See Law Offices of Veldhuis and Bullock Partner, Nathan J.D. Veldhuis', article addressing changes to Virginia's Venue Statute and how it affects litigators #vbpilaw
Virginia’s New Permissible Venue Statute: What is a “Practical Nexus”?
by Robert C. T. Reed, Esq. Nathan J. Veldhuis, Esq.
Article Originally published in Vol. XVII, Num III of “Litigation News” published by the Virginia State Bar Litigation Section (Summer 2013) For Original Article Click here
The 2013 session of the General Assembly made significant changes to a plaintiff’s ability to sue a defendant in a venue where the defendant regularly conducts substantial business activity. Legislation was initially proposed that would altogether remove this basis for venue. As part of a larger compromise, how- ever, the resulting action preserved venue based on substantial business activity, but added a new “practical nexus” requirement.1 The legislation, enacted by the General Assembly and signed by Governor McDonnell, went into effect on July 1, 2013.
Venue as it has been
The Virginia Code presents two categories of proper venue: Category A, preferred venue and Category B, permissible venue.2 In cases where there is no preferred venue, a plaintiff may choose one of the enumerated permissible venues to file suit.3 The new statute does not change Category A, preferred venue. The General Assembly only altered Code § 8.01-262, the provision dealing with permissible venue.
Under the prior version of Code § 8.01-262, venue was permissible where the cause of action arose4 or where a defendant (1) resides (or, if a defendant is a corporation, where the mayor, rector, president or chief officer resides);5 (2) has his principal place of employment;6 (3) has a registered office or agent;7 or (4) regularly conducts substantial business activity.8
Additional permissible venues relate to particular causes of action, including actions to recover personal property,9 actions against a fiduciary,10 actions for improper message transmission,11 and actions involving delivery of goods.12 If none of the foregoing applies, then venue is proper where the defendant owns property,13 or if no such venue exists, where the plaintiff resides.14
The General Assembly’s most significant change to the permissible-venue statute appears in Va. Code Ann. § 8.01-262(3), which allows venue where the defendant regularly conducts substantial business activity. The General Assembly last altered this sub- section in 2004, when it replaced the phrase “regularly conducts affairs or business activity” with “regularly conducts substantial business activity,” thereby limiting its scope.15 This venue provision has been the subject of much legal wrangling ever since.
The Virginia Supreme Court has weighed in three times to provide some guidance.16 First, in Meyer v. Brown, the Supreme Court addressed the term “regularly.”17 It held that the defendant—who only occasionally visited Richmond to conduct business with insurance brokers—had not conducted sufficiently “regular” business activity to make venue in Richmond permissible under § 8.01-262(3).18 In Barnett v. Kite, the Supreme Court held that the statute only refers to the business activity of the named defendant and does not contemplate the business activity of entities in which the defendant has an ownership interest.19 Most recently, in Hawthorne v. VanMarter, the Supreme Court addressed the term “substantial.”20 It upheld a trial court’s decision to transfer venue, holding the defendant’s transient activities within the venue (driving through for work, shopping, attending community college courses, collecting mail and storing items at an old address) did not constitute “substantial business activity.”21
Within those loose guideposts, circuit courts have regularly been called upon to interpret this venue pro- vision by defendants objecting to venue and plaintiffs seeking to establish proper venue.22
As of July 1, 2013, there is a new threshold determination for litigators to fight over when arguing whether a defendant does or does not conduct substantial business activity within a particular venue.
Venue as it is now
Some of the changes to the permissible venue statute are cosmetic tidying up awkward language23 and ugly numbering.24 But the changes also add a “practical nexus” requirement to venue based upon substantial business activity.25
Under the new § 8.01-262(3), a plaintiff will still be able to sue a defendant in a venue where that defendant regularly conducts substantial business activity, “provided there exists any practical nexus to the forum including, but not limited to, the location of fact witnesses, plaintiffs, or other evidence to the action.” 26 In other words, there must be a “practical nexus” between the cause of action and the forum.
The new statute raises several questions, which litigation will need to resolve. The overarching inquiry is to determine what is meant by “any practical nexus to the forum.” Subsidiary questions will follow, e.g., what is meant by “location of”?; what is meant by “fact witnesses”?; what is meant by “other evidence to the action”?; and how much nexus between the cause of action and the forum must there be before it is considered “practical”?
The term “practical nexus” is not new to Virginia venue law. It first appeared in Norfolk and Western Ry. Co. v. Williams, 239 Va. 390, 389 S.E.2d 714 (1990). In that case, the Virginia Supreme Court held that the trial court abused its discretion when it denied defendant’s motion to transfer venue under Virginia’s forum non conveniens statute, Code § 8.01-265.27 Section 8.01-265 authorizes the circuit court to transfer venue from a plaintiff’s chosen proper forum to another proper forum upon a showing of “good cause.”28 “Good cause” includes, among other things, “the avoidance of substantial inconvenience to the par- ties or the witnesses.”29 But the Williams Court also noted that plaintiff’s chosen venue “had no practical nexus whatsoever with the instant action.”30 The Court held that the weight given to a plaintiff’s choice of forum diminishes when there is “at best a technical, formal connection with the original court chosen.”31 Following Williams, trial courts began transferring venue solely because of a lack of nexus between the chosen forum and the cause of action—without considering inconvenience to the parties or witnesses.32
In 1999, the Virginia Supreme Court—recognizing confusion among the circuit courts—agreed to address the issue. In Virginia Electric & Power Co. v. Dungee,33 the defendant, Virginia Power, relied on Williams to argue that the lack of a practical nexus alone provided “good cause” to transfer venue.34 The trial court denied Virginia Power’s motion. On appeal, the Supreme Court affirmed. It agreed that the non-existence of a practical nexus was one factor that a trial court may consider, but it held that this was not a decisive factor.35 Thus, even though the defendant showed that there was no practical nexus with the chosen venue, the Supreme Court found that the trial court did not abuse its discretion in denying Virginia Power’s motion to transfer venue. It found that Virginia Power failed to present sufficient evidence of substantial inconvenience to parties or witnesses.36
In the post-Williams, pre-Dungee series of trial- court opinions, practical nexus was sometimes identified as the main basis for transferring or retaining venue.37 That line of cases, however, provides only limited insight into the factors courts will have to consider when assessing “practical nexus” under the new permissible-venue statute. To the extent those courts accounted for the location of plaintiff, fact witnesses, or other evidence in determining “practical nexus,” their analyses merged with analyses of whether the parties and witnesses would be substantially inconvenienced if they had to appear at trial.
In Williams and Dungee the “practical nexus” issue arose in forum non conveniens motions, i.e., motions to transfer from one permissible venue to another. As of July 1, 2013, however, courts also can consider “practical nexus” when determining whether venue is permissible in the first place, at least under the substantial-business-activity venue provision.
At what time is practical nexus determined?
Trial courts usually assess “substantial business activity” as of the time of filing suit.38 Thus, courts generally will not regard events that have occurred after suit is filed; doing so would allow a party to manipulate venue later in the case.39 The new statute is, however, silent on the issue. Should the existence of a “practical nexus” be evaluated at the time the cause of action arises? At the time suit is filed? At the time the motion objecting to venue is heard? At any other time prior to trial? Or at the time of trial?
When ruling upon forum non conveniens motions, it makes sense for trial courts to consider where witnesses or evidence will be at the time of trial. But evaluating the location of witnesses and evidence as of the time of trial arguably is inappropriate when ruling on whether venue is permissible in the first place. Suppose a court chooses the time of trial as the appropriate period with reference to which to evaluate permissible venue. If the existence of venue depends on the anticipated location of witnesses and evidence at trial, a defendant may seek to defeat venue after suit is filed by simply removing evidence from the chosen venue so that it no longer has a practical nexus to the cause of action.
People, entities, and evidence tend to move around throughout the course of litigation. A chosen venue that has a practical nexus to the cause of action when the action arises may lose that nexus by the time suit is filed. Similarly, a chosen venue that has no practical nexus to the cause of action when it arises may come to have a practical nexus by the time of filing by the relocation of fact witnesses, plaintiffs, or evidence. Courts will have to grapple with temporal arguments presented by plaintiffs and defendants in future cases.
What is meant by “location of”?
The new venue statute identifies the “location of fact witnesses, plaintiffs, or other evidence” as possible factors creating a “practical nexus.” The term “location” is broad. The General Assembly did not use the term “residence” to limit where plaintiffs or fact witnesses must be located to determine “practical nexus.” The ambiguous term “location” can have many interpretations, such as the plaintiffs’ or witnesses’ places of employment, schools, guest homes, or even actual physical location. It could also allow for locations outside of the chosen venue so long as the proximity suggests a practical nexus.40 Does a plaintiff’s chosen venue share a practical nexus to a cause of action arising outside the venue if the plain- tiff, several eyewitnesses, and some important physical evidence are brought into the venue at the moment suit is filed, only to disperse elsewhere thereafter? Perhaps trial courts will consider the permanency of persons and evidence within the chosen venue in determining whether a “practical nexus” exists.
Who are “fact witnesses”?
Trial courts will have to consider the location of “fact witnesses” in determining whether there is a practical nexus between the forum and the cause of action. In practice, fact witnesses are generally regarded as any witnesses who will not provide expert-opinion testimony.41 Nevertheless, some witnesses are not so easily defined. For example, in personal-injury and medical-malpractice litigation, a plaintiff’s treating health care provider often serves a dual role as both fact witness and expert.42 Plaintiffs will likely contend that their treating health care providers are fact witnesses for purposes of deter- mining “practical nexus,” although such witnesses may later be designated to present expert opinions at trial. Defendants, undoubtedly, will contend that the location of treating health care providers should not be considered, because they are experts and not “fact witnesses.” There may be some cases where it is unclear whether a health care provider is a retained expert or a treating physician entitled to “fact witness” status.
What is “other evidence”?
The statute makes clear that the listed factors do not exhaust the items a trial court may consider in deter- mining “practical nexus.” As if to emphasize the breadth of possible considerations, the final listed fac- tor is “other evidence to the action.” The location of any evidence—which includes items, documents, records, recordings, or anything else that tends to make the existence of any fact more probable—can be considered in determining “practical nexus.”43 Perhaps the venues in which opposing counsel’s offices are located may each have a “practical nexus” to the cause of action by virtue of the fact that they are often the repositories of much of the evidence in the case.
What degree of nexus makes it practical?
Trial courts will have to determine what degree of evidence linking a cause of action to the chosen forum will create a “practical nexus.” The statute uses the term “any practical nexus.” The statute then makes clear that “practical nexus” includes the location of witnesses, plaintiffs, or other evidence. The use of the word “any” implies that the location of a single listed item is all that is necessary to satisfy the precondition. On the other hand, trial courts may instead rule that a chosen venue’s nexus to the cause of action is not necessarily “practical” just because one piece of evidence is located in the venue. The venue where the cause of action arose will likely be sufficient to create a “practical nexus” in most cases. Only time will tell what significance the location of plaintiffs, fact witnesses, and other evidence will have in determining “practical nexus.” Trial courts likely will have to consider the value of the location of various fact witnesses and evidence on a case-by-case basis.
Who has the burden?
Normally, “the party objecting to venue has the burden of establishing that the chosen venue is improper.”44 Thus, defendants will have the burden of establishing that the chosen venue lacks “any practical nexus” to the cause of action. This could be difficult. To meet their burden, Defendants will have to account for the location of every piece of evidence and every witness in the case. Further, defendants will waive any defect in venue if they fail to object within 21 days of service.45 But at that early stage in litigation, parties often are unsure about who the fact witnesses are and what the evidence will be.
Although it technically will be defendant’s bur- den to show a “practical nexus,” plaintiffs should not be complacent. In response to a defendant’s venue motion, a plaintiff should be prepared to explain to the court why a “practical nexus” exists in the forum.
All practitioners need to be mindful of the recent changes to the permissible-venue statute. Those who are considering filing suit in a venue based on the regularly conducted substantial business activity of the defendant must be prepared with some reasons why a “practical nexus” exists. Litigators who defend such cases should be prepared to file objections to venue under Va. Code Ann. § 8.01-264, asserting that the “practical nexus” test has not been met.
The “practical nexus” concept previously served as only one factor in determining “good cause” to trans- fer venue in forum non conveniens motions. Now, it is a decisive determination trial courts must make in assessing whether venue is proper where a defendant regularly conducted substantial business activity.
1. See H 1618, Va. Acts, Chapter 71, 2013 Sess. (Va., March 5, 2013). Accessible at http://leg1.state.va.us/cgi-bin/legp504. exe?131+ful+CHAP0071+pdf (last accessed March 15, 2012).
2. See Va. Code Ann. § 8.01-261-262.
3. See Va. Code Ann. § 8.01-262.
4. See Va. Code Ann. § 8.01-262(4).
5. See Va. Code Ann. § 8.01-262(1).
6. See id.
7. See Va. Code Ann. § 8.01-262(2).
8. See Va. Code Ann. § 8.01-262(3).
9. See Va. Code Ann. § 8.01-262(5).
10. See Va. Code Ann. § 8.01-262(6).
11. See Va. Code Ann. § 8.01-262(7).
12. See Va. Code Ann. § 8.01-262(8).
13. See Va. Code Ann. § 8.01-262(9).
14. See Va. Code Ann. § 8.01-262(10).
15. See Sandler v. Wintergreen Partners, Inc., 71 Va. Cir. 155, 157 (Va. Cir. Ct. 2006).
16. See Meyer v. Brown, 256 Va. 53, 500 S.E.2d 807 (1998); Barnett v. Kite, 271 Va. 65, 624 S.E.2d 52 (2006); Hawthorne v. VanMarter, 279 Va. 566, 692 S.E.2d 226 (2010).
17. Meyer, 256 Va. at 57, 500 S.E.2d at 810.
19. Barnett v. Kite, 271 Va. at 70, 624 S.E.2d at 55.
20. Hawthorne, 279 Va. at 580, 692 S.E.2d at 234-35.
22. Trial courts that have issued opinions analyzing the term “substantial business activity” tend to compare a defendant company’s business activity in the forum with the company’s overall business activity when determining whether the activity in the venue is “substantial.” See e.g., Sandler, 71 Va. Cir. 155 (Va. Cir. Ct. 2006) (holding business activity is not substantial when defendant’s advertising purchases in venue amounted to about one percent of its overall advertising budget); Garland v. Shoosmith Bros. Inc., 73 Va. Cir. 515 (Va. Cir. Ct. 2007) (holding that $51,000 in contracts with the forum and revenue of $107,000 derived in the forum does not constitute substantial business activity when those amounts only account for less than one percent of defendant’s total revenue).
23. The new statute also does away with permissible venue where a corporate “mayor, rector, president or other chief officer resides” and opts for a more intuitive approach, making venue permissible where a corporate principal office or principal place of business is located.
24. The new statute renumbers the subparts to § 8.01-262(5)
relating to partitioned personal property.
25. See H 1618, Va. Acts, Chapter 71, 2013 Sess. (Va., March 5, 2013). Accessible at http://leg1.state.va.us/cgi-bin/legp504.exe?131+ful+CHAP0071+pdf (last accessed March 15, 2012).
27. See Williams, 239 Va. at 396, 389 S.E.2d at 718 (1990).
28. See Va. Code Ann. § 8.01-265.
30. Williams, 239 Va. at 396, 389 S.E.2d at 717 (emphasis added).
31. Id. at 395, 389 S.E.2d at 717.
32. See e.g., Jonak v. Wintergreen Dev. Inc., 43 Va. Cir. 234 (Va. Cir. Ct. 1997) (transferring action from City of Charlottesville to Nelson County because nexus stronger in transferee forum than in original forum).
33. See Virginia Electric & Power Co. v. Dungee, 258 Va.235, 520 S.E.2d 164 (1999).
34. See id. at 246, 520 S.E.2d at 170.
35. See id.
36. See id.
37. See Slone v. Hickock, 20 Va. Cir. 325 (Va. Cir. Ct. 1990);Virginia Radiology Assoc., P.C. v. Culpeper Mem. Hosp., Inc., 21 Va. Cir. 157 (Va. Cir. Ct. 1990); Beverly v. Charles Machine Works, 24 Va. Cir. 344 (Va. Cir. Ct. 1991); Gentry v. Toyota Motor Sales, USA, Inc., 29 Va. Cir. 140 (Va. Cir. Ct. 1992); Wray v. Floyd & Beasley Transfer Co., 29 Va. Cir. 126 (Va. Cir. Ct. 1992); Jonak, 43 Va. Cir. 234 (Va. Cir. Ct. 1997).
38. See Duncan v. Brannock, 78 Va. Cir. 169, 170 (Cir. Ct. 2009) (citing Jones v. Rusteau, 43 Va. Cir. 311 (Cir. Ct. 1997)).
39. See Jones, 43 Va. Cir. at 312 (“to hold otherwise would be to allow a defendant who resides or works in the place where suit is filed to ‘defeat’ venue by moving or finding new employment outside of that forum”).
40. See Gentry, 29 Va. Cir. at 143 (finding a practical nexus between the City of Danville and the cause of action because the accident occurred twenty minutes from Danville in Eden, North Carolina).
41. See Ligon v. Southside Cardiology Assoc., P.C., 258 Va. 306, 313, 519 S.E.2d 361, 364 (1999) (discussing the admission of evidence concerning habit in a medical malpractice action, the Court distinguished between fact witnesses and experts, stating “[t]he testimony of fact witnesses is relevant to show what actually happened on a particular occasion. The testimony of expert witnesses relates to the same specific incident by establishing a standard of care applicable to the defendant’s actions on that particular occasion and by accessing whether those actions conformed to the established standard of care.”); see also, Va. R. S. Ct. Rule 2:702.
42. See e.g., Ward v. Ward Trucking of Pa., L.L.C., 77 Va. Cir. 239, 239 (Va. Cir. Ct. 2008) (noting that plaintiff’s treating physicians “seem to occupy both positions, as fact witnesses and experts.”).
43. See Va. R. S. Ct. Rule 2:401.
44. Meyer, 256 Va. at 57, 500 S.E.2d at 809.
45. See Va. Code Ann. § 8.01-264.