West Virginia Business Litigation Lawyer & Attorney : Law Office of Jeffrey V. Mehalic : Charleston, Huntington, Parkersburg

    Last month, I wrote about a decision from federal court for the Northern District of West Virginia in which the court awarded death benefits to a widow whose husband died of a drug overdose.  Judge Irene Keeley held, in a thorough opinion, that the husband’s death was accidental, not intentional, and that his widow was entitled to benefits.  Judge Keeley’s analysis centered on whether the decedent could reasonably have expected to die from his overmedication. She concluded that he could not, as he was trying to relieve his pain, “not to inflict any type of injury, much less to cause his own death.”

    Contrast that decision with this one from the Sixth Circuit Court of Appeals, which recently ruled that MetLife did not act arbitrarily and capriciously in denying a claim for death benefits on the grounds that its insured’s death, which occurred while he was driving with a blood alcohol content of three times the legal limit, was not an “accident” within the meaning of its Personal Accident Insurance (PAI) policy.  Lennon v. Metropolitan Life Insurance Company, 2007 WL 2934993 (6th Cir. 2007). 

    In Lennon, the district court had held that even though the driver had a blood alcohol content of 0.321 (which was more than three times Michigan’s limit of .10), he “did not reasonably expect to lose his life and that his death was thus accidental.”

    MetLife argued that driving in an impaired state made serious injury or death “reasonably foreseeable,” and therefore Lennon’s death was not an accident within the meaning of the PAI plan.  MetLife also argued that Lennon’s impaired condition, which was caused by his voluntary consumption of alcohol, constituted intentional self-inflicted injuries under the plan, which were excluded from coverage.

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    An interesting appeal that presents an issue of first impression was argued before the Supreme Court of Appeals last week.  The case is Wetzel v. Employers Service Corporation of West Virginia, No 33337. Here are the appellant’s brief, the appellee’s brief, and the reply brief.

    The issue is whether a workers’ compensation claims administrator for a self-insured employer can be liable for unfair trade practices (or “bad faith”) for conduct that allegedly causes or hastens a claimant’s death.  Mary Wetzel, the executrix of her husband’s estate, claims that Employers Service Corporation (ESC), the claims administrator for Chemical Leaman Tank Lines, delayed or denied her husband’s physicians’ requests for medically necessary treatment, which resulted in his death at the age of 49 from the effects of occupational exposure to toluene diisocyanate.

    In response, ESC characterized its role as Chemical Leaman’s claims administrator as being the employer’s agent, and maintained that such status entitled it to immunity the same as if Chemical Leaman had been sued directly.  ESC also argued that under case law interpreting the West Virginia Unfair Trade Practices Act, an entity that does not have a contractual obligation to pay a claim, such as an insurance company, cannot be held liable for bad faith. 

    The Circuit Court of Marshall County, West Virginia granted ESC’s motion for summary judgment on the grounds that the statutory immunity afforded to Chemical Leaman, an employer covered by workers’ compensation, also extended to ESC, as its agent.  The court also ruled that ESC was not in the business of insurance and thus could not be liable under West Virginia’s Unfair Trade Practices Act.

    This case is unique because the claims administrator, not the employer, is the defendant.  The West Virginia cases cited by both parties have only addressed an employer’s conduct in determining whether a claimant may maintain a direct action against the employer. Persinger v. Peabody Coal Company, 474 S.E.2d 887 (W.Va. 1996).  Similarly, in Hawkins v. Ford Motor Co., 566 S.E.2d 624 (W.Va. 2002), which limited the applicability of the Unfair Trade Practices Act to entities which were in the business of insurance, there was no claims or third-party administrator present.

    From my reading of the parties’ briefs, if Mrs. Wetzel prevails on the issue that ESC is not entitled to immunity, her action can go forward even if the Supreme Court agrees with the Circuit Court that ESC is not in the business of insurance and therefore cannot be liable for any bad faith, as she also asserted claims for the intentional infliction of emotional distress and negligence, which would not be affected. 

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    A state court judge has dismissed the lawsuit filed by the Book Exchange, an independent bookstore in Morgantown, West Virginia, against West Virginia University and Barnes & Noble, which manages WVU’s bookstores.  Monongalia County Circuit Court Judge Robert Stone made the ruling at a hearing on October 11.  He also dissolved an injunction that was granted in July against WVU.   Here is the Associated Press story on the dismissal, which appeared in the Saturday Gazette-Mail on October 13.

   The lawsuit alleged that WVU's program of withholding funds from financial aid recipients and designating that the money can be spent only at WVU’s bookstore violated state antitrust, unfair trade practice, and consumer protection statutes.   In July, another Circuit Court judge had granted the Book Exchange's request for an injunction against WVU, which notified students via e-mail that the funds had been reserved and were available for use. 

    The AP story doesn't have any details on the basis for the dismissal, and Judge Stone has not yet entered an order reflecting his ruling.  As soon as an order is entered, I'll make it available.

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    Yesterday the jury has returned a verdict for punitive damages of $196.2 million against DuPont in the fourth and final phase of the class action trial in Harrison County, West Virginia, in which 7,000 area residents claim that DuPont injured them and contaminated their property by releasing substances including, cadmium, arsenic, and lead at its zinc smelting site.  Here is the Associated Press story on the verdict in the Saturday Gazette-Mail, as well as a statement issued by DuPont regarding the verdict.

    The AP story says that the damages awards against DuPont total nearly $400 million, but that number is an estimate, at least according to my calculations.  The punitive damages award and the property damage award of $55.5 million are nearly $252 million.  The cost of the medical monitoring program will be decided by Circuit Court Judge Thomas A. Bedell, but the AP says it’s estimated to cost more than $100 million.  Actually, I think it will cost a lot more than $100 million. 

    If every member of the class is entitled to $500 per year for medical monitoring expenses for 40 years, which is not unreasonable, considering that the jury adopted the plaintiffs’ proposal, the cost of the program is $140 million.  Taking into account anticipated increases in the cost of medical services over 40 years, the program could easily cost twice that amount, which means that DuPont is looking at more than $500 million total.  

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    The Fourth Circuit Court of Appeals has ruled that Novell has standing to pursue two antitrust claims against Microsoft. Novell, Inc. v. Microsoft Corp., 2007 WL 2984372 (October 15, 2007). 

    Novell, which manufactured WordPerfect and Quattro Pro until 1996, claimed that Microsoft required original equipment manufacturers to pre-install its office-productivity software, such as Word and Excel, as a condition of getting Windows licenses.  Novell alleged that Microsoft’s conduct decreased Novell's market share and its products’ popularity, thus causing it damage.  However, because Novell did not directly compete against Microsoft in the operating system market, Microsoft challenged Novell’s standing to bring the claims.

    Novell also asserted four claims against Microsoft in which it alleged harm to competition in the software-application market, where Novell did compete directly against Microsoft. 

    The Court pointed out that as all of Novell’s claims arose before 1996, the claims, which Novell asserted in 20056, were time-barred unless the applicable four year statute of limitations was tolled by an action brought by the Department of Justice in 1998.  The Clayton Act provides that government antitrust proceedings toll the statute of limitations for private antitrust proceedings that are “based in whole or in part on any matter complained of” by the government.

    The Court concluded that even though Novell was neither a consumer nor a competitor, Microsoft’s allegedly anticompetitive conduct in the operating system market was “directly aimed” at Novell, which gave Novell standing to pursue its two claims.  Further, Novell’s claims "echoed” the government’s theory in the 1998 complaint, and therefore were not barred by the statute of limitations. 

    Novell’s other four claims alleged injury to competition in the office-productivity-applications market.  The Court concluded that those claims did not overlap with the DOJ’s complaint, and were also barred by the “different markets” rule, which requires a private plaintiff’s claims to be “in markets identical to, or completely encompassed by, those at issue in the earlier government suit.”  Because the office-productivity-applications market was neither identical to nor encompassed by the PC operating system market, Novell’s claims were barred.

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    After deliberating for seven hours, the jury yesterday determined that DuPont must pay $55.5 million to clean up houses, trailers, and businesses that were contaminated by DuPont’s operation of a zinc smelting plant, according to this story from Bloomberg.com. 

    The jury’s verdict concludes the third phase of the trial. The final phase, in which the jury will determine whether the class members are entitled to punitive damages, begins today.

    DuPont had set aside $15 million to resolve the plaintiffs’ claims, which obviously will not be enough, assuming that this verdict is affirmed on appeal.  DuPont will have to come up with even more money to pay for the cost of medical monitoring, which the jury approved last week.  Although the jury found that medical monitoring is necessary, Harrison County Circuit Court Judge Thomas A. Bedell will determine the specifics of the program, including its cost.

    The estimated cost of the remediation program came from the plaintiffs.  DuPont took the position that no remediation was necessary and did not present any alternative estimate to the jury.  DuPont’s strategy is understandable, but still carries considerable risk.  Does DuPont argue, as it did here, that no remediation is necessary, which means that if the jury disagrees, it will have only the plaintiffs’ estimated cost as the basis for its verdict?  Or does DuPont present figures showing a lower cost for remediation, and take the chance that the jury will interpret the lower numbers as a tacit admission that some remediation is necessary?  Not an easy decision.

    In some good news for DuPont, the Department of Justice has decided not to pursue criminal charges against it for the use of perfluorooctanoic acid, also known as C8, used in the manufacture of Teflon at DuPont’s Washington Works plant near Parkersburg, West Virginia.  Ken Ward, Jr. writes about the DOJ's decision in this morning’s Charleston Gazette.

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    Another federal district court decision I have wanted to write about is one that Judge John T. Copenhaver, Jr. entered on September 26, 2007 in Strawn, et al. v. AT&T Mobility, Inc. f/k/a Cingular Wireless LLC, Civil Action No. 2:06-CV-0988.

    The plaintiffs filed a class action in the Circuit Court of Kanawha County (Charleston), West Virginia against Cingular (now AT&T), alleging that its decision to enroll them in its roadside assistance program and charge $2.99 per month without their consent constituted an unfair trade practice under the West Virginia Consumer Credit and Protection Act.

     Cingular removed the action to federal court based on the Class Action Fairness Act’s requirement that a class action with an amount in controversy in excess of $5 million, exclusive of interest and costs, is subject to federal jurisdiction.  CAFA has other jurisdictional requirements, but only the amount in controversy was in dispute.

    The court found that Cingular had the burden of establishing federal jurisdiction, but that the class representatives’ stipulations that the amount in controversy was less than $5 million were not persuasive (because in West Virginia, a jury can return a verdict in excess of the amount in controversy, thereby rendering such a stipulation meaningless).

    The parties argued about the size of the class, which was critical to the court’s jurisdiction.  Under the Consumer Credit and Protection Act, each plaintiff would be entitled to $200 in damages, so a class of 25,001 members, at $200 each, would exceed $5 million.  Cingular initially asserted that the class consisted of 62,000 members, which the plaintiffs disputed.  Cingular reduced the number to 58,800 members (after eliminating its employees and business customers), but that number included individuals who had become enrolled in Cingular’s roadside assistance program and continued to pay the monthly fee.  Because the suit was filed on behalf of those who had been enrolled and charged the amount without their consent, the court found that the putative class “was much narrower.”

    The plaintiffs challenged Cingular’s estimate of 58,800 in their reply, so the court gave Cingular an opportunity to reply and to “narrow its response to the more limited scope of the putative class and  calculate the amount defendant believes to be in dispute.”   Cingular’s reply was to inform the court that its “concerns cannot be resolved at the removal stage.”   Cingular then made three arguments that did not remotely answer the court’s questions.  Consequently, the court concluded there was no record “to support a finding that the amount-in-controversy exceeds $5,000,000.” 

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    According to the Associated Press, the jury yesterday determined that DuPont must pay for medical monitoring for 7,000 class members, as a result of its contamination of a zinc smelting plant in Spelter, West Virginia.  The class members, who are residents of Harrison County, allege that their health and property were damaged by DuPont's releases of cadmium, arsenic, and lead at the site.  I have written about the trial on several occasions, most recently yesterday.

    Although the jury apparently adopted the plaintiffs’ proposed plan, which establishes a 40-year voluntary testing program for various cancers and other conditions related to toxic exposures, the Circuit Court will determine the “scope, cost and duration of any medical monitoring plan,” according to DuPont’s spokesman.

    The trial's third phase, which addresses the plaintiffs' property damage claims, begins today.  The last phase, which should start sometime next week, will determine whether the plaintiffs are entitled to punitive damages.

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    The Associated Press reports that this morning, the jury began deliberating the plaintiffs’ medical monitoring claims in the second phase of the class action against DuPont, which is taking place in Harrison County, West Virginia.

    The jury has to determine whether the plaintiffs are entitled to compensation for medical monitoring, and if so, how much.  The plaintiffs have proposed a 40 year medical monitoring plan that would offer voluntary testing for various cancers, including those of the lung, skin, stomach, bladder and kidney, as well as testing for kidney function, cognitive problems and lead poisoning.  The plaintiffs allege that they are at greater risk for such conditions because of pollution and contamination caused by DuPont’s zinc smelting plant in Spelter, West Virginia.

     Last week, in the first phase of the trial, the jury determined that DuPont was liable for the plaintiffs' injuries.  Regardless of the jury’s verdict on medical monitoring, the trial's next phase will address property damages, and the final phase will determine whether the plaintiffs are entitled to punitive damages.

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    CNN reported a story last week on automobile insurers' “take it or leave it” approach to minor car crashes.   According to CNN, even if an accident is not your fault, you can expect most of the major insurance companies to engage in what one law professor called “institutionalized bad faith.”  

    This topic is particularly relevant in West Virginia since, in 2005, the Legislature repealed what had been one of the strongest third-party bad faith laws in the United States, and left accident victims with no judicial remedy against insurers who engage in bad faith.  (There is an administrative remedy  available through the West Virginia Insurance Commissioner, which is so ineffective as to be non-existent.)  Here’s my post on Health Insurance Litigation, which describes the trade-off West Virginians received.

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    I provided the wrong date for the Supreme Court of Appeals' argument for A. T. Massey Coal Company's appeal from the $50 million verdict in Boone County.  I wrote that the argument was set for October 3, which was incorrect.  The argument is set for tomorrow, October 10.  There is a fairly short motion docket, which will begin at 10:00, so the Massey argument, which is the first one on the argument docket, should start around 10:30 or so.  I apologize to anyone who tried to watch or listen to the argument and wondered why nothing was happening.

    Also, in an entry last week on his New York Attorney Malpractice Blog, which referenced my post about Massey's lawsuit against Wyatt, Tarrant & Combs, LLP and McGuire Woods LLP, Andrew Bluestone pointed out that one can watch a webcast of arguments before the Supreme Court.  The webcast can be accessed from several locations within the Supreme Court of Appeals' website, including the home page, opinion page, and calendar and dockets page.  The Court's proceedings can also be heard by dialing in to 304-558-1313.

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    Last month, United States District Judge Joseph R. Goodwin found that the West Virginia Lottery Commission’s prohibition of certain words that video lottery operators could use in advertising their machines was an impermissible infringement on the operators' commercial free speech.  Words such as “casino,” “jackpot,” and “Vegas” have been banned from advertising since 2004, when the Limited Video Lottery Act was passed. 

    In its order, which granted the WV Association of Club Owners and Fraternal Services, Inc.’s motion for a preliminary injunction against John Musgrave, the directory of the West Virginia Lottery, the court found that “[t]he advertising ban infringes upon the limited video lottery retailers’ right to speak and impedes the public’s ability to engage in informed political discourse."

    Since the court issued its ruling, there has been an interesting and unexpected development.   The West Virginia Amusement & Limited Video Lottery Association, which was not involved in the litigation, and whose membership consists of 18 of the 37 companies authorized to lease machines, has informed retailers with video lottery machines supplied by its members that if they attempt to advertise as permitted by the court’s ruling, they will lose all but one of their machines.  The contracts between the companies leasing the machines and the retailers provide that a retailer must be allowed to have at least one machine. 

    The organization’s rationale apparently is that increased advertising that employs the words that the Act originally banned would generate a backlash against the machines and affect their popularity and hence their profitability.  Judge Goodwin anticipated this possible outcome when he wrote, "Lifting the LVLA's ban on commercial speech will bring limited video lottery into the light, thereby providing important information to those who want to play, and those who want to protest."

    AP reporter Lawrence Messina wrote an article about the controversy, and also has an entry on his blog , Lincoln Walks At Midnight, which reviews the coverage of the issue.

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    I had intended to write about some West Virginia federal court decisions that were issued last week dealing with a class actions and commercial free speech, but an article in this morning’s Charleston Gazette caused me to put those on hold.  I'll get back to those in a day or two.

    Yesterday, I wrote that the Supreme Court of Appeals was going to hear argument in A. T. Massey Company’s appeal of a $50 million verdict rendered against it in Boone County, West Virginia in 2002.  I wasn’t able to attend the argument or watch on the Court’s webcast, so I don’t know how the argument went.

    According to the article by Gazette reporter Paul J. Nyden, Massey and two related entities have sued Wyatt, Tarrant & Combs, LLP of Lexington, Kentucky and McGuire Woods LLP of Richmond, Virginia for their alleged malpractice in representing Massey in a Virginia lawsuit filed by Hugh Caperton and his companies.  In 2001, a Virginia jury awarded the plaintiffs $6 million.  The Virginia Supreme Court refused Massey’s appeal because it was filed by a lawyer from Kentucky who wasn’t admitted to practice in Virginia.  Massey ended up paying Caperton $7.2 million, including $1.2 million in pre-judgment interest.  Here is Massey’s complaint, which was filed on July 13, 2007 in the Circuit Court of Fayette County (Lexington), Kentucky.

 

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    The Supreme Court of Appeals hears argument today in an appeal from a $50 million verdict against A. T. Massey Coal Company and several of its subsidiaries, which was rendered in 2002.  The parties’ briefs are posted on the Court's website.

    The case was brought by Hugh Caperton as an individual, and by his company, Harman Development Corporation, which owned Harman Mining Corporation, and Sovereign Coal Sales, Inc., against Massey and its affiliates.  In short, Caperton alleged that Massey put him and his companies out of business and caused him significant personal damage. 

    The Boone County, West Virginia jury awarded the Harman corporate entitles compensatory damages of $29.7 million, consequential damages of $3 million, and punitive damages of $2 million.  The jury awarded Caperton compensatory damages of $3.4 million, general damages of $7.5 million, consequential damages of $425,000, and punitive damages of $4 million.  I will write more about the case after the Court issues its decision (probably late next month), but I wanted to point out that the argument takes place today. 

     In addition to its appeal of the verdict, Massey has sought relief in the case in federal court as well, for alleged constitutional violations.  The SW Virginia Law Blog has a post from last July about Massey’s lawsuit against the court reporter at the trial for her alleged failure to provide an adequate transcript of the trial, which Massey alleged was a violation of 42 U.S.C. § 1983 because the reporter was acting under color of state law.  The case was resolved after the court reporter was able to produce a transcript that satisfied Massey. 

    Massey also sued the Supreme Court of Appeals in federal court last year, seeking to have Rule 29 of the West Virginia Rules of Appellate Procedure declared unconstitutional.  Rule 29 deals with the disqualification of justices, and Massey claimed that it was denied due process when Justice Larry Starcher refused to disqualify himself from an appeal involving Massey (and which resulted from the Caperton/Harman litigation).  Here is Massey's complaint for declaratory and injunctive relief.  The case, Massey Energy Company, et al. v. Supreme Court of Appeals of West Virginia, Civil Action No. 2:06-CV-0614, is pending before United States District Judge John T. Copenhaver, Jr.

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    Last week, I wrote that the jury had begun its deliberations in the liability phase of the class action trial against DuPont over its alleged contamination of a zinc smelting plant in Spelter, West Virginia, which the plaintiffs alleged injured their health and damaged their property.   Yesterday, the jury determined that DuPont was negligent in dumping various chemicals, including arsenic, cadmium, and lead, at the site.  Here's the story by Associated Press reported Vicki Smith.  Specifically, the jury determined that the site constituted a public and private nuisance and that the pollution at the site illegally trespassed onto private property.  The jury also determined that DuPont was strictly liable for the plaintiffs' exposures. 

    Because the trial is bifurcated, the parties began to present evidence today on damages, starting with the plaintiffs' claims for medical monitoring.  The Charleston Gazette posted this article about the damages phase on its website earlier today.

    DuPont has set aside $15 million to deal with the lawsuit.  Even if the jury doesn't award damages for medical monitoring, the plaintiffs will present evidence on their property damage claims.  Lastly, the jury will determine whether the plaintiffs are entitled to punitive damages.  The liability phase took about three weeks to conclude, but I haven't seen any estimate of how long the damages phase will take.

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