By Charles Michael Fulton

Many people in the metro-DC area have security clearances. When a legal issue arises, holders of security clearances are rightfully concerned about the impact on their security clearance and the corresponding impact on their careers. Like most legal questions, the answer is it depends—that is to say, it depends on your particular legal issue and the underlying facts. To give you some background on how we’d answer your question, this blog post will discuss the relevant portions of the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information, 32 C.F.R. § 147 (2021), (the “Adjudicative Guidelines”).

The Adjudicative Guidelines list thirteen Guidelines outlining areas of concern for agency supervisors to apply to both initial and continuing eligibility for access to classified information. Each Guideline is assigned a letter from A to M. For example, the first three Guidelines, A to C, along with Guideline L, deal with allegiance to the United States and foreign influences, including in activities outside of employment—generally not areas with which our clients are concerned. See 32 C.F.R. § 147.3–.5, .14 (2021).

For a civil matter, such as a lawsuit over a debt or a landlord/tenant dispute that ends up in litigation, the most relevant guideline is Guideline F, which deals with money concerns. See 32 C.F.R. § 147.8 (2021). Guideline F instructs supervisors to consider, among other things, an applicant’s history of not fulfilling financial obligations and an inability or unwillingness to satisfy debts. 32 C.F.R. § 147.8(b)(1),(3) (2021).

As an example, a debt collector sues a client for a debt that the client had long forgotten, never new existed, or was not actually the client’s obligation. This would likely be a concern for a supervisor in a security clearance review because it is an indicator that the client has a history of not fulfilling financial obligations.
As another example, a client failed to pay the full amount of rent (and late fees) due on his or her previous rental unit. This would also likely be a concern for a supervisor in a security clearance review because it is an indicator that the client has a history of not fulfilling financial obligations.

Fortunately, Guideline F provides some instructions on facts that could reduce concern for failing to pay debts. Specifically, Guideline F instructs supervisors to consider whether the issue happened a long time ago; the issue was isolated; the issue resulted from circumstance beyond the client’s control, due to extenuating circumstances such as loss of a job; and whether the client is actively working to resolve the issue or making an effort to repay his or her debts. 32 C.F.R. § 147.8(c)(1)–(4),(6) (2021).

To reduce concern for the first example, the client could point out that the debt arose a long time ago, and that the client has no other such debts on his or her record. Of course, the later would require the client to investigate whether the client did, indeed, have any other such outstanding debts—a great way to do this would be for the client to request several credit reports and carefully review the results.

To reduce concern for the example using unpaid rent, the client could point out that the unpaid rent was the result of unexpected circumstances, such as the loss of a job or, perhaps, the loss of a spouse or co-tenant. Further, the client could point to the fact that, hopefully, the client was actively trying to negotiate with his or her former landlord to reach a mutually agreeable settlement arrangement to resolve the debt.

If these examples do not answer your questions about how a civil claim you have, or someone has a claim against you that may affect your security clearance, please contact Steven Krieger Law, PLLC, for a consultation on the matter.

This blog post on how a civil matter may affect a security clearance is part of a series of blog posts on how legal matters may affect a security clearance. For information on how a family law matter may affect your security clearance, click here (coming soon). For information on how a criminal matter may affect your security clearance, click here (coming soon).

By Andrew J. Salinas

Imagine this: you’re a contractor in Virginia who just accepted a major home improvement project. You spend days collecting the necessary materials and doing backbreaking work so you can do the best job you can. You drive away with the final check and take it to the bank. You walk in, expecting to get paid for the last few long days of your labor you’re shocked when the teller tells you the check bounced. Now you have to explain to your workers that they won’t get paid.

Or, you’re a young person in Virginia working odd jobs off Craigslist. You just cleaned out a person’s apartment, walked their dog, or mowed their lawn. They thank you for the work and hand you a check. You deposit it through your banking app and go about your day. A few days later you’re surprised when the bank notifies you that the check was bad and now you’re short on the cash you needed for rent this month. 

Maybe you co-own a property with someone and your co-owner gave you a bad check for their part of the mortgage, which put your loan in jeopardy of default? (Note: if you need to re-finance your mortgage due a bad check or covid or some other reason, check out this article that may be helpful.)

What can you do to recover the money from the bounced check?

In addition to getting the exact amount recorded on the bad check, Virginia law also entitles you to:

1. The legal interest from the date of the check;
2. The protest or bad check return fee, if any, charged by the financial institution;
3. A processing charge of $50.00; and
4. Reasonable attorney's fees if awarded by the court.[1]

What if I’m in a situation where I was depending on this person to write me more checks? Say I’m a contractor who made an agreement with a client to renovate their house and we’ve already agreed they would pay me in three installment checks. I’ve already purchased all the building materials and put in a substantial amount of labor when the second check they gave me was bad. Even if I get the full amount of the second check, I’m still one full check short. I also passed on another project to do the home renovation and now have lost that opportunity. Do I have any other legal remedies?

Possibly. Did you already perform or substantially perform your end of the deal? In that case there are several options under the common law of Virginia. For example, there exists the private right of action known as breach of contract. Circling back to the hypothetical contractor situation, in a breach of contract claim a court could award you restitution, thus entitling you to the money you already spent on materials and labor. A plaintiff asserting a claim for breach of contract must prove the following elements:

1. There exists a legally enforceable obligation of a defendant to a plaintiff;
2. The defendant's violation or breach of that obligation; and
3. Injury or damage to the plaintiff caused by the breach of obligation.[2]

Even if you didn’t have some sort of contract with the bad check issuer, the common law also provides you with a fraud claim where plaintiff needs to prove by clear and convincing evidence that:

1. The seller intentionally and knowingly;
2. Made a false representation;
3. Of a material fact;
4. That was relied upon by the plaintiff buyer; and that
5. Resulted in damaged to the party misled.[3]

Under these common law claims you could be entitled to receive restitution for any labor you provided the issuer and even potentially punitive damages that punish the issuer for their deceptive conduct.
 
Finally, Virginia criminalizes writing bad checks as a form of larceny. The elements of this crime are outlined as follows:

1.  Any person within the Commonwealth of Virginia who;
2. With intent to defraud;[4]
3. Makes, draws, utters, or delivers;
4. Any check, draft, order, or other instrument for the payment of money upon any bank, banking institution, trust company, or other depository; and
5. Knowing at the time of creating the aforementioned instruments that the maker or drawer does not have sufficient funds in or credit with such bank, banking institution, trust company, or other depository;

           a.  Is guilty of the Class 6 felony of larceny if the check is worth $1,000.00 or more and could receive                  one to five years in prison or up to one year in jail and/or a fine up to $2,500.00, or
          b.  Is guilty of a Class 1 misdemeanor of larceny if the check is worth less than $1,000.00 and could                    serve a jail sentence up to a year and/or pay a fine of $2,500.00.[5]

You do not need to show that you received anything in return for the check for this law to apply.[6] You may report the bad check issuer to your local Commonwealth’s Attorney’s Office for prosecution. You can do this even if they eventually pay you back.[7]
 
If you received a bad check and want to get what you’re owed, contact Steven Krieger, PLLC for a consultation.

***

[1] § 8.01-27.1(A).
[2] Sunrise Continuing Care, LLC v. Wright, 277 Va. 148, 671 S.E.2d 132, 135 (Va. 2009) (quoting Filak v. George, 267 Va. 612, 594 S.E.2d 610, 614 (Va. 2004)).
[3] State Farm Mut. Auto. Ins. Co. v. Remley, 270 Va. 209, 218, 618 S.E.2d 316 (2005)(quoting Prospect Development Co. v. Bershader, 258 Va. 75, 85, 515 S.E.2d 291 (1999)).
[4] The fact that the issuer issued the check in the first place creates a prima facie presumption that issuer knew the account had insufficient funds. Bolinsky v. Commonwealth, No. 2055-93-2 (Ct. of Appeals Feb. 14, 1995).
[5] Va. Code §§ 18.2-181; 18.2-10; 18.2-11.
[6] Payne v. Commonwealth, 222 Va. 485, 281 S.E.2d 873 (1981).
[7] Cook v. Commonwealth, 178 Va. 251, 16 S.E.2d 635 (1941).

By Andrew J. Salinas

Imagine this: you’re a contractor in D.C. who just accepted a major home improvement project. You spend days collecting the necessary materials and doing backbreaking work so you can do the best job you can. You drive away with the final check and take it to the bank. You walk in, expecting to get paid for the last few long days of your labor you’re shocked when the teller tells you the check bounced. Now you have to explain to your workers that they won’t get paid
 
Or, you’re a young person in the District of Columbia working odd jobs off Craigslist. You just cleaned out a person’s apartment, walked their dog, or mowed their lawn. They thank you for the work and hand you a check. You deposit it through your banking app and go about your day. A few days later you’re surprised when the bank notifies you that the check was bad and now you’re short on the cash you needed for rent this month.
 
What can you do to recover the money from the bounced check?
 
D.C. limits bad check recovery to “merchants” or people who do or would “sell, lease, or transfer, either directly or indirectly, consumer goods or services, or a person who does or would supply the goods or services which are or would be the subject matter of a trade practice.”[1] In other words, you can receive the amount on face of the check as long as it was for the payment of goods or services. If that is the case, then the D.C. Code mandates that after the financial institution dishonors a bad check, you send a written letter[2] to the issuer demanding payment.[3] If after 30 days the issuer still hasn’t paid you, D.C. law entitles you to the face amount on the check and:

1. Twice the amount of the check, or $100.00, whichever is greater;
2. Costs; and
3. Reasonable attorneys’ fees.[4]

 
Additionally, in D.C., it is a crime to write a bad check. The elements of this crime are outlined as follows:

1. Any person within D.C. who;
2. With intent to defraud;[5]
3. Makes, draws, utters, or delivers;
4. Any check, draft, order, or other instrument for the payment of money upon any bank or other depository; and
5. Knowing at the time[6] of creating the aforementioned instruments that the maker or drawer does not have sufficient funds in or credit with such bank or other depository;

           a.     Is guilty of a felony if the check is worth $1,000.00 or more and could be fined up to $2,500.00                       and/or be imprisoned for one to three years, or
           b.     Is guilty of a misdemeanor if the check is worth less than $1,000.00 and could be fined up to                           $1,000.00 and/or be imprisoned for up to 180 days.[7]
 
Essentially, you can report the bad check issuer to the D.C. United States Attorney’s Office to get them prosecuted.[8]
 
If you received a bad check and want to get what you’re owed, contact Steven Krieger, PLLC for a consultation.

***

[1] § 28-3151.
[2] Specifics according to § 28-3152(g).
[3] § 28-3152(b).
[4] § 28-3152(c).
[5] The bank or financial institution’s failure to honor a check 5 days after the check was issued is considered prima facie proof of intent to defraud.
[6] This includes false representation, knowledge of falsity, and intent to defraud. Ciullo v. United States, 325 F.2d 227, 117 U.S. App. D.C. 31, 1963 U.S. App. LEXIS 3861 (D.C. Cir. 1963)(interpreting the bad check statute’s previous codification of D.C. Code 1961, § 22-1410).
[7] D.C. Criminal Code §§ 22-1510; 22-3571.01.
[8] To report a complaint, visit the USAO’s website at https://www.justice.gov/usao-dc/contact.

By Andrew J. Salinas

Under Virginia law, a Board[1] licensed car dealer may provide you with temporary license plates and a certificate of temporary registration after you fully or partially purchase a vehicle.[2] The vehicle registration certificate needs “its date of issuance, the name and address of the purchaser, the identification number of the vehicle, the registration number to be used temporarily on the vehicle, the name of the state in which the vehicle is to be registered, the name and address of the person from whom the dealer acquired the vehicle, and whatever other information may be required by the [DMV]” to be legally valid.[3]
 
Regardless of whether the dealer does or, through no fault of their own, does not have the original title for the vehicle at the time you buy, it is your responsibility to make sure the temporary registration certificate is recorded by the DMV.[4] Once that happens, you receive a copy of the temporary registration certificate, which allows you to get the vehicle insured and lawfully drive it around on the road while you wait for transfer of title.[5]
 
When am I entitled to receive title?
 
Those temporary certificates of registration are only valid until either 30 days after they are issued or until the dealer delivers title to you.[6]
 
It has been 30 days and I still haven’t received title. What now?
 
If the dealer fails to deliver the certificate of title or certificate of origin to you or the DMV within the first 30 days, a couple of things can happen.
 
First, you can get a full refund for what you paid for the vehicle and return it to the dealer.[7]
 
Second, if you decide to notify the dealer you still want to keep the car, the dealer is required to deliver an application for title, a “copy of the bill of sale, all required fees and a written statement of facts describing the dealer's efforts to secure the certificate of title or certificate of origin to the vehicle” to the DMV within the first 30 days period.[8] When the DMV receives those documents, the DMV may in its discretion issue a secondary temporary certificate of registration that would be valid for another 30 days.[9]
 
If after this 60-day period the dealer is still unable to produce your vehicle’s title, the DMV may extend temporary registration for an additional 90-day period.[10]
 
Okay it has been 150 days and I still don’t have my title, what are my rights?
 
After the secondary temporary certificate of registration period and the additional period expires, you have a couple of options according to Virginia law:
 
A.    Return the car and get a refund
 
Your first and most obvious option is to get a full refund. Virginia law dictates that you have a right to a full refund of all the payments you made towards the vehicle as long as you give the dealer notice that you’re returning the car before a title is issued.[11] But, one court has ruled that this also means that you are not entitled to a refund while any of the temporary registration periods are running.[12] Also keep in mind that any damage incurred to the vehicle while you had the keys and any accrued mileage after you return it will come out of your refund.[13]
 
B.    File a complaint about the dealer with the DMV Commissioner
 
Another option you can take is to report the dealer to the DMV Commissioner.[14] If you really feel slighted by the dealer and think getting a refund isn’t enough, you can bring a complaint to the DMV Commissioner who after conducting a hearing can outright suspend the dealer’s ability to issue temporary certificates of registration.[15] Doing so won’t net you any monetary benefit, but it can send a message to the car dealer to never sell a vehicle without possessing title again. If you do choose to go this route, remember to have any paperwork, emails, or text messages relating to the sale and the dealer’s failure to provide you with title ready for the hearing.
 
Keep in mind that these two options only apply to licensed car dealers who are unable to deliver title because it was lost or in another’s possession.[16] If you fail to pick up the title of certificate from the dealer after the first 30 days, one court has ruled that you’re out of luck on getting a refund on the car or collecting damages from the dealer if your car is impounded.[17] Likewise, Virginia law considers title transferred if you drive the car off the lot and the dealer has already filled out the paperwork, even if it has not delivered the paperwork to the DMV yet.[18] As of this writing, it is an open question whether you can sue a licensed dealer specifically for failing to provide title after providing a buyer with a temporary certificate of registration under Virginia Code § 46.2-1542. A federal court in Virginia ruled in 2001 that a private right of action may exist from this part of the state code.[19]
 
What if the dealer never had the title to the car in the first place? What can I do then?
 
A.    Virginia Consumer Protection Act
 
The Virginia Consumer Protection Act (VCPA) establishes a private right of action for a customer aggrieved by a fraudulent or deceptive consumer transaction within the Commonwealth of Virginia.[20] A “consumer transaction” includes the sale or offering for sale of “goods or services to be used primarily for personal, family, or household purposes.”[21] This section applies to car sales.[22] The VCPA also prohibits misrepresenting goods for having certain characteristics and using any form of deception in connection with a consumer transaction.[23]
 
If you sue a car dealer under the VCPA and win, you would be entitled to recover actual damages as a result of your lack of title (e.g. impound and other registration costs).[24] If a court finds that the dealer willfully deceived you into thinking they had title, it may award you up to three times the actual damages you incurred.[25] You could also be entitled to reasonable attorneys’ fees – see our prior blog post about this here.[26]
 
B.    Common Law Breach of Contract and Fraud Claims
 
Under the Virginia common law, a plaintiff asserting a claim for breach of contract must prove the following elements:
 
1.     There exists a legally enforceable obligation of a defendant to a plaintiff;
2.     The defendant's violation or breach of that obligation; and
3.     Injury or damage to the plaintiff caused by the breach of obligation.[27]
 
Virginia common law also provides a private right of action for fraud when a plaintiff can prove by clear and convincing evidence that:
 
1.     The seller intentionally and knowingly;
2.     Made a false representation;
3.     Of a material fact;
4.     That was relied upon by the plaintiff buyer; and that
5.     Resulted in damaged to the party misled.[28]
 
Under these common law claims you could be entitled to receive any costs associated with the non-transfer of title and potentially punitive damages that punish the dealer for their deceptive conduct. Keep in mind that if you are awarded damages under the VCPA, you are barred from recovery based on state common law.[29]
 
C.    Civil Penalties
 
Virginia law also states that it is a Class 3 misdemeanor to sell, trade, exchange, or barter a motor vehicle, trailer, or semitrailer without first having secured title for it or without legally having in their possession a certificate of title for the vehicle.[30] This means the dealer could potentially receive a fine of up to $500.00[31] if you chose to report them to the Virginia Attorney General’s Office.[32]

Remember that VCPA and state common law claims have a two-year statute of limitations that accrue either when you discover the fraud or reasonably should have discovered the fraud.[33] If you have experienced a title issue from a licensed or unlicensed car dealer, contact Steven Krieger, PLLC for a consultation.


[1] Motor Vehicle Dealer Board (§ 46.2-1503; 46.2-1542(A)).
[2] § 46.2-1542(A).
[3] Id.
[4] § 46.2-1542(A)-(B); Va. Code Ann. § 46.2-630.
[5] § 46.2-1542(A).
[6] § 46.2-1542(B).
[7] Id.
[8] 46.2-1542(C)
[9] Id.
[10] § 46.2-1542(D).
[11] § 46.2-1542(B).
[12] Rolander v. Luxury Auto Sales of Dumfries, 77 Va. Cir. 114, 2008 Va. Cir. LEXIS 129 (Prince William 9/17/2008).
[13] § 46.2-1542(B).
[14] § 46.2-1542(E). See also Lewis v. Commonwealth, 28 Va. App. 164, 170 (1998)(Va. Code Ann. § 46.2-1542 provides that the issuance of a temporary certificate of ownership pursuant to § 46.2-1542 shall have the effect of vesting ownership to the vehicle in the purchaser for the period that the certificate remains effective.)
[15] § 46.2-1542(E)
[16] Nigh v. Koons Buick Pontiac GMC, Inc., 143 F. Supp. 2d 535, 2001 U.S. Dist. LEXIS 5374 at *9 (E.D. Va. 2001), aff'd, 319 F.3d 119 (4th Cir. 2003)(ruling that § 46.2-1542’s provisions did not apply to car dealership who had possession of vehicle’s title when it sold the vehicle to plaintiff).
[17] Rolander, 77 Va. Cir. at 115-15, 118. 
[18] Wicker v. Nat’l Sur. Corp., 330 F.2d 1009, 1012-13 (4th Cir. 1964).
[19] Nigh, 2001 U.S. Dist. LEXIS 5374 at *2-*3 (E.D. Va. 2001), aff'd, 319 F.3d 119 (4th Cir. 2003) (holding that § 46.2-1542 only applies to licensed vehicle dealers and that, despite much of Title 46.2 only creating administrative remedies, a private right of action may spring from this statute).
[20] Va. Code. § 59.1-200.
[21] Va. Code. § 59.1-198.
[22] Alexander v. Southeastern Wholesale Corp., 978 F.Supp.2d 615, 621-22 (E.D. Va. 2013).
[23] Va. Code § 59.1-200(A)(5), (14).
[24] Va. Code § 59.1-204(A).
[25] Id.
[26] Va. Code § 59.1-204(B).
[27] Sunrise Continuing Care, LLC v. Wright, 277 Va. 148, 671 S.E.2d 132, 135 (Va. 2009) (quoting Filak v. George, 267 Va. 612, 594 S.E.2d 610, 614 (Va. 2004)).
[28] State Farm Mut. Auto. Ins. Co. v. Remley, 270 Va. 209, 218, 618 S.E.2d 316 (2005)(quoting Prospect Development Co. v. Bershader, 258 Va. 75, 85, 515 S.E.2d 291 (1999)).
[29] Va. Code § 59.1-204(A).
[30] Va. Code § 46.2-617.
[31] Va. Code § 18.2-11.
[32]To file a complaint, visit the Attorney General Office’s website at: https://www.oag.state.va.us/consumer-protection/index.php/file-a-complaint.
[33] Va. Code §§ 59.1-204.1; 8.01-248.

By Susann Nordvik

More Americans than ever have been able to enjoy the freedom, and the responsibility, of being a small business owner (“SBO”).  Entrepreneurship can be both an extremely rewarding and extremely risky proposition.  This self-starting demographic in many cases has not only developed unique and innovative products or services, but has sought professional assistance to create the right business entity as a vehicle for their efforts and to protect and separate their personal interests from their professional ones.  In many cases these intrepid individuals form limited liability companies or a closely held corporation under Subchapter S.  However, the shield from liability of company debt can be compromised if certain formalities are not observed.

Moreover, because revenue streams for small businesses can be somewhat erratic, many SBOs opt for credit lines and short-term loans to bridge the income gap.  However, although such loans are highly regulated in the case of a consumer loan,[1] loans in the name of a SBO’s company are considered commercial, and are not subject to consumer protections.  As such, various so-called lenders have arisen to take advantage of this niche market and in some cases, trap the unwary SBO in a loan that has wide ranging implications to the SBO if his or her company ultimately fails.

These essentially predatory lenders offer attractive options for quick and easy “signature” loans that are often handled entirely over the internet.  In many cases they advertise that no personal guarantees are required.  However, a close look at the fine print may show this not to be the case at all.  In such cases, the SBO who signs on the dotted line may have just executed a personal guarantee that bypasses the corporate veil of limited liability, and if the SBO defaults on the loan due to financial difficulty, that SBO may find their personal finances and assets in jeopardy. 

So, what should the wise SBO do?

First, make sure that you are engaging only with a reputable lender.  Finance companies that previously made their money dealing in subprime mortgages and what the industry refers to as “C paper” were hit hard when the real estate bubble burst in the early 2000s.  Some of them found new life in the post-Obama era by lending to small businesses at high interest rates or with hidden liabilities.  Therefore, the SBO’s may be better off going to their local bank or credit union and avoiding independent finance companies altogether.

If it isn’t possible to stick to a mainstream commercial lender, make sure that you are dealing with a lender that has a good rating, or is in good standing with the Better Business Bureau, the FDIC, the Office of Thrift Supervision, and/or FINRA (if the SBO is dealing with an investment company), or state regulatory agencies for state-chartered banks or lenders.  

Second, make sure that you fully review any contract and all addenda before signing anything.  Although the lender may promise a quick turnaround for much-needed funds, prudence is the better part of valor.  If at all possible, have your contract reviewed by an attorney skilled in matters involving the lending industry and closely-held businesses.  Most importantly, if you see a “personal guaranty” as part of your signature packet, think twice before agreeing to this loan.  You may be signing away your personal assets by accepting funds under such terms.

All right, thanks for the advice, but what do I do if I’ve already signed such an agreement and the lender is attempting to sue me personally?

​One of the tactics used by predatory lenders is to attempt to sue the SBO in a foreign state, possibly with the belief that the SBO will not appear to defend themselves, or because the foreign state has laws that the lender views as more favorable to it.  In such a case, the SBO may not have the requisite contacts with the forum state for the lender to successfully sue in that state.   In order for a court in another state to have personal jurisdiction over a defendant, one of two types of circumstances must exist:

1. The SBO must have either had “continuous, substantial, and systematic” contacts with that forum state.  In other words, the SBO must regularly do business in that state.[2]  This is what is known as “general jurisdiction.”
2. The second type of circumstance, “specific personal jurisdiction,” occurs when the transaction in question took place in the forum state.  For example, in most jurisdictions, a contract is formed in the locale where it is signed.  Therefore, an argument may exist that the foreign state court cannot exercise specific jurisdiction over the transaction if the contract was formed and performed elsewhere.

If the lender cannot establish one of the two types of personal jurisdiction over the SBO in the court that it chose, the SBO may be able to successfully prevent the case from moving forward in that court by making a motion to dismiss for lack of personal jurisdiction.  It is important to note, however, that if the lender does not prevail in the face of a jurisdictional argument, the lender may choose to file a new lawsuit in the SBO’s home state.  If that occurs, there may be other defenses available to the SBO in his or her home jurisdiction.

Unless and until the state legislatures pass laws to protect SBOs from predatory lending practices, SBOs will need to remain particularly vigilant in protecting their interests.  It is far better to delay a few days in securing a loan rather than risk the personal liability the SBO organized to avoid.

If you've signed a business loan or would like an attorney to review the loan documents, please feel free to contact us. 


[1]  See, e.g., Code of Virginia, § 6.2-1816, relating to the requirements and prohibited business methods for consumer lenders pertaining to “payday” loans.

[2]  See Daimler AG v. Bauman, 134 S. Ct. 746, 761 (2014) (“Our cases have long stated the rule that a defendant’s contacts with a forum State must be continuous, substantial, and systematic in order for the defendant to be subject to that State’s general jurisdiction.”)

By Katarina Nguyen

The biggest hurdle in family law litigation is often the initial one: getting that first court order. This applies to spousal support and child support, particularly when the payor spouse or parent is contesting paying the amount of support you are seeking or contesting paying any amount of support at all. But you complete all the litigation and trial to obtain your spousal support and/or child support order, the fight may not be over.
 
When a payor spouse or parent fails or refuses to pay their court-ordered support, you're left with only two options: working out a resolution with the payor spouse or parent or, more often than not, resorting to litigation. Most people are apprehensive at the idea of having to go back to court because of the time, energy, and financial resources it takes. Plus, they remember the initial litigation and how hard it was to get that first support order and the idea of going back is discouraging. However, you're able to ask the court to award you attorneys' fees if the payor spouse or parent is not paying. 
 
But lawsuits to collect on spousal support or child support arrears are actually relatively straightforward and typically involves much less effort than the initial support determination. This is because the court is only interested in four main questions: (1) whether the payor spouse or parent failed to pay the full amount due and, if yes, how much back-support is owed, (2) whether to hold the payor spouse or parent in contempt of court for violating the support order, (3) setting a new payment plan for the arrears on top of the regular support that continues to accrue, and (4) determining whether any additional punishments are necessary as a result of a contempt finding.  Plus, again, you are able to ask the court to award you your attorneys' fees for bring this type of lawsuit.
 
These lawsuits are referred to as "show cause" petitions or, simply, a "show cause." "Show cause" means that the payor spouse or parent has to appear in court and "show cause," i.e., explain why he or she is not in violation of the court order and should not be held in contempt.
 
Show cause litigation in Virginia comprise of two steps: there is the first, initial status hearing, also called the initial return, and the second hearing, which is the trial. There may be other hearings in between depending on whether you or the payor spouse or parent files any motions.
 
 I.         The Filing Requirements
 
Va. Code Section 8.01-274.1 provides the requirements for show cause petitions in the Circuit Court, while Va. Code Section 20-115 provides additional details for show cause petitions in the family law context in the Circuit Court. You will need to file a "rule to show cause," the show cause petition, and an affidavit. The petition and affidavit can be the same document, but the rule to show cause is separate. The rule to show cause is a very brief order that is entered by the court. The order instructs the payor spouse or parent to appear at the designated initial return date. The order does not grant your petition, but rather merely initiates the court hearing process by putting the payor spouse or parent on notice of the proceeding.
 
Va. Code Section 16.1-278.16 provides the requirements for show cause petitions in the Juvenile and Domestic Relations District Court ("JDR Court"). The JDR Court uses Virginia form DC-635, which has instructions.
 
The court you file your petition with depends on which court entered your support order. If the Circuit Court entered the support order, which may be part of a final divorce order or a settlement agreement incorporated into a final divorce order, then you may file in Circuit Court. However, you should review the order and/or settlement agreement to see if the Circuit Court remanded the matter of spousal support or child support to the JDR Court. If yes, then you will need to file your show cause petition with the JDR Court. And if the JDR Court entered your support order, then you simply file your show cause petition with the JDR Court.
 
Generally, you will need to include a copy of the support order with your show cause petition. When filing, you should bring one original copy of each document and extra copies for service and for you to keep for your records. If in doubt, call the court and ask about the number of copies that is required, but remember to bring one extra copy to get date-stamped with proof of filing for your own records.
 
II.         Service
 
Va. Code Section 8.01-274.1 requires the rule to show cause, the show cause petition, and the affidavit to be served on the payor spouse or parent. Va. Code Section 16.1-278.16 requires personal or substituted service of the documents.
 
Va. Code Section 8.01-296 details the types of service that are permitted for individuals. Personal service means hand-delivering a copy of the documents to the actual payor spouse or parent. Substituted service means hand-delivering a copy of the documents to a member of the payor spouse or parent's household that is at least 16 years of age. Substituted service can also mean posting a copy of the documents to the front door of the payor spouse or parent's "place of abode," or their home, and mailing a copy of the documents to the same address at least ten days before the first hearing date, with a certificate of mailing filed with the court.
 
If the payor spouse or parent lives in Virginia, you can request service through the Sheriff's Office for $12.00. If they live outside of Virginia, you can obtain service through the Secretary of the Commonwealth or by private process service.
 
III.         The Initial Return
 
The initial return is normally a short status hearing. The court will ask the payor spouse or parent if he or she admits to owing the amount you stated in your petition. If yes, then the court may enter a final order that same day or schedule another hearing on the contempt disposition. If no, then the court will schedule a trial date.
 
If you are in the Circuit Court, you automatically have the right to issue discovery. But if you are in the JDR Court and you want to be able to issue discovery, you will need to ask the court for permission at the initial return. The court may ask you to explain why you believe discovery is necessary.
 
IV.         The Trial
 
At the trial, bring your support order and proof of all payments made by the payor spouse or parent since the entry date of your support order. The court will ask you how much the payor spouse or parent owes you through the trial date, so be prepared to provide that number along with any supporting calculations.
 
If the payor spouse or parent is unable to provide proof of payment for any month that you stated he or she missed or failed to pay in full, then he or she will be unable to disprove your testimony.
 
The court will weigh the evidence presented, including the parties' testimony, the testimony of any witnesses, and any other evidence submitted before the court. The court will then decide whether to grant your show cause petition and find that the payor spouse or parent violated the support order. If yes, the court may enter its final ruling that same day or it may set a status hearing some time out for the ruling. The court may delay its ruling to allow the payor spouse or parent time to demonstrate that he or she is putting in a serious effort to comply with the court's order. If he or she does so, then the court will likely exercise leniency in its ruling.
 
V.         The Ruling
 
Regardless of whether the ruling happens the same day as trial or at a later date, the court first decides what the arrearage amount is after weighing the evidence. Once that amount is determined, the court will decide how the payor spouse or parent will make payments towards that arrearage. The payor spouse or parent may already have an existing spousal support or child support obligation owed to you, so the court will take that and the payor spouse or parent's financial status into consideration when setting the arrearage payment. The court will also decide whether to formally hold the payor spouse or parent in contempt and, if yes, whether to sentence the payor spouse or parent to imprisonment for a term of up to one year. The court is not required to hold the payor spouse or parent in contempt in order to order him or her to comply with the support order. The court may also order the payor spouse or parent pay for your reasonable attorneys' fees and costs.
 
VI.         Conclusion
 
While suing in court can be daunting, show cause petitions based purely on nonpayment of support are often relatively straight forward because the evidentiary burden is easy to prove: either the payor spouse or parent paid or didn't. Once you establish how much is owed, the arguments shift to how much the payor spouse or parent can afford to repay on a monthly basis and whether the court ought to make a contempt finding.
 
If you need assistance filing a show cause petition or would prefer to have an attorney represent you in court, especially since attorney’s fees are recoverable in these actions, please feel free to contact us for a consultation.

By Susann Nordvik, Katarina Nguyen, and Steven Krieger
 
“Every attorney shall be liable to his client for any damage sustained by the client through the neglect of his duty as such attorney.”[1]  This statutory provision stands for the common sense principle that attorneys are responsible for the actions they take as counsellors and representatives of their clients—just like everyone else who acts on behalf of others or who interacts with others.  However, because of the place where this principle stands, at the intersection of many areas of the law, this statutory obligation is not as straightforward as it appears. 
 
In civil situations, which is the area where most people will come into contact with, or require the services of, attorneys, a standard of ordinary care applies.[2]  However, what happens when a client believes that his or her counsel has breached that ordinary duty of care?
 
To prevail on a claim of legal malpractice, a client must establish the following:

1. That the client employed the attorney;
2. That the attorney failed to perform his or her services with an ordinary standard of care; and,
3. The client was damaged as a proximate result of the attorney’s failure to perform.

 
Employment of Counsel

The relationship between an attorney and client has been considered to be the most sacred relationship in the law.[3]  Because of the nature of the legal profession, it is possible that an attorney could be “employed” simply based upon the meting out of legal advice, even if no money ever changes hands, and regardless of whether a formal contract is formed.  However, generally speaking, because of the vagaries of legal situations, the formation of an attorney-client relationship requires actual interaction between the parties as opposed to the mere review of generic information, such as reading an article on an attorney’s website.  The formation of an attorney-client relationship requires the assent of both parties, either directly or impliedly.[4]  In formal terms, this relationship is known as “contractual privity.”[5] 

Nevertheless, it is possible that a third party could be what is known in the legal world as a “third party beneficiary” of legal services, and therefore, can stand in the shoes of the client for purposes of a legal malpractice claim.  For example, if a person engages an attorney to make out a will, and in the process names a specific beneficiary, that beneficiary is essentially the intended beneficiary of the agreement between the lawyer and the client.  If the attorney fails to properly safeguard the estate while making a will so that the assets do not pass to the client’s intended beneficiary, that beneficiary may be able to state a claim for malpractice against the attorney if the attorney cannot correct the error after the death of the testator.  This is precisely what happened in the case of Thorsen v. Richmond Society for the Prevention of Cruelty to Animals.[6] 

In Thorsen, the Richmond SPCA was able to maintain an action for legal malpractice on the grounds that the SPCA, which was the testator’s sole surviving beneficiary, was unable to receive the testator’s bequest of real property due to the error of the attorney Thorsen when preparing the will.  As a result, the property passed intestate to other members of the testator’s family, thereby damaging the SPCA and depriving it of the full bequest.[7]

The Virginia Supreme Court held that the third-party beneficiary doctrine was a well-reasoned exception to the privity requirement, thereby permitting a party to proceed with a malpractice action.[8]  However, if a third party cannot claim beneficiary status, the rule of contractual privity will prevent that third party from asserting a malpractice claim,[9] and a malpractice claim cannot be assigned by a client to another party.[10]  
However, in 2017, the year after the Court ruled on Thorsen, the Virginia legislature enacted Va. Code § 64.2-520.1, which arguably has the impact of undoing the Court’s ruling in the estate planning context. The statute says that only the individual or their personal representative can maintain an action for legal malpractice in the estate planning context, the cause of action for which accrues upon the completion of the representation, unless there is a specific reference to subsection (B) “expressly grant[ing] standing to a person who is not a party to the representation.”
While a third-party could bring a legal malpractice claims in other contexts, a client cannot assign a legal malpractice claim to someone else.[11] This is due to the court’s concern that legal malpractice claims would be sold and traded like a commodity, which means that an attorney could be sued for malpractice by someone they never met before and for whom they never rendered legal advice or services.[12]

Falling Below the Standard of Care

The employment of counsel establishes a duty on the part of the attorney to the client, and failing to meet, or falling below the standard of care constitutes breach of the duty owed the client.  The standard of care is based on what the ordinary, prudent attorney would do under the same or similar circumstances.  In fact, the Virginia Supreme Court has stated:  “[The attorney] is not to be answerable for every error or mistake, but on the contrary, will be protected if he acts in good faith, to the best of his skill and knowledge, and with an ordinary degree of attention.”[13]  In addition, a negligent attorney can also apply the defense of contributory negligence in the context of legal malpractice cases, or that the client’s own negligence contributed to the client’s resulting damages.[14]
​
An illustration of this comes into play when an attorney is asked to make a determination about the path the courts will take in an unsettled area of the law.  The attorney cannot “look into a crystal ball” and foresee what will happen, but he or she can review the existing law and make a reasoned judgment about how a court might rule.  In Virginia, there is no blanket “judgmental immunity,” however, the Supreme Court has held that “if an attorney exercises a ‘reasonable degree of care, skill, and dispatch’ while acting in an unsettled area of the law, which is to be evaluated in the context of ‘the state of the law at the time’ of the alleged negligence, then the attorney does not breach the duty owed to the client.”[15]

Resulting Damages

“‘Damage is an essential element of a cause of action. Without some injury or damage, however slight, a cause of action cannot accrue.’” [16] An injury may be something intangible, such as the loss of the right to pursue a legal claim because of an attorney’s failure to take timely action to sue;[17] or an injury may be a tangible effect, such as having a judgment entered against the client, even if the client had not paid the judgment, due to an attorney’s manifest error.[18] 

However, it should be noted that in the event that the damage suffered by the client is so financially catastrophic that the client finds himself or herself filing for bankruptcy protection as a result, any claim for legal malpractice that arose prior to the bankruptcy filing would become part of the bankruptcy estate.[19] As such, the future of the malpractice claim is determined by the bankruptcy trustee, who may opt either to prosecute the claim as an adversarial proceeding in the bankruptcy court, or abandon the claim, in which event the claim reverts to the client.[20]

Collectibility is also an issue the courts consider when the damage is the loss of an otherwise viable claim due to the attorneys’ negligence. Collectibility of a claim can act as a limit on “the measure of the legal malpractice plaintiff’s damages to how much the legal malpractice plaintiff could have actually recovered from the defendant in the underlying litigation, absent the attorney’s negligence, not simply to the face value of the lost claim.”[21]  This collectibility issue goes to proving the attorney’s negligence was the proximate cause of the client’s damages.[22]

Finally, a potential claimant must understand that as a contract action, only pecuniary losses are considered recoverable damages in a legal malpractice claim, but this includes losses that are “reasonably foreseeable when the contract is made.”[23]  Non-pecuniary losses, such as pain and suffering or emotional distress are not recoverable.[24] Likewise, punitive damages cannot be recovered “in the absence of an independent, willful tort giving rise to such damages.”[25]

Making a Timely Legal Malpractice Claim

One of the most important aspects of any legal claim is making the claim in a timely manner.  This requires taking action before the “statute of limitations” runs out.  A statute of limitations is a time period created by the legislature in which a legal action must be filed in court or the right to file the claim is lost forever.  The purpose of statutes of limitations is to provide sufficient time for a potential plaintiff to take action, but not allow so much time to pass that the claim becomes stale, witnesses become difficult to locate, or memories of the events fragment.  The time periods involved may appear to be somewhat arbitrary, but the time periods themselves are meant to strike a balance between the rights of an injured party, the interests of justice in a fair and complete hearing, and the interest of a potential defendant in finality.

Although there are notes of tort law in legal malpractice claims, the courts have largely concluded that the duty of the attorney arises out of the agreement to perform services for the client.  Consequently, the claim is a contract claim and governed by the limitations period for contracts.[26]  This time frame is 3 years for an oral contract and 5 years for a written contract.[27]

It is nevertheless possible to allege an “independent willful tort,” such as fraud, if the conduct of the attorney is of a type that would ordinarily be considered tortious, and the duty that the lawyer owes to the client arises in a manner not solely attributable to contract.[28]  As this concept suggests, the legal doctrines applicable to such unique situations can be highly complex, and necessitate analysis by experienced counsel to determine whether a given case involves a tort claim in addition to a contract claim.

The Code of Virginia states that the limitations period for contract claims commences on the date that the breach occurred, not the date that the breach was discovered by the client.[29]  Therefore, it is important to act quickly once you realize that your attorney or former attorney may have committed malpractice.  Nevertheless, the Supreme Court has also held that the “continuing representation” rule applies in legal malpractice claims that tolls the statute of limitations.  “[W]here there is an undertaking which requires a continuation of services, the statute of limitations does not begin to run until the termination of the undertaking. . .This special rule is applicable to a continuing agreement between attorney and client.”[30]  This prevents the client from being placed in the awkward position of having to take action against an attorney who is still performing services under the original agreement.  However, the termination of the last services performed on the particular undertaking is what controls the start of the statute of limitations period, even if the attorney represents the client for other matters.[31]

Applying These Requirements to Civil Litigation and Criminal Defense Cases
​
As discussed above, there is a certain degree of latitude given to the lawyer who attempts to discern what a court will do, but chooses wrongly.  This reasonable judgment rule commonly arises in litigation matters.  These situations are often referred to as “cases within cases,” because in order to establish damages for a lost claim against a litigation opponent, it must first be established that but for the attorney’s malpractice, the client would have prevailed in the underlying action.  This often necessitates a “mini trial” of the underlying claim to establish that the malpractice claimant would have won that original case.[32]  Consequently, whether or not your claim for litigation malpractice is a truly winnable case can be open to interpretation. 

Likewise, the threshold for an attorney malpractice claim in a criminal case is somewhat more robust than in other situations.  This is because the client must establish that he or she obtained post-conviction relief, and was legally innocent, entitling the client to release from incarceration.[33]  Generally this rule supports the public policy of the Commonwealth that “a criminal defendant may not profit from a crime in a subsequent legal malpractice action.”[34] 

Like most situations involving complex legal issues, claims are evaluated on a case-by-case basis, taking into consideration all of the facts that are unique to you.  Therefore, be sure to consult with competent counsel if you feel that you have a potential claim against an attorney that has represented you by contacting us for a consultation. 
 
* * * * *

[1] Va. Code, § 54.1-3906.

[2] Virginia does not have certifications for legal specialists, therefore, the general standard applies for all attorneys authorized to practice in the Commonwealth.

[3] Shipman v. Kruck, 593 S.E.2d 319, 324 (Va. 2004) (noting the “special trust and confidence inherent in the attorney-client relationship,” and quoting Allied Productions, Inc. v. Duesterdick, 232 S.E.2d 774, 776-77 (Va. 1977)).

[4] Bankers Credit Service of Vermont, Inc. v. Dorsch, 343 S.E.2d 339, 341 (Va. 1986) (“In order for an agreement to be binding, the parties must have assented to its terms.  This assent, however, need not be communicated by express words, but may be inferred from the conduct of the parties.”).

[5] See Ayyildiz v. Kidd, 266 S.E.2d 108, 112-13 (1980) (noting that an adverse party cannot institute a legal malpractice claim, as adverse parties are not in contractual privity with the attorney, nor are they intended beneficiaries of the agreement between lawyer and client).

[6] 786 S.E.2d 453 (Va. 2016).

[7] Id. at 457.

[8] Id. at 463; cf Copenhaver v. Rogers, 384 S.E.2d 593, 596 (Va. 1989) (noting that “[t]here is a critical difference between being the intended beneficiary of an estate and being the intended beneficiary of a contract between a lawyer and his client.”)  As Copenhaver indicates, although alleging third-party beneficiary status may permit a case to proceed, it is still necessary to prove that the individual claimant was specifically intended to benefit under the contract for legal services.  Such a situation may occur where a parent engages an attorney for the representation of an adult child, for example.  Although the child may also be considered a client of the attorney from a professional ethics standpoint, the child is clearly the intended beneficiary of the agreement between parent and lawyer.

[9] Johnson v. Hart, 692 S.E.2d 239, 243-44 (Va. 2010).

[10] MNC Credit Corp. v. Sickels, 497 S.E.2d 331, 333 (Va. 1988).

[11] Id. at 334.

[12] Id. at 333-34.

[13] Glenn v. Haynes, 66 S.E.2d 509, 512-13 (Va. 1951).

[14] Lyle, Siegal, Croshaw & Beale, P.C. v. Tidewater Capital Corp., 457 S.E.2d 28, 32, 249 Va. 426, 432 (Va. 1995).

[15] Smith v. McLaughlin, 769 S.E.2d 7, 14 (Va. 2015).

[16] Shipman v. Kruck 593 S.E.2d 319, 323 (Va. 2004) (quoting Keller v. Denny, 232 Va. 512, 520, 352 S.E.2d 327, 332 (Va. 1987)).

[17] Williams v. Joynes, 677 S.E.2d 261, 265 (Va. 2009).

[18] Shipman, 593 S.E.2d at 326 (“A client who suffers the entry of a judgment against him indeed suffers a legal injury or damage”)..

[19] See In re Sheikhzadeh, Case No.:  14-14219-BFK at **10-11 (E.D. Va. Bankr. Jun. 26, 2018); see also Shipman at 323 (the cause of action accrued during the bankruptcy petition, which vested in the Bankruptcy Trustee).

[20] Property held by the debtor prior to the filing of the petition, and scheduled under Section 521 of the Bankruptcy Code, reverts to the original holder after discharge and closure of the case if the property is not pursued by the trustee for the purpose of addressing the debtor’s debts through the bankruptcy estate.  However, bankruptcy is a complex field of law, and questions surrounding choses in action where a bankruptcy is involved should be addressed by competent bankruptcy counsel.

[21] Smith, 289 Va. at 261, 769 S.E.2d at 17 (Va. 2015).

[22] Id.

[23] Id. at 265 (What damages are recoverable in legal malpractice is governed by the law concerning damages in breach of contract cases, and thus “‘are limited to those losses which are reasonably foreseeable when the contract is made’” (quoting Kamlar Corp. v. Haley, 224 Va. 699, 706, 299 S.E.2d 514, 517 (Va. 1983)).

[24] Smith, 769 S.E.2d at 19.

[25] Id. (quoting O’Connell v. Bean, 556 S.E.2d 741, 743 (Va. 2002)).

[26] Oleyar v. Kerr, 225 S.E.2d 398, 400 (Va. 1976).

[27] Virginia Code, § 8.01-246.

[28] Goodstein v. Weinberg, 245 S.E.2d 140, 142 (Va. 1978). 

[29] Virginia Code, § 8.01-230.

[30] McCormick v. Romans, 198 S.E.2d 651, 654-55 (Va. 1973); see also Keller v. Denny, 352 S.E.2d 327, 330 (1987) (holding that “the breach of contract or duty occurs and the statute of limitations begins to run when the attorney’s services rendered in connection with that particular undertaking or transaction have terminated.”).

[31] Shipman, 593 S.E.2d at 324 (Va. 2004) (holding “[t]he proper inquiry is not whether a general attorney-client relationship has ended, but instead, when the attorney’s work on the particular undertaking at issue has ceased”); see also Moonlight Enters., LLC v. Mroz, 293 Va. 224, 232-33, 797 S.E.2d 536, 540 (Va. 2017).

[32] See e.g., Smith, 796 S.E.2d at 10-11.

[33] Id. at 13.

[34] Desetti v. Chester, 772 S.E.2d 907, 910 (Va. 2015) (citing Taylor v. Davis, 576 S.E.2d 445, 447 (Va. 2003); Adkins v. Dixon, 482 S.E.2d 797, 801-02 (Va. 1997)).

By Susann Nordvik

It’s a story almost as old as time, or at least as old as high occupancy dwellings:  Renter signs lease, renter pays security deposit, renter moves out, renter loses security deposit to a host of nebulous, if nonetheless predictable, “expenses” charged back by the landlord after the fact.  This theme is so persistent that many tenants actually plan for the inevitable loss of their security deposit.  Other tenants who are somewhat more optimistic have gone to extreme measures to try and recoup as much of the deposit as reasonably possible, including hiring detailing services for the white glove and cotton swab treatment of their former home.

Washington D.C., however, has implemented safeguards to protect the tenant’s right to recover security deposits.  In 1955, the District enacted Title 14, Section 309 of the District of Columbia Municipal Regulations to prevent the renting public from losing those hefty deposits arbitrarily.  The regulation provides that a landlord must provide notice in writing of the intent to withhold any portion of the security deposit to pay for repairs or other expenses within forty-five (45) days of the termination of the tenancy.  Once this notice is provided, the landlord then has thirty (30) days to effectuate the claimed repairs and tender a refund of the unused amount to the tenant with an itemized statement of each expense to which the deposit funds were applied. 

This modest provision was intended to protect the tenant from random charges and surprises.  In many cases landlords complied with Section 309 in one form or another, and landlord/tenant relationships evolved accordingly.  For some less scrupulous landowners, however, Section 309 marked the beginning of an arms race-like effort to avoid returning deposits.  This eventually became such an obvious concern that in 2012, the District amended Section 309 include subsection 309.5, which details the consequences of a landlord’s failure to comply with the notice and refund requirements.  In the garden variety situation, this would render the landlord responsible for the return of amounts wrongfully withheld, plus any interest accrued during the tenant’s occupancy of a year or more.  Most notably, the new provision also contained a “treble damages” remedy in the event that the tenant was able to establish that the landlord acted in bad faith by refusing to return some or all of the tenant’s deposit.  Another regulation requires landlords who hold a security deposit for one year or more must keep the funds in and interest-bearing account and then return the bank paid interest to the tenant with the remainder of the security deposit.  See 14 DCMR § 311.2.

As an example, let’s say that Jack and Jill rented a two-bedroom apartment for $1500 per month and paid a security deposit of $1500.  They paid the rent timely every month for 12 consecutive months and then moved out.  Jack and Jill would then be entitled to a return of their deposit plus interest within 45 days (unless there was damage, which would give the landlord an additional 30 days to complete the repair and refund any remaining portion of the security deposit).  However, during the final inspection, the landlord noticed that Jack had ripped up some of the tile on the floor in the bathroom, and got an estimate from Good Buddy for the repair at $250.  The landlord then sends Jack a written notice that he will be withholding approximately $250 for the repairs to the bathroom floor.  The landlord promptly has the repair completed, and within 30 days of the written notice to Jack and Jill, the landlord returns $1250, plus interest, and a receipt for the floor repair.
 
But what happens if there was actually no tile damage at the time of move out?  Jack and Jill could be expected to be quite annoyed by the idea of having to be responsible for a $250 repair that was unnecessary, or based on conduct that took place after they left.  In such a situation, Jack and Jill may be able to recoup their lost $250, plus an additional $500 if they can prove that the landlord charged them for non-existent floor damage. 

This is not necessarily as simple as it may seem at first blush.  The text of the regulation describes what “bad faith” means for the purpose of claiming treble damages:

For the purpose of this sub-paragraph, the term “bad faith” means and frivolous or unfounded refusal to return a security deposit, as required by law, that is motivated by a fraudulent, deceptive, misleading, dishonest, or unreasonably self-serving purpose and not by simple negligence, bad judgment, or an honest belief in the course of action taken. 14 DCMR § 309.5(2).

Based on this definition, it would be plausible to obtain treble damages if Jack and Jill can prove that there was never any floor damage prior to vacating the apartment. Moreover, if Jack and Jill can show that the estimate obtained by the landlord was falsified by Good Buddy, a long-time friend of the landlord, this goes a long way to proving that the whole claim as a sham to enable the landlord to keep $250 of the deposit.  However, the landlord may not be found to have acted in bad faith if after his real estate broker conducted the final inspection, the cleaning crew damaged the floor and tried to pass it off as a circumstance caused by Jack and Jill.  The landlord may have reasonably believed the story of his staff rather than his former tenant. 

Additionally, the ability to recover treble damages may also be reduced by a lack of evidence provided to the civil judge or the administrative law judge (“ALJ”) (if a claim is made to the Rental Housing Commission).  This was the case in Bell v. Pourbabai, RH-TP-13-30, 448 (OAH Apr. 15, 2015). 

Bell, together with seven others, rented a single-family residence for $10,000 per month and paid a $10,000 security deposit.  Bell claimed that after more than a year of tenancy, the residents decided not to renew the lease, and although the premises were left in nearly as good a condition as they found it (with some exceptions), the landlord refused to return any portion of the $10,000 deposit.  The tenants filed a petition with the Rental Housing Commission.  After a full evidentiary hearing, the ALJ found that although some amounts of the deposit were improperly withheld, there was an insufficient showing of the landlord’s state of mind in refusing to return the deposit, and consequently, Bell was not entitled to treble damages. The ALJ stated:

In this case, there was no evidence to allow me to consider Housing Provider’s state of mind.  The testimony and evidence did indicate that the Housing Provider was at times intimidating and occasionally threatened the tenants unnecessarily, however, a totality of the evidence presented indicates that Housing Provider’s improper deductions were the result of bad judgment and poor management.  Moreover . . . it also appears that . . . he may have received improper advice from his attorneys.

It cannot be overstated that renting is a costly endeavor for both landlords and tenants.  Therefore, the most important thing for either a tenant or a landlord to do is to document everything.  Photographs or video of both the pre-move in and post-move out inspections will protect both parties from damage claims.  Documentation should include any appliances that were included in the rental, as well as fireplaces, the condition of walls, and any surfaces or fixtures that have been subjected to normal wear and tear.  If maintenance or repairs are an obligation under the lease, then the responsible party should document all such efforts and copy the other party with any relevant estimates or receipts.  Any requests or communication between landlord and tenant should be memorialized in writing, at least as a follow up or recap.  By doing so, it may be possible to avoid a significant percentage of conflict and miscommunication.  At the same time, if your landlord has a bad intent, you may be able to unmask fraud or deception through your showing of consistent care and effort.

Consulting an attorney experienced in bad faith cases may also help guide you along the way.  If you are a tenant, your attorney can help you understand the level of evidence necessary to develop your unique situation in the best possible way.  If you are a landlord, an experienced attorney can assist you in navigating your obligations and avoid costly errors. Feel free to contact Steven Krieger Law, if you need any assistance

By Peter Anderson 

With alarming frequency, nursing homes are slipping arbitration clauses into the reams of paper elderly people musty sign when being admitted to a nursing home. There are 2.5 million Americans living in nursing homes or senior living centers. Some legal advocates believe that as many as 90% of large nursing homes in the U.S. now include arbitration agreements in their admissions contracts.

In many cases, these agreements allow nursing homes to avoid being sued in a normal civil court. This means there is no judge, no jury, and the proceedings in most cases will remain sealed from the public eye. If a person who is injured by a nursing home’s negligence as their case resolved through arbitration, the press will never hear about it, and a Google search will not reveal the case.

Arbitration was meant as a tool for business to resolve disputes quickly and efficiently to avoid courts. However, the use of arbitration has expanded over the past 30 years, and has been increasingly used to deprive consumers, who have little legal knowledge, of their rights. Today, asking the elderly to sign arbitration agreements has become standard industry practice.

​The nursing home industry argues that arbitration is good for business. Industry insiders say that claims subject to arbitration settle for 7% lower total cost to the business and three months sooner than claims with no arbitration. On the other hand, trial lawyers and consumer-rights advocates argue that arbitration agreements deprive consumers of a right to a fair trial and public proceeding.

Why Arbitration Agreements are Bad for Nursing Home Residents

There are several problems with arbitration agreements from my perspective. First, in many instances nursing home residents do not know what they are signing. Elderly consumers may have varying degrees of dementia and are presented with page after page of documents to sign before they can be admitted. Some provisions are benign – the nursing home first may ask the patient to sign a “resident’s rights” document. But, the nursing home may also bury an arbitration agreement in the middle. These agreements are very complex with legalese. The nursing home resident is anxious to be admitted and is not thinking about the wording of every sentence. If the resident has Alzheimer’s or dementia, it is unconscionable to ask such a person to sign a complex contract. But it happens all the time.

Second, arbitration agreements are known to result in lower awards. Instead of a jury hearing your case, who may be outraged by the allegations of neglect, an arbitrator will hear the case. An arbitrator is usually someone with knowledge of insurance disputes or an attorney. These people may have become numb to injury claims and may be less likely to award a large amount of money to a claimant. Further, arbitrators are often chosen from a short list of regional professionals. The same arbitrator can decide cases involving the same nursing home over and over again. This incentivizes arbitrators to keep repeat clients happy and give more favorable decisions to repeat offenders. Studies show that awards to plaintiffs can be as much as 35 percent lower.

Third, arbitration has different rules. What might be considered hearsay in civil court may be admissible under the lax rules of arbitration. Speculation about the cause of a resident’s injuries would be more likely to be heard in arbitration than in a regular court, which typically only allows expert witnesses to opine on causation.
 
Virginia Law on Nursing Home Arbitration Agreements

Under Virginia Code § 8.01-581.01, “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.” Unfortunately, courts have held that Virginia law favors arbitration provisions. Bishop v. Med. Facilities of Am. XLVII (47) Ltd. P'ship, 65 Va. Cir. 187 (2004).

However, if you have a claim against a nursing home and are trying to invalidate an arbitration provision, here are a few possibilities:

• Agency – The nursing home resident did not sign the contract herself, and the family member, or nursing home employee, who did not have a valid authority to do so.
• Competency – The nursing home resident did sign the contract herself, but was not competent to do so at the time. The contract can be invalidated by showing that the person had dementia or Alzheimer’s at the time the contract was signed.
• Waiver – A nursing home may waive the right to arbitrate by litigating an issue covered by arbitration. For example, if the nursing home has filed a lien for unpaid medical bills, that may act as a waiver of the entire arbitration agreement.
• Fraud – A nursing home may have fraudulently induced a nursing home resident to sign a contract by misrepresenting the contents of the agreement or making untrue promises with respect to the agreement, the nursing home, or nursing home arbitration clause.

Invalidating a nursing home arbitration clause is a tough task. If you are pursuing a nursing home negligence case (or another claim against the nursing home), it is important to hire an attorney who as experience in dealing with arbitration agreements. If you or loved one has a question about a nursing home arbitration clause or nursing home abuse, please contact us and we'll try to be helpful.