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Supreme Court of Virginia Provides Added Guidance on Attorney’s Fees Awards

The Supreme Court of Virginia released three decisions in recent months that provide added guidance on attorney’s fees awards.   While these are state court decisions, it is Virginia law, not federal law, that governs attorney’s fees awards on matters arising under Virginia law in the federal courts.  For example, attorney’s fees awarded by a federal court under the Virginia Business Conspiracy Act are governed by Virginia state law.  Also, fee awards by a federal court pursuant to a Virginia contract claim where the contract includes an attorney’s fees provision are governed by Virginia state law.

We have posted multiple times on attorney’s fees awards in the Eastern District.  For example, D. Mauler, New Trends in Attorney’s Fees Declarations? (November 15, 2016); D. Mauler and J. Kurz,  E.D. Va. Whacks Attorneys’ Fees Claim: Further Split on Court Revealed (September 30, 2016); D. Mauler, Recent Opinion Highlights Differing View in EDVa on Appropriate Hourly Rates (September 22, 2015).   While there are obvious overlaps in the consideration of attorney’s fees under federal precedents as opposed to Virginia law, separate consideration of recent developments at the Supreme Court of Virginia merits attention.

The Prevailing Standard for Attorney’s Fees Awards Under Virginia Law

As the starting point, the party claiming legal fees must plead a claim for the award of fees.  in Graham v. Community Management Corp., Record No. 161066 (Oct. 12, 2017), the Supreme Court confirmed that Rule 3:25 requires in most matters pleading the claim for fees (the few exceptions are covered in subpart A of the Rule).  In Graham, the prevailing defendant had not requested attorney’s fees in any pleading, including her pleas in bar, demurrers and answer.  After the defense verdict, she returned with a claim for fees based on the employment contract that was the basis for the plaintiff’s original claim.  The Fairfax Circuit Court held that the claim was waived when not pled, and the Supreme Court, applying the “express language of Rule 3:25(C),” affirmed.

A party seeking an award of fees then has the burden of proving a prima facie case that the fees were reasonable and necessary.  A party may not recover fees for duplicative work or for work that was performed on unsuccessful claims.  In determining whether the prima facie case is established, the factfinder may consider some or all of the seven factors identified in Chawla v. BurgerBusters, Inc., 255 Va. 616 (1998):

In determining whether a party has established a prima facie case of reasonableness, a fact finder may consider, inter alia, (1) the time and effort expended by the attorney, (2) the nature of the services rendered, (3) the complexity of the services, (4) the value of the services to the client, (5) the results obtained, (6) whether the fees incurred were consistent with those generally charged for similar services, and (7) whether the services were necessary and appropriate.

Chawla involved an attorney’s fees provision in a commercial lease.  Both parties sought fees.  A threshold issue was where the initial burden of proof fell – on either the party seeking fees must or the defending party to prove the fees were unreasonable.  Relying on Seyfarth Shaw v. Lake Fairfax Seven Ltd. Partnership, 253 Vas. 93 (1997), the Supreme Court held that “the party claiming legal fees has the burden of proving prima facie that the fees are reasonable and were necessary.”

Lambert v. Sea Oats Condominium Association, Inc.

In an April 2017 decision, Lambert v. Sea Oats Condominium, 293 Va. 245 (2017), the Plaintiff sought recovery of $500 from her condominium association after she paid to repair an exterior door.  Ms. Lambert lost in the general district court but prevailed when she took the case to the circuit court.   In pursuit of her claims, she spent more than $9,500 in attorney’s fees to win $500.   She claimed recovery of her attorney’s fees pursuant to the statutory provision in Va. Code § 55-79.53.  The circuit court awarded only $375 reasoning that the fee award should be proportional to the damages.

The Supreme Court rejected the circuit court’s analysis.  Courts may consider the amount of damages a plaintiff recovers, and they do so within the scope of the “results obtained” factor.   The Court directed, however, “that merely applying a ratio between the damages actually awarded and damages originally sought will not satisfy the reasonableness inquiry.”  The issue is “the necessary costs of effectively litigating a claim.”  The Court determined that the circuit court abused its discretion by failing to consider all the relevant factors, and it remanded the case back to the circuit court, directing the trial court to include “an award of the cost of the amount of reasonable attorney’s fees incurred at trial and in this appeal.”

Justice Mims, the author of the Sea Oats opinion, uses his footnotes to provide broader guidance on attorney’s fees. For example, in footnote 1 he observes that attorney’s fees may be decided by a jury, and he suggests that the review of a jury verdict on fees should not be any different than the typical appellate review of determinations of punitive damages, physical pain, suffering or mental anguish.  Citing a 1959 decision, the Court observed that jury decisions are not disturbed “unless it appears that [they were] influenced by partiality, prejudice, corruption of the jury, or some mistaken view of the evidence.”  The footnote stops short, however, of providing a definitive statement of the standard of review applicable to a jury decision on attorney’s fees because, as the opinion observes, there was no jury award at issue in the Sea Oats case.

In his footnote 7, Justice Mims discusses the use of experts in the proof of the reasonableness of attorney’s fees.  While there is no per se requirement of an expert, the footnote instructs that proving that the requested fees are reasonable “may require supplying an expert who was undertaken a detailed evaluation of its attorneys billing records to testify about what amount is reasonable.” The opinion adds that “the likelihood that such testimony is necessary will often be proportional to the complexity of the case.”

A final point from Sea Oats addresses the pleading requirements when the plaintiff is seeking attorney’s fees. The condominium association argued that because Ms. Lambert had not identified in her complaint the amount of fees she sought she should later be precluded from claiming any fees.  The Supreme Court rejected the argument instructing that “the party who may be entitled to an award of attorney’s fees is merely required to notify the opposing party that it will seek them if it prevails, as required by Rule 3:25(B).”

Denton v. Browntown Valley Associates, Inc.

In Denton v. Browntown Valley Associates, Record No. 160999 (Va. Aug. 31, 2017), a decision also authored by Justice Mims, the Supreme Court made clear that the fees incurred in litigating the reasonableness of the underlying attorney’s fees are themselves recoverable.  For example, if the fee claim is for $50,000, and the proponent must spend $20,000 to prove the reasonableness of the fees, the total of $70,000 is recoverable.  The opinion explains, “The attorney’s fees that the prevailing party incurs while litigating the issue of attorney’s fees are no different from those it incurs while litigating any other issue on which it prevails.”

At the beginning of the discussion about attorney’s fees, the Denton opinion cites both Chawla and Sea Oats for the identification of the “seven nonexclusive factors for courts to consider when weighing the reasonableness of an award of attorney’s fees.”   Relying on Sea Oats, the Denton opinion repeats the principle that fees necessary to prove the reasonableness of the underlying attorney’s fees are recoverable applies to the fees incurred on appeal as well.

Summary

With Sea Oats, Denton, and Graham, the Supreme Court of Virginia is rounding out its discussion of attorney’s fees awards.  The Seyfarth Shaw and Chawla opinions summarized the law to 1998, and provided us with the 7-factor analysis.  Subsequent decisions, now capped with the three recent opinions, confirm the test for reasonableness, explain further necessary fees, comment on the need for a fees expert, and clarify the pleading requirements.   Denton adds that fees-to-prove-fees are recoverable, and that this extends to fees on appeal.

Despite this, the Court’s attorney’s fees mosaic is not yet fully complete.  Justice Mims provided some guidance on the review of jury verdicts on attorney’s fees and on the desirability, but not the necessity, of expert testimony to assist a jury.  But the Sea Oats opinion stops short of explicit instructions because there was no jury verdict at issue in that case.  The more complete mosaic may have to wait until the Supreme Court has before it the review of a jury verdict on attorney’s fees.

Supreme Court of Virginia Addresses the Reach of Conspirator Liability under the Virginia Business Conspiracy Act

The Supreme Court of Virginia recently addressed conspirator civil liability under the Virginia Business Conspiracy Act, Va. Code §§ 18.2-499 and -500.  Borrowing from Illinois law, the Court recited that “[t]he function of the conspiracy claim is to extend liability in tort beyond the active wrongdoers to those who have merely planned, assisted or encouraged the wrongdoer’s acts.”   While the case does not really change the substance of Virginia law, the opinion in Gelber v. Glock offers language that will likely appear in every future Virginia brief on conspirator liability and in the conspiracy jury instructions.

Tucked into the back of a 39-page opinion dealing with a family feud over an estate, the Supreme Court provides its tutorial on conspirator liability.   Admittedly, this is not federal law, but VBCA claims often appear in E.D. Va. litigation when state claims are before the federal court under diversity jurisdiction or pendent jurisdiction.

The Family Feud Case

The case is Gelber v. Glock, Record No. 160500 (June 22, 2017), a decision from an appeal heard during the Supreme Court of Virginia’s February 2017 Session.  The facts are those of the classic family feud.  In an early will, Mrs. Gelber left her estate to be divided among her five children.  Subsequent estate documents seemingly altered this directive—Mrs. Gelber’s real and personal property was to go to just one of her daughters.  The Executors sued on multiple theories, including a claim that the lucky daughter was part of a civil conspiracy with one of her sisters and a brother-in-law.

The Circuit Court for Henrico County granted a Motion to Strike the conspiracy claim.   The Supreme Court found no error in this circuit court ruling.  Given this straightforward appellate finding, the Supreme Court perhaps likely could have addressed the conspiracy Assignment of Error in a single paragraph.  But the Justices chose to give us a powerful tutorial on conspirator liability under the VBCA.  The tutorial is perhaps dicta, but it is nonetheless part of the Supreme Court opinion.

The Language of the Virginia Business Conspiracy Act

The VBCA is a two-part statute found in Title 18 of the Virginia Code, the criminal law title.  Va. Code § 18.2-499 identifies the elements of the criminal conspiracy. The next section, Va. Code § 18.2-500, provides for civil remedies for conspiracy violations.  Subpart A of the section reads:

Any person who shall be injured in his reputation, trade, business or profession by reason of a violation of § 18.2-499, may sue therefor and recover three-fold the damages by him sustained, and the costs of suit, including a reasonable fee to plaintiff’s counsel, and without limiting the generality of the term, “damages” shall include loss of profits.

The Reach and Purpose of Civil Conspiracy Liability

The real punch from the Gelber decision is the confirmation of conspirator liability beyond the primary tortfeasor.  The decision explains, “the object of a civil conspiracy claim is to spread liability to persons other than the primary tortfeasor.”  Gelber at 37.  The Court expands its discussion in footnote 21.  Quoting from Beck v. Prupis, 162 F. 3rd 1090, 1099 n. 18 (11th Cir. 1998), aff’d, 529 U.S. 494 (2000), the Gelber Court adds that “[i]n a civil context … the purpose of the conspiracy claim is to impute liability– to make X jointly liable with D for what D did to P.”   This is language is straight from Prosser and Keeton on Torts § 46 (5th Ed. 1984).

The Gelber opinion continues, in the same footnote 21, “[t]hus, a civil conspiracy plaintiff must prove that someone in the conspiracy committed a tortious act that proximately caused his injury; the plaintiff can then hold other members of the conspiracy liable for that injury.”  In support of this statement, the Supreme Court cites authority not only from the 11th Circuit, but also from the 8th Circuit, and from the Utah federal court and the Illinois Supreme Court.

The cited Eighth Circuit decision, Simpson v. Weeks, 570 F.2d 240, 242-43 (8th Cir. 1978), provides a clever analogy, “[t]he charge of conspiracy in a civil action is merely the string whereby the plaintiff seeks to tie together those who, acting in concert, may be held responsible for any overt act or acts.”   The Utah federal court decision, Boisjoly v. Morton Thiokol, Inc., 707 F. Supp. 795, 803 (D. Utah 1988), explains that “[c]ivil conspiracy is essentially a tool allowing a plaintiff injured by the tort of one party to join and recover from a third party who conspired with the tortfeasor to bring about the tortious act.”

Finally, Gelber confirms that conspiracy liability is the same for low-level players as it is for conspiracy kingpins.  The cited Supreme Court of Illinois decision, Adcock v. Brakegate, Ltd., 645 N.E.2d 888, 894 (Ill. 1994), offers, “[t]he function of the conspiracy claim is to extend liability in tort beyond the active wrongdoers to those who have merely planned, assisted or encouraged the wrongdoer’s acts.”

Summary: Gelber and VBCA Conspirator Liability

The Supreme Court of Virginia ranges far and wide for its authority on conspirator civil liability perhaps because a clear statement of civil liability tied to a conspiracy claim was previously missing from the Virginia case law.  For instance, plaintiffs looking for authority for conspirator civil liability have frequently cited Carter v. Commonwealth, 232 Va. 122 (1986), a criminal case about vicarious liability for the use on a firearm in a felony.  This is not to say that Virginia law was any different before Gelber, but that it was challenging to find on-target Virginia citations supporting conspirator civil liability.

Expect that the Gelber language will be prominent in trial briefs and jury instructions for future VBCA claims in the state courts and in the federal courts.

Government Official’s “Personal” Facebook Page is a Public Forum under First Amendment

In what will likely be one of his last opinions before retiring from the Eastern District of Virginia bench, Judge James C. Cacheris authored an important decision applying traditional free speech principles to a local government official’s Facebook page.  This opinion provides important guidance regarding an official’s ability to regulate speech in the emerging digital public square.

In Davison v. Loudoun County Board of Supervisors, 1:16-cv-932, 2017 WL 3158389 (E.D. Va. July 25, 2017), a pro se plaintiff filed suit against Chair Phyllis J. Randal of the Loudoun County Board of Supervisors.  The lawsuit resulted after Chair Randall blocked the plaintiff from commenting on her Facebook page.  After a bench trial, Judge Cacheris granted the plaintiff judgment, holding that 1) Chair Randall’s Facebook page was a public forum for speech purposes under the First Amendment, and 2) Chair Randall acted under color of state law when she banned the plaintiff, which violated the plaintiff’s free speech rights.

The facts of this case are rather mundane, in reality.  The plaintiff, a resident of Loudoun County who regularly attends county board meetings, posted comments on Randall’s Facebook page implying that members of Loudoun County School Board were corrupt and financially benefiting family members.  Chair Randall deleted the plaintiff’s post and then banned him from commenting further on the page.  Chair Randall, however, had a change of heart the next morning and “unbanned” the plaintiff from the page.  In all, the plaintiff had been banned for about 12 hours.

After laying out the facts, Judge Cacheris first considered whether the Facebook page constituted a public forum for free speech purposes.  The interesting point here is that Chair Randall’s Facebook page started off as a non-public forum, and she defended this lawsuit by claiming the page was “personal.”  The page was first created by Randall the day before she was sworn in on the Board, and it was not created by County employees or through the County’s IT staff.  Instead, Randall “brought” the page with her to her new elected role.

The page became a public forum, however, based upon a “totality of circumstances” focusing on the current use of the page.  For example, Chair Randall’s Chief of Staff assisted in maintaining the page as part of her duties.  Official newsletters issued by the Chair’s office (and drafted by County employees) included links to the page.  And, as Judge Cacheris’s opinion notes in detail, Chair Randall went to great efforts to “swathe . . . the Facebook page in the trappings of her office.”  This included her official title of “Chair” prominently featured on the page, along with her official government contact information, official County website address, and her encouragement of “back and forth constituent conversations.”

Once Judge Cacheris determined the Facebook page had morphed into a public forum, he then turned to the content of the plaintiff’s speech.  Chair Randall testified she banned the plaintiff because she was offended by the criticism of her colleagues on the School Board.  She also noted that she had no way to tell if the criticism was valid or not, and she did not want to leave such criticism available on the page.

While Judge Cacheris noted that such a feeling was understandable, it was not a valid reason for deleting the comment or banning the plaintiff from the forum.  Quoting the recent Matal v. Tam Supreme Court decision, the judge noted that “[i]f the Supreme Court’s First Amendment jurisprudence makes anything clear, it is that speech may not be disfavored by the government simply because it offends.”  Judge Cacheris then held that Chair Randall had “engaged in viewpoint discrimination by banning Plaintiff from her Facebook page” and that “[v]iewpoint discrimination is ‘prohibited in all forums.’”

Turning to the form of relief, Judge Cacheris declined to order injunctive relief since the plaintiff had already been unbanned from the page.  But the judge did issue a declaratory judgment in the plaintiff’s favor.

Judge Cacheris’s opinion is noteworthy for multiple reasons, and not only because a pro se plaintiff won a case at trial against skilled counsel from Fairfax.  Rather, this opinion provides important guidance for government officials at all levels in their social media interactions with constituents.  It also demonstrates the “morphing” ability of a private web space into a public forum due to new circumstances.  Considering the frequent use of Twitter by high-ranking government officials (and the ease of blocking followers from such accounts), we will likely see more litigation over this new digital forum in the near future.

Personal Jurisdiction in the Internet World Redux

In this Blog post, we look at two recent Judge Ellis decisions on personal jurisdiction: Zaletel v. Prisma Labs, Inc., 226 F.Supp.3d 599 (E.D. Va. 2016), and Thousand Oaks Barrel Co., LLC v. Deep South Barrels LLC, 2017 WL 1074936 (E.D. Va. 2017).

It seems that the Alexandria federal court’s Friday Motions Docket often has at least one personal jurisdiction motion.  You might think that a simple test for personal jurisdiction could be applied to greatly reduce the frequency that this issue comes before the courts.  But think again.  Pulitzer Prize winner Thomas Friedman contends in his recent best-seller, Thank You for Being Late, that the pace of technological change has for at least the last 10 years been accelerating faster than we can adapt.  Why, then, should we expect the law of personal jurisdiction to keep up with the changing technology landscape?   As Friedman argues, it is not just technology per se that is accelerating, it is everything that is driven by technology that is also accelerating at unsettling speeds.  This understandably includes the exploding e-commerce world.

Zippo: a 20-year old Precedent for the Internet World   

The most widely cited case on personal jurisdiction in the Internet world is now 20 years old.  In Zippo Manufacturing Co. v. Zippo Dot Com, Inc. Co., 952 F.Supp. 1119 (W.D. Pa. 1997), the court divided Internet activities into three kinds – active, passive, and interactive.  The jurisdictional question was decided based on where a website fell within these categories.  Think back to 1997, the year of the Zippo decision. The leading ISP was AOL, and the majority of online users joined the Internet via dial-up access.  Amazon (first known as Cadabra, Inc.) was just getting started and was only beginning to sell books online.  The leading web browser was Netscape, and e-commerce was not much more than a handful of infrequently accessed “storefronts.”   Times have changed.

Fourth Circuit Law on Personal Jurisdiction in the Internet World

The controlling law in the Fourth Circuit is from 2002 – ALS Scan, Inc. v. Digital Service Consultants, Inc., 293 F.3d 707 (4th Cir. 2002).   In that case, now 15 years old, Judge Niemeyer wrote, “the convergence of commerce and technology thus tends to push the analysis to include a ‘stream-of-commerce’ concept under which each person who puts an article into commerce is held to anticipate suit in any jurisdiction where the stream takes the article.”  The Court lamented that the Supreme Court had not provided updated guidance.  Absent such controlling authority, Judge Niemeyer settled on the model developed in Zippo.

Zippo provides a three-part test:  A state may, “consistent with due process, exercise judicial power over a person outside of the state when that person (1) directs electronic activity into the state, (2) with the manifested intent of engaging in business or other interactions within the state, and (3) that activity creates, in a person within the state a potential cause of action cognizable in the state’s courts.”  ALS Scan, 293 F.3d at 714.

Later, in 2013, the Fourth Circuit revisited ALS Scan in Unspam Technologies, Inc. v. Chernuk, 716 F.3d 322 (4th Cir. 2013).   In Chernuk, the defendants were four foreign banks that were alleged to have financed the credit card operations for illegal prescription pharmacies.  They were sued as part of an alleged global conspiracy to market and sell pharmaceuticals online.  Chernuk adopted with minor adjustments the three-part test from ALS Scan.  Relying on some interim Supreme Court guidance, the Fourth Circuit added that “it is the defendant’s actions, not his expectations, that empower a State’s courts to subject him to judgment.”

Zaletel v. Prisma Labs—70 Million Downloads, but no Personal Jurisdiction

In Zaletel, a 2016 trademark case involving s photo-filtering app known as “Prisma,” Judge Ellis applies a somewhat modified ALS Scan test.  Before getting to the core of the legal analysis, Judge Ellis walks us through International Shoe and the difference between general jurisdiction and specific jurisdiction.  He then introduces the central issue with a quote from Chernuk.  The Fourth Circuit has adopted the three-part inquiry “to determine whether a defendant is subject to jurisdiction in a State because of its electronic transmissions to that State.”   That inquiry, the judge writes, should consider: “(1) the extent to which the defendant purposely availed itself of the privilege of conducting activities in the forum state; (2) whether the plaintiff’s claims arose out of those activities; and (3) whether the exercise of personal jurisdiction is constitutionally reasonable.”

Judge Ellis refers to the first part of this test as the “purposeful availment” prong, which he explains “is grounded on the traditional due process concept of minimal contacts.”  To determine whether a foreign defendant has purposely availed itself of the privilege of conducting business in a state, the court should ask whether “the defendant’s conduct in connection with the forum state are such that he could reasonably anticipate being haled into court there.”  To satisfy this standard, “a defendant outside the forum state must have at least ‘aimed’ its challenged conduct at the forum state.”  Chernuk at 328.

The defendant in Zaletel had no Virginia presence and did not sell its app directly into Virginia.  The app, however, could be downloaded from the Google Store.  Judge Ellis reverted to the more general “stream of commerce” theory.  Simply placing products into the stream of commerce, even with the expectation that they would be purchased in the forum state, is not enough to constitute “activity purposely directed” at the forum state.  The Prisma Labs app was downloaded more than 70 million times, but apparently not specifically aimed at Virginia.  Due process requires that a defendant be haled into court in a forum state based on his own affiliation with the state, and “not based on the ’random, fortuitous, or attenuated’ contacts he makes by interacting with other persons affiliated with the State.”  The Zaletel court must have recognized that some percentage of the 70 million downloads likely landed in Virginia, it was not by defendant’s doing.  Something more is required.

Thousand Oaks Barrel Co.—99 Shipments Supports Personal Jurisdiction

Three months after Zaletel, Judge Ellis again addressed personal jurisdiction in a trademark/copyright case.  Thousand Oaks Barrel sued Deep South Barrels, a Texas company that made and sold oak mini-barrels similar to the Thousand Oaks Barrel product, claiming trademark and copyright violations in Virginia.  Judge Ellis applied the now familiar ALS Scan test with specific reference to Zippo.  Restated again with minor adjustments in this decision, the three-part test is that a State can exercise personal jurisdiction over a nonresident defendant when that defendant “(1) directs electronic activity into the state, (2) with the manifested intent of engaging in business or other interactions within the state, and (3) that activity creates, in a person within the state, a potential cause of action cognizable in the state’s courts.”

Judge Ellis concluded first that Plaintiff Thousand Oaks established a prima facie case of personal jurisdiction over Deep South Barrels by showing that “Deep South Barrels directed electronic activity into Virginia with the manifest intent to do business with Virginia residents when it set up an interactive e-commerce website accessible to Virginia residents and used that website to fulfill Virginia customers’ Internet purchases.”  The facts established that website customers in Virginia could purchase the Deep South mini-barrels directly over the website, and that approximately 99 shipments originated from website sales to Virginia customers.  The judge found that Deep South Barrels’s use of an interactive e-commerce website to sell even a modest quantity of products to Virginia residents was sufficient to show that the defendant “purposely availed itself of the privilege of conducting activities [in Virginia].”

Summary

The center of the test for personal check jurisdiction in Internet or cyberspace transactions is whether there has been “purposeful availment” by the defendant, which requires that the commerce in question be aimed at the forum state.  The Zippo test addresses the relatively easy questions of personal jurisdiction with passive websites (no personal jurisdiction) and sales from highly active website (personal jurisdiction).   By the broad swath of middle-ground interactivity remains uncertain territory.

The current Fourth Circuit test yields what might tactfully be described as uneven results.  In Zaletel, 70 million downloads of the defendant’s app – of which some percentage were certainly to Virginia customers – did not support personal jurisdiction because the defendant did not aim at Virginia.  Yet the same judge only three months later and applying the same test concluded that 99 shipments of oak mini-barrels was sufficient for personal jurisdiction.

Judge Ellis’s analysis seems to be consistent between the two cases.  The problem is that the legal test for personal jurisdiction in the Internet world is from a bygone era, leaving us with no clear test of the critical “purposeful availment” analysis.

Fourth Circuit Pulls No Punches in en banc Ruling on Second Immigration Order

In writing for the majority in the Fourth Circuit’s May 25, 2017 en banc decision on the second Immigration Order, Chief Judge Roger L. Gregory pulled no punches.  The combined opinions of the Court in International Refugee Assistance Project v. Trump (No. 17-1351) span 206 pages, but in the opening paragraph of his majority opinion, the Chief Judge puts a dagger into the Administration’s arguments.  He writes:

The question for this Court, distilled to its essential form, is whether the Constitution, as the Supreme Court declared in Ex Parte Milligan, 71 U.S.  (4 Wall) 2. 120 (1866), remains “a law for rulers and people, equally in war and in peace.”  And if so, whether it protects Plaintiffs’ right to challenge an Executive Order that in text speaks with the vague words of national security, but in context drips with religious intolerance, animus, and discrimination.

There’s no ambiguity in these words.

This Blog Post is the EDVa Update’s seventh posting on the Immigration Orders.   We posted previously on EO-1 back on February 3, 7, and 14, and then on EO-2 on March 20 and 30, and again on April 21.

Thirteen of the Fourth Circuit’s fifteen judges participated in the en banc argument (two judges recused themselves—more on this below).  Chief Judge Gregory’s opinion is joined by six other judges from the court.  There are two concurring opinions (including substantially concurring votes with the majority), and three dissents.

The bottom-line result is that the Fourth Circuit affirmed the Maryland District Court’s nationwide preliminary injunction barring enforcement of Section 2(c) of Executive Order 13780, the second Immigration Order signed by President Trump.   The decision was probably expected, but the vitriolic tenor of the majority opinion is still a surprise.

The same Executive Order is the subject of an injunction entered by a Hawaii federal judge.  That ruling is also on appeal, and a three-judge panel from the Ninth Circuit heard oral argument on May 15, 2017.  That panel is not yet ruled.

On June 1, 2017, the Administration filed in the U.S. Supreme Court its Petition for a Writ of Certiorari and for an emergency stay of the decision.  A stay requires the affirmative votes of five Justices.

Isolation of the Judicial Review Issue

The issue at the core of the Immigration Order battle is whether in the immigration context the federal courts should look behind the facial justifications given for the Executive Order.  The campaign statements of candidate Trump allegedly evidenced an anti-Muslim animus, and post-inauguration statements by the President and his advisors were alleged to confirm this animus.  But it was generally conceded that the obvious flaws in EO-1 were corrected and that EO-2 was facially neutral.

In the briefing and at the oral argument, the Administration aggressively defended the second Immigration Order as facially legitimate, and argued that for this reason the Court should look no further.  The Plaintiffs alleged that the Order’s stated purpose was given in bad faith, and therefore, the federal courts must consider whether the Plaintiffs made the requisite showing of bad faith.

Fourth Circuit’s Majority Analysis

The Fourth Circuit moved to the core issue finding “that Plaintiffs have more than plausibly alleged that EO-2’s stated national security interest was provided in bad faith, as a pretext for its religious purpose.”

The Court then delivered its key finding: “Plaintiffs have made a substantial and affirmative showing that the government’s national security purpose was proffered in bad faith, we [therefore] find it appropriate to apply our long-standing Establishment Clause doctrine.”    Chief Judge Gregory concluded that “the reasonable observer would likely conclude that EO-2’s primary purpose is to exclude persons from the United States on the basis of their religious beliefs.”  The opinion discusses the now familiar evidence from the litigation on both the first Immigration Order and the second Immigration Order.   “[T]he Government’s argument that EO-2’s primary purpose is related to national security . . . is belied by evidence in the record that President Trump issued the first Executive Order without consulting the relevant agencies, . . . and that those agencies only offered a national security rationale after EO-1 was enjoined.´  This leads to the circuit court’s conclusion, “[L]ike the district court, we think the strong evidence that the national security justification for EO-2 was secondary to its primary religious purpose and was offered as more of a ‘litigating position’ than is the actual purpose of EO-2.”

The Chief Judge then again applied the dagger:

The Government has repeatedly asked this Court to ignore evidence, circumscribe our own review, and blindly defer to executive action, all in the in the name of the Constitution’s separation of powers.  We declined to do so not only because it is the particular province of the judicial branch to say what the law is, but also because we would do a disservice to our constitutional structure were we to let its mere invocation silence the call for meaningful judicial review.  The deference we give the coordinate branches is surely powerful, but even it must yield in certain circumstances, lest we abdicate our own duties to uphold the Constitution.

Judge Keenan offered a concurring opinion, which Judge Thacker joined.  Judge Wynn added his own concurring opinion.

The Three Dissents

Judges Niemeyer, Shedd, and Agree wrote dissenting opinions.

In his dissent, Judge Niemeyer accepted the Administration’s argument that in the immigration context the federal courts should not look beyond the given facially legitimate and bona fide reasons for the Immigration Order.  He concludes, “considering the Order on its face, as we are required to do . . . it is entirely without constitutional fault that the Order was a valid exercise of the President’s authority . . . “Judge Niemeyer would draw the line as barring any further court review.  But after this defense was breached, he is deeply troubled by the majority’s willingness to rely on statements made by candidate Trump during the presidential campaign.

The second dissent, by Judge Schedd, joins with Judge Niemeyer, but adds a practical public interest analysis.  He concludes that “the district court’s public interest analysis misses the mark.”  When weighing the public’s interest, as courts are required to do when considering preliminary injunctions, the national security interests of the nation seem to have been swept under the rug.  Judge Shedd would deny a preliminary injunction on the ground that a balancing of interests favors enforcement of the Order.

Judge Agee joins with the other dissenters, but states as a separate basis for his dissent the questionable standing of the remaining Plaintiffs.  Obviously, if the remaining Plaintiffs have no standing, the Court could end the case.

Judge Wilkinson’s Recusal

Judge J. Harvey Wilkinson recused himself because his son-in-law is the acting Solicitor General who argued the case for the Administration.  While the recusal was legally appropriate, Judge Wilkinson’s absence deprives the decision of the analysis from one of the Fourth Circuit’s thought leaders.  His vote would not have changed the result, but if Judge Wilkinson had participated and had joined the majority, or had provided a concurring opinion, then the Administration might be very hesitant to push this case to the Supreme Court.  On the other hand, a strong dissent from Judge Wilkinson would have added gravitas to the Administration’s arguments.

Summary

The Fourth Circuit’s en banc decision in International Refugee Assistance Project v. Trump does not come as a surprise, based upon the oral argument.  The circuit court perhaps could have decided for the Administration by adopting Judge Trenga’s analysis (see EDVa Update March 30, 2017 Post, EDVa Back in the Immigration Fray: Judge Trenga Provides Qualified Win for President Trump’s New Immigration Order), but it went decidedly the other way in its 10-3 decision.  The surprise is the vitriolic tenor of the majority opinion.   The en banc argument was civil, as is always so in the Fourth Circuit.  But the opinions evidence deep-seated and intense views on the role of the federal courts and on the veracity of the Trump Administration, and certainly the Chief Judge pulled no punches when he wrote for the majority.

The late-breaking news is that the Administration has filed its Petition for Certiorari with the U.S. Supreme Court.  An early vote on the request for a stay (which can come this month before the summer recess) would signal the Court’s leaning on the issues.

Failure to Use Basic Security Protections when Transferring Electronic Files Results in Waiver of Privilege

The Attorney/Client Privilege and Work Product Protection for a video file transferred via Box.com was lost when a client failed to use basic security precautions.  A February 2017 ruling by a Western District of Virginia magistrate judge in Harleysville Insurance Company v. Holding Funeral Home, Inc. (Case No. 1:15-cv-00057) should reinforce a requirement that lawyers use basic security protections (at a minimum) for all potentially privileged or protected communications.

  1. All Too Common Facts

There are no winners in this case. Both sides of the Harleysville Insurance matter were scolded by the magistrate judge.  In this case, an insurance investigator transferred a video file to its company’s counsel using Box.com, a popular file transfer and sharing service. To notify counsel of the transfer, the investigator sent an email that included the hyperlink to the video file.  Months later, the transmission email was produced in discovery.  Defendants’ counsel spotted and then tested the hyperlink, and immediately found the video file.

It appears from the recitation of the facts that the investigator knew how to use the basic transfer capabilities of Box.com but was never trained or instructed to use even the basic security tools. For example, Box.com allows for the creation of secure folders and the controlled access to any folder.

To make matters worse, the video file resided on the Box.com site accessible by the hyperlink for at least six months.

  1. Attorney/Client Privilege and Work Product Protection Waiver

After the access to the Box.com site and the video file were exposed, Harleysville argued that the defense counsel’s access to the file was an improper, unauthorized access to privileged information, and this should require the disqualification of defense counsel. The argument in response was that Harleysville had waived any claim of privilege or confidentiality by placing the information on Box.com without using any of the available security tools.

Attorney/Client Privilege.  The court analyzed the Attorney/Client Privilege waiver separately from the Work Product Protection issue.  Its first finding was that Harleysville waived any claim of Attorney/Client Privilege with regard to the information posted on Box.com.  The court concluded that “the information uploaded to this site was available for viewing by anyone, anywhere who was connected to the Internet and happened upon the site by use of the hyperlink or otherwise.”  The decision continues, “In essence, Harleysville has conceded that its actions were the cyber world equivalent of leaving its claim file on a bench in the public square and telling its counsel where they could find it.”

Attorney/Client Privilege issues in the case were governed by state law. Virginia law provides protection for privileged communications. See Walton v. Mid-Atlantic Spine Specialists, 694 S.E.2d 545. 549 (Va. 2010).  But this privilege is an exception to the general duty to disclose and should be strictly construed.   Continuing, the proponent of the privilege has the burden to establish that the Attorney/Client Privilege applies and that the privilege has not been waived.

The Walton case adopts a multifactor analysis for determining whether the holder of a privilege took reasonable steps to prevent disclosure and also took reasonable steps to rectify the error. The first listed factor is “the reasonableness of precautions to prevent inadvertent disclosures.”  Harleysville’s failure to take any reasonable security precautions doomed its argument from the start.

Work Product Protection.  Work Product Protection in this matter was governed by federal law.  The Harleysville Court built its analysis on the Fourth Circuit’s recognition “that the inadvertent disclosure of attorney work product, even opinion work product, can result in a waiver of its protected status.”  This guidance is tempered by additional appellate authority that holds that a waiver should occur only when an attorney’s or client’s actions are “consistent with a conscious disregard of the advantage that is otherwise protected by the work product rule.”

FRE 502(b) would protect an “inadvertent” disclosure.  But the magistrate judge reasoned the disclosure here could not be inadvertent because the investigator clearly intended to transfer the video file to Box.com.  The Court also looked to Rule 502(b)(2), which provides that the disclosure is not a waiver if the holder of the protection “took reasonable to prevent disclosure.”  Again, Harleysville was in a bad place because it failed to take any steps.

The magistrate judge was obviously troubled not only by the transfer of the video file to Box.com without any security precautions, but also by the client leaving the unprotected file on the Internet site for at least six months.  The conclusion followed that this carelessness waived the Work Product Protection.

  1. Sanctions Imposed against Defense Counsel

In the introduction to this Blog post, we noted that both sides were scolded by the Court.  The investigator’s email that included the hyperlink also included a Confidentiality Notice.  This Notice coupled with the obvious significance of the video file was sufficient for the Court to conclude that the defense counsel should not have downloaded and studied the file. The Court wrote, “by using the hyperlink contained in the email also containing the Confidentiality Notice to access the Box Site, defense counsel should have realized that the Box Site might contain privileged or protected information.”

Harleysville argued that the appropriate sanction should be the disqualification of defense counsel. The magistrate judge agreed that there was an ethical stumble, but concluded that the disqualification was an unnecessarily severe sanction. She did, however, order that defense counsel should bear the parties’ costs in obtaining the Court’s ruling on the matter.

  1. Summary and Conclusions

The immediate instruction from the Harleysville magistrate judge’s ruling is that if a party chooses to use a new technology, it will be held responsible for ensuring that its employees and agents understand how the technology works, and, more importantly, whether the technology allows unwanted access by others to its confidential information.   The Box.com facts present a straightforward set of facts—the basic security features of Box.com would, if utilized, have blocked access to the video file.

The case sets the stage for a broader set of responsibilities associated with newer and more sophisticated security technologies.  For example, now that encryption technologies are readily available, should a disclosure that would have been blocked by the use of even simple encryption be deemed a waiver of privileges?   In Harleysville, the Box.com tools were present but not utilized.  In the encryption example, the tools can be acquired and then used, but as of today are probably not widely installed.  But this could change overnight when courts understand that Microsoft has added encryption options to Outlook.   The Harleysville reasoning likely will make it a requirement, not just a recommendation, that lawyers employ encryption for potentially privileged or protected communications.

H/T to Sharon Nelson and the VSB 2017 TechShow for flagging the significance of the Harleysville Ins. Co. v. Holding Funeral Home, Inc. ruling.

C-Span to Broadcast Live Audio of Today’s 4th Circuit’s Argument on Immigration Executive Order

The Fourth Circuit will hear en banc the oral argument today at 2:30 pm in International Refugee Assistance Project v. Trump.   For the first time (that we know) the Court will allow a live audio broadcast of proceedings.

Earlier this year the Ninth Circuit permitted the live audio broadcast of the argument on the prior Immigration Executive Order.  137,000 people logged in to listen.

Listeners can find the link to the audio feed on the Fourth Circuit’s web page here.  The Court has also advised that an MP3 audio file will be available for download approximately one hour after the argument concludes here.Graphic

The case Orders and Briefs are available online on the site.  In the Case Information section under Public Advisory #4 in the News & Announcements section on Page 1, the Orders, Briefs and more are accessible.

Only 14 of the Court’s 15 active judges will hear the case.  Judge Wilkinson has recused himself because his son-in-law is the Acting Solicitor General.  The even number of participating judges presents the awkward possibility of a tie vote.

For an overview of the issues in the appeal, you should see our earlier EDVa Update posts on the Immigration Order battles here, here, here, here, and here.  But if you only have time to review one post, go our March 30th post.   While the instant appeal addresses an order from the District Court for Maryland, and not Judge’s Trenga’s ruling in Sarsour et al. v. Trump, his opinion provides extremely well-reasoned coverage of the issues.

EDVA: Legal Malpractice Does Not Give Rise to Breach of Fiduciary Duty Claim

A claim of legal malpractice by client against a former attorney does not, at the same time, give rise to a breach of fiduciary claim under Virginia law, according to Judge Henry Hudson of the Eastern District of Virginia (Richmond Division).  Judge Hudson’s ruling is a development in the law of fiduciary duty, and it goes into territory that has not yet been covered by the Virginia Supreme Court.

In Kylin Network (Beijing) Movie & Culture Media Co. Ltd v. Fidlow, 3:16-cv-999-HEH, 2017 WL 889620 (E.D. Va. Mar. 6, 2017), the case began with a Chinese company that wanted to make a movie about the life of martial arts legend Bruce Lee.  The company hired the defendants (a Virginia attorney and his former law firm) to negotiate and obtain the movie rights with the supposed copyright owner.  According to the Complaint, after some negotiation, the attorney recommended that the plaintiff pay $1 million to the supposed seller of the rights.  After the payment was made, the plaintiff allegedly discovered the seller did not have good title to the movie rights.  The unhappy client then filed a three-count complaint in federal court against its former attorney for legal malpractice, breach of fiduciary duty, and fraud.

The defendants sought to dismiss all counts of the Complaint under Fed. R. Civ. P. 12(b)(6).  The defendants first argued that the legal malpractice claim failed due to the plaintiff’s contributory negligence.  While Judge Hudson recognized that contributory negligence could be a complete defense to legal malpractice, he ruled that the defense had to be resolved at trial by the fact-finder when “reasonable minds could disagree” on the disputed facts.  Thus, the judge denied the 12(b)(6) motion on this count.

The defendants, however, had better luck on the remaining two counts.  The plaintiffs’ breach of fiduciary duty claim, according to Judge Hudson, was based upon duties arising from the attorney-client relationship.  In turn, this relationship was based in contract, specifically the written engagement agreement between the law firm and the clients that gave rise to the legal malpractice claim.  Judge Hudson noted that the Virginia Supreme Court has not ruled on the issue, but based upon prior precedent, he held that the breach of fiduciary duty had to arise from a duty independent of the attorney-client contract.  According to Judge Hudson, “[i]n Virginia, because legal malpractice is a contract claim, an additional claim for breach of fiduciary duty must be based on something other than a violation of a duty arising under the attorney-client relationship.”

Judge Hudson then made short work of the remaining fraud count, dismissing it on similar grounds and holding that such a claim must arise from a source other than the contractual relationship between the parties.

The plaintiffs’ legal malpractice claim survived the 12(b)(6) stage, which appears to be the true core of the plaintiffs’ case.  But Judge Hudson’s opinion is notable as a development in the law of fiduciary duty in Virginia, a claim that seems to appear more frequently in business litigation in the Eastern District.

Suing a URL: A Roadmap to a Cybersquatting Action

As more economic activity occurs online, internet domain addresses are increasing in value, especially for small- and medium-sized businesses.  Businesses of all sizes need to pay attention to the security of their internet domain addresses, and a recent EDVA decision highlights the dangers of losing control of a business’s domain address.

In Jacobs Private Equity, LLC v. <JPE.com>, Case No. 1:16-cv-01331, 2017 WL 830397 (E.D. Va. Feb. 2, 2017), Magistrate Judge Ivan D. Davis faced a “cybersquatting” claim that is becoming more common.  Plaintiff Jacobs Private Equity, LLC, operated www.jpe.com as its website for over 12 years.  One day, however, its employees suddenly found that their login credentials to the website no longer worked.  According to the Complaint, an employee was the victim of an email “phishing” scheme where she was conned into divulging her login credentials.  The hackers then logged into the internet domain registry and changed the password to the business’s account.  As a result, the business lost control over its website and email addresses, and a new entity registered its purported ownership of the domain address.

Represented by Mark H. M. Sosnowsky of Drinker Biddle’s DC office, the business filed suit in the Eastern District of Virginia under the federal Anti-Cybersquatting Consumer Protection Act (the “ACPA”), 15 U.S.C. § 1125(d), et seq.  The Eastern District frequently sees these actions because many of the most popular internet domain registrars have offices in northern Virginia.  In this case, VeriSign, Inc., served as the registry, and it has an office in Reston, Virginia.

Suing an Internet Address

In a marriage of ancient legal principles and new information technology, a lawsuit under the ACPA is an in rem action against the internet domain address itself (and similar to an in rem action against a parcel of real estate or tangible personal property).  While the actual internet domain address is named as a defendant, the real defendant is, of course, the party who registered the address.

An ACPA action also involves elements of traditional trademark law.  In fact, the ACPA is part of Title 15 of the U.S. Code which focuses on federal law governing trademarks, also commonly referred to as the Lanham Act.  Under the ACPA, a court may order the forfeiture or cancellation of a domain name, or transfer of a domain address to the rightful owner of the mark. The ACPA applies, for the most part, to marks that are distinctive or famous.

A Common Problem

Fraudulent phishing schemes, such as the one that snared Jacobs Private Equity, are unfortunately increasingly common.  The usual pattern for this scheme is that bad actors outside of the United States will either take over the registration for a valuable website, or will watch for a non-renewal of registration for an active website.  The new party will swoop in, register the domain, and then offer to sell the domain back to the previous user for exorbitant amounts.  This frequently ensnares small businesses who fail to renew a website registration, such as by relying upon an expired credit card for an expected “auto-renewal” that never occurs.  The ACPA was enacted in 1999 in hopes of curbing such problems.

Elements of an ACPA Claim

Judge Davis’s opinion provides a useful roadmap for cybersquatting claims.  Treating an internet domain address as a trademark, a plaintiff must prove two elements to succeed on a cybersquatting claim:

  1. The domain name is identical or confusingly similar to the plaintiff’s mark.
  2. The registrant had bad-faith intent to profit from the domain name.

Traditional Trademark Law

The ACPA protects both registered trademarks and unregistered, common law marks.  While a common course of action for a business is to register its trademarks with the U.S. Patent & Trademark Office, a business may also acquire common law trademark rights by actual use of the mark in the market place.  For example, a small jewelry shop that has operated for 15 years as “Kitty’s Fine Jewelry” likely has a common law trademark rights in the name.  And if that small jewelry shop also operated a website (such as www.kittysfinejewelry.com), it will likely have a strong ACPA claim against a subsequent registration of the domain by a party acting in bad faith.  A business need not make a formal registration with the USPTO to have such protection.

Proving Bad Faith

Proving “bad faith intent” is often the challenge in these types of cases.  Because we cannot see into a person’s mind to determine intent, the ACPA sets forth nine “factors” that a court “may consider” in determining a person’s intent.  These factors operate as non-exclusive guides to the court (which is a concept similar to the common law “badges of fraud” used in traditional fraudulent conveyance law).  The nine factors under § 1125(d)(1)(B)(i) are as follows:

  1. Any preexisting trademark or other rights in the name used in the domain address.
  2. Whether the domain name contains the legal name of the person or a name that is commonly used to identify the person.
  3. Prior use of the domain name in connection with bona fide goods or services.
  4. Legitimate noncommercial or fair use of the mark in a site that uses the mark in the domain address.
  5. Intent to divert consumers from the mark owner’s online location to another site that could harm the goodwill represented by the mark.
  6. Whether the person offered to sell the domain name back to the mark owner for financial gain without having used the domain in any legitimate business activities. (This factor also includes whether the person has engaged in such activity in the past, indicating a pattern of such conduct.)
  7. Providing false or misleading contact information during the registration of the domain address.
  8. Acquiring multiple domain names which are identical or confusingly similar to multiple preexisting marks.
  9. Whether the mark is distinctive or famous at the time of registration of the domain name.

Of course, not all of these factors will apply in a given case, and there is no set standard for how many factors need to be present to establish bad faith.  Rather, a court has wide-latitude in these fact-intensive cases.

Service of Process Issues

In Jacobs Private Equity, the new registrant of the disputed internet domain address never responded to the complaint, so Judge Davis recommended that a default judgment be entered.  In Judge Davis’s Report and Recommendation (“R&R”), he first focused on the efforts that the plaintiff went to effect service of process.  The plaintiff tried the telephone number, mailing address, and email address listed by the new registrant, but all turned out to be bogus.  The plaintiff then sought court approval to publish notice of the lawsuit in The Washington Times.  Once this was accomplished, the court was satisfied that the default judgment could be granted.

The Plaintiff Prevails

Even though the defendant defaulted, Judge Davis still performed the ACPA statutory analysis in his R&R.  He determined that the plaintiff had a valid common law trademark rights in “JPE” and that the new registrant acted in bad faith by providing bogus contact information to VeriSign, among other factors.  No objections to Judge Davis’s R&R were ever filed, and on March 2nd, District Judge Liam O’Grady adopted the R&R in full, ordering the internet register to return the domain address to the plaintiff.

Alternatives to Litigation

 While the ACPA provides a legal remedy in federal court, aggrieved mark owners can also pursue an administrative challenge to bad-faith registration.  Known as a “Uniform Domain Name Dispute Resolution Policy” (“UDRP”) proceeding, the action is essentially a private arbitration filed with the internet registry overseeing the disputed domain.  While it can be faster and cheaper than litigation, the range of remedies allowed in such an arbitration are fewer than those available from a federal court.  And a successful arbitration can have little or no deterrence or precedential value against other cybersquatters targeting a specific website.

 Conclusion

The ACPA provides a legal remedy to businesses and individuals who have been victimized by the theft  or loss of control of their internet domains.  The statutory framework is straight-forward, but proving bad-faith intent can be challenging, especially when defendants evade service of process or mask their identities.  Yet, with the rise of online commerce (especially for small- and medium-sized businesses), we will likely see more incidents of stolen internet websites, and by virtue of the Eastern District’s geographic location, more cybersquatting claims brought in this court.

EDVA Back in the Immigration Fray: Judge Trenga Provides Qualified Win for President Trump’s New Immigration Order

The Eastern District of Virginia continues to influence the national debate over President Trump’s new Executive Order on immigration.  Judge Anthony Trenga of the EDVA offered one of the first wins for the Government when he denied immediate injunctive relief against the new Executive Order.  While Judge Trenga’s opinion was not the first to arrive in the Fourth Circuit, his decision is already appearing in the Government’s appellate briefs.

On Friday, March 24, 2017, in Sarsour et al. v. Trump (Case No. 1:17cv 120), Judge Trenga denied injunctive relief sought by plaintiffs challenging President Trump’s second Executive Order on immigration.  In a 32-page opinion, Judge Trenga provided detailed consideration of the replacement Immigration Executive Order issued by the Administration on March 6, 2017.  After cataloging significant changes in the replacement Order, the judge concluded that it’s not likely that the plaintiffs can prove that the President acted outside his delegated and constitutional authority, and thus the Court denied the emergency relief sought by the plaintiffs.

In our March 20th blog post, we reported on decisions from district courts in Hawaii and Maryland that granted nationwide temporary injunctive relief enjoining critical parts of the replacement Order.  The Government has noticed an appeal of the Maryland order to the Fourth Circuit.  Judge Trenga’s ruling is the first significant decision arguably upholding the constitutionality of the replacement Immigration Executive Order.

Meanwhile in the Fourth Circuit, the Maryland Order is on the hot seat.  The Government has moved to stay that Order and asked for accelerated briefing.  The Fourth Circuit granted the acceleration request on March 23rd, and the Government filed its Opening Brief the following day.  Additionally, 12 states field an amici brief in support of the Government’s position.  The opposition briefs are due on April 14th, and oral argument is scheduled for May 8th in Richmond.  Further, the Fourth Circuit sua sponte has requested the views of the parties whether the May 8th hearing should be en banc before all of the Fourth Circuit judges, instead of the customary three-judge panel.  The deadline for the responses of the parties on this issue is today.

The Replacement Immigration Executive Order

In a previous blog post, we summarized the replacement Order.  The first Executive Order from late-January had obvious facial flaws, including the absence of any national security justification for the critical and controversial “travel ban” provisions.

The replacement Order is, by all measures, facially neutral, and the Administration has provided its statement of justification focused on national security concerns.  The justification includes explanations of why each “travel ban” country poses significant immigration dangers.

Judge Trenga’s Sarsour v. Trump Opinion – Preliminaries

The Sarsour Complaint was filed by a series of individual plaintiffs; unlike the earlier Aziz v. Trump case where the Commonwealth of Virginia assumed the lead in the case, there is no state presence in this case.

The specific substantive claims are similar to those in the Hawaii and Maryland cases.  That is, there is a count based on the Immigration and Naturalization Act (“INA”), a claim grounded in the Establishment Clause, and then Due Process claims.

Judge Trenga sets the stage for his Sarsoar opinion by reminding us that he’s ruling on a TRO/Preliminary Injunction motion.  These are both “extraordinary remedies” which should be “granted only sparingly and in limited circumstances.”  He then outlines the now-familiar four-step analysis from Winter v. Nat.  Res. Def. Council, Inc., 555 U.S. 7 (2008).

The Court’s findings recognize that the plaintiffs have sufficiently shown their standing to challenge the new Executive Order.  The opinion then turns to the INA and APA-based claims. Recall that the earlier Maryland District Court opinion rejected the INA claim as a basis for temporary injunctive relief.  Judge Trenga likewise concluded that the plaintiffs have failed to clearly show that the President’s authority is limited under the relevant INA sections

The Critical Establishment Clause Analysis

As before in the other cases, Judge Trenga’s core analysis is directed to the Establishment Clause claim, which is Count 1 in the Sarsour Complaint.  Sarsour’s allegation is that the replacement Immigration Executive Order “violates the Establishment Clause because it disfavors the religion of Islam.”  Sarsour conceded that the new Executive Order does not facially violate the Establishment Clause, and the District Court then applied the three-part test from Lemon v. Kurtzman, 403 U.S. 602 (1971).  Within this test, Judge Trenga focused on the first part of the Lemon test, specifically whether the replacement order has a secular purpose.

Judge Trenga rejected the Government’s argument that the President offered a legitimate, rational, and non-discriminating purpose in the replacement Executive Order, and in turn, this permitted the federal courts to go outside of the four corners of the Order to analyze constitutional validity.  (This was the same argument that the Government made unsuccessfully in defense of the original Executive Order; the argument was also unsuccessful before the Ninth Circuit and before Judge Brinkema in Aziz v. Trump.)

Judge Trenga then went to the heart of the case: “[T]he question is now whether the President’s past statements continue to fatally infect what is facially a lawful exercise of presidential authority.”  The past statements are those by candidate Trump and campaign surrogates promising a ban on Muslim immigration.  These allegedly anti-Muslim statements were the bases for the earlier federal court decisions enjoining the original Executive Order, and they served as the bases in the Hawaii and Maryland District Court decisions enjoining the new Order.  Citing Supreme Court authority, Judge Trenga explained that “past actions [do not] forever taint any effort on [the government’s] part to deal with the subject matter.”

Continuing in the next paragraph, Judge Trenga wrote, “the Court cannot conclude for the purposes of the motion that the statements, together with the President’s past statements, have effectively disqualified him from exercising his lawful presidential authority . . . .”   He then concludes “the substantive revisions reflected in [the replacement immigration Executive Order] have reduced the probative value of the President’s statements to the point that it is no longer likely that Plaintiffs can succeed on their claim that the predominant purpose . . . is to discriminate against Muslims based on their religion . . . .”   The Establishment Clause count, therefore, failed at this point in the proceedings.

Continuing with the four-step TRO/Preliminary Injunction analysis, Judge Trenga agreed that the plaintiffs made an adequate showing of irreparable harm.  But because of the revisions in the replacement Executive Order, the plaintiffs did not establish that the equities tipped in their favor, and the plaintiffs also did not establish that the public interest favored the issuance of immediate injunctive relief.

The Fourth Circuit Accelerates Consideration of the Maryland District Court’s Ruling

On March 17th, the Government noticed its appeal of the injunction granted by the Maryland District Court.  If Judge Trenga’s Sarsour ruling is appealed, then the Fourth Circuit might consolidate the two cases. But even without a formal appeal, the Fourth Circuit will have before it multiple citations to Judge Trenga’s opinion and analysis in the Government’s opening brief.

At this point, the Maryland District Court injunction remains in place, and the Fourth Circuit will consider the matter promptly.  As noted above, the Government has already filed its Motion to Stay the Maryland Injunction, and the Fourth Circuit has accelerated consideration of the appeal.

At this point, the Fourth Circuit is likely to see the next major action on the Executive Order, as it appears that the Government is more interested in appellate review here as opposed to the Ninth Circuit.

Stay tuned.