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

    A post earlier this week in Stephen D. Rosenberg’s Boston ERISA & Insurance Litigation Blog ties in nicely with an appeal argued in front of the Supreme Court of Appeals of West Virginia on Tuesday, which was the first day of the Court’s Spring Term.  Here is the Court’s calendar for the entire term.

    The post was entitled “The Three Rules of the Tripartite Relationship,” which refers to the relationship established when an insurance company’s policyholder is sued, and the insurance company provides a defense as required by the policy.  Even though the policyholder’s lawyer is retained and paid by the insurance company, he or she represents the policyholder’s interests exclusively.  But the tripartite relationship has the potential to create conflicting loyalties on the part of the policyholder’s counsel, whose obligation to represent the policyholder may be at odds with the interests of the insurance company that has retained him or her. 

    Stephen linked to an article entitled "On the Horns of a Defense Counsel Dilemma," and also proposed three rules of thumb that should govern the tripartite relationship.  Roy Harmon, who writes Health Plan Law, also wrote about the arrangement yesterday with a post entitled "Appointed Defense Counsel: The Small Print Enlarged."

    The tripartite relationship was at issue before the Supreme Court of Appeals in Jeffrey A. Horkulic, et al. v. William O. Galloway, et al., No. 33352, which involved an underlying legal malpractice claim.  Defendant Galloway’s malpractice carrier, TIG Insurance Company (“TIG”), appointed counsel for him, and he also retained his own private counsel.  A dispute developed between Galloway’s appointed counsel and TIG as to whether a settlement with Horkulic had been reached.  Galloway’s appointed counsel said the parties had reached a settlement, while TIG’s claims adjuster said they had not.

    The sticking point between Galloway and TIG was a provision that Galloway would confess judgment in the amount of $1,500,000, but that the plaintiff 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's objection was that the plaintiff, who had also filed a third-party bad faith claim against TIG, would be able to use the confession of judgment in the bad faith case in order to establish his damages.  The Circuit Court of Ohio County entered an order approving the settlement, including Galloway's confession of judgment, and TIG appealed.

    As you can see from the circuit court’s order, as well as the parties’ briefs (here are TIG's brief, the plaintiff’s brief, and TIG's reply brief), the plaintiff’s appointed counsel clearly was at odds with TIG, the entity who retained and paid him. This conflict is what can make the tripartite relationship so problematic. 

    At the oral argument, which I watched via the Court’s webcast, TIG argued that it would be unable to challenge the confession of judgment during the prosecution of the third-party bad faith case, for the purpose of determining the plaintiff’s damages.  The plaintiff’s counsel repeatedly assured the Court that TIG could object to the judgment, but as some members of the Court observed, until the bad faith case is underway and the confession of judgment becomes an issue, TIG’s concern may be premature.

    Finally, one other issue that was consolidated for hearing on Tuesday with the underlying appeal was State ex rel. TIG Insurance Company v. The Honorable Arthur M. Recht, et al., No. 33353, which was TIG’s petition for a writ of prohibition against the circuit court’s award of attorney’s fees to Horkulic’s lawyer.  The circuit court ordered TIG to pay attorney’s fees at the rate of $500 per hour for the work involved in enforcing the plaintiff’s settlement with TIG, which amounted to $50,750.  Here are TIG’s petition, Galloway's response, and the plaintiff’s response.  (Incidentally, Galloway's position was that the circuit court did not exceed its authority in awarding attorney's fees and that the amount of the award was not excessive.)  The Supreme Court was not alarmed about the amount of the hourly rate, so I don’t anticipate that the Court will disturb the award.

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    For the second time in about two weeks, drug manufacturer AstraZeneca Pharmaceuticals LP has sued Mylan Pharmaceuticals Inc., alleging infringement by Mylan on its patent for cholesterol drug Crestor.  Here is the complaint, which was filed in United States District Court for the Northern District of West Virginia on December 28, 2007, and assigned to Chief Judge Irene M. Keeley. AstraZeneca Pharmaceuticals LP, et al. v. Mylan Laboratories, Inc., Civil Action No. 1:07-CV-00177.

    In the action, AstraZeneca alleges that Mylan has infringed on its patent for Crestor, which is used to treat high cholesterol, by seeking FDA approval for rosuvastatin calcium tablets, which is the generic version of Crestor.  According to the complaint, Mylan’s position before the FDA is that AstraZeneca’s patent for Crestor is invalid and unenforceable.  Among other relief, AstraZeneca asks that “the effective date of any FDA approval of the Mylan Rosuvastatin Calcium Tablets shall be no earlier than the expiration date of the ‘314 patent….”

    On December 11, AstraZeneca had filed suit against seven generic drug manufacturers, including Mylan, in United States District Court in Delaware, alleging their infringement of its Crestor patent.  AstraZeneca’s complaint against Mylan is virtually identical to its West Virginia filing.  AstraZeneca Pharmaceuticals LP, et al. v. Mylan Pharmaceuticals Inc., Civil Action No. 1:07-CV-00805.  The other generics manufacturers named (in separate complaints) are Sun Pharmaceuticals Industries, Ltd., Sandoz Inc., Par Pharmaceutical Inc., Apotex Inc., Aurobindo Pharma Ltd., and Cobalt Pharmaceuticals Inc.

    In other Mylan litigation, Judge Keeley has denied the motion to dismiss filed by Eliot Disner in Mylan's legal malpractice lawsuit against him.  Here is Judge Keeley's order, which was entered on December 21, 2007.  On the same day, she also entered an order staying the case, based on a pending arbitration that may affect its outcome.  She has given the parties until March 3, 2008 to report on the status of the arbitration.  For some background on Mylan's claims against Disner, here is my post from last  August.

    Finally, one more item of interest about Mylan, which does not involve litigation (yet).  Mylan's chief operating officer, Heather Bresch, is accused of receiving an MBA from West Virginia University without satisfying the degree requirements when she was in the program nearly a decade ago.  Bresch, who is the daughter of West Virginia Governor Joe Manchin, was named COO in October, at which point the Pittsburgh Post-Gazette called WVU to verify her academic credentials.  According to the Post Gazette, which first reported on the situation on December 21, WVU initially said that Bresch did not have an MBA, then reversed its position a few days later, and explained that the discrepancy in its records was caused by the College of Business and Economics’ failure to transfer records for almost half her course work to the Office of Admissions and Records.

    As reported by the Post-Gazette, earlier this week, WVU Provost Gerald Lang named a three person panel to determine whether he did anything wrong in determining that Bresch had earned an MBA.  And today, the Post-Gazette published this editorial, which questions whether an out-of-state panel may have more credibility in investigating the allegations about Bresch's degree.

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

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

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    I had intended to write about some West Virginia federal court decisions that were issued last week dealing with a class actions and commercial free speech, but an article in this morning’s Charleston Gazette caused me to put those on hold.  I'll get back to those in a day or two.

    Yesterday, I wrote that the Supreme Court of Appeals was going to hear argument in A. T. Massey Company’s appeal of a $50 million verdict rendered against it in Boone County, West Virginia in 2002.  I wasn’t able to attend the argument or watch on the Court’s webcast, so I don’t know how the argument went.

    According to the article by Gazette reporter Paul J. Nyden, Massey and two related entities have sued Wyatt, Tarrant & Combs, LLP of Lexington, Kentucky and McGuire Woods LLP of Richmond, Virginia for their alleged malpractice in representing Massey in a Virginia lawsuit filed by Hugh Caperton and his companies.  In 2001, a Virginia jury awarded the plaintiffs $6 million.  The Virginia Supreme Court refused Massey’s appeal because it was filed by a lawyer from Kentucky who wasn’t admitted to practice in Virginia.  Massey ended up paying Caperton $7.2 million, including $1.2 million in pre-judgment interest.  Here is Massey’s complaint, which was filed on July 13, 2007 in the Circuit Court of Fayette County (Lexington), Kentucky.

 

Continue Reading...

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    In June, Mylan Laboratories Inc. and UDL Laboratories, Inc., one of its subsidiaries, sued their former counsel, Eliot G. Disner and his firm, Eliot G. Disner, P.C., in the Circuit Court of Monongalia County, West Virginia (Morgantown), for what they claimed was negligence and breach of contract regarding advice he provided on antitrust issues.  Here's the complaint. 

    Mylan alleges that Disner committed malpractice in three ways.  First, he "allowed Mylan to enter into the exclusive supply agreement with Profarmaco/GYMA [who were to supply Mylan with the "active pharmaceutical ingredients" for lorazepam and clorazepate for the generic versions of the drugs on an exclusive basis] without fully investigating the issues or apprising Mylan of the substantial risks."  Mylan also alleges that Disner allowed it "to engage SST/FIS [another supplier of lorazepam and clorazepate] in discussions on a similar exclusive arrangement, introducing a damaging horizontal element into an antitrust equation."   Finally, Mylan alleges that after the FTC initiated an investigation into Mylan's conduct, Disner "offered no advice to mitigate the problems facing Mylan or suggesting the risks that Mylan faced -- instead advising that the FTC would accept a harmless consent decree, that the FTC had no ability to seek damages, and that the states would drop their claims when the FTC dropped its claims."

    According to the complaint, after acting on Disner's advice, Mylan was hit with an investigation by the FTC, which turned into an action seeking disgorgement of Mylan's profits of more than $120 million on certain products.  Mylan was also sued by several states, various direct purchasers, who obtained class certification for their suit, and several indirect purchasers.  Mylan ended up settling with the FTC, the states, and the indirect purchasers for $147 million, and also paid $14.6 of the $35 million settlement of direct purchasers' class action.  In 2005, Mylan went to trial against four of the plaintiffs who opted out of the class settlement, and was found to be liable for slightly more than $12 million.  But with attorney's fees and treble damages, the plaintiffs seek judgment for approximately $80 million.  Finally, Mylan alleges that it has spent more than $55 million in attorney's fees and expenses for itself and for Profarmaco/ GYMA, which Mylan indemnified.

    Disner, who is representing himself and his firm, last month removed the case to the Northern District of West Virginia where it is pending before Chief District Judge Irene M. Keeley.  Mylan Laboratories, Inc. v. Eliot G. Disner, Civil Action No. 1:07-CV-00095-IMK.  The defendants' answer or responsive pleading is due by August 24. Continue Reading...

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