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

    West Virginia University President Mike Garrison made some comments about WVU’s lawsuit against former head football coach Rich Rodriguez, which were reported in Saturday’s edition of The (Morgantown, WV) Dominion Post (subscription required).   As I wrote last week, WVU sued Rodriguez last Thursday in West Virginia state court, seeking a declaration that he must pay $4 million to WVU because he resigned to take the head coach’s job at the University of Michigan. 

    As reported by Todd Murray, Garrison said:

“The ball is clearly in the coach’s court,” Garrison said.  “All this could be ended very quickly by him saying, ‘I will honor my agreement under the contract.’”

Garrison said WVU is not interested in settling with Rodriguez.

“We have no reason to settle,” said Garrison, who admitted that, as president, he would prefer to have financial incentives in a coach’s contract rather than a buyout clause.  “The facts in the contract couldn’t be clearer.” 

    Also quoted in the article is Alex Macia, WVU’s vice president of legal affairs and general counsel, who said,

“We’re asking the court to declare that this is legally enforceable agreement,” Macia said Friday.  “We haven’t said anybody breached it yet.  We didn’t breach it, and it is legally enforceable.  We’ve performed our end of the bargain.  We’re asking the court to say he has to.”

Macia’s comments are not quite consistent with the language in the complaint, which contains the following paragraph:

8.  This matter is appropriate for declaratory judgment as a justiciable controversy exists between the parties as the University is informed and believes that Rodriguez does not intend to abide by the terms of the Agreement. 

    Macia is technically correct that no one has said that Rodriguez has breached the agreement yet.  Of course, until January 18, 2008 comes and goes without Rodriguez making the first one-third payment to WVU, he hasn’t breached the agreement.  But unless WVU claims that Rodriguez does not intend to abide by the agreement, then it has no standing to seek any declaratory relief.  And that is its only basis for being in court at this point.

    My feeling when I first read the complaint, and which has not changed, is that WVU has already handled the matter ineptly, and created yet another distraction for the team (remember them?), which plays in the Fiesta Bowl on January 2.  Just as Rodriguez can fairly be asked why he did not wait until after the bowl game had been played to announce his departure for Michigan, Garrison and Macia can fairly be asked why they could not wait until after the bowl game or even later to pursue this action.  (My own guess is that much of the tension stems from a meeting between Garrison and Rodriguez on December 15, which was reported in the Detroit Free Press, in which West Virginia Media president Bray Cary (who had spoken with representatives of both men after the meeting) said, "They started kicking sand at each other,[] like two kids at a sandbox.")  

    If you want the full text of the Dominion Post article, e-mail me at jeff@mehaliclaw.com, and I’ll send it to you.

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    The big news in West Virginia is West Virginia University’s lawsuit against former head football coach Rich Rodriguez, which was filed yesterday in the Circuit Court of Monongalia County in Morgantown.  West Virginia University Board of Governors for and on behalf of West Virginia University v. Richard Rodriguez, Civil Action No. 07-C-851.  Here are the complaint and exhibits, which are Rodriguez’s contract with WVU and two amendments, as well as WVU’s first set of discovery requests to Rodriguez.  Rodriguez has 20 days to answer or respond to the complaint and 45 days to answer the discovery requests.

    WVU seeks a declaratory judgment that:

Rodriguez is required to pay the University Four Million Dollars ($4,000,000.00) as a result of his voluntary termination of the Agreement by virtue of his resignation from the position of Head Coach of the West Virginia University football team prior to the expiration of the Agreement and prior to August 31, 2008.

WVU also seeks declaratory judgments that WVU “did not materially and substantially breach the Agreement,” and that “Rodriguez never provided written notice to the University of any material and substantial breach as required by Article V(D)(1) of the Agreement and amended by the Second Amendment.”  WVU also wants a declaration that Rodriguez is liable for “pre-judgment interest on all sums not paid to the University by the time required by the Agreement, specifically the Second Agreement.”  

    According to the second amendment to the contract, if Rodriguez left his position with WVU between August 31, 2007 and August 31, 2008, he owes $4 million, one-third of which is due 30 days after termination (which would be on January 18, 2008); one-third due on the one year anniversary of the termination; and the final third due on the second anniversary of termination.

   The complaint is a pre-emptive strike by WVU against Rodriguez, whose supporters have suggested that he does not owe the buyout because WVU did not satisfy all of the contract's requirements, thus relieving him of his remaining obligations under the contract.

     I suspect that WVU’s strategy in filing this action against Rodriguez is motivated as much by its experience with the departure of head basketball coach John Beilein (also to the University of Michigan) earlier this year and negotiations regarding his buyout as by its animosity toward Rodriguez.  At this point, if there was any chance that Rodriguez would make the first payment to WVU or try to negotiate some compromise amount, the lawsuit seems to eliminate that possibility.  Rodriguez probably will file a counterclaim against WVU, alleging that it breached his employment agreement by failing to fulfill the contract. 

    Here are links to The Charleston Gazette’s article on the lawsuit, and an article in the Detroit Free Press last Saturday, which provides some background on the dispute between Rodriguez and WVU. 

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    The focus of the medical malpractice litigation against discredited surgeon John A. King has moved to federal court as the parties deal with the effect of King’s bankruptcy.  Here is my post from last week about the removal to federal court of some (as of that point) of the cases against King.

    Last week, United States Bankruptcy Judge Thomas B. Bennett (who formerly practiced in Charleston, West Virginia) of the Northern District of Alabama granted the motions filed by eight plaintiffs and lifted the automatic stay against litigation in their cases against King that had been pending in the Circuit Court of Putnam County, West Virginia.  King consented to the stay being lifted in the cases.  Here are one of the motions to lift the stay and the order granting the motion.

    Yesterday, Teays Valley Health Services, LLC f/k/a Teays Valley Health Services, Inc. d/b/a Putnam General Hospital, HCA Inc., Healthtrust, Inc.-The Hospital Company, and Hospital Corp., LLC, who are also defendants in the lawsuits against King, filed motions in the first ten cases set for trial (which include the eight cases in which the plaintiffs filed their motions) to lift the automatic stay in order to pursue their cross-claims against King.  Here is one of the motions filed by the defendants.  The defendants’ motions have been set for a final hearing on January 17, 2008.

    Meanwhile, in federal court in West Virginia, the defendants have removed the 124 cases (121 cases according to the plaintiffs) against King to the Southern District at Charleston, where they have been assigned to Judge John T. Copenhaver, Jr.  Judge Copenhaver conducted a case management conference on December 20 and entered this order on December 21, which designated one of the cases as the lead case and established a briefing schedule for the plaintiffs’ consolidated motion to remand and the defendants’ response.  Here are the plaintiffs’ motion to remand and memorandum in support, which were filed today.  The defendants’ response is due by January 28, 2008, and the plaintiffs’ reply is due within ten days thereafter.  Judge Copenhaver’s order also stays all of the cases involved in the removal, which means all of the cases against King.

    In support of their motion, the plaintiffs argue that the court lacks jurisdiction under 28 U.S.C. § 1452(a) (regarding the removal of claims related to bankruptcy cases) and alternatively because of principles of abstention and equity.  I expect that the court will rule promptly on the plaintiffs' motion, probably in late February or early March.  If the court grants the motion to remand, then the first group of cases can be rescheduled for trial, as the Bankruptcy Court has lifted the stay in those cases and there is no other impediment (at this point) to trial. 
 

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    The West Virginia Health Care Authority last week dissolved the stay it had issued pending reconsideration of the certificate of need for The Carlyle Group's buyout of HCR Manor Care's nursing homes in West Virginia, but denied Manor Care's request to affirm the CON immediately.  Here is the WVHCA's order and my post from last week with links to the parties' pleadings. 

    Joe Morris of The Charleston Gazette wrote about the dissolution of the stay on Friday (which doesn't seem to be online), then wrote a lengthier overview in yesterday's edition.  The WVHCA's decision means that the transaction can go forward at this point, but could be derailed if the WVHCA withdraws the previously-issued CON.  Morris quoted the WVHCA's chairperson, Sonia Chambers, in his story from last Friday as follows:

"'There's not anything legally staying them [Manor Care and Carlyle] from going through with it,' she said.  'But they run the risk that we might grant the reconsideration ... We could change our mind and deny the certificate of need application.'" 

Also, regulators in Michigan and Oklahoma have yet to approve the transaction for their respective states, although Manor Care's COO was quoted as saying that all states except West Virginia had given their approval.

    The takeover still faces problems in Florida, too.  The Miami Herald's website reported that last Friday, SEIU Healthcare Florida filed suit in the Circuit Court of Leon County (Tallahassee), Florida, seeking to block The Carlyle Group's buyout of Manor Care's 29 nursing homes in Florida, which have 3,700 residents. 

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    I wrote earlier this month about the West Virginia Health Care Authority’s decision to reconsider the certificate of need issued for The Carlyle Group’s buyout of the HCR Manor Care nursing home facilities in West Virginia.  The WVHCA held a hearing to reconsider the CON on December 14.   Since the hearing, the parties have filed several pleadings, including Manor Care’s motion to dissolve the stay imposed by the WVHCA’s decision to reconsider and affirm the CON (the motion’s cover letter is dated December 10, but it was filed on December 17), Service Employees International Union District 1199’s response in opposition, Manor Care’s supplemental memorandum in support of its motion, SEIU’s supplemental response in opposition, and Manor Care’s reply to SEIU’s supplemental response. 

     Also last week, the SEIU filed a petition for a writ of prohibition in the Circuit Court of Kanawha County (Charleston), West Virginia against the WVHCA, regarding its decision not to permit the SEIU to engage in any discovery concerning the buyout.  The petition asks the court to suspend the proceedings before the WVHCA and permit the SEIU to engage in discovery.  Manor Care has responded in opposition, but I do not have its response.  As of this point, I am not aware of any briefing schedule or ruling by the court.

    Yesterday, The Charleston Gazette’s Eric Eyre wrote that according to Manor Care executives, its shareholders are losing $1 million every day that the WVHCA and regulators in other states do not approve the buyout.  According to the article, the WVHCA could issue a decision on the reconsideration by mid-January.  Also, here’s a link to Juvan’s Health Law Update, written by Jayne E. Juvan, who posted a few days ago about the transaction.

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    A few days ago, I wrote that John King, the discredited surgeon who practiced at Putnam General Hospital, had filed his bankruptcy schedules, which showed that his only asset is a 1993 Volvo with a value of $500.

    I understand that counsel for some of the plaintiffs in the medical malpractice actions against King had already moved the Circuit Court of Putnam County to lift the stay imposed by King's bankruptcy and had scheduled a hearing for December 20.  Last week, though, the defendants removed several of the actions to federal court on the grounds that claims or causes of action related to a pending bankruptcy case may be removed pursuant to 28 U.S.C. § 1452(a).   Here are the removal petition and an exhibit that have been filed in one of the cases against King. 

    At this point, the plaintiffs' remedy is to move to remand the actions to state court.  That motion must be filed within 30 days of the filing of the removal petition, unless the basis for the motion is that the federal court lacks subject matter jurisdiction, which may be raised at any point prior to final judgment.

    I noticed that in King's bankruptcy petition and his schedules, he identified himself as John King, and not as Christopher Wallace Martin, which has been his name since he legally changed it in 2006.  But according to Paul J. Nyden's story in the Sunday Gazette-Mail, King has changed his name back to John Anderson King, based on a November 14 filing in the Jefferson County (Alabama) Probate Court.  Apparently, King did not give any reason for this change, unlike the one last year, which he claimed was necessary because he was the victim of identity theft perpetrated by a former co-worker.

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    My thanks to Tom Mighell at Inter Alia for selecting West Virginia Business Litigation as his Blawg of the Day.

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    Bob Coffield, who writes the Health Care Law Blog, had a post earlier this week about a potential obstacle to the proposed purchase by The Carlyle Group of several nursing homes in West Virginia that are currently owned and operated by HCR Manor Care.  The transaction is part of The Carlyle Group’s proposed $6.3 billion buyout of HCR Manor Care.

    The West Virginia Health Care Authority issued a certificate of need for the purchase on October 19, 2007, but District 1199 of the Service Employees International Union requested reconsideration on November 15 because of its concern that The Carlyle Group, as a private equity firm, has relatively little experience in operating nursing homes, which could negatively affect the nursing homes' residents.

    The WVHCA granted the reconsideration on November 20 and has scheduled a hearing on December 14 to reconsider the certificate of need.  Without having any sense one way or the other about how the hearing will turn out, the basis cited by the WVHCA as good cause for reconsideration does not sound like good news for the Carlyle Group:

District 1199 did not request reconsideration during the Certificate of Need review process.  This normally would prelude [sic] the granting of reconsideration.  However, due to the serious nature of the allegations, particularly the quality of care issues, the Authority finds that a hearing is warranted and that a full discussion of the issues is in the public's best interest.

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    After filing his emergency Chapter 7 bankruptcy petition on November 21 in United States District Court for the Northern District of Alabama, Dr. John King filed his schedules on Tuesday, and listed his only asset as a 1993 Volvo, estimated value $500.  Here are King's bankruptcy petition and the schedules of assets and liabilities.

    Last month, I wrote about the possibility of King filing for bankruptcy and the effect that the filing would have on the medical malpractice trial that was set to begin, at that point, on November 27, which was changed to December 3.    

    Paul J. Nyden wrote about King's bankruptcy filing in yesterday's Charleston Gazette, and pointed out that while King identified his sole asset as the Volvo on the schedules (which must be verified as true and correct under penalty of perjury), he described his assets very differently in a hearing last year before the Circuit Court of Putnam County, West Virginia (where 122 medical malpractice cases are pending against King and other defendants).  

    At that time, King testified under oath that "he had assets in 11 different offshore and domestic accounts.  His offshore assets were contained in a limited liability company and in a trust fund established in San Jose, Costa Rica.  King testified he also held assets in nine other trusts and accounts, four of which were based in Nevada, including an 'irrevocable life insurance trust.'  King's accounts included: the Bone Maker Trust, the Bone Crusher Trust, and the Bone Lover Trust." 

    So what happened to those assets and trusts?  King didn't list them on his schedules.  And although King has changed his name to Christopher Wallace Martin, he did not mention that name anywhere in his filing.  In any event, the immediate effect of King's filing is to stay the pending malpractice cases against him for 90 days, and perhaps longer. 

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    Andrew Lavoot Bluestone writes today in his New York Attorney Malpractice Blog about a malpractice case filed against Reed Smith by its former client, the Bair Foundation, which describes itself as a Christian charitable foundation devoted to foster care for children. 

    Bair alleges that when it was sued in a discrimination case, Reed Smith’s fees increased from an original estimate of $50,000 to $1 million, and claims that Reed Smith's economic model (more than 1,500 lawyers in 21 offices worldwide) is incompatible with its ability to represent smaller clients on a cost-effective basis.  Law.com also has an article about the lawsuit, with some background about the parties' relationship and comments by their lawyers.

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    The Supreme Court of Appeals issued its decision on November 15 in State of West Virginia ex rel. Chemtall, Inc. v, Madden, 2007 WL 4098937 (W.Va.), which was argued at the beginning of the term.  Here is my post regarding the argument. This opinion is the third one from the Supreme Court regarding this case, which is significant, given that the case has not gone to trial yet, even though it was filed in 2003.

    The per curiam opinion addressed the petition for a writ of prohibition and/or mandamus filed by the defendant suppliers and/or manufacturers of polyacrylamide against the Circuit Court of Marshall County regarding two of its orders.  The first order permitted water treatment workers to intervene in the action based on their exposure to polyacrylamide, which is the same exposure claimed by the class of former coal preparation plant workers.  The second order permitted the use of a punitive damages multiplier for the plaintiffs’ medical monitoring claims and allowed for the common adjudication of claims that arose under West Virginia and Pennsylvania’s medical monitoring claims.

    In this decision, the Court denied the defendants’ requested relief.  First, the Court held that its prior decision in Stern v. Chemtall, Inc., 617 S.E.2d 876 (W.Va. 2005), was intended to permit the intervention of water treatment workers in the action.  The Court noted that there were facts common to both groups of workers, such as exposure to the same chemical and the risk of contracting the same diseases, which made intervention appropriate.  The Court also noted that the circuit court had not “indicated how it intends to manage any differences with regard to these two groups of plaintiffs[,]” which would make a ruling premature.

    As to the issue of punitive damages, the petitioners challenged the circuit court’s proposed trial plan as violating their due process rights because a jury would not consider a plaintiff’s individualized harm in assessing the damages and would not first find actual liability against any defendant. 

    The Court emphasized that the circuit court’s trial plan did not guarantee a result contrary to Phillip Morris USA v. Williams, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007), which addressed whether the United States’ Constitution’s Due Process Clause permits a jury to award punitive damages based in part on its desire to punish the defendant for harming persons who are not before the court.  The Court again emphasized that as no trial had taken place, “[n]o evidence has been adduced, none of the petitioners have been found liable for any tortious conduct, and punitive damages have not been assessed. Therefore, a decision on the constitutionality of punitive damages at this point would amount to nothing more than an exercise in speculation.”

    The Court also declined to rule on the petitioners’ claim that punitive damages are not available in cases where the plaintiffs sought only medical monitoring damages, expressing its belief that “appellate review of this issue is better left to the review of a verdict after complete development of all the facts and testimony and after a trial of all the issues."

    Likewise, in addressing the petitioners’ argument about the adjudication of claims arising under West Virginia and Pennsylvania law, the Court reaffirmed the circuit court’s discretion to manage its docket, such that “[w]e believe that the circuit court below is fully capable of formulating procedures that effectively address any differences in West Virginia and Pennsylvania law.”

    In the final paragraph of the opinion, the Court makes clear its exasperation with the parties: “We hope the litigants understand and appreciate the difficulty this Court faces in trying to decide so many issues pre-trial, in the limited context of extraordinary remedies, and in the absence of a meaningful, fully-developed factual record.  Accordingly, we trust the lawyers and parties will now focus vigorously on letting these cases be tried by a trial court.  Having disposed of the issues raised herein, we are confident that the parties can now proceed to trial without further delay and without the necessity of additional guidance from this Court.”

    In other words, don’t come back unless you've tried the case.

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    A federal district judge has ruled that a putative class-action lawsuit against FiberNet LLC, a telecommunications provider, will stay in federal court.  Here is United States District Judge Joseph R. Goodwin’s order entered last month, which denied the plaintiffs’ motion to remand the action, which was filed in the Circuit Court of Wood County, West Virginia.  I wrote about the lawsuit in this post.

    The lawsuit seeks compensation for potentially thousands of FiberNet’s customers who were affected by an interruption in service in July.  The plaintiffs alleged claims of breach of contract, fraud, and negligence, but Goodwin found that the breach of contract claim was pre-empted by the federal tariff under which FiberNet transacts business, which is issued and regulated by the Federal Communications Commission: “The tariff has the force and effect of federal law and is the sole source of the rights and liabilities of the contracting parties.” 

    He recognized that it was less clear whether the fraud and negligence claims presented a federal question, but held that those claims “are part of the same case or controversy because they arise out of the same set of facts as the breach of contract claim[,]” and retained jurisdiction of them as well.

    Also pending before the Court are FiberNet’s motion to dismiss the plaintiffs’ claim for fraud and its motion for partial summary judgment as to the plaintiffs’ damages.  The motion for partial summary judgment asserts that the applicable state and federal tariffs limit the plaintiffs’ damages to a credit for the cost of service lost by each customer.  The plaintiffs maintain that discovery is necessary in order to determine whether FiberNet has deviated from the terms of the tariffs such that the tariffs do not apply and thus do not cap the plaintiffs’ damages. 

    Here are FiberNet’s memorandum in support of its motion for partial summary judgment and the plaintiffs’ response in opposition. 

    If FiberNet prevails on its motion for partial summary judgment, then the bulk of the damage claims disappear, as the plaintiffs would be unable to recover compensatory or punitive damages from FiberNet.  At that point, it seems to me, the need for a class action is questionable, as all of the plaintiffs would be entitled to (and limited to) the same relief from FiberNet, a credit for the lost service. 

    In a separate order, Goodwin has scheduled a hearing on the plaintiffs’ motion for class certification for June 12, 2008. 

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