COURT OF APPEALS OF VIRGINIA 

Present: Judges Humphreys, Kelsey and Retired Judge Rosenblatt∗

Argued at Richmond, Virginia 

CITLAND, LTD. 

 OPINION BY 

v. Record No. 0608-04-2 JUDGE D. ARTHUR KELSEY 

 MARCH 22, 2005 

COMMONWEALTH OF VIRGINIA, ex rel.

 JERRY W. KILGORE, ATTORNEY GENERAL 

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 

Melvin R. Hughes, Judge 

Anthony F. Troy (Bryan M. Haynes; Troutman Sanders LLP, on 

briefs), for appellant. 

Francis S. Ferguson, Deputy Attorney General (Jerry W. Kilgore, 

Attorney General, Anne Marie Cushmac, Senior Assistant 

Attorney General, on brief), for appellee. 

 This case presents the question whether the Attorney General can preclude a tobacco 

manufacturer from doing business in the Commonwealth (by excluding it from the statutory 

directory set up by Code § 3.1-336.5) solely on the ground that the manufacturer failed to pay 

statutory penalties proposed by the Attorney General, but not yet adjudicated by the courts. We 

hold the governing statutes afford him no such discretion. We reverse the circuit court’s contrary 

ruling and remand the case for further proceedings consistent with this opinion. 

 ∗

 Retired Judge Alan E. Rosenblatt took part in the consideration of this case by 

designation pursuant to Code § 17.1-400(C). 
 - 2 -

I. 

 A. THE STATUTORY FRAMEWORK

(i) The 1998 Tobacco Settlement 

In 1998, Virginia and forty-five other states entered into a Master Settlement Agreement 

with the several major tobacco manufacturers. See generally Lorillard Tobacco Co. v. Reilly, 

533 U.S. 525, 533 (2001); Star Scientific, Inc. v. Beales, 278 F.3d 339 (4th Cir. 2002) 

(upholding Virginia tobacco settlement statutes against various constitutional challenges). The 

parties intended the settlement to end further litigation between state governments and tobacco 

manufacturers. The states released the manufacturers from past and future liability in exchange 

for their agreement to abide by advertising and promotional restrictions and to make annual 

monetary payments to the states based on annual cigarette sales. 

Not all tobacco manufacturers participated in the original settlement. For those that did 

not participate, the General Assembly enacted the Tobacco Escrow Act, Code § 3.1-336.1 et seq. 

The Act permits manufacturers to sell tobacco products in the Commonwealth if they either (i) 

join the master settlement agreement and comply with its terms, or (ii) make specified payments 

into an escrow fund intended to “guarantee a source of compensation and to prevent such 

manufacturers from deriving large, short-term profits and then becoming judgment-proof before 

liability may arise . . . .” 1999 Va. Acts, chs. 714, 754; see Code § 3.1-336.2(A). If they choose 

the latter option, the manufacturers must file annual certifications with the Attorney General 

verifying that they made the required escrow payments. See Code § 3.1-336.2(C). 

(ii) Enforcing Escrow Payment Obligations 

The Tobacco Escrow Act authorizes the Attorney General to “bring a civil action on 

behalf of the Commonwealth against any tobacco product manufacturer that fails to place into 

escrow the funds required under this section.” Code § 3.1-336.2(C). Upon finding a 
 - 3 -

manufacturer liable, the “court” may assess a “civil penalty” against the manufacturer. Code 

§ 3.1-336.2(C)(1) & (2). Depending on whether the court classifies the violation as knowing or 

inadvertent, the penalty can range from 5% to 300% of the delinquent amount. Id. When a court 

finds a “second knowing violation,” the court can prohibit the manufacturer “from selling 

cigarettes to consumers within the Commonwealth” for up to two years. Code § 3.1-336.2(C)(3). 

(iii) Admission Into & Exclusion From The Directory 

In 2003, the General Assembly passed additional legislation to enhance the enforceability 

of the Tobacco Escrow Act. See 2003 Va. Acts, ch. 789 (Code §§ 3.1-336.3 to 3.1-336.16). 

These new provisions, commonly called the “Complementary Legislation,” require the Attorney 

General to maintain a directory listing all manufacturers that have filed current and accurate 

certifications. See Code § 3.1-336.5(A). A manufacturer not listed in the directory may not sell 

any tobacco products in the Commonwealth. See Code §§ 3.1-336.6, 3.1-336.10. 

Under Code § 3.1-336.5(A), the Attorney General “shall” list in the directory all 

manufacturers with “current and accurate certifications” in conformity with Code § 3.1-336.4. 

The Act provides two exceptions to this mandatory duty. 

The first exception states that the Attorney General “shall not” include in the directory 

“any nonparticipating manufacturer that fails to provide the required certification or whose 

certification the Attorney General determines is not in compliance with subsections C and D of 

§ 3.1-336.4, unless the Attorney General has determined that such violation has been cured to his 

satisfaction.” Code § 3.1-336.5(A)(1). Subsections C and D of § 3.1-336.4 require that the 

certification include certain information, verify that the escrow fund has been established, and 

include a declaration that the manufacturer is in “full compliance” with the governing statutes. 

The second exception makes clear no manufacturer can be included in the directory if the 

Attorney General concludes the required escrow funds “have not been fully paid” or the 
 - 4 -

manufacturer has not satisfied “all outstanding final judgments” for any statutory violation. 

Code § 3.1-336.5(A)(2). 

Finally, Code § 3.1-336.11 subjects any “determination of the Attorney General to not list 

or to remove” a manufacturer from the directory to judicial review pursuant to the Virginia 

Administrative Process Act (VAPA), Code § 2.2-4000 et seq. 

 B. THE DISPUTE BETWEEN CITLAND & THE ATTORNEY GENERAL

Citland did not participate in the 1998 master settlement agreement. In 2003, Citland 

submitted an application to the Attorney General for inclusion in the directory. The Attorney 

General initially rejected the application, alleging that Citland had sold cigarettes in Virginia in 

2001 and 2002 without filing the necessary certifications and depositing the appropriate escrow 

funds. In response, Citland filed the appropriate certifications and fully funded the escrow 

account. 

Citland again asked to be included in the directory. The Attorney General again refused. 

Before being allowed into the directory, the Attorney General advised, Citland would have to 

pay a proposed statutory penalty of almost $150,000 for the earlier statutory defaults that 

allegedly occurred in 2001 and 2002. Citland contested the amount of the proposed penalty and 

asserted legal defenses to its imposition. Citland also argued that only a court, not the Attorney 

General, could impose statutory penalties. Only the nonpayment of a judicially imposed penalty, 

Citland reasoned, could preclude it from being listed in the directory. See Code 

§ 3.1-336.5(A)(2). The Attorney General disagreed, entered a final case decision excluding 

Citland from the directory, and advised Citland of its right of appeal under the VAPA. 
 - 5 -

Citland filed a VAPA appeal in circuit court seeking declaratory and injunctive relief. 

The circuit court received from the parties an agreed statement of facts.1 Both parties conceded 

that Citland “satisfied all of the requirements” of the Attorney General “except one: Citland has 

not paid the penalties demanded by the Attorney General for Citland’s alleged failure to timely 

establish and fund a qualified escrow account for sales in the Commonwealth during calendar 

years 2001 and 2002.” Joint Statement of Record ¶ 15, at 4-5. After briefing and oral argument, 

the circuit court dismissed the appeal and denied Citland all of its requested relief. Citland now 

appeals to us, claiming the circuit court erred as a matter of law.2 As it did below, Citland 

contends on appeal that the Attorney General has no discretion to exclude it from the directory 

for nonpayment of proposed penalties for alleged violations of the statute. 

II. 

Under the VAPA, the governing standard of review depends on the nature of the 

controversy.3 When the contest involves factfinding, we defer to the agency just as we would a 

jury or a trial court. See Mattaponi Indian Tribe v. Commonwealth, 43 Va. App. 690, 706, 601 

S.E.2d 667, 675 (2004) (noting the court may reject agency factfinding “only if, considering the 

record as a whole, a reasonable mind would necessarily come to a different conclusion” 

(citations omitted and emphasis in original)). Similarly, when the appellant challenges a 

 

1

 In its final order, the circuit court adopted a “Joint Statement of Record” signed by both 

parties and made it “part of the record.” 

2

 Two days after Citland filed its VAPA appeal in the circuit court, the Attorney General 

filed a separate action in circuit court seeking the judicial imposition of civil penalties under 

Code § 3.1-336.2(C). The civil penalty proceeding is not before us. 

3

 The same standard applies to the circuit court, as it does to us. “Under the VAPA, the 

circuit court reviews the agency’s action in a manner ‘equivalent to an appellate court’s role in 

an appeal from a trial court.’” Mattaponi Indian Tribe v. Commonwealth, 43 Va. App. 690, 707, 

601 S.E.2d 667, 676 (2004) (citations omitted). “In this sense, the General Assembly has 

provided that a circuit court acts as an appellate tribunal.” Id.
 - 6 -

judgment call on a topic on which “the agency has been entrusted with wide discretion by the 

General Assembly,” we will overturn the decision only if it can be fairly characterized as 

“arbitrary or capricious” and thus a “clear abuse of delegated discretion.” Vasaio v. Dep’t of 

Motor Vehicles, 42 Va. App. 190, 196-97, 590 S.E.2d 596, 599 (2004) (citations omitted). 

On the other hand, an “agency does not possess specialized competence over the 

interpretation of a statute merely because it addresses topics within the agency’s delegable 

authority.” Finnerty v. Thornton Hall, Inc., 42 Va. App. 628, 634, 593 S.E.2d 568, 571 (2004); 

see also 7-Eleven, Inc. v. Dep’t of Envtl. Quality, 42 Va. App. 65, 73, 590 S.E.2d 84, 88 (2003) 

(en banc). Pure statutory construction, a matter within the “core competency of the judiciary,” 

Finnerty, 42 Va. App. at 635, 593 S.E.2d at 571, requires de novo review. Mattaponi Indian 

Tribe, 43 Va. App. at 707, 601 S.E.2d at 675 (citation omitted). “This axiom stems from basic 

principles of separation of powers. ‘It is emphatically the province and duty of the judicial 

department to say what the law is.’” Finnerty, 42 Va. App. at 635, 593 S.E.2d at 571 (quoting 

Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803)). It necessarily follows that the a priori

question whether the statute delegates or withholds discretion is itself a question of statutory 

interpretation, one implicating our duty of de novo review. 

Exercising this duty, we conclude that the General Assembly did not delegate to the 

Attorney General discretionary power to exclude manufacturers from the directory solely for 

nonpayment of proposed penalties. Code § 3.1-336.5(A) makes clear the Attorney General 

“shall” list in the directory all manufacturers with “current and accurate certifications” in 

conformity with Code § 3.1-336.4. “In its ordinary use, ‘shall’ is a word of command, and is the 

language of command, and is the ordinary, usual, and natural word used in connection with a 

mandate.” Cirrito v. Cirrito, 44 Va. App. 287, 309, 605 S.E.2d 268, 279 (2004) (citations and 
 - 7 -

internal quotation marks omitted).4

 Though exceptions exist to this statutory mandate, none 

apply to this case. See Code § 3.1-336.5(A)(1) & (2). 

Code § 3.1-336.5(A)(1) granted the Attorney General the discretionary authority to 

exclude Citland from the directory if, in his judgment, Citland failed to “cure” its prior violation 

of “subsections C and D of § 3.1-336.4.” Subsections C and D require, among other things, 

annual certification verifying that the manufacturer has established an escrow fund and otherwise 

complied with all statutory obligations. Code § 3.1-336.4(C) & (D). 

Nothing in subsections C or D of § 3.1-336.4 ⎯ or, for that matter, any other statutory 

provision ⎯ required Citland to pay a proposed civil penalty. Instead, Code § 3.1-336.2(C)(1) 

makes clear the “court, upon finding a violation” has sole authority to “impose a civil penalty” 

under the statute. In this respect, the Attorney General’s role is not adjudicative, but 

representative. See Code § 3.1-336.2(C) (authorizing the Attorney General to file a civil penalty 

action “on behalf of the Commonwealth”). The Attorney General brings the suit. The court 

alone decides it. 

Even so, the Attorney General responds, his power to insist upon a “cure” before listing a 

manufacturer in the directory includes not only the power to require full present compliance, but 

also the power to impose a civil penalty for alleged past noncompliance. We disagree. 

In accepted legal parlance, a cure remedies a default ⎯ not penalizes it. Curing a default 

“commonly means taking care of the triggering event and returning to pre-default conditions” or 

“to remedy or rectify the default and restore matters to the status quo ante.” Litton v. Wachovia

 

4

 The Attorney General does not argue that the initial “shall” command in Code 

§ 3.1-336.5(A) really means may ⎯ thus permitting him to include or exclude manufacturers 

from the directory at his discretion whether or not either of the exceptions in (A)(1) or (A)(2) 

applies. We agree with this implicit concession. If the initial statutory command were not 

mandatory, there would be little need to follow it up with express exceptions. 
 - 8 -

Bank, 330 F.3d 636, 644 (4th Cir. 2003) (citations omitted). A contractual party, for example, 

cures a breach of contract by remedying the breach,5

 not by paying punitive damages. The 

remedial concept of cure does not typically include any punitive connotation, the chief 

characteristic of a civil penalty. See generally Black’s Law Dictionary 1198 (8th ed. 2004) 

(defining penalty as “Punishment imposed on a wrongdoer . . . esp., a sum of money exacted as 

punishment for either a wrong to the state or a civil wrong”); United States v. Telluride Co., 146 

F.3d 1241, 1246 (10th Cir. 1998) (finding the ordinary meaning of “penalty” is “a sanction or 

punishment imposed for violating a public law which goes beyond compensation for the injury 

caused by the defendant”). 

We accept that the conventional use of a term may be misleading when placed in an 

unconventional statutory context. The context of the tobacco statutes, however, confirms our 

interpretation. If the “cure” discretion of Code § 3.1-336.5(A)(1) extended to proposed 

penalties, it would undermine Code § 3.1-336.2(C)(1)’s carefully crafted scheme of judicially

imposed penalties. It is hardly likely the Attorney General would file suit to collect a penalty 

payment he has already received. The judicial process overseeing the imposition of civil 

 

5

 See Restatement (Second) Contracts § 237 cmt. b (1981) (“Even if the failure is 

material, it may still be possible to cure it by subsequent performance without material failure.”); 

2 E. Allan Farnsworth, Farnsworth on Contracts § 8.17 (2001) (explaining that a breach can be 

cured “by correcting the deficiency in performance”); 8 Catherine M.A. McCauliff, Corbin on 

Contracts § 36.7 (2004) (“Cure gives a contractor a second chance to perform according to the 

contract.” (citation omitted)). So, too, a defaulting party makes a “cure” under the UCC by 

making good on his promise. See, e.g., Code §§ 8.2-508(1), 8.2-510(1), 8.2-612(2); see also

Code § 59.1-507.3(a) (employing similar “cure” principle in Uniform Computer Information 

Transactions Act). Under partnership law, a partnership may “cure” an illegality by suspending 

the illegal conduct and thus avoid statutory dissolution. See Code § 50-73.117(4). A pleader 

“cures” defects in service of process by doing it right the second time. Lifestar Response of Md., 

Inc. v. Vegosen, 267 Va. 720, 725, 594 S.E.2d 589, 591-92 (2004); see also Welding, Inc. v. 

Bland County Serv. Auth., 261 Va. 218, 228, 541 S.E.2d 909, 915 (2001) (discussing methods to 

“cure” a defective pleading). 
 - 9 -

penalties would be sidelined, almost to the point of irrelevancy, if the Attorney General could 

collect proposed penalties as a tribute for admission into the directory. 

The Attorney General’s view of his “cure” discretion would also put into question what 

meaning, if any, would be left of Code § 3.1-336.5(A)(2) in civil penalty cases. It excludes 

manufacturers from the directory for, among other things, failing to satisfy “all outstanding final 

judgments.” Here again, there would be no final judgments imposing civil penalties if the 

Attorney General coerced manufacturers into paying proposed penalties ⎯ using entry into, or 

expulsion from, the directory as the instrument of coercion. 

III. 

In sum, Code § 3.1-336.5(A)(1) does not grant the Attorney General discretion to exclude 

Citland from the directory because of nonpayment of proposed penalties for alleged violations of 

the tobacco statutes. The circuit court, therefore, erred as a matter of law in dismissing the 

VAPA appeal filed by Citland. We remand this matter to the circuit court for further 

proceedings consistent with this opinion.6

 Reversed and remanded.

 

6

 See generally Code § 2.2-4029 (authorizing the circuit court to “compel agency action 

unlawfully and arbitrarily withheld or unreasonably delayed” or to remand the matter back to the 

agency for further proceedings consistent with law).