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

My thanks to Mack Sperling, who writes the North Carolina Business Litigation Report, for letting me know about the Fourth Circuit’s unpublished decision last week in Cornett Management Co., LLC v. Firemen’s Fund Ins. Co., 2009 WL 1755912 (4th Cir. 2009). Here is the opinion, which addressed whether an insurance coverage exclusion applied to facts that are, to put it mildly, unique.

Cornett, which owns several restaurants, including the Hooters franchise in Charleston, West Virginia, faced claims from two female employees who alleged that in 2001, a store manager called them into his office and told them that a customer had reported a stolen change purse. He then told them that a police officer was on the phone and wanted to talk to them. The voice on the phone directed the women to strip in front of the manager to prove they didn’t have the purse, and told them that they risked arrest if they did not cooperate. So the women took off their clothes in front of the manager.

 Guess what? The call was a hoax. (As an aside, there was a rash of these calls a few years ago, one of which resulted in a multi-million dollar verdict.) But apparently this call was not the only incident against Cornett, as seven female employees, including the two here, alleged sexual harassment and filed suit, described by the court as the Reynolds complaint.

Cornett settled the Reynolds action, and Lexington Insurance Company paid its policy limits for Cornett’s defense and settlement costs. Cornett then made a claim under its commercial general liability policy with Firemen’s Fund.

Cornett’s suit against Firemen’s Fund was removed to the United States District Court for the Northern District of West Virginia, which granted Firemen’s motion for summary judgment on the grounds that the “employment-related practices exclusion [ERP]” in its policy provided no coverage for personal injury arising out of any “employment-related practices, policies, acts or omissions” and applied to the Reynolds action against Cornett.

On appeal, Cornett argued first that it had no practice or policy of strip-searching its employees, which rendered the exclusion inapplicable. In its per curiam opinion, the court dispensed with that argument quickly, and noted that the exclusion also applied to employment-related “acts or omissions,” which is what the Reynolds plaintiffs alleged.

Cornett’s second argument was that the provision was ambiguous and to be construed against Firemen’s Fund. This argument required the court “to determine what types of acts the policy meant to exclude from coverage when it listed ‘[c]oercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or other employment-related … acts.’”

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Apparently, I could go only one day without another post related to the Supreme Court's decision in Caperton v. A. T. Massey Coal Company. But the Supreme Court of Appeals of West Virginia yesterday resolved the question of who will replace Chief Justice Brent Benjamin when the Court hears the appeal in the fall.

In an administrative order entered yesterday by Justice Robin Jean Davis, acting as chief due to Chief Justice Benjamin's recusal, she appointed Senior Status Judge James O. Holliday, who retired from the Circuit Court of Putnam County, as Benjamin's replacement. Paul Nyden reviews Judge Holliday's prior service on the Supreme Court in the Charleston Gazette. 

Justice Davis entered a second administrative order yesterday that terminated the service of Hampshire County Circuit Court Judge Donald H. Cookman and Marion County Circuit Judge Fred L. Fox, II, who had been appointed to replace former Justices Elliott E. "Spike" Maynard and Larry V. Starcher, respectively, when the Court heard the appeal for the second time. Justices Maynard and Starcher are no longer on the Court.

According to Rule 45 of the Rules of the Supreme Court of the United States, the Court will issue its mandate 25 days after entry of the judgment, in case any party files a petition for rehearing. Assuming no petition is filed, the mandate will issue on July 3.

The appeal will be heard for the third time during the Supreme Court of Appeals' Fall Term, which begins on September 2. 

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The Supreme Court’s decision in Massey v. A. T. Massey Coal Company has occupied my attention so far this week, but today I want to look at a decision issued earlier this month by the United States Court of Appeals for the Sixth Circuit.

Eric Thompson and his then-fiancé, Miriam Regalado, worked together at North American Stainless. Regalado filed a charge with the Equal Employment Opportunity Commission alleging that the company had discriminated against her because of her gender. A few months later, the company terminated Thompson allegedly for performance-based reasons, although he alleged that it was in retaliation for Regalado‘s EEOC charge.  In other words, if the company couldn’t terminate her, it would terminate him to get back at her.

Title VII of the Civil Rights Act of 1964 prohibits retaliation against employees where the employee has opposed any practice that is an unlawful employment practice (such as gender discrimination) or has testified, assisted in or participated in an investigation, proceeding or hearing.

Thompson filed suit, and the district court granted the company’s motion for summary judgment and found that he did not state a claim under either Title VII’s anti-discrimination provision or its anti-retaliation provision.

He appealed, and last year, a three-judge panel from the Sixth Circuit held 2-1 that Title VII prohibit employers from retaliating against employees who are not directly involved in protected activity, but who are so closely related to or associated with those who are directly involved that it is clear that the protected activity motivated the employer’s action. Thompson v. North American Stainless, LP, 520 F.3d 644 (6th Cir. 2008).

North American Stainless petitioned the Sixth Circuit for rehearing en banc, and the court granted the petition and vacated the panel’s decision.   

Following its en banc reconsideration, the court held 10-6 in Thompson v. North American Stainless, LP¸ 2009 WL 1563443 (6th  Cir. 2009), that § 704(a) of Title VII of the Civil Rights Act does not create a cause of action for third-party retaliation for persons who have not personally engaged in protected activity. Only those persons who have personally engaged in protected activity by opposing a practice, making a charge or assisting or participating in an investigation may maintain a claim.

Thompson did not claim that he had personally engaged in any protected activity, but that he was terminated in retaliation for Regalado’s EEOC charge.

The majority opinion for the en banc decision was written by Judge Richard Allen Griffin, who dissented from the three-judge panel’s decision that held for Thompson.

The majority stated that by adopting Thompson’s position, the court would have become “the first circuit court to hold that Title VII creates a cause of action for third-party retaliation on behalf of friends and family members who have not engaged in protected activity[,]”  which the court declined to do. 

The majority pointed out that the Third, Fifth, and Eighth Circuits have previously considered and rejected similar third-party retaliation claims, which seemed to influence its view.  

Here are an article by Tresa Baldas about the decision in yesterday's National Law Journal, as well as Bob Ambrogi's post today in Legal Blog Watch.

Baldas' article points out that the Seventh and Eleventh Circuits have extended protection from retaliation to third parties, a fact also noted by Judge Karen Nelson Moore in her dissent (which was one of three separate dissents). 

It doesn't  appear that the Fourth Circuit has ruled on a retaliation-by-association claim.

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There are a few more items I want to mention today about the Supreme Court’s decision in Caperton v. A. T. Massey Coal Company. The first is a personal statement released by Don L. Blankenship, the chairman of Massey Energy Co., and the person whose 2004 campaign contributions on behalf of Brent Benjamin created the conflict that culminated in the Court’s decision on Monday.

Blankenship’s statement is not on Massey’s website and apparently does not represent Massey’s official reaction to the decision. Massey’s statement released on Monday quotes only Shane Harvey, Massey’s general counsel and vice-president, and is far more measured than Blankenship’s.

Blankenship’s statement is his attempt to justify his substantial financial support on behalf of Justice Benjamin, even though the highest court in the country just held that his support objectively required Justice Benjamin to recuse himself from Caperton, and that Justice Benjamin's failure to due so denied Hugh Caperton and his companies due process under the United States Constitution. I guess if I were in Blankenship’s position, I’d issue a statement that was as unapologetic and arrogant as the motive behind the contributions that were at the heart of the situation.

Of more interest and, I think, far more value is this interview on The BLT: The Blog of Legal Times with Thomas R. Phillips, retired Chief Justice of the Supreme Court of Texas, and an author of an amicus brief in Caperton on behalf of the conference of chief justices in support of neither party.

I encourage you to read his entire interview, which is brief, but this is his analysis of the decision:

Caperton established a principle that is really important: There are constitutional concerns with a judge sitting in judgment of a case where a party is a significant donor. At some point, the support becomes so substantial and so overwhelming that due process requires the judge to step aside, even if neither the donor not [sic] the judge did anything illegal or even unethical.

(Emphasis added.)

He identifies six criteria in Caperton that must be satisfied in order to establish a violation of a party’s due process and contends that its holding is so narrow that, “I’m not sure Caperton will ever be direct precedent for another recusal.”

Finally, here’s a post from Daily Kos that’s getting quite a bit of traction around the Internet. Its title is a reference to John Grisham’s novel, The Appeal, which, by sheer coincidence, I finished reading about 2 a.m. Monday morning.

As you may be aware, when the book came out last year, Grisham stated that the story wasn't far-fetched and had already happened in West Virginia, which, allowing for some poetic license in the novel, is accurate.

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There has been so much reaction and commentary about the Supreme Court’s decision yesterday in Caperton v. A. T. Massey Coal Company that it is hard to know where to begin.

First, I want to discuss the dissents, which I did not do in my post yesterday  because I wanted to focus on Justice Kennedy’s opinion.

Chief Justice Roberts wrote a dissent in which Justices Scalia, Thomas, and Alito joined. He criticized the majority opinion for

enlist[ing] the Due Process Clause to overturn a judge’s failure to recuse because of a "probability of bias." Unlike the established grounds for disqualification, a "probability of bias" cannot be defined in any limited way. The Court’s new "rule" provides no guidance to judges and litigants about when recusal will be constitutionally required. This will inevitably lead to an increase in allegations that judges are biased, however groundless those charges may be. The end result will do far more to erode public confidence in judicial impartiality than an isolated failure to recuse in a particular case.

(Emphasis added.)

He also identified 40 “fundamental questions” that courts will now have to determine “with little help from the majority,” such as:

1. How much money is too much money? What level or contribution or expenditure gives rise to a ‘probability of bias’?

6. Does the analysis change depending on whether the judge whose disqualification is sought sits on a trial court, appeals court, or state supreme court?

8. What if the “disproportionately’ large expenditure is made by an industry association, trade union, physicians’ group, or the plaintiffs’ bar? Must the judge recuse in all cases that affect the association’s interests? Must the judge recuse in all cases in which a party or lawyer is a member of that group? Does it matter how much the litigant contributed to the association?

13. Must the judge’s vote be outcome determinative in order for his non-recusal to constitute a due process violation?

21. Does close personal friendship between a judge and a party or lawyer now give rise to a probability of bias?

24. Under the majority’s ‘objective’ test, do we analyze the due process issue through the lens of a reasonable person, a reasonable lawyer, or a reasonable judge?

35. What is the proper remedy? After a successful Caperton motion, must the parties start from scratch before the lower courts? Is any part of the lower court judgment retained?

Chief Justice Roberts also looked at two of the Court’s decisions in cases involving double jeopardy (United States v. Halper, 490 U.S. 435 (1989) and Hudson v. United States, 522 U.S. 93 (1997)), and drew a comparison with the Court’s holding in Caperton, saying that,

The déjà vu is enough to make one swoon. Today, the majority again departs from a clear, longstanding constitutional rule to accommodate an ‘extreme’ case involving ‘grossly disproportionate’ amounts of money. I believe we will come to regret this decision as well, when courts are forced to deal with a wide variety of Caperton motions, each proclaiming the title of "most extreme" or "most disproportionate.

(Emphasis added.)

He also pointed out that, “Justice Benjamin just might have won because the voters of West Virginia thought he would be a better judge than his opponent. Unlike the majority, I cannot say with any degree of certainty that Blankenship ‘cho[se] the judge in his own cause.' Ante, at 16. I would give the voters of West Virginia more credit than that.”

(Emphasis added.)

Justice Scalia also dissented separately, and predicted that the Court’s decision would have the effect of reinforcing the perception that “litigation is just a game, that the party with the most resourceful lawyer can play it to win, that our seemingly interminable legal proceedings are wonderfully self-perpetuating but incapable of delivering real-world justice.” He also predicted that the opinion would add to “the vast arsenal of lawyerly gambits what will come to be known as the Caperton claim.”

Yesterday, Chief Justice Benjamin issued this statement regarding the decision, which was written on his official letterhead and posted on the Supreme Court of Appeals’ website, but was described as “personal” and “not a release of the Supreme Court of Appeals of West Virginia.”

For coverage of the decision, let me start with Paul Nyden’s article in today’s Charleston Gazette, and Jake Stump’s article in today’s Daily Mail. Nyden also wrote an interesting sidebar about who will preside as chief justice when Chief Justice Benjamin recuses himself. I think it will be Justice Robin Davis, as she has the most seniority, but apparently no one from the Court is willing to go on the record at this point.

What is most interesting is that when the Court hears this appeal again, probably during its term that starts in September, Justice Davis, who wrote both of the previous majority opinions, will be the only member who has considered the appeal. Justices Margaret Workman and Menis Ketchum were elected last November and Justice Thomas McHugh was appointed to serve the remainder of Justice Albright's term through 2010. And the acting chief justice must appoint a replacement for Chief Justice Benjamin. So how the Court will rule for the third, and presumably last, time is very much open.

For a sampling of commentary and analysis, Tony Mauro has this article on The National Law Journal 's website; on The BLT ,he has this post about Chief Justice Roberts’ connection to United States v. Halper, one of the double jeopardy cases cited in his dissent.

Carolyn Elefant of Legal Blog Watch wrote this post yesterday about the decision, with links to Mauro, Lyle Dennis at SCOTUSBlog, and George Washington University Law Professor Jonathan Turley.  Also, here is some analysis from the Constitutional Prof Law Blog.

For a couple of different takes on the decision, here are Dahlia Lithwick's "The Great Caperton Caper" on Slate and a post from Balkinization. 

And from blogs that focus on appellate litigation, here are Todd Smith's post at Texas Appellate Law Blog, which questions the effect of the decision on Texas courts, whose members are elected, and a post from Alabama Appellate Watch, which is written by Lightfoot Franklin White LLC.  

Finally, I think there have been as many editorials as there have been news articles and blog posts about the decision. But for your consideration, here is The New York Times' editorial today entitled "Honest Justice" and The Wall Street Journal's editorial entitled "Judges and 'Bias.'" I'll leave it to you to figure out what each paper thought about the decision.

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The Supreme Court of the United States issued its opinion today in Caperton v. Massey and in a 5-4 decision held that the Due Process Clause of the Fourteenth Amendment required Supreme Court of Appeals of West Virginia Chief Justice Brent Benjamin to recuse himself from Caperton's appeal and reversed the Supreme Court of Appeals' decision in Massey's favor and remanded the case for further proceedings. 

The opinion by Justice Anthony Kennedy noted that the majority "do not question his [Justice Benjamin's subjective findings of impartiality and propriety. Nor do we determine whether there was actual bias."

But the Court found that the "difficulties of inquiring into actual bias ... simply underscore the need for objective rules":

Not every campaign contribution by a litigant or attorney creates a probability of bias that requires a judge's recusal, but this is an exceptional case... We conclude that there is a serious risk of actual bias -- based on objective and reasonable perceptions -- when a person with a personal stake in a particular case has had a significant and disproportionate influence in placing the judge on the case by raising funds or directing the judge's election campaign when the case was pending or imminent. The inquiry centers on the contribution's relative size in comparison to the total amount of money contributed to the campaign, the total amount spent in the election, and the apparent effect such contribution had on the outcome of the election.

(Emphasis added.)

The Court concluded, based on the application of the principle, that:

... Blankenship's campaign efforts had a significant and disproportionate influence in placing Justice Benjamin on the case. Blankenship contributed some $3 million to unseat the incumbent and replace him with Benjamin. His contributions eclipsed the total amount spent by all other Benjamin supporters and exceeded by 300% the amount spent by Benjamin's campaign committee. App. 288a. Caperton claims Blankenship spent $1 million more than the total amount spent by the campaign committees of both candidates combined. Brief for Petitioners 28.

(Emphasis added.)

The Court rejected Massey's argument that ultimately West Virginia voters elected Justice Benjamin to the Court, stating that, "[w]hether Blankenship's campaign contributions were a necessary and sufficient cause of Benjamin's victory is not the proper inquiry. Much like determining whether a judge is actually biased, proving what ultimately drives the electorate to choose a particular candidate is a difficult endeavor, not likely to lend itself to a certain conclusion."

The Court also focused on the "temporal relationship between the campaign contributions, the justice election, and the pendency of the case...", meaning the the winner of the election would be on the Court when it reviewed the $50 million verdict:

Although there is no allegation of a quid pro quo agreement, the fact remains that Blankenship's extraordinary contributions were made at a time when he had a vested stake in the outcome. Just as no man is allowed to be a judge in his own cause, similar fears of bias can arise when -- without the consent of the other parties -- a man chooses the judge in his own cause. And applying this principle to the judicial election process, there was here a serious, objective risk of actual bias that required Justice Benjamin's recusal.

(Emphasis added.)

In describing this as "an extraordinary situation where the Constitution requires recusal," the majority opinion also rejected Massey and its amici's prediction that finding a constitutional violation in this case would result in various adverse consequences, "ranging from a flood of recusal motions to unnecessary interference with judicial elections." 

The Court found that almost every state, including West Virginia, had adopted the American Bar Association's objective standard that "a judge shall avoid impropriety and the appearance of impropriety," and also noted that the West Virginia Code of Judicial Conduct required a judge's recusal in similar circumstances.

Chief Justice John Roberts wrote a dissent in which Justices Scalia, Thomas, and Alito joined, and Justice Scalia also dissented separately.

I'll write some more about the decision, but I wanted to provide the opinion right now.  For some additional reaction, here is SCOTUSBlog's initial post  and David Stout's article in The New York Times.

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The United States Supreme Court’s recent decision in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009), dealt with a detainee’s claims that he had been discriminated against and treated harshly during his detention. But the Supreme Court dismissed his complaint for failure to state sufficient facts to support his claims against former Attorney General John Ashcroft and FBI Director Robert S. Mueller, III.

For background on the case, here is SCOTUSBlog's analysis of the decision and its effect on future claims that attempt to impose liability on high-ranking officials for the conduct of their subordinates.

Even though Iqbal's facts are unique, I am interested in it because of its language that is troublesome to plaintiffs in federal lawsuits in general.

According to Tony Mauro, who wrote last month about the decision in The National Law Journal, Iqbal “could make it significantly harder for plaintiffs in a broad range of cases to survive defendants’ motions to dismiss….”

The reason is that the opinion appears to expand on the Supreme Court’s 2007 decision in Bell Atlantic Corp. v. Twombly, 550 U.S.544 (2007), which held that initial pleadings must state a claim that is “plausible on its face,” a change from Conley v. Gibson, 355 U.S. 41 (1957), which had interpreted Rule 12(b)(6) of the Federal Rules of Civil Procedure to require dismissal of a complaint only if the plaintiff could prove “no set of facts” that would entitle him or her to relief. Because Twombly had arisen in an action alleging violations of the Sherman Act, practitioners questioned whether the holding applied outside of antitrust litigation.

But Iqbal, which, like Twombly, was written by Justice Anthony Kennedy, makes clear that it applies far beyond antitrust cases, and, according to Alan Morrison, incoming dean and professor of law at George Washington University Law School, “is an invitation to raise a Twombly issue in every case.” 

I have not read Iqbal’s complaint, but according to Mauro’s article, it was extremely detailed and should have been able to withstand the motion to dismiss. As a practical matter, plaintiffs often do not have access to a lot of information when they file suit, which requires them to make “bare-bones” allegations in their complaints. Iqbal increases the possibility of dismissal due to their lack of detail. 

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My thanks to Mack Sperling, who writes the North Carolina Business Litigation Report, for directing me earlier this month to a Fourth Circuit decision, which involves a dispute over a  physician’s practice privileges and the Health Care Quality Improvement Act of 1986.  Wahi v. Charleston Area Medical Center, Inc., 2009 WL 962310 (4th Cir. 2009).

Fellow Charleston blogger Bob Coffield, author of the Health Care Law Blog, wrote this thorough analysis of the decision,  As Bob explains, this decision makes several points that should be of particular interest to lawyers who represent hospitals and others involved in the peer-review process. 

Bob's firm represented the hospital in the appeal, and Kenneth W. Starr, former solicitor general and current dean of the Pepperdine University School of Law, argued on behalf of Dr. Wahi. 

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Philip Morris must have thought that April Fool's Day came one day early when the Supreme Court yesterday issued its opinion in Philip Morris USA v. Williams, (No. 07-1216) and dismissed as "improvidently granted" the appeal that was granted last June and argued in December.  Philip Morris was appealing a punitive damages verdict of $79.5 million that was returned by an Oregon jury in 1999 on behalf of the widow of a smoker who died of lung cancer in 1997.  The jury also had awarded compensatory damages of $821,485.50, which were reduced to $521,485 under a state law capping wrongful death damages.  With accrued interest, the verdict has grown to $150 million.

The business community had hoped that the Court would use the case to be more explicit about the permissible ratio of punitive damages to compensatory damages.  The Court had stated in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003), that, "in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process[,]" and with a ratio of 97-1, the case seemed to present an ideal opportunity for the Court to refine its holding in State Farm.

Here is SCOTUSBlog's analysis of the Court's decision, with a discussion of the case's procedural background: this was its third time before the Supreme Court.

Howard Bashman, who writes How Appealing, has a round-up of news articles about the decision, and Philip Thomas, who writes the MIssissippi Litigation Review and Commentary blog, weighed in yesterday with this post about the case.

Both Bashman and Thomas (in his post today) linked to an article by Bloomberg.com writer Greg Stohr about the business community's disappointing record before the Court during this term.  Stohr points to the decisions in Altria Group, Inc. v. Good, 129 S.Ct. 538 (2008) and Wyeth v. Levine, 129 S.Ct. 1187 (2009), and yesterday's decision in Philip Morris USA as demonstrating that businesses don't always prevail before a court that has pro-business tendencies.

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I am indebted to Roy Harmon, who writes Health Plan Law, for his explanation of the basis for the Fourth Circuit’s opinion in Martine v. Hertz Corp., 103 F.3d 118 (4th Cir. 1996), which held that West Virginia’s Public Employees Insurance Agency (PEIA) had no right of subrogation against a verdict obtained by its insured for personal injuries.

In his dissent in Turner ex rel. Turner v. Turner, Justice Larry Starcher had suggested that Martine held that ERISA does not preempt West Virginia’s made-whole doctrine.

As I noted in my post about the dissent, the Fourth Circuit did not explicitly hold that ERISA does not preempt the made-whole doctrine in West Virginia.  But, as Roy explained in a post at ERISABoard, the PEIA is a governmental plan and therefore exempt from coverage under ERISA.  So, the Martine Court would have had no need to discuss, much less apply, ERISA or whether ERISA barred the made-whole doctrine. 

Although Justice Starcher disagrees with the majority’s decision in Turner, while conceding that it was "technically correct," his opinion illustrates what happens often when state courts delve into ERISA issues.

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I’ve been writing quite a bit lately about cases dealing with ERISA, and the dissent filed by Justice Larry Starcher in Turner ex rel. Turner v. Turner, 2008 WL 5449773 (December 15, 2008), provides an opportunity to discuss a potentially significant issue.   

As you may recall, in Turner, which I wrote about last week, the Supreme Court of Appeals of West Virginia held that a subrogation action by an ERISA plan fiduciary or administrator has to be filed in federal court and cannot be adjudicated as part of an underlying personal injury action.

In his dissent, Justice Starcher, who left the Court on December 31, 2008 after he did not run for reelection, questioned whether the “made-whole” doctrine would preclude City Hospital from recovering for the medical expenses paid on behalf of its employee’s children.  Justice Starcher wrote that, “[i]n West Virginia, the ‘made whole doctrine’ stops an insurance company from gobbling up a plaintiff’s entire settlement under the rubric of ‘subrogation’ if the settlement is insufficient to fully compensate the plaintiff’s past and future losses.”

He then went on to write that, “[m]ost importantly, a per curiam opinion from the Fourth Circuit Court of Appeals indicates that West Virginia’s made whole doctrine is not preempted by ERISA.  See Martine v. Hertz Corp., 103 F.3d 118 (4th Cir. 1996)."

Unfortunately, the dissent in Turner does not expand on that issue. 

In  Martine, USB, the claims administrator for the West Virginia Public Employees Insurance Agency (PEIA), appealed the dismissal of its subrogation claim created by PEIA's payment of more than $124,000 in medical expenses incurred by Martine, who had been involved in an accident with another driver who had rented a car from Hertz. 

USB moved to intervene in the action, which the district court permitted.  Following a four-day trial, but before the jury announced its verdict, Martine moved to dismiss USB's complaint on the grounds that he would not be made whole because the tortfeasor had insufficient assets to satisfy a probable judgment. 

The jury's verdict of $650,000 included $36,800 for past medical expenses and $5,000 for future medical bills.  In granting Martine's motion, the district court relied on the Supreme Court of Appeals of West Virginia's decision in Kittle v. Icard, 405 S.E.2d 456 (W. Va. 1991) and concluded that because Martine would not be made whole by the amount he could collect, USB was not entitled to subrogation.  USB appealed.

The Fourth Circuit noted initially that the West Virginia Code gave PEIA a statutory right to subrogation, and that the Supreme Court of Appeals had held that subrogation clauses in insurance contracts are valid and enforceable.

USB argued that Kittle did not apply because its right to subrogation was contractual, while the insurer in Kittle had only a statutory right, and cited a case from the Tenth Circuit Court of Appeals that rejected the made-whole doctrine when an insurance contract unambiguously provided the insurer with subrogation rights if its insured obtained a settlement or verdict.

The Fourth Circuit disagreed because "Kittle defines subrogation in such a way as to require that equity be considered whenever an insurer invokes its right."   Here is the Court's explanation for why equitable principles did not entitle USB to subrogation at least in the amount awarded by the jury for medical expenses:

The district court determined that the West Virginia Supreme Court's pronouncements in Kittle and [State ex rel. Allstate Ins. Co. v.] Karl, supra, defined equity as per se denying insurers any recovery when insureds were not fully compensated by a settlement or judgment.  And, noting that Martine received less than one-sixth of the amount to which he was entitled and would be further undercompensated for his injuries if USB were entitled to subrogation the district court held that even aside from any per se rule, the equities favor Martine over USB.  We find no abuse of discretion or legal error in that conclusion.

This is an interesting issue.  Martine does not explicitly hold that ERISA does not preempt the made-whole doctrine in West Virginia.  But the opinion did address the presence of subrogation language in insurance policies, which would be akin to the subrogation language or anti-made-whole doctrine language present in a summary plan description, such as City Hospital's in Turner, and found that Kittle's definition of subrogation required equity to be considered.  

I would like to know if anyone has relied on Kittle or Martine successfully to defeat a health plan's subrogation claim.  The majority opinion in Turner does not cite either case -- but the opinion did not seem interested in expanding the Turners' options for challenging City Hospital's subrogation interest.  

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It seems fitting to end the year with a post about the appeal in Caperton v. A. T. Massey Coal Company, Inc., which promises to stay in the headlines in 2009, with oral arguments scheduled for March 3. 

Here is the petitioners’ merits brief (courtesy of petitioners’ counsel Bruce Stanley), which was filed on Monday, and presents the following question for the Supreme Court’s consideration:

Justice Brent Benjamin of the Supreme Court of Appeals of West Virginia refused to recuse himself from the appeal of the $50 million jury verdict in this case, even though the CEO of the lead defendant spent $3 million supporting his campaign for a seat on the court – more than 60% of the total amount spent to support Justice Benjamin’s campaign – while preparing to appeal the verdict against his company.  After winning election to the court, Justice Benjamin cast the deciding vote in the court’s 3-2 decision overturning that verdict.  The question presented is whether Justice Benjamin’s failure to recuse himself from participation in his principal financial supporter’s case violated the Due Process Clause of the Fourteenth Amendment. 

Paul Nyden wrote about the brief and cited some other excerpts in today’s Charleston Gazette.  According to his article, amicus briefs in support of the petitioners are due by January 5, Massey’s merits brief is due by January 28, and amicus briefs supporting its position are due by February 4.  I’ll post the briefs as they are filed.

Happy New Year to everyone!

 

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I hope everyone is enjoying their holidays.  I haven’t written in the past few weeks due to a death in my family, but I’m back in my office and resuming work, including catching up on decisions and developments.  The Supreme Court of Appeals of West Virginia’s Fall Term ended on December 10, so I’ll be writing about some of its opinions in the next few days.  By the way, the Court’s Spring Term starts on January 13, with the first argument docket that day.

The first opinion I want to write about is Turner ex rel. Turner v. Turner, 2008 WL 5273080 (December 15, 2008), a 4-1 decision by Chief Justice Elliott E. "Spike" Maynard, which was one of the last opinions issued for the term.

Turner is unique because it’s a state court appellate decision dealing with ERISA, which ordinarily and almost exclusively is adjudicated in federal court. 

In Turner, City Hospital, Inc. moved to intervene in the settlement of personal injury claims asserted on behalf of the minor children of City Hospital’s employee, Diane Turner.  City Hospital's health plan had paid most of the children’s medical expenses.  The settlement provided that Diane Turner agreed to waive her interest in the settlements and settle the claims within policy limits as long as the Circuit Court of Berkeley County precluded City Hospital from asserting a lien on the settlement proceeds that was inconsistent with West Virginia law.

Not surprisingly, City Hospital objected to the settlements and challenged the circuit court’s jurisdiction to consider the petitions for approval of the settlements because ERISA governed City Hospital’s health plan's claims.

The circuit court concluded that it had jurisdiction to approve or reject the proposed settlements, but did not have jurisdiction to decide the issue of City Hospital’s lien, based on its request for what was essentially equitable relief, which was governed by 29 U.S.C. § 1132(e)(1).  Diane Turner appealed that ruling on behalf of herself and her minor children.

There was a preliminary issue of whether the circuit court’s order was a final order for purposes of prosecuting an appeal, which is not germane to the resolution of the ERISA issue.  The Supreme Court concluded that the order “had the nature and effect of ending the litigation between the appellants and City Hospital with regard to City Hospital’s reimbursement/subrogation claim[,]” and could be appealed.

The more significant issue, as identified by the Court, was “whether the circuit court properly determined that it does not have jurisdiction pursuant to ERISA to decide, limit, or enforce City Hospital’s employee health plan’s subrogation rights to the proposed minor settlements submitted on behalf of Dylan, Rhiannon, and Ronan Turner.”

The Court first distinguished between ordinary preemption and complete preemption.  Because the circuit court did not find that the issue was preempted under § 1144(a) (ordinary preemption), the Court analyzed the issue under § 1132(e)(1) and controlling federal precedents.  The Court concluded:

Based on the clear language of § 1132(a)(3) in conjunction with § 1132(e)(1), and the Supreme Court’s application of these provisions, this Court now holds that an action by a fiduciary or administrator of a plan under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., to obtain appropriate equitable relief to enforce the terms the ERISA plan pursuant to 29 U.S.C. § 1132(a)(3), must be brought in the federal courts of the United States as provided for in 29 U.S.C. § 1132(e)(1).

The Court’s holding, which was incorporated in new Syllabus Point 3, left the remaining issue of whether City Hospital’s claim had to be brought under § 1132(a)(3).  The Court looked to the Supreme Court's decision in Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006), which presented a situation similar to Turner, i.e., "a fiduciary seeking reimbursements for amounts an ERISA health plan paid for the medical expenses of beneficiaries, who were injured in an automobile accident, from proceeds of the beneficiaries' settlement with the tortfeasors."

Guided by Sereboff, the Court found that the relief sought by City Hospital -- reimbursement for expenses paid on behalf of its plan's beneficiaries -- is the type provided for in § 1132(a)(3), which meant that a claim in state court arising from City Hospital's plan's subrogation/reimbursement would duplicate a § 1132(a)(3) action, which must be brought in federal court.

The Court did not devote any consideration to the Turners' arguments that the circuit court had jurisdiction, with one exception: the Turners asserted that, assuming approval of the settlements, the funds would not be paid to Diane Turner, but would be held in trust for her children.  Thus, the funds would never be available to her and could not be the subject of a claim by City Hospital under § 1132(a)(3).

The Court noted that City Hospital acknowledged that it could not seek proceeds that had not been paid to Diane Turner, but found that City Hospital's request that the circuit court preserve the funds in a separate account while City Hospital pursued an action in federal court addressed that concern.  Plus, West Virginia Code § 44-10-14(g) would prevent settlement funds from being transferred to minors' trust accounts in a way that liens, such as City Hospital's, would not be satisfied.

I question, as did Rob Hoskins at ERISABoard, why City Hospital didn't go ahead and file an action in federal court in order to assert its lien(s) against the Turner children's settlement proceeds, which may have mooted some or all of this action.  I also agree with him that in certain circumstances, a plan or its fiduciary can have state law claims that are not preempted.  But Turner makes clear that a plan fiduciary's action to obtain equitable relief under 29 U.S.C. § 1132(a)(3) must be filed in federal court.

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Earlier this month, the Supreme Court of Appeals of West Virginia issued its opinion in Certain Underwriters at Lloyd’s, London, Subscribing To Policy No. B0711 v. PinnOak Resources, LLC, 2008 WL 4867663 (W. Va., November 6, 2008).  The Court described the facts of the dispute before it as “straightforward,” but its per curiam opinion is hardly a model of clarity.  I think the facts, at least as recited in the opinion, are confusing and not clearly explained.  So with that caveat, here is what was at issue.

Lloyd’s was one of several insurers that provided PinnOak Resources, LLC with a total of $75 million in property insurance coverage.  In 2003, PinnOak’s Pinnacle Mine experienced methane ignitions.  In 2004, PinnOak sued its insurers, including Lloyd’s, to recover for its property loss.  PinnOak alleged that Lloyd’s breached its insurance agreements and engaged in bad faith in handling PinnOak’s claim.

PinnOak settled with its insurers in 2004 and 2005, and finally settled with Lloyd’s in 2006, at which time PinnOak and Lloyd’s entered into a “global settlement agreement and release” and Lloyd’s paid its share of the $56 million settlement.

Here’s where it gets complicated.  While PinnOak and Lloyd’s were litigating, Lloyd’s agreed to further insure PinnOak.  The policy originally ran from June 30, 2004 to June 30, 2005 for an up-front premium of $5 million, but PinnOak’s cash flow prevented it from accepting those terms. 

The parties then agreed that the policy would run from June 30, 2004 until June 30, 2009 and would have an annual premium of $375,000, in addition to five annual payments of $1,250,000, which would be deferred until the parties resolved the August 2003 loss.  If the policy was not renewed, the entire amount would be due in full.  Lloyd’s claimed that PinnOak recommended this provision when it realized that it would not have positive cash flow until the 2003 loss claim settled.

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In an eagerly awaited decision, the Supreme Court of the United States today granted the petition for a writ of certiorari filed by Hugh Caperton and Harman Mining from the Supreme Court of Appeals of West Virginia’s reversal of a $50 million verdict in their favor.  Here is the Court's order, which included decisions on cert petitions in several cases.

Harman and Caperton alleged that Supreme Court of Appeals Justice Brent Benjamin’s refusal to recuse himself from the case, in which A. T. Massey Coal Company was a defendant, deprived them of a fair and impartial tribunal. 

In Justice Benjamin’s 2004 campaign, Massey chairman Don Blankenship played a pivotal role by personally spending $3 million on behalf of an organization that directly or indirectly benefited Justice Benjamin.

Here are Caperton and Harman's petition for the writ, Massey's response in opposition, and amicus briefs submitted on behalf of Caperton and Harman by the American Bar Association, Public Citizen, and the Washington Appellate Lawyers Association, all courtesy of plaintiffs’ counsel Bruce Stanley.

The appeal has focused attention on the issue of contributions in judicial elections.  The New York Times published an editorial yesterday, entitled "Tainted Justice", in which in which it urged the Court to accept the petition and questioned why the Court had taken so long to make a decision.  According to the Court's docket, the petition had been considered on four prior occasions before today.

Bloomberg.com , Dow Jones Newswire, and The Charleston Gazette have written stories today on the Court's decision to accept the petition..

In the Sunday Gazette-Mail on November 9, Paul J. Nyden wrote about the Court's ongoing consideration of the petition and discussed other media outlets that had urged the Court to accept the appeal.   

Finally, here are some posts I've written about the case when Caperton hired former Solicitor General Ted Olson to prosecute the Supreme Court appeal,  the Supreme Court of Appeals reversed Caperton's verdict for a second time, and Justice Benjamin refused to recuse himself from the case.

 

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The doctrine of res judicata or claim preclusion can trip up an unwary plaintiff, as illustrated by a recent decision from the Supreme Court of Appeals of West Virginia.

In Beahm v. 7-Eleven, Inc., 2008 WL 4386838 (W. Va., September 26, 2008), the plaintiffs appealed from summary judgment in the defendants’ favor.  The underlying tort was a leak from an underground storage tank at a 7-Eleven gas station in January 2000.  Originally, eight property owners filed suit based on the leak, which they claimed contaminated their property starting in February 2000. They filed their action in state court, but it was removed to federal court based on diversity between the parties. Proctor v. 7-Eleven, Inc., Civil Action No. 3:02-CV-0021 (N. D. W. Va. 2002) 

The Proctor plaintiffs tried to add the Beahms as plaintiffs in December 2002 based on a continuing tort theory, but in February 2003, the district court denied the motion to add the Beahms and two other plaintiffs on the grounds the statute of limitations had expired.  The Fourth Circuit Court of Appeals denied the proposed plaintiffs’ extraordinary writ of mandamus.

The Beahms filed their own suit in state court on January 24, 2003 against 7-Eleven and Melissa Spinks, a non-diverse defendant.  The Beahms’ action proceeded concurrently with the Proctor action until the state court entered a stay pending the outcome in Proctor, as the two actions involved identical questions of fact and law and involved the same types of claims, issues, parties, lawyers, and experts.

On April 26, 2005, the district court in Proctor granted the defendants’ motion for summary judgment on the grounds that the plaintiffs had not sustained any recoverable damages.  The plaintiffs appealed the court’s determination that they had no recoverable damages, but not its denial of their motion to amend to add the Beahms.  The Fourth Circuit affirmed the district court’s ruling on May 18, 2006.  Proctor v. 7-Eleven, Inc., 180 Fed.Appx. 453 (4th Cir. 2006).

Shortly after the state court lifted the stay in the Beahms’ case, it granted summary judgment on the defendants’ behalf, finding that res judicata barred the action.  The court also denied the plaintiffs’ motion for reconsideration.

In its per curiam opinion, the Supreme Court identified the issue as whether the circuit court correctly held that res judicata barred the plaintiffs’ claims, and cited Blake v. Charleston Area Med. Ctr., Inc., 498 S.E.2d 41 (W. Va. 1997), for the three elements that must be satisfied in order for res judicata to apply:

First, there must have been a final adjudication on the merits in the prior action by a court having jurisdiction of the proceedings.  Second, the two actions must involve either the same parties or persons in privity with those same parties.  Third, the cause of action identified for resolution in the subsequent proceeding either must be identical to the cause of action determined in the prior proceeding or must be such that it could have been resolved, had it been presented, in the prior action.

The parties agreed that Blake’s first element of a final adjudication on the merits in the prior action was satisfied by the district court’s final judgment in Proctor.  The parties differed as to the second and third elements, however. 

For the second element, the Court found that the plaintiffs were the same as the Proctor plaintiffs’, even though they plaintiffs had tried unsuccessfully to join that lawsuit.  On this point, I think the Beahms were harmed by their admission in their writ to the Fourth Circuit that, by not moving to join the Proctor action, they "risk[ed] the barring of their claims by res judicata and/or collateral estoppel."

For the third element, the plaintiffs tried to distinguish their cause of action from the Proctor plaintiffs’ in order to avoid a finding that the causes of action were identical, but the Supreme Court disagreed:

Appellants contend that the instant action is different than Proctor because the properties’ damages in the two cases are different, the damages were discovered at different times, and there was an invasion of harmful vapors in the Council on Aging’s Senior Center [the Council was also a plaintiff in the Beahms’ lawsuit].  We find Appellants’ argument disingenuous, and the differences between the two cases too insignificant to avoid claim preclusion.

Based on the facts of Beahm, the Supreme Court's caution that “the application of res judicata is dependent on the distinctive characteristics of a particular case” is an understatement.

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The factual basis for the Supreme Court of Appeals of West Virginia’s holding in Savarese v. Allstate Ins. Co., 2008 WL 4386835 (September 26, 2008), is narrow, but it presents an opportunity for the Court to review its holdings on venue from two better-known decisions, Morris v. Crown Equipment Corp., 633 S.E.2d 292 (W. Va. 2006) and In re FELA Asbestos Cases, 665 S.E.2d 687 (W. Va. 2008).  Here is my post from last year on the West Virginia Legislature's amendment of the venue statute in response to Morris.

Frank Savarese was a resident of Jefferson County, Ohio, who was involved in an automobile accident in Belmont County Ohio.  He filed suit in Jefferson County against the other driver.  Savarese received treatment for his injuries from medical providers in Ohio and West Virginia. 

Subsequently, he filed a first-party bad faith claim in the Circuit Court of Ohio County, West Virginia against Allstate and several of its adjusters, resulting from their handling of his medical payments claims.  The defendants removed the action to federal court, which remanded the case because the defendants failed to demonstrate that the amount in controversy was sufficient to establish federal jurisdiction.  Once the action was back in state court, the defendants moved to dismiss on the grounds that the circuit court lacked subject matter jurisdiction and venue.

Savarese admitted that Ohio law governed his claims, but asserted that the West Virginia state court had jurisdiction to hear his case because Allstate had communicated with his lawyer, who was located in West Virginia, and because some of his medical providers were located in West Virginia.

The circuit court applied West Virginia Code § 56-1-1(c), which barred a nonresident of West Virginia from filing suit "unless all or a substantial part of the acts or omissions giving rise to the claim asserted occurred in this state."  The court dismissed the action for lack of subject matter jurisdiction (which the Supreme Court found was a mischaracterization, as the basis for the dismissal was lack of venue).

The Supreme Court made short work of Savarese's appeal, especially the federal cases that he cited.  The Court distinguished those decisions "because each involves circumstances where the underlying claim arose in the challenged jurisdiction or the defendant voluntarily directed communications into a jurisdiction in an effort to establish a business relationship or fraudulently induce action in that jurisdiction." 

Savarese's claim arose in Ohio, and Allstate and its adjusters were required to communicate with his lawyer in West Virginia simply because he retained a West Virginia lawyer.  There was no venue in West Virginia because those communications did not, as Savarese claimed, satisfy the requirement that all or a substantial part of the acts or omissions giving rise to the claim occur in West Virginia.

Accordingly, we now hold that the retention by Mr. Savarese, an Ohio resident, of a West Virginia attorney to pursue medical payment claims under an Ohio insurance contract for an injury sustained in Ohio is insufficient to establish venue under West Virginia Code § 56-1-1(c) for a cause of action governed by Ohio law arising from the denial of payment of such medical claims where no party to the action is a West Virginia resident.

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The Supreme Court of California dealt a significant blow to noncompete agreements with its recent decision in Edwards v. Arthur Andersen LLP, 189 P.3d 285 (Cal. 2008).

Raymond Edwards went to work for Andersen as a tax manager in 1997.  When he was hired, he had to sign a noncompete agreement.  In May 2002, when Andersen imploded as a result of its work for Enron, Andersen decided to sell its tax practice, including Edwards’ group, to HSBC USA, Inc.

In July, HSBC offered to hire Edwards, but first required that he sign a termination of noncompete agreement (TONC), which, among other things, required Edwards to resign from Andersen and release Andersen from any and all claims.

HSBC would not hire Edwards without a signed TONC and Andersen required a signed TONC before it would release him from the noncompete agreement.  Edwards signed HSBC’s offer letter, but not the TONC.  Andersen terminated him and withheld any severance, and HSBC withdrew its employment offer.

Edwards sued Andersen, HSBC, and the HSBC subsidiary created to purchase the tax practice group, and alleged intentional interference with prospective economic advantages and anticompetitive business practices under the Cartwright Act (California's general antitrust law).

He settled with everyone except Andersen, and the trial court ultimately ruled in Andersen’s favor as to all of Edwards’ claims.   The Court of Appeal determined that Andersen's noncompete agreement was invalid under California law and that requiring him to sign the TONC as consideration for being released from the noncompete agreement was an independently wrongful act for purposes of Edwards' claim for intentional interference with prospective economic advantage.  The court also held that the TONC purported to waive Edwards' right to indemnification under California labor law and therefore violated public policy.

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 The Supreme Court of Virginia today held that the unsolicited bulk electronic mail (spam) provision of the Virginia Computer Crimes Act was unconstitutional, and reversed the criminal conviction of Jeremy Jaynes, who had been convicted of sending more than 55,000 emails to AOL subscribers over three occasions in 2003.

In a unanimous opinion in Jaynes v. Commonwealth, Record No. 062388 (no Westlaw cite available yet), the court rejected Jaynes’ claim that the Virginia circuit court did not have jurisdiction over him because he sent the emails from his computer in Raleigh, North Carolina, and had no control over the routers used to send the emails, which were located in Virginia.  Because Jaynes selected AOL subscribers as recipients, however, the court found that he knew that sending the emails would use AOL’s servers, and thus came within Virginia's jurisdiction.

But Jaynes fared much better on his challenge to the statute on the grounds that it was overbroad under the First Amendment.  There, the court agreed that:

[The Virginia] statute is constitutionally overbroad on its face because it prohibits the anonymous transmission of all unsolicited bulk e-mails including those containing political, religious or other speech protected by the First Amendment to the United States Constitution.

The court distinguished between Virginia’s statute, which applied to “the transmission of unsolicited bulk electronic [UBE] mail,” and other states’ statutes, which “have restricted such regulation to commercial e-mails.” 

Virginia’s statute “is not limited to instances of commercial or fraudulent transmission of e-mail, nor is it restricted to transmission of illegal or otherwise unprotected speech such as pornography or defamation speech.  Therefore, viewed under the strict scrutiny standard, [Virginia’s statute] is not narrowly tailored to protect the compelling interests advanced by the Commonwealth.”

Here is a post from The New York Times' Blogrunner, which provides a round-up of blog posts and news articles about the decision.

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    Max Kennerly at Litigation & Trial wrote earlier this week about a recent decision from the Third Circuit Court of Appeals that held that an arbitration provision in an employment agreement can be enforced even though the agreement was written in English, which the employee did not speak.  Law.com also had this article about the decision.

    In Morales v. Sun Constructors, Inc., 2008 WL 3974059 (3^rd Cir. August 28, 2008), the court was asked to determine “whether an arbitration clause in an employment agreement is enforceable where one party is ignorant of the language in which the agreement is written.”  

    The court concluded that, in the absence of fraud, “the fact that an offeree cannot read, write, speak, or understand the English language is immaterial to whether an English-language agreement the offeree executes is enforceable.”  The 2-1 decision reversed the district court, which had found that mutual assent to the agreement did not exist as a result of the language barrier.

    But the majority opinion written by Judge Michael A. Chagares failed to address that when Sun required Morales and other hourly employees to attend an orientation session conducted in English and to sign the employment agreement, Sun asked another employee, Hodge, who was bilingual and whom Morales knew, to explain what was happening in the orientation and to help Morales understand the agreement.   And Hodge testified that he generally understands about eighty-five percent of what is said and written in English, and that he did not specifically explain the arbitration provision to Morales.

    Basically, once Morales signed the agreement, regardless of what he did or didn’t understand or knew or didn’t know about its provisions, he was bound by the agreement, including its mandatory arbitration clause.

    The dissent written by Judge Julio M. Fuentes identifies the real issue in the case: “The gravamen of this case is that Sun – the other party the Agreement – took upon itself the task of translating the Agreement for Morales and, in doing so, failed to convey the entire contents of the Agreement.  What we must determine is whether this failure resulted in a lack of mutual assent; I believe that it did.”

    I think this paragraph in the dissent summarizes the case:

If the facts of this case were different, I might adopt the majority’s position.  For example, if Sun had simply handed the Agreement to Morales and indicated that it was Morales’ responsibility to find a translator, and Morales had employed an incompetent translator who failed to translate the arbitration clause, I would agree that Morales was bound by the Agreement.  However, when Sun made the decision to insert itself between Morales and the contract, it created a situation where lack of mutual assent could, and did, occur.  Because I do not believe it was negligent or otherwise improper for Morales to rely upon the translation provided by Sun, and because Morales was not informed in the course of that translation that the Agreement contained an arbitration clause, I agree with the District Court that Morales “did not manifest an intention” to be bound by the arbitration clause.

 

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    Last year, I wrote about the United States District Court’s remand of a class action that alleged that AT&T had improperly enrolled thousands of customers in a roadside assistance program and charged them $2.95 per month, in violation of the West Virginia Consumer Credit and Protection Act.  Strawn v. AT&T Mobility , Inc., 513 F.Supp.2d 599 (S.D.W.Va. 2007).

    The court remanded the case because AT&T could not establish to the court’s satisfaction that the amount in controversy exceeded the Class Action Fairness Act’s threshold of $5 million, exclusive of interest and costs, for federal jurisdiction.  AT&T appealed the remand under 28 U.S.C. § 1453(c), which permits appellate review of remand orders in class actions. 

    In Strawn v. AT&T Mobility LLC, 2008 WL 2575871 (4^th Cir. 2008), which was decided on June 30, 2008, the Fourth Circuit concluded that “the district court either misread or construed too broadly the issues raised by the complaint and the definition of the putative class and therefore reverse[d] its order remanding this case to the state court.”

    AT&T first argued before the Fourth Circuit that CAFA shifted the burden of proof in a removal from the party asserting federal jurisdiction to the party opposing it. The court acknowledged that CAFA’s legislative history contained language supporting that view, but found that the statute itself gave no indication that Congress intended to place the burden of proof on the party opposing removal. 

    The court did hold that “in removing a class action based on diversity jurisdiction under 28 U.S.C. §§ 1453 and 1332(d), the party seeking to invoke federal jurisdiction must allege it in his notice of removal and, when challenged, demonstrate the basis for federal jurisdiction.”  The court noted that it was joining six other circuit courts that have considered the issue – the Second, Third, Sixth, Seventh, Ninth, and Eleventh.

    AT&T challenged the class size on the basis that the plaintiffs claimed that AT&T violated West Virginia law by automatically enrolling all customers in the roadside assistance program for a trial period, then charging them $2.99 per month if they did not opt out. 

    The court agreed with AT&T that the plaintiffs’ complaint defined the class as all of AT&T’s customers who were enrolled in the roadside assistance program, regardless of whether they were in the program willingly or unwillingly: 

“Such subjective inquiries about a customer’s “willingness’ or ‘unwillingness’ in continuing to pay the charge might relate to a limitation of damages by ratification, but it does not diminish the class defined in the complaint: those who were at the outset automatically enrolled in the program without their request-those who ‘were not given an option.’  At that point, none of the customers were ‘willing’ or ‘unwilling’; rather, all were unaware.

(Emphasis in original.)

    The court found that the plaintiffs failed to rebut AT&T’s estimate that 58,500 customers remained enrolled in the roadside assistance program after the initial trial period expired and paid the monthly charge.  Therefore, AT&T established that the amount in controversy, exclusive of interest and costs, exceeded $5 million and satisfied CAFA’s jurisdictional requirement.

    The court noted in a couple of places that the plaintiffs had not appealed the district court's ruling that the plaintiffs could not rely upon stipulations to limit their damages and thereby establish the amount in controversy.  As a result, the only issue before the Fourth Circuit was AT&T's appeal of the remand based on the amount in controversy. 

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The principal issue presented in this appeal is whether Grant Thornton LLP (Grant Thornton), an accounting firm retained by First National Bank of Keystone (Keystone), in response to an investigation by the Office of the Comptroller of the Currency (OCC) into Keystone’s banking activities, owed a duty of care under the West Virginia law of negligent misrepresentation to Gary Ellis, who allegedly relied on oral statements made by Stan Quay (Quay), a Grant Thornton partner, and a Grant Thornton audit report of Keystone’s 1998 financial statements in deciding to accept the job as president of Keystone. We hold that Grant Thornton owed Ellis no such duty under West Virginia law.

Ellis v. Grant Thornton LLP, 2008 WL 2514182 (4th Cir. 2008).

    In a bench trial before Judge David A. Faber of the Southern District of West Virginia, Ellis obtained a verdict of $2,419,233, based on the court’s finding that Grant Thornton negligently misrepresented Keystone’s financial condition, knowing that Ellis would rely on such misrepresentations in deciding whether to go to work for Keystone.
   
    And bear in mind that Grant Thornton's misrepresentation was not insignificant: it failed to uncover that Keystone had overestimated the value of its loans by $515 million.  Ultimately, the FDIC paid $664 million to cover Keystone's losses after its collapse.

    In addressing Grant Thornton's appeal, the Fourth Circuit had to predict how the Supreme Court of Appeals of West Virginia would rule on Ellis’ claim of negligent misrepresentation because the Supreme Court has not addressed directly or indirectly this issue,

    Although the district court had relied on First Nat. Bank of Bluefield v. Crawford, 386 S.E.2d 310 (W.Va. 1989) in ruling for Ellis, the Fourth Circuit found that, “other than the adoption of the Restatement [(Second) of Torts § 552] approach, the Bank of Bluefield court gave no further meaningful guidance concerning under what circumstances an accountant can be liable to third parties for negligent misrepresentations under §552.”

    The Fourth Circuit found that other courts had  set forth six factors based on the Restatement's language, which emphasize the third party's reliance on the inaccurate information.  Unlike Ellis' situation, however, the application of those factors focuses on the accountant or auditor's knowledge or intention that the third party will rely on the information.

    This decision provokes – to me, at least – an obvious question: why should Ellis’ reliance on the flawed Grant Thornton audit be any different than the bank management's or the OCC’s reliance on the audit?  The audit report stated on its first page that it was for the information and use of Keystone’s management and its regulatory agencies and “should not be used by third parties for any other purpose.”  But does that absolve Grant Thornton of liability if its employees misrepresented -- in any other context, lied about -- Keystone's condition? 
   
    Apparently it does.  But there is something fundamentally wrong with this decision.  The Fourth Circuit declined to employ any type of "foreseeability" standard, even though it is reasonably foreseeable that a third party like Ellis will rely on the audit report, or the representations made to him by Grant Thornton employees, who did not preface their statements with the type of disclaimer found on the first page of the audit report. 

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    An issue that always has to be addressed in ERISA disability claims is the standard of review to be applied to the plan administrator’s decision.  If the plan language does not confer discretion on the administrator, then the court reviews any decision under a de novo standard.  However, if the plan gives discretion, then the administrator’s decision is reviewed under an abuse of discretion standard.  

    But there can be another scenario, one that has confounded litigants, lawyers, and courts for years.  It is where the plan administrator, which makes the decision about a claimant’s entitlement to benefits, is also the plan insurer and therefore responsible for paying benefits.

    Courts have long recognized the conflict of interest that exists, even if they have not been sure how to deal with it.  That’s why the Supreme Court of the United States’ decision in Metropolitan Life Insurance Company v. Glenn, 2008 WL 2444796 (June 19, 2008),was so eagerly awaited.

    In Glenn, Metropolitan (“MetLife”) administered Sears, Roebuck & Company’s long-term disability plan and also paid the benefits.  Sears’ plan’s language conferred discretion on Metropolitan, which meant that its decision whether to award benefits would be reviewed under the abuse of discretion standard.

    Wanda Glenn applied for and received LTD benefits because she was able to show that she could not perform the material duties of her own job (the “own occ” standard).  After 24 months, however, the plan’s standard for proving disability changed, and required her to prove that not only could she not perform her own job, but that she could not perform the material duties of any gainful occupation for which she was reasonably qualified (the “any occ” standard).

    MetLife found that she did not satisfy this standard and denied her claim for benefits.  The District Court for the Southern District of Ohio affirmed the denial, and Glenn appealed to the United States Court of Appeals for the Sixth Circuit.

    In reversing the denial of Glenn’s benefits, the Sixth Circuit relied on a combination of factors, including MetLife’s conflict of interest (the others factors were specific to the treatment of Glenn’s claim).   MetLife appealed to the Supreme Court.

    In an opinion written by Justice Stephen Breyer for a majority of five justices, the Court affirmed the Sixth Circuit and identified two questions to be answered: the first, posed by MetLife, is “whether a plan administrator that both evaluates and pays claims operates under a conflict of interest in making discretionary benefit determinations.”  The second question, posed by the Solicitor General, is “’how’ any such conflict should ‘be taken into account on judicial review of a discretionary benefit determination.’”  

    Personally, I find the second question to be much more significant than the first.  Courts have noted for years the existence of a conflict of interest when the “entity that administers the plan, such as an employer or an insurance company, both determines whether an employee is eligible for benefits and pays benefits out of its own pocket.”  The real issue is how a court is supposed to deal with the conflict.

    The Court relied on principles of trust law in concluding that “for ERISA purposes a conflict exists,” and identified several reasons. 

The employer’s own conflict may extend to its selection of an insurance company to administer its plan (an employer may be more interested in a company that offers low rates instead of one that has accurate claim processing);

ERISA imposes higher-than-marketplace quality standards on insurers (ERISA requires a plan administrator to adhere to a special standard of care; and

A legal rule that treats insurance company administrators and employers alike in respect to the existence of a conflict can nonetheless take account of the circumstances to which MetLife points so far as it treats those, or similar, circumstances as diminishing the significance or severity of the conflict in individual cases

    Regarding the thornier problem of how to account for a conflict, the Court repeated its statement from Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), that a conflict “should be weighed as a factor in determining whether there is an abuse of discretion.”

    The Court pointed out that the standard of review should not change, however, which “in practice could bring about near universal review by judges de novo-i.e., without deference-of the lion’s share of ERISA plan claims denials.”  Rather, the Court envisioned that a conflict of interest is a “factor” to be considered in addition to other considerations.  This was the approach taken by the Sixth Circuit; it considered the conflict, but may not have found it to be determinative of Glenn’s appeal in view of other factors.

    Interestingly, in his partial concurrence, Chief Justice John Roberts cautioned that the majority’s approach would bring about a change in the standard of review:  “The end result is to increase the level of scrutiny in every case in which there is a conflict-that is, in many if not most ERISA cases-thereby undermining the deference owed to plan administrators when the plan vests discretion in them.” 

    If you're interested in knowing more about MetLife v. Glenn (and who wouldn't be?), I recommend the knowledgeable and insightful comment and analysis of Roy Harmon at Health Plan Law, Brian King at ERISA Law Blog,  Steven Rosenberg at Boston ERISA & Insurance Litigation Blog, Paul Secunda at Workplace Prof Blog, Suzanne Wynn at Pension Protection Act Blog, and Mark DeBofsky at DDBlog.

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    The Supreme Court of Appeals of West Virginia issued a decision on June 13 dealing with dissenting shareholders’ rights, an aspect of corporate law that the Court does not often address. 

    In Dodd v. Potomac Riverside Farm, Inc., 2008 WL 2390159 (June 13, 2008), the Court, in a per curiam opinion, considered rulings from the Circuit Court of Berkeley County, West Virginia, which established the fair value of the appellants’ shares in a corporation that owned a family farm and the rate of interest to which the appellants were entitled, and addressed the appellees’ motion for attorney’s fees.   

    The statute under which the appellants dissented from the proposed corporate action, West Virginia Code § 31-1-123, has since been repealed, but applied to the action because it was in effect when the appellants filed their lawsuit. 

    The Court’s rulings are specific to the facts of the appeal and do not represent any new pronouncements of law.  All but one of the Court’s syllabus points address the standard of review to be applied to a circuit court’s rulings, and the other one holds that prejudgment interest is simple in nature, unless a statute or regulation provides otherwise. 

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    There is already one casualty from the Supreme Court of Appeals of West Virginia's rejection of Chesapeake Energy Corporation’s petition for appeal from the $404 million verdict in Estate of Garrison G. Tawney v. Columbia Natural Resources, LLC.

    Today, Chesapeake announced that it is canceling plans to build a $35 million regional headquarters in Charleston, and blamed the Supreme Court’s decision not to hear its appeal.   Here is George Hohmann's article about the decision in today's (Charleston) Daily Mail.

   Chesapeake issued this media statement today:

On Thursday May 22nd, the West Virginia State Supreme Court issued a unanimous (5-0) decision against hearing NiSource and Chesapeake's appeal in the Tawney case.  Chesapeake inherited the lawsuit when it purchased Columbia Natural Resources in 2005.

This decision was stunning, as it means we will not have the opportunity to challenge the verdict issued in Roane County in January, 2007.  While we hold a less significant amount of the liability in the verdict, we do believe it sends a profoundly negative message about the business climate in the state.  The reality of this decision is that nobody in West Virginia, similarly situated, has a guaranteed right of appeal in the judicial system.  Chesapeake plans to join NiSource in appealing the case to the U.S. Supreme Court.

As a result, Chesapeake Energy has made the decision to cancel plans to build a new regional headquarters building in Charleston, WV.

We remain committed to our people and our operations in West Virginia and the Appalachian Basin. Chesapeake's Eastern Division will continue to be managed from Charleston, but we will do it from leased space.

--Scott Rotruck, Vice President -Corporate Development

    I have no doubt that Chesapeake is frustrated by the rejection of its appeal, but that was always a possibility.  Unlike federal district court, with its right of appeal, nearly all appeals from West Virginia state courts are discretionary. 

    Chesapeake’s reaction strikes me as a case where its assessment of the success of its appeal may have been based on considerations such as the amount of the verdict, its investment in the local economy, or the prominence of the defendants, and Chesapeake is dismayed that the Supreme Court did not agree with its view.

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    Last week, the Supreme Court of Appeals of West Virginia rejected appeals in two widely-publicized cases.  In Estate of Garrison G. Tawney v. Columbia Natural Resources, LLC, No. 080482, Columbia and NiSource, Inc. appealed the jury’s verdict of $404,335,138, which included punitive damages of $ 270 million.  Here is my post about the verdict.

    In Tawney, which the Court rejected by a vote of 5-0, Justice Robin Davis recused herself because her husband is counsel for the plaintiffs, and Justice Brent Benjamin recused himself because his former firm represents some of the defendants.  Raleigh County Circuit Court Judge H. L. Kirkpatrick and Cabell County Circuit Court Judge Dan O’Hanlon were appointed in their places.

    In Wheeling-Pittsburgh Steel Corporation v. Central West Virginia Energy Company, Nos. 080182 and 080183, Central West Virginia and Massey Energy Company appealed the verdict of $219 million, resulting from the jury’s finding that the defendants breached their contract with Wheeling-Pittsburgh Steel Company and committed fraud.  That verdict included punitive damages of $100 million.  Here is my post about that verdict.

    In Wheeling-Pittsburgh, which the Court also rejected by a vote of 5-0, Chief Justice Elliott E. “Spike” Maynard recused himself because of his relationship with Massey chairman Don L. Blankenship, and retired Greenbrier County Circuit Court Judge Frank Jolliffe was appointed in his place. 

    At this point, the remedy for the defendants in both cases is to petition the Supreme Court of the United States for review.  According to Veronica Nett, writing in yesterday's Sunday Gazette-Mail, the defendants in Tawney intend to appeal on the grounds that the punitive damages were excessive.  But a two-to-one ("single digit") ratio of punitive damages to compensatory damages does not appear to be inherently excessive, according to State Farm Mut. Ins. Co. v. Campbell, 538 U.S. 408 (2003), 

    Massey is considering an appeal to the Supreme Court, according to the Associated Press' Tim Huber, but has not yet made a decision. 

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    The Supreme Court of Appeals of West Virginia issued a decision in March that didn’t attract a lot of attention, which may be due to the rather straightforward procedural issues presented by the appeal.  But the facts in Hoover v. Moran, 2008 WL 696879 (March 14, 2008), make the decision worth studying.

    Johnnie Hoover worked as a mechanic, welder, and equipment operator for Peter Moran’s company, Princess Beverly Coal Company, from 1984 until 2000.  At various points from the mid-1980s until the early 1990s, Hoover alleged that he lent Moran money to cover the payroll and pay other debts.

    In February 1985, Hoover loaned Moran $20,000 to be repaid within 60 days.  Before the repayment date, Hoover alleged that Moran asked for more time to repay him and agreed, as consideration for the extension, to pay Hoover 10% of the profits from the sale of the company if it were ever sold.  The parties did not put the agreement in writing and Hover was repaid at some point.

    In 1997, Hoover and Moran attempted to negotiate Hoover’s claim of an interest in the proceeds from the company’s sale, but they could not reach an agreement.  Two years later, Princess Beverly was sold for $11.6 million.  Hoover sued Moran and the company in 2002, alleging breach of the oral agreement.

    The defendants moved to dismiss for failure to state a claim.  Before the circuit court could rule on the motion, however, Princess Beverly filed for bankruptcy in November 2002, and received an automatic stay against Hoover’s litigation.  Subsequently the parties voluntarily dismissed Princess Beverly from the case.  Then, the circuit court, on its own motion, dismissed the case against Moran due to inactivity for more than one year.

    Hoover moved to reinstate the case, and the circuit court granted his motion in August 2006.  The parties supplemented their briefs on Moran’s pending Rule 12(b)(6) motion.  Moran argued that the action did not state a claim against him in his personal capacity, and that in order to be enforceable, the alleged agreement between him and Hoover had to be in writing.                   

    Following a hearing on the motion, the circuit court granted Moran’s motion to dismiss on the grounds the complaint failed to state a claim against him in his personal capacity.  Hoover’s motion for reconsideration was denied, and he prosecuted an appeal from the circuit court’s order.  Moran also prosecuted a cross-appeal from the order reinstating the action.

    As to the dismissal of the complaint for failure to state a claim against Moran as an individual, the Supreme Court, in a per curiam opinion, found that Hoover’s allegations against Moran and Princess Beverly, although somewhat ambiguous, “sufficiently placed Mr. Moran on notice that he was being sued in his individual capacity[,]”  and reversed the dismissal on that basis. 

    The Court also rejected Moran’s argument that the action was barred because the statute of frauds contained in the Uniform Commercial Code required the agreement to be in writing, finding that the doctrine of promissory estoppel applied to Hoover’s claim.  Hoover alleged that after he and Moran reached their agreement that Moran would pay Hoover 10% of the profits from the sale of Princess Beverly, Moran borrowed an additional $31,000 from Hoover, which Hoover was willing to lend because of the agreement:

“To the extent that Mr. Hoover’s allegations are true, an injustice would occur were we to allow the statute of frauds contained in W. Va. Code §46-8-319 to defeat his cause of action.  We believe that under the doctrine of promissory estoppel, Mr. Hoover should have his day in court notwithstanding the possible application of the statute of frauds writing requirement of W. Va. Code §46-8-319.”

    Moran did not fare any better in his appeal of the reinstatement of the action.  The circuit court had reinstated the action because neither Hoover nor his counsel received notice of the dismissal as required by Dimon v. Mansy, 479 S.E.2d 339 (W.Va. 1996), which Moran did not dispute.   Absent such notice, which is intended to give the parties an opportunity to be heard before the case is actually dismissed, the Supreme Court held that the reinstatement of the case was appropriate.

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    In an order entered on Monday, the Supreme Court of the United States rejected Camden-Clark Memorial Hospital’s petition for a writ of certiorari from the Supreme Court of Appeals of West Virginia’s decision not to review the jury’s verdict of $6.5 million in a medical malpractice action filed against the hospital.  Camden-Clark Memorial Hospital v. Boggs, Bernard, No. 07-812.  Here are my posts from last September about the hospital’s petition for appeal and the Supreme Court of Appeals’ refusal thereof. 

    Reporter Andrew Clevenger has an article about the case in today’s Charleston (West Virginia) Gazette, in which he mentions that a “countersuit” filed by the hospital against Bernard Boggs, alleging that Boggs’ original lawsuit was frivolous, is still pending.  It seems like a verdict for $6.5 million in the underlying action, plus sanctions in the amount of $1.3 million, would prove that Boggs' lawsuit had merit.  

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    For the second time, the Supreme Court of Appeals of West Virginia has reversed the $50 million verdict awarded to Hugh Caperton and his companies against A. T. Massey Coal Company, Inc. and its subsidiaries.  Caperton v. A. T. Massey Coal Company, Inc., No. 33350 (The Westlaw opinion is not available yet, so the link is to the PDF version of the opinion, which was released yesterday afternoon, from the Court’s website). 

    The majority opinion for the 3-2 decision was written by Justice Robin Davis, who also wrote the majority opinion in the first appeal, which was vacated when the Court granted the plaintiffs' motion for rehearing.  Justice Brent Benjamin, who refused to recuse himself, and became acting Chief Justice in the case when Chief Justice Elliott E. "Spike" Maynard recused himself, was also in the majority, as was Marion County Circuit Judge Fred L. Fox, II, who was appointed to replace Justice Larry Starcher, who recused himself.  

    Justice Joseph Albright dissented, as he did in the first appeal, and was joined by Hampshire County Circuit Judge Donald H. Cookman, who was appointed to replace Chief Justice Maynard.   Here is their dissent, which is the PDF version from the Court's website.

    I have not had an opportunity to study either opinion very closely, but here are a couple of  preliminary observations.  The majority opinion is substantially longer than in the first appeal, which may be attributable to the Court's elaboration on the two grounds for reversal that it identified in the first appeal: first, that the circuit court should have granted the defendants' motion to dismiss based on a forum selection clause in a contract entered into in Virginia, and second,, assuming that the ruling on the motion was not erroneous, the doctrine of res judicata barred the West Virginia action based on an action that had been litigated in Virginia.  (Even though the earlier opinion had been vacated, the parties addressed the grounds for reversal set forth in that opinion.)

    In the first appeal, the Court wrote that, “At the outset we wish to make perfectly clear that the facts of this case demonstrate that Massey’s conduct warranted the type of judgment rendered in this case."  That statement seemed out of place, considering that the Court reversed the verdict against Massey, notwithstanding its conduct.  

    That statement is missing from the majority opinion this time, which is not lost on the dissent:

Today's "new" opinion of the Court rests on the same indefensible legal grounds as the original opinion -- supplemented by even more extended discussion of some of the points -- but, strangely, omitting the clearly correct assertion in the original majority opinion that "Massey's conduct warranted the type of judgment rendered in this case."  Id.  This time the majority stands silent regarding any disdain of Massey's conduct.   Once again, it bends the law to deny Plaintiffs the proper "result that clearly appears to be justified."  Id.

Emphasis in original.

    I think that this decision will generate an enormous amount of attention, both for the merits of the opinion, but particularly because Chief Justice Maynard and Justice Starcher recused themselves, and Justice Benjamin, who was in the majority in both appeals, did not. 

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    In January, I wrote about the so-called tripartite relationship among an insured, the insured’s lawyer retained and paid by the insurance company, and the insurance company, and an appeal before the Supreme Court of Appeals that illustrated some of the perils of the relationship.

    The Court  has issued its decision in Horkulic v. Galloway, 2008 WL 481000 (W.Va. 2008), which involved a dispute between the lawyer for William Galloway, the defendant in a legal malpractice case, and TIG Insurance Company, which insured Galloway and had retained his lawyer, William Wilmoth.  Galloway’s lawyer claimed that a settlement had been reached with plaintiff Jeffrey Horkulic, in which Galloway would confess judgment in the amount of $1,500,000, but that Horkulic would accept Galloway’s policy limits of $500,000 in satisfaction of his claim, would not pursue Galloway’s personal assets, and would not record the judgment. 

    TIG argued that the purported settlement would enable Horkulic to use Galloway’s confession of judgment in a separate bad faith action in order to establish the value of that claim, and appealed the Circuit Court of Hancock County’s order approving the settlement, including Galloway’s confession of judgment. 

    in a unanimous opinion by Justice Joseph Albright, the Court noted the difficulties presented by the parties' relationships:  

In the present case, TIG was not permitted to participate in the settlement enforcement hearing and thus cannot be deemed to have had a full and fair opportunity to litigate the issue.  More specifically, the order in question expressly declares that TIG will have the opportunity to challenge the $1.5 million confessed judgment by Mr. Galloway.  This case presents the classic tripartite configuration in which a party to a bifurcated bad faith action was not a party in the underlying action, despite the reality that such entity furnished counsel for the defendant in the underlying action.  The fact remains that Mr. Wilmoth, as counsel for Mr. Galloway hired through TIG, was not protecting the interests of the insurance company, TIG, while the settlement negotiation matters were being litigated in the lower court.  His duties as counsel ran solely to the interests of Mr. Galloway.

    The Court did not reverse the circuit court's order approving the settlement, but clarified TIG's right to challenge Galloway's confession of judgment:

Based upon the foregoing, we hold that a consent or confessed judgment against an insured party is not binding on that party's insurer in subsequent litigation against the insurer where the insurer was not a party to the proceeding in which the consent or confessed judgment was entered, unless the insurer expressly agreed to be bound by the judgment.  Therefore, an attack on the consent or confessed judgment in the subsequent litigation by an insurer who did not expressly agree to such judgment is a permissible direct, not collateral, attack on the consent or confessed judgment ...  The primary issue to be resolved in this appeal is the extent to which the specific August 25, 2006 order [approving the settlement] under inquiry may be utilized against TIG when the bifurcated bad faith claim is ultimately litigated.  Thus, subsequent to the filing of this opinion, the lower court will progress forward on the course it previously set, dissolving the stay and proceeding with discovery on the bad faith claim.

    In other words, because TIG did not agree to be bound by Galloway's confession of judgment, TIG is free to challenge it during the litigation of the bad faith case.  But because the  bad faith case has not been litigated yet,  the Court cannot predict what effect, if any, the confession of judgment will have.

    In addition to TIG's appeal of the order approving the settlement, it had also sought a writ of prohibition against the circuit court's award of attorney's fees to Horkulic's counsel for  having  to enforce the settlement.  The circuit court awarded fees of $500 per hour for 101.5 hours and $54.00 in expenses.  TIG's challenge was based on its lack of opportunity to participate before the circuit court and that the award was excessive.

    The Supreme Court granted the writ based on TIG's lack of participation: "Thus, under the facts of this case, we find that the lower court erred in granting attorney fees against TIG without allowing TIG to participate in the evidentiary hearing addressing the pertinent issues culpability [sic] for the extensive delays of this case.  It is appropriate to grant a writ of prohibition and to remand this matter for a full evidentiary hearing to determine the extent of TIG's culpability in delaying the settlement." 

    Although the Supreme Court did not explicitly address the amount of the award, under West Virginia case law, such as Aetna Cas.& Sur. Co. v. Pitrolo, 342 S.E.2d 156 (W.Va. 1986), part of the circuit court's inquiry will necessarily focus on the reasonableness of the fees.

    Justice Robin Davis concurred on behalf of herself and Chief Justice Elliott Maynard in order to point out that by granting TIG's petition for a writ of prohibition, "this Court has made no determination with respect to the reasonableness of those fees." 

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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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    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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    Insurance coverage was at issue in recent decisions from two federal appeals courts, in which one court found that no coverage was available, while the other interpreted which of two companies’ policies was excess coverage.

    In Scottsdale Ins. Co. v. Flowers, 2008 WL 140968 (January 16, 2008), the Sixth Circuit Court of Appeals was asked to review a district court’s declaratory judgment that Flowers, a therapist employed by the Morton Center, was not covered by the Morton Center’s liability insurance policy with Scottsdale Insurance Company for tort damages resulting from his sexual relationship with Burke, who had been his patient. 

    The appeals court first engaged in a thorough analysis and determined that the district court properly exercised its jurisdiction under the Declaratory Judgments Act.  The court then turned to whether Flowers’ affair with Burke fell within the scope of his employment with the Morton Center, such that there would be coverage under Scottsdale’s policy.

    The court concluded that the meaning of the legal term of art, “scope of employment,” was not ambiguous under Scottsdale’s policy, and therefore the district court correctly found that the policy excluded coverage for Flowers’ activities that were not within the scope of his employment.  Having determined that Scottsdale’s insurance policy was not ambiguous, the court proceeded to address whether Flowers’ affair with Burke came within the scope of his employment as a therapist with the Morton Center.

    The court was guided by precedent that focuses on the employee’s motive in determining whether he or she acted within the scope of employment.  Consequently, the court found that Flowers’ motivation for the affair was his own sexual proclivities, and not the furtherance of the Morton Center’s business.  Burke claimed that Flowers acted negligently, and not intentionally, by having the affair with her, but the court observed that Flowers did not have the affair with her as part of her treatment, but for his own benefit.  Thus, as a matter of Kentucky law, there was no insurance coverage for damages resulting from Flowers’ affair with Burke.

    The remaining issue for the Sixth Circuit’s consideration was the propriety of an amended order entered by the district court on Burke’s motion.  In its original order, the district court ordered that “plaintiff, Scottsdale Insurance Company, has no duty to extend coverage to Norman Flowers for any of the torts alleged in [Burke’s civil action].” (Emphasis added.)  However, Burke moved the court to amend its order because the Morton Center was trying to use the original order to preclude litigation on the issue of its liability in Burke’s state court action. 

    The district court vacated its original order and entered an amended order that found that Scottsdale “has no duty to extend coverage to Norman Flowers for his sexual affair with Kathleen Burke.”  (Emphasis added.)  

Continue Reading...

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    The Supreme Court of Appeals has voted 5-0 to rehear A.T. Massey Coal Company, Inc.’s appeal of the  $50 million verdict obtained in 2002 by Hugh Caperton and companies he operated.  The Court originally ruled 3-2 in November to reverse the verdict.  The case will be reargued on March 12.

    Circuit Court Judge Donald Cookman was appointed to replace Chief Justice Elliott E. “Spike” Maynard, after the Chief Justice recused himself amid allegations that his personal friendship with Massey Energy Company chairman Don Blankenship would affect his ability to be impartial.  Justice Brent Benjamin, who appointed Judge Cookman, rejected a request by the Harman companies that he recuse himself, based on Blankenship's involvement in his 2004 campaign.

    Here is the Associated Press story, which includes Massey’s statement about the Supreme Court's decision to reconsider the verdict.

    Also, I need to correct my post last Saturday about Justice Benjamin's refusal to recuse himself.  In his statement, he said, in part, that, "Simply conclusory accusations and assumptions are plainly  insufficient to support a motion for disqualification[,]"  not "simply accusatory accusations," as I wrote.

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    The situation regarding the composition of the Supreme Court of Appeals when it takes up the plaintiffs’ motions for reconsideration in Caperton v. A.T. Massey Coal Company, Inc. has been clarified by Justice Brent Benjamin’s decision yesterday afternoon not to recuse himself from the case, as the Harman companies had requested.  I do not have the text of Justice Benjamin’s statement or any order from the Supreme Court, but Paul Nyden’s  article in today’s Saturday Gazette-Mail quotes from the statement. 

    Here is the statement as quoted in the Nyden article:

The motion seeking disqualification comes over three years after the 2004 election and focuses entirely on that election. It contains nothing about this justice’s record on the court. There are no allegations that this justice has, or has had, any relationship with Mr. Blankenship or any Massey company in his 20-plus years of private practice. Simply accusatory accusations and assumptions are plainly insufficient to support a motion for disqualification.

    The plaintiffs, Harman Development Corporation, Harman Mining Corporation, and Sovereign Coal Sales, Inc., renewed their motion to disqualify Justice Benjamin based on the involvement of Massey Energy Company chairman Don Blankenship in the 2004 election in which Justice Benjamin defeated incumbent Justice Warren McGraw.  Blankenship provided significant support to Justice Benjamin’s campaign.  Here is the companies' motion to disqualify Justice Benjamin filed in October 2005. 

    Also yesterday, Justice Benjamin, who is acting chief justice in this case due to Chief Justice Maynard’s recusal, appointed Circuit Court Judge Donald H. Cookman to serve as the fifth justice when the Court holds its rehearing conference on January 24.

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    Supreme Court of Appeals of West Virginia Chief Justice Elliott E. "Spike" Maynard has recused himself from further participation in Caperton v. A.T. Massey Coal Company, Inc., et al., in which the Supreme Court reversed the plaintiffs' $50 million verdict   The plaintiffs have filed motions for reconsideration, which the Court will take up on January 24.  Here is the order entered by the Clerk and Chief Justice Maynard's memorandum to the Clerk.  

    Here is the text of the memorandum:

It is not enough to do Justice--Justice also must satisfy the appearance of Justice.  I have decided to voluntarily recuse myself from this case.  I will recuse myself despite the fact I have no doubt in my own mind and firmly believe I have been and would be fair and impartial in this case.  I know that of a certainty.

The issue, because of the controversy surrounding this case, is no longer an issue of whether I can be fair and impartial.  Rather it has now become an issue of public perception and public confidence in the courts.  Above all else, I am very concerned about how the public views this court.

Without question, the Judicial Branch of state government should always be held in the highest public confidence and trust.  The mere appearance of impropriety, regardless of whether it is supported by fact, can compromise the public confidence in the courts.  For that reason -- and that reason alone -- I will recuse myself from this case.

    The issue of the Chief Justice's friendship with Massey Energy Company chairman Don Blankenship and his continued participation in the case has attracted a lot of attention, as reflected by Adam Liptak's article today in The New York Times  and this entry on The Wall Street Journal Law Blog.   Here is Associated Press reporter Lawrence Messina's article today. 

    In another development, Harman Mining Development Corporation, Harman Mining Corporation, and Sovereign Coal Sales, Inc. yesterday renewed their motion to disqualify Justice Brent Benjamin from participation in the case.  The plaintiffs first made the motion in October 2005, at which time Justice Benjamin declined to recuse himself.  The renewed motion focuses on the role played by Blankenship in Justice Benjamin's election in 2004, when "Blankenship invested more than $3 million in direct or indirect support of Justice Benjamin -- more than any person, other than a person seeking his own election, had ever spent to effect the outcome of a state judicial race, certainly in West Virginia and perhaps in the United States."   Here is the renewed motion, which had also sought the Chief Justice's disqualification.  As of today, Justice Benjamin has not indicated whether he will recuse himself.

    As Adam Liptak noted, Chief Justice Maynard did not indicate whether he was withdrawing his vote or making his disqualification retroactive, as the plaintiffs had requested.  Furthermore, when a Supreme Court justice recuses himself or herself, the chief justice appoints the substitute justice.  But here, where the chief justice has recused himself, I don't know whether the justice with the most seniority (Robin Davis) or the one next in line for chief justice (Brent Benjamin) makes the appointment.   Of course, that issue is complicated by the motion pending against Justice Benjamin.

    I think Chief Justice Maynard is going to have to address the remainder of the plaintiffs' motion, i.e., advise whether his recusal is retroactive to the oral argument in September, which would require the parties to start over, or whether he intends his recusal to apply only to the plaintiffs' motions for reconsideration.

    These are my posts from earlier this week about the Maynard disqualification issue and the plaintiffs' motions for reconsideration of the Court's decision.

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    Hugh Caperton, whose verdict against A.T. Massey Coal Company, Inc. for $50 million was reversed by the Supreme Court of Appeals of West Virginia by a vote of 3-2, yesterday filed an amended motion to disqualify Chief Justice Elliott E. “Spike” Maynard from participating in the plaintiffs’ petitions for reconsideration of the Court’s decision and seeking the withdrawal of his vote in Massey’s favor.

    The basis for the amended motion is that Caperton “has become aware of the existence of thirty-four (34) photographs which depict Chief Justice Maynard and Mr. Blankenship vacationing together in the Kingdom of Monaco during the time period of July 3-5, 2006.  Copies of twenty-four of these photographs are attached hereto as Exhibit A.”  The motion also states that, “[t]en (10) of the photographs also depict, in addition to Chief Justice Maynard and/or Mr. Blankenship, two females apparently traveling with them as companions.”  Those photographs have been filed under seal.   

    The motion and the underlying relationship between Chief Justice Maynard and Blankenship are the subject of a story today in The New York Times by Adam Liptak, entitled “Motion Ties W. Virginia Justice to Coal Executive.”   For more local coverage, here are stories by Paul J. Nyden in today’s Charleston Gazette and by Associated Press reporter Lawrence Messina. 

    Yesterday I wrote about the petitions for reconsideration filed by Caperton and his companies, as well as Caperton’s motion to disqualify Chief Justice Maynard, which was filed earlier this month, which alleged that less than two weeks before the Court issued its decision in Caperton’s appeal, Chief Justice Maynard and Blankenship had been seen having dinner together.

    The standard for disqualification of a Supreme Court justice is governed by Rule 29 of the West Virginia Rules of Appellate Procedure, which provides that, “[a] justice shall disqualify himself or herself, upon proper motion or sua sponte, in accordance with the provisions of Canon 3(E)(1) of the Code of Judicial Conduct or, when sua sponte, for any other reason the justice deems appropriate.”  Canon 3(E)(1) provides that, “[a] judge shall disqualify himself or herself in a proceeding in which the judge’s impartiality might reasonably be questioned ….” 

    Caperton’s amended motion alleges that:

It is beyond the realm of human comprehension that any judge could claim any semblance of impartiality when, before casting the deciding vote in a $76 million case, he accompanies the CEO of the litigant on the hook for that judgment on a luxurious trip to the French Riviera.  As if that were not enough, he then consciously chooses not to disclose the very fact of the trip.  Apparently unsatisfied, he then casts the deciding vote in support of a “majority” opinion which was not only expressly intended to deprive Mr. Caperton, by reason of a dismissal “with prejudice” of any further opportunity to obtain justice, but also to bestow a $76 million windfall upon Massey and good friend Don Blankenship.

    Rule 29 provides that the justice whose disqualification is sought “shall promptly notify the Clerk of the Supreme Court of his or her decision on the motion for disqualification and the Clerk of the Supreme Court shall promptly notify the other justices and the parties of such decision.”  As soon as Chief Justice Maynard makes his decision, which most likely will be in the form of an order, I’ll post it here.   

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    On January 24, the Supreme Court of Appeals will consider the petitions for rehearing filed by Hugh Caperton and Harman Mining Compan, which ask the Court to reconsider its November 21, 2007 decision, which reversed their 2002 verdict for $50 million against A. T. Massey Coal Company, Inc. and several of its subsidiaries.  Caperton v. A. T. Massey Coal Company, Inc., 2007 WL 4150960.  Here are Caperton's petition and Harman Mining's petition, courtesy of Harman's counsel, David Fawcett.  The Clerk's office has not yet posted the dockets for the Court's conferences on January 24, but should do so this week. 

    Caperton and Harman challenge as procedurally and substantively improper the Supreme Court's retroactive application of its forum selection clause test, which it announced for the first time in its decision.  The Court determined that the Circuit Court of Boone County erred in denying Massey's motion to dismiss, based on the existence of a forum selection clause in a 1997 coal supply agreement entered into by Harman, Sovereign Sales, and Massey subsidiary Wellmore Coal Company (which was not involved in the litigation), which required all litigation to be brought in and adjudicated by the Circuit Court of Buchanan County, Virginia. 

    Caperton and Harman also challenge the Supreme Court's finding that their West Virginia lawsuit was barred by the doctrine of res judicata, based on the plaintiffs' 1998 lawsuit against Wellmore in the Circuit Court of Buchanan County, Virginia for breach of contract and breach of the duty of good faith faith and fair dealing, which resulted in a $6 million verdict for the plaintiffs.  They maintain that they were permitted to assert their tort claims against the Massey defendants separately from the Virginia breach of contract action. 

    The United Mine Workers of America moved for leave to file an amicus brief in support of the plaintiffs, which the Court denied on Thursday as premature, pending its decision on the petitions for rehearing.  The UMWA's interest in the action stems from the $15 million that its members and retirees are owed in benefits and compensation by Harman Mining, Sovereign Coal Sales, and Harman Development Company, all of which are in bankruptcy.  Here is the UMWA's motion and amicus brief.

    Still pending before the Court is Caperton's motion to disqualify Chief Justice Elliott E. Maynard based on his association with Massey chairman Don Blankenship.  The motion alleges that Maynard and Blankenship were seen having dinner on November 8, 2007, which was about two weeks before the Court issued its decision.  The motion asks that Maynard

disclose the nature of any meetings or discussions with Appellants, including Mr. Don L. Blankenship, during the pendency of this appeal, and, if such meetings or discussions occurred, to disqualify himself from participating in any consideration of Appellee Caperton's Petition for Rehearing, and further requests that Justice Maynard withdraw his earlier vote in favor of the Court's majority opinion in this matter ....

   Here is my post about the Supreme Court's decision, and Paul Nyden's article in The Charleston Gazette last week about the litigation. 

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    A California appeals court has ruled that health insurer Blue Shield of California improperly rescinded an insurance policy after its insured incurred more than $450,000 in medical expenses, then demanded that he repay more than $100,000.  Hailey v. California Physicians’ Service, 2007 WL 4472790 (December 24, 2007). 

    Blue Shield claimed that Steve Hailey made several misrepresentations in applying for insurance, but in a unanimous opinion, the Fourth Appellate District of the Court of Appeals disagreed.  The court found that Hailey’s wife, Cindy, who completed his application, did not entirely understand the application and therefore may have provided incorrect information.  Here is the court's ruling: 

We conclude [California Health and Safety Code] section 1389.3 precludes a health services plan from rescinding a contract for a material misrepresentation or omission unless the plan can demonstrate (1) the misrepresentation or omission was willful, or (2) it had made reasonable efforts to ensure the subscriber’s application was accurate and complete as part of the precontract underwriting process. Because both of these issues turn on disputed facts, the trial court’s summary judgment ruling cannot stand. We also conclude a triable issue of facts exists whether Blue Shield engaged in bad faith, and that the Haileys adequately alleged a cause of action for intentional infliction of emotional distress. We therefore reverse the judgment.

    The Wall Street Journal Law Blog wrote about the Hailey decision, and the San Francisco Chronicle had this story, which provided background about the Haileys' experience with Blue Shield.  Both articles also discuss actions taken by California regulators against insurance companies.  Last May, I wrote this post about Blue Cross of California’s decision to stop its practice of “use it and lose it,” which is another name for Blue Shield’s practice of “post-claim underwriting.”

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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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    The Supreme Court of the United States will not hear an appeal from a verdict for $13 million returned by a Putnam County jury against Emerson Electric Co. and two of its subsidiaries, Daniel Measurement Services, Inc. and Daniel Industries, Inc.  The Court entered an order on Monday which denied DMS’ petition for a writ of certiorari, but which granted leave for the filing of several amici briefs on DMS’ behalf (page 12).

    The case started in 1999 when, in response to DMS’ request for proposal, Eagle bid on a contract for the manufacture of a flow computer, which would identify what is flowing through a pipe and measure the substance’s pressure without having to open the pipe.  As part of the bidding process, Eagle and DMS entered into a confidentiality agreement, whereby Eagle’s design could not be revealed.  Eagle was the low bidder, and entered into a contract with DMS to manufacture 3,000 of the units.

    Soon thereafter, Emerson bought DMS and obtained access to Eagle’s proprietary design information, which breached Eagle’s confidentiality agreement with DMS.  After an Emerson  employee disclosed the breach, Eagle filed suit in the Circuit Court of Putnam County against Emerson, DMS, and Daniel Industries.  (I understand that that disclosure also resulted in a lawsuit by Emerson against the employee.)

    Eagle claimed that Emerson’s conduct breached its confidentiality agreement with DMS.  Following a two week trial in 2006, a jury returned a verdict in Eagle’s favor for $14.8 million, of which $10.5 million represented damages for breach of the confidentiality agreement.

    The trial court reduced the verdict by $1.8 million, which the jury had awarded for Eagle’s lost profits on the sale of communications devices.  Eagle filed a petition for appeal with the Supreme Court of Appeals of West Virginia from that ruling, which was accepted by a vote of 5-0, but which Eagle subsequently withdrew.  DMS’ petition for appeal from the $13 million verdict was refused by the Supreme Court of Appeals by a vote of 3-2.

    I have not been able to obtain the parties’ briefs before either appellate court, but from reviewing the amicus brief filed by the Washington Legal Foundation on behalf of DMS, I gather that DMS’ petition for cert alleged that the verdict violated the Due Process Clause of the Fourteenth Amendment because there was no evidence in the record to support the verdict and because there was insufficient post-trial or appellate review of the verdict. 

    (The WLF brief asserted that “the West Virginia courts provided no meaningful review of the jury’s award.”   However, because the WLF, by its own admission, “regularly participates in tort reform efforts[,]” its view of the proceedings, particularly in West Virginia, the American Tort Reform Foundation’s “No. 1 Judicial Hellhole,”  makes it difficult, if not impossible, to get an accurate understanding of the parties’ positions on appeal.) 

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    I want to make a correction to my post last week about the Supreme Court’s decision reversing a $50 million verdict against A.T. Massey Coal Company and its subsidiaries.  I indicated that the trial was held in the Circuit Court of Lincoln County, which was incorrect. The trial was held in the Circuit Court of Boone County.  Sorry for any confusion.

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    Yesterday was the last day of the Supreme Court of Appeals of West Virginia’s Fall Term, and the Court released several opinions, including its decision in Caperton v. A.T. Massey Coal Company, Inc., No 33350. (The Westlaw opinion is not available yet, so the link is to the PDF version on the Court’s website.)

    At stake was the $50 million verdict in the plaintiffs’ favor, based on the jury’s finding that A.T. Massey Coal Company, Inc. and several of its subsidiaries intentionally interfered with and destroyed Hugh Caperton’s business.  With accrued interest since the verdict in 2002, the plaintiffs’ judgment had grown to approximately $76 million. Here’s my post from last month when the case was argued. 

    In a 3-2 decision written by Chief Justice Robin Davis, the Supreme Court reversed the verdict and remanded the case to the Circuit Court of Lincoln County with directions to enter an order dismissing with prejudice the plaintiffs’ claims against the defendants.  The Court identified two grounds for the reversal.  First, the circuit court should have granted the defendants’ motion to dismiss based on a forum selection clause contained in “a contract directly related to the conflict giving rise to the instant lawsuit.”  Second, assuming that the circuit court’s ruling on the forum selection clause was not erroneous, the Supreme Court found that the doctrine of res judicata based on an action that had been litigated in Virginia.

    The Virginia litigation to which the Court refers is the plaintiffs’ 1998 suit against a Massey subsidiary in the Circuit Court of Buchanan County, Virginia, which alleged breach of contract and breach of the duty of good faith and fair dealing.  Only the breach of contract claim was considered by the jury, which returned a verdict in the plaintiffs’ favor for $6 million.  That verdict resulted in Massey suing its Virginia counsel for malpractice, on the grounds that they failed to sign the notice of appeal, which resulted in the dismissal of the appeal and the affirmance of the verdict, which I also wrote about last month. 

    The first paragraph of the Court’s discussion will not provide any comfort to the plaintiffs: “At the outset we wish to make perfectly clear that the facts of this case demonstrate that Massey’s conduct warranted the type of judgment rendered in this case.  However, no matter how sympathetic the facts are, or how egregious the conduct, we simply cannot compromise the law in order to reach a result that clearly appears to be justified.  As we will demonstrate below, the law simply did not permit this case to be filed in West Virginia.”  So, if the Court had not reversed based on the forum selection clause and the doctrine of res judicata, it would have affirmed the verdict.

    Interestingly, the Court acknowledged that while the circuit court was correct in denying the defendants’ motion for summary judgment based on the doctrine of res judicata because the Virginia judgment was pending when the motion was filed, the Court concluded that it “may address the issue anew because a final judgment was rendered in the Virginia case by the time this appeal was prosecuted.” 

    Justices Larry Starcher and Joseph Albright filed separate dissenting opinions, which are here and here, both of which quote from the Court’s initial paragraph of its discussion, in which it affirms the factual basis for the jury’s verdict.  The Albright dissent points out that the majority opinion created seven new syllabus points having to do with forum selection clauses “applied to the facts of this case so as to relieve the defendants in excess of a verdict in excess of $50 million, plus interest and costs, which would have resulted in a judgment calculated to be in excess of $75 million.”

    The Starcher dissent focuses on jury’s assessment of the conduct of Don Blankenship, Massey Energy Company’s chairman, in bringing Hugh Caperton and his businesses to financial ruin.

    This opinion will generate a lot of discussion, particularly because the Court agreed that the plaintiffs were entitled to the verdict returned by the jury, but reversed on relatively narrow grounds. Paul J. Nyden wrote about the decision in this morning’s Charleston Gazette. 

   At this point, I will conclude this post and turn my attention to dinner, which is nearly ready.  Happy Thanksgiving to everyone. 

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    It didn’t take the Supreme Court of Appeals long to issue its ruling in Wetzel v. Employers Service Corporation of West Virginia, 2007 WL 3312679 (W.Va.), which was argued on October 10, and which I discussed on October 23.

    The issue was whether the claimant's widow could hold the workers' compensation claims administrator for her husband's employer liable for its conduct in allegedly causing or hastening his death from an occupational disease.  Mary Wetzel claimed that Employers Service Corporation of West Virginia (ESC), the claims administrator for Chemical Leaman Tank Lines, was not Chemical Leaman's agent and therefore not entitled to the statutory immunity from civil liability that traditionally applied to workers' compensation employers.  Alternatively, she argued that if ESC was Chemical Leaman's agent, then ESC was liable under an intentional tort theory.  She also argued that she could assert a claim for unfair trade practices against ESC because it was in the business of insurance in processing and paying workers' compensation claims for Chemical Leaman.

    The Supreme Court was not persuaded by any of the plaintiff's theories.  in a per curiam opinion, the Court found that, under its prior decision interpreting the meaning of "agent," ESC, in its capacity as workers' compensation claims administrator, was Chemical Leaman's agent for workers' compensation purposes. 

    The Court also rejected the plaintiff's theory that even if ESC was Chemical Leaman's agent, ESC could be liable for its intentional refusal to pay certain medical claims.  The plaintiff had not alleged a deliberate intention claim against ESC, as provided by West Virginia Code § 23-4-2(d)(2), which is traditionally the only method of defeating workers' compensation immunity, but had urged a new cause of action for ESC's intentional refusal "to honor and timely pay workers' compensation benefits."  The Court expressed concern that recognizing the plaintiff's cause of action would interfere with an employer's right to contest an employee's claim, which had also been the Court's concern in Persinger v. Peabody Coal Co., 474 S.E.2d 887 (W.Va. 1996). 

    Finally, the Court concluded that ESC was not in the business of insurance for purposes of the plaintiff's claim under the West Virginia Unfair Trade Practices Act.  The plaintiff had conceded that ESC was not an insurer, but claimed that it was engaged in the business of insurance, which brought it within the scope of the UTPA.   In so holding, the Court affirmed its ruling in Hawkins v. Ford Motor Co., 566 S.E.2d 624 (W.Va. 2002), which had established that self-insured employers that process their own liability claims are not liable for unfair trade practice claims.  (The Court also pointed out in a footnote that in amendments to the Workers' Compensation Act in 2005, the Legislature had eliminated claims such as Mrs. Wetzel's, which alleged violations of the UTPA by a private workers' compensation carrier or third-party administrator or by its employees or agents.)
   
    Justices Joseph Albright and Larry Starcher dissented, and would have reversed the circuit court's rulings regarding ESC's immunity and its liability under the UTPA.  Their opinions accused the majority of reading the pertinent statutes on both issues too broadly, with the result that ESC improperly received immunity from liability and Mrs. Wetzel was deprived of her day in court.

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   The Alabama Appellate Watch blog, which is published by Lightfoot Franklin & White, LLC, reports that earlier this week, the Supreme Court of Alabama reversed a $3.5 billion punitive verdict rendered against ExxonMobil Corporation in 2003.  Lightfoot Franklin was among the counsel for ExxonMobil in the appeal.  There is a separate post that provides news coverage of the decision. 

    The case was first tried in 1999 and resulted in a compensatory damages verdict of $87 million and a punitive damages verdict of $3.42 billion in favor of the plaintiff, the Alabama Department of Conservation and Natural Resources.  The Supreme Court reversed on the grounds that the trial court had improperly admitted a confidential letter from Exxon's in-house counsel and ordered a new trial. 

    In the retrial in 2003, which was the subject of this appeal, the jury awarded punitive damages of $11.8 billion and compensatory damages of $102.8 million for the plaintiff.  The State claimed that Exxon deliberately underpaid royalties that were due the State from natural gas wells that Exxon drilled in State-owned waters along the coast.  The trial court reduced the punitive award by $8.5 billion based on an impermissibly high ratio of compensatory to punitive damages.

     The Supreme Court held that the plaintiff had not proven that Exxon committed fraud and reversed the entire punitive damage award, which had been based on the jury's finding that Exxon defrauded the State.  The Court affirmed the award of compensatory damages for breach of contract, but reduced that verdict from $63.7 million to $51.9 million, and remanded the matter to the trial court with directions to award compensatory damages and interest consistent with the opinion, which, according to an attorney for the State, would amount to approximately $80 million.

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    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.

Continue Reading...

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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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    In the Saturday Gazette-Mail (Charleston, West Virginia), Tom Searls has a nice recap on Camden-Clark Memorial Hospital's appeal to the Supreme Court of Appeals from a $6.5 million verdict in a medical malpractice trial.  I wrote yesterday that the Court rejected the petition by a vote of 3-2.

    Also in the paper is an article on Marshall University's decision to start disciplining students who are accused of downloading songs illegally.  Marshall's decision was apparently prompted by the lawsuits filed by some record companies against two students, which I wrote about earlier today.  Although 20 Marshall students received pre-litigation settlement letters from the Recording Industry Association of America (RIAA) in February, and nine more received them last month, Marshall had not previously taken any disciplinary action.  According to Stephen Hensley, the dean of student affairs, who is quoted in the article, the students' use of Marshall's network to download and/or distribute the songs violates the university's code of conduct and carries the risk of disciplinary action.

    Marshall needs to be careful in how it proceeds.  It has an interest in upholding its code of conduct and giving students a disincentive from engaging in similar conduct, but it cannot and should not rely solely on the RIAA's allegations against a student as the basis for any disciplinary action.  As noted in a 2005 post in the blog, Ars Technica,

But the RIAA has been wrong before, as it was in its 2003 suit against Sarah Seabury Ward, a sixty-something sculptor who was accused of downloading gangsta rap. The suit was eventually withdrawn, but the case (and others like it, including one against a dead grandmother) does shed some doubt on the RIAA's ability to correctly identify the infringing party.   With Santangelo's case now headed for trial, a judge's ruling may provide more clarity about what the RIAA can and cannot do in its war on musical piracy.

    There is also an equal protection issue.  It isn't clear from the Gazette-Mail article whether Marshall is going to discipline only the two students who have been sued or the nine who received the RIAA's pre-litigation settlement letters.  But if it's going to act against the nine who received the letters last month, what's it going to do about the 20 students who received the letters in February?   Dean Hensley's explanation that, "We were new at it then, and we're not so new at it now," isn't very reassuring. 

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    As a follow up to yesterday's post, the Supreme Court of Appeals refused, by a vote of 3-2, Camden-Clark Memorial Hospital's petition for appeal from an adverse jury verdict of $4,834,380.00, which was rendered last year in a medical malpractice case. 

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    I intended to post this yesterday, but ran out of time.  In any event, the Supreme Court of Appeals of West Virginia started its Fall Term yesterday, which runs through November 21.  The Court has posted several of its motion and argument dockets on its calendar, which also includes the Court's writ, decision, opinion, and administrative conferences.

    For cases on the argument docket, which are appeals or petitions that the Court has accepted, the Clerk's office posts the parties' briefs in PDF format.  For cases on the motion docket, which have not yet been accepted or refused by the Court, the parties' pleadings are not available online.  Although the size of the Court's dockets precludes an extensive discussion of all or even most of the cases,  I will attempt to identify cases, particularly on the argument docket, that present important issues.

    Today, the Court will hear argument in State ex rel. Chemtall Inc., et al. v. The Honorable John T. Madden, et al., No 33380, which involves claims for medical monitoring by a proposed class of former coal preparation plan workers who were exposed to polyacrylamide flocculants, which are products used to treat coal wash water at preparation plants.  The petitioners, who are the defendants, are seeking a writ of prohibition and/or mandamus against the Circuit Court of Marshall County to prevent enforcement of two orders that the petitioners claim are contrary to the Supreme Court's prior opinions in this case.

    The Supreme Court has issued decision regarding the Chemtall case on two earlier occasions.  In the first decision, State of West Virginia ex rel. Chemtall Inc. v. Madden, 607 S.E.2d 772 (W.Va. 2004), the Court vacated the Circuit Court's certification of a class that included plaintiffs from seven states, some of which did not recognize medical monitoring, and directed the Circuit Court to consider whether such differences in the law would preclude the adjudication of the claims  arising from several states on a class-wide basis.  The second decision, Stern v. Chemtall Inc., 617 S.E.2d 876 (W.Va. 2005), reversed a denial of intervention sought by two coal preparation plant workers, who had been plaintiffs in an earlier suit, and a water treatment worker.    

    The petitioners challenge the Circuit Court's decisions to allow the water treatment worker to participate in the action, to permit the use a punitive damages multiplier in a medical monitoring action, and to allow the common adjudication of claims that arise under West Virginia and Pennsylvania's medical monitoring laws. 

    I had written about West Virginia's medical monitoring law in an earlier post dealing with Mattel's recall of defective toys.  I think the most significant issues presented in this case are whether the the punitive damages multiplier is permissible and whether the trial court can adjudicate claims that arise under both West Virginia and Pennsylvania medical monitoring laws.  As I read the parties' pleadings, the law in West Virginia is unsettled on both of those issues, and each has potentially tremendous consequences.

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    John Day of Day On Torts wrote a post last week about the Supreme Court of West Virginia's recent decision in State ex rel. Johnson & Johnson Corp. v. Karl, 647  S.E.2d  899 (W.Va. 2007), in which the Court declined to adopt the learned intermediary doctrine "as an exception to the general duty of manufacturers to warn consumers of the dangerous propensities of their products."

    The learned intermediary doctrine provides that "a drug manufacturer is excused from warning each patient who receives the prescription drug when the manufacturer properly warns the prescribing physician of the product's dangers."

    The Court reviewed the law in every other state and found that the doctrine had been adopted by decision of the state's highest court or by statute in 22 states, while an equal number had not adopted it.  Six other states had referred to the doctrine favorably in dicta or had adopted it in a context unrelated to prescription drugs, but had not adopted it with respect to prescription drugs.

    The majority opinion found that, "Significant changes in the drug industry have post-dated the adoption of the learned intermediary doctrine in the majority of states in which it is followed.  We refer specifically to the initiation and intense proliferation of direct-to-consumer advertising, along with its impact on the physician/patient relationship, and the development of the internet as a common method of dispensing and obtaining prescription drug information."

    The Court found that West Virginia's existing law of comparative contribution among joint tortfeasors is adequate to address issues of liability in cases where patients sued their physicians and the drug companies regarding the use of prescription drugs.  The Court also noted that drug manufacturers had the means and the ability to communicate directly and effectively with consumers, and that it was reasonable to place the burden of providing appropriate warnings on the drug manufacturers because they benefited financially from the sales of their products and possessed the knowledge regarding potential harms posed by their products. 

    Finally, I need to note one correction to John's post.  He wrote that with the Johnson & Johnson opinion, the learned intermediary doctrine was no longer the law in West Virginia.  But the point of the decision was to decline to adopt the doctrine in West Virginia's jurisprudence.

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    The Supreme Court of the United States has denied a petition for a writ of certiorari filed by MBNA America Bank from a decision from the Supreme Court of Appeals of West Virginia that affirmed the denial of MBNA's request for a tax refund (06-1228, FIA Card Services, N.A. v. WV Tax Comm'r).  The Supreme Court also denied the petition for a writ of certiorari filed by a Delaware corporation from a ruling by the Supreme Court of New Jersey that reached a similar result (06-1236, Lanco, Inc. v. Director, Division of Taxation).

    Last November, the Supreme Court of Appeals of West Virginia held that West Virginia's Tax Commissioner could impose business franchise and corporate net income taxes on a corporation that had no real or tangible personal property and no employees located within the State. 

    In Tax Com'r of State v. MBNA America Bank, N.A., 640 S.E.2d 226 (W.Va. 2006), the Court held that the requirement that an entity have a physical presence in a state in order for there to be a "substantial nexus" supporting a state tax on interstate commerce applied only to use and sales taxes, and not to the business franchise and corporate net income taxes imposed on MBNA.   The Court explained that it would determine whether a "substantial nexus" existed based on whether an entity had a substantial economic presence, and that because MBNA had such a presence in West Virginia, the business franchise and corporate net income taxes were appropriate.   
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     The Supreme Court of Appeals of West Virginia has rejected a claim for negligent spoliation of evidence against an insurance company in Mace v. Ford Motor Company, No. 33080 (May 25, 2007).

    In February 2002, Terry Mace was in an accident involving the rollover of her Ford Explorer. Her insurance company, Liberty Mutual Insurance Company, declared the Explorer to be a total loss, paid Mace, and sold it to a salvage company in April 2002.

     Mace and her husband filed suit in January 2004 against Ford Motor Company and the dealership where she bought the Explorer, alleging product liability and negligence claims.  At that point, however, she could not obtain some necessary parts of the Explorer because they had been removed as part of the vehicle’s salvage.  The plaintiffs then amended their complaint to assert a claim against Liberty Mutual for negligent spoliation of evidence. 

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    A couple of weeks ago, I wrote about the rehearing petition filed by the plaintiffs regarding the Supreme Court of Appeals of West Virginia's decision in Schrader, Byrd & Companion, P.L.L.C. v. Marks, 2007 WL 1039070 (W.Va.).  The Court had held that the plaintiffs' lawyers could collect a contingency fee on the royalty payments received by their clients under a coal lease, even though the amount and durations of the clients' payments, and hence, the fees, were unknown. 

    The Court considered the petition yesterday, and rejected it 3-2, with Justices Maynard and Benjamin voting to rehear the case.  Both of them dissented from the original decision. 

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    This is an update to a post from last month regarding the Supreme Court of Appeals of West Virginia's decision in Schrader, Byrd & Companion, P.L.L.C. v. Marks, 2007 WL 1039070 (W.Va.), which upheld the application of a contingency fee contract to royalty payments due the client under a coal lease, even though the amount of the payments, and thus the fees, and the duration of the payments are unknown.

    Christopher Riley (my law school classmate), whose firm has represented the plaintiffs, asked the Supreme Court of Appeals on May 7 to rehear the case.  As I will explain, Chris is in a somewhat unenviable position. 
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    In Shamblin v. Nationwide Mutual Insurance Company, 396 S.E.2d 766 (W.Va. 1990), the Supreme Court of Appeals created a "hybrid negligence-strict liability" standard of proof to be used in actions by insureds against their insurers for failure to settle third-party liability claims against them within the insureds' policy limits. 

    But in Strahin v. Sullivan, 2007 WL 559219 (W.Va.), the Court revisited Shamblin and concluded that an insured's personal assets must actually be at risk in order for an insured to recover  an excess verdict: "We now hold that in order for an insured or an assignee of an insured to recover the amount of a verdict in excess of the applicable insurance policy limits from an insurer pursuant to this Court's decision in Shamblin, the insured must be actually exposed to personal liability in excess of the policy limits at the time the excess verdict is rendered." Continue Reading...

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    In some cases, a client's recovery involves payments that will be received on a periodic basis.  While an attorney's fees generally can be calculated in advance and paid in full, what happens if the amount of the client's payments varies and the duration of the payments is unknown?  How much does the attorney receive and for how long?  The Supreme Court of Appeals of West Virginia recently addressed these issues in a case involving attorney's fees on royalty payments under a coal mining lease. 

    In Schrader, Byrd & Companion, P.L.L.C. v. Marks, 2007 WL 1039070 (W.Va.), the clients appealed the summary judgment in their attorneys' favor as to the applicability of a contingency fee arrangement to royalty payments under a coal mining lease.  In affirming the judgment, the Supreme Court of Appeals of West Virginia held: "an attorney fee arrangement whereby the attorney receives a percentage of funds as they are periodically received by the attorney's client is not, as such, either suspect or impermissible." Continue Reading...

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