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Michael Beswick LICSW, BCD

Mike Beswick, LICSW, BCD, has a vast amount of experience working in the mental health field. He is a board-certified diplomat, and holds the highest level of mental health licensure in West Virginia, Virginia and California. He has been on a lifelong quest to better serve his clients, and has specializations or certifications in substance-abuse counseling, psycho drama, experiential outdoor based therapy, family systems, neurolinguistic programming, dialectical behavior therapy, (DBT) brain spotting, EMDR and clinical Hypnosis. Mike believes therapy should be a co-created, interactive relationship with results that are tangible. Mike incorporates his own lifestyle and values into his practice. All are treated with the upmost respect and with the belief that all of us want to do our best and that our problems are frequently opportunities in disguise. Mike is an avid outdoorsman and enjoys back country skiing, white water kayaking, and hiking. He is married with two sons and currently spends his time between facilitating his private practice and telehealth in West Virginia and overseeing a young adult program in California.

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1

Arbitraon Update & Perspecves from an Arbitrator

Presented by:

K. Bre [email protected]

Kirk M. [email protected]

1

Arbitration Update & Perspectives from an Arbitrator

Gentry Locke Seminar, September 10, 2021

K. Brett Marston Kirk M. Sosebee

I. Background: What Is Arbitration Anyway And How Does It Work?

a. What Is Arbitration?

While litigation “is our default adjudicative process, [] it is not the only possible process.

Private arbitration has existed at least since the Roman Empire.”1 Arbitration has developed to be a more cost-effective and private alternative to litigation. “In the modern American legal system, arbitration is an important means of dispute resolution. When state and federal courts require time-consuming, complex, and expensive procedures, arbitration offers a means of dispute resolution that is faster, easier, and cheaper for parties to utilize.”2 While the default dispute resolution option in America is litigation, parties today increasingly choose other methods, such as mediation and arbitration. Today, arbitration is the most-used method of binding alternative dispute resolution.3

Of course, both arbitration and ligation developed as formal and less violent alternatives to

other previous historical options. These other historical options have fallen out of favor, including trial by combat, and duels. However, the idea of trial by combat was re-introduced a few years ago by attorney Richard A. Luthmann of New York. In 2015, Mr. Luthmann filed a motion in Richmond County, New York requesting that the case be resolved by a combat, against both the plaintiffs and their attorneys. The Motion “invoke[d] the common law writ of right” and demanded the “common law right to Trial By Combat as against Plaintiffs and their counsel, whom plaintiff wishes to implead into the Trial By Combat by writ of right.”4 Intriguingly, the court denied the request for a trial by combat, but only after stating that trial by combat was an available remedy that the court did have the power to order.5 But outside of New York at least, these methods of dispute resolution are no longer available to parties.

Unlike litigation, arbitration is based on the consent of the parties.6 “[A]rbitrators wield

only the authority they are given . . . they derive their powers from the parties’ agreement to forgo the legal process and submit their disputes to private dispute resolution.”7 “Parties may generally shape such agreements to their liking by specifying with whom they will arbitrate, the issues

1 Gherardi v. Citigroup Glob. Mkts., Inc., 975 F.3d 1232, 1236 (11th Cir. 2020). 2 Rowland v. Sandy Morris Fin. & Estate Planning Servs., LLC, 993 F.3d 253, 257 (4th Cir. 2021). 3 See Jacqueline Nolan-Haley, “Mediation: The ‘New Arbitration,’” 17 Harv. Negotiation L. Rev. 61, 66 (Spring 2012) (“Historically, arbitration has been the most popular alternative to the court adjudication of disputes.”). 4 https://abovethelaw.com/2015/08/is-trial-by-combat-coming-to-nyc/; http://loweringthebar.net/2015/08/game-of-thrones-fan-demands-trial-by-combat.html. 5 https://www.wearethemighty.com/articles/this-is-how-trial-by-combat-is-totally-legal-in-new-york-state; http://www.silive.com/news/index.ssf/2016/03/no_game_of_thrones_throwdown_j.html; https://abovethelaw.com/2016/03/judge-admits-trial-by-combat-is-available-in-new-york-then-declines-to-order-it/. 6 Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1416 (2019). 7 Id.

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subject to arbitration, the rules by which they will arbitrate, and the arbitrators who will resolve their disputes.8

b. How Does Arbitration Work?

Like litigation, arbitration involves a neutral decision-maker deciding which party will

prevail on its claims and defenses. Instead of a judge or a jury deciding the case, however, the matter is decided by an arbitrator or a panel of arbitrators.

The arbitrator or arbitrators are chosen by the parties, and their cost is usually split equally

by the parties. The arbitrators are often attorneys with experience in the subject matter of the dispute. They can also be former judges, or other professionals with subject matter experience, such as architects, engineers, or contractors in a construction dispute. For smaller disputes, one arbitrator is usually used, while a panel of three arbitrators is often used for larger disputes.9

The arbitrator usually holds a hearing where written evidence, witness testimony, and legal

arguments are presented. Unlike litigation, arbitrators are not as strictly bound by the law as a court is. The arbitrator’s decision, known as an ‘award,’ is final and binding on all the parties. Arbitration awards can be confirmed and enforced in a court, but there is very little judicial review of arbitration awards. As explained in more detail below, they are rarely be overturned by a court. And crucially, the fact that the arbitrator or arbitrators did not follow the law is generally not grounds for a court to overturn an arbitration award. Arbitration is generally confidential, and documents submitted in arbitration are not publicly-available, unlike court-related filings.

c. How Do Parties End Up In Arbitration?

“The question whether a party has agreed to arbitrate a particular issue is a matter of

contract interpretation.” Amchem Prods. v. Newport News Cir. Court, 264 Va. 89, 96 (2002). In determining whether a party has agreed to arbitrate a particular dispute, courts apply “ordinary state-law principles that govern the formation of contracts.” Id. at 97.

Parties generally have great freedom in specifying up-front in their contracts which dispute

resolution method will apply in the event of a later dispute. Parties may provide for arbitration as the default dispute resolution mechanism in their contracts. “Arbitration agreements are contracts where the bargain is for the arbitrator’s construction of the underlying agreements, rather than for any particular outcome.”10 An arbitration agreement is better thought of as a sort of choice-of-forum clause, and a motion to confirm an arbitration award is very nearly like asking a court to recognize and enforce the judgment of a different court. In that context, so long as the rendering

8 Id. 9 See American Arbitration Association Construction Industry Arbitration Rules and Mediation Procedures (2015), Rule R-18(a) (“If the parties have not agreed on the number of arbitrators, the dispute shall be heard and determined by one arbitrator, unless the AAA, in its discretion, directs that three arbitrators be appointed. A party may request three arbitrators in the demand or answer, which request the AAA will consider in exercising its discretion regarding the number of arbitrators appointed to the dispute.”). 10 Gherardi v. Citigroup Glob. Mkts., Inc., 975 F.3d 1232, 1237 (11th Cir. 2020).

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court had jurisdiction, the court in which execution is sought will not look behind the judgment and reopen the case on the merits.”11

In several fields, such as employment and construction, arbitration provisions are widely

used in parties’ contracts. For example, the most widely-used construction contract forms, published by the American Institute of Architects (“AIA”), allow the parties to check-the-box and choose their preferred method of dispute resolution. Below is the dispute resolution provision from the AIA “A101 Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum” contract template:

The AIA contract forms contain detailed arbitration provisions, which in turn refer to and incorporate the arbitration rules of American Arbitration Association (“AAA”), discussed further below.

A party who is sued in court for a dispute covered by an arbitration provision may ask the

court to stay or dismiss the litigation and compel arbitration.12 Even if arbitration is not previously required by the parties’ contract, they can agree to resolve their dispute through arbitration by entering into an agreement to arbitrate.

All manner of disputes are subject to arbitration, including the following types of cases:

• Agency • Building and engineering • Close corporations • Commercial • Construction • Consumer • Corporate elections • Distribution Agreements

11 Id. at 1237-38 (quotation omitted). 12 See 9. U.S.C. § 4; Va. Code § 8.01-581.02.

• Franchise • Health industry • Insurance • Leases • Licenses • Logistics • Maritime

4

• Purchase and sale of commodities and goods

• Real Estate • Securities

d. Where Do Parties Arbitrate?

In a contractual arbitration provision, the parties may specify the venue for any arbitration

hearing. The most common locations are a neutral venue, the location where the contract is to be performed, or where the party with most bargaining power is located. In cases where the parties agree to move an existing dispute out of litigation into arbitration, the court’s venue is often used as the arbitration venue as well.

Contracting parties should be aware of state-law arbitration venue provisions, such as Va.

Code Ann. § 8.01-262.1, which provides for an arbitration venue in Virginia for any dispute involving a construction project located in Virginia and a contractor party that is located in Virginia, notwithstanding any contractual venue provision to the contrary.13 This statute would prevent requiring a Virginia contractor to participate in an arbitration in another state relating to a Virginia construction project.

e. What Is The Legal Basis For Arbitration?

The enforceability of arbitration provision in Virginia is covered by the Federal Arbitration

Act and the Virginia Arbitration Act.

i. Federal Arbitration Act The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., applies to maritime transactions

and to contracts relating to interstate commerce.14 Given today’s broad interpretation of “interstate commerce,” the FAA will apply to a very broad range of contracts and disputes. When it applies, the FAA pre-empts any contrary state laws. However, the FAA does expressly exclude from its coverage employment contracts of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce (collective bargaining agreements).15

The FAA makes arbitration provisions broadly enforceable. It provides that a “written

provision in any . . . contract . . . to settle by arbitration a controversy thereafter arising . . . or an agreement in writing to submit to arbitration an existing controversy . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”16 Congress adopted the FAA in 1925, “in response to a perception that courts were

13 See Va. Code Ann. § 8.01-262.1(B) (in arbitrations relating to construction projects in Virginia where one party is a Virginia contractor, subcontractor, or material supplier, “[t]he forum for any arbitration proceedings required in such a contract . . . shall be in this Commonwealth. If the contract provides for arbitration proceedings outside the Commonwealth, such provision is unenforceable and arbitration proceedings shall be in the county or city where the work is to be performed, unless the parties agree to conduct the proceedings elsewhere within the Commonwealth.”). 14 9 U.S.C. §§ 1-2. 15 9 U.S.C. § 1. 16 9 U.S.C. § 2.

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unduly hostile to arbitration.”17 The FAA requires courts to “rigorously” “enforce arbitration agreements according to their terms.”18 This is because of “Congress’s judgment [that] arbitration had more to offer than courts recognized—not least the promise of quicker, more informal, and often cheaper resolutions for everyone involved.”19 The FAA therefore “embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts.”20 As interpreted by the Supreme Court, the FAA creates a “uniform body of federal substantive law” regulating the enforceability of agreements to arbitrate that applies to all contracts involving interstate commerce in both state or federal court.”21

“Not only did Congress require courts to respect and enforce agreements to arbitrate; it

also specifically directed them to respect and enforce the parties’ chosen arbitration procedures.”22 Consequently, there is also a lot of flexibility in the way an arbitration can be conducted, with no rules of civil procedure or evidence to bind the arbitrators. The parties can generally specify in their contract the way the arbitration process will work. “The Federal Arbitration Act allows parties to an arbitration contract considerable latitude to choose what law governs some or all of its provisions.”23

Under the FAA, if the arbitration agreement prescribes a method for choosing the

arbitrator, that method will be followed, but if it is silent on the issue, upon request, a court will choose the arbitrator.24 The FAA empowers a court to stay a case and compel arbitration.25 An appeal may be taken from an order refusing a stay, or denying a motion to compel arbitration.26 However, an appeal may not be taken from an order staying the case and compelling arbitration.27 The FAA also specifically grants courts the ability to enter an order confirming an arbitration award.28

ii. Virginia Arbitration Act

Virginia has enacted the Uniform Arbitration Act, as the Virginia Arbitration Act

(“VAA”), Va. Code § 8.01-581.01, et seq. Under the VAA, “A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, except upon such grounds as exist at law or in equity for the revocation of any contract.”29

17 Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621 (2018). 18 Id. 19 Id. 20 Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006). 21 Stephen Smerek & Daniel Whang, Preemption and the Federal Arbitration Act: What Law will Govern your Agreement to Arbitrate? American Bar Association, Section of Business Law; Buckeye, 546 U.S. at 445, quoting Southland Corp. v. Keating, 465 U.S. 1, 12 (1984). 22 Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621 (2018). 23 DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468 (2015). 24 9 U.S.C. § 5. 25 9 U.S.C. § 4. 26 9 U.S.C. §16. 27 Id. 28 9 U.S.C. § 9. 29 Va. Code. § 8.01-581.01.

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Unlike the FAA, the VAA does apply to employment contracts and collective bargaining agreements. Similar to the FAA, the VAA allows courts to stay proceedings and compel arbitration,30 to appoint arbitrators if the parties are unable to,31 to confirm arbitration awards,32 and provides for appeals from orders denying a motion to compel arbitration.33

II. Arbitration Pros and Cons

While arbitration offers many benefits over litigation, there are certain drawbacks as well.

Parties should carefully evaluate these when making a decision between the two processes.

a. Pros Arbitration offers several advantages over litigation. These include more flexibility, speed

and finality, informality and privacy, a lower cost, and decision-making expertise.

i. Speed and finality

Arbitration cases usually proceed to a hearing and a final award quicker than litigation.34 In Virginia, where many judges and courts prioritize a quick resolution of disputes, this may be somewhat less pronounced than in other states, but overall, arbitration is usually a faster path to resolution than the court system. This advantage could be even more useful today, with the court and trial backlogs that have arisen due to COVID-19 delays in jury trials.

Arbitration also brings quicker finality to the parties. Having the litigation hanging over

their heads for years can be one of the worst effects to any party involved in a dispute. In the vast majority of arbitrations, however, once you receive the arbitration award from the arbitrator, the dispute is usually over. Arbitration awards are not often appealed, and are rarely overturned. They have a strong presumption of finality. This advantage will be even greater beginning January 1, 2022, when every VA Circuit Court decision will have an appeal of right to the VA Court of Appeals, then the possibility of discretionary appeal to the VA Supreme Court. Arbitration avoids this.

Unfortunately, the speed advantage provided by arbitration had been lessening, pre-

COVID-19.35 Particularly in large disputes, arbitration has become more similar to litigation, with extensive discovery and motions practice for months leading up to the arbitration hearing. Parties are able to counter this trend, however, and preserve the speed and low cost of arbitration, including by limiting the amount of discovery available, in the arbitration agreement itself or in a

30 Va. Code. § 8.01-581.02. 31 Va. Code. § 8.01-581.03. 32 Va. Code. § 8.01-581.09. 33 Va. Code. § 8.01-581.016. 34 See “Mediation: The ‘New Arbitration,’” 17 Harv. Negotiation L. Rev. at 66 (“Many parties seeking finality, privacy, informality, speed, low cost and decision-making expertise gravitate to the arbitration process.”). 35 See id. (“Arbitration is, in many respects, in crisis mode. U.S. practitioners complain that business arbitration has become as slow and costly as litigation.”).

7

preliminary hearing or conference with the arbitrator.36 Arbitration providers such as the AAA also have fast-track procedures, for speedy resolution of claims of less than $100,000, with a 45-day timeline from the preliminary telephone conference with the arbitrator to the hearing date.37

ii. Informality and privacy

Litigation is almost always public – members of the public can attend hearings and trials

(COVID-19 permitting), and almost all documents that are filed in court are publicly available. Arbitration offers litigants the opportunity to avoid this. Arbitration proceedings are private, between only the parties, witnesses, and the arbitrator. Depending on the nature of the dispute, this can be a great benefit to one or both parties. However, some of this benefit could potentially be lost later on if there ends up being a dispute in court over whether the arbitration award should be enforced or vacated.

iii. Lower cost

With arbitrations’ intended greater speed comes reduced costs. In theory, and often in fact,

arbitration ends up being less expensive than litigation. A large part of the costs in litigation are driven by discovery and motions practice in litigation. This is usually greatly reduced in arbitration. However, sometimes complex commercial disputes in arbitration can involve discovery issues and motions practice similar to full blown litigation. In addition, in arbitration, the parties must pay the arbitrators for their time, as well as any fees of any agency administering the arbitration, while taxpayers pay judges and juries.

iv. Flexibility

Another advantage of arbitration is the great flexibility the parties have to structure all

aspects of the process. Discovery plans and scheduling orders can be tailored to the needs of the case and the parties’ wishes, with the arbitrator’s approval.

The parties can choose between one arbitrator or a panel of three arbitrators. Parties can

choose between different methods of selection of the arbitrator(s), including the strike-and-rank method, where each party is presented with a list of potential arbitrators, strikes the arbitrators it objects to, and rank the others, with the highest-ranked arbitrators being chosen; or each party choosing one arbitrator, with those two arbitrators together picking the third. If a panel is chosen, one of the panel members can be designated as the chair, with the power to address and rule on discovery issues on their own. The parties can choose how detailed a ruling they want from the

36 See American Arbitration Association Construction Industry Arbitration Rules and Mediation Procedures (2015), Rule R-18(a) (“Care must be taken to avoid importing procedures from court systems, as such procedures may not be appropriate to the conduct of arbitrations as an alternative form of dispute resolution that is designed to be simpler, less expensive and more expeditious.”). 37 See American Arbitration Association Construction Industry Arbitration Rules and Mediation Procedures (2015), Rules F-1 through F-14.

8

arbitrator – just a decision, or findings of fact, or a reasoned opinion.38 There is similarly a lot of flexibility in the way the parties can structure in-person, virtual, or hybrid hearings.

Parties can decide before-hand if the arbitration costs will be split equally between the

parties, or if the arbitrator will have the discretion to award the costs of the arbitration to one side or the other. This can include expert’s costs and the arbitrator’s time. Also, you can agree that the arbitrator has the discretion to award attorney’s fees to the prevailing party. Additionally, the parties can provide for any or all of the following:

• Arbitrators’ Qualifications • Locale Provisions • Governing Law • Discovery • Documents-Only Hearing • Duration of Arbitration Proceedings

• Pre- and Post-Hearing Briefing • Remedies • Opinion Accompanying the Award • Confidentiality • Payment of Arbitration Expenses • Appeals

The parties can also use the rules of a sponsoring organization, such as the AAA. The

parties can choose a convenient or neutral venue. The parties also should carefully consider whether to include provisions allowing for the joinder of other parties into the arbitration, or the consolidation of the arbitration with other related arbitrations.39 It can be advantageous to have an avenue to bring all interested parties into one arbitration, but it can also complicate and bog down the process to have too many parties involved.

v. Expertise of the Decision-Maker

Judges and juries are generalists, while arbitrators are usually specialists in their field.

Employing an arbitrator brings that experience to bear on your dispute, and can be invaluable, particularly in technical fields such as construction. Many construction disputes involve highly technical facts, and an arbitrator who is an architect, engineer, or construction attorney, will be much more familiar with the subject matter than a generalist judge or a jury would be. As with a bench trial, arbitration also avoids the randomness of jury trials and sympathetic appeals to a jury. There is not much risk of anything like a “runaway jury” in arbitration.

b. Cons

While it has many benefits, there are also potential downsides to arbitration which parties

should consider carefully.

i. Timing and cost issues

38 See American Arbitration Association Construction Industry Arbitration Rules and Mediation Procedures (2015), Rule R-47(c) (“The parties may request a specific form of award, including a reasoned opinion, an abbreviated opinion, findings of fact, or conclusions of law.”). 39 See American Arbitration Association Construction Industry Arbitration Rules and Mediation Procedures (2015), Rule R-7 (establishing a procedure for the appointment of a separate arbitrator to decide contested issues of joinder).

9

The first of these, as mentioned above, is that arbitration is not always as quick and cheap as it is intended to be. In large disputes, it can tend to look very similar to litigation by another name, with the additional costs of paying the arbitrator and any agency administering the arbitration (and these fees are not cheap).

ii. Arbitrators not as bound by the law and contract provisions

The next two considerations are related – arbitrators are not as bound by the law and any

contract between the parties as a court would be. They are freer to try to “do justice” between the parties. This may be undesirable if a party feels they have a very strong legal or contractual basis for their claims or defenses, while the other side is relying more equitable arguments. As arbitration is a creature of contact, some contracts are now trying to rein this in more by specifying the rules or laws that the arbitrators must follow. And the FAA and VAA do not permit arbitrators to completely ignore the law or the parties’ rights.40

Arbitrators are also often accused of “splitting the baby” – of giving each party only part

of what they asked for. However, judges and juries also rarely award one party everything they as for. This is partly because plaintiffs or claimants usually ask for more than they deserve or should realistically hope to get, and there are also often counterclaims to deal with.

iii. Lack of judicial review

A significant disadvantage of arbitration is the lack of recourse if a party loses. One of the

primary incentives for courts to follow the law and the terms of parties’ contracts is the threat of being overturned on appeal. With arbitration awards, the appeals rights are very limited, however.

It is “black letter law that judicial review of an arbitration award in federal court is

substantially circumscribed.” 41 The “scope of judicial review of an arbitrator’s decision is among the narrowest known at law because to allow full scrutiny of such awards would frustrate the purpose of having arbitration at all—the quick resolution of disputes and the avoidance of the expense and delay associated with litigation.”42 A court’s review of an arbitration award is

40 See 9 U.S.C. § 10 and Va. Code Ann. § 8.01-581.010 (permitting courts to vacate arbitration awards when the arbitrators refuse to hear evidence material to the controversy, exceed their powers, or otherwise prejudice the rights of one of the parties.) 41 Beckley Oncology Assocs. v. Abumasmah, 993 F.3d 261, 266 (4th Cir. 2021). 42 Id. (internal quotations and citations omitted).

10

therefore extremely deferential.43 If an arbitrator makes a decision with little support in the law or in the parties’ contract, it is still unlikely to be overturned by a court.44

Appeal opportunities are limited, and courts generally defer to arbitration awards.45 An

arbitration award may only be overturned under the FAA (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.46

Where the issues that the arbitration panel resolved were within the scope of the powers conferred upon them, the arbitrators do not exceed their powers because they may have applied the wrong legal standard.47 Nor in Virginia is a “manifest disregard of the law” one of the enumerated bases on which a court may rely to vacate an arbitration award.48

43 See, e.g., Wachovia Sec., LLC v. Brand, 671 F.3d 472, 478, 478 n.5 (4th Cir. 2012) (the Federal Arbitration Act “limits courts’ ability to vacate arbitral awards as part of its comprehensive scheme to replace judicial hostility to arbitration with a national policy favoring it . . . The FAA notably does not authorize a district court to overturn an arbitral award just because it believes, however strongly, that the arbitrators misinterpreted the applicable law. When parties consent to arbitration, and thereby consent to extremely limited appellate review, they assume the risk that the arbitrator may interpret the law in a way with which they disagree. Any more probing review of arbitral awards would risk changing arbitration from an efficient alternative to litigation into a vehicle for protracting disputes.”) (internal quotations and citations omitted)); Reddy v. Buttar, No. 3:18-cv-00172-FDW-DSC, 2020 U.S. Dist. LEXIS 79887, at *16-17 (W.D.N.C. May 4, 2020). 44 See Reddy v. Buttar, No. 3:18-cv-00172-FDW-DSC, 2020 U.S. Dist. LEXIS 79887, at *16-17 (W.D.N.C. May 4, 2020) (“judicial review of an arbitration award in federal court is substantially circumscribed. When reviewing a petition to confirm an arbitration award, a court has the limited authority to ask whether the arbitrators were within the proper scope of their authority—and not whether they reached the correct, or even a reasonable, outcome. In the Fourth Circuit, it is has been the case for some time that neither misinterpretation of a contract nor an error of law constitutes a ground on which an award can be vacated. Instead, the award should be enforced, despite a court’s disagreement with it on the merits, if there is a barely colorable justification for the outcome reached.”) (quotations and citations omitted). 45 See LaPrade v. Kidder, Peabody & Co., 246 F.3d 702, 706 (D.C. Cir. 2001) (“It is well settled that a court's review of an arbitration award is limited . . . arbitration awards can be vacated only if they are in manifest disregard of the law, or if they are contrary to some explicit public policy that is well defined and dominant and ascertained by reference to the laws or legal precedents. Manifest disregard of the law means more than error or misunderstanding with respect to the law. Consequently, to modify or vacate an award on this ground, a court must find that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case.”) (internal quotations, citations, and alterations omitted). 46 9 U.S.C. § 10(a). 47 Signal Corp. v. Keane Federal Systems, Inc. 265 Va. 38, 45 (2005). 48 Id. at 46, 258.

11

An arbitrator may make other decisions short of a ruling on the merits that are unfavorable, and for which there is little or no recourse. The arbitrator may artificially limit discovery to an extent that it makes it more difficult for a party to prepare and prove its claims or defenses.

However, where an arbitrator acted beyond the terms of the contract that contained the

arbitration agreement by resolving a claim that did not related to the contract, the arbitrator exceeds his power.49

III. Additional Considerations When Dealing With International Arbitrations

Many international disputes are also resolved through arbitration. The benefits of having a

decision-maker with experience in the particular field are often enhanced, given the technical complexities of many large international disputes. Another advantage is that using a neutral venue and internationally-recognized arbitrators can make the parties be more respectful of both the process and the result than if the court system of one of the parties was used. It is convenient to enforce arbitration awards: most courts around the world support the arbitration process and will enforce an arbitration award,50 making this a popular mechanism for international cross-border disputes. There are several international arbitration providers with available international arbitration rules, including the U.S.-based International Institute for Conflict Prevention and Resolution (“CPR”).51 IV. Recent Supreme Court And Fourth Circuit Caselaw On Arbitration

a. Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019)

An interesting preliminary issue in considering whether a particular dispute should be

decided through arbitration is the question of whether the court or an arbitrator gets to decide this. This is the question of arbitrability – whether a court or an arbitrator is the proper entity to decide if a particular dispute falls within an arbitration clause. The arbitrability question is generally “an issue for judicial determination.”52

In certain circumstances, however, the arbitrability question is for the arbitrator to decide

– when the agreement to arbitrate clearly and unmistakably provides that the arbitrator shall determine what disputes the parties agreed to arbitrate. The Fourth Circuit has held that this can be accomplished by the parties incorporating the rules of an organization, such as the American Arbitration Association, which provide that the arbitrator shall rule on questions of arbitrability.53

In Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019), the Supreme

Court addressed this arbitrability question. The Court noted that parties may stipulate by contract that “an arbitrator, rather than a court, will resolve threshold arbitrability questions as well as

49 Trustees of Asbury United Methodist Church v. Taylor & Parrish, Inc. 249 Va. 144, 153-54 (1995). 50 See, e.g. the FAA, 9 U.S.C. § 9. 51 The CPR’s arbitration rules are available at https://www.cpradr.org/resource-center/rules/arbitration. 52 Peabody Holding Co., LLC v. UMW, 665 F.3d 96, 102 (4th Cir. 2012). 53 Rowland v. Sandy Morris Fin. & Estate Planning Servs., LLC, 993 F.3d 253, 258 (4th Cir. 2021); Berkeley Cty. Sch. Dist. v. Hub Int’l. Ltd., 944 F.3d 225, 242 (4th Cir. 2019).

12

underlying merits disputes.”54 The Court granted cert. in this case to address the propriety of the decision that some courts had nevertheless made in such instances to “short-circuit the process and decide the arbitrability question themselves if the argument that the arbitration agreement applies to the particular dispute [was deemed to be] ‘wholly groundless.’”55

The Court found that the “wholly groundless” exception was not consistent with the

Federal Arbitration Act.56 The Court held that when “the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.”57 The Court stated that an “agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.”58

The Court held that the “wholly groundless” exception was is inconsistent with the

statutory text and with precedent, confusing “the question of who decides arbitrability with the separate question of who prevails on arbitrability.”59

In Henry Schein, the parties’ contract stated that disputes would be resolved “by binding

arbitration in accordance with the arbitration rules of the American Arbitration Association [(AAA)].”60 The AAA rules “provide that arbitrators have the power to resolve arbitrability questions.”61 “Schein contended that the contract’s express incorporation of the American Arbitration Association’s rules meant that an arbitrator—not the court—had to decide whether the arbitration agreement applied to this particular dispute.”62 The Court declined to address the issue of whether the incorporation of the AAA rules was clear evidence of the parties’ intent to delegate the question of arbitrability to the arbitrator.63

b. Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019)

In Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, (2010), the Supreme Court

had decided that a court may not compel arbitration on a classwide basis when an agreement is silent on the availability of such arbitration. The Court held so because class arbitration fundamentally changes the nature of the “traditional individualized arbitration” envisioned by the FAA, “a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.”64

In Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019), the Supreme Court considered

whether the FAA bars an order requiring class arbitration when an agreement is not silent, but

54 Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 527 (2019). 55 Id. at 527-28. 56 Id. at 528. 57 Id. 58 Id. at 529. 59 Id. at 531. 60 Id. at 528. 61 Id. 62 Id. 63 Id. at 531. 64 Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 684 (2010).

13

rather “ambiguous” about the availability of class arbitration.65 The respondent, Varela was an employee of the petitioner, Lamps Plus.66 Varela had signed an arbitration agreement when he started work with Lamps Plus.67 Varela sued Lamps Plus on behalf of a putative class of employees whose tax information was compromised in a company data breach.68 Lamps Plus asked the district court to compel arbitration on an individual basis.69 The district court, however authorized arbitration on a classwide basis, and the Ninth Circuit affirmed.70 The Ninth Circuit held that the parties’ agreement was ambiguous on the issue of class arbitration, and construed the ambiguity against the drafter, Lamps Plus.71

The Supreme Court began by reiterating from its prior decisions that “that shifting from

individual to class arbitration is a ‘fundamental’ change, that ‘sacrifices the principal advantage of arbitration’ and ‘greatly increases risks to defendants.’”72 The Court noted that “Class arbitration is not only markedly different from the ‘traditional individualized arbitration’ contemplated by the FAA, it also undermines the most important benefits of that familiar form of arbitration.” 73 The Court explained that in individual arbitration, “parties forgo the procedural rigor and appellate review of the courts in order to realize the benefits of private dispute resolution: lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes.”74 According to the Court, class arbitration lacks those benefits – it sacrifices the principal advantage of arbitration—its informality—and makes the process slower, more costly, and more likely to generate procedural morass than final judgment.”75

The Court relied on the “foundational” and “first principle that underscores all of our

arbitration decisions” – that “[a]rbitration is strictly a matter of consent.”76 The court held that the FAA “requires more than ambiguity to ensure that the parties actually agreed to arbitrate on a classwide basis,” and that an ambiguous agreement cannot provide the necessary contractual basis for compelling class arbitration.77 The Court stated that its holding in Stolt-Nielsen that “courts may not infer consent to participate in class arbitration absent an affirmative contractual basis for concluding that the party agreed to do so” controlled this question as well.78 The Court held that “[l]ike silence, ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to “sacrifice[ ] the principal advantage of arbitration.”79

c. Beckley Oncology Assocs. v. Abumasmah, 993 F.3d 261 (4th Cir. 2021)

65 Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1412 (2019). 66 Id. at 1412. 67 Id. at 1413. 68 Id. 69 Id. 70 Id. 71 Id. 72 Id. at 1414 (citations omitted). 73 Id. at 1415 (citations omitted). 74 Id. at 1416. 75 Id. 76 Id. at 1415 (citations omitted). 77 Id. (citations omitted). 78 Id. at 1416-17. 79 Id.

14

In Beckley Oncology Assocs. v. Abumasmah, 993 F.3d 261 (4th Cir. 2021), the Fourth Circuit addressed the issue of whether arbitration provision can waive judicial appeals. In this case, the parties’ contract contained an arbitration provision which provided that all disputes be decided through arbitration, and that the arbitrator’s decision “shall be final and conclusive and enforceable in any court of competent jurisdiction without any right of judicial review or appeal.”80 The district court held that the arbitration provision’s purported waiver of any judicial review of the arbitration award was invalid under the FAA.81 The district court went on to uphold the arbitration award.82

On appeal, the Fourth Circuit considered the threshold issue of whether the arbitration

provision could validly waive any appeal of the district court’s confirmation of the award.83 The court noted that the validity of an appellate waiver in an arbitration agreement under the FAA was a matter of first impression in the Fourth Circuit.84 However, the Tenth Circuit had addressed this issue before and found such a waiver enforceable.85 The Fourth Circuit agreed with the Tenth.86

It is worth noting that the Fourth Circuit assumed without deciding that that parties are not

able to completely waive all judicial review of an arbitration award under the FAA, noting that “arbitration awards are not self-enforcing.”87

The Court noted that “enforcing the waiver in this context furthers the FAA’s policy

objectives,” which include reducing litigation costs by providing parties with a more efficient forum.88 The Court cautioned against reflexive appeals of arbitration awards, which would lead “to arbitration no longer being treated as an alternative to litigation, but as its precursor.”89

V. Sample Arbitration Providers, Templates & Forms

There are several groups which provide arbitration administration services, lists of pre-

approved arbitrators, and sets of arbitration rules and procedures. A few of these are listed below.

a. American Arbitration Association The American Arbitration Association (“AAA”) is one leading provider of arbitration

services. Their website contains sample standard arbitration clauses which parties can use in their contracts.90 They also have commercial arbitration rules and mediation procedures, construction industry arbitration rules and mediation procedures, consumer arbitration rules, employment

80 Beckley Oncology Assocs. v. Abumasmah, 993 F.3d 261, 262 (4th Cir. 2021). 81 Id. at 265. 82 Id. 83 Id. 84 Id. 85 Id. 86 Id. 87 Id. at 265-66, 266 n.4. 88 Id. at 265-66. 89 Id. at 266. 90 See https://www.adr.org/Clauses.

15

arbitration rules and mediation procedures, labor arbitration rules, and international dispute resolution procedures.91

In the construction industry, many contracts call for arbitration under the AAA. The default

rule is that these arbitrations will be administered by the AAA, in addition to following the AAA rules. In this situation, the parties must also pay the AAA its fees as well as paying the arbitrator Once a dispute between parties arises, they are free to agree to opt out of having the arbitration administered by the AAA itself. The parties can still use the AAA’s arbitrator list to pick their arbitrator, and can even use AAA’s arbitration rules, without having the arbitration be administered by the AAA.

b. JAMS

Another prominent arbitration provider is JAMS, formerly known as Judicial Arbitration

and Mediation Services, Inc. JAMS provides arbitration administration services, and has their own arbitration clauses and rules templates on their website.92

c. Financial Industry Regulatory Authority

The Financial Industry Regulatory Authority (“FINRA”) similarly provides arbitration

services. FINRA operates the largest securities dispute resolution forum in the United States.93 It has its own list of arbitration procedures and rules available online as well.94

d. The McCammon Group

In Virginia, The McCammon Group provides arbitration services to parties.95 They provide

Agreements to Arbitrate and their own arbitration rules.96

VI. Conclusion Are you tired of today’s litigation backlog, and the ever-increasing attorney’s fees involved

in litigation? Do you wish your judge actually knew something about the subject matter of your dispute? Would you prefer your dispute be handled privately, instead of having your dirty laundry aired in a public trial? Do you want more flexibility in the way your dispute is handled, instead of being bound by arcane civil procedure rules? If this sounds like you, ask your attorney whether Arbitration™ may be right for you. Arbitration™ is available in all contracts, and in a litigation off-ramp format as well. (Side effects in some cases can include: loss of judicial oversight, lack of appellate rights, and frustrations at decisions which make no sense and leave you no recourse.)

Arbitration™: It Might Be Right For You.

91 See https://www.adr.org/Rules. 92 See https://www.jamsadr.com/adr-rules-procedures/. 93 https://www.finra.org/arbitration-mediation. 94 See id. 95 https://www.mccammongroup.com. 96 https://www.mccammongroup.com/services/arbitration/.

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Arbitration™ is empowered and endorsed by the Federal Arbitration Act, the Virginia Arbitration Act, and the Supreme Courts of the United States and Virginia.

2

Potenal Repercussions Arising from Death

Presented by:

Travis J. [email protected]

1 //9989532v1

Potential Repercussions Arising from Death


Travis J. Graham

2 //9989532v1

WELCOME!

To the world of estate

and fiduciary

litigation --

-- it’s like domestic relations

law, except with the

added grief of the recent death or

disability of a loved one,

and a certain

difficulty in communicating

with the chief witness.

3 //9989532v1

Am I at risk of being involved in estate or fiduciary

litigation?

Question 1: Do you have any family members?

☐ Yes ☐ No

Question 2: Do you or your family members, if any, have any money or property?

☐ Yes ☐ No

If you answered “yes” to any of these questions, you

are at risk of being involved in estate or fiduciary

litigation.

4 //9989532v1

BONUS QUESTIONS:

• Are you or any of your family members rich?

• Does your family contain a Black Sheep, Redheaded Stepchild, Bad Seed, or family member generally regarded as Sorry, Good-for-Nothing, A Big Disappointment, or Crazy as a Fruit Bat?

• Does your family contain more than one lawyer, or a paralegal?

• Do you have a step-parent who is younger than you?

• Does one of your siblings live in a parent’s home and “take care” of him or her?

If you answered “yes” to any of these questions, you might as well hire me now.

5 //9989532v1

The Three Categories of Estate and Fiduciary Litigation: Category A: Cases that involve stealing from

an old or disabled person before he or she dies.

This category includes:

• Misuse of a power of attorney

• Mismanagement of trusts

• Plain old stealing

Category B: Cases that involve doing things while an old or disabled person is alive, but which will cause effects after he or she dies.


• Misuse of a power of attorney

• Making changes to deeds, accounts, beneficiary designations, and characteristics of property

• Changing or executing wills

6 //9989532v1

Category C: Cases that involve stealing from a person’s estate, i.e., after he or she dies.


• Mismanagement of estates

• Plain old stealing

7 //9989532v1

Category A: Theft Before Death The Power of Attorney: The Worst

Thing in the Whole World

• Creation § 64.2-1603. Execution of power of attorney.

A power of attorney shall be signed by the principal or in the principal's conscious presence by another individual directed by the principal to sign the principal's name on the power of attorney. A signature on a power of attorney is presumed to be genuine if the principal acknowledges the signature before a notary public or other individual authorized by law to take acknowledgments. A power of attorney in order to be recordable shall satisfy the requirements of § 55.1-600.

* Does not have to be witnessed.

* Does not have to be notarized.

* Does not have to be filed or recorded.

* Does not have to be revealed before use.

* No accounting is required.

* You can have as many as you want.

* Available online.

• Duties Under Power of Attorney § 64.2-1612. Agent's duties.

A. Notwithstanding provisions in the power of attorney, an agent that has accepted appointment shall:

1. Act in accordance with the principal's reasonable expectations to the extent actually known by the agent and, otherwise, in the principal's best interest;

8 //9989532v1

2. Act in good faith; and

3. Act only within the scope of authority granted in the power of attorney.

B. Except as otherwise provided in the power of attorney, an agent that has accepted appointment shall:

1. Act loyally for the principal's benefit;

2. Act so as not to create a conflict of interest that impairs the agent's ability to act impartially in the principal's best interest;

3. Act with the care, competence, and diligence ordinarily exercised by agents in similar circumstances;

4. Keep a record of all receipts, disbursements, and transactions made on behalf of the principal;

5. Cooperate with a person that has authority to make health care decisions for the principal to carry out the principal's reasonable expectations to the extent actually known by the agent and otherwise act in the principal's best interest; and

6. Attempt to preserve the principal's estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal's best interest based on all relevant factors, including:

a. The value and nature of the principal's property;

b. The principal's foreseeable obligations and need for maintenance;

c. Minimization of taxes, including income, estate, inheritance, generation-skipping transfer, and gift taxes; and

d. Eligibility for a benefit, a program, or assistance under a statute or regulation.

. . .

• Authority * What can you do with a power of attorney? Pretty much anything, except signing

a will. But there are some special rules about gifts.

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§ 64.2-1622. Authority that requires specific grant; grant of general authority.

A. Subject to the provisions of subsection H, an agent under a power of attorney may do the following on behalf of the principal or with the principal's property only if the power of attorney expressly grants the agent the authority and exercise of the authority is not otherwise prohibited or limited by another statute, agreement, or instrument to which the authority or property is subject:

. . .

2. Make a gift;

. . .

B. Notwithstanding a grant of authority to do an act described in subsection A or H, unless the power of attorney otherwise provides, an agent that is not an ancestor, spouse, or descendant of the principal may not exercise authority under a power of attorney to create in the agent, or in an individual to whom the agent owes a legal obligation of support, an interest in the principal's property, whether by gift, right of survivorship, beneficiary designation, disclaimer, or otherwise.

C. Subject to subsections A, B, D, and E, if a power of attorney grants to an agent authority to do all acts that a principal could do, the agent has the general authority described in § 64.2-124 and §§ 64.2-1625 through 64.2-1637.

D. Unless the power of attorney otherwise provides and subject to subsection H, a grant of authority to make a gift is subject to § 64.2-1638.

E. Notwithstanding the provisions of subsection A, if a power of attorney grants to an agent authority to do all acts that a principal could do, the agent shall have the authority to make gifts in any amount of any of the principal's property to any individuals or to organizations described in §§ 170(c) and 2522(a) of the Internal Revenue Code or corresponding future provisions of federal tax law, or both, in accordance with the principal's personal history of making or joining in the making of lifetime gifts. This subsection shall not in any way impair the right or power of any principal, by express words in the power of attorney, to authorize, or limit the authority of, an agent to make gifts of the principal's property.

§ 64.2-1638. Gifts.

A. In this section, a gift "for the benefit of" a person includes a gift to a trust, a custodial trust under the Uniform Custodial Trust Act (§ 64.2-900 et seq.), an account under the Uniform Transfers to Minors Act (§ 64.2-1900 et seq.), and a

10 //9989532v1

tuition savings account or prepaid tuition plan as defined under Internal Revenue Code 26 U.S.C. § 529, as amended.

B. Unless the power of attorney otherwise provides, language in a power of attorney granting general authority with respect to gifts authorizes the agent only to:

1. Make outright to, or for the benefit of, a person a gift of any of the principal's property, including by the exercise of a presently exercisable general power of appointment held by the principal, in an amount per donee not to exceed the annual dollar limits of the federal gift tax exclusion under Internal Revenue Code 26 U.S.C. § 2503 (b), as amended, without regard to whether the federal gift tax exclusion applies to the gift, or if the principal's spouse agrees to consent to a split gift pursuant to Internal Revenue Code 26 U.S.C. § 2513, as amended, in an amount per donee not to exceed twice the annual federal gift tax exclusion limit; and

2. Consent, pursuant to Internal Revenue Code 26 U.S.C. § 2513, as amended, to the splitting of a gift made by the principal's spouse in an amount per donee not to exceed the aggregate annual gift tax exclusions for both spouses.

C. An agent may make a gift of the principal's property only as the agent determines is consistent with the principal's objectives if actually known by the agent and, if unknown, as the agent determines is consistent with the principal's best interest based on all relevant factors, including:

1. The value and nature of the principal's property;

2. The principal's foreseeable obligations and need for maintenance;

3. Minimization of taxes, including income, estate, inheritance, generation-skipping transfer, and gift taxes;

4. Eligibility for a benefit, a program, or assistance under a statute or regulation; and

5. The principal's personal history of making or joining in making gifts.

* How does all this stuff about gifts actually work?

There are two types of authority to make gifts under a power of attorney, express and implied.

Start with the proposition set out in § 64.2-1622(A)(2) that an agent may only make a gift if the power of attorney expressly says so. This is “express authority.” But, this is subject to the rule set out in § 64.2-1622(H) that, if the power of

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attorney says that the agent can do “all acts” that the principal can do, then the agent can make gifts to individuals or charities “in accordance with the principals personal history” of making gifts. This is “implied authority.”

Then, § 64.2-1622(D) says that, unless the power of attorney says otherwise, an express grant of authority to make a gift is subject to §64.2-1638. That section says that, unless the power of attorney says otherwise, gifts to any one recipient are limited to the amount of the federal gift tax exclusion, which is roughly $15,000 per year.

In short, unless the power of attorney says different, gifts made under an express grant of authority are limited to the annual federal gift tax exclusion, while gifts made pursuant to implied grant of authority must be in accordance with the principal’s history of making gifts.

All gifts are limited by these factors as set out in § 64.2-1638(C):

1. The value and nature of the principal’s property;

2. The principals’ foreseeable obligations and need for maintenance;

3. Minimization of taxes, including income, estate inheritance, generation-skipping transfer, and gift taxes;

4. Eligibility for a benefit, a program, or assistance under a statue or regulations; and

5. the principal’s personal history of making or joining in making gifts.

* The case that explains all of this is Davis v. Davis, 298 Va.157, 835 S.E. 2d 888 (2019).

• Misuse “My name is Legion, for we are many.” Matthew (8:28-34)

* Signing checks, making bank withdrawals.

* Making or taking gifts.

* Buying or selling stuff.

* Contracting for services.

* Changing living arrangements.

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• Remedies

§ 64.2-1612. Agent's duties.

H. Except as otherwise provided in the power of attorney, an agent shall disclose receipts, disbursements, or transactions conducted on behalf of the principal if requested by the principal, a guardian, a conservator, another fiduciary acting for the principal, or, upon the death of the principal, by the personal representative or successor in interest of the principal’s estate. If so requested, within 30 days the agent shall comply with the request or provide a writing or other record substantiating why additional time is needed and shall comply with the request within an additional 30 days.

I. Except as otherwise provided in the power of attorney, an agent shall, on reasonable request made by a person listed in subdivisions A 3 through A 9 of § 64.2-1614 who has a good faith belief that the principal suffers an incapacity or, if deceased, suffered incapacity at the time the agent acted, disclose to such person the extent to which he has chosen to act and the actions taken on behalf of the principal within the five years prior to either (i) the date of the request or (ii) the date of the death of the principal, if the principal is deceased at the time such request is made, and shall permit reasonable inspection of records pertaining to such actions by such person. In all cases where the principal is deceased at the time such request is made, such request shall be made within one year after the date of the death of the principal. If so requested, within 30 days the agent shall comply with the request or provide a writing or other record substantiating why additional time is needed and shall comply with the request within an additional 30 days.

. . .

§ 64.2-1614. Judicial relief.

A. In addition to the remedies referenced in § 64.2-1621, the following persons may petition a court to construe a power of attorney or review the agent's conduct, and grant appropriate relief:

1. The principal or the agent;

2. A guardian, conservator, personal representative of the estate of a deceased principal, or other fiduciary acting for the principal;

3. A person authorized to make health care decisions for the principal;

4. The principal's spouse, parent, or descendant;

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5. An adult who is a brother, sister, niece, or nephew of the principal;

6. A person named as a beneficiary to receive any property, benefit, or contractual right on the principal's death or as a beneficiary of a trust created by or for the principal that has a financial interest in the principal's estate;

7. The adult protective services unit of the local department of social services for the county or city where the principal resides or is located;

8. The principal's caregiver or another person that demonstrates sufficient interest in the principal's welfare; and

9. A person asked to accept the power of attorney.

B. 1. Whether or not supplemental relief is sought in the proceeding, where an agent has violated duties of disclosure imposed by § 64.2-1612, any person to whom such duties are owing may, for the purpose of obtaining information pertinent to the need or propriety of (i) instituting a proceeding under Chapter 20 (§ 64.2-2000 et seq.); (ii) terminating, suspending, or limiting the authority of the agent; or (iii) bringing a proceeding to hold the agent, or a transferee from such agent, liable for breach of duty or to recover particular assets or the value of such assets of a principal or deceased principal, petition a circuit court for discovery from the agent of information and records pertaining to actions taken pursuant to a power of attorney.

2. The petition may be filed in the circuit court of the county or city in which the agent resides or has his principal place of employment, or, if a nonresident, in any court in which a determination of incompetency or incapacity of the principal is proper under Chapter 20 (§ 64.2-2000 et seq.), or, if a conservator or guardian has been appointed for the principal, in the court that made the appointment. The court, after reasonable notice to the agent and to the principal, if no guardian or conservator has been appointed, or to the conservator or guardian, if one has been appointed, may conduct a hearing on the petition. The court, upon the hearing on the petition and upon consideration of the interest of the principal and his estate, may dismiss the petition or may enter such order or orders respecting discovery as it may deem appropriate, including an order that the agent respond to all discovery methods that the petitioner might employ in a civil action or suit subject to the Rules of Supreme Court of Virginia. Upon the failure of the agent to make discovery, the court may make and enforce further orders respecting discovery that would be proper in a civil action subject to such Rules and may award expenses, including reasonable attorney fees, as therein provided. Furthermore, upon completion of discovery, the court, if satisfied that prior to filing the petition the petitioner had requested the information or records that are the subject of ordered discovery pursuant to § 64.2-1612, may, upon finding that the failure to comply with the request for information was unreasonable, order the

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agent to pay the petitioner's expenses in obtaining discovery, including reasonable attorney fees.

3. A determination to grant or deny in whole or in part discovery sought hereunder shall not be considered a finding regarding the competence, capacity, or impairment of the principal, nor shall the granting or denial of discovery hereunder preclude the availability of other remedies involving protection of the person or estate of the principal or the rights and duties of the agent.

C. The agent may, after reasonable notice to the principal, petition the circuit court for authority to make gifts of the principal's property to the extent not inconsistent with the express terms of the power of attorney or other writing. The court shall determine the amounts, recipients, and proportions of any gifts of the principal's property after considering all relevant factors including, without limitation, those contained in subsection C of § 64.2-1638.

D. Upon motion by the principal, the court shall dismiss a petition filed under this section, unless the court finds that the principal lacks capacity to revoke the agent's authority or the power of attorney.

E. In a judicial proceeding under this chapter, if the court finds that the agent breached his fiduciary duty in violation of the provisions of this chapter, the court, as justice and equity may require, may award costs and expenses, including reasonable attorney fees, to any person who petitions the court for relief under subdivisions A 1 through 8, to be paid by the agent found in violation. This provision applies to a judicial proceeding concerning a power of attorney commenced on or after July 1, 2019.

§ 64.2-1615. Agent's liability.

An agent that violates this chapter is liable to the principal or the principal's successors in interest for the amount required to:

1. Restore the value of the principal's property to what it would have been had the violation not occurred; and

2. Reimburse the principal or the principal's successors in interest for the attorney fees and costs paid on the agent's behalf.

§ 64.2-1621. Remedies under other law.

The remedies under this chapter are not exclusive and do not abrogate any right or remedy, including a court-supervised accounting, under the laws of the Commonwealth other than this chapter.

* This is all pretty much useless.

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• Legal Principals * Davis v. Davis, 298 Va.157, 835 S.E. 2d 888 (2019) explains the extent of an

agent’s authority to make gifts.

* The relationship between an attorney-in-fact and his or her principal is, by definition, a confidential relationship.

* A transaction conducted by an attorney-in-fact that benefits him or her is presumptively fraudulent. It does not matter if the power of attorney was actually used to conduct the transaction.

* Once the presumption arises, the burden shifts to the agent to go forward with evidence showing that the transaction was legitimate.

* However, once the agent produces evidence to support such a finding, the presumption disappears, leaving the challenger with the burden of proving his or her case by clear and convincing evidence.

• Helpful Tips * No one understands how powers of attorneys work--not even lawyers and

judges.

* Guardianships/conservatorships do not automatically cancel powers of attorney.

* For best results, do not execute a power of attorney.

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Category B: Bad Conduct Before Death; Payoff After

The Power of Attorney: Still the Worst Thing in the Whole World

• Misuse * Transferring real estate, with a retained life estate for the former owner.

* Changing or adding transfer-on-death provisions on accounts.

* Changing insurance beneficiary designation.

* Recharacterizing assets.

Will Contests Grounds • Invalidity of the Will Due to Errors in

Execution * Here’s what you remember from law school:

§ 64.2-403. Execution of wills; requirements.

A. No will shall be valid unless it is in writing and signed by the testator, or by some other person in the testator's presence and by his direction, in such a manner as to make it manifest that the name is intended as a signature.

B. A will wholly in the testator's handwriting is valid without further requirements, provided that the fact that a will is wholly in the testator's handwriting and signed by the testator is proved by at least two disinterested witnesses.

C. A will not wholly in the testator's handwriting is not valid unless the signature of the testator is made, or the will is acknowledged by the testator, in the presence of at least two competent witnesses who are present at the same time

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and who subscribe the will in the presence of the testator. No form of attestation of the witnesses shall be necessary.

* Surprise! None of that matters anymore:

§ 64.2-404. Writings intended as wills.

A. Although a document, or a writing added upon a document, was not executed in compliance with § 64.2-403, the document or writing shall be treated as if it had been executed in compliance with § 64.2-403 if the proponent of the document or writing establishes by clear and convincing evidence that the decedent intended the document or writing to constitute (i) the decedent's will, (ii) a partial or complete revocation of the will, (iii) an addition to or an alteration of the will, or (iv) a partial or complete revival of his formerly revoked will or of a formerly revoked portion of the will.

B. The remedy granted by this section (i) may not be used to excuse compliance with any requirement for a testator's signature, except in circumstances where two persons mistakenly sign each other's will, or a person signs the self-proving certificate to a will instead of signing the will itself and (ii) is available only in proceedings brought in a circuit court under the appropriate provisions of this title, filed within one year from the decedent's date of death and in which all interested persons are made parties.

§ 64.2-410. Revocation of wills generally.

A. If a testator with the intent to revoke a will or codicil, or some person at his direction and in his presence, cuts, tears, burns, obliterates, cancels, or destroys a will or codicil, or the signature thereto, or some provision thereof, such will, codicil, or provision thereof is void and of no effect.

B. If a testator executes a will in the manner required by law or other writing in the manner in which a will is required to be executed that expressly revokes a former will, such former will, including any codicil thereto, is void and of no effect.

C. If a testator executes a will or codicil in the manner required by law that (i) expressly revokes a part, but not all, of a former will or codicil or (ii) contains provisions inconsistent with a former will or codicil, such former will or codicil is revoked and superseded to the extent of such express revocation or inconsistency if the later will or codicil is effective upon the death of the testator.

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• Lack of Testamentary Capacity * Testamentary capacity is “the degree of mental capacity required for the valid

execution of a will.” It exists if, at the time the testator executed the will, he or she “was capable of recollecting his or her property, the natural objects of his or her bounty and their claims upon him or her, knew the business about which he or she was engaged, and how he or she wished to dispose of her property.”

* It is an extremely low standard. It is not the same as illness or dementia. It is not the same as mental weakness. It is a lower level of capacity than that which is required to execute a contract. The fact that a person is a subject of guardianship or conservatorship does not establish that he or she lacks testamentary capacity.

* The capacity only has to exist at the exact moment of executing the will.

* The person seeking to establish the will has the burden of proving that the testator had testamentary capacity. However, compliance with all of the statutory provisions creates a presumption that testamentary capacity existed. The person challenging the will must then go forward with evidence to overcome the presumption, although the ultimate burden remains with the person trying to establish the will.

* Clear and convincing evidence is not required.

• Undue Influence * Undue influence is a species of fraud. It exists when a person is clearly deprived

of his or her own free will. It is a form of coercion, and does not include things like “resistible persuasion,” “solicitation,” “advice,” “suggestions,” and “importunity.”

* Under influence must be proven by clear and convincing evidence. However, a presumption of undue influence arises under either of two circumstances. First, such a presumption arises when 1) the testator was old or ill and his or her will was established; 2) the testator named the beneficiary who stood in a relationship of confidence or dependence; and 3) the testator previously had expressed an intention to make a contrary deposition of his or her property.

* Note that this is slightly different from the standard relevant to inter vivos transfers. There, a presumption of undue influence arises when 1) a person’s weakness of mind and grossly inadequate consideration or suspicious circumstances regarding the transaction are shown, or 2) when the transaction benefitted a person in a confidential relationship.

* Once a presumption of undue influence arises, the burden shifts to the person seeking to establish the will to go forward with evidence to rebut the presumption.

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Once this occurs, the presumption disappears, and the person challenging the will is left with the burden of proving the undue influence by clear and convincing evidence.

* No one actually understands how this is supposed to work.

• Will Contests § 64.2-448. Complaint to impeach or establish a will; limitation of action; venue.

A. A person interested in the probate of the will who has not otherwise been before the court or clerk in a proceeding to probate the will pursuant to § 64.2-444 or in an ex parte proceeding to probate the will pursuant to subsection B of § 64.2-446 may file a complaint to impeach or establish the will within one year from the date of the order entered by the court in exercise of its original jurisdiction or after an appeal of an order entered by the clerk, or, if no appeal from an order entered by the clerk is taken, from the date of the order entered by the clerk.

B. A person interested in the probate of the will who had been proceeded against by an order of publication pursuant to subsection B of § 64.2-449 may file a complaint to impeach or establish the will within two years from the date of the order entered by the court in the exercise of its original jurisdiction, unless he actually appeared as a party or had been personally served with a summons to appear.

C. A person interested in the probate of the will who has not otherwise been before the court and who was a minor at the time of the order pursuant to § 64.2-444 or 64.2-446 may file a complaint to impeach or establish the will within one year after such person reaches the age of maturity or is judicially declared emancipated.

D. A person interested in the probate of the will who has not otherwise been before the court and who was incapacitated at the time of the order pursuant to § 64.2-444 or 64.2-446 may file a complaint to impeach or establish the will within one year after such person is restored to capacity.

E. Upon the filing of a complaint to impeach or establish the will pursuant to this section, the court shall order a trial by jury to ascertain whether what was offered for probate is the will of the testator. The court may require all testamentary papers of the testator be produced and direct the jury to ascertain whether any paper produced is the will of the testator. The court shall decide whether to admit the will to probate.

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F. The venue for filing a complaint to impeach or establish the will shall be as specified in subdivision 7 of § 8.01-261.

G. Subject to the provisions of § 8.01-428, a final order determining whether to admit a will to probate bars any subsequent complaint to impeach or establish a will.

§ 64.2-404.1. Reformation of will to correct mistakes or achieve decedent's tax objectives.

A. The court may reform the terms of a decedent's will, or any codicil thereto, even if unambiguous, to conform the terms to the decedent's intention if it is proved by clear and convincing evidence that both the decedent's intent and the terms of the will were affected by a mistake of fact or law, whether in expression or inducement.

B. If shown by clear and convincing evidence, the court may modify the terms of a decedent's will to achieve the decedent's tax objectives in a manner that is not contrary to the decedent's probable intention.

C. Notice must be given and a person may represent and bind another person in proceedings under this section to the same extent that a person may represent and bind another person in proceedings brought under § 64.2-733 or 64.2-734 relating to trusts.

D. The remedies granted by this section are available only in proceedings brought in a circuit court under the appropriate provisions of this title, filed within one year from the decedent's date of death and in which all interested persons are made parties.

E. This section applies to all wills and codicils regardless of the date of their execution and all judicial proceedings regardless of when commenced, except that this section shall not apply to any judicial proceeding commenced before July 1, 2018, if the court finds that its application would substantially interfere with the effective conduct of the judicial proceeding or prejudice the rights of the parties.

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Category C: Theft After Death

* Executors and administrators are generally free to do as they will, subject only to the duty to account at the end.

* There is theft in almost every estate, and it is largely unprovable.

* Beneficiaries have very little right to oversee the process.

The Other Side of the Equation: * Sometimes nice, honorable folks agree to serve as agents under powers of

attorney. If you do, you can expect:

- family members to accuse you of stealing;

- demands for accounting, documents, bank statements, receipts, access to

accounts and access to your principal.

* Your actions will be scrutinized and you will face all of the shifting burdens of

proof described above.

* This is particularly true if you are a beneficiary under your principal’s will.

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The Effecve Use of Evolving Technology To Win Your Personal Injury Case

(And What To Do If The Data Is Lost)

Presented by:

Evans G. [email protected]

Charles R. [email protected]

The Effective Use of Evolving Technology to Win Your Personal Injury Case (and What to Do if the Data is Lost)


Charles R. Calton Evans G. Edwards

I. Introduction

Data and technology is changing the way personal injury cases are litigated.1 Gone are the days when, as an elder statesman of our firm liked to say, “all you need to litigate a case is legal pad and a good pen.” This underlying data is being created by almost every interaction we have with electronic devices. There are times when we know that the data is being collected and used by someone else, such as when we have a computed tomography (“CT”) scan.2 However, in addition to the data we know is being collected, there are many more instances where we may not know that data is being collected and available to use in a litigation context, such as the voluminous data that is being collected by your vehicle.3 Understanding what data is out there is only the first step. The next, and harder, step is determining how to take that data and use it in a way that is beneficial for your client. Presenting raw data from a CT scan, or the 1s and 0s from the computerized data captured by an Event Data Recorder (“EDR”) in a vehicle is a sure-fire way to lull a jury to sleep. This presentation covers some of the ways in which you can take that data and put it into a usable form that will provide the factfinder with the underlying information in a way that makes it understandable and, dare we say, enlightening. Also, understanding what data is out there ensures that you seek that data from opposing counsel. But, as this presentation will cover, what do you do if the data has been destroyed? What options are available to you or your client? The spoliation of evidence can have dire consequences for the party who fails to preserve that evidence. With the recent shifts in the law surrounding spoliation, it is critical that an attorney understand what recourse they have and how to ensure that their client’s position is protected.

1 See, e.g., Emma Williams, The Rise of Technology and its Impact on Personal Injury Law, Lawyer Technology Today, July 15, 2020, available at https://www.lawtechnologytoday.org/2020/07/the-rise-of-technology-and-its-impact-on-personal-injury-law/. 2 See National Institute of Biomedical Imaging and Bioengineering, Computed Tomography, available at https://www.nibib.nih.gov/science-education/science-topics/computed-tomography-ct (explaining how x-ray slices are digitally “stacked” to create three-dimensional imaging). 3 See, e.g., Michael Liedtke, How is Data Being Collected and Used in my Car?, Chicago Tribune, Dec. 25, 2018.

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II. How do you actually identify, obtain, and use all of the available data in a meaningful way?

As mentioned, it’s one thing to ensure that the opposing party preserves all of their data; it’s another thing to ensure that you get everything; and then the hardest part is actually using the data in a way that is understandable by a judge/jury in a way that helps you win your case. In the realm of personal injury litigation, specifically medical malpractice and automobile/tractor-trailer litigation, the sources of data available to plaintiffs has increased exponentially over the past ten (10) years.

1. An Example of Data Use in Medical Malpractice Litigation

a. Audit Trails

Audit trails are a potential goldmine of information in a personal injury action, and are

available in almost any situation where your client received medical care. One of the reasons this data is so ubiquitous is because the federal government, through CMS, requires that providers have systems in place which generate these audit trails.4 Below are some of the benefits and what information can you glean from an audit trail:

i. Automatically generated

ii. An audit trail will provide you with every change or addition to an

electronic medical record;

iii. Can provide you with who made the edit and potentially where they were when the edit was made;

iv. Can provide you with the substance or the type of edit.5

v. Are discoverable in Virginia courts; and

vi. Are discoverable in federal court.

1. How to use the data you obtain to benefit your case.

The data obtained from the request of an audit trail provides valuable information in evaluating the value of a case as well as formulating trial strategy. Oftentimes, despite a request

4 See Department of Health & Human Services and Centers for Medicaid Services, CMS Manual System, Pub 100-06, CMS Manual System, Oct. 5, 2007, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R132FM.pdf. 5 See, e.g., Jeffrey L. Masor, Medical Records and E-Discovery: With New Technology Come New Challenges, 5 Hastings Sci. & Tech L.J. 245 (Summer 2013).

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that the data be in a “usable” format,6 it is difficult to read, follow, or understand. The key to truly unlocking the potential of this data is to utilize software that will make the information more easily understood and digestible.

b. Understanding the Evolution of Imaging Studies

Prior to the advent of modern imaging technologies, such as CT and Magnetic Resonance Imaging (“MRI”), the primary form of imaging studies was the basic X-ray.7 Essentially, the data derived from these CT scans is computer data that has been reconfigured to produce three-dimensional images by using a specialized viewer.8 Understanding how best to use this software, how to explain the software to a jury, and then how to take the same data and create three-dimensional models outside of a viewer, oftentimes can be the difference between winning and losing a case.

i. Why it is important to understand how to use imaging software.

1. Being able to communicate with expert witnesses;

2. Being able to utilize the software in conjunction with your expert witnesses at trial;

3. Gaining credibility with judges/juries.

ii. How this software can assist an attorney trying a personal injury matter.

Gone are the days, for the most part, of simply putting up an x-ray and having an expert point to various portions of it to explain injuries such as fractures to a jury. The software now available, and the complexity of the imaging studies, now allows for “scrolling” through the body, in all planes (axial, coronal, and sagittal) to better demonstrate the anatomy at issue.9

6 See Virginia Rule 4:9(b)(iii)(B)(2) which states that the party must produce electronically stored information “as it is ordinarily maintained if it is reasonably usable…” 7 See GE Healthcare, When and why was MRI Invented, Jan. 8, 2019, available at https://www.gehealthcare.com/article/when-and-why-was-mri-invented (noting the first whole-body MRI scanner was utilized in 1978); International Society for Computed Tomography, Half a Century in CT: How Computed Tomography has Evolved, Oct. 7, 2016, available at https://www.isct.org/computed-tomography-blog/2017/2/10/half-a-century-in-ct-how-computed-tomography-has-evolved (noting that CT scanners were first invented in 1967); and Columbia Surgery, History of Medicine: Dr. Roentgen’s Accidental X-rays, Sept. 17, 2015, available at https://columbiasurgery.org/news/2015/09/17/history-medicine-dr-roentgen-s-accidental-x-rays (noting that X-rays came into existence and were widespread in 1930s and 1940s). 8 See National Institute of Biomedical Imaging and Bioengineering, Computed Tomography, supra at n. 3. 9 See O. Karatas and E. Toy, Three-dimensional Imaging Techniques: A Literature Review, 8 Eur. J. Dent. 132, 132-140 (Jan – Mar. 2014).

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One way of doing this is by utilizing the right viewer to demonstrate the images to the factfinder. An example of a viewer that we have utilized at trials is the RadiAnt Dicom Viewer. In using this system, we are able to compare different studies in all three planes, present multiplanar reconstruction, explain three-dimensional volume rendering, and to even export the isolated imaging to a video file that can be played.10

iii. The next steps in imaging study data to bolster your case.

Turning “blobs” into workable imagery is the next evolution in presenting imaging studies to the factfinder. One way in which we have been successful in doing this is by presenting full-color, interactive three-dimensional representations of the pertinent anatomy to the jury. Presenting evidence in this manner, when introduced through an expert, allows the jury to not have to imagine what the actual anatomy looks like when looking at “blobs” on an imaging study.

2. Use of Electronic Information and New Technology in Catastrophic Personal Injury Cases

a. Driver/Vehicle Data Systems

There is a LOT of data that can be gleaned from data systems that are installed on tractor-trailer vehicles. This is data that goes well beyond just tracking time and speed.11 The questions are: how do you get the data and what can you do with it once you have it??

b. What data is recorded and how?

Tractor-trailer vehicles are, generally, equipped with an Event Data Recorder (“EDR”) within the vehicle’s Electronic Control Module (“ECM”).12 The National Highway Transportation Safety Administration (“NHTSA”) defines an EDR as follows:

An Event Data Recorder (EDR) is a function or device installed in a motor vehicle to record technical vehicle and occupant information for a brief period of time (seconds, not minutes) before, during and after a crash for the purpose of monitoring and assessing vehicle safety system performance. For instance, EDRs may record (1) pre-crash vehicle dynamics and system status, (2) driver inputs,

10 RadiAnt Dicom Viewer, Features, available at https://www.radiantviewer.com/. 11 See, e.g., Aaron Marsh, 7 Truck Technologies you Need (and why), FleetOwner, Dec. 20, 2017 (noting these data systems include dynamic routing, forward-looking camera systems, driver scorecards, collision mitigation technology, electronic logging devices, trailer tracking, and temperature tracking). 12 See, e.g., Joseph G. Klest, Preserving the “Black Bock” After a Truck Accident, FindLaw, Feb. 25, 2014, available at https://corporate.findlaw.com/litigation-disputes/preserving-the-black-box-after-a-truck-accident.html.

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(3) vehicle crash signature, (4) restrain usage/deployment status, and (5) post-crash data such as the activation of an automatic collision notification system.13

Additionally, the NHTSA has promulgated rules that govern what an EDR is required to record.14 This includes, but is not limited to:

• Vehicle speed (5 seconds before impact);

• Engine throttle – was the accelerator pressed? (5 seconds before impact);

• Brake use (5 seconds before impact);

• Delta-V/change in velocity (for up to 3 seconds after impact);

• Safety belt status, driver;

• Driver frontal airbag employment;

• Right front passenger frontal airbag deployment;

• Number of crash events;

• Time between crash events, if applicable, and;

• Did the EDR complete the recording?15

c. How can you access the data?

i. Utilization of an expert through on-site or bench downloads.

1. Once the data is obtained, the issue then becomes “how do I explain this to a jury?”

a. Understanding how to utilize this data in a visual form, whether in a written expert report for federal court or in a demonstrative for a jury, is critical.

3. Rise of the “Driverless” Car

13 See National Highway Transportation Safety Administration, EDR Q&As, available at EDR_QAs_11Aug2006.pdf. 14 Id. 15 Id.

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Virginia has now seen the arrival of the “driverless” vehicle.16 In fact, driverless vehicles are currently being tested on public roads less than an hour away from where this seminar is being presented.17 Virginia has not passed much in the way of legislation pertaining to autonomous or driverless vehicles. In fact, a search of recently passed legislation in Virginia provides that the only subject related to autonomous driving that has been passed dealt with allowing the use of a visual display by the driver if the vehicle was being operated autonomously.18

a. What are the levels of vehicle autonomy?

i. Society of Automotive Engineers (‘”SAE”) International Vehicle Autonomy Levels:19

1. Level 0: Always under human control, but an have active features like automatic emergency braking or forward collision warning. The big difference: vehicles with this level of autonomy offer only visual or audible alerts and never actually control the car;

2. Level 1: Some active safety features that combine to take over the driving duty from the driver in certain situations. These features can provide a small amount of steering, acceleration, or braking input. However, this level is still not truly concerned with “driving” the vehicle as they are with accident avoidance.

3. Level 2: More active safety features that work together to assume some of the driving duty from the driver. These systems generally incorporate onboard cameras and radar (LIDAR) to assist with functions such as keeping the vehicle in hits lane of travel, clear of surrounding vehicles, and maintaining speed. The most common examples of this include Tesla’s AutoPilot and the Cadillac Super Cruise.

16 Luz Lazo, ‘This is our Future’: Fairfax tests Region’s First Self-Driving Shuttle for Public Transit, Washington Post, August 16, 2020, available at https://www.washingtonpost.com/local/trafficandcommuting/this-is-our-future-fairfax-tests-regions-first-self-driving-shuttle-for-public-transit/2020/08/16/c3e7a1ac-dca1-11ea-8051-d5f887d73381_story.html. 17 Anmar Frangoul, Self-Driving Trucks are Being Tested on Public Roads in Virginia, CNBC, Sep. 10, 2019, available at https://www.cnbc.com/2019/09/10/self-driving-trucks-are-being-tested-on-public-roads-in-virginia.html. 18 HB 454 was passed by the House and Senate in March 2016 and signed into law by the Governor on April 6, 2016. Full text available at https://lis.virginia.gov/cgi-bin/legp604.exe?ses=161&typ=bil&val=hb454&submit=GO&ses=161&typ=bil&val=hb454&submit=GO. 19 The National Highway Transportation Safety Administration has published the SAE Standards on its website in describing the levels of vehicle autonomy. NHTSA, Automatid Vehicles for Safety, available at Automated Vehicles for Safety | NHTSA.

7

4. Level 3: At this level of autonomy, the vehicle takes over all driving control in select conditions. These conditions could be he road type or even certain geographic areas.

5. Level 4: All of the fun sci-fi-type features for Level 3, but with the added ability to adapt to more road and weather conditions.

6. Level 5: The automotive “holy grail.”20 At this level the vehicle drives itself at all times and requires no driver input.

ii. What does Tesla and Cadillac being at “Level 2” mean for litigation?

1. Given that Tesla’s AutoPilot system is an SAE Level 2 autonomous level,21 what does that mean for litigation surrounding

20 See, e.g., Dawn Kawamoto, Auto and Tech Giants Chase Self-Driving Car ‘Holy Grail’ in Bay Area, San Francisco Business Times, Nov. 21, 2018 (reporting on the progress of companies such as Audi, Nissan, Ford, BMW, Honda, General Motors, and Volkswagen toward achieving a “self-driving” car.” 21 See Ronan Glon, Tesla Admits its Full Self-Driving Technology is a Level 2 System, AutoBlog, Mar. 9, 2021.

8

the technology?

a. The short answer: Nobody knows.

i. Tesla says AutoPilot makes its vehicles safer,22 lawsuits argue otherwise.23

1. What are the issues? Negligence of the driver v. product liability.

a. Impact of no “strict liability” under Virginia law.24

ii. Onboard EDR data will be essential. As will other issues such as:

1. Human factors experts;25

2. Computer programming/software engineering experts;26 and

3. Design engineers.27

Now, armed with an understanding of how to obtain and how to use data to help you win your personal injury case, it is time to examine what happens if the data you are seeking is destroyed and/or otherwise spoliated. Virginia law is evolving on this, and the legislative fix to recent Supreme Court of Virginia case law demonstrates the precarious nature of where the law may be headed.

22 See Neal E. Boudette, Tesla Says Autopilot Makes Its Cars Safer. Crash Victims Say It Kills, New York Times, July 5, 2021, available at https://www.nytimes.com/2021/07/05/business/tesla-autopilot-lawsuits-safety.html. 23 Attached is a state court Complaint filed against Tesla in the County Court for Miami-Dade County, Florida. See also, Russ Mitchell, DMV Probing Whether Tesla Violates State Regulations with Self-Driving Claims, Los Angeles Times, May 17, 2021, available at DMV investigating Tesla's self-driving claims - Los Angeles Times (latimes.com) (noting that Tesla was facing “hundreds” of lawsuits related to its AutoPilot system). 24 See Harris v. T.L., Inc., 243 Va. 63, 71 (1992) (“…These exception are based upon the doctrine of strict liability – a doctrine that is not recognized in Virginia.”). 25 See, e.g., Robson Forensic, Human Factors & Ergonomics, available at Human Factors & Ergonomics | Robson Forensic. (noting that a “human factors” expert is one who can provide analysis and testimony regarding perception, attention and distraction, fatigue, and risk perception). 26 See, e.g., ForensicGroup, Autonomous Vehicle Expert Witnesses, available at https://www.forensisgroup.com/expert-witness/autonomous-vehicle/. 27 Id.

9

I. Spoliation of Electronically Stored Information (“ESI”) – Current Federal and Virginia Law 1) Federal Law

a) “Spoliation” defined. i) “Spoliation refers to the destruction or material alteration of evidence or to the

failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001).

ii) Effective December 1, 2015, Fed. R. Civ. P. 37(e) was amended to read: “FAILURE TO PRESERVE ELECTRONICALLY STORED

INFORMATION. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:.

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may: (A) presume that the lost information was unfavorable to the party; (B) instruct the jury that it may or must presume the information was

unfavorable to the party; or (C) dismiss the action or enter a default judgment.”

b) The previous (2006) version of Rule 37(e) had read: “Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” i) The Advisory Committee found the 2006 version of the Rule inadequate to

address “the continued exponential growth in the volume” of ESI, causing “litigants to expend excessive effort and money on preservation in order to avoid the risk of severe sanctions if a court finds they did not do enough.” Fed. R. Civ. P. 37(e), comment to 2015 amend.

c) Rule 37(e) “does not apply when information is lost before a duty to preserve arises.” Fed. R. Civ. P. 37(e), comments to 2015 amend. i) The court will “need to decide whether and when a duty to preserve arose.

Courts should consider the extent to which a party was on notice that litigation was likely and that the information would be relevant.” In addition, the court must consider the scope of the ESI that should be preserved. Fed. R. Civ. P. 37(e), comment to 2015 amend.

ii) PRACTICE TIP: Always send a preservation letter (“litigation hold”) as soon as possible upon being retained. With regard to motor vehicle collision cases,

10

always advise in the letter it is essential for the preservation of available evidence that the subject vehicle not be powered up or the ignition turned on pending a requested joint vehicle inspection. Otherwise, evidence stored on the vehicle’s ECM (engine control module) or on the vehicle’s infotainment (and/or navigation) system may be destroyed.

iii) Under Rule 37(e) (and as we will see under current Virginia law), the duty to preserve ESI in tractor trailer and other motor vehicle collision cases arises when the collision occurs and before a preservation letter/litigation hold is received. The question is always whether ESI “should have been preserved in anticipation or conduct of litigation[,]” Fed. R. Civ. P. 37(e), not whether one party has provided written notice to the other to anticipate litigation.

d) Under Rule 37(e) as amended in 2015, the court must make a threshold determination whether spoliation of ESI occurred. i) Four elements:

“1) ESI should have been preserved in the anticipation or conduct of litigation; 2) It was lost; 3) the loss occurred because a party failed to take reasonable steps to preserve it; and 4) it cannot be restored or replaced through additional discovery.” Johns v. Gwinn, 2020 U.S. Dist. LEXIS 230793, at *11 (W.D. Va. Nov. 30, 2020).

ii) “The movant has the burden of proving the four predicate elements under Rule 37(e).” Edwards v. Kanode, 2021 U.S. Dist. LEXIS 62785, at *8 (W.D. Va. Mar. 31, 2021) (citation omitted). (1) The level of proof required—whether by a preponderance or by clear and

convincing evidence—is not set out in the Rule nor clarified by a published Fourth Circuit decision.

e) “‘Any level of fault, whether it is bad faith, willfulness, gross negligence, or ordinary negligence’ satisfies the culpability element” for spoliation. Thompson v. Clarke, 2019 U.S. Dist. LEXIS 145494, at *8 (W.D. Va. Aug. 27, 2019) (quoted citation omitted). (1) Remember, though, that Rule 37(e) requires only that a party undertake

“reasonable steps to preserve.” The court should recognize that information may be destroyed by events outside the party’s control.

(2) The Advisory Committee notes give as examples “the computer room may be flooded, a ˋcloud´ service may fail, a malign software attack may disrupt a storage system.” Fed. R. Civ. P. 37(e), comments to 2015 amend.

(3) A further example common to cases involving motor vehicle collisions is that the towing company or public safety personnel may have turned on the ignition

11

on the scene thereby destroying ECM or infotainment system evidence from the collision.

f) Spoliation must “actually prejudice[]” the movant’s case for the court to impose Rule 37(e) sanctions. Johns, 2020 U.S. Dist. LEXIS 230793, at *34. “Although the moving party cannot be expected to demonstrate with certainty the content of the lost evidence, the moving party must demonstrate a likelihood that the evidence would have been favorable to the moving party’s case.” Id. (internal quotations and citations omitted); see also Jenkins v. Woody, 2017 U.S. Dist. LEXIS 9581, at *22 (E.D. Va. Jan. 21, 2017) (“irretrievability” of critical video files supported Rule 37(e) sanctions). i) “In the spoliation context, a party must establish relevance by offering probative

evidence, not the hyperbole of argument, that the lost materials were likely to have been favorable to its case. . . . The lack of relevance translates into a lack of prejudice.” Thompson, 2019 U.S. Dist. LEXIS, at *5-6 (cleaned up).

ii) Consider the “actual prejudice” requirement in the context of a defendant driver’s cellphone in a motor vehicle collision case. Cellphones have become essential to modern life. Is the defendant driver obligated to turn over his cellphone to his attorney in the event of a collision? (1) Is the fact that the defendant driver had a cellphone with them and that it

was turned on when the collision occurred enough to create a likelihood of evidence favorable to the plaintiff? Most likely NO. (a) Couldn’t it be just as likely that the cellphone contained evidence

favorable to the defendant (like proof the driver was not interacting with it in any way)?

(2) Once retained, you the attorney should always consider sending a preservation letter to the opposing driver covering that driver’s cellphone. (a) Be aware in some instances, the opposing driver’s cellphone may

become an instrumentality of spoliation. For example, audio/video recordings and still photos from a video system, dash camera, or still camera may be stored on a microSD card. MicroSD cards can insert into, among other devices, Android cellular devices (like the Samsung Galaxy) where the audio/video and photo files can then be manipulated and/or deleted.

(b) The obligation to preserve cellphone evidence and other ESI is, of course, a two-way street. If you send a preservation letter to the opposing driver, you need to preserve your client’s cellphone and ESI as well.

(c) An alternative to taking physical custody of the cellphone is hiring an expert to make a forensic image of the cellphone. This can be expensive.

(d) Other information from your client to preserve: (i) All photos of property damage to the subject vehicle.

12

(ii) Any video or audio recordings from the scene. (iii)Any and all physical evidence. (iv) Any texts or emails from or to family and friends concerning the

collision or your client’s injuries therefrom. And (v) Social media posts regarding the collision.

1. This is so important that a standard term in our firm’s engagement letters directs our clients to refrain from social media posts about the subject matter of the engagement and further not to delete any existing posts.

g) “Once a finding of prejudice is made, the court is authorized to employ measures ‘no greater than necessary to cure the prejudice.’” Fed. R. Civ. P. 37(e)(1), comments to 2015 amend. i) Appropriate sanctions to cure prejudice may include “forbidding the party that

failed to preserve information from putting on certain evidence.” Id. ii) Under Rule 37(e)(1), spoliation resulting from ordinary negligence which is

prejudicial to the moving party may justify “allowing the parties to present evidence to the jury concerning the loss and likely relevance of information and instructing the jury that it may consider that evidence, along with all the other evidence in the case, in making its decision.”

h) The more severe spoliation sanctions are reserved under Rule 37(e)(2) for those cases where the spoliator “acted with the intent to deprive another party of the information’s use in the litigation.” i) Ordinarily, a party will have to show spoliation took place during the course of

litigation—i.e., to avoid production of ESI in response to a discovery request or a court order—to prove the spoliator “acted with the intent to deprive another party of the information’s use in the litigation.”

ii) Permissive or mandatory adverse inference instructions are reserved for cases of intentional spoliation—negligence or even gross negligence is not enough. Fed. R. Civ. P. 37(e)(2), comments to 2015 amend.

iii) Significantly, the court can presume prejudice from the intentional destruction or loss of ESI to deprive another party of its use in litigation and need not make a separate finding of prejudice to the moving party. Fed. R. Civ. P. 37(e)(2), comments to 2015 amend.

i) Federal district courts in Virginia and the Fourth Circuit will impose appropriate sanctions under Rule 37(e) for prejudicial and intentional spoliation. See, e.g., Sines v. Kessler, 2021 U.S. Dist. LEXIS 61074, at *9, *32-41 (W.D. Va. Mar. 30, 2021) (after defendant Vanguard America disregarded discovery orders, magistrate judge granted sanction of permissive adverse inference instruction against Vanguard for intentionally withholding ESI supporting plaintiff’s claims that Vanguard conspired with others to plan racially motivated violence at August 2017 “Unite the Right” rallies in Charlottesville).

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(1) Consider QueTel Corp. v. Abbas, 819 Fed. Appx. 154 (4th Cir. 2020). QueTel was a misappropriation of trade secrets and copyright infringement case alleging that Abbas stole source code from QueTel’s copyrighted software to use in a competing product. (a) After QueTel sent defendants a cease-and-desist letter, Abbas disposed

of the computer he used to develop the competing product several months later. The destroyed computer had a system installed that would have tracked changes to the software program’s source code which could have established the competing product was derived from the copyrighted software. Despite being served a targeted interrogatory, defendants did not inform QueTel about the destroyed computer. Judge Trenga in Alexandria ultimately ruled that the computer was destroyed in bad faith with the intent to deprive QueTel of evidence needed to prove its case. Under these circumstances, the court found an adverse inference instruction was not enough and instead entered judgment against the defendants. QueTel v. Abbas, 2018 U.S. Dist. LEXIS 231798 (E.D. Va. Oct. 25, 2018).

(b) Finding no abuse of discretion in awarding judgment to QueTel as a sanction for Defendants’ spoliation and imposing a permanent injunction, the Fourth Circuit affirmed per curiam. QueTel, 819 Fed. Appx. at 156-57.

2) Virginia Law a) Emerald Point, LLC v. Hawkins, 294 Va. 544, 808 S.E.2d 384 (2017) – The Impetus

for the General Assembly to Act on Spoliation i) Not an ESI case. ii) Plaintiffs were tenants of an apartment who obtained a jury verdict against their

landlord and management company for injuries caused by carbon monoxide (CO) poisoning.

iii) The allegedly spoliated evidence was the old furnace which was removed from the tenants’ apartment on January 4, 2013. The furnace was stored for over a year then disposed of prior to November 13, 2014 when the tenants’ joint lawsuit was filed. Emerald Point, 294 Va. at 555.

iv) In a May 2016 motion, the tenants “sought a jury instruction which would have directed the jury to accept as undisputed fact that the furnace had a ˋburned through´ combustion chamber and that this was the principal source of CO entering their apartment.” Id.

v) The circuit court stated that the landlord had done nothing in bad faith when disposing of the furnace, but nevertheless gave the following spoliation instruction: If a party has exclusive possession of evidence which a party knows, or reasonably should have known would be material to a potential civil action and the party disposes of that evidence, then you may infer, though you are not

14

required to do so, that if that evidence had been available it would be detrimental to the case of the party that disposed of it. You may give such inference what force or effect you think is appropriate under all the facts and circumstances. Id. at 555-56.

vi) The Supreme Court of Virginia noted that it “had not yet had the opportunity to address in detail the standard under which an instruction or other relief for spoliation of evidence may be imposed.” Id. at 557. (1) The Court found the standard set forth in Fed. R. Civ. P. 37(e) for ESI

“persuasive” and applicable to all forms of spoliation of evidence in Virginia. Id. at 558.

(2) The Court then held: “[T]he evidence must support a finding of intentional loss or destruction of evidence in order to prevent its use in litigation before the court may permit the spoliation inference.” Id. at 559. (a) Because the Court found the circuit court had erred in giving a

permissive adverse inference spoliation instruction when the destruction of the furnace “resulted at worst from negligence,” it directed at retrial that the tenants “not be entitled to a spoliation instruction with regard to their inability to inspect the furnace.” Id.

(b) Emerald Point aligns with Fed. R. Civ. P. 37(e)(2) in terms of when a permissive or mandatory adverse inference instruction may be given—that is, only upon a finding of intentional loss or destruction. (i) Emerald Point ignored, however, Rule 37(e)(1)’s authorization for

imposition of a narrower sanction tailored to cure the prejudice in all cases of prejudicial spoliation (even when due to ordinary negligence).

b) The General Assembly’s Response to Emerald Point – Va. Code § 8.01-379.2:1. i) For any attorney who delighted in Emerald Point’s restrictive holding on

spoliation, their delight was short-lived. ii) The General Assembly took aim at Emerald Point in its very next (2018)

legislative session. Two versions of a spoliation bill were introduced—the second tracking Fed. R. Civ. P. 37(e) except it would have been applicable to all evidence not just ESI—but neither was enacted in 2018. See A.M. Dickens, “Consequences of Spoliation in Virginia and the March Toward Adopting the Federal Spoliation Rules,” Journal of Civil Litigation, at 21-28 (Vol. 33 Spring 2019).

iii) In the 2019 legislative session, a spoliation bill (SB 1619) was enacted and signed into law effective July 1, 2019. The legislative summary specifically notes that the act was in response to Emerald Point. Codified at Va. Code §8.01-379.2:1 (“Spoliation of evidence”), it reads:

15

“A. A party or potential litigant has a duty to preserve evidence that may be relevant to reasonably foreseeable litigation. In determining whether and at what point such a duty to preserve arose, the court shall include in its consideration the totality of the circumstances, including the extent to which the party or potential litigant was on notice that specific and identifiable litigation was likely and that the evidence would be relevant. B. If evidence that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, or is otherwise disposed of, altered, concealed, destroyed, or not preserved, and it cannot be restored or replaced through additional discovery, the court (i) upon finding prejudice to another party from such loss, disposal, alteration, concealment or destruction of the evidence, may order measures no greater than to cure the prejudice, or (ii) only upon finding that the party acted recklessly or with the intent to deprive another party of the evidence’s use in the litigation, may (a) presume that the evidence was unfavorable to the party, (b) instruct the jury that it may or shall presume that the evidence was unfavorable to the party, or (c) dismiss the action or enter default judgment. C. Nothing in this section shall be interpreted as creating an independent cause of action for negligent or intentional spoliation of evidence.”

c) Va. Code § 8.01-379.2:1 essentially adopts the Fed. R. Civ. P 37(e) standard in Virginia courts for all spoliation evidence not just ESI. Section 8.01-379.2:1, however, varies in one key respect from the federal rule: it allows a circuit court to impose the most severe sanctions for intentional and reckless spoliation of evidence. In this way, the new law is more expansive than both Emerald Point and federal law.

d) This new Code section creates an affirmative duty to preserve potentially relevant evidence in anticipation of “reasonably foreseeable litigation.”

e) As of July 22, 2021, we have found no Virginia case law interpreting Va. Code § 8.01-379.2:1. Perhaps this is not surprising since the COVID-19 pandemic effectively halted litigation for much of 2020 into the first half of 2021. In any event, expect a circuit court faced with a spoliation motion under the new Code section to look to federal court precedent interpreting Fed. R. Civ. P. 37(e).

e a ocument

County Court in and for Miami-Dade County, Florida Case No. 2021-009716-CA-01 Neima Benavides (PR) v. Tesla, Inc.

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Filing # 125455230 E-Filed 04/22/2021 04:50:26 PM

IN THE CIRCUIT COURT OF THE 11TH JUDICIAL CIRCUIT 1N AND FOR MIAMI-DADE COUNTY, FLORIDA

NEIMA BENAVIDES, Personal Representative of the Estate of NAIBEL BENAVIDES LEON, deceased,

Plaintiff, vs.

TESLA, INC. a/k/a TESLA FLORIDA, INC.

Defendant. /

CASE NO.:

COMPLAINT FOR DAMAGES AND DEMAND FOR JURY TRIAL

COMES NOW the Plaintiff, NEIMA BENAVIDES, Personal Representative oftlle Estate of

NAIBEL BENAVIDES LEON, deceased, by and through the undersigned counsel, and sues tl~e

Defendant, TESLA, INC. a/k/a TESLA FLORIDA, INC., and alleges the following:

1. This is an action for damages in excess of Thirty Thousand Dollars ($30,000.00)

exclusive of interest and costs, brought pursuant to the Florida Wrongful Death Act, Florida Statute

§768.16 et seq.

JURISDICTION, VENUE AND PARTIES

2. At all times material hereto,. Neima Benavides, is the duly appointed personal

representative of the ESTATE OF NAIBEL BENAVIDES LEON, probate documents attached

hereto and marked as Exhibit A. As personal representative of the Estate, the Plaintiff, NEIMA

BENAVIDES, has standing to and otherwise is duty bound to bring this wrongful death action

pursuant to Florida Statute X768.16 et seq.

3. At the time of the death of NAIBEL BENAVIDES LEON was 22 years old and was

not married and had no children.

4. NAIBEL BENAVIDES LEON is survived by her natural parents, Lilia Marilin Leon

Jimenez and Guillermo Benavides, who are survivors under the Florida Wrongful Death Act.

5. Lilia Marilin Leon Jimenez is a resident of Miami Dade County.

6. At all times material to this action, the Defendant, TESLA, INC. a/k/a TESLA

FLORIDA, INC. (hereinafter referred to as "TESLA"), was a foreign corporation licensed and

authorized to do business in the State of Florida.

7. At all times hereinafter mentioned and at the time of the incident complained of, the

Defendant, TESLA, had an office for the transaction of its customary business in Miami-Dade County,

Florida, had agents and other representatives in Miami-Dade County, Florida, and was actually doing

business in Miami-Dade County, Florida by virtue of its shipping to and sale of automobiles in Miami-

Dade County, Florida.

8. At all times hereinafter mentioned and at the time of the incident complained of; the

Defendant, TESLA, was in the business of designing, testing, inspecting, manufacturing, distributing,

selling, maintaining, repairing and otherwise placing into the stream of commerce, and causing same

to come into the State of Florida, certain automobiles, including a certain specific automobile

designated and described as a 2019 Tesla Model S, VIN: SYJSAlE24KF302997 (Hereinafter

described as the "Vehicle").

FACTS GIVING RISE TO CAUSE OF ACTION

9. On or about April 25, 2019, the Vehicle was owned by George McGee.

10. On or about Apri125, 2019, George McGee was operating and/or driving the Vehicle

eastbound on CR-905A in Key Largo, Monroe County, Florida.

11. At that time and place, George McGee, had activated the autopilot function in his

Tesla and was relying on its ability to detect obstacles in the roadway ahead of the Vehicle and

reduce speed and/or come to a complete stop when such obstacles were detected.

12. Because he was relying on the Vehicle's auto pilot system, George McGee took his

eyes of the road to look at his phone.

13. George McGee failed to notice he was approaching the T-intersection at CR-905A.

14. Parked on the other side of the T-Intersection was the Chevrolet Tahoe owned by

Dawn Angulo, and driven by her son, Dillon Angulo. NAIBEL BENAVIDES LEON and Dillon

Angulo were standing next to the truck.

15. The auto-pilot of George McGee's Vehicle failed to detect the substantial profile of

Chevrolet Tahoe at any point, despite the fact that it was parked directly in front of the Vehicle's

path.

16. As a result, the Vehicle continued eastbound through the intersection without

initiating the brakes and the Vehicle struck the Tahoe at almost 70 miles per hour, causing it to

violently rotate and strike the decedent, NAIBEL BENAVIDES LEON, sending her approximately

75 feet into the surrounding wooded area, taking her life as a result.

COUNTI STRICT LIABILITY

The Plaintiff, Neima Benavides, as Personal Representative of the Estate of NAIBEL

BENAVIDES LEON, Deceased, realleges each and every allegation contained in paragraphs 1 through

16, and, by reference, further states:

17. At all times mentioned herein, Tesla was engaged in the business of manufacturing,

fabricating, designing, assembling, distributing, selling, inspecting, warranting, leasing, renting,

retailing, and advertising vehicles, including the Vehicle with Tesla's Autopilot systems suite.

18. Tesla's vehicles, including the Vehicle, contained design defects when the vehicles

were introduced into the stream of commerce by Tesla.

19. Tesla's vehicles, including the Vehicle, were defective and unsafe for their intended

use. Due to the design defects, the Vehicle failed to perforni as safely as an ordinary consumer would

expect when used in an intended or reasonably foreseeable manner.

20. On April 25, 2019, George McGee was driving the Vehicle in a reasonably

foreseeable and intended manner, with Tesla's autopilot systems suite engaged, when the Vehicle

failed to detect the substantial profile of Chevrolet Tahoe parked directly in front of the Vehicle's

path, and the Vehicle struck the Tahoe, killing NAIBEL BENAVIDES LEON in the resulting

collision.

21. Tesla knew that consumers would use and drive their vehicles as the driver did on

April 25, 2019.

22. Tesla manufactured, designed, assembled, tested, inspected, marketed, distributed,

and sold their vehicles, including the Vehicle, and their component parts including Tesla's Autopilot

system and suite of driver assistance features technology with defects in design which made them

dangerous, hazardous, and unsafe for their intended and reasonably foreseeable use.

23. The design defects in the Vehicle and Tesla's Autopilot system suite of technology

included defective and unsafe characteristics such as the failure to adequately monitor and determine

driver-engagement, which resulted in the death of Decedent NAIBEL BENAVIDES LEON. The

Vehicle's performance in this incident revealed a fatal defect and flaw in Tesla's Autopilot design,

specifically regarding the method in which the system monitors driver engagement.

24. The design defects in Tesla's Model X vehicle also includes additional defective and

unsafe characteristics, such as the failure to adequately determine stationary objects in front of the

vehicle, which resulted in the death of Decedent NAIBEL BENAVIDES LEON when the Vehicle

was unable to recognize the side profile of a Chevrolet Tahoe parked directly in front of the

Vehicle's path. Tesla's Autopilot suite of driver assistance features, specifically its forward obstacle

detection and computer processing and camera visioning system failed to detect a side profile of a

Chevrolet Tahoe parked directly in front of the Vehicle's path.

25. Tesla failed to meet the expectations of the reasonable consumer by placing on the

market a Tesla Model X vehicle which failed to incorporate an autopilot system that included safety

components which would keep the vehicle only in designated travel lanes, reasonably match vehicle

speed to traffic conditions, keep the vehicle within its lane, and provide active automatic collision

avoidance and automatic emergency braking in a manner which detected objects the car might

impact and applied the brakes so as to avoid impact with such objects.

26. Subsequent to the incident which killed the Decedent, Tesla equipped subsequent

Tesla Model S with additional technology programs and systems and safety components and

passenger protection components that did, in fact, provide active automatic collision avoidance and

automatic emergency braking in order to detect objects the car might impact, and apply the brakes

accordingly to avoid impact with such objects. The inclusion of these features on the Tesla Model S

after NAIBEL BENAVIDES LEON's death, had they been installed on the accident vehicle, would

have entirely avoided and prevented the fatal injuries sustained by her.

27. By reason of the omission of the above described safety systems, features and

components from the Vehicle, on and prior to the date of Decedent's injuries and death, the Tesla

Model S was defective in its design, in that the auto pilot systems of the vehicle would not, could

not, and did not perform in a manner as safely as an ordinary consumer would expect when the

vehicle was subjected to foreseeable accident or driving conditions. Further, the Tesla Model S, as

designed, caused fatal injury to NAIBEL BENAVIDES LEON when the vehicle failed to perforni as

it should have.

28. The risk of danger in the design of Tesla's Model S vehicle outweighed any benefits

of the design, and especially where safer alternative designs were available at the time of

manufacture. Such reasonably safer alternative designs include, but are not limited to, the following:

a. Driver-facing cameras that would monitor the driver's eyes and/or head position as a way

to determine driver engagement and awareness;

b. LIDAR, or any other reasonable alternative system that may or may not include the use of

radar technology for the detection of obstacles and surroundings of a Tesla vehicle; and

c. Recoding of Tesla's proprietary software for its Autopilot technology and suite of driver

assistance features, specifically, the Traffic Aware Cruise Control feature.

29. Therefore, the Vehicle, and all of Tesla's vehicles that are equipped with Tesla's

Autopilot system suite of technology presented and continue to present a substantial and

unreasonable risk of serious injuries to drivers of Tesla vehicles and the public.

30. The defects in the design of all Tesla vehicles equipped with Tesla's Autopilot system

was a substantial factor in causes Decedent NAIBEL BENAVIDES LEON's death, as well as

Plaintiffs damages as alleged herein.

31. As a direct and proximate cause of the defects in the Vehicle, the ESTATE OF

NAIBEL BENAVIDES LEON, deceased, suffered damages more specifically set forth below.

WHEREFORE, the Plaintiff, Plaintiff, Neima Benavides, as Personal Representative of the

Estate of NAIBEL BENAVIDES LEON, Deceased, demands judgment against the Defendant,

TESLA, INC. a/k/a TESLA FLORIDA, INC., for compensatory damages together• with post-

judgment interest and taxable costs incurred in this action.

COUNT II

STRICT LIABILITY (FAILURE TO WARN)

The Plaintiff, Neima Benavides, as Personal Representative of the Estate of NAIBEL

BENAVIDES LEON, Deceased, realleges each and every allegation contained in paragraphs 1 through

16, and, by reference, further states:

32. At all times mentioned herein, Tesla was engaged in the business of manufacturing,

fabricating, designing, assembling, distributing, selling, inspecting, warranting, leasing, renting,

retailing, and advertising their vehicles, including the Tesla Model X vehicle, with Tesla's autopilot

system technology suite.

33. On April 25, 2019, George McGee was driving the Vehicle in a reasonably

foreseeable and intended manner, with Tesla's autopilot systems suite engaged, when the Vehicle

failed to detect the substantial profile of Chevrolet Tahoe parked directly in front of the Vehicle's

path, and the Vehicle struck the Tahoe, killing NAIBEL BENAVIDES LEON in the resulting

collision.

34. Tesla knew that consumers would use and drive their vehicles as the driver did on

Apri125, 2019.

35. An ordinary consumer would not have recognized the potential risks and dangers

inherent in the operation and use of a Tesla vehicle with autopilot engaged, including the fact that a

Tesla vehicle would be unable to recognize the Profile of a Chevrolet Tahoe parked directly in front

of its path.

36. Tesla failed to warn of the dangers in the reasonably foreseeable use of its vehicles.

37. As a direct and proximate cause of Tesla's failure to warn of the defects and dangers

of its Autopilot technology and suite of driver assistance features, the ESTATE OF NAIBEL

BENAVIDES LEON, deceased, suffered damages more specifically set forth below.

WHEREFORE, the Plaintiff, Plaintiff, Neima Benavides, as Personal Representative of the

Estate of NAIBEL BENAVIDES LEON, Deceased, demands judgment against the Defendant,

TESLA, INC. a/k/a TESLA FLORIDA, INC., for compensatory damages together with post-

judgment interest and taxable costs incurred in this action.

WRONGFUL DEATH DAMAGES

38. The Estate of NAIBEL BENAVIDES LEON has suffered and will suffer the

following damages:

a. Lost wages, benefits and other earnings, including the value of lost earnings

that the decedent, NAIBEL BENAVIDES LEON, could reasonably have been

expected to earn had she lived a full life.

b. Loss of "prospective net accumulations" of the Estate of NAIBEL

BENAVIDES LEON, or the value of earnings the Estate of NAIBEL

BENAVIDES LEON, could reasonably have been expected to collect had the

decedent, NAIBEL BENAVIDES LEON, lived a full life.

c. Medical and funeral expenses paid by the Estate of NAIBEL BENAVDES

LEON.

38. Lilia Marilin Leon Jimenez, surviving natural mother and legal beneficiary under the

Florida Wrongful Death Act, has in the past and will continue to suffer in the fiittire the following

damages, per the Florida Wrongful Death Act, Florida Statute §768.16:

a. The loss of support and services NAIBEL BENAVIDES LEON had prop ided

to her mother, Lilia Marilin Leon Jimenez.

b. The loss of companionship, guidance and protection provided by the

decedent, NAIBEL BENAVIDES LEON to her mother, Lilia Marilin Leon

Jimenez.

39. Guillermo Benavides, surviving natural father and legal beneficiary under the Florida

Wrongful Death Act, has in the past and will continue to suffer in the future the following damages,

per the Florida Wrongful Death Act, Florida Statute §768.16:

a. The loss of support and services NAIBEL BENAVIDES LEON had provided

to her father, Guillermo Benavides.

b. The loss of companionship, guidance and protection provided by the

decedent, NAIBEL BENAVIDES LEON to her father, Guillermo Benavides.

c. Mental and emotional pain and suffering due to the loss of the decedent,

NAIBEL BENAVIDES LEON.

d. Medical and funeral expenses paid for or owed by Guillermo Benavides as a

result of the death of his daughter, NAIBEL BENAVIDES LEON.

WHEREFORE, the Plaintiff, NEIMA BENAVIDES, as Personal Representative of the Estate

of NAIBEL BENAVIDES LEON, demands judgement and damages against the Defendant, TESLA,

INC. a/k/a TESLA FLORIDA, INC, costs and interest allowed by the law, and further demands a

trial by jury of all issues so triable as a matter of right thereby.

DATED this 22nd day of April, 2021.

POSES &POSES, P.A. Alfred I. Dupont Building 169 East Flagler Street Suite 1600 Miami, Florida 33131 (305) 577-0200 Tel (305) 371-3550 Fax tposes(a~posesandposes. com maria(a,posesandposes. com

/s/Todd Poses TODD POSES, ESQUIRE FBN: 0075922

4Hot Topics with Virginia Legislaon

Legislave Changes to Virginia Appellate Courts

Presented by:

Monica Taylor Monday - [email protected] | David R. Berry - [email protected]

Criminal Changes in Virginia

Presented by:

John G. DaJohn G. Danyluk - [email protected]

Hot Topics in Virginia Employment Laws

Presented by:

Todd A. Leeson - [email protected] | Catherine J. Huff - [email protected]

GLC/Cannabis; 2021 Bills of Interest

Presented by:

Gregory D. Habeeb - [email protected] | Patrice L. Lewis - [email protected]

1 5002/9003/9986132v1

Legislative Changes to Virginia Appellate Courts


Monica T. Monday David R. Berry Gentry Locke

I. Senate Bill 1261

A. Where do I find the legislation?

1. S.B. 1261, Va. Gen. Assem. (1st Spec. Sess. 2021).

2. The final version of the bill can be found here: Bill Tracking - 2021 session > Legislation (state.va.us).

B. Patrons: Senators John S. Edwards (Chief Patron), Joseph D. Morrissey, and Scott A. Surovell.

C. Passage Date: Governor Northam signed S.B. 1261 into law on March 31, 2021.

D. Effective Date of SB 1261:

1. All but one part of the legislation is effective on January 1, 2022. See 2021 Va. Acts ch. 489(6).

2. Code § 17.1-400 is effective on July 1, 2021, see 2021 Va. Acts ch. 489(6), and provides for the election of 6 new judges to the Court of Appeals.

II. Jurisdiction of the Court of Appeals through December 31, 2021

A. Generally: The Court of Appeals is a court of limited jurisdiction. Reaves v. Tucker, 67 Va. App. 719, 727 (2017).

B. Appeals of Right (See Code § 17.1-405 (2021); 17.1-406(B) (2021)):

1. Workers’ compensation

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2. Juvenile and domestic relations

3. Administrative agency appeals

C. Appeals by Petition (See Code § 17.1-406(A) (2021)):

1. Defendant criminal and traffic convictions

2. Commonwealth criminal appeals

D. Original Jurisdiction:

1. Writs of mandamus, prohibition, and habeas corpus in any case over which the Court of Appeals would have appellate jurisdiction. See Code § 17.1-404.

2. Writs of actual innocence based on non-biological evidence. See Code § 19.2-327.10.

III. The Court of Appeals on January 1, 2022

A. Appellate Jurisdiction:

1. Appeals of Right (Code § 17.1-405 (2022)):

a. A final decision of a circuit court in a civil matter. See Code § 17.1-405 (2022).

b. A final decision of a circuit court on appeal from a decision of an administrative agency. Id.

c. A final decision of a circuit court on appeal from a grievance hearing decision issued pursuant to Code § 2.2 3005. Id.

d. A final decision of the Workers’ Compensation Commission. Id.

e. A final judgment, order or decree of a circuit court involving:

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i. An application for a concealed weapons permit pursuant to Article 6.1 of Chapter 7 of Title 18.2.

ii. Involuntary treatment of prisoners pursuant to Code §§ 53.1-40.1 or 53.1-133.04.

iii. Declaratory or injunctive relief under Code § 57-2.02. Id.

f. An interlocutory decree or order pursuant to Code §§ 8.01-267.8, 8.01-626, or 8.01-675.5. Id.

g. A final conviction in a circuit court of a traffic infraction or a crime. See Code § 17.1-406(A).

2. Appeals by Petition (Code § 17.1-406(A)):

a. Commonwealth (and county, city or town) criminal appeals that were previously brought by writ of error under Code § 19.2-317.

b. Commonwealth appeals in criminal cases pursuant to Code § 19.2-398.

B. Original Jurisdiction:

1. Writs of mandamus, prohibition, and habeas corpus in any case over which the Court of Appeals would have appellate jurisdiction. See Code § 17.1-404.

2. Writs of actual innocence based on non-biological evidence. See Code § 19.2-327.10.

C. Judges:

1. The Court of Appeals currently has 11 judges. See Code § 17.1-400 (2021).

2. The Court will gain 6 new judges, for a total of 17 judges. See Code § 17.1-400 (eff. 7/1/2021).

3. “The General Assembly shall consider regional diversity in making its elections.” Id.

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4. Additionally, the Chairs of the Senate Judiciary Committee and House Courts Committee announced that the new Court of Appeals judges also will be selected based on racial and practice area diversity. See Virginia State Bar - News - VSB to Evaluate Candidates for Virginia Court of Appeals Vacancies.

D. New Procedures:

1. Amended Rules of Court for Part 5 and Part 5A: These new rules will be approved before the end of 2021.

2. Notice of Appeal (Code § 17.1-407(A)):

a. Filed in the Clerk’s office of lower tribunal or commission.

b. Copy of notice of appeal is sent to all opposing counsel, parties not represented by counsel, the Clerk of the Court of Appeals, and (in criminal cases) to the Attorney General.

3. Appeal Bonds: Appeal bonds are no longer required in criminal appeals. See Code § 8.01-676.1.

4. The Appendix (Rule 5A:25):

a. The General Assembly has authorized the adoption of rules to permit “truncated record or appendix preparation” in the Court of Appeals.

b. This means that there are likely to be significant amendments to Rule 5A:25, which relates to the joint appendix.

c. The new rules may permit the parties to dispense with the appendix when there is a digital record, as recommended by the Working Group that studied the issue. WORKING GRP. TO STUDY JURISDICTION OF THE COURT OF APPEALS OF VA., REP. TO THE JUDICIAL COUNCIL OF VA.: COURT OF APPEALS JURISDICTION STUDY – SJ 47, at 10 (Sept. 24, 2020).

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d. Many of Virginia’s circuit court clerk’s offices currently send a digital record of the proceedings to the appellate courts.

5. Oral argument:

a. The Court of Appeals may dispense with oral argument only when: (1) the appeal is wholly without merit or (2) when “the dispositive issue or issues have been authoritatively decided, and the appellant has not argued that the case law should be overturned, extended, modified, or reversed.” Code § 17.1-403.

b. Note: Under current rules, the Court of Appeals may dispense with oral argument through a procedure called “summary disposition” when an appeal lacks merit. Rule 5A:27.

6. Electronic Filing: Pursuant to amendments of the Rules for the Court of Appeals, electronic filing is required for all filings beginning June 1, 2021, except where the party is a pro se prisoner or a litigant who has been granted permission by the court to file documents in paper form. See Amendments to Rules of the Supreme Court of Virginia (state.va.us).

IV. The Supreme Court of Virginia on January 1, 2022

A. Jurisdiction:

1. The Supreme Court will have appellate review of virtually all decisions of the Court of Appeals:

a. “A party aggrieved by a final decision of the Court of Appeals may petition the Supreme Court for an appeal in accordance with § 17.1-411.” Code § 8.01-670; see also Code § 17.1 410(B).

b. Exception: Under Code § 17.1-410(A), a decision or dismissal by the Court of Appeals in the following cases is final and not appealable to the Supreme Court:

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(i) Appeals involving denial of a concealed handgun permit pursuant to Code § 18.2-308.08.

(ii) Involuntary treatment of prisoners pursuant to Code §§ 53.1-40.1 or 53.1-133.04.

(iii) Appeals in criminal cases pursuant to subsections A or E of Code §§ 19.2-398 and 19.2-401.

c. The pre-2022 limitations on appeals from the Court of Appeals to the Supreme Court in cases involving administrative agencies, workers’ compensation, domestic relations, adoption, and traffic and misdemeanor cases where there is no incarceration are abolished. See Code § 17.1-410 (2021) (making the final judgment of the Court of Appeals in such cases final unless the case involves a substantial constitutional question or matter of significant precedential value).

d. Appeals from the Court of Appeals to the Supreme Court are brought by petition. Code § 8.01-670.

e. Most procedures for the Supreme Court appeal will remain the same.

2. There is a limited right of appeal to the Supreme Court:

a. Appeals of right to the Supreme Court are available in State Corporation Commission appeals, Virginia State Bar disciplinary cases, and appeals from the circuit court involving a petition for a writ of habeas corpus. Code § 17.1-406(B).

b. As part of the Supreme Court’s original jurisdiction, Complaints of the Judicial Inquiry & Review Commission are filed directly with the Supreme Court. Id. The Supreme Court also has original jurisdiction to issue writs of mandamus, prohibition, habeas corpus, and actual innocence based upon biological evidence. Code §§ 17.1-309 and 19.2-327.2.

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B. Procedure after January 1, 2022

1. New rules will be approved before the end of 2021.

2. Most appeals will proceed as before in the Supreme Court.

3. Note: Pursuant to amendments of the Rules for the Court of Appeals, electronic filing is required for all filings in the Supreme Court beginning June 1, 2021, except where the party is a pro se prisoner or a litigant who has been granted permission by the Court to file documents in paper form. See Amendments to Rules of the Supreme Court of Virginia (state.va.us)

V. Interlocutory Appeals and Petitions

A. General Rule: Interlocutory appeals will be heard by the Court of Appeals. Code § 8.01-267.8 (eff. 1/1/2022); Code § 8.01-675.5 (eff. 1/1/2022); Code § 17.1-405(4) (eff. 1/1/2022).

B. Appeals by Permission

1. Multiple Claimant Litigation under Code § 8.01-267.1 et seq.

a. “The Court of Appeals, in its discretion, may permit an appeal to be taken from an order of a circuit court although the order is not a final order where the circuit court has ordered a consolidated trial of claims joined or consolidated pursuant to this chapter.” Code § 8.01-267.8(A).

b. “The Court of appeals, in its discretion, may permit an appeal to be taken from any other order of a circuit court in an action combined pursuant to this chapter although the order is not a final order provided the written order of the circuit court states that the order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” Code § 8.01-267.8(B).

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2. Certified Interlocutory Appeals under Code § 8.01-675.5(A).

a. When, before trial, a circuit court issues a non-final order or decree, a party may file in the circuit court a motion asking the circuit court to certify such order or decree for interlocutory appeal.

b. The motion shall include a concise analysis of the statutes, rules, or cases believed to be determinative of the issues and request that the court certify in writing that the order or decree involves a question of law as to which (i) there is substantial ground for difference of opinion; (ii) there is no clear, controlling precedent or point in the decisions of the Supreme Court or Court of Appeals; (iii) determination of the issues will be dispositive of a material aspect of the proceeding pending before the court; and (iv) it is in the parties’ best interest to seek an interlocutory appeal.

c. Within 15 days of the entry of an order by the circuit court granting such certification, a petition for appeal may be filed with the Court of Appeals.

d. If the Court of Appeals determines that the certification has sufficient merit, it may, in its discretion, permit an appeal to be taken from the interlocutory order or decree.

e. Consideration of such an appeal will proceed in accordance with the applicable procedures.

f. No petition or appeal under Code § 8.01-675.5(A) will stay proceedings in the circuit court unless the circuit court or appellate court so orders upon a finding that (i) the petition or appeal could be dispositive of the entire civil action or (ii) there exists good cause, other than the pending petition or appeal, to stay the proceedings. Code § 8.01-675.5(C).

g. “The failure of a party to seek interlocutory review under this section shall not preclude review of the issue on appeal from a final order.” Code § 8.01-675.5(D).

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h. “An order by the Court of Appeals denying interlocutory review under this section shall not preclude review of the issue on appeal from a final order, unless the order denying such interlocutory review provides for such preclusion.” Id.

3. Immunity Appeals under Code § 8.01-675.5(B).

a. “When, prior to the commencement of trial, a circuit court has entered in any pending civil action an order granting or denying a plea of sovereign, absolute, or qualified immunity that, if granted, would immunize the movant from compulsory participation in the proceeding, the order is eligible for immediate appellate review.”

b. “Any person aggrieved of by such order may, within 15 days of the entry of such order, file a petition for review with the Court of Appeals in accordance with the procedures set forth in Code § 8.01-626.”

c. “If the assigned judge or judges grant the petition for review, the clerk shall refer the appeal to a panel of the court, as the court shall direct, and the parties shall prosecute the appeal in the manner provided for in the Rules of the Supreme Court of Virginia.”

d. No petition or appeal under Code § 8.01-675.5(B) will stay proceedings in the circuit court unless the circuit court or appellate court so orders upon a finding that (1) the petition or appeal could be dispositive of the entire civil action or (ii) there exists good cause, other than the pending petition or appeal, to stay the proceedings. Code § 8.01-675.5(C).

e. “The failure of a party to seek interlocutory review under this section shall not preclude review of the issue on appeal from a final order.” Code § 8.01-675.5(D).

f. “An order by the Court of Appeals denying interlocutory review under this section shall not preclude review of the issue on appeal from a final order, unless the order

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denying such interlocutory review provides for such preclusion.” Id.

C. Injunction Petitions under Code § 8.01-626.

1. The procedure for injunction petitions remains essentially the same, except that the appeal is heard by the Court of Appeals instead of the Supreme Court.

2. A party may file a petition for review with the Court of Appeals seeking review of an order of the circuit court that grants an injunction, refuses an injunction or, having granted an injunction, dissolves or refuses to enlarge it.

3. The aggrieved party must file a petition for review within 15 days of the circuit court’s order, and serve a copy of the petition on counsel for the opposing party; the petition for review must be accompanied by a copy of the proceedings, including the original papers and the court’s order respecting the injunction.

4. The opposing party may file a response to the petition within seven days from the date of services unless the Court specifies a shorter time frame.

5. The same standard: The Court of Appeals “may take such action thereon as it considers appropriate under the circumstances of the case.”

6. Further review in the Supreme Court: A party aggrieved by the action of the Court of Appeals regarding its petition for review may, within 15 days of the order of the Court of Appeals, present a petition for review to the Supreme Court, and essentially the same procedure will again be followed in the Supreme Court.

7. A change in Supreme Court review: Previously, a party could present the injunction petition to one justice of the Supreme Court. After January 1, 2022, the Clerk of the Supreme Court “shall assign the petition to a three-justice panel of the Supreme Court.”

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VI. Pending Cases

A. The date the notice of appeal is filed will govern how the case will proceed.

1. Virtually all appeals filed on or after January 1, 2022 will be filed in the Court of Appeals of Virginia.

2. Appeals noted before the effective date of the legislation will proceed in the Court of Appeals and Supreme Court under existing rules and procedures. See 2021 Va. Acts ch. 489(3).

3. Exception: For criminal cases pending in the Court of Appeals where a petition has been filed before, but remains pending, on January 1, 2022, the petition will be deemed granted. See 2021 Va. Acts ch. 489(4).

4. There is a 30-day window before the effective date of the legislation where a civil litigant may determine whether their appeal will be heard by petition in the Supreme Court or as a matter of right in the Court of Appeals.

B. Transfer of Appeal 1. There is no change in existing law regarding appeals filed in the

wrong appellate court.

2. Appeals filed in the wrong appellate court will be transferred to the correct appellate court. Code § 8.01-677.1.

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Criminal Law Changes in Virginia


John Danyluk Virginia implemented sweeping criminal justice legislation in 2021, largely prompted by the murder of George Floyd and the national outrage that ensued. During a special legislative session stretching nearly 12 weeks, the General Assembly passed hundreds of pages of legislation which will significantly impact criminal law and procedure in the Commonwealth.

I. Civilian Review Boards a. Cities and counties in Virginia previously had the power to create

advisory panels to provide input to local police. Va. Code Ann. § 9.1-601. These panels were purely advisory and lacked teeth to provide meaningful oversight.

b. The new law, effective July 1, 2021, allows local governments to create panels to field and investigate complaints. They can then issue binding disciplinary action based on their findings.

c. Sheriffs are exempt on grounds that they are already subject to civilian review by virtue of being elected.

II. Ban on No-Knock Warrants a. Bars police from executing warrants without first knocking and

announcing themselves. Va. Code Ann. § 19.2-56.

b. “No law-enforcement officer shall seek, execute, or participate in the execution of a no-knock search warrant. A search warrant authorized under this section shall require that a law-enforcement officer be recognizable and identifiable as a uniformed law-enforcement officer and provide audible notice of his authority and purpose…” (emphasis added). Id.

c. Previously, the Virginia Supreme Court had upheld no-knock warrants under exigent circumstances. Johnson v. Commonwealth, 189 S.E.2d 678 (Va. 1972).

d. Virginia becomes just the third state in the country to ban no-knock warrants. The law became effective on March 1, 2021.

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e. Named “Breonna’s Law” after Breonna Taylor who was shot and killed during a late-night raid in Louisville.

III. Downgrading Minor Traffic Violations a. Prohibits police from making traffic stops for:

i. Non-functioning brake and tail lights (unless more than one

light is out) - Va. Code Ann. § 46.2-1013

ii. Broken or loud exhaust systems - Va. Code Ann. § 46.2-1049

iii. Tinted windows - Va. Code Ann. § 46.2-1052 (2020)

iv. Objects hanging from rearview mirror - Va. Code Ann. § 46.2-1054

v. Smoking in a car with a minor present - Va. Code Ann. § 46.2-810.1

vi. State inspection that is less than four months expired - Va. Code Ann. § 46.2-646

b. These violations were not eliminated, but became secondary infractions, meaning police cannot stop the driver and issue a citation unless the driver also commits a more serious infraction.

c. The legislators who proposed and supported the law argued that police often use the violations as a pretext for a stop, stating that “a disproportionate number of people pulled over for minor traffic offenses tend to be people of color, this is a contributor to the higher incarceration rate among minorities.”1

IV. Prohibiting Searches Based on Smell of Marijuana a. Prohibits police from searching people or their vehicles upon

recognizing the scent of marijuana. Va. Code Ann. § 4.1-1302.

b. Rolled into the legislation downgrading minor traffic violations based on a similar rationale.

1 Ned Oliver, Virginia Lawmakers Pass Bill Limiting Pretextual Traffic Stops, Barring Searches Based on Smell of Marijuana, Virginia Mercury (Oct. 2, 2020), https://www.virginiamercury.com/2020/10/02/virginia-lawmakers-pass-bill-banning-pretextual-traffic-stops-and-searches-based-on-the-smell-of-marijuana/.

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c. These searches were difficult to challenge after the fact and had faced growing scrutiny.

d. The publicized traffic stop of Derrick Thompson in Fairfax, who was stopped by a Virginia State trooper for an expired inspection decal which escalated upon the officers alleging to have smelled marijuana, is an example of the type of incident that this law seeks to prevent.2

V. Eliminating Jury Sentencing a. Transfers sentencing authority in jury trials to the judge unless

defendant specifically requests it be set by the jury. Va. Code Ann. § 19.2-295.1.

b. Previously, Virginia was one of just two states where a defendant exercising their constitutional right to a jury trial would also be sentenced by that same jury if convicted. The Commonwealth’s jury sentencing structure had been in place for 224 years.

c. The previous system was often referred to as a “jury penalty,” because electing to have a jury trial risked steeper punishments if convicted. Juries do not use sentencing guidelines, are not able to suspend confinement sentences, and often deliver longer sentences when compared to judges.

VI. Other Changes to Virginia Criminal Law

a. Establishment of Statewide Code of Conduct for Police – requires

establishment of statewide standards by Criminal Justice Services Board to replace previous system whereby individual departments adopted their own conduct standards and regulations. Va. Code Ann. § 15.2-1705.

b. Creation of Mental-Health Crisis Response Teams – establishes response teams around the Commonwealth specialized in behavioral health issues. Va. Code Ann. § 9.1-193.

2 Justin Jouvenal, Virginia State Police Investigating Violent Traffic Stop Involving Black Motorist, Official Says, The Washington Post (July 15, 2020), https://www.washingtonpost.com/local/public-safety/virginia-state-police-investigating-violent-traffic-stop-involving-black-motorist-official-says/2020/07/15/5b26fbbe-c6de-11ea-a99f-3bbdffb1af38_story.html.

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c. Limitation on Police Chokeholds - police can only use neck restraints when they are “immediately necessary to protect the law-enforcement officer or another person.” Va. Code Ann. § 18.2-51.8.

d. Early Release for Prison Inmates – allows prisoners to cut their

sentences by a third, as long as they were not convicted of certain violent offenses, follow prison rules, and participate in counseling and education programs. (Effective July 1, 2022). Va. Code Ann. § 53.1-202.3.

e. Authorization for Attorney General to Investigate Local Police

Departments – authorizes Virginia Attorney General to file civil suit or inquire into any unlawful patterns or practices by law-enforcement. Va. Code Ann. § 2.2-511.1.

1

Hot Topics in Virginia Employment Laws


Todd A. Leeson Catherine J. Huff

I. What Do Virginia Lawyers Need to Know about Cannabis & the Workplace? Va. Code § 4.1-600, et seq., the Cannabis Control Act (the “Act”). Generally stated, Virginia law now allows persons over 21 years of age to possess small amounts of marijuana and cultivate up to 4 plants at home. The Act establishes the Virginia Cannabis Control Authority as an independent authority responsible for issuing regulations, approving licenses, and enforcement. There are 4 license categories: cultivation, product and manufacturing, wholesale and retail. The Act contains restrictions on vertical integration and anti-labor activity. There are key provisions for each geographic disbursement and social equity. The potential tax rate is at least 21% with a maximum of 24%. Brief Comments on Current Federal Law & Cannabis. The Federal Controlled Substances Act of 1970, administered by the U.S. Drug Enforcement Administration (DEA), currently classifies marijuana as a Schedule I substance, meaning that it has no accepted medical use and a high potential for abuse. Moreover, the Federal Drug-Free Workplace Act (DFWA) requires certain federal contractors and grant recipients to maintain a drug-free workplace to receive federal funds. In addition, the U.S. Department of Transportation regulates companies that employ persons who operate a commercial motor vehicle. The DOT position is that states’ cannabis laws do not modify its drug-related regulations. New Virginia Law Permits Use of Cannabis Oils in Limited Situations. There is another new Virginia law, Virginia Code § 40.1-27.4, that took effect July 1, 2021. The prohibits an employer from disciplining an employee based on the employee’s “lawful use of cannabis oil pursuant to a valid written certification issued by a practitioner for the treatment or to eliminate the symptoms of the employee’s diagnosed condition or disease.”

2

This law only applies to “cannabis oils,” a defined term. The definition is not the same as medical marijuana or a person’s recreational use as a form of self-medication. The law also includes the following exceptions:

1. An employer is not restricted from taking an adverse employment action for any work impairment caused by the use of cannabis oil or to prohibit possession during work hours.

2. An employer is not required to commit any act that would cause it to be in violation of federal law or that would result in the loss of a federal contract or federal funding.

3. Any defense industrial base sector employer or prospective employer is not required to hire or retain any applicant or employee who tests positive for TCH in excess of 50 ng/ml for a urine test or 10 pg/mg for a hair test.

What about Virginia’s new law requiring reasonable accommodations on the basis of disability? Similar to the federal ADA, in HB 1848, Virginia has now amended the Virginia Human Rights Act to prohibit discrimination on the basis of disability. Accordingly, employers must now provide reasonable accommodations to the known mental and physical impairments of an otherwise qualified person with a disability to assist such person in performing a particular job unless the employer can demonstration that the accommodation would impose an undue burden on the employer. The term “mental impairment” does not include alcoholism or current drug addiction. The employer is required to engage in a timely, good faith interactive process with the employee who has requested an accommodation. Let’s assume an employee informs management that he has a medical impairment that his health care provider opines can be alleviated with the use of cannabis that would allow him to perform his job, and that he will not be “impaired” while working. The employee requests that the employer not discipline him for his cannabis use. Two weeks later, the employee tests positive for cannabis during a “random” drug test. May the employer lawfully discipline the employee for violating its substance abuse policy? Some Final Thoughts about Lawful Cannabis Use by Employees. There is no Virginia law that prohibits an employer from taking disciplinary action against employees for their lawful, off-duty conduct, including cannabis use. This is true of just about all off-duty conduct by “at-will” employees. Examples include unfortunate social media posts or other activity may cast the company in an unfavorable light.

3

While employers have wide discretion, a practical question, especially given the tight labor markets and increasing acceptance of cannabis use, is whether an employer should modify its “zero tolerance” drug policy or consider the facts and landscape in exercising its discretion. Back to the Cannabis Control Act: Some Surprises Added to Final Law. Virginia Code § 4.1-900(1)(p) contains some surprising additional requirements for licensees. The Board may suspend or revoke any cannabis license if it has reason to believe that the licensee has refused to:

• Remain neutral regarding any union organizing efforts by employees; • Pay employees prevailing wages as determined by the U.S. DOL; or • Classify more than 10% of its workers as independent contractors.

The Virginia General Assembly must vote on this bill again for it to become law.

II. New Virginia Laws on Compensation: Overtime and Wage Theft

Virginia’s Minimum Wage Effective May 1, 2021, Virginia’s minimum wage increased to $9.50 for all employers. This means that all compensation based upon the calculation of the minimum wage must be adjusted for this new rate, i.e., overtime, tip credit, etc. The minimum wage will continue to increase through 2024 as follows:

• $11.00 on January 1, 2022; • $12.00 on January 1, 2023; • $13.50 on January 1, 2025*; • $15.00 on January 1, 2026*.

*The increases to $13.50 and $15.00 will be contingent on the General Assembly enacting these two changes by July 1, 2024. Virginia’ Wage Theft Law – Va, Code Ann. § 40.1-29 Effective July 1, 2020, employees now have a private right of action against their employers for failure to pay all wages. Prior to July 1, 2020, employees had to file an administrative claim with the Virginia Department of Labor and Industries, and only had a private action under the federal Fair Labor Standards Act. Now, however, an employee may file suit individually or collectively (i.e., a “collective action”) for unpaid or improperly paid wages.

4

This new law also clarifies that general contractors are considered to be “employers” of their subcontractors’ employees for purposes of ensuring proper pay. Employees can sue general contractors and hold them jointly and severally liable for a subcontractor’s violations. This applies only to contracts entered into after July 1, 2020. The employee must be able to show that the GC knew, or should have known, that the subcontractor was not paying proper wages. Potential damages under this new law are significant. The Wage Theft Law imposes a civil penalty of up to $1,000 per violation, depending upon the employer’s size and the magnitude of the violation. There are also criminal penalties for “willful” violations, which is defined as having actual knowledge of wage theft, as well as showing deliberate indifference or reckless disregard for the requirements under this law. If a court finds the employer knowingly failed to properly pay wages, the employee can receive up to three times the amount of wages owed (treble damages), plus attorneys’ fees, costs, and 8% prejudgment interest. This new wage law creates significant damages for violations. Employers should take the opportunity to audit their pay records, pay practices, and policies in order to ensure that they do not fall victim to a claim. Virginia Overtime Wage Act – Va. Code § 40.1-29.2 The new Virginia Overtime Wage Act (“VOWA”) took effect on July 1, 2021. The new law leaves untouched the overtime calculation for hourly employees, which mirrors the calculation under the Fair Labor Standards Act (“FLSA”). For salaried, non-exempt employees, however, the formula has changed drastically. Under the FLSA an employee must be paid overtime for all hours worked overtime. A salaried, non-exempt employee’s overtime is calculated by dividing the employee’s weekly wage by the total number of hours worked for that week (the “regular rate”). The employee must be paid one-half of that rate for each hour worked overtime. For example, if a salaried, non-exempt employee is paid $1,000 per week and works 50 hours in a week, the regular rate is $20 per hour. The employee’s overtime rate (one half the regular rate) is $10 per hour. That employee is owed $100 in overtime for the 10 overtime hours he worked that week. The calculation under the VOWA is vastly different. Under VOWA, the regular rate for non-exempt employees that are paid on a salary or other regular basis will always be calculated as 1/40 of all wages paid that week. Instead of dividing an employee’s wages by total hours worked in one week, the denominator will always be forty hours. This new formula significantly increases the amount of overtime owed. For example, if a salaried, non-exempt employee is paid $1,000 per week and works 50 hours in one week, their regular rate is $25 per hour because the denominator is 40, not 50 hours. One- and one-half times the regular rate is $37.50 per hour. The employee is owed $375 in overtime. Because the VOWA requires 1.5x overtime pay for all employees, schemes using half-time pay to compensate employees for overtime hours (including methods like the Fluctuating Workweek, day rate, piece rate, etc.) may be potentially unlawful.

5

If an employee is misclassified and brings a lawsuit alleging they are owed overtime over a period of months and years, the potential exposure could be significant. In addition to individual lawsuits, the VOWA allows collective action suits as well, and the statute of limitations is three-years for all violations – regardless of whether the violation was “willful.”

2021 Cannabis Control ActGregory D. Habeeb and Patrice L. Lewis

Gentry Locke Seminar – September 10, 2021

Current State Law

Pharmaceutical Permit ProcessorsVa. Code §54.1-3442.6

• A facility permitted by the Board of Pharmacy tocultivate and dispense cannabis oil to registeredpatients for the purpose of alleviating a diagnosedcondition or disease.

• The Board may permit up to 1 pharmaceuticalprocessor in each of Virginia’s 5 health service areas(HSAs).

• 1 pharmaceutical processor may establish up to 5cannabis dispensing facilities within the same HSA.

• Each facility must be under personal supervision oflicensed pharmacist in good standing.

Registered Hemp Growers, Processors, and Dealers

Va. Code §3.2-4112-4121

• Registration expires annually.

• A registered grower, processor, or dealer may assignresponsibilities of growing, processing, or dealing to an“agent.”

• Registered growers must submit report to VDACS within14 days of planting.

• VDACS may conduct random testing on industrial hempproducts to ensure THC concentration is less than 0.3%.

Current State Law

• Virginia first decriminalized marijuana during the 2020 General Assembly Session.• Penalty for possession of up to 1 oz of marijuana is a $25 civil fine (Va. Code §18.2-250.1).• Past marijuana convictions now sealed from employers and school administrators (Va. Code §19.2-

389.3).

• Later in 2020, the General Assembly passed additional legislation allowing people to prepaytheir civil penalties, eliminating required court appearance (Va. Code §18.2-250.1(a)).

• Under current state law, the sale, manufacture, or distribution of marijuana is still considereda felony punishable by both incarceration and severe fines (Va. Code §18.2-248.1).

Current Federal Law

• Cannabis remains a Schedule I drug under DEA guidelines.

• President Barack Obama's Department of Justice had a formal policy of not pursuinginvestigations against cannabis use that was legal under state law.

• Attorney General Merrick Garland indicated in his confirmation hearings that he did not believethe federal government should be investigating or prosecuting marijuana cases, but no policy hasbeen announced.

• The FTC, FDA, HHS may issue federal laws, policies, or guidelines, related to health warnings,advertising, product labeling, etc. of cannabis products.• Products designed for consumption or to be applied to the body have labeling requirements that

fall under the federal Food, Drug & Cosmetics Act, and the language of the labels themselves –and any advertising for the products – can be subject to federal regulation by the FDA and theFTC.

2021 Cannabis Control Act(Va. Code §4.1-600, et. seq.)

• Beginning July 1, 2021, individuals may possess small amounts of marijuana and cultivate up to four plants at home.

• Establishes the Virginia Cannabis Control Authority as an independent authority responsible for issuing regulations, approving licenses, and enforcement.

• Four license categories:• Cultivation• Product Manufacturing• Wholesale• Retail

• Restrictions on vertical integration and on anti-labor activity.

• Provisions for geographic disbursement and social equity.

• Potential tax rate of at least 21%, at the most 24%.

Timeline

1 July 2021

Personal Consumption & Home Cultivation

Virginia Cannabis Control Authority

1 July 2022

Regulations

1 July 2023

License Applications

1 January 2024*

Full Commercial Sale

Enactment Clause 10 Enactment Clause 11 Enactment Clause 13Enactment Clause 8

*Prior to January 1, 2024, any licensed applicant may begin operations, except for the selling of marijuana products, seeds, and immature plants (Enactment Clause 11).

Home Cultivation

Va. Code §4.1-1101

*A “household” means those individuals, whether related or not, who live in the same house or other place of residence.

A person 21 years of age or older may cultivate up to four marijuana plants for personal use in their

household.* The person shall:

Attach a legible tag that includes name, driver’s license or ID number, and notation that the plant is for personal use. Attach a legible tag that includes name, driver’s license or ID number, and notation that the plant is for personal use.

Ensure that no plant is visible from a public way.Ensure that no plant is visible from a public way.

Not manufacture or distribute their own marijuana product.Not manufacture or distribute their own marijuana product.

Personal Consumption

andAdult

SharingVa. Code §4.1-1100;1101.1; 1103

Possession greater than 1 oz. of marijuana/marijuana product is subject to a $25 civil fine.

Possession greater than 1 oz. of marijuana/marijuana product is subject to a $25 civil fine.

Possession greater 1 lb. of marijuana/marijuana product is subject to felony imprisonment.

Possession greater 1 lb. of marijuana/marijuana product is subject to felony imprisonment.

Adult sharing does not include when marijuana is contemporaneously given away with another reciprocal

transaction or as a gift with purchase.

Adult sharing does not include when marijuana is contemporaneously given away with another reciprocal

transaction or as a gift with purchase.

No civil or criminal penalty may be imposed for adult sharing of marijuana/marijuana product up to 1 oz.

No civil or criminal penalty may be imposed for adult sharing of marijuana/marijuana product up to 1 oz.

No person shall consume or offer a marijuana product to another in public.

No person shall consume or offer a marijuana product to another in public.

Beginning July 1, a person 21 years of age or older may possess up to one ounce of marijuana

or equivalent amount of product in public.

Virginia Cannabis Control Authority(Va. Code §4.1-601-605)

• Establishes the number of licensees, criteria to evaluate new licensees, weighs public health outcomes, and approves labs.

• Board of Directors (Va. Code §4.1-607)• Comprised of 5 members appointed by Governor.• Serve for 5 years and no more than 2 consecutive terms.• Directors cannot hold cannabis licenses during tenure.

• The Board has the power to grant, suspend, or revoke licenses for the cultivation, manufacture, distribution, sale, and testing of marijuana and marijuana products.

• In addition to determining fees for licenses, the Board may assess and collect civil penalties for violations of regulations.

Virginia Cannabis Control Authority(Va. Code §4.1-606)

The regulations set by the Board over the next few years will govern every aspect of the industry including, but not limited to:

• Security of cultivation facilities• Advertising and warning labels• Acreage of cultivation sites• THC content• Social Equity Applicant qualifications• Density of retail stores• Defining “economically-distressed” regions• Business hours of retail stores

• The actions of the Board shall be governed by the Administrative Process Act ((Va. Code §4.1-606(a)).

LicensesAvailable

CULTIVATION PRODUCT MANUFACTURING

WHOLESALE RETAIL

(Va. Code §4.1-800)

(Va. Code §4.1-801)

(Va. Code §4.1-803) (Va. Code §4.1-804)

Licenses per Category

(Va. Code §4.1-606(c)1)

Cultivation450

Product Manufacturing60

Wholesale25

Retail400

License Application

Timeline(Enactment Clause 8)

July 1, 2021Cannabis Control

Authority begins working on regulations

July 1, 2021Cannabis Control

Authority begins working on regulations

July 1, 2022Application

requirements become available

July 1, 2022Application

requirements become available

July 1, 2023Applications will

be accepted

July 1, 2023Applications will

be accepted

Restrictions and

Requirements(Va. Code §4.1-810)

To any member or employee of the Board.To any member or employee of the Board.

To any corporation or other business entity in which such member or employee is a

stockholder or has any economic interest.

To any corporation or other business entity in which such member or employee is a

stockholder or has any economic interest.

The Board shall refuse to grant any license:

*Elected or appointed officials must state on their license application any corporation or other business entity in which they are a stockholder or

hold interest but are not barred from holding a license.

Restrictions and

Requirements(Va. Code §4.1-809)

has been convicted of any crime of moral turpitude.has been convicted of any crime of moral turpitude.

has not demonstrated sufficient financial responsibility.

has not demonstrated sufficient financial responsibility.

is a licensed manufacturer, distributor, or retailer of alcoholic beverages or tobacco products.

is a licensed manufacturer, distributor, or retailer of alcoholic beverages or tobacco products.

has been sanctioned by the Board of Pharmacy.has been sanctioned by the Board of Pharmacy.

The Board may refuse to grant licenses if has reasonable cause to believe that the applicant,

among others:

Locational Restrictions

(Va. Code §4.1-809(2))

Does not conform to the code requirements of the locality.Does not conform to the code requirements of the locality.

Would result in violation of state or local ordinances relating to peace and good order.

Would result in violation of state or local ordinances relating to peace and good order.

Is located with respect to any place of worship; hospital; substance use disorder treatment facility; public, private, parochial school, or institution of higher

education; playground or recreational facility; child day program; federal, state, or local government-operated facility; residence or residential area.

Is located with respect to any place of worship; hospital; substance use disorder treatment facility; public, private, parochial school, or institution of higher

education; playground or recreational facility; child day program; federal, state, or local government-operated facility; residence or residential area.

Is located within 1,000 ft. of another retail marijuana store.Is located within 1,000 ft. of another retail marijuana store.

Is in a locality where the granting of an additional cannabis license is detrimental to the interests, morals, safety, or welfare of the public.

Is in a locality where the granting of an additional cannabis license is detrimental to the interests, morals, safety, or welfare of the public.

The Board may refuse to grant licenses if the place to be occupied by the applicant:

Social Equity

Applicants(Va. Code §4.1-606(b)14-15)

The Board shall establish standards and requirements for:

Evaluating which jurisdictions have been disproportionately policed for marijuana crimes or are economically distressed.Evaluating which jurisdictions have been disproportionately policed for marijuana crimes or are economically distressed.

Any preference in the licensing process for qualified social equity applicants.

Any preference in the licensing process for qualified social equity applicants.

What percentage of application or license fees are waived for qualified social equity applicants.

What percentage of application or license fees are waived for qualified social equity applicants.

A low-interest business loan program for qualified social equity applicants.

A low-interest business loan program for qualified social equity applicants.

Social Equity

Applicants(Va. Code §4.1-606(b)13)

who have been convicted of a misdemeanor violation related to marijuana.

who have been convicted of a misdemeanor violation related to marijuana.

whose close family member* has been convicted of a misdemeanor violation related to marijuana.

whose close family member* has been convicted of a misdemeanor violation related to marijuana.

who graduated from a Virginia HBCU.who graduated from a Virginia HBCU.

who have resided for three of the last five years in an area disproportionately policed for marijuana crimes.

who have resided for three of the last five years in an area disproportionately policed for marijuana crimes.

who have resided for three of the last five years in an economically distressed area.

who have resided for three of the last five years in an economically distressed area.

Social Equity Applicants shall live or be domiciled in Virginia for at least 12 months and are applying for a business with at

least 66% ownership by a person or persons:

*parents, children, siblings, or spouse.

License Stipulations

1 license per place of business (Va. Code §4.1-702)

1 license per place of business (Va. Code §4.1-702)

1 license category per applicant(Va. Code §4.1-805)

1 license category per applicant(Va. Code §4.1-805)

ABC co-location(Va. Code §4.1-809(1)k)

ABC co-location(Va. Code §4.1-809(1)k)

1,000 ft. between retail stores (Va. Code §4.1-809(2)e)

1,000 ft. between retail stores (Va. Code §4.1-809(2)e)

Labor/employment requirements(Va. Code §4.1-900(1)p)

Labor/employment requirements(Va. Code §4.1-900(1)p)

The Board may make additional determinations into the granting, suspension, or revocation of a license.

LicenseeExemptions

(Va. Code §4.1-700)

Pharmaceutical Permit Processors/Cannabis Dispensing Facilities.

Pharmaceutical Permit Processors/Cannabis Dispensing Facilities.

Registered Hemp Dealers, Processors, or Growers.Registered Hemp Dealers, Processors, or Growers.

Registered manufacturers of industrial hemp extract or food containing industrial hemp extract.

Registered manufacturers of industrial hemp extract or food containing industrial hemp extract.

Home Cultivators.Home Cultivators.

The licensure requirements shall not apply to:

Ban onVertical

Integration(Va. Code §4.1-805)

No person shall be granted or have interest in a license in more than one license

category, including cultivation, manufacturing, wholesale, retail, or testing.

Vertical IntegrationExceptions

(Va. Code §4.1-805(c))

Pay a $1 million fee to the Board.Pay a $1 million fee to the Board.

Submit a diversity, equity, and inclusion plan to the Cannabis Business Equity and Diversity Support Team.

Submit a diversity, equity, and inclusion plan to the Cannabis Business Equity and Diversity Support Team.

The Board may, however, allow vertical integration for:

Pharmaceutical Permit Processors.Pharmaceutical Permit Processors.

Registered Industrial Hemp Processors.Registered Industrial Hemp Processors.

Pharmaceutical permit processors and registered industrial hemp processors interested in vertical

integration shall:

Taxes and

Fees

STATE LOCAL

LICENSE FEES

21% retail(Va. Code §4.1-1003)

To be set by Board(Va. Code §4.1-1000(c))

3% option(Va. Code §4.1-1004)

Local Referenda

(Va. Code §4.1-629)

“Shall the operation of retail marijuana stores be prohibited in _____?”

“Shall the operation of retail marijuana stores be prohibited in _____?”

YesYes

Retail stores shall be

prohibited


prohibited

A subsequent referendum may be held but not earlier than 4 years later

A subsequent referendum may be held but not earlier than 4 years later

NoNo


permitted


permitted

No subsequent referendum may

be held

No subsequent referendum may

be held

A locality may, by resolution, petition the circuit court for the locality for a referendum on the question of whether

retail marijuana stores should be prohibited in the locality.

Local Referenda(Enactment Clause 23)

The initial referendum on the question of whether the operation of retail marijuana stores shall be

prohibited in a particular locality shall be held and results certified by December 31, 2022.

An initial referendum on such question shall not be permitted in a locality after January 1, 2023.

This provision shall become effective July 1, 2022.

Next StepsCreation of

Cannabis Control Authority

Creation of Cannabis Control

Authority

JLARC ReportJLARC Report

Regulatory Process

Regulatory Process

2022 Legislative Session

2022 Legislative Session

Jurisdictional Referenda

Jurisdictional Referenda

2021 Bills of Interest

Passed or Considered by the

2020 Session of the General Assembly of Virginia

Gentry Locke Seminar - September 10, 2021



Tort Law ....................................................................... page 3

Medical Malpractice .................................................... page 5

Criminal Law ................................................................ page 8

Insurance Law ............................................................ page 21

Workers’ Compensation ............................................ page 22

Consumer .................................................................. page 24

Judicial Administration ............................................... page 29

Family Law ................................................................. page 31

General Practice ......................................................... page 33

Long Term Care .......................................................... page 34

Employment .............................................................. page 35

Product Liability ......................................................... page 38 The final disposition of the bills are presumed accurate as of March 15, 2021. If you have a question regarding the status of legislative action of the 2021 Acts of the General Assembly, please visit http://leg1.state.va.us/lis.htm.

2 2021 Bills of Interest

2021 BILLS OF INTEREST

TORT LAW

– PASSED –. SB 1108: General district courts; jurisdictional limits. Increases from $25,000 to $50,000 the maximum civil jurisdictional limit of general district courts for civil actions for personal injury and wrongful death. The bill also reinstates the appeal bond posting requirement for defendants who were covered under an indemnity policy of coverage, but only to the extent of the judgment that is covered by such policy.

SB 1160: Removal of vehicles and cargoes involved in accidents. Modernizes and improves enforcement of mechanics’ and storage liens by (i) transferring notification and auction posting requirements to the Department of Motor Vehicles (the Department); (ii) allowing for independent appraisals to establish accurate vehicle values; (iii) expanding vehicle owner searches to other states and requiring the Department to notify owners in those states; and (iv) creating a limited process for relinquishing mechanics’ and storage liens. The bill permits out-of-state requesters to obtain Virginia vehicle information for mechanics’ or storage lien or abandoned vehicle enforcement in their states, and clarifies disposal rights, auction requirements, and titling documentation for abandoned vehicles. The Department is authorized to collect administrative fees to cover the expenses associated with these duties. The bill also provides that an entity acting at the direction of law enforcement or the Department of Transportation to remove a vehicle or cargo after an accident shall not be liable for damages or claims resulting from

exercise of authority, provided that the entity acted reasonably. The provisions of this bill related to mechanics’ and storage liens have a delayed effective date of January 1, 2022.

SB 1241: Personal injury claim; disclosure of insurance policy limits. Civil actions filed on behalf of multiple persons. Provides that in a civil action for personal injuries sustained from a motor vehicle accident, regardless of the amount of losses sustained by an injured person, an insurance company shall disclose the policy limits of an alleged tortfeasor who has been charged with an offense of driving under the influence within 30 days of a request for such disclosure. Under current law, such disclosure is required only if the alleged tortfeasor is convicted of such an offense. The bill also adds the offense of refusal to submit to a breath or blood test to the list of driving under the influence offenses for which disclosure of the insurance policy limits is required.

HB 2099: Limitations on enforcement of judgments; judgment liens; settlement agents. Reduces from 20 years to 10 years from the date of a judgment the period of time within which an execution may be issued or action may be taken on such judgment. The bill provides that the limitation of the enforcement of a judgment may be extended up to two times by a recordation of a certificate prior to the expiration period in the clerk's office in which a judgment lien is recorded. The bill provides that such recordation shall extend the limitations period for 10 years per recordation from the date of such recordation. Under current law, such limitation period may be extended on motion of the judgment creditor or his assignee. The bill allows a


settlement agent or title insurance company to release a judgment lien, in addition to a deed of trust as provided under current law, provided that the obligation secured by such judgment lien has been satisfied by payment made by the settlement agent and whether or not the settlement agent or title insurance company is named as a trustee under such lien or received authority to release such lien. The bill has a delayed effective date of January 1, 2022, for all provisions except those related to the recordation of a certificate for the extension of a judgment, which are effective in due course.

HB 2139: Accrual of cause of action; diagnosis of latent injury or disease. Provides that a cause of action for a latent injury resulting from the exposure to a substance or the use of a product shall accrue when the person knew or should have known of the injury and its causal connection to an injury-causing substance or product.

HB 2190: Wrongful death beneficiaries. Provides that an award in a wrongful death action, where there is no surviving spouse of the decedent, children of the decedent, or children of a deceased child of the decedent, shall be distributed to the parents, brothers and sisters of the decedent, and any other relative who is primarily dependent on the decedent for support or services and is also a member of the same household as the decedent.

HB 2217: Liability of public access authorities. Grants public access authorities, including the land holdings and facilities of such authorities, certain liability protections that are currently given to localities in relation to parks, recreational facilities, and playgrounds.

TORT LAW

– FAILED – SB 1180: Civil actions filed on behalf of multiple persons.

SB 1268: Disposition of the remains of a decedent; persons to make arrangements for funeral and disposition

SB 1324: Actions against real estate appraisers or appraisal management companies; statute of limitations.

SB 1380: Electric utilities; electric school bus projects; report.

SB 1446: Medicine and other healing arts; practice, provision of litigation assistance.

SB 1454: Evidence of mental competence; medical scans of brain.

HB 2045: Civil action for deprivation of rights; duties and liabilities of certain employers.

HB 2073: Wrongful death statute of limitations; criminal investigations by law enforcement.

HB 2143: Immunity from civil claims related to the transmission of or exposure to the COVID- 19 virus.

HB 2193: Settlement agreements; indication of contingent dismissal.


MEDICAL MALPRACTICE

– PASSED –. SB 1205: Programs to address career fatigue and wellness in certain health care providers; civil immunity. Expands civil immunity for health care professionals serving as members of or consultants to entities that function primarily to review, evaluate, or make recommendations related to health care services to include health care professionals serving as members of or consultants to entities that function primarily to address issues related to career fatigue and wellness in health care professionals licensed, registered, or certified by the Boards of Medicine, Nursing, or Pharmacy, or in students enrolled in a school of medicine, osteopathic medicine, nursing, or pharmacy located in the Commonwealth. The bill contains an emergency clause and is identical to HB 1913.

SB 1320: Licensed certified midwives; licensure; practice. Defines "practice of licensed certified midwifery," directs the Boards of Medicine and Nursing to establish criteria for the licensure and renewal of a license as a certified midwife, and requires licensed certified midwives to practice in consultation with a licensed physician in accordance with a practice agreement. The bill also directs the Department of Health Professions to convene a work group to study the licensure and regulation of certified nurse midwives, certified midwives, and certified professional midwives to determine the appropriate licensing entity for such professionals. The bill requires the Department to report its findings and conclusions to the Governor and the General Assembly by November 1, 2021. This bill is identical to HB 1953.

HB 1737: Nurse practitioners; practice without a practice agreement. Reduces from five to two the number of years of full-time clinical

experience a nurse practitioner must have to be eligible to practice without a written or electronic practice agreement. The bill has an expiration date of July 1, 2022.

HB 1747: Clinical nurse specialist; licensure of nurse practitioners as specialists, etc. Changes for clinical nurse specialists the requirement to register with the Board of Nursing as a clinical nurse specialist to licensure by the Boards of Medicine and Nursing to practice as a nurse practitioner in the category of clinical nurse specialist and provides that a nurse practitioner licensed as a clinical nurse specialist shall practice pursuant to a practice agreement between the clinical nurse specialist and a licensed physician and in a manner consistent with the standards of care for the profession and applicable law and regulations. For the transition of registration to licensure, the bill requires the Boards of Medicine and Nursing to jointly issue a license to practice as a nurse practitioner in the category of a clinical nurse specialist to an applicant who is an advance practice registered nurse who has completed an advanced graduate-level education program in the specialty category of clinical nurse specialist and who is registered by the Board of Nursing as a clinical nurse specialist on July 1, 2021.

HB 1953: Licensed certified midwives; licensure; practice. Defines "practice of licensed certified midwifery," directs the Boards of Medicine and Nursing to establish criteria for the licensure and renewal of a license as a certified midwife, and requires licensed certified midwives to practice in consultation with a licensed physician in accordance with a practice agreement. The bill also directs the Department of Health Professions to convene a work group to study the licensure and regulation of certified nurse midwives, certified midwives, and certified professional midwives to determine the appropriate licensing entity for such professionals. The bill requires the


Department to report its findings and conclusions to the Governor and the General Assembly by November 1, 2021. This bill is identical to SB 1320.

HB 1987: Telemedicine. Requires the Board of Medical Assistance Services to amend the state plan for medical assistance to provide for payment of medical assistance for remote patient monitoring services provided via telemedicine for certain high-risk patients, makes clear that nothing shall preclude health insurance carriers from providing coverage for services delivered through real-time audio-only telephone that are not telemedicine, and clarifies rules around prescribing of Schedule II through VI drugs via telemedicine, including establishing a practitioner-patient relationship via telemedicine.

HB 2039: Practice as a physician assistant. Allows a physician assistant to enter into a practice agreement with more than one patient care team physician or patient care team podiatrist and provides that a patient care team physician or patient care team podiatrist shall not be liable for the actions or inactions of a physician assistant for whom the patient care team physician or patient care team podiatrist provides collaboration and consultation. The bill also makes clear that a student physician assistant shall not be required to be licensed in order to engage in acts that otherwise constitute practice as a physician assistant, provided that the student physician assistant is enrolled in an accredited physician assistant education program.

HB 2300: Hospitals; emergency treatment for substance use-related emergencies. Requires each hospital with an emergency department that is currently regulated by the State Board of Health (the Board) to establish a protocol for treatment and discharge of individuals experiencing a substance use-related emergency, which shall include provisions for (i)

appropriate screening and assessment of individuals experiencing substance use-related emergencies and (ii) recommendations for follow-up care, which may include dispensing of naloxone or other opioid antagonist used for overdose reversal, issuance of a prescription for naloxone, and information about accessing naloxone at a community pharmacy or organization that dispenses naloxone or other opioid antagonist to persons without a prescription. Such protocols may also include referrals to peer recovery specialists and community-based providers of behavioral health services or providers of pharmacotherapy for the treatment of drug or alcohol dependence or mental health diagnoses. The bill also directs the Department of Health Professions, together with the Department of Health, to convene a work group to develop recommendations for best practices for the treatment and discharging of patients in emergency departments experiencing opioid-related emergencies, including overdose, which shall include recommendations for best practices related to (a) performing substance use assessments and screenings for patients experiencing opioid-related overdose and other high-risk patients; (b) prescribing and dispensing naloxone or other opioid antagonists used for overdose reversal; (c) connecting patients treated for opioid-related emergencies, including overdose, and their families with community substance abuse resources, including existing harm reduction programs and other treatment providers; and (d) identifying barriers to and developing solutions to increase the availability and dispensing of naloxone or other opioid antagonist used for overdose reversal at hospitals and community pharmacies and by other community organizations. The bill also provides that hospitals in the Commonwealth may enter into agreements with the Department of Health for the provision to uninsured patients of naloxone or other opioid antagonist used for overdose reversal.


MEDICAL MALPRATICE

– FAILED – SB 1107: Medical malpractice; limitation on recovery.

SB 1167: Board of Nursing; licensure or certification by endorsement for members of the U.S. milititary.

SB 1218: Naturopathic doctors; license required.

HB 1769: Health care providers, certain; licensure or certification by endorsement.

HB 1795: Counseling, Board of; licensure of professional counselors without examination.

HB 2044: Naturopathic doctors; license required.


CRIMINAL LAW

– PASSED –. SB 1113: Communicating threats of death or bodily injury to a person at any place of assembly, etc.; penalty. Provides that any person 18 years of age or older who communicates a threat in writing, including an electronically transmitted communication producing a visual or electronic message, to another to kill or to do serious bodily injury to any other person and makes such threat with the intent to (i) intimidate a civilian population at large; (ii) influence the conduct or activities of a government, including the government of the United States, a state, or a locality, through intimidation; or (iii) compel the emergency evacuation, or avoidance, of any place of assembly, any building or other structure, or any means of mass transportation is guilty of a Class 5 felony. The bill provides that any person younger than 18 years of age who commits such offense is guilty of a Class 1 misdemeanor. This bill is identical to HB 2194.

SB 1119: Law-enforcement agencies; body- worn camera systems. Creates a special nonreverting fund to be known as the Body- Worn Camera System Fund to assist state or local law-enforcement agencies with the costs of purchasing, operating, and maintaining body- worn camera systems.

SB 1122: Habitual offenders; repeals remaining provisions of Habitual Offender Act. Repeals the remaining provisions of the Habitual Offender Act. The bill also requires that the Commissioner of the Department of Motor Vehicles reinstate a person's privilege to drive a motor vehicle that was suspended or revoked solely on the basis that such person was determined to be or adjudicated a habitual offender pursuant to the Habitual Offender Act. The bill also authorizes the Virginia Alcohol and

Safety Action Program to continue to administer intervention for individuals who were ordered to attend an intervention interview on or before June 30, 2021.

SB 1125: Parole Board; notice of parole of prisoner to victim. Provides that any person who is diagnosed with a sexually transmitted infection and engages in sexual behavior that poses a substantial risk of transmission to another person according to current Centers for Disease Control and Prevention recommendations regarding such risk of transmission with the intent to transmit the infection to another person and transmits such infection to that person is guilty of infected sexual battery, punishable as Class 1 misdemeanor. Under current law, the crime of infected battery is punishable as a Class 6 felony. The bill also repeals the crime of donating or selling blood, body fluids, organs, and tissues by persons infected with human immunodeficiency virus and the provisions regarding the testing of certain persons for human immunodeficiency virus or hepatitis B or C viruses.

SB 1165: Abolition of the death penalty. Abolishes the death penalty, including for those persons currently under a death sentence. The bill provides that no person may be sentenced to death or put to death on or after its effective date for any violation of law. This bill is identical to HB 2263.

SB 1168: Definition of 'abused or neglected child.'" Conforms the definition of "abused or neglected child" in Title 16.1 (Courts Not of Record) with the definition of the same term in Title 63.2 (Welfare (Social Services)).

SB 1206: Confidentiality of juvenile court records; exceptions. Provides that juvenile court service unit records and Department of Juvenile Justice records may be open for inspection to the Department of Social Services


or any local department of social services that is providing services or care for, or has accepted a referral for family assessment or investigation and the provision of services regarding, a juvenile and these local agencies have entered into a formal agreement with the Department of Juvenile Justice to provide coordinated services to such juveniles.

SB 1213: Driver's license suspensions; restricted licenses; drug offenses. Authorizes the Department of Motor Vehicles to issue restricted driving credentials to individuals with driver's license suspensions resulting from drug- related offenses.

SB 1242: Personal appearance by two-way electronic video and audio communication; entry of plea. Provides that with the consent of the court and all parties, an appearance in a court may be made by two-way electronic video and audio communication for the purpose of (i) entry of a plea of guilty or nolo contendere and the related sentencing of the defendant charged with a misdemeanor or felony, (ii) entry of a nolle prosequi or dismissal, or (iii) a revocation proceeding. As introduced, this bill was a recommendation of the Judicial Council of Virginia and the Committee on District Courts.

SB 1248: Juveniles; competency evaluation; receipt of court order. Requires the appointed evaluator or the director of the community services board, behavioral health authority, or hospital to acknowledge receipt of the court order requiring a competency evaluation to be performed to the clerk of the court on a form developed by the Office of the Executive Secretary of the Supreme Court of Virginia as soon as practicable but no later than the close of business on the next business day following receipt of the court order. The bill also provides that if the appointed evaluator or the director of the community services board, behavioral health authority, hospital, or private evaluator

is unable to conduct the evaluation, he shall inform the court on the acknowledgment form.

SB 1262: Restricted permit; prepayment of fines and costs. Provides that any person who is otherwise eligible to receive a restricted permit to operate a motor vehicle shall not be required to pay in full his fines and costs before being issued such restricted permit.

SB 1272: Disposition of the unrestorably incompetent defendant; capital murder charge; inpatient custody. Provides that a court may commit a capital murder defendant to the inpatient custody of the Commissioner of the Department of Behavioral Health and Developmental Services, provided that such defendant has remained unrestorably incompetent for a period of five years. The bill provides that after such defendant has been committed to the inpatient custody of the Commissioner, he may make interfacility transfers and treatment and management decisions regarding such defendant after obtaining prior approval of or review by the committing court. This bill is a recommendation of the Virginia Criminal Justice Conference.

SB 1297: Emergency order for adult protective services; acts of violence, force, or threat. Allows the circuit court, upon a finding that an incapacitated adult has been, within a reasonable period of time, subjected to an act of violence, force, or threat or been subjected to financial exploitation, to include in an emergency order for adult protective services one or more of the following conditions to be imposed on the alleged perpetrator: (i) a prohibition on acts of violence, force, or threat or criminal offenses that may result in injury to person or property; (ii) a prohibition on such other contacts by the alleged perpetrator with the adult or the adult's family or household members as the court deems necessary for the health and safety of such persons; or (iii) such other conditions as the court deems necessary


to prevent (a) acts of violence, force, or threat; (b) criminal offenses that may result in injury to persons or property; (c) communication or other contact of any kind by the alleged perpetrator; or (d) financial exploitation by the alleged perpetrator. The bill provides that any person who violates any such condition is guilty of a Class 1 misdemeanor. Also, the bill provides that hearings on emergency orders for adult protective services shall be held no earlier than 24 hours and no later than 72 hours after the notice required has been given, unless such notice has been waived by the court.

SB 1315: Criminal proceedings; consideration of mental condition and intellectual and developmental disability. Permits the admission of evidence offered by the defendant concerning a defendant's mental condition at the time of an alleged offense, including expert testimony, is relevant, is not evidence concerning an ultimate issue of fact, if such evidence (i) tends to show the defendant did or did not have the specific mental state required for the offense charged and (ii) is otherwise admissible pursuant to the general rules of evidence. If a defendant intends to introduce such evidence, the bill requires him or his counsel to give notice in writing to the attorney for the Commonwealth. The bill also clarifies that a diagnosis of an intellectual or developmental disability shall be considered by a judicial officer for the purpose of rebuttal of a presumption against bail and that a court may order that a sentencing report prepared by a probation officer contain any diagnoses of an intellectual or developmental disability. Lastly, the bill adds to the requirements to be met for qualification as a court-appointed attorney two hours of continuing legal education, which shall cover the representation of individuals with behavioral or mental health disorders and individuals with intellectual or developmental disabilities. This bill incorporates SB 1383.

SB 1329: Promises to appear after the issuance of a summons. Eliminates the requirement that a promise to appear be completed after the issuance of a summons for a misdemeanor traffic offense. The bill provides that an accused shall be released from custody after a summons has been issued.

SB 1406: Marijuana; legalization of simple possession; penalties. Eliminates criminal penalties for simple possession of up to one ounce of marijuana by persons 21 years of age or older, modifies several other criminal penalties related to marijuana, and imposes limits on dissemination of criminal history record information related to certain marijuana offenses. The bill creates the Virginia Cannabis Control Authority (the Authority) and establishes a regulatory and licensing structure for the cultivation, manufacture, wholesale, and retail sale of retail marijuana and retail marijuana products, to be administered by the Authority. The bill contains social equity provisions that, among other things, provide support and resources to persons and communities that have been historically and disproportionately affected by drug enforcement. The bill has staggered effective dates and numerous provisions of the bill are subject to reenactment by the 2022 Session of the General Assembly. This bill incorporates SB 1243 and is identical to HB 2312.

SB 1415: Violations of protective orders; preliminary child protective order. . Changes the punishment and sentencing requirements for a violation of a preliminary child protective order so that the maximum penalty is a Class 1 misdemeanor and the court is no longer required to enter a permanent family abuse protective order (i.e., a protective order with a maximum duration of two years) upon a conviction of a violation of a preliminary child protective order. The bill provides that a violation of a preliminary child protective order


is punishable as contempt of court; however, if the violation involves an act or acts of commission or omission that endanger the child's life, health, or normal development or result in bodily injury to the child, it is punishable as a Class 1 misdemeanor. Under current law, violations of preliminary child protective orders constitute contempt of court and are also subject to the same penalties as violations of preliminary, emergency, and permanent family abuse protective orders, including enhanced penalties for certain violations. As introduced, this bill was a recommendation of the Virginia Criminal Justice Conference.

SB 1426: Orders of restitution; enforcement. Provides that an order of restitution shall be docketed in the name of the Commonwealth, or a locality if applicable, on behalf of a victim, unless the victim named in the order of restitution requests in writing that the order be docketed in the name of the victim. The bill provides that an order of restitution docketed in the name of the victim shall be enforced by the victim as a civil judgment. The bill also states that the clerk of such court shall record and disburse restitution payments in accordance with orders of restitution or judgments for restitution docketed in the name of the Commonwealth or a locality. The bill provides that at any time before a judgment for restitution docketed in the name of the Commonwealth or a locality is satisfied, the court shall, at the written request of the victim, order the circuit court clerk to execute and docket an assignment of the judgment to the victim and remove from its automated financial system the amount of unpaid restitution. Similarly, the bill provides that if a judge of the district court orders the circuit court clerk to execute and docket an assignment of the judgment to the victim, the district court clerk shall remove from its automated financial system the amount of unpaid restitution.

Additionally, the bill states that if the victim requests that the order of restitution be docketed in the name of the victim or that a judgment for restitution previously docketed in the name of the Commonwealth or a locality be assigned to the victim, the victim shall provide to the court an address where the defendant can mail payment for the amount due and such address shall not be confidential. This bill is identical to HB 2233.

SB 1442: Public defender office; establishes an office for the County of Chesterfield. Establishes a public defender office for the County of Chesterfield. The provisions of the bill are contingent on funding in a general appropriation act.

SB 1456: Juveniles; eligibility for commitment to the Department of Juvenile Justice. Provides that a juvenile may be committed to the Department of Juvenile Justice (the Department) only if he (i) is adjudicated delinquent of a violent juvenile felony and is 11 years of age or older or (ii) is 14 years of age or older. The bill provides that no juvenile younger than 11 years of age may be detained in a secure facility prior to an order of final disposition unless he is alleged to have committed a violent juvenile felony; in such case, the juvenile may only be detained in an approved foster home, a facility operated by a licensed child welfare agency, or another suitable place designated by the court and approved by the Department, but under no circumstances shall such juvenile be detained in a secure detention facility.

SB 1468: Victims of crime; certifications for victims of qualifying criminal activity. Establishes a process for a state or local law- enforcement agency, an attorney for the Commonwealth, the Attorney General, or any other agency or department employing law- enforcement officers to complete a certification form or declaration that is required by federal


immigration law certifying that a person is a victim of qualifying criminal activity.

SB 1475: Search warrants; date and time of issuance, exceptions. Provides that a search warrant for the search of any place of abode shall be executed by initial entry of the abode only in the daytime hours between 8:00 a.m. and 5:00 p.m. unless (i) a judge or a magistrate, if a judge is not available, authorizes the execution of such search warrant at another time for good cause shown by particularized facts in an affidavit or (ii) prior to the issuance of the search warrant, law-enforcement officers lawfully entered and secured the place to be searched and remained at such place continuously. The bill also provides that a law- enforcement officer shall make reasonable efforts to locate a judge before seeking authorization to execute the warrant at another time, unless circumstances require the issuance of the warrant after 5 p.m., in which case the law-enforcement officer may seek such authorization from a magistrate without first making reasonable efforts to locate a judge. The bill contains an emergency clause.

HB 1806: Suspension or modification of sentence; transfer to the Department of Corrections. Provides that if a person has been sentenced for a felony to the Department of Corrections (the Department), the court that heard the case, if it appears compatible with the public interest and there are circumstances in mitigation of the offense, may, at any time before the person is transferred to the Department, or within 60 days of such transfer, suspend or otherwise modify the unserved portion of such a sentence. Under current law, the court may only suspend or otherwise modify the unserved portion of such a sentence prior to the transfer of such person to the Department.

HB 1821: Experiencing or reporting overdoses; prohibits arrest and prosecution. prohibits the arrest or prosecution of an individual for the unlawful purchase, possession, or consumption of alcohol, possession of a controlled substance, possession of marijuana, intoxication in public, or possession of controlled paraphernalia if (i) such individual, in good faith, renders emergency care or assistance, including cardiopulmonary resuscitation (CPR) or the administration of naloxone or other opioid antagonist for overdose reversal, to an individual experiencing an overdose while another individual seeks or obtains emergency medical attention; (ii) such individual remains at the scene of the overdose or at any location to which he or the individual requiring emergency medical attention has been transported; (iii) such individual identifies himself to the law- enforcement officer who responds; and (iv) the evidence for a prosecution of one of the enumerated offenses would have been obtained only as a result of the individual's rendering emergency care or assistance.

HB 1878: Juvenile intake and petition; appeal to a magistrate on a finding of no probable cause. Limits the ability to appeal a decision by an intake officer not to authorize a petition relating to an offense that, if committed by an adult, would be punishable as a Class 1 misdemeanor or felony, when the decision is based solely upon a finding of no probable cause. The bill requires the application for a warrant to the magistrate to be filed within 10 days of the issuance of the written notification from the intake officer to the complainant of the refusal to authorize a petition. The bill also provides that such written notification shall indicate that the intake officer made a finding that no probable cause exists and provide notice that the complainant has 10 days to apply for a warrant to the magistrate. The bill requires the complainant to provide the magistrate with a copy of the written


notification upon application to the magistrate. The bill also specifies that if an intake officer finds (i) probable cause and (ii) that the matter is appropriate for diversion, this decision is final, and the complainant shall not have the right to appeal the decision to a magistrate.

HB 1895: Fines and costs; accrual of interest; deferral or installment payment agreements. provides that no interest shall accrue on any fine or costs imposed in a criminal case or in a case involving a traffic infraction (i) for a period of 180 days following the date of the final judgment imposing such fine or costs; (ii) during any period the defendant is incarcerated; and (iii) for a period of 180 days following the date of the defendant's release from incarceration if the sentence includes an active term of incarceration. Current law prohibits interest from accruing on such fines or costs for a period of 40 days from the date of the final judgment imposing such fine or costs or during any period the defendant is incarcerated.

The bill also removes the requirement that a defendant be unable to make payment of a fine, restitution, forfeiture, or penalty and costs within 30 days of sentencing in order to be eligible to enter into a deferred or installment payment agreement and allows any defendant to enter such payment agreements. The bill removes the requirement that a defendant make a down payment upon entering a deferred, modified deferred, or installment payment agreement.

HB 1991: Juveniles; release and review hearing for serious offender; plea agreement. Clarifies that the Department of Juvenile Justice (the Department) may petition the court that committed a juvenile for a hearing for an earlier release of a juvenile when good cause exists for an earlier release as permitted under current law and shall petition the committing court for a determination as to the continued commitment of each juvenile committed as a

serious offender at least 60 days prior to the second anniversary of the juvenile's date of commitment and at least 60 days prior to each annual anniversary thereafter as required under current law, notwithstanding the terms of any plea agreement or commitment order. Similarly, at the conclusion of such hearing, the bill provides that notwithstanding the terms of any plea agreement, the court shall order any of the dispositions permitted under current law such as continued commitment to the Department or release of the juvenile under terms and conditions after considering the statutory factors.

HB 1992: Purchase, possession of firearms following conviction for assault and battery of a family member. Prohibits a person who has been convicted of assault and battery of a family or household member, as defined in the bill, from purchasing, possessing, or transporting a firearm. The prohibition expires three years after the date of conviction, at which point the person's firearms rights are restored, unless he receives another disqualifying conviction. A person who violates the provisions of the bill is guilty of a Class 1 misdemeanor.

HB 2010: Earned sentence credits; revocation of suspended sentence. Contains a technical amendment. This bill is declarative of existing law.

HB 2017: Juvenile offenders; youth court programs. Authorizes any jurisdiction to establish a youth justice diversion program, defined in the bill as a diversionary program that (i) is monitored by a local youth justice diversion program advisory committee; (ii) uses juvenile volunteers as lawyers, jurors, and other court personnel; (iii) uses volunteer attorneys as judges; (iv) conducts peer trials, subject to the juvenile and domestic relations court's jurisdiction, of juveniles who are referred to the program by an intake officer; and (v) imposes


various sentences emphasizing restitution, rehabilitation, accountability, competency building, and education, but not incarceration. The bill provides that a jurisdiction may establish a youth justice diversion program upon establishment of a local youth justice diversion program advisory committee and approval of the program by the chief judge of the juvenile and domestic relations court that serves such jurisdiction The bill requires each local youth justice diversion program advisory committee to establish criteria for the eligibility and participation of juveniles alleged to have committed a delinquent act other than an act that would be a felony or a Class 1 misdemeanor if committed by an adult, with the consent of the juvenile's parent or legal guardian, and to establish policies and procedures for the operation of such program. The bill provides that whenever an intake officer takes informal action on a complaint alleging that a child committed a delinquent act other than an act that would be a felony or a Class 1 misdemeanor if committed by an adult, the intake officer may refer the juvenile to a youth justice diversion program. The bill also adds provisions that the Department of Juvenile Justice shall develop a statewide evaluation model and conduct ongoing evaluations of the effectiveness and efficiency of youth justice diversion programs and report these evaluations to the General Assembly by December 1 of each year.

HB 2018: Emergency order for adult protective services; acts of violence, force, or threat. Allows the circuit court, upon a finding that an incapacitated adult has been, within a reasonable period of time, subjected to an act of violence, force, or threat or been subjected to financial exploitation, to include in an emergency order for adult protective services one or more of the following conditions to be imposed on the alleged perpetrator: (i) a prohibition on acts of violence, force, or threat

or criminal offenses that may result in injury to person or property; (ii) a prohibition on such other contacts by the alleged perpetrator with the adult or the adult's family or household members as the court deems necessary for the health and safety of such persons; or (iii) such other conditions as the court deems necessary to prevent (a) acts of violence, force, or threat; (b) criminal offenses that may result in injury to persons or property; (c) communication or other contact of any kind by the alleged perpetrator; or (d) financial exploitation by the alleged perpetrator. The bill provides that any person who violates any such condition is guilty of a Class 1 misdemeanor. Also, the bill provides that hearings on emergency orders for adult protective services shall be held no earlier than 24 hours and no later than 72 hours after the notice required has been given, unless such notice has been waived by the court. Current law just requires such hearing be held no earlier than 24 hours. Lastly, the bill provides that if the court enters an order containing any of the aforementioned conditions, the primary law- enforcement agency providing service and entry of protective orders shall enter the name of the perpetrator into the Virginia Criminal Information Network and the order shall be served forthwith on the perpetrator. This bill is identical to SB 1297.

HB 2038: Probation, revocation, and suspension of sentence; limitations. Limits the amount of active incarceration a court can impose as a result of a revocation hearing for a probation violation. The bill provides that if the court finds the basis of a violation of the terms and conditions of a suspended sentence or probation is that the defendant was convicted of a criminal offense or violated another condition other than a technical violation, the court may pronounce whatever sentence might have been originally imposed. The bill defines "technical violation" and provides specific limitations on the sentence a court may impose


depending on whether the violation is a first, second, or third or subsequent technical violation. The bill also provides that a court may fix the period of probation for up to the statutory maximum period for which the defendant might originally have been sentenced to be imprisoned and any period of supervised probation shall not exceed five years from the release of the defendant from any active period of incarceration. The bill also provides that a court must measure any period of suspension of sentence from the date of entry of the original sentencing order.

HB 2047: Criminal proceedings; consideration of mental condition and intellectual and developmental. Permits the admission of evidence concerning a defendant's mental condition at the time of an alleged offense, including expert testimony, if such evidence (i) tends to show the defendant did or did not have the specific mental state required for the offense charged and (ii) is otherwise admissible pursuant to the general rules of evidence. The bill provides that to establish a mental condition for such purposes, the defendant must show that his condition existed at the time of the offense and that such condition satisfies the diagnostic criteria for (a) an autism spectrum disorder as defined in the most recent edition of the Diagnostic and Statistical Manual of Mental Disorders published by the American Psychiatric Association or (b) an intellectual or developmental disability. If a defendant intends to present such evidence, the bill requires him or his counsel to give notice in writing to the attorney for the Commonwealth within specified time periods. The bill also clarifies that a diagnosis of an intellectual or developmental disability shall be considered by a judicial officer for the purpose of rebuttal of a presumption against bail and that a court may order that a sentencing report prepared by a probation officer contain any diagnosis of an intellectual or developmental disability. The bill also adds to

the requirements to be met for qualification as a court-appointed attorney two hours of continuing legal education, which shall cover the representation of individuals with behavioral or mental health disorders and individuals with intellectual or developmental disabilities.

HB 2110: Pretrial data collection. Requires the Virginia Criminal Sentencing Commission to collect and disseminate, on an annual basis, statewide and locality-level data related to adults charged with criminal offenses punishable by confinement in jail or a term of imprisonment. The bill provides that any personal or case identifying information within the data shall not be subject to the Virginia Freedom of Information Act and shall not be made publicly available. The bill does not require that the Virginia Criminal Sentencing Commission submit such annual report prior to December 1, 2022. Additionally, the bill requires the Virginia State Crime Commission to provide the Virginia Criminal Sentencing Commission with the final dataset of all adults charged with a criminal offense punishable by confinement in jail or a term of imprisonment in October 2017 and that the Virginia Criminal Sentencing Commission make such statewide and locality-level data publicly available on a website established and maintained by the Virginia Criminal Sentencing Commission as an electronic dataset, excluding any personal and case identifying information, by October 1, 2021, and on an electronic interactive data dashboard tool that displays aggregated data based on characteristics or indicators selected by the user, by December 1, 2022. As introduced, this bill was a recommendation of the Virginia State Crime Commission. This bill incorporates HB 1945 and is identical to SB 1391.


HB 2113: Automatic expungement of criminal records. Establishes a process for the automatic expungement, defined in the bill, of criminal records for certain convictions, deferred dispositions, and acquittals and for offenses that have been nolle prossed or otherwise dismissed. The bill also provides a process for the automatic expungement of criminal records for charges arising from mistaken identity or the unauthorized use of identifying information. The bill has staggered delayed effective dates in order to develop systems for implementing the provisions of the bill. As introduced, this bill was a recommendation of the Virginia State Crime Commission.

HB 2132: Homicides and assaults and bodily woundings; certain matters not to constitute defenses. provides that the discovery of, perception of, or belief about another person's actual or perceived sex, gender, gender identity, or sexual orientation, whether or not accurate, is not a defense to any charge of capital murder, murder in the first degree, murder in the second degree, voluntary manslaughter, or assault and bodily wounding-related crimes and is not provocation negating or excluding malice as an element of murder.

HB 2133: Issuance of writ of vacatur for victims of commercial sex trafficking. Establishes a procedure for victims of sex trafficking to file a petition of vacatur in circuit court to have certain convictions vacated and the police and court records expunged for such convictions. The bill requires the court to grant the writ and vacate a qualifying offense if it finds the petitioner (i) was convicted or adjudicated delinquent of a qualifying offense and (ii) committed the qualifying offense as a direct result of being a victim of sex trafficking, as defined in the bill. As introduced, the bill is a recommendation of the Virginia State Crime Commission.

HB 2150: Jurisdiction over criminal cases; certification or appeal of charges. Provides that upon (i) certification by the general district court of any felony charge and ancillary misdemeanor charge or when an appeal of a conviction of an offense in general district court is noted or (ii) certification by the juvenile and domestic relations district court of any felony charge and ancillary misdemeanor charge committed by an adult or when an appeal of a conviction or adjudication of an offense is noted, jurisdiction as to such charges shall vest in the circuit court, unless such case is reopened, modified, vacated, or suspended or the appeal has been withdrawn in the district court within 10 days. As introduced, this bill was a recommendation of the Virginia Criminal Justice Conference.

HB 2166: Involuntary admission. Amends provisions governing involuntary inpatient and mandatory outpatient treatment to (i) revise criteria for entry of a mandatory outpatient treatment order to become effective upon expiration of an order for involuntary inpatient treatment; (ii) eliminate the requirement that a person agree to abide by a mandatory outpatient treatment plan to be eligible for mandatory outpatient treatment and instead require that the judge or special justice find that the person is able to adhere to a mandatory outpatient treatment plan; (iii) eliminate the role of a treating physician in determining when a person is eligible to transition from inpatient to mandatory outpatient treatment under an order for mandatory outpatient treatment following a period of involuntary inpatient treatment; (iv) increase from 90 to 180 days the length of an order for mandatory outpatient treatment; (v) revise requirements for monitoring of a person's adherence to a mandatory outpatient treatment plan by a community services board; (vi) expand the category of persons who may file petitions for various reviews of a mandatory outpatient


treatment order or plan; and (vii) add a provision for status hearings during the period of mandatory outpatient treatment. The bill has a delayed effective date of July 1, 2022.

HB 2167: Parole; notice and certification; monthly reports; discretionary early consideration. Provides that the Department of Corrections shall set the release date for an inmate granted discretionary parole or conditional release no sooner than 30 business days from the date that the Department of Corrections receives notification from the Chairman of the Parole Board of the Board's decision to grant discretionary parole or conditional release, except that the Department of Corrections may set an earlier release date in the case of a terminally ill inmate granted conditional release. The bill provides that in the case of an inmate granted parole who was convicted of a felony and sentenced to a term of 10 or more years, or an inmate granted conditional release, the Board shall notify the attorney for the Commonwealth in the jurisdiction where the inmate was sentenced (i) by electronic means at least 21 business days prior to such inmate's release that such inmate has been granted discretionary parole or conditional release or (ii) by telephone or other electronic means prior to release that a terminally ill inmate has been granted conditional release where death is imminent.

The bill requires that the monthly reports issued by the Board regarding actions taken on the parole of prisoners (a) be published on the fifteenth day of the month and (b) include the name of each prisoner considered for parole, the offense of which the prisoner was convicted, the jurisdiction in which such offense was committed, the amount of time the prisoner has served, whether the prisoner was granted or denied parole, and the basis for the grant or denial of parole. However, in the case of a prisoner granted parole, the bill provides

that such information shall be included in the statement published in the month immediately succeeding the month in which notification of such decision was given to the attorney for the Commonwealth and any victim. The bill also provides that if additional victim research is necessary, electronic notification shall be sent to the attorney for the Commonwealth and the director of the victim/witness program, if one exists, of the jurisdiction in which the offense occurred. The bill provides that the provisions regarding the monthly reports issued by the Board shall become effective on July 1, 2022.

HB 2169: Solicitation of prostitution; reorganization. Reorganizes the statute penalizing prostitution into two distinct sections. The penalties for all offenses remain unchanged. This bill is a recommendation of the Virginia State Crime Commission.

HB 2194: Communicating threats Provides that any person 18 years of age or older who communicates a threat in writing, including an electronically transmitted communication producing a visual or electronic message, to another to kill or to do serious bodily injury to any other person and makes such threat with the intent to (i) intimidate a civilian population at large; (ii) influence the conduct or activities of a government, including the government of the United States, a state, or a locality, through intimidation; or (iii) compel the emergency evacuation, or avoidance, of any place of assembly, any building or other structure, or any means of mass transportation is guilty of a Class 5 felony. The bill provides that any person younger than 18 years of age who commits such offense is guilty of a Class 1 misdemeanor. This bill is identical to SB 1113.

HB 2233: Orders of restitution; enforcement. Provides that an order of restitution shall be docketed in the name of the Commonwealth, or a locality if applicable, on behalf of a victim, unless the victim named in the order of


restitution requests in writing that the order be docketed in the name of the victim. The bill provides that an order of restitution docketed in the name of the victim shall be enforced by the victim as a civil judgment. The bill also states that the clerk of such court shall record and disburse restitution payments in accordance with orders of restitution or judgments for restitution docketed in the name of the Commonwealth or a locality. The bill provides that at any time before a judgment for restitution docketed in the name of the Commonwealth or a locality is satisfied, the court shall, at the written request of the victim, order the circuit court clerk to execute and docket an assignment of the judgment to the victim and remove from its automated financial system the amount of unpaid restitution. Similarly, the bill provides that if a judge of the district court orders the circuit court clerk to execute and docket an assignment of the judgment to the victim, the district court clerk shall remove from its automated financial system the amount of unpaid restitution. Additionally, the bill states that if the victim requests that the order of restitution be docketed in the name of the victim or that a judgment for restitution previously docketed in the name of the Commonwealth or a locality be assigned to the victim, the victim shall provide to the court an address where the defendant can mail payment for the amount due and such address shall not be confidential. This bill is identical to SB 1426.

HB 2234: Victims of human trafficking; affirmative defense to prosecution for certain offenses. Provides an affirmative defense to prosecution for prostitution and keeping, residing in, or frequenting a bawdy place if, at the time of the offense leading to such charge, such person was a victim of sex trafficking, as defined in the bill, and (i) was coerced to engage in the offense through the use of force or intimidation or (ii) such offense was

committed at the direction of another person other than the individual with whom the person engaged in the acts of prostitution or unlawful sexual intercourse for such money or its equivalent..

HB 2312: Marijuana; legalization of simple possession, etc. Eliminates criminal penalties for simple possession of up to one ounce of marijuana by persons 21 years of age or older, modifies several other criminal penalties related to marijuana, and imposes limits on dissemination of criminal history record information related to certain marijuana offenses. The bill creates the Virginia Cannabis Control Authority (the Authority) and establishes a regulatory and licensing structure for the cultivation, manufacture, wholesale, and retail sale of retail marijuana and retail marijuana products, to be administered by the Authority. The bill contains social equity provisions that, among other things, provide support and resources to persons and communities that have been historically and disproportionately affected by drug enforcement. The bill has staggered effective dates and numerous provisions of the bill are subject to reenactment by the 2022 Session of the General Assembly. This bill incorporates HB 1815 and is identical to SB 1406.

CRIMINAL LAW

– FAILED – SB 1104: Parole; notice and certification, monthly reports.

SB 1105: Post-conviction relief; previously admitted scientific evidence, report.

SB 1138: Sexually transmitted infections; infected sexual battery; repeal.


SB 1230: Criminal cases; transfer to general district court.

SB 1231: Filing an order of disposition from a criminal case in general district courts.

SB 1240: Criminal sexual assault committed by parents, stepparents, grandparents; penalty.

SB 1244: Civil commitment of sexually violent predators.

SB 1250: Criminal history record information check required for firearm rentals; penalty.

HB 2031: Facial recognition technology; authorization

SB 1332: Use of deadly force by a law- enforcement officer during an arrest or detention.

SB 1283: Automatic expungement of criminal records.

SB 1306: Assault and battery; penalty.

SB 1308: Pedestrians; interference with traffic; penalty.

SB 1440: Law-enforcement officer, etc.; civil action for unlawful acts of force or failure to intervene.

SB 1443: Mandatory minimum sentences; elimination, modification of sentence to mandatory minimum term.

HB 1777: Serious or Habitual Offender Comprehensive Action Program; def. of serious juvenile offender, etc.

HB 1779: Death penalty; abolition of current penalty.

HB 1791: Assault and battery or threats of bodily injury; sports official, penalty.

HB 1840: Issuing citations; certain traffic offenses.

HB 1860: Controlled substances or marijuana; obtaining, procuring, etc., by means of the Internet or by mail.

HB 1840: Issuing citations; certain traffic offenses.

HB 1860: Controlled substances or marijuana; obtaining, procuring, etc., by means of the Internet or by mail.

B 1897: Summons for unlawful detainer; notice; adverse employment actions prohibited.

HB 1941: Required release of video or audio recording; discharge of firearm or use of stun weapon.

HB 1945: Bail; data collection and reporting standards; report.

HB 1948: Law-enforcement officer; duty to render aid; duty to report wrongdoing by another officer.

HB 1951: Common-law crime of suicide.

HB 2011: Parole; investigation prior to release; notice to victim.

HB 2056: Status offenders; willful and material violation of court order or terms of probation.

HB 2151: Search warrants; daytime execution; exceptions.

HB 2152: Department of Criminal Justice Services; licensure and regulation of charitable bail organizations.

HB 2141: Parole; investigation prior to release.

HB 2144: Felony homicide; certain drug offenses; penalty.

HB 2196: Virginia Freedom of Information Act; required release of law-enforcement disciplinary records; exc


HB 2226: Criminal street gang reporting; notice and process for contesting entry of information.

HB 2309: Condition of parole; registration with Sex Offender and Crimes Against Minors Registry, penalty.

HB 2315: Marijuana; local referendum on the legalization, report.

HB 2329: Involuntary commitment; release of person before expiration of order.

HB 2331: Mandatory minimum sentences; elimination, modification of sentence to mandatory minimum term.


INSURANCE LAW

– PASSED –. SB 1182: Motor vehicle liability insurance coverage limits. Increases the motor vehicle liability insurance coverage amounts from $25,000 to $30,000 in cases of bodily injury to or death of one person and from $50,000 to $60,000 in cases of bodily injury to or death of two or more persons from any one accident, for policies effective between January 1, 2022 and January 1, 2025. For policies effective after January 1, 2025, the bill increases the motor vehicle liability insurance coverage amounts to $50,000 in cases of bodily injury to or death of one person, $100,000 in cases of bodily injury to or death of two or more persons from any one accident, and from $20,000 to $25,000 for injury to or destruction of property of others as a result of any one accident. The bill requires that self-insured operators of taxicabs maintain protection against uninsured and underinsured drivers with limits of $25,000, $50,000, and $20,000, respectively, with respect to each motor vehicle. The bill has a delayed effective date of January 1, 2022.

SB 1473: Health Insurance Reform Commission; mandated health insurance benefit or provider. Provides that, for the purposes of the requirement that the Chair of the House Committee on Labor and Commerce or Senate Committee on Commerce and Labor refer certain legislation regarding a mandated health insurance benefit or provider to the Health Insurance Reform Commission for review, "mandated health insurance benefit or provider" means coverage required under the laws of the Commonwealth to be provided in a policy of accident and sickness insurance or a contract for a health-related condition that (i) includes coverage for specific health care services or benefits; (ii) places limitations or restrictions on deductibles, coinsurance,

copayments, or any annual or lifetime maximum benefit amounts; or (iii) includes a specific category of licensed health care practitioners from whom an insured is entitled to receive care.

HB 1892: Property and casualty insurance form approval. Permits an insurer that receives approval of an insurance policy form or endorsement from the State Corporation Commission to use the form as soon as it is approved rather than waiting 30 days after the filing date to use it as is current law.

INSURANCE LAW

– FAILED – SB 1195: Motor vehicle insurance; underinsured motor vehicle.

SB 1202: Uninsured and underinsured motorist insurance policies; bad faith.


WORKERS’ COMPENSATION

– PASSED –. SB 1275: Workers' compensation; presumption of compensability for certain diseases. Provides that the occupational disease presumption for death caused by hypertension or heart disease will apply for salaried or volunteer emergency medical services personnel who have at least five years of service and are operating in a locality that has legally adopted a resolution declaring that it will provide one or more of such presumptions. The provisions of the bill do not apply to any individual who was diagnosed with hypertension or heart disease before July 1, 2021. This bill is identical to HB 1818.

SB 1351: Workers' compensation; claims not barred. Provides that an order issued by the Workers' Compensation Commission awarding or denying benefits shall not bar by res judicata any claim by an employee or cause a waiver, abandonment, or dismissal of any claim by an employee if the order does not expressly adjudicate such claim.

HB 1818: Workers' compensation; presumption of compensability for certain diseases. Provides that the occupational disease presumption for death caused by hypertension or heart disease will apply for salaried or volunteer emergency medical services personnel who have at least five years of service and are operating in a locality that has legally adopted a resolution declaring that it will provide one or more of such presumptions. The provisions of the bill do not apply to any individual who was diagnosed with hypertension or heart disease before July 1, 2021. This bill incorporates HB 2080 and is identical to SB 1275.

HB 1985: Workers' compensation; presumption of compensability for COVID-19. Establishes a presumption that COVID-19 causing the death or disability of health care providers is an occupational disease compensable under the Workers' Compensation Act. The bill provides that the COVID-19 virus is established by a positive diagnostic test for COVID-19 and signs and symptoms of COVID-19 that require medical treatment. The bill provides that such presumption applies to any death or disability occurring on or after March 12, 2020, caused by infection from the COVID-19 virus, provided that for any such death or disability that occurred on or after March 12, 2020, and prior to July 1, 2020, either of the following criteria must be met, and on or after July 1, 2020, and prior to December 31, 2021, both of the following criteria must be met: (i) the claimant received a positive diagnosis of COVID-19 from a licensed physician, nurse practitioner, or physician assistant after either a presumptive positive test or a laboratory-confirmed test for COVID-19 and (ii) presented with signs and symptoms of COVID-19 that required medical treatment. The bill provides that such presumptions do not apply to any person offered by his employer a vaccine for the prevention of COVID-19 unless the person is immunized or the person's physician determines in writing that immunization would pose a significant risk to the person's health.

HB 2207: Workers' compensation; presumption of compensability for COVID-19. Establishes a presumption that COVID-19 causing the death or disability of firefighters, emergency medical services personnel, law- enforcement officers, correctional officers, and regional jail officers is an occupational disease compensable under the Workers' Compensation Act. The bill provides that such presumption applies to any death or disability occurring on or after September 1, 2020,


caused by infection from the COVID-19 virus, provided that for any such death or disability that occurred on or after September 1, 2020, and prior to December 31, 2021, the claimant received a diagnosis of COVID-19 from a licensed physician, after either a presumptive positive test or a laboratory confirmed test for COVID-19, and presented with signs and symptoms of COVID-19 that required medical treatment. This bill is identical to SB 1375.

WORKERS’ COMPENSATION

– FAILED – HB 2228: Workers' compensation; injuries caused by repetitive and sustained physical stressors.

HB 2296: Worker classification; independent contractors.

HB 2080: Workers' compensation; presumption of compensability for certain diseases


CONSUMER LAW

– PASSED –. SB 1215: Virginia Residential Landlord and Tenant Act; tenant remedies for exclusion from dwelling unit. Provides that a general district court shall enter an order upon petition by a tenant that his landlord has (i) removed or excluded the tenant from the dwelling unit unlawfully, (ii) interrupted or caused the interruption of an essential service to the tenant, or (iii) taken action to make the premises unsafe for habitation. The bill allows entry of a preliminary order ex parte to require the landlord to allow the tenant to recover possession of the dwelling unit, resume any such interrupted essential service, or fix any willful actions taken by the landlord or his agent to make the premises unsafe for habitation if there is good cause to do so and the tenant made reasonable efforts to notify the landlord of the hearing. The bill requires that any ex parte order entered shall further indicate a date for a full hearing on the petition that is no later than 10 days from the initial hearing date. Finally, the bill provides that, at a full hearing on such petition and upon proper evidence presented, the tenant shall recover actual damages, the greater of $5,000 or four months' rent, and reasonable attorney fees. This bill is identical to HB 1900.

SB 1310: Employment; domestic service; Human Rights Act. Provides that individuals who are engaged in providing domestic service are not excluded from employee protection laws and laws regarding the payment of wages. The measure also provides that the prohibitions on nondiscrimination in employment of the Virginia Human Rights Act apply to employers that employ one or more domestic workers.

SB 1327: Housing Bill of Rights; housing protections; foreclosures; manufactured housing. Provides for various protections for homeowners and tenants of manufactured home parks, including (i) restricting the circumstances under which a court may order a person's primary residence to be sold to enforce a judgment lien; (ii) requiring localities to incorporate into their comprehensive plans strategies to promote manufactured housing as a source of affordable housing; (iii) requiring the Director of Housing and Community Development to develop a statement of tenant rights and responsibilities explaining in plain language the rights and responsibilities of tenants under the Virginia Manufactured Home Lot Rental Act; (iv) in the case of a deed of trust conveying owner-occupied residential real estate, prohibiting a trustee of such deed of trust from selling such property in a foreclosure sale without receiving an affidavit signed by the party that provided notice of the sale to the owner confirming that such notice was sent to the owner, with a copy of such notice attached to the affidavit; (v) in the case of a deed of trust conveying owner-occupied residential real estate, increasing the notice period for a foreclosure sale from 14 to 60 days and requiring such notice to provide the grantor with information regarding housing counseling; and (vi) requiring the landlord of a manufactured home park to provide tenants who own their manufactured home information about housing assistance and legal aid organizations.

HB 1824: Virginia Residential Property Disclosure Act; required disclosures, mold. Adds to the provision of the required disclosure statement directing a buyer to beware and exercise necessary due diligence with respect to determining the condition of real property or any improvements thereon a provision advising the buyer to obtain a mold assessment conducted by a business that follows the


guidelines provided by the U.S. Environmental Protection Agency.

HB 1887: Titling and registration of foreign market vehicles. Authorizes the Department of Motor Vehicles to issue a negotiable title for a foreign market vehicle manufactured 25 or more years ago that does not comply with current federal safety requirements. Current law only allows for a negotiable title to be issued to such vehicles manufactured prior to 1968.

HB 1889: Virginia Residential Landlord and Tenant Act; landlord remedies; noncompliance. Extends the sunset date from July 1, 2021, to July 1, 2022, of certain provisions enacted during the 2020 Special Session related to the Virginia Residential Landlord and Tenant Act. Such provisions (i) changed from five to 14 days the amount of time that a landlord who owns four or fewer rental dwelling units must wait after serving written notice on a tenant notifying the tenant of his nonpayment of rent and of the landlord's intention to terminate the rental agreement if rent is not paid before the landlord may pursue remedies for termination of the rental agreement; (ii) required a landlord who owns more than four rental dwelling units, or more than a 10 percent interest in more than four rental dwelling units, before terminating a rental agreement due to nonpayment of rent, to serve upon such tenant a written notice informing the tenant of the total amount due and owed and offer the tenant a payment plan under which the tenant must pay the total amount due and owed in equal monthly installments over a period of the lesser of six months or the time remaining under the rental agreement; (iii) outlined the remedies a landlord has if a tenant fails to pay the total amount due and owed or enter into a payment arrangement within 14 days of receiving notice or if the tenant enters into a payment

arrangement but fails to pay within 14 days of the due date any rent that becomes due under the payment plan or arrangement after such plan or arrangement becomes effective; and (iv) clarified that a tenant is not precluded from participating in any other rent relief programs available to the tenant through a nonprofit organization or under the provisions of a federal, state, or local law, regulation, or action.

HB 1900: Virginia Residential Landlord and Tenant Act; tenant remedies for exclusion from dwelling unit. Provides that a general district court shall enter an order upon petition by a tenant that his landlord has (i) removed or excluded the tenant from the dwelling unit unlawfully, (ii) interrupted or caused the interruption of an essential service to the tenant, or (iii) taken action to make the premises unsafe for habitation. The bill allows entry of a preliminary order ex parte to require the landlord to allow the tenant to recover possession of the dwelling unit, resume any such interrupted essential service, or fix any willful actions taken by the landlord or his agent to make the premises unsafe for habitation if there is good cause to do so and the tenant made reasonable efforts to notify the landlord of the hearing. The bill requires that any ex parte order entered shall further indicate a date for a full hearing on the petition that is no later than 10 days from the initial hearing date. Finally, the bill provides that, at a full hearing on such petition, the tenant shall recover actual damages, the greater of $5,000 or four months' rent, and reasonable attorney fees.

HB 1971: Virginia Fair Housing Law; reasonable accommodations; disability-related requests for parking. Provides that for the purposes of the Virginia Fair Housing Law, when a person receives a request for accessible parking to accommodate a disability, the person receiving the request shall treat such request as a request for reasonable accommodation.


HB 1981: Virginia Residential Landlord and Tenant Act; access to dwelling unit during certain emergencies. Provides that a tenant shall be deemed to have reasonable justification for declining to permit a landlord or managing agent to exhibit the tenant's dwelling unit for sale or lease if the tenant has reasonable concern for his own health, or the health of any authorized occupant, during a state of emergency declared by the Governor in response to a communicable disease of public health threat and the tenant has provided written notice to the landlord informing the landlord of such concern. The bill requires the tenant in such circumstances to provide to the landlord or managing agent a video tour of the dwelling unit or other acceptable substitute for exhibiting the dwelling unit for sale or lease. The bill also provides that during a state of emergency declared by the Governor in response to a communicable disease of public health threat a tenant may provide written notice to the landlord requesting that one or more nonemergency property conditions in the dwelling unit not be addressed in the normal course of business of the landlord due to such communicable disease of public health threat. The bill provides that in such case the tenant shall be deemed to have waived any and all claims and rights under the Virginia Residential Landlord and Tenant Act against the landlord for failure to address such nonemergency property conditions. Lastly, the bill provides that in the case of a tenant who has provided notice that he does not want nonemergency repairs made during the state of emergency due to a communicable disease of public health threat, the landlord may nonetheless enter the dwelling unit, provided that the employees and agents sent by the landlord are wearing all appropriate and reasonable personal protective equipment as required by state law, (i) to do nonemergency repairs and maintenance with at least seven days' written notice to the tenant

and at a time consented to by the tenant, no more than once every six months, and (ii) if the landlord is required to conduct maintenance or an inspection pursuant to the agreement for the loan or insurance policy that covers the dwelling units.

HB 2003: Consumer Protection Act; prohibited practices; certain advertising related to school quality. rohibits a landlord from accepting full payment of rent, as well as any damages, money judgment, award of attorney fees, and court costs, from a tenant and receiving an order of possession pursuant to an unlawful detainer action and proceeding with eviction, unless there are bases for the entry of an order of possession other than nonpayment of rent stated in the unlawful detainer action filed by the landlord. Under current law, a landlord may accept full or partial payment of all rent and receive an order of possession pursuant to an unlawful detainer action and proceed with eviction, provided that he has stated in a written notice to the tenant that any and all amounts owed to the landlord by the tenant, including payment of any rent, damages, money judgment, award of attorney fees, and court costs, would be accepted with reservation and would not constitute a waiver of the landlord's right to evict the tenant from the dwelling unit. The bill provides specific language that must be included within such notice, and requires a landlord who elects to seek possession of the dwelling unit to provide a copy of the notice to the court for service to the tenant along with the summons for unlawful detainer.

HB 2014: Virginia Residential Landlord and Tenant Act; landlord remedies; landlord's acceptance of rent. Prohibits any locality, its employees, or its appointed commissions from discriminating (i) in the application of local land use ordinances or guidelines, or in the permitting of housing developments, on the basis of race, color, religion, national origin, sex,


elderliness, familial status, source of funds, sexual orientation, gender identity, military status, or disability; (ii) in the permitting of housing developments because the housing development contains or is expected to contain affordable housing units occupied or intended for occupancy by families or individuals with incomes at or below 80 percent of the median income of the area where the housing development is located or is proposed to be located; or (iii) by prohibiting or imposing conditions upon the rental or sale of dwelling units, provided that the provisions of this subsection shall not be construed to prohibit ordinances related to short-term rentals. The bill provides that it shall not be a violation of the Virginia Fair Housing Law if land use decisions or decisions relating to the permitting of housing developments are based upon considerations of limiting high concentrations of affordable housing. The bill also requires the Fair Housing Board, after determining the existence of an unlawful discriminatory housing practice and after consultation with the Attorney General, to immediately refer the matter to the Attorney General for civil action.

HB 2175: Housing Bill of Rights; housing protections; foreclosures; manufactured housing. Provides for various protections for homeowners and tenants of manufactured home parks, including (i) restricting the circumstances under which a court may order a person's primary residence to be sold to enforce a judgment lien; (ii) requiring localities to incorporate into their comprehensive plans strategies to promote manufactured housing as a source of affordable housing; (iii) requiring the Director of Housing and Community Development to develop a statement of tenant rights and responsibilities explaining in plain language the rights and responsibilities of tenants under the Virginia Manufactured Home Lot Rental Act; (iv) in the case of a deed of trust conveying owner-occupied residential real

estate, prohibiting a trustee of such deed of trust from selling such property in a foreclosure sale without receiving an affidavit signed by the party that provided notice of the sale to the owner confirming that such notice was sent to the owner, with a copy of such notice attached to the affidavit; (v) in the case of a deed of trust conveying owner-occupied residential real estate, increasing the notice period for a foreclosure sale from 14 to 60 days and requiring such notice to provide the grantor with information regarding housing counseling; and (vi) requiring the landlord of a manufactured home park to provide tenants who own their manufactured home information about housing assistance and legal aid organizations.

HB 2229: Virginia Residential Landlord and Tenant Act; responsibilities of real estate brokers; foreclosure. Provides that if a dwelling unit used as a single-family residence is foreclosed upon and there is a tenant in such dwelling unit on the date of the foreclosure sale, if the successor in interest acquires the dwelling unit for the purpose of occupying such unit as his primary residence, the rental agreement terminates and the tenant is required to vacate the dwelling unit on a date not less than 90 days after receiving written notice. The bill also provides that if the successor in interest acquires the dwelling unit for any other purpose, the successor in interest acquires the dwelling unit subject to the rental agreement and is required to permit the tenant to occupy the dwelling unit for the remaining term of the lease.

HB 2307: Consumer Data Protection Act; establishes a framework for controlling and processing personal data. Establishes a framework for controlling and processing personal data in the Commonwealth. The bill applies to all persons that conduct business in the Commonwealth and either (i) control or


process personal data of at least 100,000 consumers or (ii) derive over 50 percent of gross revenue from the sale of personal data and control or process personal data of at least 25,000 consumers. The bill outlines responsibilities and privacy protection standards for data controllers and processors. The bill does not apply to state or local governmental entities and contains exceptions for certain types of data and information governed by federal law. The bill grants consumer rights to access, correct, delete, obtain a copy of personal data, and to opt out of the processing of personal data for the purposes of targeted advertising. The bill provides that the Attorney General has exclusive authority to enforce violations of the law, and the Consumer Privacy Fund is created to support this effort. The bill directs the Joint Commission on Technology and Science to establish a work group to review the provisions of this act and issues related to its implementation, and to report on its findings by November 1, 2021. The bill has a delayed effective date of January 1, 2023. This bill is identical to SB 1392.

HB 2320: Va. Residential Property Disclosure Act; required disclosures for buyer to exercise due diligence. Requires the Real Estate Board to make available on its website a flood risk information form, the details of which are outlined in the bill. The bill also provides that an owner of residential real property located in the Commonwealth who has actual knowledge that the dwelling unit is a repetitive risk loss structure, as defined in the bill, shall disclose such fact to the purchaser on a form provided by the Real Estate Board on its website. The bill has a delayed effective date of January 1, 2022. This bill is identical to SB 1389.

CONSUMER LAW

– FAILED – SB 1474: Nonrepairable and rebuilt vehicles; extends sunset provision relating to certain requirements.

HB 1908: Virginia Residential Landlord and Tenant Act; noncompliance with rental agreement, etc

HB 2046: Virginia Fair Housing Law; unlawful discriminatory housing practices.

HB 2076: Motor vehicle sales and use tax; definition of sale price.


JUDICIAL ADMINISTRATION

– PASSED –. SB 1220: State facilities; admission of certain aliens. Repeals the requirements that (i) the Commissioner of Behavioral Health and Developmental Services determine the nationality of each person admitted to a state facility and, if the person is an alien, notify the United States immigration officer in charge of the district in which the state facility is located and (ii) upon request of the United States immigration officer in charge of the district in which a state facility to which a person who is an alien is admitted is located or the judge or special justice who certified or ordered the admission of such alien, the clerk of the court furnish a certified copy of records pertaining to the case of the admitted alien.

SB 1234: Attorneys; granting certificates without examination. Allows persons who have completed all degree requirements from a law school not approved by the American Bar Association, including a foreign law school, obtained an LL.M. from a law school approved by the American Bar Association, and been admitted to practice law before the court of last resort in any state or territory of the United States or the District of Columbia to sit for the Virginia Bar examination.

SB 1261: Court of Appeals; jurisdiction; number of judges. Expands the jurisdiction of the Court of Appeals of Virginia by providing for an appeal of right in every civil case and provides that the granting of further appeal to the Supreme Court of Virginia shall be within the discretion of the Supreme Court. The bill provides for an appeal of right in criminal cases by a defendant, but leaves unchanged the current requirement that in criminal cases the Commonwealth must petition the Court of Appeals for granting of an appeal. The bill

increases from 11 to 17 the number of judges on the Court of Appeals. The bill also (i) provides jurisdiction to the Court of Appeals over interlocutory appeals and petitions for review of injunctions; (ii) allows for oral arguments to be dispensed with if the panel of judges makes a unanimous decision that the appeal is wholly without merit or that the dispositive issues on appeal have already been authoritatively decided and the appellant has not argued that the case law should be overturned, extended, or reversed; (iii) provides that the Attorney General shall represent the Commonwealth in criminal appeals unless, and with the consent of the Attorney General, the attorney for the Commonwealth who prosecuted the case files a notice of appearance; (iv) eliminates the requirement for an appeal bond in criminal appeals; (v) requires all criminal cases in a court of record to be recorded and requires the clerk of the circuit court to prepare a transcript of any trial for which an appeal is noticed to him; and (vi) requires an expedited review of appeals of permanent protective orders and of bond validation proceedings. The bill has a delayed effective date of January 1, 2022, which is applicable to all provisions of the bill except for those increasing the number of judges on the Court of Appeals.

SB 1277: Repeal of reporting requirement; Department of Motor Vehicles and Supreme Court of Virginia. Repeals an enactment clause that requires the Department of Motor Vehicles and the Supreme Court of Virginia to submit an annual report regarding the implementation of a program to allow the Department to collect certain fees and fines on behalf of a district or circuit court.


JUDICIAL ADMINISTRATION

– FAILED – SB 1226: Compensation Board determining staffing and salaries for an attorney for the Commonwealth.

SB 1237: Certain emergency and quarantine orders; additional procedural requirements.

HB 2112: Court of Appeals; jurisdiction; number of judges.


FAMILY LAW

– PASSED –. SB 1321: Confirmatory adoption. Expands the stepparent adoption provisions to allow a person who is not the child's stepparent but has a legitimate interest in the child to file a joint petition for adoption with the child's birth parent or parent by adoption.

SB 1325: Visitation; petition of grandparent. Allows a grandparent who has petitioned the court for visitation of a minor grandchild, in cases where the parent of the minor grandchild is deceased or incapacitated, to introduce evidence of such deceased or incapacitated parent's consent to visitation with the grandparent. The bill provides that if the parent's consent is proven by a preponderance of the evidence, the court may then determine if grandparent visitation is in the best interest of the minor grandchild.

SB 1328: State-Funded Kinship Guardianship Assistance program. Creates the State-Funded Kinship Guardianship Assistance program (the program) to facilitate child placements with relatives, including fictive kin, and ensure permanency for children. The bill sets forth eligibility criteria for the program, payment allowances to kinship guardians, and requirements for kinship guardianship assistance agreements.

HB 1852: Uniform Collaborative Law Act; created. Creates the Uniform Collaborative Law Act, which provides a framework for the practice of collaborative law, a process entered into voluntarily by clients for the express purpose of reaching a settlement in a family or domestic relations law matter, including (i) marriage, divorce, dissolution, annulment, and property distribution; (ii) child custody, visitation, and parenting time; (iii) alimony, spousal support, maintenance, and child

support; (iv) adoption; (v) parentage; and (vi) negotiation or enforcement of premarital, marital, and separation agreements. The Act governs disclosure of information, privilege against disclosure of communications, and scope of representation by the attorneys in the proceeding.

HB 1912: Child support payments; juvenile in custody of or committed to the Department of Juvenile Justice. Provides that the Department of Juvenile Justice is no longer required to apply for child support from, and the parent of a juvenile is no longer responsible to pay child support to, the Department of Social Services for a juvenile who is in the temporary custody of or committed to the Department of Juvenile Justice.

HB 2002: Child support; health care coverage. Provides that in any case in which a petitioner is seeking to establish child support, the intake officer shall provide the petitioner information on the possible availability of medical assistance through the Family Access to Medical Insurance Security (FAMIS) plan or other government- sponsored coverage through the Department of Medical Assistance Services. The bill also requires the Department of Social Services to refer children for whom it has issued an order directing the payment of child support to the FAMIS plan if it appears that the gross income of the custodial parent is equal to or less than 200 percent of the federal poverty level.

HB 2055: Child support obligations; party's incarceration not deemed voluntary unemployment/underemployment. Provides that a party's incarceration alone for 180 or more consecutive days shall not ordinarily be deemed voluntary unemployment or underemployment for the purposes of calculating child support and imputing income for such calculation. The bill further provides that a party's incarceration for 180 or more days shall be a material change of


circumstances upon which a modification of a child support order may be based.

HB 2192: Domestic relations; contents of support orders; unemployment benefits. Requires support orders to contain a provision requiring an obligor to keep the Department of Social Services or a court informed of, in addition to the name, address, and telephone number of his current employer, any change to his employment status and if he has filed a claim for or is receiving unemployment benefits. The bill further requires that the provision shall further specify that any such change or filing be communicated to the Department of Social Services or the court in writing within 30 days of such change or filing.

FAMILY LAW

– FAILED – HB 2041: Best interests of the child; assuring frequent and continuing contact with both parents.

HB 1911: No-fault divorce; corroboration requirement. Removes the corroborating witness requirement for no-fault divorces.


GENERAL PRACTICE

– PASSED –. SB 1142: Persons who may celebrate rites of marriage; members of the General Assembly. Authorizes any current member of the General Assembly and the current Governor, Lieutenant Governor, and Attorney General to celebrate the rites of marriage anywhere in the Commonwealth without the necessity of bond or order of authorization.

HB 1853: Lawyers; client accounts. Repeals the provision prohibiting the Supreme Court of Virginia from adopting a disciplinary rule requiring that lawyers deposit client funds in an interest-bearing account. The bill provides that any rule promulgated by the Supreme Court of Virginia requiring attorney participation in the Interest on Lawyers Trust Accounts (IOLTA) program clearly state that an attorney or law firm has no responsibility to remit interest earned to the IOLTA program.

HB 1856: Estate planning documents; electronic execution, codifies Uniform Electronic Wills Act. Permits trusts, advance medical directives, and refusals to make anatomical gifts to be signed and notarized, as appropriate, by electronic means. The bill also codifies the Uniform Electronic Wills Act, which permits a testator to execute a will by electronic means. The Act requires that the will be signed by two witnesses who are in the physical or electronic presence of the testator and acknowledged by the testator and attesting witnesses in the physical or electronic presence of a notary public.

HB 1882: Deeds of trust; amendment to loan document, statement of interest rate of a refinanced mortgage. Provides that a deed of trust that has been recorded and that states that it secures indebtedness or other obligations under a loan document and that it

also secures indebtedness or other obligations under such loan document as it may be amended, modified, supplemented, or restated shall secure such loan document as amended, modified, supplemented, or restated from time to time, without the necessity of recording an amendment to such deed of trust. The bill further requires that the interest rate of a prior mortgage be stated on the first page of a refinance mortgage.

HB 2064: Recording an electronic document; electronic notarial certificate; emergency. Provides that if a clerk has an eRecording Sytem, the clerk shall follow the provisions of the Uniform Real Property Electronic Recording Act. The bill further provides that if a clerk does not have an eRecording System, the clerk shall record a legible paper copy of an electronic document, provided that such copy otherwise meets the requirements for recordation and is certified to be a true and accurate copy of the electronic original by the party who submits the document for recordation. The bill requires an electronic notarial certificate to include the county or city in the Commonwealth where the notary public was physically located and indicate whether the notarization was done in person or by remote online notarization, defined in the bill as an electronic notarization where the signer is not in the physical presence of the notary. The bill also adds additional forms of "satisfactory evidence of identity" when a notary is using video and audio communication. The bill contains an emergency clause.


GENERAL PRACTICE

– FAILED –

SB 1123: Will contest; presumption of undue influence.

SB 1124: Execution of wills; witnesses to a will required to be disinterested, definition.

SB 1140: Gifts of real estate; requirements.

HB 1802: Local government attorneys; prohibiting the handling of matters related to certain wills.

HB 2005: Disposition of the remains of a decedent; persons to make arrangements for funeral and disposition.

LONG TERM CARE

– FAILED –

SB 1149: Nursing homes; standards of care and staff requirements, regulations.

HB 2154: Hospitals, nursing homes, and certified nursing facilities; intelligent personal assistants.

HB 2156: Nursing home staffing and care standards; study.


EMPLOYMENT LAW

– PASSED –. SB 1219: Bureau of Insurance; paid family leave; report. Directs the State Corporation Commission's Bureau of Insurance (the Bureau) to review and make policy recommendations to meet the goals identified in the "Paid Family and Medical Leave Study" published by the Offices of the Secretary of Commerce and Trade and the Chief Workforce Development Advisor in September 2020 as part of a statewide paid family and medical leave program to be administered by the Commonwealth. The bill requires the Bureau to convene a stakeholder group to participate in the process, which is required to include representatives from the insurance industry and the business community, labor organizations, advocates for paid family leave, and other interested parties. The bill requires the Bureau to report its findings and recommendations to the Senate Committees on Commerce and Labor and Finance and Appropriations and the House Committees on Labor and Commerce and Appropriations by November 30, 2021.

SB 1410: Prohibited discrimination; status as active military or a military spouse. Prohibits discrimination in public accommodations, employment, and housing on the basis of a person's military status, defined as a member of the uniformed services of the United States or a reserve component thereof or a spouse or other dependent of the same. The bill also prohibits terms in a rental agreement in which the tenant agrees to waive remedies or rights under the federal Servicemembers Civil Relief Act prior to the occurrence of a dispute between the landlord and the tenant. This bill is identical to HB2161.

HB 1848: Virginia Human Rights Acts; adds discrimination on the basis of disability. Adds discrimination on the basis of disability as an unlawful discriminatory practice under the Virginia Human Rights Act. The bill also requires employers, defined in the bill, to make reasonable accommodation to the known physical and mental impairments of an otherwise qualified person with a disability, if necessary to assist such person in performing a particular job, unless the employer can demonstrate that the accommodation would impose an undue hardship on the employer. The bill also prohibits employers from taking any adverse action against an employee who requests or uses a reasonable accommodation, from denying employment or promotion opportunities to an otherwise qualified applicant or employee because such employer will be required to make reasonable accommodation to the applicant or employee, or from requiring an employee to take leave if another reasonable accommodation can be provided to the known limitations related to the disability.

HB 1862: Employee protections; medicinal use of cannabis oil. Prohibits an employer from discharging, disciplining, or discriminating against an employee for such employee's lawful use of cannabis oil pursuant to a valid written certification issued by a practitioner for the treatment or to eliminate the symptoms of the employee's diagnosed condition or disease. The bill provides that such prohibition does not (i) restrict an employer's ability to take any adverse employment action for any work impairment caused by the use of cannabis oil or to prohibit possession during work hours or (ii) require an employer to commit any act that would cause the employer to be in violation of federal law or that would result in the loss of a federal contract or federal funding.


HB 1864: Virginia Human Rights Act; definition of employer; expands definition of employer. Expands the definition of "employer" for all purposes of the Virginia Human Rights Act to include a person employing one or more domestic workers, as defined in the bill.

HB 2032: Employment; domestic service. Provides that individuals who are engaged in providing domestic service are not excluded from employee protection laws and the Virginia Workers' Compensation Act.

HB 2036: Virginia Employment Commission; communications with parties. Authorizes the Virginia Employment Commission to send notices and other communications related to claims brought under the Virginia Unemployment Compensation Act through email or other electronic means in lieu of mail if a party to the claim so elects. The bill requires the Commission, if an electronic communication fails to be transmitted successfully, to send a new notice by first-class mail to the party's alternative address on record. The bill directs the Commission to report the number of unemployment insurance claimants who elect to receive communications electronically, and the effect of this change on Commission operations, by December 31, 2022.

HB 2040: Unemployment compensation; failure to respond; continuation of benefits; repayment of overpayments. Provides that an employer shall be deemed to have established a pattern of failing to respond timely or adequately to written requests for information relating to claims if the Virginia Employment Commission determines that the employer has failed to respond timely or adequately to a written request for information relating to a claim on two or more occasions within a 48- month window and requires such employer to pay a penalty upon his second such failure to respond timely or adequately.

HB 2063: Virginia Overtime Wage Act; penalties. Requires an employer to compensate its employees who are entitled to overtime compensation under the federal Fair Labor Standards Act at a rate not less than one and one-half times the employee's regular rate of pay, defined in the bill, for any hours worked in excess of 40 hours in any one workweek. The bill includes provisions for calculating overtime premiums due to fire protection and law- enforcement employees by certain public sector employers. The penalties provided by the bill for an employer's failure to pay such overtime wages, including civil and criminal penalties, are the same as currently provided for failing to pay wages generally. The statute of limitations for bringing a claim for a violation of the bill is three years.

HB 2137: Paid sick leave. Requires employers to provide certain employees paid sick leave. An employee is eligible for paid sick leave under the bill if the employee is an essential worker and works on average at least 20 hours per week or 90 hours per month. The bill provides for an employee to earn at least one hour of paid sick leave benefit for every 30 hours worked. An employee shall not use more than 40 hours of earned paid sick leave in a year, unless the employer selects a higher limit. The bill provides that earned paid sick leave may be used for (i) an employee's mental or physical illness, injury, or health condition; an employee's need for medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition; or an employee's need for preventive medical care or (ii) care of a family member with a mental or physical illness, injury, or health condition; care of a family member who needs medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition; or care of a family member who needs preventive medical care. The bill prohibits employers from taking certain


retaliatory actions against employees related to leave.

HB 2140: Department of Human Resource Management, alternative application for employment. Directs the Department of Human Resource Management to create an alternative application process for the employment of persons with a disability. The process must be noncompetitive in nature and provide state agencies using the process an option for converting positions filled through the noncompetitive process into positions that are normally filled through a competitive process. The bill directs the Department of Human Resource Management to develop and disseminate a policy to implement the provisions of the bill.

HB 2161: Prohibited discrimination; status as active military or a military spouse. Prohibits discrimination in public accommodations, employment, and housing on the basis of a person's military status, defined as a member of the uniformed services of the United States or a reserve component thereof or a spouse or other dependent of the same. The bill also prohibits terms in a rental agreement in which the tenant agrees to waive remedies or rights under the federal Servicemembers Civil Relief Act prior to the occurrence of a dispute between the landlord and the tenant. This bill is identical to SB 1410.

HB 2176: School board policies; abusive work environments; definitions. Defines, for the purposes of mandatory school board policies relating to abusive work environments, the terms "abusive conduct," "abusive work environment," "physical harm," and "psychological harm." The bill clarifies that the requirement to adopt such policies shall not be construed to limit a school board's authority to adopt policies to prohibit any other type of workplace conduct as the school board deems necessary.

HB 2327: Prevailing wage rate; clarifies that public works includes transportation infrastructure projects. Clarifies, for purposes of the requirement under certain circumstances to pay the prevailing wage rate for work performed on public works contracts, that public works includes transportation infrastructure projects.

EMPLOYMENT LAW

– FAILED – SB 1159: Use sick leave for the care of immediate family members.

SB 1209: Liability of general contractor for wages of subcontractor's employees.

SB 1228: Virginia Equal Pay Act; civil penalties.

SB 1323: Worker classification; independent contractors.

SB 1330: Paid family and medical leave program.

HB 1754: Employer or other person; retaliatory discharge of employee prohibited.

HB 1780: Public employees; prohibition on striking, exception.

HB 1785: Employment health and safety standards; heat illness prevention.

HB 2015: Essential workers; hazard pay; personal protective equipment; civil penalty.

HB 2037: Unemployment compensation; benefits; suitable work; benefits charges.

HB 2103: Paid sick time.

HB 2155: Virginia Human Rights Act; nondiscrimination in employment; sexual and workplace harassment


PRODUCT LIABILITY

– FAILED – HB 1129 Product safety; flame retardants; regulations; fund; civil penalty. Prohibits the manufacture or sale in the Commonwealth, beginning July 1, 2021, of upholstered furniture intended for residential use or any product that is intended to come into close contact with a person younger than 12 years of age if such upholstered furniture or product contains any flame-retardant chemical listed in the bill.

5

The Rules Lawyers Have to Know to Avoid Catastrophe –

Statutes of Limitaon

Presented by:

Caley A. [email protected]

Abby M. [email protected]

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The Rules Lawyers Have to Know to Avoid Catastrophe – Statutes of Limitation


Caley DeGroote Abby Broughton

I. Statutes of Limitation: Who, What, When, Where, Why, How A. Who – You.

a. Applies to any person with a cause of action.

b. For today’s purpose, the “who” is you, but in practice it’s your client or

adversary.

B. What – Dead Ends for Legal Action.

a. Virginia has “recognized three distinct types of statutory enactments aimed at precluding litigation of stale claims.” Liberty Nursing Home, Inc. v. Dir., Va. Dep't of Med. Assistance Servs., 45 Va. Cir. 534, 534 (Cir. Ct. 1998). Two of these are statute of limitations:

i. Procedural or “pure” statutes of limitation 1. Serve merely to time-restrict the assertion of a remedy. 2. Affirmative defense – waived if not pled.

ii. Substantive or “special” statutes of limitation 1. Ordinarily contained in statutes which create a new right and restrict

its availability. 2. Compliance with such a statute is a condition precedent to

maintenance of a claim.

b. A statute of limitations for a civil case is commonly defined as a statute establishing a time limit for suing in a civil case, based on the date when the claim accrued. Generally, a statute of limitations prescribes a period of time in which the person with a cause of action must file pleadings to enforce that cause of action or the right of action may be defeated if the party against whom the cause of action has been filed asserts the statute of limitations as a bar. Long, Long & Kellerman, P.C. v. Wheeler, 264 Va. 531, 533, 570 S.E.2d 822, 823 (2002) (emphasis added).

C. When – Summary of Statutes of Limitation in Virginia.

a. Because statutes of limitations come from various sources and exist for an array of reasons, the time periods and accrual dates are different across areas of the law.

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Below are some statutes of limitations to be aware of when evaluating cases under Virginia law.

i. Contracts

1. Actions upon written, signed contracts • Statute of limitations – 5 years. Va. Code § 8.01-246(2). • Accrues – When the breach of contract occurs. Va. Code §

8.01-230. 2. Actions upon written, unsigned contracts

• Statute of limitations - 3 years. Va. Code § 8.01-246(4)(i). • Accrues - When the breach of contract occurs. Va. Code §

8.01-230. 3. Actions upon oral contracts

• Statute of limitations – 3 years. Va. Code § 8.01-246(4)(ii). • Accrues - When the breach of contract occurs. Va. Code §

8.01-230. 4. Actions for breach of contract for sale

• Statute of limitations – 4 years. Va. Code § 8.2-725. • Accrues - When the breach of contract occurs. Va. Code §

8.01-230. ii. Torts

1. Actions for personal injury, regardless of theory of recovery,

unless otherwise specified • Statute of limitations – 2 years. Va. Code § 8.01-243(A). • Accrues – When the injury is sustained. Va. Code § 8.01-

230. 2. Wrongful Death

• Statute of limitations – 2 years. Va. Code § 8.01-244. • Accrues – Date of deceased persons death. Va. Code §

8.01-230. 3. Actions for personal injury in which fraud, concealment, or

intentional misrepresentation prevented discovery of the injury within the two-year period.

• Statute of limitations – 1 year, but not more than 10 years after the cause of action would have accrued under the standard two-year period. Va. Code § 8.01-243(C)(2).

• Accrues - When the injury is or reasonably should have been discovered.

4. Actions for injury to property • Statute of limitations: 5 years. Va. Code § 8.01-243(A). • Accrues – When the injury is sustained. Va. Code § 8.01-

230.

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5. Actions for personal injury resulting from sexual abuse not occurring during the person’s infancy or incapacity, regardless of theory of recovery (for causes of action accruing on or after July 1, 2020)

• Statute of limitations: 10 years. Va. Code § 8.01-243(D1). • Accrues - When the injury is sustained. Va. Code § 8.01-

230. 6. Actions for personal injury resulting from sexual abuse during the

person’s infancy or incapacity, regardless of theory of recovery • Statute of limitations: 20 years. Va. Code § 8.01-243(D). • Accrues - When the injury is sustained. Va. Code § 8.01-

230. 7. Actions for injury resulting from libel, slander, insulting words, or

defamation • Statute of limitations: 1 year. Va. Code § 8.01-247.1. • Accrues - When the injury is sustained. Va. Code § 8.01-

230. But note – if publisher of actionable statement publishes anonymously or under a false identity on the internet, accrual occurs when the identity of the publisher is or reasonably should have been discovered. Va. Code § 8.01-247.1.

8. Actions for malicious prosecution or abuse of process • Statute of limitations: 2 years. Va. code § 8.01-248. • Accrues - When the relevant action is terminated. Va. Code

§ 8.01-249(3). 9. Actions for injury to the person resulting from exposure to asbestos

or products containing asbestos • Statute of limitations: 2 years. Va. Code § 8.01-243(A). • Accrues - When a diagnosis of asbestosis, interstitial

fibrosis, mesothelioma, or other disabling asbestos-related injury or disease is first communicated to the person or his or her agent by a physician. Va. Code § 8.01-249(4).

10. Actions to recover for injury to property or person arising out of the defective and unsafe condition of an improvement to real property, and related actions for contribution or indemnity, against any person performing or furnishing the design, planning, surveying, supervision of construction, or construction

• Accrues – The performance or furnishing of such services or construction.

11. Actions against a health care provider for personal injury or death of a person

• Statute of limitations 2 years. Va. Code § 8.01-243.1. • Accrual – Date injury is sustained. Va. Code § 8.01-

243(C).

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D. Where - Know the rules of the road.

a. This outline pertains to Virginia law only.

b. In Virginia courts, statutes of limitation follow general conflicts of law rules. The statute of limitations of the forum state . . . governs litigations.” 1-4 VIRGINIA CIVIL PROCEDURE § 4.14.

c. “However, if the statute of a foreign state created the cause of action involved, and

in that same enactment set forth an integral limitation period specific to the statutory cause of action, a Virginia court hearing the action will apply the statute of limitations of the foreign state.” Id.

i. This could be used to your advantage or disadvantage.

d. This is distinct to Virginia. If you practice in federal court or out of state, as always, acquaint yourself with the appropriate laws regarding statutes of limitation prior to accepting cases.

E. Why

a. Why do statutes of limitations exist? i. Memory Recall

1. Can you recall the details of an event that happened five years ago? 2. The reality is, humans forget things quickly. Statutes of limitation

are intended to prevent potential defendants from being subject to unfair prosecution or other legal action due to relevant evidence being lost, destroyed or forgotten, and availability/reliability of witness testimony.

3. A separate school of thought suggests that statutes of limitation exist because it is unjust to bring a claim against an alleged offender for an offense they committed in the distant past.

ii. Public Policy

1. In certain instances, such as sexual misconduct described above, the statute of limitations is extended without regard for the memory recall concerns described above.

2. Research your practice area to ensure you are not accepting or declining cases that should be handled otherwise based on an exception to normal statute of limitations rules.

b. Why is it imperative to be aware of statutes of limitations? i. You may fail to raise the affirmative defense required to argue a missed

statute of limitations, leaving you to defend a case that should have been barred.

ii. Letting a statute of limitations run on behalf of your client is one of the easiest ways to get sued for legal malpractice.

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F. How – How to make sure you don’t miss a statute

a. Know your deadline

i. In computing whether the statute of limitations has expired, you must use calendar years, not 365-day periods. See Ward. V. Insurance Co. of N. Am., 253 Va. 232, 235; 482 S.E.2d 795, 797 (1997).

1. When the last day within the limitations period falls on a Saturday, Sunday, legal holiday, or day or part of a day on which the court clerk’s office is closed as authorized by an act of the General Assembly, the action may be brought on the next business day. Va. Code § 1-210.

b. Be aware of the statute of respose. This is different and distinct from a statute of limitations, and precludes some lawsuits even when the statute of limitations would not.

i. A statute of respose limits actions to recover for injury to property or person arising out of the defective and unsafe condition of an improvement to real property, and related actions for contribution or indemnity, against any person performing or furnishing the design, planning, surveying, supervision of construction, or construction to 5 years. Va. Code § 8.01-250.

c. Rules to keep in mind when figuring out the date your statute runs

i. The Discovery Rule - Generally, where a limitation period is prescribed for

a cause of action, the right of action accrues when the injury or breach of contract occurs, and not when the injury or damage is discovered, unless the relief sought is solely equitable or a statute provides otherwise. Va. Code § 8.01-230.

ii. Virginia as a Party - A statute of limitations cannot bar the

Commonwealth of Virginia from bringing an action unless that statute applies to Virginia in express terms. Va. Code § 8.01-231.

ii. Death or Disability of a Party –

a. Being an infant, or minor, is considered a disability under Virginia law, the statute does not begin to run until the disability is removed. See Va. Code §§ 8.01-229(A)(1) & (A)(2)(a).

b. Statutes are tolled while a convict is incarcerated. Va. Code § 8.01-229(A)(2)(b).

c. If a person entitled to bring a personal action dies before the action is pending, and before the statute of limitations expired, the action may be brought by the later of either the expiration of the statute of limitations, or within one year after the

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qualification of a personal representative. Va. Code § 8.01-229(B)(1).

d. Know when to say NO to a case.

i. “There are no impossible goals, there are impossible deadlines.” – Julie Nguyen.

ii. Saying no to a case with a quickly approaching statute, or a potentially missed statute, will help protect you from missing a statute.

iii. If you decline a case due to the statute of limitations approaching, tell the client of your concerns in writing, err on the side of caution when “estimating” the SOL, and suggest they get a second opinion immediately.

G. You might have missed it? Now what? a. The expiration of a statute of limitation must be pleaded as an affirmative

defense; it cannot be raised by demurrer. Va. Code § 8.01-235.

b. Try filing anyway, but also inform your client and retain counsel.

6

No Lawyer Would Ever Do This, Right?

Presented by:

J. Sco [email protected]

Kathleen L. [email protected]

JJ. Court [email protected]

//10004435v2

No Lawyer Would Ever Do This, Right? 2021 Ethics Updates


J. Scott Sexton

Kathleen Wright J. Court Shipman

Although most lawyers follow ethical rules, there are always a few who miss the mark, either accidentally or purposefully. This outline provides information on lawyer disciplinary cases in Virginia – how many, the most common types of ethical breaches, and some examples. It also covers recent legal ethics opinions on the no-contact rule, outsourcing, and requirements for legal representation in a contingency fee case when the client’s former lawyer may have a claim for fees and costs. I. 2020 Public Disciplinary Sanctions in Virginia. During calendar year 2020, the Bar issued 70 public sanctions1:

A. 15 Public Admonition or Reprimand B. 34 License Suspended C. 21 License Revoked

II. Top Five Ways to Have a Virginia Law License Revoked. Below are summaries of a sampling of cases that represent common ways Virginia law licenses have been revoked over the last year.

A. Pay Yourself Unearned Fees. 1. Attorney was hired to set up irrevocable trust for client’s father. Attorney

created the trust, named himself trustee, and deposited $68,000 of the father’s funds into an account opened in the name of the trust. Over the next 22 months, the attorney paid himself “Trustee Fees” totaling $47,170 from the trust’s bank account without authorization from the client or trust beneficiary. When asked about the balance, the attorney represented that the trust had over $28,000, when the balance was in fact only $590.71. The attorney ignored requests for documents and interviews from the VSB investigators and did not appear at the Disciplinary Board’s hearing. The Disciplinary Board found that the attorney’s conduct violated Rule 1.15 (safekeeping property), Rule 8.1 (failure to respond to disciplinary investigation), and 8.4(b) and (c)(misconduct). In a separate matter, the same attorney represented a personal injury plaintiff who had received chiropractic care. The client had made an arrangement for the chiropractor to be paid from any settlement proceeds she received. The attorney sent the chiropractor a letter representing that he would honor the doctor’s lien. When the chiropractor was

1 This is an unofficial count.

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unsuccessful in getting paid by the attorney, he filed a bar complaint. The attorney represented to the bar’s investigator that he was holding enough funds in trust to pay the chiropractor’s bill when he was not.2

2. The attorney had settled an employment discrimination claim for client 1, then convinced that client to invest the proceeds in the litigation of client 2. While convincing client 1 to invest, the attorney disclosed his settlement expectations for client 2’s litigation. The attorney spent client 1’s money on personal expenses. Although client 2’s case settled for a significant amount, the attorney did not repay client 1 her “investment.” Instead, the attorney told client 1 that the case was a “huge loss.” The attorney was disbarred in Maryland and contested the imposition of reciprocal discipline in Virginia. However, the attorney failed to show cause why the Disciplinary Board should not impose the same discipline.3 B. Commit a Crime.

1. Attorney represented a husband in a divorce proceeding. Attorney forged the signatures of wife and a notary on a document waiving service of process. Attorney later pled guilty to forging a public record with intent to defraud, and was subsequently sentenced to five years in prison (with all but 15 months suspended).4

2. Attorney was convicted of 10 felony counts including conspiracy to launder money, mail fraud, conspiracy to commit mail and wire fraud and aggravated identity theft after the attorney and his wife embezzled $1,640,665 from the attorney’s employer, his wife’s employer and a charity the attorney and his wife had founded.5

3. Attorney pled guilty to one count of “Transmission of Interstate Communications With Intent to Extort” in violation of Title 18 U.S.C. Section 875(d), admitting that he attempted to extort a chemical company over health risks related to Roundup weed killer. The attorney and another lawyer had demanded that the chemicals company enter into a “consulting agreement” with the lawyers in exchange for payments of $200 million. The attorney warned the chemicals company that if it did not pay the $200 million, the attorney would have “thousands of future plaintiffs against [the chemicals company]” which he could find through his “extensive network of referral lawyers, [and] lead generators.”6 C. Make a Statute of Limitation Mistake, Then Spend the Next 6 Years Covering

Up the Mistake. In the spring of 2012, the attorney was engaged to represent a plaintiff in a medical malpractice claim. The attorney informed his client that he had consulted with experts who recommended that client had a claim against Dr. Domingo Tan, a radiologist who had allegedly failed to identify the presence of cancer in the client. The attorney filed a complaint in March 2013 (a year after being retained) against Dr. Tan for $2,000,000, but did not request that Dr. Tan be served. The attorney did not send a copy of the complaint to Dr. Tan or notify him of the filing. The attorney never: (1) obtained a written opinion from

2 VSB Docket Nos. 20-090-117131 and 19-090-114614. 3 VSB Docket No. 20-000-118485. 4 VSB Docket No. 20-000-116867. 5 VSB Docket No. 20-000-117085. 6 VSB Docket No. 20-070-117650.

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a qualified expert that Dr. Tan had deviated from the standard of care, (2) explained to his client the need for such expert opinion, or (3) requested service of process upon Dr. Tan. However, the attorney told his client that he had obtained an expert opinion, that he had retained an expert on client’s behalf, and that he had Dr. Tan served and scheduled a trial in January 2014. To convince his client he had tried to obtain service of process, the attorney sent his client a letter to the clerk requesting service. The attorney had never sent the letter. Shortly before the supposed “trial,” the attorney informed his client that the trial would have to be postponed because service had not been effected. The attorney blamed the Clerk of Court. The attorney then filed a motion for default judgment, knowing that Dr. Tan had not been served. The attorney neither sent a copy of the motion to Dr. Tan, nor noticed the motion for a hearing to obtain an order of default judgment. In an effort to deceive his client into believing that he was pursuing a default judgment, the attorney then noticed a damages hearing for entry of a monetary judgment against Dr. Tan, despite knowing that Dr. Tan had never been served with the motion for default judgment (or complaint). At the damages hearing, the attorney informed the substitute judge that Dr. Tan had been served and proceeded to put on evidence of his client’s damages. The substitute judge then allegedly entered judgment for $2,000,000 against Dr. Tan. The attorney then sent his client a copy of a final judgment order purportedly signed by the substitute judge and bearing an entry date of December 17, 2014. The attorney admitted to preparing the order, but insists he sent a draft to the judge and received a signed copy back. The substitute judge later recalled that he did not believe he held a damages hearing, but instead continued the matter. The judge also disputed that he entered the order because (1) he doubted that he would enter such a big award without evidence (which was not in the court’s file), (2) the date of the final judgment was not in the judge’s handwriting, (3) he was not in court on December 17, 2014, and the authenticity of his signature was questionable. By July 2015, the Clerk had dismissed the case because the complaint had not been served and the final order not filed with the Clerk. The attorney told to his client that the court’s online case information was incorrect, and that she had a final judgment against Dr. Tan. The client questioned the attorney’s truthfulness when no monies had been received after receiving the judgment. Rather than admit his failures, the attorney then spent the next four years deceiving his client into believing that he was collecting the judgment by sending her sporadic payments from his trust account, and telling her lies about his difficulties in collecting the judgment. In the fall of 2017, the attorney presented his client with a payment agreement, purportedly proposed and signed by Dr. Tan and his insurer. The agreement provided that the insurer would guarantee Dr. Tan’s payments of the judgment amount if the client agreed to a payment plan. The attorney had forged Dr. Tan and the insurance carrier’s signatures. His client agreed to the terms and signed the agreement. The attorney thereafter made several payments to his client to convince her that the payment agreement was legitimate, and monies were being collected. Overall, the attorney paid the client $364,239.50 from his trust account and $77,200.00 from his personal account. None of these funds were proceeds from her case.

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The scheme was revealed after the client complained to the attorney’s father who had a separate law practice. The father filed a motion to set aside the dismissal on behalf of the client then subsequently discovered his son’s misconduct. The attorney consented to the revocation of his license after admitting all of the material facts asserted against him related to violations of Rules 1.3, 1.4, 1.15, 4.1. However, the attorney would not admit to the facts related to violations of Rules 4.1 (Candor before a tribunal) or 8.1 (Dishonesty with the bar).7

D. Be a Repetitive Offender of the Rules. The attorney had been engaged to serve as trustee of a trust for the benefit of a minor. When the beneficiary reached age 25, he notified the attorney that he had reached the age of 25 and provided the attorney with his current mailing address so the attorney could mail the trust proceeds. The attorney did not respond. The attorney told a bar investigator that the trustee services were never required, “no work was done by [the attorney],” and no fees were paid. The attorney later delivered a quitclaim deed to the beneficiary as trustee. The Disciplinary Board revoked his license after learning that he had two prior suspensions of two and three years each.8

E. Continue Practicing When Your License is Suspended. (Five days after the attorney’s license was suspended, he appeared on behalf of a criminal defendant in circuit court without advising the court or the prosecutor of his suspension. The attorney told the prosecutor that he was unavailable for three months because of his workload. He also signed a waiver of a jury trial and endorsed a discovery order as counsel during his suspension.9

III. Top Five Ways to Have a Virginia Law License Suspended. Below are summaries of a sampling of cases that illustrate how Virginia law licenses have been suspended over the last year.

A. Conceal from a Court Documents About Your Client’s Found Gold Treasure. The attorney, licensed in Virginia and Ohio, represented several entities that searched for gold treasure from a ship that sank off the coast of South Carolina in 1857. The entities prepared several inventories of the treasure recovered from the ship. Disputes arose regarding the distribution of the booty, and an Ohio court ordered the attorney’s clients to produce inventories of items recovered from the ship. The attorney asserted that his client produced all the available inventories, when they had not. In fact, additional inventories were later found in a home owned by the attorney. An Ohio court found the attorney had concealed the inventories in bad faith and ordered sanctions in the amount of $224,580. The VSB Disciplinary Board concluded that it had authority to discipline the attorney for violations of the Ohio Rules of Professional Conduct, including Rule 3.3 (Candor toward the Tribunal), Rule 3.4 (Fairness to Opposing Party and Counsel), and Rule 4.1 (Truthfulness in Statements to Others). In determining the sanction of four-year suspension, the VSB Disciplinary Board found the following aggravating factors: attorney (1) had 40 years of experience practicing law, (2) the recent misconduct involved multiple rule violations that were “prejudicial to the administration of justice, sabotaged the court proceedings in the

7 VSB Docket No. 19-010-114365. 8 VSB Docket No. 20-032-116198. 9 VSB Docket No. 21-052-121267.

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Ohio Admiralty Cases over many years, and ultimately resulted in the imposition of sanctions against [the attorney] and his clients”, and (3) failed to acknowledge the wrongfulness of his conduct. The Board found the following mitigating factors: attorney (1) had no disciplinary record, (2) was not actively practicing law, (3) had fully paid the sanctions ordered by the Ohio court, (4) cooperated with the bar’s investigation, and (5) produced evidence of good character and reputation.10

B. Repeated Failures to Comply with the Rules. Attorney had several bar complaints pending before the Disciplinary Board. In the first complaint, the attorney had been retained to represent a client in a lemon law action against Honda. The attorney failed to communicate with his client for months. When a bar complaint was filed, the intake investigator closed the file when the attorney represented that negotiations with the car manufacturer were ongoing. This was not true. After another year passed with no communication, the client filed a second bar complaint. The client learned that the attorney had received discovery requests from Honda, but failed to notify the client of them and failed to respond to them. She requested her file several times, but the attorney only produced the file after the client obtained other counsel. The client was required to pay Honda’s attorneys’ fees associated with the unanswered discovery. In a separate matter, the attorney had been hired to represent a plaintiff in a personal injury/premises liability action against Busch Gardens. The attorney was hired shortly before trial because the client’s former counsel had a conflict. The attorney nonsuited the action because he allegedly had difficulty finding an necessary expert report. However, the bar investigators found that the attorney had made minimal, if any, effort to locate the expert report or to prepare the case for trial. The client consulted with another attorney who was able to obtain a copy of the expert report with a quick phone call to the expert. In a third matter, the attorney had been retained to assist a couple with construction and permitting issues with their home. The attorney told his client that he had filed a lawsuit on their behalf and that a hearing was scheduled. However, the attorney had not done so. In the fourth matter, the attorney had been retained to assist a client with removing derogatory posts on the client’s ex-girlfriend’s blog and Facebook account. The client had stressed to the attorney that immediate action was required to disable the blog. The attorney was hired over the phone on June 9, 2017 and was paid a $1,500 advance of fees with no retainer agreement. The attorney had promised the client that he would do research, confirm who posted the derogatory information, and prepare cease and desist letters to Facebook and the author of the post. However, the attorney then became largely unresponsive to the client. When the client was able to reach the attorney, the attorney gave excuses for why the work was not being completed. The client filed a bar complaint on April 4, 2018. The attorney finally sent a demand letter to the client’s ex-girlfriend on December 5, 2018; and the post was quickly removed. When asked why it took 16 months to send the letter, the attorney told the bar investigator that the file involved extensive research and he was having health issues. The attorney said that he deposited the advanced fees into his operating account, but did not maintain a client ledger or any type of activity log for the client’s case.11

10 VSB Docket No. 19-021-114994. 11 VSB Docket Nos. 18-010-109107, 18-010-110173, 18-010-110371, 18-010-112242.

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C. Backdate a Document After Missing a Deadline. The attorney was hired to file an asylum petition on behalf of a Ukrainian immigrant. The deadline for filing the petition was March 25, 2015. The attorney filed the petition with a cover letter dated March 20, 2015. However, metadata from the attorney’s computer showed that the electronic version of the cover letter was not created until April 2, 2015. The attorney admitted that he missed the deadline, then backdated the cover letter so that he could argue that the petition was timely. The Disciplinary Board found that the attorney’s conduct was a violation of Rule 8.1(b)(failure to “disclose a fact necessary to correct a misapprehension known to the person to have arisen in the matter”).12

D. Not Properly Accounting for Settlement Proceeds. The attorney had settled a personal injury case for $50,000. The settlement agreement required the attorney to distribute a portion of the proceeds to health care providers. The attorney failed to pay the providers and left a positive balance in his trust account. After a bar complaint was filed, the attorney filed an interpleader action and paid the funds into the court. None of the health care providers asserted any rights to the proceeds; so, the court ordered the proceeds to be paid to the client. A subsequent review of the attorney’s trust accounting records showed that the attorney did not have receipts or disbursement journals or a client ledger. The bar found that the attorney owed nine other clients money from his trust account. In a separate matter, the attorney settled a personal injury case for $40,000 and again agreed to pay health care providers from the settlement proceeds. Attorney withheld $9,016.04 to pay the providers, but only had evidence that he paid $5,772.75 of medical bills on the client’s behalf. The attorney could not prove what happened to the remainder of the settlement proceeds. The Disciplinary Board suspended his license for one year provided he have a forensic accountant review his records and promptly disburse funds that are found to be owing to clients.13

E. Moonlight Without Following Trust Accounting Rules. An associate attorney at a law firm began providing legal services on the side without informing the firm. The attorney did not have a trust account and did not deposit advanced fees into a trust account. The attorney admitted to accepting $3,900 in advanced fees without depositing them into trust. The attorney also failed to keep a client ledger. Further, on a malpractice form, the attorney falsely represented that she did not perform legal services for any entity other than her law firm.14

IV. Recent Virginia Legal Ethics Opinions A. LEO 1890, “Communications with Represented Persons (Compendium

Opinion).” A copy is attached. 1. Deals with Rule 4.2 “No contact” Rule: In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer

12 VSB Docket No. 18-042-110577. 13 VSB Docket Nos. 19-010-099988, 20-010-118800. 14 VSB Docket No. 19-031-115415.

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in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so. 2. An LEO with a checkered past:

a) VSB requested approval in November 2019 b) Virginia Supreme Court approved LEO by order dated January 9, 2020,

BUT c) Then vacated the January 9, 2020 order on April 3, 2020, and remanded the

LEO to the VSB stating the Court would consider approving it without “Section 8” 3. “Section 8” allowed/condoned ex parte communications with employees or

constituents of a represented organization unless the employees or constituents were in the “control group” or were the “alter ego” of the organization.

4. Section 8 was a more liberal rule than the ABA Model Rule – that is, Section 8 allowed ex parte communications with more employees or constituents than would be ethically permitted under the comments to the ABA Rule, which prohibits ex parte contact with employees or constituents in three categories:

a) People who supervise, direct or regularly consult with the organization’s lawyer concerning the matter; or

b) People who have authority to obligate the organization with respect to the matter; or

c) People whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability. 5. VSB Resubmitted the LEO in September 2020 without Section 8 6. Virginia Supreme Court approved, effective immediately, on January 6, 2021.

The LEO modifies the comments section of Rule 4.2 to match the ABA comment language above; three categories of people may not be contacted ex parte.

7. Otherwise consolidates prior LEOs regarding Rule 4.2 communications (see “table of contents” at page 3), including:

a) Rule 4.2 applies even when the communicating lawyer represents him/herself

b) The fact that an organization has in house or general counsel does not prohibit another lawyer from communicating directly with constituents of the organization, and the fact that an organization has outside counsel in a particular matter does not prohibit another lawyer from communicating directly with in-house counsel for the organization.

c) Plaintiff’s counsel generally may communicate directly with an insurance company’s employee/adjuster after the insurance company has assigned the case to defense counsel.

d) A lawyer may communicate directly with a represented person if that person is seeking a “second opinion” or replacement counsel.

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e) Rule 4.2 does not apply to communications with former constituents of the represented organization (even former control group members or others who could not be contacted if still employed or acting as constituent); but the lawyer cannot ask former employees about any confidential communications between the employee and the organization’s lawyer while the employee was employed.

f) A lawyer’s inability to communicate with an uncooperative opposing counsel or reasonable belief that opposing counsel has withheld or failed to communicate settlement offers is not a basis for direct communication with a represented adversary.

B. LEO 1850, “Outsourcing of Legal Services.” A copy is attached. 1. This LEO was originally published in 2010, but the Virginia Supreme Court

approved amendments on January 12, 2021 to clarify client consent requirements. It relates to Rules 1.1 (Competence); 1.2(a) (Scope of Representation); 1.4 (Communication); 1.5 (Fees); 1.6 (Confidentiality of Information); Rule 5.3 (Responsibilities Regarding Nonlawyer Assistants); and Rule 5.5 (Unauthorized Practice of Law); and the Multijurisdictional Practice of Law.

2. The Court, VSB and Committee consider four categories of outsourcing: a) Supervision.

(1) Any outsourced tasks should be performed by people who (a) Are competent to handle the task (b) Will comply with ethical rules (c) Will support a lawyer’s professional obligations (d) Will allow the lawyer to adequately supervise

(2) To adequately protect the client, the lawyer should: (a) Review any non-lawyer’s work on an ongoing basis; (b) Maintain communication to ensure the nonlawyer is following

directions and meeting expectations; (c) Thoroughly review all work product for accuracy and reliability (d) Particularly for overseas outsourcing, have a written outsourcing

agreement requiring compliance with ethical and professional obligations (e) Perform a reasonable inquiry before hiring a provider

b) Confidentiality. (1) If confidential information will be shared, the lawyer must have the

client’s consent in advance; EXCEPT, client consent is not required to outsource “office management” tasks like statistical, bookkeeping, accounting, data processing, printing, or other similar services, if the lawyer exercises due care in selecting the service provider, advises the provider that the information

9 //10004435v2

must be kept confidential, and reasonably believes the information will be kept confidential.

(2) To protect the client, the lawyer should (a) Confirm that service providers have policies and procedures to

protect and secure data; (b) Ask nonlawyer providers if they are performing services for

adverse parties (3) Written confidentiality agreements are recommended

3. Client Communication and Consent. See LEO 1712 - A lawyer must obtain informed consent from the client when outsourcing work to a lawyer or nonlawyer who is not working under the direct supervision of a lawyer in the firm that the client retained, even if no confidential information is involved.

4. Billing and Fees. a) See LEO 1712 and 1735 regarding payment arrangements for outsourcing or

temporary lawyers, or independent contractors, respectively. b) Amendment clarifies that if payment is billed to the client as a

disbursement, the lawyer must disclose the actual amount of the disbursement and any mark-up or surcharge; BUT, if the outsourced lawyer or nonlawyer is working on site, or under the direct supervision of an in-firm lawyer (so that the service provided is considered associated with the firm), then the lawyer may bill the client for the usual or customary charges for in-firm associates or employees, even if that usual and customary charge is more than the service provider is actually receiving. “The amount paid to the staffing agency or vendor is an overhead expense that the firm is not required to disclose to a client.”

c) In a contingency fee case, it would be improper to charge separately for work usually done by the client’s own lawyer and that is incorporated into the standard contingency fee, when that work is instead paid to a third-party provider. 5. The lawyer remains ultimately responsible.

C. LEO 1878, “Successor Counsel’s Ethical Duty to Include in a Written Engagement Agreement Provisions Relating to Predecessor Counsel’s Quantum Meruit Legal Fee Claim in a Contingent Fee Matter.” A copy is attached.

1. Deals with Rule 1.5, “Fees”15, subsections (a) and (b)

15 Full Rule 1.5 language: (a) A lawyer's fee shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained;

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a) “A lawyer's fee shall be reasonable.” b) “The lawyer's fee shall be adequately explained to the client.”

2. New counsel MUST advise the client of potential liability to prior counsel for work performed when prior counsel has performed legal services toward effecting the ultimate recovery.

3. No excuses: The Court, the VSB and the Committee recognize that new counsel: a) May not know the nature or extent of work done by prior counsel; b) May have limited information on the status of the claim; c) May not be able to adequately advise the client of the value of the quantum

meruit claim, because: (1) Lien may be disputed; (2) Recovery amount is unknown;

(5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.

(b) The lawyer's fee shall be adequately explained to the client. When the lawyer has not regularly represented the client, the amount, basis or rate of the fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation. (c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall state in writing the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination. (d) A lawyer shall not enter into an arrangement for, charge, or collect a contingent fee:

(1) in a domestic relations matter, except in rare instances; or (2) for representing a defendant in a criminal case.

(e) A division of a fee between lawyers who are not in the same firm may be made only if: (1) the client is advised of and consents to the participation of all the lawyers involved; (2) the terms of the division of the fee are disclosed to the client and the client consents thereto; (3) the total fee is reasonable; and (4) the division of fees and the client's consent is obtained in advance of the rendering of legal services, preferably in writing.

(f) Paragraph (e) does not prohibit or regulate the division of fees between attorneys who were previously associated in a law firm or between any successive attorneys in the same matter. In any such instance, the total fee must be reasonable.

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(3) There are other “unknowns,” such as the amount of work needed to resolve the claim; the extent to which prior counsel’s work contributed to the ultimate resolution; which tasks the prior lawyer performed; and

(4) There are probably unknown unknowns16 4. Nevertheless, the Committee recommends the fee agreement for successor

counsel in a contingent fee case include the following principles (but not necessarily this exact language):

a) the state of the law in Virginia regarding perfection of attorneys’ liens and quantum meruit awards available to attorneys discharged without cause;

b) a statement that the client’s recovery may be subject to both the discharged lawyer’s attorney’s lien and the contingent fee charged by the successor lawyer; and whether the discharged lawyer’s lien would be included within or in addition to the successor lawyer’s contingency fee;

c) who bears the expense (legal fees and court costs, if any) of determining predecessor counsel’s fee entitlement, to include the cost of adjudicating the validity and amount of any claimed lien, through an interpleader action or otherwise. 5. The LEO includes factors that may impact successor counsel’s potential conflict

of interest in representing the client in negotiating or litigating the prior counsel’s lien: 6. Successor counsel may represent the client in negotiations and litigation

involving the prior counsel’s claim of lien, provided she has explained to the client any potential material limitations conflict by acting in a dual role. In these situations where successor counsel’s representation is materially limited by a concurrent conflict of interest, the client’s informed consent must be obtained pursuant to Rule 1.7(b).

V. Conclusions: A. Don’t dabble. B. Be OCD about money coming through your practice. C. Communicate with your client. D. Admit mistakes when you need to so the issues and problems can be addressed. E. Stay cautious about contacting current employees or constituents in represented

organizations. F. Be more thoughtful about outsourcing, and use a confidentiality agreement

when appropriate. G. Update your contingency fee agreements to address possible liens from prior

lawyers on the matter.

16 Nod here to former Secretary of Defense, the late Donald Rumsfeld, of “known knowns, known unknowns, and unknown unknowns” fame; notwithstanding Wikipedia’s attribution of the initial concept to psychologists Joseph Luft and Harrington Ingham. See There are known knowns - Wikipedia

Approved by the Supreme Court of Virginia January 6, 2021

1

LEGAL ETHICS OPINION 1890. COMMUNICATIONS WITH REPRESENTED PERSONS (COMPENDIUM OPINION)

In this compendium opinion, the Committee addresses numerous issues that have been

raised in past legal ethics opinions regarding the application of Rule 4.2 of the Virginia Rules of

Professional Conduct, formerly DR 7-103(A)(1) of the Virginia Code of Professional

Responsibility. Although the rule on its face seems simple and straightforward, many issues arise

in its application.

Rule 4.2 of the Virginia Rules of Professional Conduct states that:

[i]n representing a client, a lawyer shall not communicate about the subject of the

representation with a person the lawyer knows to be represented by another

lawyer in the matter, unless the lawyer has the consent of the other lawyer or is

authorized by law to do so.

Prior to January 1, 2000, the “no-contact rule” was embodied in DR 7-103(A)(1) of the

former Virginia Code of Professional Responsibility which stated:

During the course of his representation of a client a lawyer shall not communicate

or cause another to communicate on the subject of the representation with a party

he knows to be represented by a lawyer in that matter unless he has the prior

consent of the lawyer representing such other party or is authorized by law to do

so.

The commentary to Rule 4.2 provides guidance for interpreting the scope and meaning of

the Rule. Zaug v. Virginia State Bar, 285 Va. 457, 462, 737 S.E.2d 914 (2013). In various places

throughout this opinion, the rule is described as the “no-contact rule” or simply “the rule.”

Throughout this opinion “communicate directly” means to communicate ex parte with a

represented person, that is, without the knowledge or consent of the lawyer representing that

person. The term “represented person” means a person represented by counsel. LEO means

“legal ethics opinion.” The Committee addresses these points in the opinion:

1. The rule applies even if the represented person initiates or consents to an ex

parte communication.

2. The rule applies only if the communication is about the subject of the

representation in the same matter.

3. The rule applies only if the lawyer actually knows that the person is represented


2

by counsel.

4. The rule applies even if the communicating lawyer is self-represented.

5. Represented persons may communicate directly with each other regarding the

subject of the representation, but the lawyer may not use the client to circumvent

Rule 4.2.

6. A lawyer may not use an investigator or third party to communicate directly

with a represented person.

7. Government lawyers involved in criminal and certain civil investigations may

be “authorized by law” to have ex parte investigative contacts with represented

persons.

8. The rule does not apply to communications with former constituents of a

represented organization.

9. The fact that an organization has in house or general counsel does not prohibit

another lawyer from communicating directly with constituents of the organization,

and the fact that an organization has outside counsel in a particular matter does not

prohibit another lawyer from communicating directly with in-house counsel for the

organization.

10. Plaintiff’s counsel generally may communicate directly with an insurance

company’s employee/adjuster after the insurance company has assigned the case to

defense counsel.

11. A lawyer may communicate directly with a represented person if that person is

seeking a “second opinion” or replacement counsel.

12. The rule permits communications that are “authorized by law.”

13. A lawyer’s inability to communicate with an uncooperative opposing counsel

or reasonable belief that opposing counsel has withheld or failed to communicate

settlement offers is not a basis for direct communication with a represented

adversary.

The purpose of the no-contact rule is to protect a represented person from “the danger of

being ‘tricked’ into giving his case away by opposing counsel's artfully crafted questions,”

United States v. Jamil, 707 F.2d 638, 646 (2d Cir. 1983), and to help prevent opposing counsel

from “driving a wedge between the opposing attorney and that attorney's client.” Polycast Tech.

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Corp. v. Uniroyal, Inc., 129 F.R.D. 621, 625 (S.D.N.Y. 1990). The presence of a person's lawyer

“theoretically neutralizes” any undue influence or encroachment by opposing counsel. Univ.

Patents, Inc. v. Kligman, 737 F. Supp. 325, 327 (E.D. Pa. 1990).

Authorities recognize that the no-contact rule contributes to the proper functioning of the

legal system by (1) preserving the integrity of the attorney-client relationship; (2) protecting the

client from the uncounseled disclosure of privileged or other damaging information relating to

the representation; (3) facilitating the settlement of disputes by channeling them through

dispassionate experts; (4) maintaining a lawyer's ability to monitor the case and effectively

represent the client; and (5) providing parties with the rule that most would choose to follow

anyway. Grievance Comm. for Southern Dist. New York v. Simels, 48 F.3d 640, 647 (2d. Cir.

1995); Richards v. Holsum Bakery, Inc., 2009 BL 240348 (D. Ariz. Nov. 5, 2009); Am. Plastic

Equip., Inc. v. Toytrackerz, LLC, 2009 BL 66761 (D. Kan. Mar. 31, 2009); Lobato v. Ford, 2007

BL 295553, No. 1:05-cv-01437-LTB-CBS (D. Colo. Nov. 9, 2007); ABA Formal Ethics Op. 95-

396, at 4; Model Rules R. 4.2 cmt. 1. See also Comments [8] and [9] to Va. Rule 4.2 (“concerns

regarding the need to protect uncounseled persons against the wiles of opposing counsel and

preserving the attorney-client relationship”).

Rule 4.2 is a “bright line” rule. As the Supreme Court of Virginia noted in Zaug v.

Virginia State Bar, 285 Va. 457, 737 S.E.2d 914 (2013):

We agree with the State Bar that attorneys must understand that they are ethically

prohibited from communicating about the subject of representation with a person

represented by another attorney unless they have that attorney's consent or are

authorized by law to do so. The Rule categorically and unambiguously forbids an

attorney from initiating such communications and requires an attorney to

disengage from such communications when they are initiated by others.

Zaug, supra, 285 Va. At 465. For the Rule to apply, three elements must be established:

(1) that the attorney knew that he or she was communicating with a person

represented by another lawyer; (2) that the communication was about the subject

of the representation; and (3) that the attorney (a) did not have the consent of the

lawyer representing the person and (b) was not otherwise authorized by law to

engage in the communication. While the first two facts may occur in any order,

both must occur before an attorney violates the Rule.


























4

Zaug, supra, 285 at 463.

1. The Rule Applies Even if the Represented Person Initiates or Consents to an Ex Parte

Communication.

Comment [3] to Rule 4.2 states:

The Rule applies even though the represented person initiates or consents to the

communication. A lawyer must immediately terminate communication with a

person if, after commencing communication, the lawyer learns that the person is

one with whom communication is not permitted by this Rule.

As the Supreme Court of Virginia explained in Zaug, “immediately” does not mean

“instantaneously.” If a represented person contacts opposing counsel by telephone, for example,

counsel must have an opportunity to ascertain the identity of the caller and to disengage politely

from the communication, advise the represented person that the lawyer cannot speak with him

directly about his case and should advise the represented person that he should speak with his

lawyer.

2. The Rule Applies Only if the Communication is About the Subject of the Representation in the

Same Matter.

To trigger Rule 4.2 the communication must be about the subject of the representation—

i.e., the lawyer’s representation of his or her client. Zaug, supra, 285 Va. at 463; ABA Formal

Op. 95-396 at 12.

Comment [4] to Rule 4.2 explains:

This Rule does not prohibit communication with a represented person, or an

employee or agent of a represented person, concerning matters outside the

representation. For example, the existence of a controversy between an

organization and a private party, or between two organizations, does not prohibit a

lawyer for either from communicating with nonlawyer representatives of the other

regarding a separate matter.

For example, the Standing Committee on Legal Ethics opined in Legal Ethics Opinion

1527 (1993) that a lawyer/shareholder cannot communicate with officers or directors of a

represented corporation regarding sale of lawyer’s stock in the corporation if the stock sale is the

subject of the lawsuit lawyer filed pro se against the corporation.

The Rule applies to ex parte communications with represented persons even if the subject


5

matter of the representation is transactional or not the subject of litigation. LEO 1390 (1989).


This Rule covers any person, whether or not a party to a formal proceeding, who

is represented by counsel concerning the matter in question. Neither the need to

protect uncounseled persons against being taken advantage of by opposing

counsel nor the importance of preserving the client-attorney relationship is limited

to those circumstances where the represented person is a party to an adjudicative

or other formal proceeding. The interests sought to be protected by the Rule may

equally well be involved when litigation is merely under consideration, even

though it has not actually been instituted, and the persons who are potentially

parties to the litigation have retained counsel with respect to the matter in dispute.

The Rule limits communications with represented persons only when the person is

represented “in the matter,” so communication with a represented person about a different

“matter” than the one in which the person is represented is permissible even if the

communication involves facts that also relate to the matter in which the person is

represented. For example, when a guardian ad litem represents a child in a civil matter,

criminal prosecutors may communicate with the child in a related criminal matter in which

the child is the victim, even if the communication involves subject matter related to a

pending or contemplated civil proceeding involving the child. LEO 1870 (2013). A lawyer

who represents a client in a civil matter may likewise communicate with a defendant who

is represented in a related criminal matter unless and until the lawyer has notice that the

defendant is represented by counsel in the civil matter as well. See also New York State

Bar Association Ethics Opinion 904 (concluding that criminal investigation and civil

restitution claim are “two related matters rather than a single unitary matter” for purposes

of Rule 4.2).

3. The Rule Applies Only if the Lawyer Actually Knows that the Person is Represented by

Counsel.

As the Supreme Court of Virginia explained in Zaug v. Virginia State Bar, a lawyer must

know that she is speaking with a represented person. As used in Rule 4.2, the term “knows”

denotes actual knowledge of the fact in question. Part 6, § II (“Terminology”). However, “[a]

person’s knowledge may be inferred from circumstances.” For example, if a case concludes with


6

a final order, may a lawyer thereafter communicate directly with a person previously represented

by counsel during trial, during the time within which an appeal could be taken? In LEO 1389

(1990), the Committee concluded that a lawyer cannot presume that a final decree of divorce

terminated the opposing party’s relationship with his attorney since matters involving support,

custody and visitation are often revisited by the courts:

The Committee believes it would not be improper for an attorney to make direct

contact with a previously represented party, following a final Order in that prior

litigation, (1) where the attorney knows that the representation has ended through

discharge by the client or withdrawal by the attorney, or (2) where, as permitted

by DR:7-103(A)(1), the attorney is authorized by law to do so. It is the

Committee's opinion that, absent such knowledge or leave of court, it would be

improper for an attorney to communicate on the subject of the prior litigation with

the previously represented party, irrespective of the substance of the litigation.

The Committee also stated that if the lawyer is without knowledge or uncertain as to

whether the adverse party is represented, it would not be improper to communicate directly with

that person for the sole purpose of securing information as to their current representation.

The Committee has opined that it is improper for an attorney to send a letter to the

opposing party concerning judgment matters during the appeal period following entry of a

general district court judgment when the opposing party had been represented by counsel at trial,

even though no appeal had yet been filed nor had the opposing party's attorney indicated that any

appeal would be filed. LEO 963 (1987).

4. The Rule Applies Even if the Communicating Lawyer is Self-represented.

Rule 4.2 prohibits a self-represented lawyer from directly contacting a represented

person. See LEO 1527 (1993) (“Additionally, the committee is of the opinion that neither the fact

that the attorney/shareholder is representing himself nor the claim that the corporation's directors

are not receiving accurate information about the nature of the attorney/shareholder's claim would

constitute an exception to DR:7-103(A)(1).”). Further, the Supreme Court of Virginia has held

that a lawyer cannot avoid the duties and obligations under the Rules of Professional Conduct on

the basis that the lawyer is representing himself rather than another. In Barrett v. Virginia State

Bar, 272 Va. 260, 634 S.E.2d 341 (2006) the Court ruled:

Rules of statutory construction provide that language should not be given a literal


7

interpretation if doing so would result in a manifest absurdity. Crawford v.

Haddock, 270 Va. 524, 528, 621 S.E.2d 127, 129 (2005). Applying these Rules in

the manner Barrett suggests would result in such an absurdity. The Rules of

Professional Conduct are designed to insure the integrity and fairness of the legal

process. It would be a manifest absurdity and a distortion of these Rules if a

lawyer representing himself commits an act that violates the Rules but is able to

escape accountability for such violation solely because the lawyer is representing

himself. [Citations omitted.]

Furthermore, an attorney who represents himself in a proceeding acts as both

lawyer and client. He takes some actions as an attorney, such as filing pleadings,

making motions, and examining witnesses, and undertakes others as a client, such

as providing testimonial or documentary evidence. See In re Glass, 309 Or. 218,

784 P.2d 1094, 1097 (1990) (lawyer appearing in proceeding pro se is own client);

In re Morton Allan Segall, 117 Ill.2d 1, 109 Ill.Dec. 149, 509 N.E.2d 988, 990

(1987) (“attorney who is himself a party to the litigation represents himself when

he contacts an opposing party”); Pinsky v. Statewide Grievance Committee, 216

Conn. 228, 578 A.2d 1075, 1079 (1990) (restriction on attorneys contacting

represented parties limited to instances where attorney is representing client, not

where attorney represents himself).

The three Rules at issue here address acts Barrett took while functioning as an attorney

and thus the three-judge panel correctly held that such acts are subject to disciplinary

action.

Barrett, supra, 272 Va. at 345. But see Barrett v. Virginia State Bar, 269 Va. 583, 611 S.E.2d 375

(2005) (holding that Rule 4.3 (b)’s prohibition against giving legal advice does not apply to pro se

lawyer in divorce proceedings against his unrepresented wife).

5. Represented Persons May Communicate Directly With Each Other Regarding the Subject of the

Representation, but the Lawyer May Not Use the Client to Circumvent Rule 4.2.

Although their lawyer may advise against it, a represented party may communicate directly with

a represented adversary. See Comment [4] to Rule 4.2. However, a lawyer may not use a client or a third

party to circumvent Rule 4.2 by telling the client or third party what to say or “scripting” the

communication with the represented adversary. Rule 8.4(a) (a lawyer may not violate a rule of conduct


8

through the actions of another). See also LEO 1802 (2010) (It would be unethical for a lawyer in a civil

matter to advise a client to use lawful undisclosed recording to communicate with a person the lawyer

knows is represented by counsel.); LEO 1755 (2001) (“Thus, while a party is free on his own initiative

to contact the opposing party, a lawyer may not avoid the dictate of Rule 4.2 by directing his client to

make contact with the opposing party.”); LEO 233 (1974) (It is improper for an attorney to indirectly

communicate with a party adverse to his client giving specific instructions to his client as to what

communications to make, unless counsel for the adverse party agrees to such communication.).

6. A Lawyer May Not Use an Investigator or Another Third Party to Communicate Directly with a

Represented Person.

In some situations, it may be necessary to determine if a nonlawyer or investigator’s contact with

a represented person can be imputed to a lawyer supervising or responsible for an investigation. There

are two ethical considerations. First, a lawyer cannot violate or attempt to violate a rule of conduct

through the agency of another. Rule 8.4 (a). Second, a lawyer having direct supervisory authority over a

non-lawyer agent may be responsible for conduct committed by that agent, if the rules of conduct would

have been violated had the lawyer engaged in the conduct; and, the lawyer orders or, with knowledge of

the specific conduct, ratifies the conduct involved; or, the lawyer knows or should have known of the

conduct at a time when its consequences could be avoided or mitigated but fails to take remedial action.

Rule 5.3.

In Legal Ethics Opinion 1755 (2001), the Committee noted that Rule 8.4(a) prohibits an attorney

from violating Rule 4.2 through the acts of others. Consistent with this precept, ABA Formal Legal

Ethics Op. 95-396 (1995), in its analysis of an attorney’s use of investigators, states as follows:

Since a lawyer is barred under Rule 4.2 from communicating with a represented

party about the subject matter of the representation, she may not circumvent the

Rule by sending an investigator to do on her behalf that which she is herself

forbidden to do. [Footnote omitted.] Whether in a civil or a criminal matter, if the

investigator acts as the lawyer's “alter-ego,” the lawyer is ethically responsible for

the investigator's conduct.

See also United States v. Smallwood, 365 F.Supp.2d 689, 696 (E.D. Va. 2005) (“[W]hat a lawyer

may not ethically do, his investigators and other assistants may not ethically do in the lawyer’s

stead.”)

7. Government Lawyers Involved in Criminal and Certain Civil Investigations May Be


9

“Authorized By Law” to Have Ex Parte Investigative Contacts with Represented Persons.

Generally, prosecutors, government agents, and informants may communicate with

represented criminal suspects in a non-custodial setting up until indictment, information or when

the represented person’s Sixth Amendment right to counsel would attach. See United States v.

Balter, 91 F.3d 427 (3d Cir. 1996) (agreeing with other federal circuits, except Second Circuit,

that pre-indictment non-custodial interrogations are covered by “authorized by law” exception).

The courts have long recognized the legitimacy of undercover operations, even when they

involve the investigation of individuals who keep an attorney on retainer. United States v.

Lemonakis, 158 U.S.App.D.C. 162, 485 F.2d 941 (1973), cert. denied, 415 U.S. 989 (1974);

United States v. Sutton, 255 U.S.App.D.C. 307, 801 F.2d 1346 (1986); United States v. Vasquez,

675 F.2d 16 (2d Cir, 1982); United States v. Jamil, 707 F.2d 638 (2d Cir. 1984). Comment [5] to

Rule 4.2 states:

In circumstances where applicable judicial precedent has approved investigative

contacts prior to attachment of the right to counsel, and they are not prohibited by

any provision of the United States Constitution or the Virginia Constitution, they

should be considered to be authorized by law within the meaning of the Rule.

Similarly, communications in civil matters may be considered authorized by law

if they have been approved by judicial precedent. This Rule does not prohibit a

lawyer from providing advice regarding the legality of an interrogation or the

legality of other investigative conduct.

Since government lawyers often rely on investigators to contact persons in the course of

an investigation, this excerpt from Comment [1] to Rule 5.3 is also relevant to the discussion:

The measures employed in supervising nonlawyers should take account of the fact

that they do not have legal training and are not subject to professional discipline.

At the same time, however, the Rule is not intended to preclude traditionally

permissible activity such as misrepresentation by a nonlawyer of one's role in a

law enforcement investigation or a housing discrimination “test”.

8. The Rule Does Not Apply to Communications with Former Constituents of a Represented

Organization.


“[c]onsent of the organization’s lawyer is not required for communication with a


10

former constituent.”

In LEO 1670, the Committee stated:

[O]nce an employee who is also a member of the control group separates from the

corporate employer by voluntary or involuntary termination, the restrictions upon

direct contact cease to exist because the former employee no longer speaks for the

corporation or binds it by his or her acts or admissions. In fact, this committee has

previously held that it is ethically permissible for an attorney to communicate

directly with the former officers, directors and employees of an adverse party

unless the attorney is aware that the former employee is represented by counsel.

(See LE Op. 533, LE Op. 905 and LE Op. 1589). Counsel for the corporation

represents the corporate entity and not individual corporate employees. (See EC5-

18). In the instance where it is necessary to contact unrepresented persons, a

lawyer should not undertake to give advice to the person, except to advise them to

obtain a lawyer. (See EC:7-15).

The Restatement provides an explanation:

Contact with a former employee or agent ordinarily is permitted, even if the

person had formerly been within a category of those with whom contact is

prohibited. Denial of access to such a person would impede an adversary's search

for relevant facts without facilitating the employer's relationship with its counsel.

Restatement (Third) of the Law Governing Lawyers § 100 cmt. g (2000).

Although a lawyer may communicate with a former employee, the lawyer may not ask

the former employee about any confidential communications the employee had with the

organization’s counsel while the employee was employed by the organization. Seeking

information about confidential communications would impair the organization’s confidential

relationship with its lawyer and therefore violate Rule 4.4. LEO 1749 (2001). See also Pruett v.

Virginia Health Servs., Inc., No. CL03-40, 2005 Va. Cir. LEXIS 151 (Va. Cir. Ct. Aug. 31, 2005)

(declining to prohibit a plaintiff's lawyer from ex parte contacts with any former employees of

the defendant nursing home); Bryant v. Yorktowne Cabinetry Inc., 538 F.Supp.2d 948 (W. D. Va.

2008) (holding that Rule 4.2 generally does not prohibit an ex parte interview of a represented

company’s former employee who is not represented by counsel, unless the interviewing lawyer

inquires into matters that involve privileged communications by and between the former


11

employee and the company’s counsel related to the subject of the representation).

9. The Fact that an Organization has In-House or General Counsel Does Not Prohibit Another

Lawyer from Communicating Directly with Constituents of the Organization and the Fact that an

Organization has Outside Counsel in a Particular Matter Does Not Prohibit Another Lawyer

from Communicating Directly with In-House Counsel for the Organization.

The fact that an organization has a general counsel does not itself prevent another lawyer

from communicating directly with the organization’s constituents. SEC v. Lines, 669 F. Supp. 2d

460 (S.D.N.Y 2009) (neither organization nor president deemed represented by counsel in a

particular matter simply because corporation has general counsel); Humco, Inc. v. Noble, 31

S.W.3d 916 (2000) (knowledge that corporation has in-house counsel is not actual notice that

corporation is represented); Wis. Ethics Op. E-07-01 (2007) (fact that organization has in-house

counsel does not make it “represented” in connection with any particular matter).

A lawyer is generally permitted to communicate with a corporate adversary’s in-house

counsel about a case in which the corporation has hired outside counsel. The purpose of Rule 4.2

is to “protect uncounseled persons against being taken advantage of by opposing counsel” and to

preserve the client-lawyer relationship; neither of those dangers is implicated when a lawyer

communicates with an organization’s in-house counsel. It is unlikely that an in-house lawyer

would inadvertently reveal confidential information or be tricked or manipulated into making

harmful disclosures or taking harmful action on behalf of the organization, and therefore the

lawyer does not need to be protected or shielded from communication with an opposing lawyer.

ABA Formal Op. 06-443 (2006); D.C. Ethics Op. 331 (2005).

10. Plaintiff’s Counsel Generally May Communicate Directly with an Insurance Company’s

Employee/Adjuster After the Insurance Company Has Assigned the Defense of the Insured to

Outside or Staff Counsel.

The question has arisen as to whether Rule 4.2 prohibits a personal injury lawyer from

communicating or settling a claim with the insurance company’s employee/adjuster once the

insurance company has retained counsel to defend the insured. If the insurance adjuster or claims

person has authority to offer and accept settlement proposals, that employee would fall within

the scope of Comment [7]. Does this mean that the adjuster may be contacted only with the

consent of the lawyer hired by the insurance company to defend the insured?

The answer to this question turns upon factual and legal questions that are beyond the


12

purview of the Committee. Virginia is not a direct action state and the insurance company

generally is not a named party to a lawsuit against the insured based upon a liability claim.1 The

plaintiff’s claim is against the insured, not the insurance company. Whether the defense lawyer

hired by the insurance company to defend the insured also represents the insurance company is a

legal not an ethics issue. In other words, whether or not an attorney-client relationship exists

between defense counsel and the insurer is a legal issue beyond the Committee’s purview.

The Committee faced this inquiry in Legal Ethics Opinion 1863 (2012). In the

hypothetical, a defendant/insured in a personal injury case is represented by a lawyer provided

by his liability insurer. The plaintiff is also represented by a lawyer. The defendant/insured’s

lawyer has not indicated to the plaintiff’s lawyer whether he represents the insurer or only the

insured. The plaintiff’s lawyer asks whether he may communicate directly with the insurance

adjuster, an employee of the insurer, without consent from the defendant/insured’s lawyer. The

Committee’s research indicates that the Supreme Court of Virginia has not had the occasion to

address directly the question of whether the insurer is also a client of the defendant/insured’s

lawyer when that lawyer is provided to the defendant/insured pursuant to his contract of

insurance with the insurer.2 In Unauthorized Practice of Law Opinion 60 (1985) the Court

1 Unauthorized Practice of Law Opinion 60, approved by the Supreme Court of Virginia in 1985, explains:

Courts have recognized that a suit against an insurance carrier’s insured may in some instances be tantamount to a suit directly against the carrier. In many suits against insured defendants, the carrier’s obligation to fully satisfy any judgment is fixed by contract and is unquestioned by the insurer. Such cases, while brought against the insured, are sometimes said to be de facto suits against the insurance carrier. Some states permit the insurer to be sued directly by the injured party, and the carrier has been regarded as the “real party in interest” in federal courts interpreting the laws of those states. Lumbermen’s Casualty Company v. Elbert, 348 U.S. 48, 51 (1954) (diversity of citizenship existed between Louisiana plaintiff and Illinois insurer, even though insured was also a Louisiana resident, since insurance carrier was “real party in interest.”).

2 The Committee reviewed a number of decisions in which the question is addressed obliquely in dicta, i.e., the finding of an attorney-client relationship between defense counsel and insurer was not relevant or necessary to the holdings in those cases. Norman v. Insurance Co. of North America, 218 Va. 718, 727, 239 S.E.2d 902, 907 (1978) (“And an insurer's attorney, employed to represent an insured, is bound by the same high standards which govern all attorneys, and owes the insured the same duty as if he were privately retained by the insured.”) (emphasis added). A similar suggestion appears in State Farm Mutual Automobile Insurance Co. v. Floyd, 235 Va. 136, 366 S.E.2d 93 (1988) (“During their representation of both insurer


13

approved this language, suggesting that the only “client” in these circumstances is the insured:

This opinion is restricted to the unauthorized practice of law implications of the

question presented and does not attempt to analyze any ethical considerations

which might be raised by the inquiry. Staff counsel, in undertaking the

representation of the insureds of his or her employer within the guidelines

established herein, is clearly bound by the same ethical obligations and constraints

imposed on attorneys in private practice. This includes zealously guarding against

any potential erosion, actual or perceived, of the duties of undivided loyalty to the

client (the insured), independence and confidentiality, to mention on the most

obvious areas of potential concern in their relationship. (emphasis added).

Finally insurance carriers, in selecting cases for handling by staff counsel which

involve potential excess exposure to the insured, should be aware that the

employer-employee relationship between the insurer and the insured’s counsel

carries with it certain risks. The opinions of staff counsel in regard to legal

liability, potential verdict ranges, and settlement value and his or her decisions

concerning trial preparations and trial strategy will be subjected to unusually close

scrutiny and subsequent litigation following any excess verdict. (emphasis added).

As stated above, the creation of an attorney-client relationship is a question of law and

fact. Nevertheless, in prior opinions the Committee has addressed the question in order to resolve

the ethics inquiry put to it. Legal Ethics Opinion 598 (approved by Supreme Court of Virginia,

1985) (“the client of an insurance carrier's employee attorney is the insured, not the insurance

carrier”); see also Legal Ethics Opinion 1536 (1993) (stating that insurer is not a client of

insurance defense counsel, and that counsel may therefore sue a party insured by the same

insurer in a later action without a conflict of interest).

In Legal Ethics Opinion 1863, the Committee stated:

and insured, attorneys have the duty to convey settlement offers to the insured “that may significantly affect settlement or resolution of the matter.” Code of Professional Responsibility, Disciplinary Rule 6-101(D) [DR:6-101]; Ethical Consideration 7-7 [EC:7-7] (1986)”) (emphasis added). But see General Security Insurance Co. v. Jordan, Coyne & Savits, LLP, 357 F. Supp. 2d 951, 957 (E.D. Va. 2005) (“the Supreme Court of Virginia has never suggested that an insurer, as well as the insured, may be a client of the law firm the insurer retains to defend an insured.”). Again, none of the holdings in those opinions turned on whether the attorney and the insurer had an attorney-client relationship.


14

Although the question of whether an attorney-client relationship exists in a

specific case is a question of law and fact, the Committee believes that, based on

these authorities, it is not accurate to say that the defendant/insured’s lawyer

should be presumed to represent the insurer as well. On the other hand, in the

absence of a particular conflict, it would be permissible for a single lawyer to

represent both the insured and the insurer. If the lawyer is jointly representing

both the insured and the insurer, then Rule 4.2 would apply to require the lawyer’s

consent to any communications between the plaintiff’s lawyer and the insurer.

Conversely, if the lawyer is not representing the insurer, then Rule 4.2 does not

apply and the plaintiff’s lawyer is free to communicate with the insurer without

the defendant/insured’s lawyer’s consent/involvement.

Rule 4.2 requires that the plaintiff’s counsel actually know that defense counsel

represents both the insured and insurer. Thus, the Committee concluded in LEO 1863, “unless

the plaintiff’s lawyer is aware that the defendant/insured’s lawyer also represents the insurer, the

plaintiff’s lawyer may communicate with the insurance adjuster or other employees of the

insurer without consent from the defendant/insured’s lawyer.”

11. A Lawyer May Communicate Directly with a Represented Person if that Person is Seeking a

“Second Opinion” or Replacement Counsel.

Comment [3] to Rule 4.2 allows a lawyer to communicate with a person seeking a second

opinion or replacement counsel concerning the subject of the representation even if a lawyer

currently represents that person:

A lawyer is permitted to communicate with a person represented by counsel

without obtaining the consent of the lawyer currently representing that person, if

that person is seeking a “second opinion” or replacement counsel.

In Legal Ethics Opinion 369 (1980) the Committee stated that it is not improper for an

attorney to give advice of a general nature or express an opinion on a matter to an individual

already represented by an attorney on that same matter. The legal right of such individual to

select or discharge counsel makes such general advice “authorized by law.” However, it is

improper for an attorney to accept employment on that same matter unless the other counsel

approves, withdraws, or is discharged.

12. The Rule Permits Communications that are “Authorized by Law.”


15

Unfortunately, in most jurisdictions, including Virginia, the precise reach and limits of

the “authorized by law” language in Rule 4.2 is not clear. As a starting point, ABA Formal

Ethics Op. 95-396 (1995) explains that the “authorized by law” exception in Model Rule 4.2 is

satisfied by “constitutional provision, statute or court rule, having the force and effect of law,

that expressly allows particular communication to occur in the absence of counsel.” ABA

Formal Op. 95-396, at 20. Statutes, administrative regulations, and court rules grounded in

procedural due process requirements are also a common place to find ex parte communications

that are “authorized by law.”

As Comment g to Section 99 of the Restatement (3d) of the Law Governing Lawyers

explains:

Direct communication may occur pursuant to a court order or under the

supervision of a court. Thus, a lawyer is authorized by law to interrogate as a

witness an opposing represented non-client during the course of a duly noticed

deposition or at a trial or other hearing. It may also be appropriate for a tribunal to

order transmittal of documents, such as settlement offers, directly to a represented

client.

Contractual notice provisions may explicitly provide for notice to be sent to a

designated individual. A lawyer’s dispatch of such notice directly to the

designated non-client, even if represented in the matter, is authorized to comply

with legal requirements of the contract.

See also LEO 1375 (1990) (opining that the provision of legal notices does not constitute the

communication prohibited by DR:7-103).

Therefore, a lawyer may arrange for service of a subpoena, or other process, directly on

an opposing party represented by counsel because controlling law or court rule requires that

process must be served directly. See, e.g., Va. Code § 8.01-314 (“... in any proceeding in which

a final decree or order has been entered, service on an attorney shall not be sufficient to

constitute personal jurisdiction over a party in any proceeding citing that party for contempt ...

unless personal service is also made on the party.”).

See also LEO 1861 (2012) (Rule 4.2 does not bar a Chapter 13 trustee from

communicating with a represented debtor to the extent that the communications are authorized

or mandated by the statute requiring the trustee to assist debtor in performance under the plan).
















16

13. A Lawyer’s Inability to Communicate with Opposing Counsel or Reasonable Belief that

Opposing Counsel has Withheld or Failed to Communicate Settlement Offers is not a Basis for

Direct Communication with a Represented Adversary.

Sometimes lawyers ask if there are reasonable excuses or justification for bypassing a

lawyer and communicating directly with a represented adversary. Generally, the answer is “no.”

For example, a lawyer’s inability to contact opposing counsel and a client’s emergency is not a

basis for ex parte contacts with a represented adversary. LEO 1525 (1993).

In LEO 1323 (1990), the Committee indicated that a prosecutor's belief that defense

counsel may not have communicated the plea agreement offer to the defendant does not

constitute sufficient reason for an exception. In that opinion, the Committee concluded that the

prosecutor violated the no-contact rule by copying the defendant in a letter sent to defense

counsel reiterating a plea offer and deadline for acceptance. See also Pennsylvania Ethics Op.

88-152 (1988) (concluding that a lawyer may not forward settlement offers to an opposing party

even if the opposing counsel failed to notify the client about the offer); Ohio Ethics Op. 92-7, at

*1 (1992) (finding it inappropriate for a lawyer to send copies of settlement offers directly to a

government agency even if the original is served on the government's attorney).

In LEO 1752 (2001), the Committee said that even if plaintiff’s counsel believes

insurance defense counsel has failed to advise, or wrongfully withheld information regarding the

underinsured client’s right to hire personal counsel, plaintiff’s counsel may not communicate that

advice directly to defense counsel’s client.


SCV Approved/Amended January 12, 2021 Committee Opinion December 28, 2010

1

LEGAL ETHICS OPINION 1850. OUTSOURCING OF LEGAL SERVICES

This opinion deals with the ethical issues involved when a lawyer considers outsourcing

legal or non-legal support services to lawyers or paralegals. Many lawyers already engage in

some form of outsourcing to provide more efficient and effective service to their clients.

Outsourcing takes many forms: reproduction of materials, database creation, conducting legal

research, case and litigation management, drafting legal memoranda or briefs, reviewing

discovery materials, conducting patent searches, and drafting contracts, for example. Law firms

have always and will always engage other lawyers and nonlawyers in the provision of various

legal and non-legal support services. Legal outsourcing can be highly beneficial to the lawyer

and the client, since it gives the lawyer the opportunity to seek the services of outside lawyers

and staff in complex matters. Legal outsourcing also gives sole practitioners and small law firms

more flexibility in not having to hire staff or employees when they experience temporary work

overflows for which a contract lawyer or non-lawyer may be appropriate.

A few examples of outsourcing arrangements are:

1. A Virginia law firm retains an outsourced law firm in India to conduct patent searches

and to prepare patent applications for some of its clients. Lawyers and nonlawyers at the

outsourced firm may work on the matters. The outsourced firm will not have access to any client

confidences except confidential information that is necessary to perform the patent searches and

prepare the patent applications. The outsourced law firm regularly does patent searches and

applications for U.S. law firms. In some situations, the outsourced law firm might be hired

through an intermediary company that verifies the credentials of the firm and checks conflicts; in

other situations, the Virginia law firm might directly retain the outsourced law firm.

2. A Virginia law firm occasionally hires Lawyer Z, who works for several firms on an

as-needed contract basis, to perform specific legal tasks such as legal research and drafting legal

memoranda and briefs. Lawyer Z is a Virginia-licensed lawyer who works out of her home and

works on an hourly basis for the law firm, but does not meet with firm clients. She has access to

firm files and matters only as needed for the discrete tasks she is hired to perform.


2

3. A Virginia law firm sends legal work involving legal research and brief writing to a

legal research “think tank” to produce work product that is then incorporated into the work

product of the law firm.

On the other hand, a situation that may be colloquially called “outsourcing” but that does

not raise any of the concerns identified in this opinion is: a Virginia law firm regularly hires

Lawyer Y to perform specific legal tasks for them, which may or may not involve contact with

firm clients, working directly with and under the supervision of lawyers in the law firm. In that

scenario, Lawyer Y is working under the direct supervision of lawyers in the firm and has full

access to information about the firm’s clients, and therefore is associated with the firm for

purposes of the Rules of Professional Conduct, including confidentiality and conflicts.

APPLICABLE RULES AND OPINIONS

The applicable Rules of Professional Conduct are: Rule 1.1, Competence, Rule 1.2(a),

Scope of Representation, Rule 1.4, Communication, Rule 1.5, Fees, Rule 1.6, Confidentiality of

Information, Rule 5.3, Responsibilities Regarding Nonlawyer Assistants, and Rule 5.5,

Unauthorized Practice of Law; Multijurisdictional Practice of Law.

Applicable legal ethics opinions are LEOs 1712 and 1735, regarding the use of temporary

lawyers and contract lawyers.

ANALYSIS

A lawyer’s ethical duties when outsourcing tasks fall into four categories: supervision of

nonlawyers, including unauthorized practice of law issues, client communication and the need

for consent to outsourcing arrangements, confidentiality, and billing and fees. This opinion will

address each of these categories in order.

Supervision and Unauthorized Practice of Law

The lawyer’s initial duty when considering outsourcing, as established by Rule 5.3(b), is

to exercise due diligence in the selection of lawyers or nonlawyers. Lawyers have a duty to be

competent in the representation of their clients and to ensure that those who are working under


3

their supervision perform competently. See Rule 1.1. To satisfy the duty of competence, a lawyer

who outsources legal work must ensure that the tasks in question are delegated to individuals

who possess the skills required to perform them and that the individuals are appropriately

supervised to ensure competent representation of the client.

The lawyer must also consider whether the lawyer or nonlawyer understands and will

comply with the ethical rules that govern the initiating lawyer’s conduct and will act in a manner

that is compatible with that lawyer’s professional obligations, just as in any other supervisory

situation. In order to comply with Rule 5.3(b), the lawyer must be able to adequately supervise

the nonlawyer if the work is outsourced. Specifically, the lawyer needs to review the

nonlawyer’s work on an ongoing basis to ensure its quality, the lawyer must maintain ongoing

communication to ensure that the nonlawyer is discharging the assignment in accordance with

the lawyer’s directions and expectations, and the lawyer needs to review thoroughly all work

product to ensure its accuracy and reliability and that it is in the client’s interest. The lawyer

remains ultimately responsible for the conduct and work product of the nonlawyer. Rule 5.3(c).

The Committee recommends that overseas outsourcing, in particular, should include a

written outsourcing agreement to protect the law firm and its clients. The agreement should

include assurances that the outsourced firm or vendor will meet all professional obligations of

the hiring lawyer, specifically including confidentiality, information security, conflicts, and the

unauthorized practice of law. The hiring lawyer should make reasonable inquiry and act

competently in choosing a provider that will honor these obligations and use reasonable

measures to supervise the vendor’s work.

Client Communication and Consent

In LEO 1712, the Committee concluded that when a lawyer hires a temporary lawyer to

work on a client’s matter, the lawyer must advise the client of that fact and must obtain the

client’s consent to the arrangement if the temporary lawyer will perform independent work for

the client and will not work under the direct supervision of a lawyer in the firm. Applying Rules

1.2(a) and 1.4, the Committee concluded that the client is entitled to know who is involved in the

representation and can refuse to allow the use of an outsourced lawyer or nonlawyer. Extending


4

that analysis to other outsourcing situations, a lawyer must obtain informed consent from the

client if the lawyer is outsourcing legal work to a lawyer or nonlawyer who is not associated with

or working under the direct supervision of a lawyer in the firm that the client retained, even if no

confidential information is being shared outside of the firm.

Confidentiality

If, when outsourcing, confidential client information will be shared with a lawyer or

nonlawyer outside of the law firm (where “outside of the law firm” means neither associated

with the firm nor directly supervised by a lawyer in the firm), the lawyer must secure the client’s

consent in advance. The implied authorization of Rule 1.6(a) and its Comment [6]1 to share

confidential information within a firm generally does not extend to entities or individuals

working outside the law firm. Thus, in a typical outsourcing relationship, no information

protected by Rule 1.6 may be revealed without the client’s informed consent. The exception to

this requirement is when the outsourced service is an “office management” task of the types

identified in Rule 1.6(b)(6)2, for which client consent is not required. In all cases, the lawyer

needs to ensure that appropriate measures have been employed to educate the nonlawyer on the

lawyer’s duties to protect client confidences.

When sharing or storing confidential information, the lawyer must act reasonably to

safeguard the information against unauthorized access by third parties and against inadvertent or

unauthorized disclosure by anyone under the lawyer’s supervision. See Rule 1.6, Comment [19].

For example, the nonlawyer should assure the lawyer that policies and procedures are in place to

protect and secure data while in transit and that he or she understands and will abide by the

1 Rule 1.6, Comment [6]: Lawyers in a firm may, in the course of the firm’s practice, disclose to each other information relating to a client of the firm, unless the client has instructed that particular information be limited to specified lawyers. 2 Rule 1.6(b)(6): To the extent a lawyer reasonably believes necessary, the lawyer may reveal information to an outside agency necessary for statistical, bookkeeping, accounting, data processing, printing, or other similar office management purposes, provided the lawyer exercises due care in the selection of the agency, advises the agency that the information must be kept confidential and reasonably believes that the information will be kept confidential.


5

policies and procedures. Written confidentiality agreements are strongly advisable in outsourcing

relationships. The outsourcing lawyer should also ask the nonlawyer whether he or she is

performing services for any parties adverse to the lawyer’s client, and remind him or her,

preferably in writing, of the need to safeguard the confidences and secrets of the lawyer’s current

and former clients. See Rule 1.6, Comment [5c].3

Billing and Fees

In LEO 1712, the Committee discussed the issue of payment arrangements when legal

services are outsourced or when temporary lawyers are used. The Committee reiterated its

position in LEO 1735, which deals with a lawyer independent contractor. This Committee opines

that if payment is billed to the client as a disbursement, then the lawyer must disclose the actual

amount of the disbursement including any mark-up or surcharge on the amount actually

disbursed to the nonlawyer. Any mark-up or surcharge on the disbursement billed to the client is

tested by the principles articulated in ABA Formal Opinion 93-379 (1993):

When that term [“disbursements”] is used, clients justifiably should expect that the

lawyer will be passing on to the client those actual payments of funds made by the lawyer

on the client’s behalf. Thus, if a lawyer hires a court stenographer to transcribe a

deposition, the client can reasonably expect to be billed as a disbursement the amount the

lawyer pays to the court reporting service. Similarly, if the lawyer flies to Los Angeles

for the client, the client can reasonably expect to be billed as a disbursement the amount

of the airfare, taxicabs, meals and hotel room.

It is the view of this Committee that in the absence of disclosure to the contrary it would

be improper for the lawyer to assess the surcharge on these disbursements over and above

the amount actually incurred unless the lawyer incurred additional expenses beyond the

actual cost of the disbursement item. In the same regard, if a lawyer receives a discounted

rate from a third-party provider, it would be improper for the lawyer to charge the client

3 Rule 1.6 Comment [5c]: Compliance with Rule 1.6(b)(5) might require a written confidentiality agreement with the outside agency to which the lawyer discloses information.


6

the full rate and to retain the profit instead of giving the client the discount. Clients could

view this practice as an attempt to create profit centers when they had been told they

would be billed for disbursements.

On the other hand, if the lawyer or firm hires a contract lawyer or non-lawyer to work on

site or under the direct supervision of the lawyer such that they are considered

“associated” with the firm, the lawyer or firm may bill the client for the usual or

customary charge the firm would bill for any other associate or employee even if that

amount is more than what the firm pays the staffing agency or vendor. The amount paid

to the staffing agency or vendor is an overhead expense that the firm is not required to

disclose to a client.

This Committee believes that these same principles apply in the case of outsourced legal

services. Fees must be reasonable, as required by Rule 1.5(a), and adequately explained to the

client, as required by Rule 1.5(b). Further, in a contingent fee case it would be improper to

charge separately for work that is usually done by the client’s own lawyer and that is

incorporated into the standard fee paid to the lawyer, even if that cost is paid to a third-party

provider.

CONCLUSION

A lawyer may ethically outsource services to a lawyer or nonlawyer who is not associated

with the firm or working under the direct supervision of a lawyer in the firm if the lawyer (1)

rigorously monitors and reviews the work to ensure that the outsourced work meets the lawyer’s

requirements of competency and to avoid aiding a nonlawyer in the unauthorized practice of law,

(2) preserves the client’s confidences, (3) bills for the services appropriately, and (4) obtains the

client’s informed consent in advance of outsourcing the work.

Approved by the Supreme Court of Virginia May 17, 2021 LEGAL ETHICS OPINION 1878. SUCCESSOR COUNSEL’S ETHICAL DUTY TO INCLUDE IN A WRITTEN ENGAGEMENT AGREEMENT PROVISIONS RELATING TO PREDECESSOR COUNSEL’S QUANTUM MERUIT LEGAL FEE CLAIM IN A CONTINGENT FEE MATTER. INTRODUCTION

This opinion examines the ethical duties of an attorney who assumes representation of a

client in a contingent fee matter when predecessor counsel may have a claim against the client or

a lien for legal fees earned on a quantum meruit basis against the proceeds of a recovery.1

A lawyer discharged without cause from representation in a contingent fee matter may

assert a lien upon the proceeds of a recovery ultimately obtained in the same matter by successor

counsel. The Virginia cases2 which address a discharged attorney’s quantum meruit fee

entitlement do not set forth how a successor attorney’s legal fee should be calculated under these

circumstances.3

It is beyond the purview of this Committee to advocate a legal principle which limits

either counsel’s fee to a given percentage or dollar amount of the recovered sums, or to a

particular method of calculation. Lawyers must, however, observe the ethical requirements in the

Rules of Professional Conduct to adequately explain fees charged to a client, how those fees are

calculated and to impose only reasonable fees. Successor counsel in a contingent fee matter must

adequately explain at the inception of the representation the client’s potential obligation to all

counsel and should ensure that her fee ultimately charged to the client is reasonable. Rules 1.5(a)

and (b) provide:

RULE 1.5. Fees.

(a) A lawyer's fee shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

1 See § 54.1-3932 of the 1950 Code of Virginia, as amended, and Virginia Legal Ethics Opinion 1865 (2012), “Obligations of a Lawyer in Handling Settlement Funds when a Third Party Lien or Claim Is Asserted.” 2 Hughes v. Cole, 251 Va. 3, 465 S.E.2d 820 (1996); Fary v. Aquino, 218 Va. 889, 241 S.E.2d 799 (1978); Heinzman v. Fine, Fine, Legum and Fine, 217 Va. 958, 234 S.E.2d 282 (1977). 3 In contrast, for example, Louisiana has identified a governing legal principle that the total fee charged by both attorneys could not exceed the largest fee to which the client had agreed. See Saucier v. Hayes Dairy Products, Inc., 373 So.2d 102 (1979) (remanding a case to the trial court to adjudicate both original counsel’s and successor counsel’s respective fee entitlements.)

Approved by the Supreme Court of Virginia May 17, 2021

2

(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

(3) the fee customarily charged in the locality for similar legal services;

(4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the

circumstances; (6) the nature and length of the professional relationship with

the client; (7) the experience, reputation, and ability of the lawyer or

lawyers performing the services; and (8) whether the fee is fixed or contingent. (b) The lawyer's fee shall be adequately explained to the

client. When the lawyer has not regularly represented the client, the amount, basis or rate of the fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation. [Emphasis added.]

QUESTIONS AND ANALYSES

A. What must successor counsel address in her written contingent fee agreement when predecessor counsel may be entitled to a fee based on quantum meruit?

An attorney who accepts a case wherein predecessor counsel has performed legal services

toward effecting the ultimate recovery must advise the client of potential liability to predecessor

counsel for work performed by the latter prior to discharge. Successor counsel may not have

knowledge of the nature and extent of the work performed by the client’s former attorney or the

opportunity to review predecessor counsel’s complete file before being engaged by the client.

For example, the client may have engaged or consulted with successor counsel before

discharging the predecessor counsel. Successor counsel’s information about the status of the

claim at the time she is engaged may be limited or even nonexistent. The successor attorney

nonetheless must advise the client that the predecessor attorney may have an enforceable lien for

fees which will be in addition to successor counsel’s legal fees.

The Committee recognizes that the successor attorney may lack information sufficient to

advise the client of the value of predecessor counsel’s services. Even if the predecessor counsel


3

has identified a dollar amount for his claimed lien,4 the amount of the lien or the lien itself may

be in dispute or challenged. Under some circumstances, it may be difficult for the client,

predecessor counsel, and successor counsel to agree upon how predecessor counsel is to be

compensated when a recovery is achieved. In addition to the “unknown” of the recovery to be

had, if any, there are other “unknowns,” such as the balance of work which will actually be

required to complete the matter and the extent to which predecessor counsel’s legal services will

have contributed to the recovery and relieved successor counsel from performing services

otherwise required. Without knowledge of what tasks were performed by the discharged lawyer,

it is also possible that the successor lawyer will duplicate those tasks. The presence of unknowns

may require that how predecessor counsel will be compensated must await the time of recovery

upon the claim. Nevertheless, if successor counsel accepts a contingent fee client knowing that

the client has discharged their former attorney, successor counsel must advise the client of the

predecessor attorney’s potential lien for fees against the settlement or recovery obtained by

successor counsel.

ABA Formal Opinion 487, issued on June 18, 2019,5 speaks to successor counsel’s

obligation to provide an adequate explanation of her fees thusly:

Although Rules 1.5(b) and 1.5(c) do not specifically address obligations when one counsel replaces another, both rules are designed to ensure that the client has a clear understanding of the total legal fee, how it is to be computed, when it is to be paid, and by whom . . . . A contingent fee agreement that fails to mention that some portion of the fee may be due to or claimed by the first counsel in circumstances addressed by this opinion is inconsistent with these requirements of Rule 1.5(b) and (c). To avoid client confusion, making the disclosure in the fee agreement itself is the better practice, but this disclosure may be made in a separate document associated with the contingent fee agreement and provided to the client at the same time. [Emphasis and ellipsis added.]

4 See Legal Ethics Opinion 1812 (2005), “Can Lawyer Include in a Fee Agreement a Provision Allowing for Alternative Fee Arrangements Should Client Terminate Representation Mid-Case without Cause”. There are instances when a discharged counsel’s compensation based on his hourly rate would result in an unreasonable fee. 5 Fee Division with Client’s Prior Counsel https://www.americanbar.org/content/dam/aba/images/news/2019/06/FormalOpinion487.pdf


4

In 1989, the San Francisco Bar Association issued LEO 1989-1, which answered, among

others, the question under review here: “Where a client discharges Lawyer A in a contingency

fee case and consults Lawyer B, may Lawyer B replace Lawyer A on a contingency fee basis

without advising the client of Lawyer A's claim for fees?” The opinion concluded that

a contingency client should be advised by the successor attorney of the existence and effect of the discharged attorney's claim for fees on the occurrence of the contingency as part of the terms and conditions of the employment by the successor attorney. This will enable the client to knowingly and intelligently determine whether to pursue litigation and choose an appropriate attorney.

In reaching that conclusion, the writers stated that

it is better practice for an attorney who proposes to succeed a discharged attorney in a contingency fee matter to advise the client concerning the discharged attorney's quantum meruit claim for fees, particularly under current California law where the client's obligation to the discharged attorney for payment of the quantum meruit claim could be in addition to the contingency fee paid the successor attorney . . . . [Emphasis and ellipsis added.]

This Committee endorses the view expressed in San Francisco Bar Association’s issued

LEO 1989-1 and ABA Formal Opinion 487, and further opines that Virginia Rules of

Professional Conduct 1.5(b) and (c)6 require that successor counsel, at the inception of proposed

representation in a contingent fee matter, advise her client in writing of the client’s potential

obligation to pay legal fees based upon quantum meruit to prior counsel. Successor counsel

should address both the client’s potential fee obligation to prior counsel and to successor counsel

under her contingency fee agreement. Although each attorney’s fee must be reasonable under

Rule 1.5(a), a client who discharges her first counsel without cause may be obligated to pay

6 Rule 1.5(c), pertaining to contingent fee agreements, requires that “A contingent fee agreement shall state in writing the method by which the fee is to be determined . . . .” Thus, to the extent possible, the agreement should identify the means of determining the reasonable fee required by Rule 1.5(a) in view of predecessor counsel’s agreed or adjudicated quantum meruit fee entitlement in the event of a recovery via settlement or trial.


5

combined fees in excess of the contingent fee which applied to her engagement with predecessor

counsel. The important consideration is that successor counsel must make the client aware of that

possibility. See also Rule 1.4(b), which requires that a lawyer explain a matter to the extent

reasonably necessary to permit the client to make informed decisions regarding the

representation.

In order to document compliance with the obligations imposed by Rules 1.4 and 1.5(b)

and (c), the Committee recommends that successor counsel in a contingent fee matter include in

her proposed contingent fee agreement with the client, the following general principles (but this

exact language is not required):

a. the state of the law in Virginia regarding perfection of attorneys’ liens and quantum

meruit awards available to attorneys discharged without cause;

b. a statement that the client’s recovery may be subject to both the discharged lawyer’s

attorney’s lien and the contingent fee charged by the successor lawyer; and whether

the discharged lawyer’s lien would be included within or in addition to the successor

lawyer’s contingency fee;

c. who bears the expense (legal fees and court costs, if any) of determining predecessor

counsel’s fee entitlement, to include the cost of adjudicating the validity and amount

of any claimed lien, through an interpleader action or otherwise.

B. May successor counsel represent the client in negotiations and litigation involving the prior counsel’s claim of lien?

One of the circumstances giving rise to a concurrent conflict of interest under Rule

1.7(a)(2)7 is when “a personal interest of the lawyer” presents a “significant risk” that her

7RULE 1.7 Conflict of Interest: General Rule.

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: * * *

(2) there is significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.


6

competent and diligent representation of the client would be “materially limited.” Thus, there

may be instances when successor counsel cannot provide diligent and competent representation

to a client because successor counsel herself would not be capable of exercising the independent

professional judgment and objectivity required to assess the value of the relative contributions

which she and the predecessor attorney made in effecting the recovery. The client may need

independent legal advice and advocacy regarding the calculation of successor counsel’s fee, the

value of predecessor counsel’s quantum meruit lien, or the apportionment of any recovery among

counsel claiming a lien on the recovery and the client.

Contracts between attorneys and their clients stand on a different footing than

conventional contracts:

Contracts for legal services are not the same as other contracts. “[I]t is a misconception to attempt to force an agreement between an attorney and his client into the conventional modes of commercial contracts. While such a contract may have similar attributes, the agreement is, essentially, in a classification peculiar to itself. Such an agreement is permeated with the paramount relationship of attorney and client which necessarily affects the rights and duties of each.” Krippner v. Matz, 205 Minn. 497, 506, 287 N.W. 19, 24 (1939).

Heinzman v. Fine, Fine, Legum and Fine, 217 Va. at 962, 234 S.E.2d at 285, (1977).

Although the Heinzman court was speaking to the issue of the enforceability of a discharged

attorney’s contract, the principle that contracts between lawyers and clients stand on a different

footing than ordinary commercial contracts applies equally to successor counsel.

Whether a concurrent conflict of interest exists for successor counsel to represent her

client in the determination of fees to be paid predecessor counsel must be assessed on a case-by-

case basis. For example, a successor attorney, whose contingent fee agreement contains a

provision for adjustment of her own fee by the amount of the predecessor attorney’s quantum

meruit claim so as to limit the client’s liability to payment of a specific total fee, may ethically

represent the client in negotiations with or litigation against prior counsel, but at no additional

charge to the client. ABA Formal Opinion 487 addresses the ethical issues involved when

successor counsel seeks to charge her client fees related to any dispute with predecessor counsel

regarding his fees:


7

Successor counsel’s compensation for representing the client in the client’s dispute with predecessor counsel must be reasonable, which in this context means, at a minimum, that the successor counsel cannot charge the client for work that only increases the successor counsel’s share of the contingent fee and does not increase the client’s recovery. Successor counsel must also obtain the client’s informed consent to any conflict of interest that exists due to successor counsel’s dual roles as counsel for the client and a party interested in a portion of the proceeds.

The “informed consent” referred to in the hypothetical posed in ABA Formal Opinion 487

must be obtained under Rule 1.7(b).8 But, as stated above, whether a concurrent conflict of interest

exists with its commensurate duty to obtain informed consent must be assessed on a case-by-case

basis.

In sum, successor counsel may represent the client in negotiations and litigation

involving the prior counsel’s claim of lien, provided she has explained to the client any potential

material limitations conflict by acting in a dual role. In these situations where successor

counsel’s representation is materially limited by a concurrent conflict of interest, the client’s

informed consent must be obtained pursuant to Rule 1.7(b).

CONCLUSION Successor counsel in a contingent fee matter must charge a reasonable fee and must

adequately explain her fee to the client. If the client, predecessor counsel, and successor counsel

cannot determine or agree in advance of successor counsel’s engagement how predecessor

8 RULE 1.7 Conflict of Interest: General Rule. * * *

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if each affected client consents after consultation, and:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client

against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) the consent from the client is memorialized in writing.


8

counsel’s fee will be calculated, then successor counsel must advise the client of the client’s

potential obligation to pay fees on a quantum meruit basis to discharged counsel, as well as the

successor counsel’s fees under her contingent fee agreement, each of which must be reasonable

using the factors identified in Rule 1.5(a). When applicable, successor counsel should advise the

client that the combined fees of both lawyers may exceed the amount which would have been

paid to predecessor counsel in the event the client had not changed counsel. Successor counsel

may represent the client in negotiations and litigation involving the predecessor counsel’s claim

of lien, provided that there is no conflict under Rule 1.7(a)(2) or that she obtains informed

consent to a potential conflict in accordance with Rule 1.7(b).

7

The Stressed-Out Lawyer: Overturning the Burnout Verdict

Presented by:

Clinician Mike Beswick, LICSW, BCD

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The Stressed Out Lawyer: Overturning the Burnout Verdict

Gentry Locke Seminar, September 2021

By Mike Beswick LICSW, BCD

I. INTRODUCTION

Lawyers’ jobs can be incredibly rewarding, but the inherent nature of their personalities and demanding work can create high levels of stress. In the adversarial system in which lawyers operate, there is often a great deal of pressure to promptly assist clients with pressing problems—regularly leading to long and unpredictable working hours. As studies demonstrate, lawyers are often prone to greater stress, leading to adverse mental and physical health problems. A 2019 study by The American Lawyer (Law.com), released in early 2020, found some alarming statistics. Of the 3,800 lawyers that responded to the survey:

• 31.2% felt depressed;

• 64% had some level of anxiety;

• 10.1% felt as though they had an alcohol problem and 44.4% said they drink alcohol

regularly;

• 2.8% felt as though they had a drug problem;

• 17.9%—that is one in six respondents—reported contemplating suicide at some point in

their career (that is compared to only 4.3% of the general population that has

contemplated suicide);

• 73% agreed that their work environment contributed to their mental health issues;

• 41% thought that mental health and substance abuse problems were at crisis levels in the

profession; and

• 74% believed that the legal profession has had a negative effect on their mental health

over time.1

A subsequent survey taken during the pandemic exhibited a worsening trend: 37% of the lawyer respondents were depressed, nearly 71% reported having anxiety, 70.4% said that the

1 Lizzy McLellan, Lawyers Reveal True Depth of Mental Health Struggles, THE AMERICAN LAWYER (Feb. 19, 2020), https://www.law.com/2020/02/19/lawyers-reveal-true-depth-of-the-mental-health-struggles/?slreturn=20210623131005 (last visited July 23, 2021).

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COVID pandemic had made their mental health worse, and only about half believed that their firm was making a larger commitment to employee mental health amidst the pandemic.2 These statistics are not new. In 2016, the American Bar Association (“ABA”) Commission on Lawyer Assistance Programs, in conjunction with the Hazelden Betty Ford Foundation, published a wide-ranging study of nearly 13,000 practicing attorneys.3 The survey’s distressing indicators led to the formation of the National Task Force on Lawyer Well-Being (the “Task Force”) in 2016. A summary of the findings are visualized in Exhibit A. Among the Task Force’s 44 recommendations in its report, The Path to Lawyer Well-Being, it suggested that bar associations “develop and regularly offer educational programming on well-being-related topics” including at “day-long continuing legal education events.”4 The hope is that these well-being-related CLE presentations will raise awareness of the underlying causes of lawyers’ stress, depression, suicidal thoughts, and other mental and physical health problems. By increasing consciousness, offering support, and breaking down stigmas, lawyers can help their colleagues end the downward spiral of the profession’s wellness woes. In response to the Task Force’s 2017 Report, the Virginia Supreme Court issued its own report titled, A Profession at Risk, in 2018. The report also recommended CLE on well-being-related topics taught by “professionals who study, evaluate, or teach wellness full-time.”5 This outline and its presentation are meant to address the underlying causes of—and strategies for dealing with—stress in the lives of lawyers.

II. UNDERSTANDING STRESS IN THE LEGAL PROFESSION The American Bar Association (“ABA”) defines stress as “a physical, mental and emotional response to life’s changes and demands.”6 While not all stress is necessarily negative, chronic high-degree stress can lead to a number of health problems.7 Johns Hopkins Medicine has identified the potential negative health effects of stress to include “high blood pressure, susceptibility to illness, abuse of drugs or alcohol, less able to fight disease, and increasing the likelihood of depression.”8

2 The Legal Industry’s Mental Health Problem Grew in 2020, Our Survey Shows, THE AMERICAN LAWYER (May 3, 2021), https://www.law.com/americanlawyer/2021/05/03/the-legal-industrys-mental-health-problem-grew-in-2020-our-survey-shows/ (last visited July 23, 2021). 3 The study is thoroughly analyzed in The Path to Lawyer Well-Being, a 2017 report by the Task Force. See THE PATH TO LAWYER WELL-BEING, NAT’L TASK FORCE ON LAWYER WELL-BEING (Aug. 14, 2017), https://www.americanbar.org/content/dam/aba/images/abanews/ThePathToLawyerWellBeingReportFINAL.pdf (last visited July 23, 2021). 4 Id. at 41. 5 A PROFESSION AT RISK, THE COMM. ON LAWYER WELL-BEING OF THE SUP. CT. OF VA. (2018), http://www.courts.state.va.us/programs/concluded/clw/2018_0921_final_report.pdf (last visited July 23, 2021). 6 Stress, ABA (Jan. 13, 2021), https://www.americanbar.org/groups/lawyer_assistance/resources/stress/ (last visited July 23, 2021). 7 Id. 8 Stress: Overview, JOHNS HOPKINS MEDICINE, https://www.hopkinsmedicine.org/health/conditions-and-diseases/stress (last visited July 23, 2021).

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a. Why Lawyers are Stressed

The Supreme Court of Virginia has identified a number of “Occupational Risks” that can contribute to increased stress in the legal field. Those Risks include:

• The sedentary nature of work;

• Long and unusual hours;

• Managing the problems of others;

• Adversarial nature of the work;

• The client, court, and professional demands;

• Education debt;

• Vicarious trauma;

• Changing legal paradigms;

• Technological changes; and

• The need to display confidence and conceal vulnerability.9

The inherent nature of the personalities of lawyers also contributes to the profession’s high stress level. For instance, lawyers typically score lower than the average population on the personality trait of extraversion and higher on the trait of neuroticism. High levels of introversion can lead to feelings of loneliness and isolation. Whereas high degrees of neuroticism—i.e., individuals who “are more prone to fear, anger and distress”—can lead to increased levels of anxiety, self-consciousness, and irritability.10 Therefore, it is important that the legal community understand that both internal and external factors can contribute to the prevalence of anxiety and depression in the profession.

b. Symptoms of Stress While stress might often be viewed as an emotional condition, its symptoms often manifest in a number of ways, including:

• Headache;

• Muscle tension or pain;

• Chest pain;

9 The Supreme Court has outlined risk factors and recommended remedial measures in its 2018 report. See A PROFESSION AT RISK, supra note 5 at App. 8. 10 See Madeleine Deveson, The ‘Lawyer Personality’ and the Five Factor Model: Implications from Personality Neuroscience, ACADEMIA (2012), https://www.academia.edu/attachments/30416142/download_file?st=MTYyNzMwMjIyNyw3MC4zMy4xNDkuOTg%3D&s=swp-splash-header (last visited July 23, 2021).

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• Fatigue;

• Change in sex drive;

• Stomach upset;

• Sleep problems;

• Anxiety;

• Restlessness;

• Lack of motivation or focus;

• Irritability or anger; and

• Sadness or depression.11 While the negative impacts of stress might seem overwhelming, there are many remedial measures lawyers can take to address these inherent aspects of legal work. III. OVERCOMING STRESS Here are 12 habits and activities that promote health:

(1) Regular sleeping habits, approximately 7 to 8 hours per evening;

(2) Exercise at an aerobic level 3 to 5 times per week for 20 to 30 minutes;

(3) Always wear a seatbelt while driving;

(4) Non-smoker;

(5) Healthy diet; limited red meat, lots of fruits and vegetables, avoidance of processed carbohydrates, refined cooking oils, trans fats and sugar;

(6) Some form of “mindfulness” (defined as being in the present moment, not worrying about what happened in the past or overly concerned about the future);

(7) Time in nature; ideally every day;

(8) Healthy relationships, strong friendship circle, and physical touch;

(9) Being hydrated, primarily through drinking water;

(10) Minimal use of alcohol (defined as four or less drinks per week);

(11) Use of electronics (phone, TV, computer) two hours or less outside of work;

11 Stress, supra note 6.

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(12) Having a sense of life purpose, engaging in some form of spiritual practice

In addition, the Virginia Supreme Court has identified a number of remedial measures, habits, and activities that promote health and manage stress. These are outlined in Exhibit B, and include:

• Committing to proper exercise and sufficient sleep—usually 7-8 hours per night;

• Maintaining proper work/life balance—including setting reasonable expectations for

working hours for both you and your subordinates;

• Joining professional, sports, civic, religious, and other groups to foster supportive

relationships;

• Spending time outside in nature;

• Setting reasonable expectations and boundaries with clients and minimizing professional

deadlines when possible;

• Limiting exposure to traumatic events;

• Maintaining relationships outside of the law; and

• Attending meeting of legal professionals for mutual support.12

a. Understanding Your Individual Stress Behaviors

The Holmes-Rahe Stress Inventory is a tool that you can use to determine your level of

susceptibility to stress-induced health breakdown.13 According to the American Institute of Stress, the results indicate the following:

• 150 points or less denotes a “relatively low amount of life change and a low susceptibility

to stress-induced health breakdown;”

• 150 to 300 points indicates a “50% chance of health breakdown in the next two years;”

while

• 300 points or more can mean an “80% chance of health breakdown in the next 2 years,

according to the Holmes-Rahe statistical prediction model.”14

Understanding your individual stress-inducing indicators is an important first step in determining the best mitigation strategies to keep your well-being in check. At the end of the

12 See A PROFESSION AT RISK, supra note 5 at App. 8; see also Exhibit B, infra. 13 See The Holmes-Rahe Stress Inventory, THE AMERICAN INST. OF STRESS, https://www.stress.org/holmes-rahe-stress-inventory (last visited July 23, 2021). See also Exhibit C, infra. 14 Id.

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day, mitigating and managing stress begins with self-awareness and ends with ongoing, daily wellness habits that lead to a balanced life.

The American Bar Association has depicted this balance visually as such:15

IV. OTHER RESOURCES TO HELP DEAL WITH STRESS

a. The CDC’s online resources for managing stress at work. Stress at Work, CTRS.

FOR DISEASE CONTROL AND PREVENTION,

https://www.cdc.gov/niosh/topics/stress/ (last visited July 23, 2021).

b. The American Bar Association’s online stress page. Stress, supra note 7.

c. Virginia Judges and Lawyers Assistance Program. Lawyers, VIRGINIA JUDGES &

LAWYERS ASSISTANCE PROG., https://vjlap.org/lawyers/ (last visited July 23,

2021).

i. 24/7 Help Line is available at 1-877-545-4682.

15 THE PATH TO LAWYER WELL-BEING, supra note 3 at 9.

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Exhibit A16

16 See THE PATH TO LAWYER WELL-BEING, supra note 3.

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Exhibit B17

17 See A PROFESSION AT RISK, supra note 5 at App. 8.

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Exhibit C18

18 See The Holmes-Rahe Stress Inventory, supra note 13.

8

The Business of Praccing Law in 2021

Presented by:

W. William [email protected]

Christen C. [email protected]

ChriChristopher M. [email protected]

1 5002/898/9996456v1

The Business of Practicing Law in 2021


W. William Gust Christen C. Church

Christopher M. Kozlowski

I. CYBERSECURITY

“Holland & Knight Sued Over Botched Wire Transfer” - The American Lawyer July 22, 2020

“Ransomware Attackers Take Aim At Law Firms”

- Forbes March 12, 2021

“Small and Midsized Law Firms Slammed by Ransomware” - Ohio State Bar Association Practice Management June 30, 2021

Lawyers and law firms have always felt both the privilege and burden of being entrusted

with our clients’ most valuable and private information and our duty of confidentiality is a fundamental duty that we owe to our clients. As attorneys, we regularly have in our care sensitive personal information and often process or hold significant sums of money on behalf of others.

Security has always been important, and adding the element of technology has not changed

our duty as lawyers to protect the information with which we are entrusted. What does change is that now someone can break into your file room from 6,000 miles away. And whereas before it would have taken a criminal days to copy all of your client files (or at the least a few hours and a moving truck), that same criminal can copy (and delete) all of your files with a few key strokes (or more commonly with a single click by someone inside of your organization). A. What is Cybersecurity?

“Cybersecurity” is defined in Merriam-Webster as “measures taken to protect a computer or computer system (as on the Internet) against unauthorized access or attack.”

The term “cybersecurity” came to prominence decades ago, but we still struggle with what

exactly cybersecurity should look like for a given individual or company. Time and innovation (on all sides) have sped up. Having the most recent version of scanning software does not make you immune to experiencing a cybersecurity incident. We have moved from receiving software updates in physical form that could take months to prepare, to electronic updates and patches that could be pushed out daily. Even with these advances, the “bad guys” are always working to be one step ahead and no software can provide 100% protection from ourselves and inadvertent activity that could lead to a cybersecurity incident.

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The pandemic resulted in an explosion of remote working, which can create new opportunities for cyber-attacks. There were also a new population of potential hackers who needed only the tools available for purchase and download through the dark web.

We as a society have realized that absolute prevention is not currently possible, there isn’t

a software or monitoring solution out there to eliminate the risk. Innovation began to focus on identifying cybersecurity incidents, mitigating the harm, and assisting companies and individuals in responding to these incidents.

B. Examples of Cybersecurity Related Laws, Regulations and Rules Applicable to

Attorneys The laws, regulations and rules that will be applicable during a cybersecurity incident may be influenced by a number of factors including: what information is involved, the form of the information involved (electronic, paper, encrypted, etc), where the individuals reside, where the information is held, in what capacity the law firm is acting and who the law firm is representing, and the nature of any incident. 1. Virginia Code § 18.2-186.61. Breach of personal information notification

Excerpts: “‘Breach of the security of the system’ means the unauthorized access and acquisition of unencrypted and unredacted computerized data that compromises the security or confidentiality of personal information maintained by an individual or entity as part of a database of personal information regarding multiple individuals and that causes, or the individual or entity reasonably believes has caused, or will cause, identity theft or other fraud to any resident of the Commonwealth…” “…Notice required by this section shall include a description of the following: (1) The incident in general terms; (2) The type of personal information that was subject to the unauthorized access and acquisition; (3) The general acts of the individual or entity to protect the personal information from further unauthorized access; (4) A telephone number that the person may call for further information and assistance, if one exists; and (5) Advice that directs the person to remain vigilant by reviewing account statements and monitoring free credit reports.….”

“…‘Personal information’ means the first name or first initial and last name in combination with and linked to any one or more of the following data elements that relate to a resident of the Commonwealth, when the data elements are neither encrypted nor redacted: 1. Social security number; 2. Driver's license number or state identification card number issued in lieu of a driver's license number;

1 See Exhibit A enclosed with this outline for Virginia Code §18.2-186.6 in its entirety.

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3. Financial account number, or credit card or debit card number, in combination with any required security code, access code, or password that would permit access to a resident's financial accounts; 4. Passport number; or 5. Military identification number….”

2. Virginia State Bar Rules of Professional Conduct. Rule 1.62 Confidentiality of

Information Excerpts:

“Rule 1.6 (d) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information protected under this Rule.”

“Acting Reasonably to Preserve Confidentiality [19] Paragraph (d) requires a lawyer to act reasonably to safeguard information protected under this Rule against unauthorized access by third parties and against inadvertent or unauthorized disclosure by the lawyer or other persons who are participating in the representation of the client or who are subject to the lawyer’s supervision. See Rules 1.1, 5.1 and 5.3. The unauthorized access to, or the inadvertent or unauthorized disclosure of, confidential information does not constitute a violation of this Rule if the lawyer has made reasonable efforts to prevent the access or disclosure. Factors to be considered in determining the reasonableness of the lawyer’s efforts include, but are not limited to, the sensitivity of the information, the likelihood of disclosure if additional safeguards are not employed, the employment or engagement of persons competent with technology, the cost of employing additional safeguards, the difficulty of implementing the safeguards, and the extent to which the safeguards adversely affect the lawyer’s ability to represent clients (e.g., by making a device or important piece of software excessively difficult to use). [19a] Whether a lawyer may be required to take additional steps to safeguard a client’s information in order to comply with other laws, such as state and federal laws that govern data privacy or that impose notification requirements upon the loss of, or unauthorized access to, electronic information, is beyond the scope of this Rule. [20] Paragraph (d) makes clear that a lawyer is not subject to discipline under this Rule if the lawyer has made reasonable efforts to protect electronic data, even if there is a data breach, cyber-attack or other incident resulting in the loss, destruction, misdelivery or theft of confidential client information. Perfect online security and data protection is not attainable. Even large businesses and government organizations with sophisticated data security systems have suffered

2 See Exhibit B enclosed with this outline for VSB Rule 1.6 in its entirety.

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data breaches. Nevertheless, security and data breaches have become so prevalent that some security measures must be reasonably expected of all businesses, including lawyers and law firms. Lawyers have an ethical obligation to implement reasonable information security practices to protect the confidentiality of client data. What is “reasonable” will be determined in part by the size of the firm. See Rules 5.1(a)-(b) and 5.3(a)-(b). The sheer amount of personal, medical and financial information of clients kept by lawyers and law firms requires reasonable care in the communication and storage of such information. A lawyer or law firm complies with paragraph (d) if they have acted reasonably to safeguard client information by employing appropriate data protection measures for any devices used to communicate or store client confidential information. To comply with this Rule, a lawyer does not need to have all the required technology competencies. The lawyer can and more likely must turn to the expertise of staff or an outside technology professional. Because threats and technology both change, lawyers should periodically review both and enhance their security as needed; steps that are reasonable measures when adopted may become outdated as well. [21] Because of evolving technology, and associated evolving risks, law firms should keep abreast on an ongoing basis of reasonable methods for protecting client confidential information, addressing such practices as:

(a) Periodic staff security training and evaluation programs, including precautions and procedures regarding data security; (b) Policies to address departing employee’s future access to confidential firm data and return of electronically stored confidential data; (c) Procedures addressing security measures for access of third parties to stored information; (d) Procedures for both the backup and storage of firm data and steps to securely erase or wipe electronic data from computing devices before they are transferred, sold, or reused; (e) The use of strong passwords or other authentication measures to log on to their network, and the security of password and authentication measures; and (f) The use of hardware and/or software measures to prevent, detect and respond to malicious software and activity.”

3. Other examples of laws and regulations that may apply? o VSB Rule 1.1 Maintaining Competence o Virginia Consumer Data Protection Act and other state privacy laws. o HIPAA (Are you acting as a Business Associate to a Covered Entity?) o Contract Law (Engagement Letters, Data Security Addenda, Terms of

Service, etc.) o DFARS - Do you represent federal contractors? o Federal Trade Commission Rules and Regulations (Health Breach

Notification Rule; Gramm-Leach-Bliley)

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C. So, what does Cybersecurity look like for law firms today?

There is no one size fits all, as outlined above, what is “reasonable” cybersecurity will vary based on the information that a law firm maintains as well as the size of, the resources of, and the burdens placed on a law firm in protecting the information.

Importantly, what is “reasonable” will also continue to change over time as the threats and available technology continues to evolve—i.e.. what is “reasonable” as to encryption of data at rest and in motion, software patching, physical safeguards, etc., is constantly evolving.

This evaluation process can be a daunting (and never-ending) task. One resource that is intended to focus efforts and allow you to respond to these changes in threats and technology is the National Institute of Standards and Technology (NIST) Framework for Improving Critical Infrastructure Cybersecurity (the “NIST Framework”). The NIST Framework was initially designed for use with protecting critical US infrastructure, but it allows for flexibility for use by organizations of varying sizes and capabilities. Additional information regarding the NIST Framework is available at https://www.nist.gov/cyberframework. D. NIST Framework Core Functions3:

1. Identify

2. Protect

3. Detect

4. Respond

5. Recover

This analysis structure is useful in performing a self-analysis on your law firm and can

also be used when advising clients. All Core Functions should be ongoing and are overlapping. 1. Identify: Identify information and obligations and control who has access to the information

in your care. Develop an understanding of the information you hold to better understand and manage the cybersecurity risk to your systems and data.

3 For a more in-depth walk through of the NIST Framework Core Functions, see the NIST Framework at https://www.nist.gov/cyberframework

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Examples of questions to consider/action items:

i. What types of information do you maintain? - E.g. Health Information, Financial information, trade secrets, IP

ii. Have you agreed to any specific security requirements? - E.g. Business Associate Agreement, Terms of Representation, etc.

iii. Who has access to firm and client information? - Look at both internal and third party vendors, physical access and virtual

access iv. What agreements govern access to information?

- E.g. firm policies, vendor contracts, confidentiality agreements, etc. v. Do you have the ability to track who specifically has accessed information?

vi. Can you limit access of certain information or files? vii. What vetting is conducted of companies and individuals who have access to

sensitive data? viii. Do you have sufficient policies and procedures in place governing access to and

use of information? ix. When you take information do you have a process in place to identify specific

protections?

Note: There is increasing focus on risk shifting with regards to data security and supply chain risk management. Increasingly data security, breach notification, and related indemnification obligations are included in third party vendor contracts, and corporations and insurance companies are increasingly requiring vendors and subcontractors to sign data security addenda (including law firms). 2. Protect: Protect the information you maintain, in order to limit the exposure or likelihood of

a cybersecurity incident and to limit the impact of a potential cybersecurity incident. Develop safeguards to allow you to protect and ensure continued access to your critical data. Examples of questions to consider/action items:

i. Have you limited access to information where practicable? ii. Do you have a procedure in place to immediately terminate a user’s access to

sensitive information if needed? iii. Do you have sufficient physical security? Are you tracking access to information? iv. Do you have a plan to respond to power outages or damage to or the malfunction

of your electronic systems? Are backups available offsite? Do you have a data recovery plan?

v. How frequently are you checking for and installing software application patches? vi. Are you using wireless networking? Is your router using WPA-2? Do guests use a

separate network? vii. Are you utilizing firewalls and is your server (data at rest) encrypted?

viii. What email and website filtering software do you use? ix. Can you send data in an encrypted manner?

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x. What security protections are on your computer equipment and phones? How do you dispose of devices that are damaged or have reached the end of their useful life?

xi. Training – Have initial and ongoing training regarding how to handle and protect data. Revisit policies and procedures to bring up to date with current practice. Put in place an incident response plan and data recovery plan and educate employees on what to do in order to respond to an emergency or cybersecurity incident.

3. Detect: Timely discover cybersecurity incidents. Develop and implement the appropriate

processes and procedures and utilize reasonable technology to quickly identify a cybersecurity incident. Examples of questions to consider/action items:

i. Update all incident detection software (anti-virus, anti-spyware, anti-malware). ii. Maintain and monitor logs generated by your software and also related to

information access. iii. Have clear procedures in place and a point person(s) for employees or clients to

notify of suspicious emails or contacts. iv. Consider cybersecurity assessment/testing/monitoring; conduct cost/benefit

analysis.

4. Respond: Respond to any cybersecurity incident to contain the incident and reduce any negative impact. Examples of questions to consider/action items:

i. Do you have an Incident Response Plan in place? Develop a plan when you are not in the middle of an emergency to lead your response to an incident.

i. What constitutes an incident that triggers activation of the Incident Response Plan?

ii. To whom are incidents immediately reported? iii. Who is on the response team, both internally and what third party

vendors? iv. What notification obligations are triggered? How can you help those

impacted further mitigate risk and harm? ii. Develop a plan to isolate intrusions to the extent possible.

iii. Do you have cybersecurity/data breach insurance? What are the terms of coverage? Are there any limitations on vendors you may use for coverage?

5. Recover: Recover from a cybersecurity incident and resume normal operation.

Examples of questions to consider/action items:

i. Do you have backups of your information? i. Are backups maintained offsite?

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ii. Is there the potential a cybersecurity incident could compromise your system as well as backups or are backups isolated from the network?

iii. How quickly can you restore normal function while regaining and maintaining the integrity of the system?

ii. Do you have cybersecurity/data breach insurance? What coverage is provided to assist with recovery and preparation for recovery?

iii. Review existing policies and procedures to reduce the likelihood of a repeat incident, implement additional training if needed. Identify ways to improve your processes and response.

II. LAW FIRMS AND ECONOMIC NEXUS

Since the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), law firms that engage in matters involving clients located in one or more states must become aware of the potential for state tax apportionment. Prior to the Wayfair decision, the longstanding maxim for state taxation was a required physical presence within a state (i.e., office warehouse, employees, etc.). In Wayfair, the U.S. Supreme Court ruled that a physical presence within a state is not necessary for a state to require a business to collect and remit sales tax. Instead, a certain level of economic activity such as sales or other transactions within a state may trigger a tax obligation by an out-of-state seller. From the Wayfair decision, the term “economic nexus” has been applied beyond the mere collection of sales tax on cross border transactions to income and gross receipts taxes. Currently, 40 states have adopted economic nexus laws of their own. For lawyers, the economic nexus concept may seem to pose a remote risk. However, for the representation of clients that have multiple locations in several states, some effort to understand the potential for tax apportionment is important to avoid unanticipated and unpleasant experiences. For law firms structured as “pass-through” entities such as an “S” corporation or limited liability company, the income (and corresponding tax liability) pass through to the individual owner. Therefore, partners, LLC members, and “S” corporation shareholders bear the individual risk associated with state taxation based upon their pro rata share of firm income. In the event no tax return is filed in a state where income is earned, the statute of limitations does not expire on a claim for unpaid tax. However, if the income has been reported entirely in one state, such as Virginia, and the statute of limitations has expired for the reporting years thereby barring an amended return seeking to recover an overpayment, the lawyer may find himself or herself subject to double taxation on the same income in two states. The economic nexus for services may be established within a state where the benefit of the services is to be received; often referred to as the “market-based sourcing” method. Another means of sourcing income is the “cost of performance” method.

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A majority of states in the U.S. have adopted the market-based sourcing method for services, which looks to identify the location of a client and where the benefit of the service is received. The remaining states using the “cost of performance” sourcing method look to where the service provider incurs the costs to perform the services. The impact of the Wayfair decision, rapid advancement of e-commerce and state revenue loss as a result of the COVID pandemic, have resulted in increased scrutiny by states with respect to cross-border service providers. As a result, it is important for the law firm manager to know which states may seek to tax professional fees. Recently, there have been increased enforcement activities by states where the IRS is providing Form 1099 information relative to entities paying legal fees to out-of-state lawyers. The level of activity within a state that creates a tax return filing obligation is defined by state statute and will vary with each state.

Example of State Economic Thresholds

Virginia 2019 Applies to gross revenue of retail sales and taxable services Trigger: sales or transaction of $100,000 or 200 transactions in current or prior year

North Carolina 2018 Applies to gross sales (including services sourced to the state) Trigger: sales of $100,000 or 200 transactions for prior year

Tennessee 2019 Applies to sales only (services included for trigger amount but not taxed) Trigger: $100,000 sales for prior year

West Virginia 2019 Applies to gross sales of tangible personal property or services Trigger: sales of $100,000 or 200 transactions for preceding or current year

For law firms engaged in litigation matters for clients located in multiple states or for domestic litigation requiring activities in multiple states, some determination must be made as to whether any verdict/settlement proceeds must be apportioned as multistate income. For intellectual property, tax or other commercial transactional matters where travel to an out-of-state location is not required, the determination as to the apportionment of taxable income will require some understanding of the “nexus” rules of each state.

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III. LAW FIRMS AFTER FEDERAL TAX REFORM At the end of 2017, the Tax Cuts and Jobs Act significantly changed the tax landscape for small businesses. Most law firms and law practices (which are small businesses!) are not exempt from these tide changes. How does the Tax Cuts and Jobs Act impact law firms? There are a number of tax law changes that impact law firms:

1. The reduction or elimination of deductions for meals and entertainment expenses. In 2020, the meal deductions were reinstated as part of the Consolidated Appropriations Act, however, client entertainment remains non-deductible.

2. A new limitation on the deduction of business interest expense most likely will not impact firms taxed as partnerships, but very well could impact firms taxed as corporations.

3. The pass-through deduction for partners and S corporation shareholders is only useful in certain situations because of the exclusion for law firms unless the partner/shareholder is below the income thresholds.

4. The lowering of the corporate tax rate will certainly benefit those firms that are taxed as corporations.

Should firms consider changing their structure to secure more favorable tax treatment? The changes are significant enough for businesses to go through a discernment process to determine if changing structure is an advantage under the new law. There is not a “one size fits all” answer to this question. By doing “what if” scenarios based on projected earnings and related income taxes, the law firm will be able to make a more informed decision. The issue of entity structure is complex and depends on many aspects of each particular firm. Although income taxes are certainly one of the big issues to consider, there are other items such as the firm’s management structure, liability issues, and how owners transition into and out of the firm. Most discussions revolve around converting from a partnership to a C corporation because of the lower corporate rate. While it is true that a C corporation will only pay tax at 21%, most professional service firm owners want to draw most of the income out of the business each year. They generally do not have significant capital needs that require a large investment in the firm. While any income left in the corporation will only be taxed at 21 percent, any money paid out to the owners in the future will be a dividend, taxable to the owner and not deductible by the corporation, so the combined tax rate will be at least as high as the individual rate on pass-through income. Generally, a pass-through should only consider converting if it has capital needs for a long period of time or wants to use the corporation as an investment vehicle. There are other potential issues with using the corporation as an investment vehicle that are beyond the scope of this discussion.

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What should law firms do, if anything, based on the new administration’s tax plan? At this point – nothing! The Greenbook includes a series of aggressive proposals from a tax policy perspective. Given the composition of Congress, we expect these proposals to be subject to much negotiation. It is not apparent when, or if any of these proposals will come to the debate floor. Some of these proposals include:

1. Increasing the corporate tax rate to 28% beginning for tax years after December 31, 2021.

2. Increasing long term capital gains rates to ordinary income levels.

3. Applying the3.8% investment income tax to pass through income of high-earners.

4. Repeal of like-kind exchanges.

Code of Virginia Title 18.2. Crimes and Offenses Generally Chapter 6. Crimes Involving Fraud Article 5. False Representations to Obtain Property or Credit § 18.2-186.6. Breach of personal information notification A. As used in this section: "Breach of the security of the system" means the unauthorized access and acquisition ofunencrypted and unredacted computerized data that compromises the security or confidentialityof personal information maintained by an individual or entity as part of a database of personalinformation regarding multiple individuals and that causes, or the individual or entity reasonablybelieves has caused, or will cause, identity theft or other fraud to any resident of theCommonwealth. Good faith acquisition of personal information by an employee or agent of anindividual or entity for the purposes of the individual or entity is not a breach of the security ofthe system, provided that the personal information is not used for a purpose other than a lawfulpurpose of the individual or entity or subject to further unauthorized disclosure. "Encrypted" means the transformation of data through the use of an algorithmic process into aform in which there is a low probability of assigning meaning without the use of a confidentialprocess or key, or the securing of the information by another method that renders the dataelements unreadable or unusable. "Entity" includes corporations, business trusts, estates, partnerships, limited partnerships,limited liability partnerships, limited liability companies, associations, organizations, jointventures, governments, governmental subdivisions, agencies, or instrumentalities or any otherlegal entity, whether for profit or not for profit. "Financial institution" has the meaning given that term in 15 U.S.C. § 6809(3). "Individual" means a natural person. "Notice" means: 1. Written notice to the last known postal address in the records of the individual or entity; 2. Telephone notice; 3. Electronic notice; or 4. Substitute notice, if the individual or the entity required to provide notice demonstrates thatthe cost of providing notice will exceed $50,000, the affected class of Virginia residents to benotified exceeds 100,000 residents, or the individual or the entity does not have sufficientcontact information or consent to provide notice as described in subdivisions 1, 2, or 3 of thisdefinition. Substitute notice consists of all of the following: a. E-mail notice if the individual or the entity has e-mail addresses for the members of theaffected class of residents; b. Conspicuous posting of the notice on the website of the individual or the entity if theindividual or the entity maintains a website; and

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c. Notice to major statewide media. Notice required by this section shall not be considered a debt communication as defined by theFair Debt Collection Practices Act in 15 U.S.C. § 1692a. Notice required by this section shall include a description of the following: (1) The incident in general terms; (2) The type of personal information that was subject to the unauthorized access and acquisition; (3) The general acts of the individual or entity to protect the personal information from furtherunauthorized access; (4) A telephone number that the person may call for further information and assistance, if oneexists; and (5) Advice that directs the person to remain vigilant by reviewing account statements andmonitoring free credit reports. "Personal information" means the first name or first initial and last name in combination withand linked to any one or more of the following data elements that relate to a resident of theCommonwealth, when the data elements are neither encrypted nor redacted: 1. Social security number; 2. Driver's license number or state identification card number issued in lieu of a driver's licensenumber; 3. Financial account number, or credit card or debit card number, in combination with anyrequired security code, access code, or password that would permit access to a resident's financialaccounts; 4. Passport number; or 5. Military identification number. The term does not include information that is lawfully obtained from publicly availableinformation, or from federal, state, or local government records lawfully made available to thegeneral public. "Redact" means alteration or truncation of data such that no more than the following areaccessible as part of the personal information: 1. Five digits of a social security number; or 2. The last four digits of a driver's license number, state identification card number, or accountnumber. B. If unencrypted or unredacted personal information was or is reasonably believed to have beenaccessed and acquired by an unauthorized person and causes, or the individual or entityreasonably believes has caused or will cause, identity theft or another fraud to any resident of theCommonwealth, an individual or entity that owns or licenses computerized data that includespersonal information shall disclose any breach of the security of the system following discoveryor notification of the breach of the security of the system to the Office of the Attorney General

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and any affected resident of the Commonwealth without unreasonable delay. Notice required bythis section may be reasonably delayed to allow the individual or entity to determine the scope ofthe breach of the security of the system and restore the reasonable integrity of the system. Noticerequired by this section may be delayed if, after the individual or entity notifies a law-enforcement agency, the law-enforcement agency determines and advises the individual orentity that the notice will impede a criminal or civil investigation, or homeland or nationalsecurity. Notice shall be made without unreasonable delay after the law-enforcement agencydetermines that the notification will no longer impede the investigation or jeopardize national orhomeland security. C. An individual or entity shall disclose the breach of the security of the system if encryptedinformation is accessed and acquired in an unencrypted form, or if the security breach involves aperson with access to the encryption key and the individual or entity reasonably believes thatsuch a breach has caused or will cause identity theft or other fraud to any resident of theCommonwealth. D. An individual or entity that maintains computerized data that includes personal informationthat the individual or entity does not own or license shall notify the owner or licensee of theinformation of any breach of the security of the system without unreasonable delay followingdiscovery of the breach of the security of the system, if the personal information was accessedand acquired by an unauthorized person or the individual or entity reasonably believes thepersonal information was accessed and acquired by an unauthorized person. E. In the event an individual or entity provides notice to more than 1,000 persons at one timepursuant to this section, the individual or entity shall notify, without unreasonable delay, theOffice of the Attorney General and all consumer reporting agencies that compile and maintainfiles on consumers on a nationwide basis, as defined in 15 U.S.C. § 1681a (p), of the timing,distribution, and content of the notice. F. An entity that maintains its own notification procedures as part of an information privacy orsecurity policy for the treatment of personal information that are consistent with the timingrequirements of this section shall be deemed to be in compliance with the notificationrequirements of this section if it notifies residents of the Commonwealth in accordance with itsprocedures in the event of a breach of the security of the system. G. An entity that is subject to Title V of the Gramm-Leach-Bliley Act (15 U.S.C. § 6801 et seq.)and maintains procedures for notification of a breach of the security of the system in accordancewith the provision of that Act and any rules, regulations, or guidelines promulgated thereto shallbe deemed to be in compliance with this section. H. An entity that complies with the notification requirements or procedures pursuant to therules, regulations, procedures, or guidelines established by the entity's primary or functionalstate or federal regulator shall be in compliance with this section. I. Except as provided by subsections J and K, pursuant to the enforcement duties and powers ofthe Office of the Attorney General, the Attorney General may bring an action to addressviolations of this section. The Office of the Attorney General may impose a civil penalty not toexceed $150,000 per breach of the security of the system or a series of breaches of a similarnature that are discovered in a single investigation. Nothing in this section shall limit anindividual from recovering direct economic damages from a violation of this section.

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J. A violation of this section by a state-chartered or licensed financial institution shall beenforceable exclusively by the financial institution's primary state regulator. K. Nothing in this section shall apply to an individual or entity regulated by the StateCorporation Commission's Bureau of Insurance. L. The provisions of this section shall not apply to criminal intelligence systems subject to therestrictions of 28 C.F.R. Part 23 that are maintained by law-enforcement agencies of theCommonwealth and the organized Criminal Gang File of the Virginia Criminal InformationNetwork (VCIN), established pursuant to Chapter 2 (§ 52-12 et seq.) of Title 52. M. Notwithstanding any other provision of this section, any employer or payroll service providerthat owns or licenses computerized data relating to income tax withheld pursuant to Article 16 (§58.1-460 et seq.) of Chapter 3 of Title 58.1 shall notify the Office of the Attorney General withoutunreasonable delay after the discovery or notification of unauthorized access and acquisition ofunencrypted and unredacted computerized data containing a taxpayer identification number incombination with the income tax withheld for that taxpayer that compromises theconfidentiality of such data and that creates a reasonable belief that an unencrypted andunredacted version of such information was accessed and acquired by an unauthorized person,and causes, or the employer or payroll provider reasonably believes has caused or will cause,identity theft or other fraud. With respect to employers, this subsection applies only toinformation regarding the employer's employees, and does not apply to information regardingthe employer's customers or other non-employees. Such employer or payroll service provider shall provide the Office of the Attorney General withthe name and federal employer identification number of the employer as defined in § 58.1-460that may be affected by the compromise in confidentiality. Upon receipt of such notice, theOffice of the Attorney General shall notify the Department of Taxation of the compromise inconfidentiality. The notification required under this subsection that does not otherwise requirenotification under this section shall not be subject to any other notification, requirement,exemption, or penalty contained in this section. 2008, cc. 566, 801;2017, cc. 419, 427;2019, c. 484;2020, c. 264. The chapters of the acts of assembly referenced in the historical citation at the end of thissection(s) may not constitute a comprehensive list of such chapters and may exclude chapterswhose provisions have expired.

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http://lis.virginia.gov/cgi-bin/legp604.exe?081+ful+CHAP0566









Rule 1.6 - Professional Guidelines and Rules of Conduct

Rule 1.6

Confidentiality of Information

(a) A lawyer shall not reveal information protected by the attorney-client privilege under applicable law or otherinformation gained in the professional relationship that the client has requested be held inviolate or the disclosure ofwhich would be embarrassing or would be likely to be detrimental to the client unless the client consents afterconsultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except asstated in paragraphs (b) and (c).(b) To the extent a lawyer reasonably believes necessary, the lawyer may reveal:

(1) such information to comply with law or a court order;(2) such information to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer andthe client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in whichthe client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of theclient;(3) such information which clearly establishes that the client has, in the course of the representation, perpetratedupon a third party a fraud related to the subject matter of the representation;(4) such information reasonably necessary to protect a client’s interests in the event of the representing lawyer’sdeath, disability, incapacity or incompetence;(5) such information sufficient to participate in a law office management assistance program approved by theVirginia State Bar or other similar private program;(6) information to an outside agency necessary for statistical, bookkeeping, accounting, data processing, printing, orother similar office management purposes, provided the lawyer exercises due care in the selection of the agency,advises the agency that the information must be kept confidential and reasonably believes that the information willbe kept confidential;(7) such information to prevent reasonably certain death or substantial bodily harm.

(c) A lawyer shall promptly reveal:(1) the intention of a client, as stated by the client, to commit a crime reasonably certain to result in death orsubstantial bodily harm to another or substantial injury to the financial interests or property of another and theinformation necessary to prevent the crime, but before revealing such information, the attorney shall, wherefeasible, advise the client of the possible legal consequences of the action, urge the client not to commit the crime,and advise the client that the attorney must reveal the client's criminal intention unless thereupon abandoned.However, if the crime involves perjury by the client, the attorney shall take appropriate remedial measures asrequired by Rule 3.3; or(2) information concerning the misconduct of another attorney to the appropriate professional authority under Rule8.3. When the information necessary to report the misconduct is protected under this Rule, the attorney, afterconsultation, must obtain client consent. Consultation should include full disclosure of all reasonably foreseeableconsequences of both disclosure and non-disclosure to the client.

(d) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorizedaccess to, information protected under this Rule.

Comment

[1] The lawyer is part of a judicial system charged with upholding the law. One of the lawyer's functions is to advise clients sothat they avoid any violation of the law in the proper exercise of their rights.

[2] The common law recognizes that the client's confidences must be protected from disclosure. The observance of the ethicalobligation of a lawyer to hold inviolate confidential information of the client not only facilitates the full development of factsessential to proper representation of the client but also encourages people to seek early legal assistance.

[2a] Almost without exception, clients come to lawyers in order to determine what their rights are and what is, in the maze oflaws and regulations, deemed to be legal and correct. Based upon experience, lawyers know that clients usually follow theadvice given, and the law is upheld.

[2b] A fundamental principle in the client-lawyer relationship is that the lawyer maintain confidentiality of information relatingto the representation. The client is thereby encouraged to communicate fully and frankly with the lawyer even as toembarrassing or legally damaging subject matter.

[3] The principle of confidentiality is given effect in two related bodies of law, the attorney-client privilege (which includes thework product doctrine) in the law of evidence and the rule of confidentiality established in professional ethics. The attorney-client privilege applies in judicial and other proceedings in which a lawyer may be called as a witness or otherwise required toproduce evidence concerning a client. The rule of client-lawyer confidentiality applies in situations other than those whereevidence is sought from the lawyer through compulsion of law. The confidentiality rule applies not merely to matterscommunicated in confidence by the client but also to all information protected by the attorney-client privilege under applicablelaw or other information gained in the professional relationship that the client has requested be held inviolate or the disclosureof which would be embarrassing or would be likely to be detrimental to the client, whatever its source. A lawyer may notdisclose such information except as authorized or required by the Rules of Professional Conduct or other law.

[3a] The rules governing confidentiality of information apply to a lawyer who represents an organization of which the lawyer is

Rule 1.6 - Professional Guidelines and Rules of Conduct https://www.vsb.org/pro-guidelines/index.php/rules/client-lawyer-relatio...

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an employee.

[4] The requirement of maintaining confidentiality of information relating to representation applies to government lawyerswho may disagree with the policy goals that their representation is designed to advance.

Authorized Disclosure

[5] A lawyer is impliedly authorized to make disclosures about a client when appropriate in carrying out the representation,except to the extent that the client's instructions or special circumstances limit that authority. In litigation, for example, alawyer may disclose information by admitting a fact that cannot properly be disputed, or in negotiation by making a disclosurethat facilitates a satisfactory conclusion.

[5a] Lawyers frequently need to consult with colleagues or other attorneys in order to competently represent their clients’interests. An overly strict reading of the duty to protect client information would render it difficult for lawyers to consult witheach other, which is an important means of continuing professional education and development. A lawyer should exercise greatcare in discussing a client’s case with another attorney from whom advice is sought. Among other things, the lawyer shouldconsider whether the communication risks a waiver of the attorney-client privilege or other applicable protections. The lawyershould endeavor when possible to discuss a case in strictly hypothetical or abstract terms. In addition, prior to seeking advicefrom another attorney, the attorney should take reasonable steps to determine whether the attorney from whom advice issought has a conflict. The attorney from whom advice is sought must be careful to protect the confidentiality of the informationgiven by the attorney seeking advice and must not use such information for the advantage of the lawyer or a third party.

[5b] Compliance with Rule 1.6(a) might include fulfilling duties under Rule 1.14, regarding a client with an impairment.

[5c] Compliance with Rule 1.6(b)(5) might require a written confidentiality agreement with the outside agency to which thelawyer discloses information.

[6] Lawyers in a firm may, in the course of the firm's practice, disclose to each other information relating to a client of the firm,unless the client has instructed that particular information be confined to specified lawyers.

[6a] Lawyers involved in insurance defense work that includes submission of detailed information regarding the client’s case toan auditing firm must be extremely careful to gain consent from the client after full and adequate disclosure. Client consent toprovision of information to the insurance carrier does not equate with consent to provide the information to an outside auditor.The lawyer must obtain specific consent to disclose the information to that auditor. Pursuant to the lawyer’s duty of loyalty tothe client, the lawyer should not recommend that the client provide such consent if the disclosure to the auditor would in someway prejudice the client. Legal Ethics Opinion #1723, approved by the Supreme Court of Virginia, September 29, 1999.

Disclosure Adverse to Client

[6b] The confidentiality rule is subject to limited exceptions. However, to the extent a lawyer is required or permitted todisclose a client's confidences, the client will be inhibited from revealing facts which would enable the lawyer to counsel againsta wrongful course of action. The public is better protected if full and open communication by the client is encouraged than if itis inhibited.

[7] Several situations must be distinguished.

[7a] First, the lawyer may not counsel or assist a client in conduct that is criminal or fraudulent. See Rule 1.2(c). Similarly, alawyer has a duty under Rule 3.3(a)(4) not to use false evidence. This duty is essentially a special instance of the dutyprescribed in Rule 1.2(c) to avoid assisting a client in criminal or fraudulent conduct.

[7b] Second, the lawyer may have been innocently involved in past conduct by the client that was criminal or fraudulent. Insuch a situation the lawyer has not violated Rule 1.2(c), because to "counsel or assist" criminal or fraudulent conduct requiresknowing that the conduct is of that character.

[7c] Third, the lawyer may learn that a client intends prospective criminal conduct. As stated in paragraph (c)(1), the lawyer isobligated to reveal such information if the crime is reasonably certain to result in death or substantial bodily harm to another orsubstantial injury to the financial interests or property of another. Caution is warranted as it is very difficult for a lawyer to"know" when proposed criminal conduct will actually be carried out, for the client may have a change of mind. If the client’sintended crime is perjury, the lawyer must look to Rule 3.3(a)(4) rather than paragraph (c)(1).

[8] When considering disclosure under paragraph (b), the lawyer should weigh such factors as the nature of the lawyer'srelationship with the client and with those who might be injured by the client, the nature of the client's intended conduct, thelawyer's own involvement in the transaction, and factors that may extenuate the conduct in question. Where practical, thelawyer should seek to persuade the client to take appropriate action. In any case, a disclosure adverse to the client's interestshould be no greater than the lawyer reasonably believes necessary to the purpose.

[8a] Paragraph (b)(7) recognizes the overriding value of life and physical integrity and permits disclosure reasonably necessaryto prevent reasonably certain death or substantial bodily harm. Such harm is reasonably certain to occur if it will be sufferedimminently or if there is a present and substantial threat that a person will suffer such harm at a later date if the lawyer fails totake action necessary to eliminate the threat.

Withdrawal

[9] If the lawyer's services will be used by the client in materially furthering a course of criminal or fraudulent conduct, thelawyer must withdraw, as stated in Rule 1.16(a)(1).


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[9a] After withdrawal the lawyer is required to refrain from making disclosure of the client's confidences, except as otherwiseprovided in Rule 1.6. Neither this Rule nor Rule 1.8(b) nor Rule 1.16(d) prevents the lawyer from giving notice of the fact ofwithdrawal, and the lawyer may also withdraw or disaffirm any opinion, document, affirmation, or the like.

[9b] Where the client is an organization, the lawyer may be in doubt whether contemplated conduct will actually be carried outby the organization. Where necessary to guide conduct in connection with this Rule, the lawyer may make inquiry within theorganization as indicated in Rule 1.13(b).

Dispute Concerning a Lawyer's Conduct

[10] Where a legal claim or disciplinary charge alleges complicity of the lawyer in a client's conduct or other misconduct of thelawyer involving representation of the client, the lawyer may respond to the extent the lawyer reasonably believes necessary toestablish a defense. The same is true with respect to a claim involving the conduct or representation of a former client. Thelawyer's right to respond arises when an assertion of such complicity has been made. Paragraph (b)(2) does not require thelawyer to await the commencement of an action or proceeding that charges such complicity, so that the defense may beestablished by responding directly to a third party who has made such an assertion. The right to defend, of course, applieswhere a proceeding has been commenced. Where practicable and not prejudicial to the lawyer's ability to establish the defense,the lawyer should advise the client of the third party's assertion and request that the client respond appropriately. In any event,disclosure should be no greater than the lawyer reasonably believes is necessary to vindicate innocence, the disclosure shouldbe made in a manner which limits access to the information to the tribunal or other persons having a need to know it, andappropriate protective orders or other arrangements should be sought by the lawyer to the fullest extent practicable.

[10a] If the lawyer is charged with wrongdoing in which the client's conduct is implicated, the rule of confidentiality should notprevent the lawyer from defending against the charge. Such a charge can arise in a civil, criminal or professional disciplinaryproceeding, and can be based on a wrong allegedly committed by the lawyer against the client, or on a wrong alleged by a thirdperson; for example, a person claiming to have been defrauded by the lawyer and client acting together. A lawyer entitled to afee is permitted by paragraph (b)(2) to prove the services rendered in an action to collect it. This aspect of the Rule expressesthe principle that the beneficiary of a fiduciary relationship may not exploit it to the detriment of the fiduciary. As stated above,the lawyer must make every effort practicable to avoid unnecessary disclosure of information relating to a representation, tolimit disclosure to those having the need to know it, and to obtain protective orders or make other arrangements minimizingthe risk of disclosure.

Disclosures Otherwise Required or Authorized

[11] If a lawyer is called as a witness to give testimony concerning a client, absent waiver by the client, paragraph (a) requiresthe lawyer to invoke the attorney-client privilege when it is applicable. Except as permitted by Rule 3.4(d), the lawyer mustcomply with the final orders of a court or other tribunal of competent jurisdiction requiring the lawyer to give informationabout the client.

[12] The Rules of Professional Conduct in various circumstances permit or require a lawyer to disclose information relating tothe representation. See Rules 2.3, 3.3 and 4.1. In addition to these provisions, a lawyer may be obligated or permitted by otherprovisions of law to give information about a client. Whether another provision of law supersedes Rule 1.6 is a matter ofinterpretation beyond the scope of these Rules, but a presumption should exist against such a supersession.

Attorney Misconduct

[13] Self-regulation of the legal profession occasionally places attorneys in awkward positions with respect to their obligationsto clients and to the profession. Paragraph (c)(2) requires an attorney who has information indicating that another attorney hasviolated the Rules of Professional Conduct, learned during the course of representing a client and protected as a confidence orsecret under Rule 1.6, to request the permission of the client to disclose the information necessary to report the misconduct todisciplinary authorities. In requesting consent, the attorney must inform the client of all reasonably foreseeable consequencesof both disclosure and non-disclosure.

[14] Although paragraph (c)(2) requires that authorized disclosure be made promptly, a lawyer does not violate this Rule bydelaying in reporting attorney misconduct for the minimum period of time necessary to protect a client's interests. Forexample, a lawyer might choose to postpone reporting attorney misconduct until the end of litigation when reporting duringlitigation might harm the client's interests.

[15 - 17] ABA Model Rule Comments not adopted.

Former Client

[18] The duty of confidentiality continues after the client-lawyer relationship has terminated.

Acting Reasonably to Preserve Confidentiality

[19] Paragraph (d) requires a lawyer to act reasonably to safeguard information protected under this Rule againstunauthorized access by third parties and against inadvertent or unauthorized disclosure by the lawyer or other persons who areparticipating in the representation of the client or who are subject to the lawyer’s supervision. See Rules 1.1, 5.1 and 5.3. Theunauthorized access to, or the inadvertent or unauthorized disclosure of, confidential information does not constitute aviolation of this Rule if the lawyer has made reasonable efforts to prevent the access or disclosure. Factors to be considered indetermining the reasonableness of the lawyer’s efforts include, but are not limited to, the sensitivity of the information, thelikelihood of disclosure if additional safeguards are not employed, the employment or engagement of persons competent withtechnology, the cost of employing additional safeguards, the difficulty of implementing the safeguards, and the extent to whichthe safeguards adversely affect the lawyer’s ability to represent clients (e.g., by making a device or important piece of software


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excessively difficult to use).

[19a] Whether a lawyer may be required to take additional steps to safeguard a client’s information in order to comply withother laws, such as state and federal laws that govern data privacy or that impose notification requirements upon the loss of, orunauthorized access to, electronic information, is beyond the scope of this Rule.

[20] Paragraph (d) makes clear that a lawyer is not subject to discipline under this Rule if the lawyer has made reasonableefforts to protect electronic data, even if there is a data breach, cyber-attack or other incident resulting in the loss, destruction,misdelivery or theft of confidential client information. Perfect online security and data protection is not attainable. Even largebusinesses and government organizations with sophisticated data security systems have suffered data breaches. Nevertheless,security and data breaches have become so prevalent that some security measures must be reasonably expected of allbusinesses, including lawyers and law firms. Lawyers have an ethical obligation to implement reasonable information securitypractices to protect the confidentiality of client data. What is “reasonable” will be determined in part by the size of the firm. SeeRules 5.1(a)-(b) and 5.3(a)-(b). The sheer amount of personal, medical and financial information of clients kept by lawyers andlaw firms requires reasonable care in the communication and storage of such information. A lawyer or law firm complies withparagraph (d) if they have acted reasonably to safeguard client information by employing appropriate data protection measuresfor any devices used to communicate or store client confidential information.

To comply with this Rule, a lawyer does not need to have all the required technology competencies. The lawyer can and morelikely must turn to the expertise of staff or an outside technology professional. Because threats and technology both change,lawyers should periodically review both and enhance their security as needed; steps that are reasonable measures whenadopted may become outdated as well.

[21] Because of evolving technology, and associated evolving risks, law firms should keep abreast on an ongoing basis ofreasonable methods for protecting client confidential information, addressing such practices as:

(a) Periodic staff security training and evaluation programs, including precautions and procedures regarding data security;

(b) Policies to address departing employee’s future access to confidential firm data and return of electronically storedconfidential data;

(c) Procedures addressing security measures for access of third parties to stored information;

(d) Procedures for both the backup and storage of firm data and steps to securely erase or wipe electronic data from computingdevices before they are transferred, sold, or reused;

(e) The use of strong passwords or other authentication measures to log on to their network, and the security of password andauthentication measures; and

(f) The use of hardware and/or software measures to prevent, detect and respond to malicious software and activity.

Virginia Code Comparison

Rule 1.6 retains the two-part definition of information subject to the lawyer's ethical duty of confidentiality. EC 4-4 added thatthe duty differed from the evidentiary privilege in that it existed "without regard to the nature or source of information or thefact that others share the knowledge." However, the definition of "client information" as set forth in the ABA Model Rules,which includes all information "relating to" the representation, was rejected as too broad.

Paragraph (a) permits a lawyer to disclose information where impliedly authorized to do so in order to carry out therepresentation. Under DR 4-101(B) and (C), a lawyer was not permitted to reveal "confidences" unless the client first consentedafter disclosure.

Paragraph (b)(1) is substantially the same as DR 4-101(C)(2).

Paragraph (b)(2) is substantially similar to DR 4-101(C)(4) which authorized disclosure by a lawyer of "[c]onfidences or secretsnecessary to establish the reasonableness of his fee or to defend himself or his employees or associates against an accusation ofwrongful conduct."

Paragraph (b)(3) is substantially the same as DR 4-101(C)(3).

Paragraph (b)(4) had no counterpart in the Virginia Code.

Paragraphs (c)(1) and (c)(2) are substantially the same as DR 4-101(D).

Paragraph (c)(3) had no counterpart in the Virginia Code.

Committee Commentary

The Committee added language to this Rule from DR 4-101 to make the disclosure provisions more consistent with currentVirginia policy. The Committee specifically concluded that the provisions of DR 4-101(D) of the Virginia Code, which requiredbroader disclosure than the ABA Model Rule even permitted, should be added as paragraph (c). Additionally, to promote theintegrity of the legal profession, the Committee adopted new language as paragraph (c)(3) setting forth the circumstancesunder which a lawyer must report the misconduct of another lawyer when such a report may require disclosure of privilegedinformation.

The amendments effective January 1, 2004, added present paragraph (b)(4) and redesignated former paragraphs (b)(4)


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and (5) as present (b)(5) and (6); in paragraph (c)(3), at end of first sentence, deleted “but only if the client consents afterconsultation,” added the present second sentence, and deleted the former last sentence which read, “Under this paragraph, anattorney is required to request the consent of a client to disclose information necessary to report the misconduct of anotherattorney.”; added Comment [5b] and [6a]; rewrote Comment [13].

The amendments effective March 1, 2016, added paragraph 1.6 (d); added “Acting Reasonably to PreserveConfidentiality” before adding Comments [19], [19a], [20] and [21] paragraphs “a” through “f”.

The amendments effective December 1, 2016, added paragraph (7); in paragraph (c)(1) added the language “reasonablycertain to result in death or substantial bodily harm to another or substantial injury to the financial interests or property ofanother”, and rewrote the last sentence of the paragraph; deleted former paragraph (2) and redesignated former paragraph (3)as present paragraph (2); added the language to comment [7c] “if the crime is reasonably certain to result in death orsubstantial bodily harm to another or substantial injury to the financial interests or property of another”, substituted thelanguage “Caution” is “warranted” in place of “Some discretion is involved”, and added the last sentence; in Comment [8]deleted the language “The lawyer’s exercise of discretion requires consideration of” and replaced it with “When consideringdisclosure under paragraph (b), the lawyer should weigh”, and added the language “and with those who might be injured by theclient”; added Comment [8a]; and in Comments [13] and [14] substituted the language “(c)(3)” with “(c)(2)”.

Updated: November 29, 2016


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9

Consideraons for Commercial Contracts in a Post-COVID-19 World

Presented by:

Maxwell H. [email protected]

Hugh H. [email protected]

1

Considerations for Commercial Contracts in a Post-COVID-19 World


Maxwell H. Wiegard, Esq. Hugh H. Brown, Esq.

I. Introduction:

(a) The purpose of this presentation is to identify certain issues that should be reviewed and considered in connection with the drafting of commercial contracts, based on our experiences assisting clients deal with the effects of the COVID-19 pandemic, including unexpected delays and nonperformance of contractual obligations.

(b) The goal of this presentation is to help you understand how to develop a strategy

for protecting your clients and their interests from unexpected delays and nonperformance through careful drafting of key contractual provisions.

II. Overview of Excuses for Delayed Performance and Nonperformance of Contractual

Obligations:

(a) “Supervening Events”: Supervening events are events that occur after a contract has been executed but before the time complete performance becomes due.

(b) Allocation of Risk for Supervening Events: Statutory and Common-law Default

Rules vs. Express Contractual Provisions

(i) Examples of Statutory and Common-law Default Rules (1) Impracticability: A supervening event changes the inherent nature

of performance to be more difficult, complex, or challenging, contravening a basic assumption of the parties' agreement. As a result, the cost of performing increases excessively and unreasonably. These changes render performance commercially senseless and can excuse performance.

(2) Impossibility: Performance is no longer possible because of a

supervening event. (3) Frustration of Purpose: One party's known principal purpose for

entering a transaction has been obviated by a supervening event.

(ii) Express Contractual Provisions: The parties to an agreement expressly allocate the risk of loss for supervening events among themselves in the agreement.

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(1) Force Majeure Clauses: The most common example of such an

express contractual provision is the “Force Majeure” clause. Force majeure clauses allocate the risk of certain events, such as acts of God, hurricanes, earthquakes, and other natural disasters, terrorism, government acts, embargoes, labor strikes and lock-outs, and other events beyond the control of the parties.

III. Contractual Provisions Warranting Careful Consideration in a Post-COVID-19

Marketplace: (a) “Time is of the essence” clauses (“TOE” clauses):

(i) If the contract contains an enforceable TOE clause, the breaching party's failure to comply in a timely manner with the underlying obligation results in a material breach of the agreement. When one party breaches a material obligation, the injured party may be entitled to a claim for breach of contract, damages incurred by the delay or failure to perform, or be entitled to terminate the contract.

(ii) Types of TOE clauses:

(1) Express: Specific vs. General Express Clauses

- Specific Express TOE Clauses are narrowly drafted clauses stating that time is of the essence for specific obligations in the agreement.

- General Express TOE Clauses generally state that time is of the essence in the agreement without specifically identifying any particular obligation, and are often found unenforceable.

(2) Implied TOE Clauses: If the purpose of the agreement, or the

circumstances surrounding it, indicate that the parties intended timing to be a material condition, courts may find that timing is implied as essential to the agreement. Common situations in which implied TOE Clauses may be read into an agreement include when the subject of a sale has a fluctuating value or when a delay in performance would cause one party to suffer a serious loss.

(iii) Enforceability of TOE clauses generally depends on:

(1) Whether the parties clearly intended for time of performance to be an essential obligation of the agreement, which will often depend on factors including the language of the agreement itself or the type of agreement (i.e., sale of goods vs. real property); and

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(2) Equitable factors and the circumstances surrounding the breach

including:

- The extent to which the injured party is deprived of a reasonably expected benefit.

- The extent to which the injured party can be compensated.

- The extent to which the party failing to perform experiences forfeiture.

- The likelihood that the party who failed to perform cures its

failure.

- Whether the behavior of the party who failed to perform comports with standards of good faith and fair dealing.

(iv) Key considerations for drafting TOE clauses:

(1) Specificity: Specific TOE Clauses are more likely to be found enforceable. The more specific the clause, the less room there is for ambiguity or disagreement between the parties over its meaning.

(2) Consistency: Similarly, it is important to ensure that the TOE

Clause does not conflict with other provisions of the agreement (e.g., grace periods or notice requirements) to avoid ambiguity and the possibility that the clause could be interpreted in multiple ways.

(b) “Force Majeure” Clauses:

(i) As stated above, the purpose of Force Majeure clauses is to allocate the risk of loss caused by certain superseding events between the parties to the agreement.

(ii) Key considerations when drafting and interpreting Force Majeure clauses

include:

(1) Whether a pandemic, or similar event is specifically listed as a force majeure event in the agreement. a. Whether an event must be declared a pandemic or epidemic by

the WHO, the CDC, the Virginia Department of Health, or some other agency to qualify as a pandemic or epidemic.

b. How national, state, or local emergency declarations related to a health emergency will affect the parties’ rights and obligations

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under force majeure provisions related to pandemic or epidemic events.

c. What is the appropriate source of definitions of an epidemic and pandemic used in the contract?

(2) Whether the force majeure clause contains catch-all wording.

a. In other words, whether excusable events or force majeure

events should expressly include the effects of certain events that may or may not directly relate to a pandemic or epidemic, including:

i. labor shortages;

ii. disruptions in supplies; or

iii. the inability of personnel to work on a particular project.

(3) Whether the contract excludes foreseeable events. (4) Whether causation has to be established for the clause to be given

effect. (5) Whether there is any duty to mitigate. (6) Whether the clause contains exclusions, i.e. whether the clause

excuses a party’s performance entirely or excuses only the party’s payment obligations.

(7) What are a party’s notice obligations to the other party regarding the

occurrence of a force majeure event that delays or prevents performance?

(8) What are the consequences of a Force Majeure event? Does the

occurrence of the event provide temporary relief from performance or give the party the right to terminate the contract?

(c) Insurance Coverage: The COVID-19 pandemic also re-emphasized the importance

of including provisions in the agreement specifying the amounts and kinds of insurance coverage the parties should obtain to protect against unanticipated occurrences. The parties to an agreement should review their policies to determine if they have coverage for losses related to COVID-19 or similar occurrences. Such a policy will typically require the insured to give prompt notice to the insurer and take steps to mitigate its loss or damage, so it is important to identify these

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requirements early. Some potentially applicable policies for COVID-19 related losses include:

(i) Business Interruption Insurance (BI): This provides coverage for losses a

company sustains due to a business stoppage or slowdown caused by direct physical loss or damage to insured property.

(ii) Supply Chain Insurance: This provides coverage against losses resulting

from disruptions in a company's supply chain, but there are often limits or exclusions to these policies that the insured must check.

(iii) Commercial General Liability Insurance: This coverage for third-party

claims alleging bodily injury, property damage, or personal injury can apply, for example, if a company faces a claim that its negligence led to COVID-19 exposure and infection of customers.

(iv) Additional Insureds: It will also be important to ensure that any party at

risk of suffering a loss that is not the holder of the applicable insurance policy is listed as an “additional insured” on each such policy.

(d) Indemnification Obligations: Parties to an agreement often use a contractual

indemnity provision as an additional way to customize risk allocation. Indemnification clauses are generally heavily negotiated provisions, but typically include the indemnifying party’s promise to reimburse the indemnified party from and against "losses, liabilities, claims, and causes of action" incurred by the indemnified party that "are caused by," "arise from," or are "related to" the specified events giving rise to the indemnity.

IV. Effects of COVID-19 on Contractual Provisions in Our Practices:

(a) Construction Contracts:

(1) Properly documenting terms and conditions for performance under supply contracts;

(2) Clearly defining “excusable delay”; and (3) Provisions addressing adjustments in compensation and price fluctuations

related to delays in performance.

(b) Contracts for Purchase and Sale of Goods and Services:

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(1) Revise purchase order forms to set customers’ expectations regarding whether time is of the essence in connection with the certain obligations of the seller or vendor.

(2) Address potential delays resulting from labor shortages, materials shortages, container shortages, limitations on travel and physical distancing requirements under government orders, (including the closing of borders to foreign vessels, travelers or goods), and whether such delays are excusable, in purchase orders and related contracts for goods and services.

(3) Address the remedy for excusable and inexcusable delays in purchase

orders and related contracts for goods and services.

a. Are contemplated extensions of time for performance of a seller’s or vendor’s obligations sufficient to address the adverse effects of delays resulting from an epidemic or pandemic?

b. If not, what other remedies are appropriate?

i. Is there a point at which contract termination rights would be appropriate?

(4) Expressly address which party bears the risk of fluctuations in price resulting from delayed performance of the seller or vendor’s obligations under a purchase order or related contracts for goods and services.

(c) Commercial Lending & Purchase and Sale Agreements:

(1) Some businesses are being bought and sold during the periods of time for

which they qualify for forgiveness of Paycheck Protection Program Loans administered by the United State Small Business Administration.

(2) Take care to draft contractual provisions expressly addressing and

separately accounting for the status of PPP Loan proceeds and the status of related PPP Loan forgiveness applications to avoid conflict with and violation of the PPP Loan forgiveness application process, which may introduce serious pitfalls for Purchasers, Sellers, Lenders and Borrowers.

(3) In M&A transactions involving the acquisition of stock or membership

interest, purchasers should require express representations and warranties regarding the status and use of PPP Loan proceeds, and agreement schedules identifying costs paid with PPP Loan proceeds.

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Sources: 1. Excuses for Non-Performance: Conditions Following Contract Formation (Westlaw PL). 2. Brian D. Carlson, Off the hook: Contractual performance excused due to COVID, Virginia Lawyers Weekly (June 21, 2021), https://valawyersweekly.com/2021/06/21/off-the-hook-contractual-performance-excused-due-to-covid/ 3. Commercial and Contract Law Implications of the COVID-19 Pandemic (Westlaw PL). 4. Time of the Essence in Commercial Contracts (Westlaw PL). 5. Damages for Breach of Commercial Contracts Checklist (Westlaw PL). 6. Interpretation of Force Majeure Provisions and Future Contract Drafting Considerations (Westlaw PL). 7. Force Majeure State Case Law Summary Chart: Overview (Westlaw PL).

10

Current Trends in White Collar Enforcement Acons:

The Criminal Implicaons of Sales in the ‘New’ Highly Regulated Industries

Presented by:

Erin M. [email protected]

Jennifer S. [email protected]

1

Current Trends in White Collar Enforcement Actions:

The Criminal Implications of Sales in the “New” Highly Regulated Industries


Erin Harrigan Jennifer DeGraw

I. Introduction

White collar enforcement historically focused in a few highly regulated

industries – like health care, banking and defense contracting, or around a few well-worn criminal statutes – like mail and wire fraud and tax fraud. Increasingly, however, federal criminal enforcement actions are branching out to new industries, and new targets. The rising prominence of medication assisted treatment in response to the opioid crisis has put a whole new set of pharmaceutical manufacturers, and their individual corporate officers, in the investigatory spotlight. The cannabis industry, burgeoning nationally under a rapidly growing number of states legalizing marijuana sales, is facing the increasing scrutiny of the Food & Drug Administration and the Federal Trade Commission. The COVID-19 pandemic brought federal regulatory oversight to a whole host of industries with little experience running robust compliance operations. States Attorney Generals have started running headlong into white collar investigations that used to be pursued only by federal prosecutors.

In this presentation, we will explore some of these recent white collar trends in Virginia, and identify areas that attorneys need to flag for a closer look with their business clients.

II. Food, Drug, Cosmetic Act Enforcement (Misbranding & Adulterating)

A. The Food, Drug, and Cosmetic Act (FDCA) Generally

1. The FDCA criminalizes the introduction of adulterated or misbranded food, drugs, tobacco products, or cosmetics into interstate commerce. 21 U.S.C. § 331(a).

a. Adulteration & Misbranding can include inadequate information to provide assurance an ingredient is not an unreasonable risk of illness/injury.

2. The FDCA covers all advertising, product labeling, directions for use and consumption, website testimonials, etc., and applies to all pharmaceutical and cosmetic products, even over-the-counter products.

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a. The FDCA provides guidelines for manufacturing any food, drug or cosmetic safely. 21 U.S.C. § 501 (Drugs); 21 U.S.C. § 601 (Cosmetics).

b. The FDCA requires labeling for all food, drugs, and cosmetics to contain accurate instructions for use and consumption. 21 U.S.C. § 352(f)(1).

c. The FDCA regulates all marketing claims for foods, drugs, and cosmetics, and can require rigorous medical-legal review of marketing claims to be compliant. 21 U.S.C. § 502 (Drugs); 21 U.S.C. § 602 (Cosmetics).

i. These provisions cover any claims about treating any medical conditions, or about affecting physical appearance.

3. What is a “drug” under the FDCA?

a. Any product intended to have a therapeutic or medical use, or

b. Any product (other than a food) that is intended to affect the structure or function of the body of humans or animals.

4. What is a “cosmetic” under the FDCA?

a. Anything intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body … for cleansing, beautifying, promoting attractiveness, or altering the appearance.

5. Criminal Enforcement Penalties: The level of criminal liability depends on the intent of the defendant.

a. Act committed with no intent/strict liability: Misdemeanor, up to one year in prison and a $1,000 fine.

b. Act committed with the intent to defraud or mislead, or a second offense misdemeanor: Felony, up to three years in prison and a $10,000 fine.

6. Civil Enforcement Mechanisms: The FDA has several non-criminal enforcement tools it can use to compel compliance, including:

a. Warning letters outline violations, demand the target cease and desist from the activity, which can include all commercial sales. They also provide a period of time, typically 15 days, to demonstrate compliance.

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b. Product recalls can be either mandatory or voluntary, depending on the perceived level of risk to the public.

c. Administrative seizure can impact all products alleged to be adulterated or misbranded.

d. Injunctions against sales prohibit all commercial activity pending a more permanent solution.

e. Debarment may be either mandatory, which is permanent and depends on the nature of the violations, or permissive, which can last up to five years and is issued in the discretion of the agency.

f. Civil monetary penalties typically arise from joint actions by the FDA and the Federal Trade Commission, and are targeted at false marketing or unsubstantiated claims.

B. Pharmaceutical Actions: Using Misbranding Enforcement to Target Medication Assisted Treatments for Opioid Use Disorder

1. Misbranding is defined as labeling or advertising that is false or misleading. 21 U.S.C. § 352(a).

a. In determining whether a prescription drug’s promotional labeling or advertising is false or misleading, the FDA may take into account “representations made or suggested by statement, word, design, device, or any combination thereof” and “the extent to which the labeling or advertising fails to reveal facts material in the light of such representations or material with respect to consequences which may result from the use of the article to which the labeling or advertising relates.” 21 U.S.C. § 321(n).

b. Advertisements for prescription drugs are “false, lacking in fair balance, or otherwise misleading” under the statute if they: contain “a representation . . . that a drug is safer than it has been demonstrated to be by substantial evidence or substantial clinical experience”; present “information from a study in a way that implies that the study represents larger or more general experience with the drug than it actually does”; contain “favorable data or conclusions from nonclinical studies of a drug . . . in a way that suggests they have clinical significance when in fact no such clinical significance has been demonstrated”; or use “literature, quotations, or references that purport to support an advertising claim but in fact do not support the claim or have relevance to the claim.” 21 C.F.R. §202.1(e)(6).

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2. Federal Prosecutors have recently brought criminal and civil misbranding actions against corporate producers of drugs used to treat opioid addiction.

3. Federal Prosecutors also targeted individual corporate officers for independent criminal charges.

a. Reminder: This is a STRICT LIABILITY offense; neither criminal intent nor even personal knowledge are required elements.

b. Corporate officers do not need to have actual knowledge of corporate misconduct in these types of cases to be subject to criminal liability. United States v. Park, 421 U.S. 658 (1975).

i. Under the Park doctrine, a company executive can be held vicariously liable for the acts of others within the company, even without knowledge of the misconduct, so long as the executive was in a position to prevent or correct the violation.

ii. The Park doctrine provides an avenue for prosecutors to convict high-level employees of criminal offenses for their companies’ actions. DOJ believes this will serve as greater deterrence and motivate compliance.

iii. Critically, the government only has to prove that the defendant is within the chain of command and has responsibility for the area within the business where the violation occurred.

C. Cannabis Regulations Under FDCA

1. Virginia General Assembly decriminalized marijuana possession up to one ounce, and is implementing a regulatory structure for legalized, commercials sales starting in 2024.

a. Marijuana is still on Schedule I for the federal Controlled Substances Act, making all possession and sale illegal.

b. However, even if the federal government decided to remove marijuana from Schedule I and legalize commercial sales, all marijuana and cannabis product sales would be regulated under the FDCA.

2. All of the above principles under the FDCA apply to all products derived from cannabis.

3. “Food” and edible cannabis products are regulated under the FDCA.

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a. The FDA has created a list of products derived from hemp that are “generally recognized as safe” (GRAS): hulled hemp seed, hemp seed protein powder, and hemp seed oil.

4. What about CBD – isn’t it just a dietary supplement? Maybe.

a. To qualify as a dietary supplement, and bypass many of the FDA regulations for “foods” and “drugs,” the product must be on the list of GRAS products, otherwise:

i. The producer must notify the FDA about a “new dietary ingredient,” and

ii. The producer must provide the FDA with assurances it “will reasonably be expected to be safe under the conditions of use recommended or suggested in the labeling.”

b. Some “CBD” – which is short for cannabidiol – is not actually CBD, and is derived from hemp. Any hemp-derived compounds that fit the definition of the GRAS products, not true CBD, can be safely marketed as supplements.

c. The FDA has already determined that true CBD does not fall under the definition of dietary supplements.

i. Essentially the FDA determined CBD and THC are drugs that require clinical investigation and approval.

ii. As a result, according to the FDA, there are virtually NO safe marketing or labeling claims that can be made about CBD and THC products.

5. Operation CBDeceit: In December 2020, joint FDA/FTC enforcement actions very publicly targeted six companies distributing CBD products.

a. The FDA/FTC alleged the companies had made scientifically unsupported claims about their ability to treat serious health conditions.

b. Civil monetary penalties ranged from $20,000 to $85,000 per company, and each had to engage in an ongoing compliance program that:

i. notified consumers about the enforcement action, and

ii. requires companies to support any health claims they make for CBD products.

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III. Pandemic Benefits Fraud Enforcement

A. The DOJ recently secured convictions in a number of cases involving

fraudulent procurement of pandemic unemployment benefits.

B. In June 2021, a woman in Lee County plead guilty to conspiring to defraud the government of more than $699,124 in pandemic-related unemployment funds, mail fraud, and aggravated identity theft.

1. The U.S. Attorney’s office for the Western District of VA charged her with conspiring to file fraudulent unemployment benefits through the Virginia Employment Commission’s website despite being ineligible to receive pandemic employment benefits.

2. She is alleged to have filed more than 100 fraudulent claims for benefits and created fraudulent IRS forms purporting to establish pre-pandemic income.

3. She further filed numerous claims in the names of prison inmates who were unaware that the defendant had used their identities.

4. Acting U.S. Attorney for the Western District, Daniel Bubar, emphasized that these recent enforcement efforts were aimed at holding accountable those who seek to defraud the government of “critical funds designed to assist those in need, particularly during a worldwide pandemic.”

C. A similar pandemic fraud scheme resulted in a conviction for a Russell County woman who was sentenced to 108 months in prison and $455,930 in restitution.

1. This scheme to obtain nearly half a million dollars in pandemic unemployment compensation and involved over 35 co-conspirators, lead by the defendant in this case.

IV. Environmental Protection Agency (EPA) COVID Investigations

A. The COVID pandemic prompted EPA regulators to dust off a criminal enforcement provision of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), which mirrors the misbranding and adulteration provisions of the FDCA.

1. Provides federal regulation for the distribution, sale and use of pesticides.

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2. FIFRA defines a “pesticide” as “any substance or mixture of substances intended for preventing, destroying, repelling, or mitigating any pest.” 7 U.S.C. § 136(u).

a. A product is considered to be intended for a pesticidal purpose if, among other things, the person who distributes or sells it claims, states, or implies that the product prevents, destroys, repels or mitigates a pest.

b. This definition of “pest” includes allergens, bacteria, insects, germs, microorganisms, dust mites, biofilm, scum, etc.

c. Any product that says it “sanitizes, disinfects, or sterilizes” may be governed by FIFRA.

3. Unless otherwise exempted from registration under 40 CFR §§ 152.20, 152.25 or 152.30, pesticide products that are intended for a pesticidal purpose must be registered.

B. EPA’s criminal investigators launched the “COVID-19 Fraud Initiative” in March 2020.

1. This initiative targeted all products marketed at COVID-19, and focused on the illegal sale and distribution of pesticide products that either have no active or effective ingredients, or contain restricted or banned ingredients.

2. In FY 2020, EPA reported 447 civil enforcement actions and opened approximately 60 criminal cases related to suspected or confirmed unlawful sales or distributions of unregistered or misbranded pesticides or devices that have made claims of efficacy against SARS-CoV-2.

3. The EPA issued stop sale, use, or removal orders to 11 entities including two of the largest e-commerce platforms, Amazon and eBay, to prevent further distribution of unregistered or misbranded pesticides and devices.

a. Product descriptions on Amazon included language such as effective at “preventing epidemics.” A potentially lethal paint stripper was among the products sold as a COVID-19 disinfectant.

b. Amazon and eBay often utilize third-party sellers, which may have diminished their level of liability when compared to direct sellers.

C. The EPA pursued criminal enforcement of several FIFRA cases:

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1. Several cases arose from the “Toamit Virus Shut Out” product, which is a lanyard that was manufactured in Japan that purported to protect the wearer from COVID by sanitizing the air around them.

2. Another criminal prosecution involved the sale of cleaning disinfectant products where the defendant brought pesticides from someone he met on Facebook Marketplace.

a. The defendant repackaged the product using his own handmade label and application instructions.

b. He used EPA registration information from a discontinued product and falsely claimed the product was approved by the EPA and CDC and “kills COVID-19.”

V. Labor Enforcement Actions (VA OAG Wage & Hour Violations)

A. Attorney General Mark Herring established a Worker Protection Unit on March 3, 2021

1. Multidisciplinary team of prosecutors and attorneys within the Office of Attorney General, led by a dedicated criminal prosecutor.

2. Focus on investigating and prosecuting individuals and businesses who unlawfully engage in worker exploitation, in addition to educating Virginia workers on their rights.

B. Herring’s office has also sued the US Department of Labor over a new rule that the AG’s office alleges provides “incentive” for businesses to offload employment responsibilities to smaller companies, which, under the new rule, he argues would be shielded from federal liability for wage and hour obligations under the Fair Labor Standards Act.

1. The AG’s office has placed particular emphasis and focus on wage theft and unpaid back wages, and is seeking to combat the corporate trend of outsourcing many core responsibilities to intermediary entities, instead of hiring workers directly.

2. AG’s office perceives these smaller, intermediary entities as more likely to violate wage and hour laws.

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Solar and Energy Storage Legislaon and Land Use in Virginia

Presented by:

Chip (John G.) [email protected]

D. Sco Foster, [email protected]

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“Solar and Energy Storage Legislation and Land Use in Virginia”


Chip Dicks Scott Foster

Utility Scale Solar and Energy Storage were nascent industries prior to the passage of the Virginia Clean Economy act in 2020. Since then, the industry has boomed, resulting in historic interest and investment in localities across Virginia as the industry responded to the requirement that the state’s energy generation be 100% renewable by 2050. This dramatic transition presents interesting regulatory, tax and land use issues for the legal community that require solutions in real time.

Summary of 2021 Utility Scale Solar and Storage Land Use and Local Revenue Legislation

This is a summary of the large package of legislation passed by the 2021 Virginia General Assembly relating to local land-use and local revenues for utility-scale solar (“USS”) and Energy Storage (“ES” or “Storage”). These bills are critical to successfully implementing the goals of the Virginia Clean Economy Act and deploying USS development and ES at the local government level in the years ahead.

• Conditional Use Permits for Solar or Storage Projects –These bills clarify that

localities may accept cash payments for solar or storage projects through a conditional use permit provided that such payments meet the nexus test. In other words, the payments need to off-set the impacts of a particular project. This legislation provides a solar or storage developer and a locality “another tool in the toolbox” to negotiate compensation to a locality as part of an approval of a solar or storage land use application. See the links to these two bills, HB 2201 and SB 1207:

https://lis.virginia.gov/cgi-bin/legp604.exe?212+sum+HB2201

https://lis.virginia.gov/cgi-bin/legp604.exe?ses=212&typ=bil&val=sb1207

• Siting Agreements for Solar or Storage Projects –This legislation creates another tool for localities and solar or storage developers to negotiate business terms and conditions for approval of projects.

This key points of this legislation are as follows: (i) a Siting Agreement may be used if a project is located on any parcel of real property in the locality; (ii) approval of a Siting Agreement by the local governing body automatically deems the project in substantial accord with the locality’s comprehensive plan; (iii) a developer and a locality may provide funding for important local capital projects included in the locality’s capital improvement plan or for deployment of broadband (which is so important to the

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improving the quality of life in rural Virginia); (iv) a developer still files land use applications with the locality regardless of whether an agreement is reached between the developer and locality in a Siting Agreement; and (v) a Siting Agreement may supersede provisions of the zoning ordinance if agreement is reached between the developer and the locality.

It is also important to remember that a real value for localities in use of a Siting Agreement is the ability to bind future governing bodies for the life of the project, thereby enabling a Siting Agreement to act as a financing instrument, upon which the locality may do an anticipation revenue bond. General obligation bonds in counties requires approval by the voters in a referendum, whereas a revenue bond can be approved by the board of supervisors.

See the links to these two bills, HB 2201 and SB 1207:

https://lis.virginia.gov/cgi-bin/legp604.exe?212+sum+HB2201


• Revenue Share/Local Option by Ordinance for Solar or Storage Projects –These bills amend the 2020 revenue share legislation and create a local option for localities to adopt a revenue share ordinance to allow localities to assess $1,400 per megawatt capacity, with an escalator of 10% every 5 years, over the life of the project. This provides a meaningful and reliable revenue stream from the project to the localities without impacting their state education funding formula or being subject to a depreciation schedule otherwise applicable to a machinery and tools tax regime. See the links to these two bills, HB 2006 and SB 1201:

https://lis.virginia.gov/cgi-bin/legp604.exe?ses=212&typ=bil&val=hb2006


• Tax Equity Legislation for Stand-Alone Energy Storage Projects – Carried by

Delegate Heretick and Senator Peterson, this legislation equalizes the taxation treatment for stand-alone energy storage with the taxation treatment for solar and solar/hybrid projects.

Effective July 1, 2021, the following will apply to storage:

(i) storage will be exempt from sales tax on its equipment purchases;

(ii) localities will have the option to use M&T (80/70/60 step-down) or revenue share;

(iii) will now be included within the definition of “electric supplier” so that storage will file an annual report with the SCC and the SCC will make a uniform assessment at the state level, with a uniform depreciation schedule instead of a 156 different M&T rates, assessments and depreciation;

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(iv) will be classified as “pollution control equipment” under Section 58.1-3660, thereby subject to certification by DMME; and

(v) have the same 80/70/60 exemption through July 1, 2030.

https://lis.virginia.gov/cgi-bin/legp604.exe?212+ful+HB2006ER+pdf


Local Government Permitting for Solar Facilities in Virginia

What the Virginia Clean Economy Act (VCEA) Says: Virginia will deploy 16,100 megawatts of solar and onshore wind by 2035. What the Public Hears: “Virginia is going green!” What the Industry Hears: “Virginia is the place to be!” What a Land Use Attorney Hears: “That’s a lot of zoning applications!”

1. Solar Permitting Generally a. In the context of the VCEA the following VCEA “buckets” generally require some

local government legislative approval: i. “Utility scale” projects (generally 5MW and above) will supply the vast

majority of the MW required by the VCEA. 1. To date, most local government permitting for solar facilities has

focused on projects 3MW and larger, with the majority of utility-scale being in the 50-150MW range.

ii. The “Shared Solar” program, whose projects are no greater than 5MW will likely require local government legislative approval.

1. https://lis.virginia.gov/cgi-bin/legp604.exe?201+ful+CHAP1238+pdf

2. With the deployment of the Shared Solar Program, a wave of 5MW, or less projects is anticipated.

iii. Certain projects within the “Distributed Generation” provisions will require local government legislative approval.

1. https://lis.virginia.gov/cgi-bin/legp604.exe?201+sum+HB1184S 2. More of these projects are on the horizon with additional SCC

rulemaking pending.

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2. Overview of Solar Zoning a. Solar Zoning Ordinances: A growing number of Virginia localities have or are in

the process of adopting specific zoning language to address solar development. These ordinances address issues including, but not limited to size, buffering, setbacks, fencing, decommissioning, environmental and cultural impacts, etc.

i. Permitting in Existing Zoning Districts: Most localities regulate solar zoning by conditional use or special use permits and a few require a rezoning in addition to a use permit.

1. Prohibited by Zoning Ordinance: A few localities have discussed prohibiting solar in total or placed temporary bans or “moratoriums” on solar applications.

2. By-Right: Solar facilities are permitted subject to the development requirements of the solar zoning ordinance and underlying zoning district, as applicable.

3. Special/Conditional Use Permit in specific zoning districts: a. Conditional or Special Use in Agricultural/Rural and

Industrially Zoned Districts. b. Limiting Solar to Industrially Zoned Districts: Certain

localities consider solar as an industrial use, only permitting it with a use permit in certain industrially zoned districts. As a result, nearly every project in these localities requires a rezoning to that industrial designation.

ii. Single Use Solar Zoning Districts 1. Certain localities are adopting “single purpose” solar zoning

districts, where solar facilities are the only permitted use. a. This regime requires a rezoning to the solar district in

addition to a use permit. iii. “Solar Overlay” Districts

1. A few localities have applied a “solar overlay” to areas around transmission lines and require that all or a portion of each solar facility be positioned within this district. As a result, a proposed project must be in both a district where the use is permitted and in the applicable overlay district.

b. Special or Conditional Use Permitting Without Solar Specific Standards: i. Some localities that have not adopted a specific solar ordinance have added

it as a conditional/special use in certain districts subject to the general requirements applicable to all conditional/special uses. In this case, a solar facility will need to comply with those general standards in addition to the requirements of the underlying zoning district. Like those localities that have adopted a specific solar zoning ordinance, solar may or may not be permitted with a conditional/special use permit in a given district and as a result may require a rezoning.

c. Permitting Solar By-Right, Subject to Applicable District Regulations i. Some localities simply permit solar by right, subject to pending

development regulations generally applicable to uses within that district. d. No Zoning

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i. Only a handful of Virginia localities lack zoning or are partially zoned, but in this case, there is no local legislative approval required to establish the use other than the “2232 review” as detailed below.

e. “Solar Policies” i. Some localities have adopted “solar policies” in addition to a solar zoning

ordinance. These policies can address just about anything but many deal with decommissioning requirements or application fees. The intent of these policies is to provide guidance for the development of solar in their respective locality somewhat akin to what might be found in a Comprehensive Plan. These documents often contain more restrictive language than the ordinance itself and include provisions that might may be legally unenforceable or subject to potential litigation if they were to be contained in an ordinance.

ii. These documents do not have the effect of a zoning ordinance nor do they have the effect of language within a Comprehensive Plan but the locality expects you to follow them anyway.

3. Solar, Va. Code § 15.2-2232 and Comprehensive Plans

a. “2232 Review or “Substantially In Accord Determination:” It has become customary that all solar facilities must to be reviewed by local Planning Commissions for conformity with the locality’s comprehensive plan by Va. Code § 15.2-2232. Planning Commissions issue a determination whether the proposed “general location or approximate location, character and extent thereof” is “substantially in accord” with the Comprehensive Plan. This process is commonly referred to as a “2232 Review” or “SIA.” This is one of very few legislative determinations by a Planning Commission. Typically their findings are advisory to Boards of Supervisors and City and Town Councils. The governing body has the right to overrule the Planning Commission. If this finding is not appealed to the Board of Supervisors, it is final, and as a result, an affirmative SIA Determination is required for a solar facility.

i. Comprehensive Plans are required to be reviewed every five years pursuant to Va. Code § 15.2-2230, but most localities do not actually update and revise their plans this frequently.

ii. At present, most comprehensive plans do not specifically address solar as a land use, but as revisions occur, solar provisions are being added. Only a handful of localities have amended to address solar development.

iii. As a general land use document, Comprehensive Plans are not intended to address ever land use and are instead designed to apply generally to a diverse range of uses.

b. There are specific carveouts from the 2232 Review for certain solar facilities: i. Va. Code § 15.2-2232 (H): “A solar facility subject to subsection A shall be

deemed to be substantially in accord with the comprehensive plan if (i) such proposed solar facility is located in a zoning district that allows such solar facilities by right; (ii) such proposed solar facility is designed to serve the electricity or thermal needs of the property upon which such facility is located, or will be owned or operated by an eligible customer-generator or

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eligible agricultural customer-generator under § 56-594 or 56-594.01 or by a small agricultural generator under § 56-594.2; or (iii) the locality waives the requirement that solar facilities be reviewed for substantial accord with the comprehensive plan. All other solar facilities shall be reviewed for substantial accord with the comprehensive plan in accordance with this section. However, a locality may allow for a substantial accord review for such solar facilities to be advertised and approved concurrently in a public hearing process with a rezoning, special exception, or other approval process.”

ii. Pursuant to Va. Code § 15.2-2316.9 (C), If a Siting Agreement (detailed below) is approved for a solar facility, the project is deemed to be substantially in accord with the comprehensive plan satisfying the requirement of Va. Code § 15.2-2232.

4. Siting Agreements for Solar Facilities a. Siting Agreements: Created by 2020 Virginia legislation and updated during the

2021 legislative session, a “Siting Agreement” is a unique tool for localities and solar or energy storage developers to negotiate business terms and conditions for approval of projects.

i. Originally applied to any solar project within a census tract that was eligible for designation as a Federal Opportunity zone. A project does not need to be located within an actual opportunity zone.

1. Map of eligible tracts (both blue and grey shaded) a. https://vedp.maps.arcgis.com/apps/webappviewer/index.ht

ml?id=3e058276ef7e45da99a042d5baddb83c ii. Effective July 1, 2021, the process was applied statewide.

1. https://lis.virginia.gov/cgi-bin/legp604.exe?212+sum+HB2201 iii. Siting Agreement concept was developed in response to an Industry and

Locality Need: 1. Many developers were negotiating business terms and other

community benefits through a “voluntary payment agreement” which some localities were reluctant to accept without express authorization by the Code of Virginia. Because the Siting Agreement is expressly authorized in statute, there are no issues with enforceability. An additional value for localities in use of a Siting Agreement is the ability to bind future governing bodies for the life of the solar project, thereby enabling a Siting Agreement to act as a financing instrument, upon which the locality may do an anticipation revenue bond. General obligation bonds in counties requires approval by the voters in a referendum, whereas a revenue bond can be approved by the Board of Supervisors.

2. Modeled after the siting or host agreement process used for siting of landfills.

b. Siting Agreement Negotiation Process: i. The developer gives notice to the locality of its intent to locate a solar

facility in the locality and requests a meeting to discuss the facility.

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1. https://law.lis.virginia.gov/vacode/title15.2/chapter22/section15.2-2316.7/

ii. Prior to or simultaneously with the filing of a land use application for a solar facility, the developer proposes a Siting Agreement that may address specific project features, provide funding for important local capital projects included in the locality’s capital improvement plan or for deployment of broadband, contain language superseding, modifying or exempting the solar facility from provisions of the zoning ordinance or provide specific performance terms for both the locality and developer.



iii. A negotiation ensues between the developer and the locality of a contractual nature, and can occur outside the public meeting setting.

1. The locality may rely on the chief administrative officer, the finance director and up to two members of the local elected body, often including the chair of the finance committee in the negotiation process.


iv. Once a tentative agreement is reached, the Siting Agreement is placed on the agenda of the local legislative body and a public hearing is scheduled, often at the same meeting where the land use application is being considered.


2. In the event no agreement is reached, the land use application still proceeds.

v. Once approved, the project is deemed to be substantially in accord with the locality’s comprehensive plan, satisfying the requirement of Va. Code 15.2-2232. Failure to agree upon a Siting Agreement may be a factor in the governing body’s consideration of any land use approvals for a solar facility, but shall not be the sole reason for a denial of such land use approvals.


5. Solar Revenue Streams for Localities a. Real Estate Taxes

i. The real estate where solar facilities are located is taxed at the applicable real estate tax rate. There is no solar related tax exemption on the real estate taxes collected. Once the solar use is permitted, the assessed value of the land increases, often to $10,000-$15,000 per acre, generally resulting in a significant increase in real estate taxes paid compared to agricultural or forestal uses, particularly where use value assessment has been reduced based on land use programs.

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1. Land in a “land use” program that is used for solar facilities requires payment of roll-back taxes pursuant to Va. Code § 58.1-3237.

b. Machinery and Tools Taxes i. Solar facilities are subject to local machinery and tool taxes, with a complex

set of exemptions contained in Va. Code § 58.1-3660. 1. Under this code section, solar facilities are deemed “Certified

Pollution Control Equipment and Facilities” and are fully exempted from state and local taxation pursuant to Article X, Section 6(d) of the Constitution of Virginia.

2. This tax exemption has various limitations on applicability, and tiered percentages of the assessed value of Certified Pollution Control Equipment and Facilities to be subjected to Machinery and Tools Taxes. These exemptions have evolved since 2016 and we expect future revisions.

a. Factors in determining the level of exemption include: i. Size of a solar facility.

ii. Date a facility filed an initial interconnection request with an electric utility or a regional transmission organization.

iii. These exemptions are contained in Va. Code § 58.1-3660 (C).

3. Tax exemptions summarized: a. With the exception of the real estate on which the facilities

are located, solar facilities 5MW and less and those 20MW and less that serve public institutions of higher education or any private college are 100% exempt from all local taxation.

b. An 80% exemption applies to the assessed value of projects for which an initial interconnection request was filed:

i. Between January 1, 2015 and June 30, 2018 for facilities 20MW or larger or

ii. On or after July 1, 2018, for projects greater than 20 MW and less than 150 MW, as measured in alternating current (AC) generation capacity, and that are first in service on or after January 1, 2017

c. An 80% exemption of the assessed value of projects equaling more than 5MW and less than 150MW which filed an initial interconnection request on or after January 1, 2019.

d. “M&T Stepdown:” For projects greater than 20MW and less than 150MW that filed an interconnection request on or after January 1, 2019, the exemption shall be 80 percent of the assessed value in the first five years in service after commencement of commercial operation, 70 percent of the assessed value in the second five years in service, and 60 percent of the assessed value for all remaining years in service.

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i. These exemptions are currently scheduled to sunset in 2030.

e. The Virginia SCC regularly publishes depreciation schedules on which the calculations for assessed value are based.

ii. While solar facilities are subject to local machinery and tool taxes, the tax is not assessed at the local machinery and tool tax rate, but instead the local Real Estate tax rate.

1. Va. Code 58.1-2606 (C). “Notwithstanding any of the foregoing provisions, generating equipment that is reported to the Commission by electric suppliers shall be taxed at a rate determined by the locality but shall not exceed the real estate rate applicable in the respective localities.”

c. Sales and Use Tax –Certified Pollution Control Equipment and Facilities are exempt from sales and use taxes.

i. Tax Rulings Applicable to Sales and Use Taxation of Solar Facilities. a. https://www.tax.virginia.gov/laws-rules-decisions/rulings-

tax-commissioner/14-12 b. https://www.tax.virginia.gov/laws-rules-decisions/rulings-

tax-commissioner/18-112

d. Solar Revenue Share i. Created in 2020 and modified and expanded in 2021, “Solar Revenue

Share” is a local option for localities designed to serve as an alternative to the Machinery and Tool tax regime. Localities may adopt a revenue share ordinance and assess $1,400 per megawatt of solar facility “nameplate capacity,” with an escalator of 10% every 5 years, over the life of the project. This provides a meaningful and reliable revenue stream from the project to the localities that is exempt from the Local Composite Index formula for K-12 education and is not subject to depreciation otherwise applicable to a machinery and tools tax regime. If localities adopt Solar Revenue share, solar facilities are exempt from Machinery and Tool Taxes in that locality. Unless agreed to by existing solar facilities, Solar Revenue Share is not retroactive and only applies to facilities built subsequent to adoption.

1. Existing Solar Revenue Share Statute: Va. Code § 58.1-2636 2. See the links to these two bills, HB 2006 and SB 1201 updating

Solar Revenue Share in 2021: https://lis.virginia.gov/cgi-bin/legp604.exe?ses=212&typ=bil&val=hb2006, https://lis.virginia.gov/cgi-bin/legp604.exe?ses=212&typ=bil&val=sb1201

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Ethical Consideraons When Working with Vendors & Co-Counsel

Presented by:

E. Sco [email protected]

Imani E. [email protected]

1 5002/9003/9998562v1

Ethical Considerations When Working With Vendors & Co-Counsel


E. Scott Austin Imani E. Sowell

I. Introduction There are several reasons for an attorney(s) to engage co-counsel on a matter. Some law firms have

limitations due to size—too few counsel and support staff. Many cases are complex and implicate

several areas of law, so it may be necessary to engage co-counsel for those issues which the

engaging attorney is unfamiliar. A familiar scenario is one in which an attorney may need to

engage local counsel in a jurisdiction he or she is not admitted. Each scenario is a perfectly logical

reasons for engaging co-counsel, but it is not without some ethical risk. Neither the Model Rules

of Professional Conduct (“Model Rules”) nor the Virginia Rules of Professional Conduct

(“Virginia Rules”) specifically address the ethical issues raised by these scenarios. It is, therefore,

up to us to read between the lines of the rules and determine which rules are implicated and what

practices to use so we do not run afoul of the rules.

As we all know, litigation can be extremely document intensive. For some matters, the document

count can total in the millions. It would be impossible to complete document review without

technological assistance. Fortunately, third-party litigation support vendors such as Relativity®

can assist with e-discovery. We could not do our job without these vendors, but the use raises

ethical issues concerning client confidentiality and privileged communications. While working

with litigation support vendors is a near guaranteed consequence of litigation, there are steps we

can take to protect client confidences and avoid ethical violations.

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II. Working with Co-Counsel

A. Applicable Rules of Professional Conduct

• Rule 1.1 (Competence)

Rule 1.1 states that a lawyer shall provide competent representation to a client. Competent

representation requires the legal knowledge, skill, thoroughness and preparation

reasonably necessary for the representation.

• Comment 1 states that engaging co-counsel, if feasible, is a factor in the

competency analysis.

o Don’t forget Rule 1.6! You should obtain informed consent from your client

before engaging co-counsel and divulging client confidences. See Cmt. 6.

• Rule 1.2 (Scope of Representation)

Rule 1.2(a) states that a lawyer shall abide by a client’s decisions concerning the objectives

of representation and, as required by Rule 1.4, shall consult with the client as to the means

by which they are to be pursued. A lawyer my take such action on behalf of the client as is

implied authorized to carry out the representation.

• Co-counsel may be necessary to achieve goals of representation—consult with

client.

o Consider the complexity of the matter. o Evaluate the staffing requirements necessary to “complete” the matter—this

includes being honest about whether your firm alone can handle the matter.

• In accordance with Rule 1.2, as well as Rule 1.4, be sure to communicate the

expense that will be incurred when co-counsel is engaged.

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• Rather than assessing whether it is impliedly authorized—get the authorization.

Importantly here, Comment 3 to the rule states that, “at the outset of a representation, the

client may authorize the lawyer to take specific action on the client’s behalf without further

consultation. Absent a material change in circumstances and subject to Rule 1.4, a lawyer

may rely on such an advance authorization.

• Rule 1.4 (Communication)

Rule 1.4(a) states that a lawyer shall: (1) promptly inform the client of any decision or circumstance with respect to which the

client’s informed consent, as defined in Rule 1.0(e), is required by these Rules;

(2) reasonably consult with the client about the means by which the client’s objectives are

to be accomplished;

(3) keep the client reasonably informed about the status of the matter;

(4) promptly comply with reasonable requests for information; and

(5) consult with the client about any relevant limitation on the lawyer’s conduct when the

lawyer knows that the client expects assistance not permitted by the Rules of

Professional Conduct or other law.

• The comments are instructive:

o Comment 2 to Rule 1.4 states that you should secure client consent prior to

taking action unless prior discussions have resolved what action the client

wants the lawyer to make.

o Comment 3 states that you should consult with client about the means used

to accomplish objectives.

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o Comment 5 states that the adequacy of communication depends in part on

the kind of advice or assistance involved.

Explain the general strategy—this is especially important if you’re

the engaging attorney. This puts the onus on you to reasonably

consult with the client and engaged attorney on things like timeline,

strategy, dispositive motions, etc.—not the other way around.

This does not mean that the engaged attorney is relieved of any

communicative responsibility! If the engaged attorney is doing the

majority of the leg work, they should be in regular communication

with the client.

• Rule 1.6 – Client Confidentiality

Rule 1.6(a) states that a lawyer shall not reveal information relating to the representation

of a client unless the client gives informed consent, the disclosure is impliedly authorized

to carry out the representation, or the disclosure is permitted by paragraph (b).

• There is an overlap between the duty to communicate and the duty to keep client

confidences! Before seeking potential co-counsel, obtain the client’s informed

consent.

o In order for the engaged attorney to accurately determine whether he or she

can assist with the matter, client confidences must be revealed. Get

informed consent.

• NOTE: Even if you believe disclosure of client confidences and the engagement

of co-counsel is impliedly authorized—think again! Informed consent is the best

practice to avoid running afoul of the Rules.

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B. Best Practices

• Although the rules do not address co-counsel scenarios, it is clear from Rules 1.2

and 1.4 that the engaging attorney must consult with the client about the decision

to engage co-counsel.

• The engaged attorney should obtain informed consent, confirmed in a writing,

separate and apart from the engaging attorney.

o Note: Pre-engagement, instead of obtaining informed consent, the engaging

attorney may describe the relevant circumstances to the attorney to be

engaged using a hypothetical. See Comment 4 to Rule 1.6. The engaging

attorney should reveal enough information for the engaged attorney to

decide whether he or she can assist with the matter, but not so much

information that the client’s identity may be learned.

• TIP: Since the rules do not address co-counsel scenarios directly, there is no

express requirement to obtain informed consent in writing, unless the engaging

attorney and engaged attorney intend to split fees. See Rule 1.5(e)(2).1 However,

in our everyday practice, we regularly utilize engagement letters. Therefore, the

engaged attorney should send an engagement letter that confirms the scope of their

representation.

• A Wrinkle in the Rules: While the engaged attorney and the engaging attorney

are both bound by the duty to communicate, the client can agree that the engaged

attorney need not communicate the status of the matter to the client directly. See

Rule 1.2 (c). The client could agree due to ease or because of familiarity with the

engaging attorney.

1Rule 1.5 (e) states that a division of a fee between lawyers who are not in the same firm may be made only if: (1) the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation; (2) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and (3) the total fee is reasonable.

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o Though this is allowed, the engaged attorney is still counsel for the client

and should, at the least, briefly communicate the status of the matter. Rule

1.4(a)(3) requires that the attorney keep the client reasonably informed.

C. Joint-Defense Agreements

• A Joint-Defense Agreement is an agreement that allows co-defendants who have a

shared interest in litigation to maintain the attorney-client and attorney-work product

privileges when sharing confidential information with one another through the joint

defense privilege. Protections under such an agreement apply to communications

between the co-defendants and their attorneys.

• Rule 1.1 (Competence): It is important to consider the nature of the other attorney

representing the co-defendant. Use your judgement to determine whether or not that

attorney is trustworthy and capable of doing good and efficient work.

• Rule 1.2 (Scope of Representation): Finances can complicate joint-defense

agreements, and the written agreements should include provisions on how to handle

finances such that each party fairly contributes to expenses.

• Rule 1.4 (Communication): A proper joint-defense agreement should include

informed consent of all members to the agreement, so the parties should be informed

of the costs and benefits of such agreements.

• Rule 1.6 – Client Confidentiality: Under a Joint-Defense Agreement, all parties

must consent in order to waive the joint defense privilege. Thus, such an agreement

should be written to emphasize that confidential information obtained through the

agreement cannot be released to third parties without the co-defendants’ consent. It

is best practice to put such an agreement in writing.

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III. Working with Third-Party Litigation Support Vendors

A. A Familiar Cautionary Tale – Mill Lane Management, LLC v. Wells Fargo Advisors, LLC During discovery, Wells Fargo counsel used an e-discovery platform to review documents

to produce to the plaintiff. Counsel, however, got careless. Wells Fargo counsel, in its

document production, revealed extremely sensitive, confidential information about several

Wells Fargo clients. Plaintiff’s counsel went to the press. The New York Times ran a story

about the production—albeit without the sensitive client information. Wells Fargo’s

defense? The e-discovery platform was difficult to navigate and the sensitive information

was inadvertently disclosed. This is not a successful line of defense.2

B. Applicable Rules of Professional Conduct

• Rule 1.1 (Competence) Rule 1.1 states that a lawyer shall provide competent representation to a client. Competent

representation requires the legal knowledge, skill, thoroughness and preparation

reasonably necessary for the representation. Comment 8 provides some guidance that is

important to e-discovery. It states that to maintain the requisite knowledge and skill, a

lawyer should keep abreast of changes in the law and its practice, including the benefits

and risks associated with relevant technology.

• Rule 1.6 (Confidentiality)- The Hallmark of the Client-Lawyer Relationship

Rule 1.6(a) states that a lawyer shall not reveal information relating to the representation

of a client unless the client gives informed consent, the disclosure is impliedly authorized

to carry out the representation, or the disclosure is permitted by paragraph (b).3

2 FRE 502 is a safe harbor, but several factors must be met to avoid waiver of privilege. 3 Rule 1.6(b) states that a lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary: (1) to prevent reasonably certain death or substantial bodily harm; (2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services; (3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services;

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Rule 1.6(c) requires a lawyer to safeguard information relating to the representation and

protect against inadvertent or unauthorized disclosure by the lawyer. See Cmt. 18.

• Rule 5.1 (Responsibilities of a Partner or Supervisory Lawyer)

Rule 5.1(a) states that a partner in a law firm, and a lawyer who individually or together

with other lawyers possesses comparable managerial authority in a law firm, shall make

reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance

that all lawyers in the firm conform to the Rules of Professional Conduct.

Rule 5.1(b) states that a lawyer having direct supervisory authority over another lawyer

shall make reasonable efforts to ensure that the other lawyer conforms to the Rules of

Professional Conduct.

• Rule 5.3 (Responsibilities Regarding Nonlawyer Assistance)

Rule 5.3 states that, with respect to a nonlawyer employed or retained by or associated with a lawyer: (a) a partner, and a lawyer who individually or together with other lawyers possesses

comparable managerial authority in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the person's conduct is compatible with the professional obligations of the lawyer.

(b) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person's conduct is compatible with the professional obligations of the lawyer.

(4) to secure legal advice about the lawyer's compliance with these Rules; (5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client; (6) to comply with other law or a court order; or (7) to detect and resolve conflicts of interest arising from the lawyer's change of employment or from changes in the composition or ownership of a firm, but only if the revealed information would not compromise the attorney-client privilege or otherwise prejudice the client.

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• Attorney-Client Privilege

o Attorney-client privilege protects communications between the client and

the lawyer4 - this privilege does not protect the underlying facts. o This protection also extends to the attorney’s agents.5

C. Federal Rule of Evidence 502—A safe harbor?

FRE 502(b) covers inadvertent disclosure of privileged communications. It states that when

made in a federal proceeding…the disclosure does not operate as a waiver in a federal or

state proceeding if:

(1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable)

following Federal Rule of Civil Procedure 26(b)(5)(B).

FRE 502(d) states that a federal court may order that the privilege or protection is not

waived by disclosure connected with the litigation pending before the court — in which

event the disclosure is also not a waiver in any other federal or state proceeding.

• Litigation can be extremely document intensive—privileged and protected

information may be buried and overlooked during document review. This greatly

increases the chances of inadvertent disclosure of protected communications and

information.

o TIP: Use artificial intelligence and search terms to detect potentially

protected communications and information. Those documents that contain

those terms should be reviewed separately to prevent inadvertent disclosure.

4 Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). 5 Commonwealth v. Edwards, 235 Va. 499, 509 (1988).

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o TIP: Move the court for a Rule 502(d) order which can read: (a) the

production of privileged or work-product protected documents, including

ESI, is not a waiver, whether the production is inadvertent or otherwise, in

the particular case or in any other federal or state proceeding, and (b)

nothing contained in the order limits a party’s right to conduct a review for

relevance and the segregation of privileged information and work product

material prior to production.6

D. ABA Tips on Protecting Confidential Information in E-Discovery7

• Consult with the client about the nature and location of ESI that has been created

or retained by the client.

• Communicate with the client about which ESI is confidential and deserves

protection—information such as trade secrets, personal identifying information,

and information that is confidential per law.

• ESI might be subject to the attorney-client privilege or attorney work-product

protection—communicate with the client about underlying legal representation to

determine which communications and documents are protected.

• To protect against the disclosure of confidential information, opposing counsel

should attempt to agree on protective orders and, if an agreement cannot be reached,

move the Court for a protective order.

E. Legal Ethics Opinion 1850—Outsourcing of Legal Services

• Issued in 2010, and revised in 2021, LEO 1850 analyzes the ethical issues that can

arise when lawyers and law firms outsource legal services.

6 19 Sedona Conf. J. 150-51 (2018). 7 Tips on Protecting Confidential Information in E-Discovery (americanbar.org) (last visited July 12, 2021)

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• Contracting with e-discovery vendors is a form of legal outsourcing that comes with

some risk.

• Rules of Professional Conduct.

o Rule 1.1 (Competence)

Do your due diligence! Select an e-discovery vendor that

understands the rules of professional conduct and uses the most up-

to-date technology to safeguard your client’s information.

o Rule 1.4 (Communication) Communicate with your client, and obtain their consent, before

engaging an e-discovery vendor.

o Rule 1.6 (Client Confidentiality)

Ensure that the e-discovery vendor has in place policies and

procedures to protect client data and confirm these policies in a

written confidentiality agreement.

o Rule 5.3 (Responsibility Regarding Non-Lawyer Assistance)

Monitor and review the e-discovery vendor’s work to ensure

compliance with the ethical rules and the confidentiality agreement

F. Best Practices

• Do your homework! Ensure that the e-discovery company you decide to engage

has the best technology available to detect potentially privileged communications and attorney work product

• Have a representative from the e-discovery vendor walk you through the steps they

will take to protect your client’s confidential information and attorney work product. Memorialize these practices and procedures in the agreement with the e-discovery vendor.

• Employ artificial intelligence, but be aware of the risks

o Artificial intelligence saves cost and time

Due to the likely large volume of emails and documents, artificial intelligence is a helpful tool to determine what’s responsive to

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discovery requests and what is likely protected by attorney-client privilege and the work product doctrine

o Use AI for a separate privilege review

The artificial intelligence can be used to detect certain terms that are contained in privileged communications and attorney work product—this includes attorney names, law firms, etc.

This is not without risk! AI is imperfect and it cannot pick up

everything

While the privilege review should be separate, all reviewers should be aware of the potentially privileged terms

Maintain consistent communication with the litigation support

vendor about technologies and strategies to minimize the risk of inadvertent disclosures

IV. Conclusion

Working with co-counsel and third-party vendors present many ethical concerns—none of

which can be completely eliminated. With these rules and best practices in mind, however,

you can help protect yourself and your firm from liability exposure and a bar complaint.