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

    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.)  

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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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