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

    I think I’m going to avoid predicting how an appellate court will rule in a particular matter, and instead focus on the issues presented.  Yesterday, I wrote that Camden-Clark Memorial Hospital’s petition for appeal from a $1.3 million sanctions award was being considered by the Supreme Court of Appeals, and that I thought that the Court would accept the petition.

    According to the Court's website today, the Court refused the petition by a vote of 5-0.

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    Last spring, the Circuit Court of Wood County, West Virginia awarded $1.3 million in sanctions against Camden-Clark Memorial Hospital and its lawyer for their alleged misconduct before and during the trial of a medical malpractice action (which itself resulted in a verdict of $6.5 million).

    The Supreme Court of Appeals today considered the hospital’s petition for appeal from the sanctions award.  The Court did not have the vote posted on its website by the end of the day, but it should be posted tomorrow.  Here are the hospital’s petition for appeal and the plaintiff’s response in opposition, courtesy of plaintiff's counsel, Chris Regan.

    Even though the Court rejected the hospital’s petition for appeal from the underlying malpractice verdict, I think the Court will accept this petition because of the amount of the award and in order to review the alleged (mis)conduct at issue in the case.  It is rare enough in West Virginia for a trial court to award sanctions, but to do so in this amount is startling.  

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    In an order entered today, the Supreme Court of the United States rejected a request by tobacco companies to get involved in a mass tort action pending in the Circuit Court of Ohio County, West Virginia.   Philip Morris USA, Inc. v. Accord, No. 07-860.

    The tobacco companies had filed a petition for a writ of certiorari from the Supreme Court of Appeals of West Virginia’s November 7, 2007 ruling that denied their request for a writ of prohibition to prohibit the circuit court from proceeding on March 18 with the first phase of a consolidated mass trial.

   The tobacco companies objected to the circuit court's case management plan, and specifically its use of  “reverse bifurcation,” whereby the jury will determine whether, as a group, the plaintiffs are entitled to punitive damages before there has been a finding that any individual plaintiff is entitled to compensation.  A different jury will then determine issues unique to each plaintiff.   Reverse bifurcation has been used in other West Virginia mass tort cases, including asbestos and Fen-Phen litigation.

    Here are The Wall Street Journal’s article on the effect of the Supreme Court’s decision and a post from earlier this month at Akin Gump’s SCOTUSBLOG, which reviewed several petitions scheduled to be reviewed by the Court on February 15, and included PDFs of the parties’ briefs and the amicus briefs.  Philip Morris USA, Inc. is the last petition listed.

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    Last month, following the recusal of Chief Justice Elliott E. “Spike” Maynard, the Supreme Court of Appeals agreed 5-0 to reconsider its reversal of the $50 million verdict against A.T. Massey Coal Company, Inc.   The appeal will be reargued on March 12.  Here are the supplemental briefs filed by Massey, Hugh Caperton, and the Harman companies, and the United Mine Workers of America’s supplemental amicus brief.

    In addition to Chief Justice Maynard, whose recusal was sought by the plaintiffs, Massey had moved to recuse Justice Larry Starcher, who dissented from the Court’s original ruling in November.  Massey’s motion was based on statements made by Justice Starcher, which it alleged demonstrated bias on his part against Massey chairman Don L. Blankenship.  Last Friday, Justice Starcher agreed to recuse himself from further participation in the case.  Here are the Supreme Court’s press release and Justice Starcher’s opinion, and Paul Nyden’s article in the Saturday Gazette-Mail. 

    Justice Starcher also made clear his belief that Justice Brent Benjamin, who last month had rejected the plaintiffs’ request to recuse himself, should still do so in order to protect the integrity of the Court:

I repeat – the pernicious effects of Mr. Blankenship’s bestowal of his personal wealth and friendship have created a cancer in the affairs of this Court.  And I have seen that cancer grow and grow, in ways that I may not fully disclose at this time.  At this point, I believe that my stepping aside in the instant case might be a step in treating that cancer – but only if others as well rise to the challenge.  If they do not, they I shudder to think of the cynicism and disgust that the lawyers, judges, and citizens of this wonderful State will feel about our justice system.

And I reiterate that unless another justice also steps aside in this case, my replacement on the Court will be selected by the justice whose campaign was supported by something close to $4,000,000 from monies that came from one side of the case.  Perhaps, a serious read of the United States Supreme Court case, Aetna Insurance Co. v. Lavoie, 475 U.S. 813, 106 S.Ct. 1580, 89 L.Ed.2d 823 (1986), is in order before such a decision is made.

    I don’t know whether Justice Benjamin read the Aetna decision, but yesterday, he rejected a request that he recuse himself from another appeal involving Massey, and by way of explanation, relied on his refusal last month to recuse himself from the Caperton case.  Here is the Associated Press’ story regarding Justice Benjamin’s refusal to recuse himself.

    Justice Benjamin’s decision not to recuse himself was made in Wheeling-Pittsburgh Steel Corp., et al. v. Central West Virginia Energy Company, et al., Nos. 080182 and 080183, which are the defendants’  appeals from the jury’s verdict of $220 million.  Here are the petitions for appeal filed by CWVEC and Massey.

    In that case, Wheeling Pitt sued Massey and one of its subsidiaries for breach of contract after they refused to deliver a set amount of metallurgical-grade coal to Wheeling-Pitt on a monthly basis.  The jury awarded $119.85 million in compensatory damages and $100 million in punitive damages.  Based on Chief Justice Maynard's feeling that his partiality could reasonably be questioned due to his friendship with Blankenship, he recused himself last month, which Paul Nyden reported in the Charleston Gazette.

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    When I last wrote about West Virginia University’s lawsuit against Rich Rodriguez, its former head football coach, WVU had filed an amended complaint in order to assert a claim for breach of contract based on Rodriguez’s failure to make the first one-third payment of his $4 million buyout by January 18.  Since then, there have been some significant developments in the lawsuit. For simplicity, I will review them in chronological order.

    On January 29, Rodriguez filed a letter of credit for $1.5 million with the Court, presumably to show his good faith in dealing with WVU and also to attempt to satisfy WVU's claim for less than $4 million.  WVU has been adamant that it will not settle for less than the full amount of the buyout, and as the case has developed, nothing has happened to weaken WVU’s position.

    Also on January 29, WVU moved for leave to conduct jurisdictional discovery on the issue of Rodriguez’s residency, in order to defeat the removal of the action to federal court based on Rodriguez’s position that he and his wife established their residency in Michigan prior to WVU filing suit against him in West Virginia state court on December 27, 2007.  WVU had moved to remand the action on January 17 on the grounds that first, it was not a citizen of West Virginia for purposes of diversity jurisdiction and that second, Rodriguez was still a citizen of West Virginia when WVU filed suit.  Here are WVU's motion and memorandum in support.

    On February 1, Rodriguez answered the amended complaint and asserted a counterclaim against WVU and filed a third-party complaint against the West Virginia University Foundation, the fund-raising arm of WVU.  Rodriguez attached as an exhibit another letter of resignation to Ed Pastilong, WVU’s athletic director, dated January 10, 2008, in which he elaborated on his reasons for leaving WVU so abruptly:

On [sic] my resignation letter dated December 18, 2007, I did not list some of the reasons for my resignation.  It was not until I read that lawsuit against me by the West Virginia University Board of Governors did [sic] I realize that I needed to put in writing my reasons that I felt that West Virginia University has material [sic] and substantial [sic] breaches [sic] in [sic] our Agreement.

On February 4, Rodriguez filed his response to the motion to remand, and on February 8, WVU filed its reply.

    United States District Judge John Preston Bailey didn’t waste any time in ruling on the motion to remand, and entered an order on February 11 that granted the motion and denied as moot WVU’s motion to conduct discovery.

    Much to Rodriguez’s chagrin, I imagine, Judge Bailey did not reach the issue of whether Rodriguez had established residency in Michigan by the time he was sued, but focused on WVU's status.  In finding that WVU was an arm or alter ego of the State of West Virginia, which defeated diversity jurisdiction, Judge Bailey acknowledged that “’almost universally’ courts have found that public state universities are ‘arms of the state.’”  Thus, Rodriguez's removal of the suit was improper as the Court did not have jurisdiction.  Judge Bailey denied WVU's motion for attorney's fees and costs against Rodriguez, however, because he found that Rodriguez had a colorable basis for removal and did not remove the action in bad faith. 

    The action is back in the Circuit Court of Monongalia County in Morgantown before Judge Robert B. Stone.  West Virginia University Board of Governors v. Rodriguez, Civil Action No. 07-C-851.

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    Robert Martin used to work for Al Minor & Associates, an actuarial firm in Ohio, as a pension analyst, which gave him access to the firm’s approximately 500 clients.  After working for Minor for four years, Martin started his own company, providing the same type of services as Minor, then resigned a year later without taking any documents containing confidential client information.  But he successfully solicited 15 of Minor’s clients using information that he had memorized.

    Minor sued Martin for misappropriation of trade secrets based on Martin's use of the information he had memorized.  The trial court ruled in favor of Minor, and Martin appealed to the Franklin County Court of Appeals, which affirmed the denial of equitable relief to Minor, but affirmed a verdict in Minor’s favor of $25,973, representing fees not generated from the former clients Martin had solicited based on the information he had memorized while working for Minor. 

    Martin appealed to the Supreme Court of Ohio, which held unanimously this week that “the client information at issue in this case did not lose its status as a trade secret, or the protection of the UTSA, because it had been memorized by a former employee.”   Al Minor & Associates, Inc. v. Martin, 2008 WL 343482 (February 6, 2008).

    The Court rejected Martin’s argument that the memorized information could not constitute a trade secret and that his right to compete was being unfairly infringed, and agreed with Minor that public policy favors the protection of trade secret information, regardless of whether it is written or memorized, and that the analysis should focus on the nature of the information at stake, and not its format.

Information that constitutes a trade secret pursuant to R.C. 1333.61(D) does not lose its character as a trade secret if it has been memorized.  It is the information that is protected by the UTSA, regardless of the manner, mode, or form in which it is stored – whether on paper, in a computer, in one’s memory, or in any other medium.

    The Court was persuaded by the fact that the Ohio legislature had not chosen to distinguish between formats of information, nor had the legislature specifically excluded memorized information from protection under the UTSA.

    West Virginia is among more than 40 states that have adopted the UTSA, and its act is located at West Virginia Code §§ 47-22-1, et seq.  For further reference, here is a discussion of the decision on Womble Carlyle’s Trade Secrets Blog.

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    A Kanawha County (Charleston), West Virginia jury has awarded $5 million in compensatory damages and $20 million in punitive damages to a surgeon who claimed that Charleston Area Medical Center damaged his reputation and improperly revoked his privileges over a dispute about his professional liability coverage.  CAMC has promised to appeal the verdict.  Here are Eric Eyre’s article about the verdict in yesterday’s Charleston Gazette and his article from last week when the trial began.

    The trouble started in 2004 when Dr. R. E. Hamrick, Jr. decided to self-insure his professional liability coverage by placing $1 million in a trust account.  CAMC challenged his right to do so, and revoked his privileges on September 10, 2004.  Hamrick appealed the revocation, and the Supreme Court of Appeals of West Virginia issued a preliminary injunction on September 16, 2004, ordering CAMC to reinstate his privileges, and subsequently entered a standing order that enabled him to continue to care for his patients.

    Hamrick filed suit against CAMC, alleging, inter alia, that it engaged in misconduct regarding his professional liability insurance and damaged his reputation by revoking his privileges.  In 2005, the circuit court ruled that CAMC failed to show that Hamrick’s self-insurance was actuarially unsound or violated the Medical Professional Liability Act, and granted summary judgment in his favor.  The Supreme Court voted 5-0 not to hear CAMC’s appeal.

    In 2006, CAMC changed its policy to allow physicians to insure themselves, and the West Virginia Legislature enacted § 55-7B-12 of the Medical Professional Liability Act, which authorizes a physician to self-insure by establishing an irrevocable trust of not less than $1 million.

    Assuming that the judgment order is entered without too much delay, CAMC's petition for appeal will be considered during the Supreme Court's Fall Term, which starts in September. 

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    In an effort to provide businesses with a more efficient way to resolve their legal disputes, West Virginia House of Delegates Speaker Rick Thompson has asked that the Legislature study during the coming months the creation of a chancery court, with jurisdiction limited to business litigation, such as those in Delaware, Mississippi, Tennessee, and New Jersey.

    In an article by Justin D. Anderson in yesterday’s (Charleston) Daily Mail, Thompson explained that such a court would show businesses that West Virginia is serious about their needs.  He pointed out that three of the four states with chancery courts were in the top 20 in Forbes’ 2007 list of “The Best States for Business.”   Delaware was number 11, Tennessee was number 13, New Jersey was number 19, and the fourth state, Mississippi, was number 43.  West Virginia was number 50, which may explain Thompson’s interest.

    Thompson, who is also chairman of the House Rules Committee, introduced a resolution that would create the interim study in advance of legislation to be introduced next year.  Alternatively, he proposed the use of special masters specializing in business law, who could advise circuit court judges in cases involving business litigation.  The creation of a new court would require a constitutional revision, and thus a statewide election, while the Legislature could authorize the use of business law special masters.

    Anderson's article also noted the Delaware chancery court's well-known role in "setting the parameters of corporate law," as shown, for example, by the 2005 litigation brought by shareholders of the Walt Disney Company as a result of Michael Ovitz's $130 million severance package.  For further reference, there are several excellent blogs that concentrate on Delaware business litigation, including Francis G.X. Pileggi's Delaware Corporate and Commercial Litigation Blog and Morris James LLP's Delaware Business Litigation Report.   

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