I intended to write earlier about Tuesday’s argument before the Supreme Court of Appeals of West Virginia in Caperton v. A. T. Massey Coal Co., which I watched on the Court’s webcast, but better late than never with the post.
The composition of the Court has always been an issue in the case, as shown by former Justices Larry Starcher and Elliott Maynard’s voluntary recusals and the United States Supreme Court’s decision that Chief Justice Brent Benjamin should have recused himself and its reversal of the West Virginia Supreme Court’s decision in favor of Massey. Four of the five justices currently on the Court did not participate in either of the prior appeals, and the one who did, Robin Davis, wrote both of the majority opinions that reversed the $50 million verdict in Caperton’s favor.
In reversing the verdict on two earlier occasions, the Court held that the circuit court should have granted Massey’s motion to dismiss based on the forum-selection clause in the coal services agreement between one of Hugh Caperton’s companies, Sovereign Coal Sales, Inc., and Massey’s subsidiary, Wellmore Coal Corporation, which required any litigation to take place in Buchanan Count, Virginia. Alternatively, if that ruling was not erroneous, the court should have granted Massey’s motion for summary judgment based on the doctrine of res judicata, as a result of the suit brought by Sovereign and another of Caperton’s companies, Harman Mining Corporation against Wellmore in Virginia, which alleged that Wellmore breached the coal services agreement with the plaintiffs, and resulted in a verdict of $6 million.
Not surprisingly, D. C. Offutt, Massey’s counsel, argued that the West Virginia action was barred by res judicata, on the grounds that Massey and its subsidiaries had been subjected to the same case in Virginia and West Virginia because the two actions involved the same parties and the same claims and the plaintiffs sought the same damages in both actions.
Justice Thomas McHugh questioned why Caperton could not bring the West Virginia case if he was not a plaintiff in Virginia. Offutt replied that the West Virginia action sought the same damages as had been recovered in Virginia.
Offutt also argued that all damages in both cases stemmed from Wellmore’s December 1, 2007 declaration of force majeure, which enabled it to cancel its contract with the Harman companies and led soon thereafter to their bankruptcy.
Justice Margaret Workman asked how Caperton could have foreseen that Massey would engage in “various machinations” to put him out of business, to which Offutt repeated that all the claims asserted in West Virginia related to the declaration of force majeure and cancellation of Wellmore’s contract with the Harman companies.
David Fawcett, counsel for the Harman companies, distinguished between the Virginia action, which involved only the companies’ claim for breach of contract, and the West Virginia action, which asserted several torts, but no breach of contract. Fawcett said that in his closing argument, he identified ten acts of interference by Massey with the Harman companies’ business, so that the West Virginia case “was not a simple breach of contract.”
Fawcett also argued that Virginia law would not hold that the plaintiffs’ tortious interference claim and their breach of contract claim were the same claim for res judicata purposes.
Fawcett also claimed that West Virginia in its prior decisions was the first court in the United States to reverse a breach of contract verdict against a non-signatory to a contract on res judicata grounds, and that no other case nationally was on point.
Bruce Stanley, counsel for Caperton individually, argued that Caperton’s primary loss was that after Massey’s interest in buying Caperton’s companies had fallen through as a result of Massey’s own conduct, Caperton found himself on the Office of Surface Mining’s Applicant Violator System, which meant that he was "blacklisted" from the mining industry. Stanley argued that Caperton’s claim arose after the breach of contract litigated in Virginia.
Stanley told the Court that it had to presume that the jury had followed the circuit court’s instruction not to award any damages for breach of contract, which meant that the plaintiffs were not recovering twice for the breach of contract.
In his reply, Offutt told the Court that the modern trend is for courts to adopt forum-selection clauses, but that if it was worried, the claims were also barred by res judicata, which he described as putting “the nail in the coffin.”
The Court will likely issue its decision later in this term. I found the justices’ questioning to be rather cryptic in terms of what they were focusing on, which makes it impossible, I think, to predict how the Court will rule.