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

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

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

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

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

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    Last month, United States District Judge Joseph R. Goodwin found that the West Virginia Lottery Commission’s prohibition of certain words that video lottery operators could use in advertising their machines was an impermissible infringement on the operators' commercial free speech.  Words such as “casino,” “jackpot,” and “Vegas” have been banned from advertising since 2004, when the Limited Video Lottery Act was passed. 

    In its order, which granted the WV Association of Club Owners and Fraternal Services, Inc.’s motion for a preliminary injunction against John Musgrave, the directory of the West Virginia Lottery, the court found that “[t]he advertising ban infringes upon the limited video lottery retailers’ right to speak and impedes the public’s ability to engage in informed political discourse."

    Since the court issued its ruling, there has been an interesting and unexpected development.   The West Virginia Amusement & Limited Video Lottery Association, which was not involved in the litigation, and whose membership consists of 18 of the 37 companies authorized to lease machines, has informed retailers with video lottery machines supplied by its members that if they attempt to advertise as permitted by the court’s ruling, they will lose all but one of their machines.  The contracts between the companies leasing the machines and the retailers provide that a retailer must be allowed to have at least one machine. 

    The organization’s rationale apparently is that increased advertising that employs the words that the Act originally banned would generate a backlash against the machines and affect their popularity and hence their profitability.  Judge Goodwin anticipated this possible outcome when he wrote, "Lifting the LVLA's ban on commercial speech will bring limited video lottery into the light, thereby providing important information to those who want to play, and those who want to protest."

    AP reporter Lawrence Messina wrote an article about the controversy, and also has an entry on his blog , Lincoln Walks At Midnight, which reviews the coverage of the issue.

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    A few days ago, I wrote about a recent United States District Court decision awarding benefits to the widow of a man who had accidentally overdosed on prescription medications.  I noted that based on ERISA pre-emption, almost all such cases have to be brought in federal court, where the claims and damages available to plaintiffs are very limited.

    Today, in the Boston ERISA Law Blog, Stephen Rosenberg pokes a little fun at The Wall Street Journal Law Blog’s fascination this week with the doctrine of pre-emption, and accurately describes ERISA pre-emption (which the WSJ Law Blog has omitted from its discussion) as “the most important and interesting application of preemption ….”

    Rosenberg also points out that efforts by states to require employers to provide health care coverage to their employees demonstrate that ERISA pre-emption “is in fact the one area of preemption that consistently affects broad numbers of everyday, real life people ….”   He is referring to Maryland’s Fair Share Act, which was held by the Fourth Circuit Court of Appeals in Retail Industry Leaders' Association v. Fielder, 475 F.3d 180 (4th Cir. 2007),  to be pre-empted by ERISA, and to efforts by California to provide universal health coverage.  Rosenberg's post from August 27, entitled "California, Health Insurance and ERISA Preemption," includes a link to a paper on the topic by University of Maryland Professor Sharon Reece and a post by the Workplace Prof Blog.

    Rosenberg seems to doubt the success of such efforts (and he appears to be right, according to The Wall Street Journal article referenced above), but Brian King at the ERISA Law Blog has a contrary view, in this post from April 27. 

    My own view is that unless Congress amends ERISA’s pre-emption language (highly unlikely, at least in the short term) or the United States Supreme Court holds that ERISA’s scope of pre-emption is too broad (even more unlikely, given the enormous body of federal law, including, significantly, decisions from the Supreme Court, which has repeatedly endorsed that scope as demonstrating Congressional intent), legislation like California’s will be pre-empted. 

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    In January, a jury in Roane County, West Virginia determined that natural gas producers had failed to honor their leases with gas well owners, and awarded a class of more than 10,000 natural gas well owners a total of $404 million in damages.  The plaintiffs contended that Columbia Natural Resources, LLC, formerly owned by NiSource, Inc., and now owned by Chesapeake Energy Company, systematically and deliberately underpaid them in violation of their leases by withholding the production costs from the royalties paid to the plaintiffs.  The jury's verdict included compensatory damages of $134 million and punitive damages of $270 million.

    Roane County Circuit Judge Thomas C. Evans, III entered an order affirming the verdict on June 27, 2007.  Estate of Garrison G. Tawney, et al. v. Columbia Natural Resources, LLC, et al., Civil Action No. 03-C-10E (Circuit Court of Roane County, West Virginia).  Once the court enters the final order, the defendants have four months to file their petition for appeal with the Supreme Court of Appeals of West Virginia.

    In response to the outcry against the verdict by natural gas producers, West Virginia Governor Joe Manchin proposed a bill for the Legislature’s consideration during its three day special session, which ended yesterday, which, among other things, would have given the producers an implied covenant in all oil and natural gas leases that allows companies to deduct reasonable post-production costs when calculating royalties to the landowners.  (The deduction of these costs formed the basis for the plaintiffs' claims in Tawney.)

    The Legislature chose not to take any action on the bill, on the grounds that it was too complicated to be considered in such a short session.  In all likelihood, the Governor will resubmit the bill when the Legislature’s regular 60 day session begins in January 2008.  Here is The Charleston (West Virginia) Gazette’s story this morning on the bill’s fate, as well as posts from Monday and yesterday by AP Larry Messina, who blogs at Lincoln Walks At Midnight.  But it’s clear that the opposition to the bill voiced by the landowners, who include individuals and businesses, also was a consideration in the Legislature’s decision not to consider the bill.

    What is not clear is whether the bill would apply to the jury’s verdict in Tawney.  Messina posted this compilation of stories earlier in the week, including another Gazette article that said that the bill would effectively overturn the verdict because the implied covenant would be retroactive and would apply to the defendants in the action.  But the bill specifically provided that its provisions would apply only in cases where there had been no jury verdict or final decision or judgment by a court of competent jurisdiction. 

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