaluation of whether to submit such letter must game-out what your opponent will likely say in response.  Just like an opening letter, a response can both highlight aspects of the authority and present related argument.

There is only an opening letter and response—no reply is permitted.  This sequencing is important in assessing whether a letter will be a net positive.  Appellate Lawyers, in particular, may be loath to give their opponents a platform to have the “last word.” 

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The Executive View: Virginia Regulatory Process, Appeals, and Lessons Learned from the Inside

Friday, January 5th, 2024

My law professor once said that administrative law is “electrical engineering for lawyers.”  I did not fully appreciate what this meant, other than that it sounded complicated.  That was until I had the opportunity to spend years watching the regulatory and appellate process up-close.  

I had the honor and privilege of coordinating review of Virginia’s regulatory process on behalf of the Virginia Governor.  As Deputy Counsel and then Counsel to Governor Terry McAuliffe, I reviewed more regulations than, I suspect, most any other lawyer in the state. More importantly, I saw the process work and not work.  And I watched how appeals progressed to the Supreme Court of Virginia through judicial review of agency action.

From this experience, I understand more how administrative law parallels the intricacies of electrical engineering. There are so many factors at play, all of which must align, for things to work—law, policy, politics, science, data, and the inexorable ticking of the clock.  This article attempts to provide some lessons learned from that experience.

Lesson One: The Process is a Gauntlet, so Know Your Goal Up Front

Whether your regulatory issue involves a general regulation or a case-specific decision (such as obtaining a permit or license or other regulatory approval), they both share important similarities.  The Virginia Administrative Process Act (“VAPA” at Va. Code § 2.2-4000, et seq.) defines separately procedures for rulemaking and case decisions, with strict procedures for adopting regulations, making case decisions, and judicial review.

Because agencies act only under statutory authority, they have to follow those rules.  So the process matters immensely.  Thus, know what you want from the beginning.  

For instance, say you want to stop a regulatory change at all costs.  That means you want to make the process harder for the agency.  If the agency messes up along the way, and even if you lose before the agency, you might win an appeal of the decision, and as discussed below, time is your friend.

If, on the other hand, you need the agency to grant a license or permit, then your fate is not only in convincing the agency, but also having that decision survive appeals and judicial review.  Time is your enemy, and so you want to be a helping hand to get things wrapped up quickly and effectively.

Lesson Two: Many Calendars and Actors Impact Timing of Regulatory Process

The process for enacting or amending a regulation is defined by statute, and it takes time—but that statutory calendar is not the only one at play.  

On paper, the Virginia regulatory process goes through three phases—the Notice of Intended Regulatory Action (“NOIRA”), the Proposed phase, and the Final phase.  Public comment periods are required between each phase, with a 30-day period before a Final regulation becomes effective after it is published in the Virginia Register of Regulations.  Thus, in general, the process cannot be faster than 120-180 days.  But it never goes that fast, and the timeline is far more complicated and impacted by multiple different actors:

  • Executive Branch Review Calendar — This process is layered atop the statutory process by Governors’ Executive Orders.  Every modern Governor has imposed some review process (partially required also under VAPA) through which the Attorney General, the Department of Planning and Budget, the Cabinet Secretary, and the Governor all review regulations as they advance through the regulatory process.  This process has few enforceable deadlines, so it can become a regulatory purgatory.
  • Legislative Calendar – The General Assembly session occupies an immense amount of agencies’ time.  So in the month before and during the legislative session (say December to April), good luck getting any agency to do anything.
  • Board’s Calendar – If the regulatory action is controlled by a Board (and not a full-time agency head), then that Board’s calendar becomes relevant.  Most regulatory boards do not meet every day or even week.  They might meet every month or perhaps even less frequently.  So, if your action misses March’s meeting, it might be another month or more before action can be taken.

Accordingly, the Virginia Registrar estimates that actions generally take between 18 and 24 months.  Even when the action is a high priority for the Virginia Governor (and thus the Executive Branch), it will take around one year.  For instance, Governor Youngkin made exiting the Regional Greenhouse Gas Initiative a high priority.  That regulatory action, through the State Air Pollution Control Board, took just under one year from the publication of the NOIRA to it becoming finally effective.   

But of course, the regulatory process is not “over” at the Final stage.  There is the calendar for appeals and judicial review of regulatory action, if a stakeholder pursues it.  That can take years to wind through the Circuit Court, the Court of Appeals of Virginia, and the Supreme Court of Virginia.

Supreme Court of VA

Lesson Three: The Passage of Time is Not Neutral

A related lesson is that timing is not neutral.  Since the regulatory process occurs within a dynamic political system, delay tends to favor the status quo.  Thus, generally speaking, proponents of a regulatory action need to get things done ASAP; opponents (a/k/a proponents of the status quo) generally benefit from time.

The reason returns us to my law professor: the regulatory process requires alignment, just like an electrical circuit.  And, over time, something will undoubtedly change that could mean the required alignment no longer exists.  For instance, there may be a new Governor with a different policy view (which is guaranteed every four years under the Virginia Constitution).  There may be a new General Assembly, with different priorities (possible every two years).  The underlying policy issues (or public perception of them) may shift in one direction or another.  Once the regulatory “circuits” are no longer aligned, the regulatory process stalls, and the status quo is maintained.  

Accordingly, proponents of a particular regulatory action—particularly if it is politically contentious—have a limited window, which makes perfecting the regulatory process all the more important.

Lesson Four: Proponents Should Help the Agency Get it Right; Opponents Should Make it Harder

Because of this “alignment” dynamic, and pulling together Lessons 1-3, there are certain takeaways for stakeholders.  Let’s accept that a given regulatory process takes 1.5-2 years, and, let’s assume that judicial review will take 2-3 years.  Thus, generally speaking, if an agency action fails to pass judicial review, there will almost certainly be a new Governor, with a new administration, before the agency can reconsider the issue.  So the “alignment” is fleeting.  

Thus, proponents should see their fate as tied to the agency getting it right the first time.  Under administrative law, agencies generally get deference from the appellate courts; however, errors in the process or in considering the issues can be fatal.  Thus, to win an appeal, proponents need to act as allies to the agency—help it get things right and be vigilant:  

  1. Do not let errors fester—if the agency didn’t do something right, advocate for getting it right then, rather than waiting for judicial review to set things back years after the fact.
  2. Be engaged and provide evidentiary support for the regulatory action. 

The same lessons teach opponents to make things harder.  And, here, opponents need to be equally vigilant:

  1. Demand more process to draw things out—delay is your friend.
  2. Submit contrary evidence on the record—and know that substantive evidence (such as studies, data, etc) is going to be much harder for the agency to get around than generic opposition from public comments.

Lesson Five: Mind the State Budget

The State Budget, adopted every two years and amended every other year, is always the most important piece of legislation passed by the General Assembly.  But it is not just about money.  A lot, and I mean a lot, of policy is made through the State Budget.  

Thus, stakeholders should pay attention to budget language—both as it is being considered and implemented.  The General Assembly, ultimately, is the chief policymaker in Virginia, and it has an enormous ability to attach conditions to the appropriations it makes.  And that conditioning power is often used to direct or restrict regulatory action by the Executive Branch.

That can be a total game-changer—so just be aware of how legislative changes, even arcane ones in the State Budget, could impact the regulatory process in ways helpful or hurtful to your cause.

Conclusion

The regulatory process is a dynamic one that operates alongside political and judicial processes.  It is, in many ways, electrical engineering for lawyers, but it also is a human process.  So, in the end, participation is key—and quality matters more than quantity.  That said, when the stakes are high in a regulatory action, I hope some of these lessons-learned from the inside will be helpful in successfully navigating the process. If you have any questions or need guiadance on Virginia regulatory proccesses or appeals, contact us today.

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Kill the Goose that Lays the Golden Eggs? Is There an Alternative Remedy to Dissolution in Oppression Cases?

Thursday, November 30th, 2023

A New Path for Appellate Lawyers

Last year, the jurisdiction of the Court of Appeals of Virginia was expanded to offer aggrieved litigants in civil cases an automatic right of appeal. Va. Code § 17.1-405(A)(3).[1] That change offers opportunities for the Court to provide guidance to circuit courts and litigants in many areas of law that are unsettled, under-developed, or otherwise unclear. This is particularly true of corporate law under the Virginia Stock Corporation Act, an area in which decisions by the Supreme Court of Virginia have been few and far between over the past few decades, despite significant statutory changes over the years. This article discusses one of those open issues – the scope of relief available in a shareholder oppression case brought under the judicial dissolution statute of the Act, Virginia Code § 13.1-747. With oppression cases on the rise, the Court of Appeals should have the occasion to decide the question.

An Undeveloped Issue in Virginia Corporate Law

In an oppression case, a minority owner typically alleges that the majority owner(s) have attempted to “freeze” or “squeeze” him out of the business or suppress his rights.[2] Code § 13.1-747 provides at least one potential remedy in such circumstances. The circuit court, in the exercise of its equitable authority, “may dissolve a corporation” when a shareholder establishes that “the directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent[.]” Va. Code § 13.1-747(A)(1)(b) (emphasis added). The Supreme Court of Virginia has held that the statute is remedial and intended to protect the rights of corporate stockholders – particularly minority owners. Baylor v. Beverly Book Co., 216 Va. 22, 24, 216 S.E.2d 18, 19 (1975).

Code § 13.1-747 is the successor statute to Virginia Code § 13.1-94, which stated, in relevant part, that “[a]ny court of record, with general equity jurisdiction . . . shall have full power to liquidate the assets and business of the corporation” in an action by a stockholder where oppression is established. Va. Code § 13.1-94(a)(2) (repealed) (emphasis added). The statute also provided a limited alternative to dissolution in an oppression case: to place the corporation into receivership until the management authority of the corporation has either been restored to the original board of directors or a new board is elected.

In the cases of Giannotti v. Hamway and White v. Perkins, the Supreme Court of Virginia interpreted Virginia Code § 13.1-94 as providing the exclusive remedies to an oppressed minority shareholder, and did “not permit the trial court to fashion other, apparently equitable remedies.” Giannotti, 239 Va. at 28, 387 S.E.2d at 733; White, 213 Va. at 135, 189 S.E.2d at 320. However, the Supreme Court also described the circuit court’s authority to order dissolution as “discretionary” – presumably because the court could choose the alternative remedy of receivership. 239 Va. at 28, 387 S.E.2d at 733. Also seemingly key to the Supreme Court’s analysis was the strong language in the Code § 13.1-94, which vested the circuit court with “full power” to liquidate a corporation where oppressive conduct was established.

In 1985, the General Assembly rewrote the Virginia Stock Corporation Act. Jordon v. Bowman Apple Prods. Co., 728 F. Supp. 409, 414 n.7 (W.D. Va. 1990) (noting the overhaul of the statute).[3] The phrase “full power to liquidate” in Code § 13.1-94 was changed to “may dissolve” in § 13.1-747(A) today.[4] Meanwhile, the “full power” language was incorporated into a new subsection (B) of § 13.1-747 – a provision that does not relate to oppressive conduct.[5]

Additionally, the General Assembly omitted the alternative remedy of temporary receivership from § 13.1-747. Virginia Code § 13.1-747(F) now provides only a single alternative to dissolution in an oppression/dissolution case: the other shareholders may elect to purchase the shares of the dissenting minority.[6] See Va. Code § 13.1-749.1.

The Supreme Court of Virginia has not interpreted and applied § 13.1-747(A) since the comprehensive changes in 1985. In the absence of additional guidance, at least two lower courts in Virginia have followed the holdings in White and Giannotti under the prior Code section. See Jordon, 728 F. Supp. at 415 (applying White to a § 13.1-747(A) claim); Colgate v. Disthene Group, Inc., 85 Va. Cir. 286, 292 (Buckingham County, 2012) (same).

The Question for the Court of Appeals

This begs the question: is a circuit court powerless to consider and issue any other equitable remedy in lieu of dissolution in an oppression case? Code § 13.1-747(A) provides that the circuit court “may” dissolve a corporation when shareholder oppression is established, and the Supreme Court has further stated that the issuance of such relief is “discretionary.” Giannotti, 239 Va. at 28, 387 S.E.2d at 733. In this regard, the Supreme Court of Virginia has instructed circuit courts to “be reluctant to order the liquidation of a functioning corporation at the instance of minority stockholders.” Id. Indeed, often “[t]o liquidate the corporation is to kill the goose that laid the golden egg.” Giannotti, 239 Va. at 30, 387 S.E.2d at 734 (Gordon, Ret. J., dissenting). Accordingly, it is conceivable under the current statute for a circuit court to find oppression but decline to order dissolution, thus leaving an oppressed minority shareholder essentially without recourse.[7] Conversely, a circuit court may feel compelled to dissolve a going concern to ensure that an oppressed plaintiff is provide some remedy.

Supreme Court of Virginia

These scenarios, along with the substantial rewriting of the Act in 1985, would seem to suggest that the circuit court’s power is not as curtailed as it was under the prior scheme, but rather allows the court discretion to award some form of equitable relief in lieu of dissolution. These possible remedies might include: (1) appointing a receiver; (2) appointing provisional directors; (3) requiring the issuance of dividends or distributions; and/or (4) requiring the corporation or the majority stockholder(s) to purchase the minority shareholder’s stock at a particular price. See, e.g., Masinter v. WEBCO Co., 164 W. Va. 241, 254 n. 12, 262 S.E.2d 433, 441 (1980) (listing “possible forms of relief against oppressive conduct short of outright dissolution”).

An Opportunity for the Court of Appeals

Historically, the “chancellor” was vested with broad authority to “do equity” in light of the facts and circumstances presented by a particular case. In corporate dissolution/oppression cases, the Supreme Court had previously determined that such power was curtailed by Code § 13.1-94. However, the substantial changes to the Act in 1985, the absence of appellate direction under the present Act, and few lower court decisions in the arena leave open the possibility that a circuit court presiding over an oppression/dissolution case maintains some authority to issue equitable relief that is short of completely dissolving the corporation. The Court of Appeals’ expansion should afford the Court the opportunity to reach this issue and provide critical direction to the circuit courts deciding such cases.

So stay tuned and contact our appellate lawyers for additional guidance on this and other appellate issues as the Court of Appeals of Virginia continues to exercise its expanded jurisdiction and develop existing law.

[1] There are limited exceptions not material to this article. See Va. Code § 17.1-406.1(B).
[2] The Supreme Court of Virginia has defined “oppressive” conduct to mean action “by corporate managers toward stockholders which departs from the standards of fair dealing and violates the principles of fair play on which persons who entrust their funds to a corporation are entitled to rely.” Giannotti v. Hamway, 239 Va. 14, 23, 387 S.E.2d 725, 730 (1990); accord White v. Perkins, 213 Va. 129, 134, 189 S.E.2d 315, 320 (1972).
[3] Code § 13.1-747 took effect in January, 1986. While Giannotti was decided in 1990, the case was initially filed in 1980 when the prior Code § 13.1-94 was still in effect. 239 Va. at 16, 387 S.E.2d at 726. Accordingly, the Supreme Court of Virginia applied Code § 13.1-94 in that case. Id.
[4] This language was adopted from the judicial dissolution provisions in §§ 14.30 and 14.31 of the Model Business Corporation Act.
[5] Subsection B provides, in relevant part, that “[t]he circuit court . . . shall have full power to liquidate the assets and business of the corporation at any time after the termination of corporate existence, pursuant to the provisions of this article upon the application of any person, for good cause, with regard to any assets or business that may remain[.]” Virginia Code § 13.1-747(B).
[6] Subsection F was added to § 13.1-747 in 2019.
[7] While a shareholder may file suit under the derivative sections of the Stock Corporation Act, see, e.g., Va. Code § 13.1-672.1, a derivative action is brought to vindicate the rights of the corporation, not those of an individual shareholder.

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