The Lawletter Vol. 51 No. 3

ALTERNATIVE DISPUTE RESOLUTION: It’s Hard to Attack an Arbitration Award

Paul Ferrer—Senior Attorney

     Attacking an arbitration award is never an easy task. The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16, which serves as a model for many similar state arbitration statutes, provides very limited grounds for vacating an arbitrator’s award. See 9 U.S.C. § 10(a) (grounds for vacation include that the award was procured by “corruption, fraud, or undue means,” or that the arbitrators were partial, exceeded their powers, or committed certain kinds of misconduct, including refusing to hear pertinent evidence). Other than those grounds, judicial review of an arbitration award is “severely circumscribed”: “A court sits to determine only whether the arbitrator did his job, not whether he did it well, correctly, or reasonably, but simply whether he did it.” Ctr. for Excellence in Higher Educ., Inc. v. Accreditation All. of Career Schs., 166 F.4th 452, 457 (4th Cir. 2026) (quotations omitted). A person aggrieved by an arbitrator’s award on one of the stated grounds may seek relief from the federal district court for the district where the award was made. See 9 U.S.C. § 10(b). In the cited case, the United States Court of Appeals for the Fourth Circuit joined the Fifth, Sixth, and Tenth Circuits in holding that a person may not, however, launch a collateral attack on the arbitrator’s award.

The Lawletter Vol. 51 No. 1

Paul Ferrer, Senior Attorney

     The common law is, by definition, judge-made law. See, e.g., Ballentine’s Law Dictionary (3d ed. 2010) (defining “common law” as “[t]hose principles, usages and rules of action . . . which do not rest for their authority upon any express or positive statute or other written declaration, but upon statements of principles found in the decisions of the courts”). The Supreme Court of Virginia has long expressed that “[o]ne of the great virtues of the common law is its dynamic nature that makes it adaptable to the requirements of society at the time of its application in court.” Surratt v. Thompson, 212 Va. 191, 193, 183 S.E.2d 200, 202 (1971) (quotation marks omitted). The court has consistently expressed this understanding of the protean nature of the common law despite a Virginia statute mandating that “[t]he common law of England, insofar as it is not repugnant to the principles of the Bill of Rights and Constitution of this Commonwealth, shall continue in full force within the same, and be the rule of decision, except as altered by the General Assembly.” Va. Code Ann. § 1-200. Thus, the court has indicated that Code § 1-200 “does not mean that common law rules are forever chiseled in stone, never changing. The common law is dynamic, evolves to meet developing societal problems, and is adaptable to society’s requirements at the time of its application by the Court.” Cline v. Dunlora S., LLC, 284 Va. 102, 106-07, 726 S.E.2d 14, 16 (2012) (quotation marks omitted). And yet, in Under Wild Skies, Inc. v. NRA of AmericaUnder Wild Skies, Inc. v. NRA of Am., 304 Va. 310, 319, 915 S.E.2d 514, 519 (2025), the court declined to incorporate the universally well-regarded doctrine of adequate assurance into the Virginia common law, ostensibly because “[t]he decision to adopt a new doctrine applicable to all contractual disputes is a policy decision that is more appropriately left to the legislature.”

The Lawletter Vol 50 No. 2

Paul Ferrer—Senior Attorney

       The United States Supreme Court decided a crucial question concerning a federal court’s removal jurisdiction in Royal Canin U.S.A., Inc. v. Wullschleger, 604 U.S. 22 (2025). If a complaint filed in a state court asserts a claim or claims under federal law, then the defendant may remove the case to the U.S. district court for the district and division embracing the place where the state action was filed. See 28 U.S.C. § 1441(a). And if the complaint also asserts a claim or claims under state law arising out of the same facts, then the federal court can exercise “supplemental jurisdiction” over those claims and adjudicate them too. See 28 U.S.C. § 1367(a). But what happens, as the Supreme Court put the question in Royal Canin, “if, after removal, the plaintiff amends her complaint to delete all the federal-law claims, leaving nothing but state-law claims behind? May the federal court still adjudicate the now purely state-law suit?” 604 U.S. at 25.

Lawletter Vol. 49 No. 4

Paul Ferrer—Senior Attorney

SECURITIES LAW/CIVIL PROCEDURE:  Supreme Court Rules That Jury Trial Is Required When SEC Seeks Civil Penalties for Securities Fraud

The United States Supreme Court has limited one of the U.S. Securities and Exchange Commission’s (SEC’s) major tools for penalizing securities fraud by ruling that the Seventh Amendment requires a jury trial when the SEC seeks civil penalties against a defendant. See SEC v. Jarkesy, 144 S. Ct. 2117 (2024). And the decision may have much more far-reaching implications by calling into question the ability of other government agencies to seek civil penalties.

            Three of the primary federal statutes regulating the registration and trading of securities—the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940—all contain antifraud provisions that target the same basic behavior: misrepresenting or concealing facts that would be material to an investor’s decision. These statutes are enforced by the SEC, which may bring an enforcement action either (1) in its own forum, an administrative proceeding, or (2) in a federal court action. In federal court, a federal judge presides, a jury decides the facts, proceedings are governed by the Federal Rules of Evidence, and discovery is had under the Federal Rules of Civil Procedure. By contrast, when the SEC adjudicates the matter in-house, its Division of Enforcement prosecutes the case and the SEC presides and finds the facts, although the SEC may delegate its role as judge and fact finder to one of its administrative law judges (ALJs). The SEC or its ALJ decides discovery disputes and determines the scope and form of permissible evidence pursuant to the SEC’s own Rules of Practice. The SEC can, but does not have to, review the ALJ’s findings and conclusions. Judicial review is available but is deferential.

The Lawletter Vol. 49 No. 3

Paul Ferrer, Senior Attorney

SECURITIES LAW/CIVIL PROCEDURE: Supreme Court Rules That Jury Trial Is Required When SEC Seeks Civil Penalties for Securities Fraud

     The United States Supreme Court has limited one of the U.S. Securities and Exchange Commission’s (SEC’s) major tools for penalizing securities fraud by ruling that the Seventh Amendment requires a jury trial when the SEC seeks civil penalties against a defendant. See SEC v. Jarkesy, 144 S. Ct. 2117 (2024). And the decision may have much more far-reaching implications by calling into question the ability of other government agencies to seek civil penalties.

The Lawletter Vol. 49 No. 1

Paul Ferrer—Senior Attorney

                The Virginia Supreme Court’s July 2023 decision in Monroe v. Monroe, 889 S.E.2d 646 (Va. 2023), turned on the trial court’s lack of jurisdiction to enter a sanctions order more than 21 days after the trial court had entered its final order dismissing the case. See Va. S. Ct. R. 1:1. For corporate attorneys, however, the case is more notable for Justice Kelsey’s admirably lucid discussion of the nature of a shareholder-derivative action and the status of the plaintiff seeking to maintain such an action.

            Lisa Monroe and Joseph Monroe were the married co-owners of MEPCO Materials, Inc., with 51% and 49% ownership interests, respectively. A week after Joseph filed for divorce, he, as the sole director at that time, caused MEPCO to file a civil action against Lisa for conversion and breach of fiduciary duty, alleging that she had used MEPCO funds for personal use. The following year, Joseph resigned from his position. Because he could no longer speak directly for MEPCO, he sought to convert the action against Lisa—which alleged classic claims that devolved to the benefit of the corporation and both of its shareholders, and not just to Joseph individually—to a shareholder-derivative action, that is, “an equitable proceeding in which a shareholder asserts, on behalf of the corporation, a claim that belongs to the corporation rather than the shareholder.” Monroe, 889 S.E.2d at 650 (quoting Little v. Cooke, 274 Va. 697, 709, 652 S.E.2d 129, 136 (2007)). Under the Virginia Stock Corporation Act, however, a shareholder “shall not commence or maintain a derivative proceeding unless the shareholder,” among other things, “[f]airly and adequately represents the interests of the corporation in enforcing the right of the corporation.” Va. Code Ann. § 13.1-672.1(A)(3). Justice Kelsey referred to this as a “statutory standing requirement that the putative representative must satisfy from the beginning to the end of the derivative action.” Monroe, 889 S.E.2d at 650.

Lawletter Vol  48 No. 3

The Utility of a Declaratory Judgment Action

Paul Ferrer—Senior Attorney

          Most states, as well as the federal government, have enacted some form of declaratory judgment act, which authorizes courts to declare the rights and other legal relations among parties even though traditional remedies for damages or equitable relief are not yet available. Virginia’s Declaratory Judgment Act is typical. It permits Virginia’s trial courts, “[i]n cases of actual controversy, . . . to make binding adjudications of right, whether or not consequential relief is, or at the time could be, claimed” by the parties. Va. Code Ann. § 8.01-184. Declaratory relief is particularly useful in settling controversies involving the interpretation of written instruments, such as contracts, deeds, and wills, but relief may be sought whenever there is an “actual antagonistic assertion and denial of right.” Ames Ctr., L.C. v. Soho Arlington, LLC, 301 Va. 246, 876 S.E.2d 344, 347 (2022) (quoting Va. Code Ann. § 8.01-184). In Ames Center, the Virginia Supreme Court noted the struggle courts have sometimes faced in finding “the case-specific equilibrium where a declaratory-judgment action serves its intended purpose without going too far or not going far enough.” 876 S.E.2d at 348. That, however, was not one of those cases.

The Lawletter Vol. 48 No. 1

Paul Ferrer, Senior Attorney, National Legal Research Group, Inc.

            Rule 60(b) of the Federal Rules of Civil Procedure authorizes a court to relieve a party from a final judgment, order, or proceeding for various reasons, including “mistake, inadvertence, surprise, or excusable neglect.” Fed. R. Civ. P. 60(b)(1). The U.S. Circuit Courts of Appeal have had a “longstanding disagreement whether ‘mistake’ in Rule 60(b)(1) includes a judge’s errors of law.” Kemp v. United States, 142 S. Ct. 1856, 1861 & n.1, 213 L. Ed. 2d 90 (2022). Resolving that question in Kemp, the U.S. Supreme Court held, based on the text, structure, and history of Rule 60(b), that “a judge’s errors of law are indeed ‘mistake[s]’ under Rule 60(b)(1).” Id. at 1860. In so holding, the Supreme Court indicated that the term “mistake” in Rule 60(b)(1) should be given its broadest possible interpretation to include any mistake, including “all mistakes of law made by a judge.” Id. at 1862.

            The Supreme Court specifically rejected the Government’s narrower reading of Rule 60(b)(1) in Kemp that the term “mistake” includes “only so-called ‘obvious’ legal errors.” Id. The Supreme Court’s decision sensibly spared the federal district courts from having “to decide not only whether there was a ‘mistake’ but also whether that mistake was sufficiently ‘obvious,’” since the plain language of Rule 60(b)(1) “does not support—let alone require—that judges engage in this sort of complex line-drawing.” Id. at 1863. Thus, the rule going forward could not be any simpler: relief from a final judgment or order may be granted under Rule 60(b)(1) based on a judge’s “mistakes,” including legal errors.

The Lawletter Vol 47 No 4

Paul Ferrer—Senior Attorney, National Legal Research Group

            A question that has long vexed both litigants and courts alike is what constitutes a “final decision” triggering the right to file an appeal under 28 U.S.C. § 1291, which confers jurisdiction on the federal circuit courts of appeals over “appeals from all final decisions of the district courts of the United States.” In a civil case (except where the United States is a party), the notice of appeal from a “final decision” must be filed “within 30 days after entry of the judgment or order appealed from.” Fed. R. App. P. 4(a)(1)(A). Many an appeal has been lost just by failing to timely file the notice of appeal.

            Making a determination as to when an appeal must be filed to comply with the 30-day time limit is supposed to be relatively easy in light of the procedures specified in Federal Rule of Civil Procedure 58. Rule 58 requires that every judgment generally “must be set out in a separate document.” Fed. R. Civ. P. 58(a). If a separate document is required by Rule 58(a), then judgment is “entered,” and the time to appeal starts running, when the judgment is entered in the civil docket and the earlier of one of these two events occurs: (1) the judgment is, in fact, set out in a separate document, or (2) 150 days have run from the entry of the judgment in the civil docket. Fed. R. Civ. P. 58(c)(2). The second alternative deals with those situations in which the district court, despite the requirements of Rule 58(a), does not set the judgment out in a separate document.

The Lawletter Vol 47 No 2

Paul Ferrer—Senior Attorney, National Legal Research Group

            As part of the check collection process governed by Article 4 of the Uniform Commercial Code (“UCC”), the “midnight deadline” rule of § 4-302 requires that a payor bank pay or return an item, or send notice of its dishonor, before midnight of the next banking day following the banking day on which the bank receives the item. The rule imposes strict liability on a payor bank that fails to meet the midnight deadline requirement. But what if something happens to the payee while the check is being dishonored as part of the collection process? Who has standing to sue the payor bank to enforce the midnight deadline rule?

            That was the unusual question decided by the Virginia Supreme Court in Stahl v. Stitt, ___ Va. ___, 869 S.E.2d 55 (2022).