Contaminated Oysters in Virginia Restaurant Enough for Jurisdiction Under "Stream of Commerce" Test

Contaminated oysters served at a Roanoke restaurant were placed in the "stream of commerce" by a Connecticut seafood supplier, and thus served as the basis for the Western District of Virginia to exercise personal jurisdiction over the out-of-state seafood supplier. 

Since the oysters at issue traveled through several different distributors and suppliers before reaching Frankie Rowland's Steakhouse in Roanoke, the original supplier had argued that the was no personal jurisdiction over him given his lack of contacts with Virginia.  Judge Conrad, however, held that although the oysters were initially sold outside of Virginia, they were placed in the "stream of commerce" and purposefully availed to the Virginia market.  Therefore, it was foreseeable that the oysters would end up in Virginia and the supplier haled into court there.

The obvious lesson to be learned from this case is to eat locally sourced oysters, such as those served in Charlottesville's new Rocksalt restaurant.  There will be no jurisdictional issues if you get sick from eating the Olde Salts from Chincoteauge, Virginia or the Rappahannocks from the Middle Peninsula.

Court Declines To Dissolve Prayer Injunction After Supreme Court's Town of Greece Decision

In March 2013, Judge Urbanski issued an injunction prohibiting Pittsylvania County from opening its board of supervisors meetings with sectarian prayers associated with any one religion as a violation of the Establishment Clause.  That case is currently on appeal before the Fourth Circuit.

In May 2014, the US Supreme Court issued a 5-4 decision upholding the constitutionality of non-coercive sectarian invocations by invited clergy and laypeople at city council meetings.  See Town of Greece v. Galloway, 572 U.S. ___ (2014).    Given this new Supreme Court decision on public prayer, many localities that had been subject to injunctions have petitioned courts to modify those injunctions to conform with Town of Greece. 

Pittsylvania County filed a Rule 60(b)(5) motion in Western District of Virginia seeking to modify the Court's prior order.  The Court, however, held that it was without jurisdiction to modify its permanent injunction because the matter was on appeal to the Fourth Circuit.  There is a limited exception allowing the Court to rule on matters "in aid of the appeal."  Under this exception, the Court is permitted to entertain the motion and issue a short order if the Court is inclined to grant the motion, thus allowing the movant to request a limited remand from the Fourth Circuit for that purpose. 

After considering the merits of Pittsylvania County's request, Judge Urbanski determined that the Court was inclined to modify the injunction "to a very limited extent, i.e., to make it clear, consistent with Town of Greece, that opening prayers offered at the start of the Pittsylvania County Board of Supervisors meetings need not be generic or nonsectarian."  The Court, however, would deny the request to dissolve the injunction altogether because of factual differences between this case and Town of Greece. 

First, Pittsylvania County did not invite clergy or laypersons to offer invocations, as was the case in Town of Greece.  Instead, the prayers were led by the board members themselves.  "Thus, in contrast to Town of Greece, where the town government had no role in determining the content of the opening invocations at its board meetings, the government of Pittsylvania County itself, embodied in its elected Board members, dictated the content of the prayers opening official Board meetings."

Second, the Pittsylvania board of supervisors often directed the public to participate in the prayers by asking them to stand.  For example one board of supervisor began his prayer by stating: "If you don't want to hear this prayer, you can leave.  Please stand up."

In summary, the Court held that the active role of the board of supervisors in leading the prayers, dictating their content and directing public participation distinguished this case from Town of Greece.

It will be interesting to see how the Fourth Circuit rules in the appeal.

While it must have been irresistible for Pittsylvania County to try to dissolve the permanent injunction order after Town of Greece, given the decision by Judge Urbanski, it would have been better for the County not to have filed the Rule 60(b)(5) motion.  The Fourth Circuit can now see that the District Court would have granted the injunction anyway, even after considering the new Supreme Court precedent.  Thus, not only does this case involve an interesting constitutional question, but it is also instructive on matters of litigation and appeal strategy.

Fraud Claim Against Lender Dismissed

"Courts have held that there is no duty on a lender to ensure that a loan is suitable for a borrower," wrote Judge Jones in a recent case dismissing a fraud and misrepresentation claim brought by a home owner against the lender.  In this case, the plaintiffs alleged that the loan officer told them that their income qualified them for the loans they were seeking, when in fact plaintiffs' income was not high enough to meet debt to income ratio utilized by mortgage lenders.  The Court found that these allegations were not sufficiently specific to meet the heightened pleading standards of Rule 9.  "Without more, plaintiffs' allegations essentially amount to an assertion that the lender convinced them to take out a loan they couldn't afford," which is not a basis for fraud.

The Court cited several cases stating that lenders do not act on behalf of borrowers, do not have a duty to determine a borrower's ability to repay a loan, and that borrowers have to "rely on their own judgment and risk assessment to determine whether or not to accept the loan."  Alternatively, the Court found that the claims were barred by the statute of limitations.  The case, Muncy v. Centex Home Equity Company, LLC, was pending in the Abingdon division of the Western District of Virginia.

This case is another example of the steady stream of cases brought by borrowers against lenders related to lending or foreclosure practices.  Most of the cases, like this one, are dismissed in the preliminary stages of litigation.  However, there is still a significant cost to lenders in having to defend all cases brought against them, even the most frivolous.

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