Docket – February 7, 2019

NOTE: Evening Docket will be on hiatus on Friday, February 8, 2019.

4th U.S. Circuit Court of Appeals

Jesus Christ is the Answer Ministries Inc. v. Baltimore County, Md. (P), 4th Cir. (Diaz) from DMD at Baltimore (Bennett).

The district court erred in dismissing the plaintiffs’ suit against Baltimore County raising claims under the Religious Land Use and Institutionalized Persons Act and the 1st and 14th Amendments to the U.S. Constitution.

The plaintiff sufficiently alleged that the County substantially burdened her religious exercise. She sufficiently alleged that she had a reasonable expectation of using her property as a church. Her realtor told her that such a use was permitted on the property, which was correct under applicable zoning regulations.

The allegations are also sufficient to support the plaintiffs’ claim of discrimination based on religion or religious denomination in violation of the Act. The district court reasoned that the complaint failed to allege disparate treatment because other churches that ultimately received approval are situated on larger lots and have sufficient space for parking. However, the Act’s nondiscrimination provision doesn’t require a comparison to similarly situated entities. The church has alleged that the Board’s dismissal of Ware’s second zoning petition was motivated by religious discrimination. This is enough to make out a prima facie claim of religious discrimination, provided that the Church can establish discriminatory intent.

Here, the alleged sequence of events leading to the challenged decision is highly probative of the defendants’ motives. As alleged, neighbors displayed the behavior Congress sought to eradicate from zoning decisions, with remarks evincing ethnic and religious bias. Following the neighbors’ remarks, the Board denied the petition. This connection is strengthened by the neighbors’ ongoing involvement in the dispute, right up through the dismissal of the second petition. The Board also granted the neighbors’ motion to dismiss the second petition, contrary to the position of its own legal expert.

As to the plaintiffs’ free-exercise and equal-protection claims, a government decision fails strict scrutiny if it is not narrowly tailored to advance a compelling state interest. While the County may have a significant interest in finality and economy that would ordinarily be served by res judicata and collateral estoppel, the second petition’s dismissal on those grounds wasn’t narrowly tailored to serve that interest because it didn’t seek to re-litigate the Board’s prior decision.

Vacated and remanded.

Trana Discovery Inc. v. So. Research Inst. (P), 4th Cir. (Richardson) from EDNC at Raleigh (Boyle).

In this contract action, the district court did not err in granting summary judgment to the appellee on claims of fraud and negligent misrepresentation.

The appellant has developed a technology that it believes can help find new drugs to treat HIV. It collaborated with the appellee, a contract research organization, to put its technology to work by testing chemical compounds for signs that they inhibited the reproduction of HIV. The appellant brought this action after the testing yielded inconsistent results.

The appellant’s “false negatives” theory of misrepresentation alleges that the appellee failed to identify certain promising compounds as potential HIV treatments. But stripped to its core, this theory attempts to shoehorn a claim for professional negligence or breach of contract into one for negligent misrepresentation. The appellant has not shown that any breach introduced false information into the report at issue. Thus, this theory fails.

The appellant’s “false positives” theory of misrepresentation alleges that the appellee falsely identified other compounds as potential treatments when in fact they were not. But to establish reasonable reliance on the appellee’s reports, the appellant must have incurred patent expenses related to the two “false positive” compounds between the June and December 2010 reports. At oral argument, counsel couldn’t represent that any relevant patents were filed before January 2011. Failure to address this critical timing issue dooms the appellant’s claim.


Supreme Court of Virginia

The Corp. Exec. Bd. Co. v. Va. Dep’t of Tax. (P), SCV (McCullough) from Arlington (Fiore).

The Virginia Department of Taxation’s method for assessing the petitioner’s taxes is constitutional as applied under the “dormant” Commerce Clause and the Due Process Clause of the U.S. Constitution.

The crux of the disagreement between the parties is whether the tax is fairly apportioned. The parties agree that Virginia’s method of assessing the petitioner’s corporate income is internally consistent, so the question is whether the tax is externally consistent.

No U.S. Supreme Court precedent holds that the dormant Commerce Clause or the Due Process Clause requires one of two taxing states to recede simply because both have lawful tax regimes reaching the same income. The content for the petitioner’s core product was developed by its employees working in Virginia. The servers on which the product resides are located in Virginia. Each time a customer uses the core product, the customer reaches into Virginia to consult materials developed in Virginia and stored in Virginia. Thus, the Tax Department’s apportionment of income did not reach beyond that portion of value that is fairly attributable to economic activity within the taxing state. Virginia’s apportionment formula does not create a “grossly distorted” result.

In addition, 23 VAC § 10-120-280(B)(4)(b) doesn’t apply to allow relief here. Any double taxation is not “attributable” to Virginia. The petitioner’s double taxation is “attributable” to changes adopted more recently by other states in their apportionment formulas, and in particular to the increased trend of using single-factor sales apportionment. Virginia adopted its apportionment formula as part of an effort to provide a uniform method of division of income for tax purposes among the several taxing jurisdictions. The Commonwealth has adhered to its formula for nearly 60 years. The record also fails to establish that other states’ sourcing methods are “unique.”


U.S. District Court – Virginia Eastern

Fitzgibbon v. Radack, EDVA at Richmond (Payne).

In this suit for malicious prosecution and defamation, transfer to the District of Columbia, where the defendant allegedly falsely accused the plaintiff of sexual assault, is not justified.

While the plaintiff’s choice of forum carries less weight than usual because he lives outside Virginia and sues for events that occurred in D.C., he resided in Richmond during the relevant events and most of his witnesses live in and around this area. Also, the effects of the allegedly defamatory remarks were felt in this forum. Even if D.C. law applies to the claims, the defendant provides no reason why this court cannot apply the law of that jurisdiction.

Motion to transfer venue denied.

U.S. District Court – Virginia Western

Harris v. Edem, WDVA at Danville (Kiser).

A defendant who has received a discharge in bankruptcy does not become a nominal party for purposes of diversity and removal jurisdiction.

In this personal injury suit, both parties are citizens of Virginia. The defendants maintain that, by virtue of the tortfeasor’s bankruptcy discharge and the fact that his insurance carrier has interpled his policy limits in state court, he is a “nominal” party whose citizenship may be ignored for purposes of determining jurisdiction. But the plaintiff is required by law to sue the insured personally to recover any proceeds. The courts that have addressed this issue are virtually unanimous that a bankrupt defendant is not “nominal” for purposes of diversity jurisdiction.

The defendants effectively argue that a judgment-proof defendant’s citizenship may be ignored for jurisdictional purposes. That is not the law. Edem is not a nominal party, and his inclusion as a defendant divests this court of jurisdiction.

Motion to remand granted.

Categories: Daily Dockets

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