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

    Last month, I wrote about the class action filed by employees of U.S. Sugar, who claim that their shares of company stock have been devalued as a result of mismanagement and self-dealing by the company’s officers.  In 1983, the employees participated in an ESOP (employee stock ownership plan) which traded their participation in a pension plan for ownership of the company’s stock, which is not publicly traded.  Thus, the employees have to depend on what the company is willing to pay to redeem their shares, which, according to allegations in the lawsuit, has been far less than what the shares are actually worth. 

    Then, last week, in an unexpected development, Florida Governor Charlie Crist announced that, as part of the restoration of the Everglades, Florida is willing to pay U.S. Sugar $1.75 billion for its 187,000 acres in four counties in southern Florida.  The company would lease the property back from Florida for six years, then go out of business.  Here are the statements issued by U.S. Sugar and by Governor Crist’s office, and an Associated Press story in today’s New York Times, which reports that the proposed purchase is moving forward.  

    This post by Suzanne Wynn in her Pension Protection Act Blog notes that the ESOP participants (U.S. Sugar's employees), as the owners of the largest block of stock, are the largest group affected by the purchase. 

    Although a lot has been written already about Florida’s proposal (and that’s all it is at this point), I have not seen any discussion of how a purchase price for the employees’ shares of stock would be formulated.  This deal may represent an opportunity for U.S. Sugar’s employees (and remaining shareholders) to obtain some value for their stock, but it does not seem to affect the issues in the litigation.

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    For the past few months, any story in The New York Times about West Virginia has discussed Don Blankenship or the Supreme Court of Appeals or both.  But a story in Monday’s edition focused attention on a lawsuit filed in the Circuit Court of Kanawha County (Charleston), West Virginia by Frank J. Haas against the West Virginia Masonic organization and its top officers.  Haas v. Montgomery, Civil Action No. 08-C-1035 (May 30, 2008).

    (In the interest of disclosure, I have known Frank for several years and appeared before him in his capacity as a West Virginia administrative law judge.)

    The lawsuit alleges that Frank, a former West Virginia Grand Master, was expelled from the Masons as a result of his successful efforts to reform the organization and eliminate practices that were, at best, anachronistic and, at worst, illegal:

During his Masonic career and as Grand Master, Plaintiff Haas supported various progressive reforms in Masonry reflecting the will of the majority of the members of Defendant Grand Lodge which reforms were consistent with and promoted rules and regulations designed to respect and protect the constitutional and other rights of all Masons and prospective Masons.  The proposed changes and reforms were not only morally right but were consistent with and designed to bring Masonic laws and attitudes into conformity with the substantial public policy of the State of West Virginia and the United States of America.

Plaintiff Haas' goal was to make Masonry more tolerant, friendly, decent and accepting of everyone regardless of nationality, race, religion or disability.

During the 2006 Annual Meeting, the members of Defendant Grand Lodge voted approval of various reforms proposed by Plaintiff Haas that were in his opinion designed to make Masonry more tolerant, friendly, decent and accepting of all Masons and prospective Masons.  These reforms and proposals were intended to rid Masonry in West Virginia of the Orwellian, repressive, regressive and unconstitutional practices that were and are clearly unconstitutional and against the substantial public policy of this State.

    The lawsuit raises questions about membership in a fraternal organization, such as whether a member is entitled to due process if he is to be expelled from the membership, and, if so, what type of due process.   

    But I think the more important question presented by the action is the public policy aspect: can an organization, even one that is private and fraternal, take punitive action against a member for activities that are intended to rid the organization of illegal or unethical practices?  I would hope the answer is no, but that’s what the lawsuit will decide.

    For more local coverage of the lawsuit, here are articles that appeared in the The Charleston Gazette and the (Charleston) Daily Mail, as well as some entries from a blog called Freemasons For Dummies (which did not think much of the Times’ article).

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    The parties in West Virginia University’s breach of contract case against former head football coach Rich Rodriguez agreed not to release the videos of the depositions taken in the case, but fortunately for us, there is no such prohibition against releasing the transcripts themselves, as noted by this post from the blog published by the West Virginia University Sports & Entertainment Law Society. 

    So for your reading enjoyment, here are the deposition transcripts for WVU Athletic Director Ed Pastilong, Rodriguez, and Rodriguez’s agent, Mike Brown. 

    Here's one tidbit from Rodriguez's deposition.  According to this Associated Press story in USA Today last month, Rodriguez testified that in August 2007, several members of the WVU Board of Governors told him that his outstanding demands for the football program would be met once Mike Garrison was president of WVU.  The problem is that when the BOG members allegedly made those statements, WVU was conducting a supposedly nationwide search for the position and Garrison was simply one of the applicants. 

    Rodriguez’s testimony is being cited by some who opposed Garrison’s selection as evidence that the search was rigged and not intended to find the best candidate for the position.  The depositions of Garrison and his chief of staff, Craig Walker, are scheduled for later this month.

    In other news regarding WVU v. Rodriguez, the (Charleston) Daily Mail reported that the parties are required to complete mediation by August 1, but WVU does not seem inclined to settle for less than the $4 million buyout.  Monongalia County Circuit Judge Robert Stone has scheduled a hearing on dispositive motions for November 10. 

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    In The New York Times yesterday, Mary Williams Walsh wrote about the situation faced by thousands of employees of U.S. Sugar, who participated in an ESOP (employee stock ownership plan) in 1983, which traded their participation in a pension plan for ownership of the company’s stock.  But as more employees reach retirement, they have discovered that their shares are not as valuable as they expected. 

    U.S. Sugar's shares are not traded publicly, so their value is determined by what the company is willing to pay to redeem them.  Then, once an employee cashes in his or her shares, the shares are retired, which critics of the plan allege makes it easier for insider groups to maintain control, because the pool of shares is getting smaller.

    According to the article, the company’s board turned down two offers by the Lawrence Group, a large agribusiness concern from Sikeston, Missouri,  to buy the shares for $293 each, even though the company was paying employees from $194 to $205 per share at the time.  The employees claim that they were not told about the offers or given the chance to sell their shares at the higher price. 

    To make matters worse, U.S. Sugar hired an outside appraisal firm to evaluate the Lawrence Group’s second offer, which was made in early 2007.  The appraiser determined that U.S. Sugar’s break-up value was $2.5 billion, or $1,273 per share.  Based on that estimate, U.S. Sugar rejected the Lawrence Group’s bid as inadequate, but did not increase the purchase price offered to employees.

    The employees have filed a class action, Johnson v. White, Civil Action No. 08-CV-80101 (M.D. Fla.), which is described on this Website set up by their counsel, Colson Hicks Eidson. The site has most of the court filings from PACER in PDF format. 

    The most recent filing is an amended complaint filed on May 2, 2008, which alleges claims for breach of fiduciary duty against the company’s directors and officers and for violations of ERISA and equitable relief under ERISA Section 502(a)(3).  

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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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   A few days ago, I wrote that the Circuit Court of Putnam County had approved three settlements in cases alleging medical malpractice by discredited surgeon John King, and had rejected the parties' requests to keep those settlements confidential.

    Last Thursday, the court approved and made public the terms of nine more settlements, but it appears unlikely that the terms of the settlements of the remaining 58 clients represented by Curry & Tolliver will be revealed.

    Because the parties are not asking the court to make a specific finding in those cases that the settlements are good faith settlements, its approval is not necessary, and those plaintiffs will voluntarily dismiss their claims against the settling defendants.  Here is the notice of presentation of stipulation for and order of dismissal presented by the Curry & Tolliver plaintiffs.

    These are the details of the nine settlements approved last week, as described by Paul J. Nyden in his article in Friday’s Charleston Gazette:

• Lisa and Stephen Coiner, $1.45 million for injuries to Lisa Coiner;

• Linda and Marvin Goodpaster, $1.32 million for injuries to Marvin Goodpaster, including $46,773 set aside for each of two children;

• John and Lisa Hansroth, $1.15 million in a settlement involving injuries from King's surgery on John "Andy" Hansroth, a Charleston Gazette reporter who died in March 2005.  The settlement included money for their three children;

• David and Zamba Holestin: $1.32 million for a failed spinal fusion operation to David Holestin, including $187,915 for one of the couple's two children who was alive at the time of the failed surgery;

• Matthew and April Murphy: $150,000 for injuries to one of their daughters during an operation King performed on her broken arm.  Their daughter suffered no permanent injuries;

• Katherine and Barry Rutledge, $2 million for King's failed treatment of Katherine Rutledge's minor foot problem, which later caused her legs to be amputated; and
  

• Carrie Ann and Mark Triplett, $730,000 for a flawed 2003 operation, which included $70,463 for each of their two children.

    In addition, the court approved two other settlements by King patients whose competency to enter into their settlements had been at issue.  In those settlements, Regina Bird received $2 million and Steven Dingess received $750,000. 

    I realize that the parties may have legitimate reasons for not wanting to disclose the terms of the remaining settlements, but I think that Putnam County Circuit Court Judge Spaulding is correct that the public has a right to know whether these were legitimate cases.  Under these circumstances (did King operate on any patient without committing malpractice?), the court should determine whether every settlement was made in good faith and if so, order the disclosure of its terms.  

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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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    You may have seen the print ads or TV commercials for LifeLock, Inc., which feature its president, Todd Davis, disclosing his Social Security number and guaranteeing its security, and offering a $1 million service guarantee if a subscriber’s identity is stolen or compromised.  But according to a lawsuit filed last week in the Circuit Court of Jackson County, West Virginia, not everyone is satisfied with LifeLock’s services.  Here is the complaint, courtesy of the plaintiff's counsel, Davis Paris of Marks & Klein, LLP.

    In Gerhold v. LifeLock, Inc., Civil Action No. 08-C-69 (May 12, 2008), the plaintiff alleges that LifeLock and Davis, who is also named as a defendant, engage in deceptive business practices and fraudulent advertising in having “induced nearly one million individuals, including Plaintiff and the Putative Class in the state of West Virginia, into subscribing to the identity theft protection services the company purportedly provides.”

    The plaintiff seeks to certify a class consisting of “All persons in the state of West Virginia who subscribed to LifeLock, between 2005 and the present, including former residents who resided in West Virginia at the time they subscribed to LifeLock’s services.”  The class is alleged to have more than 1,000 members.

    LifeLock is alleged to misrepresent the scope and effectiveness of its services, and to conceal the potential harm that its services could have on its subscribers' credit profiles by LifeLock's placing and renewing fraud alerts on those profiles.  LifeLock also fails to disclose that the credit reports it obtains for its subscribers are the free annual reports to which they would be entitled ordinarily, and that by LifeLock ordering the credit report, the subscriber is ineligible to order the report for 12 months.

    The complaint also deals with Davis’ disclosure of his own Social Security number, which apparently has not been as secure as Davis has claimed:

9.      While LifeLock has only publicly acknowledged that Davis’s identity was compromised on one (1) occasion, there are more than twenty (20) driver’s licenses that have been fraudulently obtained through the misappropriation of Davis’s personal information.

10.    Furthermore, a simple background check performed using Davis’s social security number reveals that his entire personal profile has been compromised to the extent that the birth date associated with his social security number is November 2, 1940, which would make Davis 67 years old.  This is clearly fraudulent information.

    The complaint alleges causes of action for violations of the West Virginia Consumer Credit and Protection Act for unfair or deceptive acts or practices and by a credit service organization, unconscionability, injunctive relief, and declaratory judgment.

    The lawsuit was the subject of a front-page story by Andrew Clevenger in the Sunday Gazette-Mail, which points out that Gerhold's counsel has filed similar class actions against LifeLock and Davis in New Jersey in March  and in Maryland in April.  For additional information, here are posts from, the Blogger News Network and from News Blaze.

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    The saga of Caperton v. A. T. Massey Coal Company, Inc. continues, following the Supreme Court of Appeals of West Virginia’s decision to reverse the jury’s verdict of $50 million against Massey.  Paul J. Nyden reported in yesterday’s Charleston Gazette that Caperton and his company, Harman Mining Corporation, have retained Theodore B. Olson of Gibson, Dunn & Crutcher, to represent them in an appeal before the Supreme Court of the United States.

    Olson served as Solicitor General from 2001 until 2004, but may be best known for arguing Bush v. Gore before the Supreme Court in 2000 on behalf of President Bush. 

    Olson will present Caperton and Harman’s petition for a writ of certiorari, which will likely focus on the make-up of the Supreme Court of Appeals and argue that Caperton and Harman did not have an impartial tribunal because of the participation of Justice Brent Benjamin, whose election in 2004 benefited from the involvement of  Massey Energy Company chairman Don Blankenship.

    Here is a quote from Olson in the Gazette article:

“A line needs to be drawn somewhere to prevent a judge from hearing cases involving a person who has made massive campaign contributions to benefit the judge. We certainly believe that, in this case, acting Chief Justice Benjamin crossed that line.”

    Justice Benjamin became acting Chief Justice when Chief Justice Elliott E. “Spike” Maynard recused himself after photographs were released in January showing him with Blankenship in Monte Carlo in the summer of 2006, while Massey’s appeal was pending before the Supreme Court of Appeals.

    Although Nyden did not mention any time frame for the presentation of the petition, Rule 13 of the Rules of the Supreme Court of the United States provides that a petition for a writ of certiorari from a judgment of a state court of last resort must be filed within 90 days after entry of the judgment.  The Supreme Court of Appeals’ decision was issued on April 3, which makes the petition due by July 2.

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    In March, I wrote that most of the plaintiffs in the medical malpractice actions against discredited surgeon John King had reached settlements with several of the defendants.  Last week, three plaintiffs had their settlements approved by the Circuit Court of Putnam County, West Virginia.  What I find interesting is that Judge O. C. Spaulding refused the parties’ request to keep the amounts of the settlements confidential.   

    Paul J. Nyden wrote about the hearing in last Wednesday’s Charleston Gazette.  In denying the parties' request for confidentiality, Judge Spaulding  noted the publicity and attention that the cases had generated state-wide and nationally, and said that, “the public has a right to know, were these legitimate cases?” 

    You can answer that question for yourself.  These are the settlements that were approved, according to the article:

• $1,083,384 for the estate of Cora Linville, who died three years after her back surgery resulted in multiple infections;
  

• $923,585 for the estate of John Higgenbotham, who was 91 when he died.  Higgenbotham never woke up after King performed a massive spinal operation on his back; and 
  

• $423,585 for the estate of Leatha Johnson, who died less than three months after King performed the first of four surgeries to repair fractures and counter infections.  
  

    Court approval for these settlements was necessary because the Supreme Court of Appeals of West Virginia held in Estate of Postlewait ex rel. Postlewait v. Ohio Valley Medical Center, Inc., 591 S.E.2d 226 (W.Va. 2003), that West Virginia Code § 55-7-7 “clearly contemplates and requires that all compromises of wrongful death actions be submitted to the circuit court for approval.”  

    Another hearing is scheduled for May 22 for court approval of nine settlements of plaintiffs who were minors when King performed surgery on them.  

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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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    Although John Beilein’s resignation last April as West Virginia University's head basketball coach did not attract nearly the attention (or outrage) that Rich Rodriguez’s resignation has, that could change.

    When Beilein left for the same position at the University of Michigan, he was able to negotiate a reduction in the amount of his buyout with WVU from $2.5 million to $1.5 million, payable in five annual installments to the West Virginia University Foundation, Inc.  (Incidentally, Beilein’s attorney in those negotiations now represents WVU in its lawsuit against Rodriguez.) 

    Sports writer Mike Casazza reports in today’s (Charleston) Daily Mail that on April 1, Beilein paid the first installment of $300,000, less a deduction of $10,000 to reflect incentives he was owed for achieving team GPA and graduation rate levels, to WVU President Mike Garrison.  Here is Beilein’s letter, which also has a copy of the check.  The Daily Mail obtained the letter through a FOIA request, which seems to be the only way to get information from WVU.

    Here are some excerpts from Beilein’s letter:

It is my belief that the [Resolution and Termination] Agreement’s provision requiring payment of $1.5 million over five years is void and unenforceable because it is a penalty premised on an unenforceable and illegal liquidated damages provision contained in the Employment Agreement.  The liquidated damages provision in the Employment Agreement is grossly disproportionate to any actual damages that might have been incurred by the University and is void as a matter of public policy.

At that time, I have chosen not to initiate legal proceedings to declare the Agreement and the related liquidated damages provision in the Employment Agreement void but reserve my right to seek future action.  I urge the University to stop using the liquidated damages provision in its employment contracts because such provisions are illegal, onerous, and violate public policy.

    Obviously Beilein doesn’t want to be a defendant in a breach of contract action, so he made the payment as agreed.  But judging from his statements, he may not mind being the plaintiff in a declaratory judgment action aimed at invalidating his buyout.  He may also be waiting to see how WVU does in its lawsuit against Rodriguez.  Their situations are so different factually, though, that whatever happens with Rodriguez would not be an accurate barometer of what Beilein could expect. 

    Beilein also says that he’s making his payment “[w]ithout waiving any rights and under protest[.]”  But even if he raised his concerns with WVU before entering into the agreement, he signed the agreement, which would seem to undermine his implied threat that he may not abide by its terms.    

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    Aubrey McClendon is the CEO of Oklahoma City-based Chesapeake Energy Company, which was hit with a verdict for $404 million last year when a jury determined that it had systematically and deliberately underpaid natural gas well owners in violation of their leases by withholding production costs from the royalties paid to them. 

    But what is more relevant here is that McClendon is also a member of The Professional Basketball Club, LLC, which purchased the NBA’s Seattle SuperSonics and the WNBA’s Seattle Storm from Starbucks founder and CEO Howard Schultz in 2006.  Last week, the NBA Board of Governors approved the Sonics' move from Seattle to Oklahoma City in time for the 2010 season, if not sooner.

    The team's move did not sit well with Schultz, who, in his capacity as the sole member of Canarsie Holdings, LLC, filed a derivative lawsuit in federal court on behalf of The Basketball Club of Seattle, LLC, which formerly owned the teams.  Schultz’s claim is that McClendon’s group always intended to move the Sonics franchise to Oklahoma City even as they promised to keep the team in Seattle.  The Basketball Club of Seattle, LLC v. The Professional Basketball Club, LLC, (W. D. Wash., April 22, 2008).

    The introduction to Schultz’s complaint explains that

In early 2006, when The Basketball Club of Seattle (“BCOS”) offered the Seattle SuperSonics for sale, it was critical to BCOS that any potential buyer be  committed to keeping the team in Seattle. Defendant, a group of Oklahoma City businessmen, knew that BCOS would only sell it the team if defendant persuaded BCOS that it wanted to keep the Sonics in Seattle. For that reason, the Oklahoma City group told BCOS at the time it purchased the team that “it is our desire to have the Sonics and the Storm continue their existence in the Greater Seattle Area and it is not our intention to move or relocate the team.” That statement was false from the moment it was made. The Oklahoma City group’s true intention, as later described candidly by one of its principal owners, was to move the team to Oklahoma City at the earliest possible time: “We didn’t buy the team to keep it in Seattle, we hoped to come here [to Oklahoma City].”

Defendant fraudulently induced BCOS to sell the Sonics to it, and actively concealed that deception. These Oklahoma City businessmen wanted a team that would play in Oklahoma City – not in Seattle. They were willing to lie, and did lie, to complete the deal. Under these circumstances, principles of law and equity do not permit defendant to continue to own property it fraudulently obtained.

The principal owner referred to above was McClendon, who was fined $250,000 by NBA Commissioner David Stern for making that statement (because it was contrary to Stern's stated hope of keeping the Sonics in Seattle). 

    The complaint seeks various relief, including:

• a declaratory judgment that the purchase agreement was induced by fraud and therefore is voidable at BCOS’ option;

• the imposition of a constructive trust from which McClendon’s group “can be ordered to convey the Sonics to an honest buyer who desires to keep the Sonics in Seattle;”

• the appointment of a receiver to manage the assets at issue in the litigation for the benefit of the constructive trust;

• an accounting of the Sonics’ financial condition;

• a preliminary injunction that prohibits McClendon’s group from taking any action that would compromise the Sonics’ value or interfere with the court’s ability to render the relief sought by BCOS; and

• attorney’s fees and costs.

    For more information, here is The Seattle Times'  story, which has links to various documents, including some e-mails that allegedly show the McClendon group's intent to move the team, and earlier coverage of the sale.  

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    One of the rulings made by Monongalia County Circuit Judge Robert Stone in West Virginia University’s lawsuit against its former football coach, Rich Rodriguez, dismissed the third-party complaint filed by Rodriguez against the West Virginia University Foundation, Inc., WVU’s fundraising arm.

    As a result of its dismissal, the Foundation has asked, pursuant to Rule 11 of the West Virginia Rules of Civil Procedure, that Rodriguez be made to pay its attorney’s fees of $29,461.00 and costs of $826.44.  Here is its motion filed on April 16, which quotes Rodriguez’s counsel as suggesting that the purpose of naming the Foundation was to obtain a tactical advantage in the litigation against WVU. 

    Rodriguez had alleged in his third-party complaint that he needed the records maintained by the Foundation in order to prove that contributions to WVU had not been affected by his resignation: 

The only way for Richard Rodriguez to obtain a fair trial and to see if damages actually have been incurred by West Virginia University is to review the books and records of the Foundation, along with donations that have been made since his departure, compared with donations prior to his departure from the West Virginia University.

Rodriguez also alleged that the Foundation was WVU's alter ego and was a necessary party to the litigation because it would receive any payments made by Rodriguez as part of his buyout.  

    The Foundation’s position is that its counsel asked Rodriguez to voluntarily dismiss the action, and when he would not do so, it had “to fully participate in the litigation.”  The affidavit attached to the motion establishes that the Foundation’s counsel expended 125.8 hours in its representation.  The motion also notes that “[a]dditional detail [regarding the billing entries] will be supplied to opposing counsel and the Court for review after agreement regarding confidentiality and the attorney client privilege.” 

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    Largely overlooked in the discussion about the recusal, actual or possible, of various members of the Supreme Court of Appeals of West Virginia in Caperton v. A. T. Massey Coal Company, Inc.  is the lawsuit filed by Massey Energy Company and its subsidiary, Marfork Coal Company, against the Supreme Court of Appeals in the United States District Court for the Southern District of West Virginia in August 2006, which was assigned to Judge John T. Copenhaver, Jr.  Massey Energy Company v. Supreme Court of Appeals of West Virginia, 2:06-CV-00614. 

    Here is how the plaintiffs described their action in their complaint:

This is a civil action to challenge the constitutionality of a West Virginia rule of appellate procedure. Plaintiff Massey Energy and its subsidiary, Plaintiff Marfork Coal, seek declaratory and injunctive relief under 42 U.S.C. § 1983 and 28 U.S.C. §§ 2201 and 2202 on the grounds that Rule 29 of the West Virginia Rules of Appellate Procedure (“Rule 29”) violates Plaintiffs’ Fourteenth Amendment due process right to a fair hearing before an impartial tribunal and to the appearance of justice insofar as the rule, as promulgated and applied, permits a single justice of the West Virginia Supreme Court of Appeals [sic] (“West Virginia Supreme Court”) who is the subject of a disqualification motion exclusively to determine the merits of that motion and does not provide for review or determination of such motion by an impartial judicial officer.

    Although the complaint purports to challenge the recusal procedure applicable to all members of the Supreme Court, specific allegations that refer to Justice Larry Starcher, who has criticized Massey and its chairman, Don Blankenship, suggest that he is its focus. 

    The emphasis on Justice Starcher's participation in cases involving Massey is reinforced by the fact that this case was filed while the Caperton appeal was before the Supreme Court.  As it turns out, Justice Starcher recused himself from the case, as did Chief Justice Elliott "Spike" Maynard.  Only Justice Brent Benjamin, whose recusal was sought by the plaintiffs in Caperton, did not recuse himself. 

    The Supreme Court moved to dismiss the complaint, which the district court denied.  Thereafter, the Supreme Court moved to strike certain paragraphs of the complaint that deal with Justice Starcher, and also moved to appeal the district court’s denial of its motion to dismiss.  Here are the memorandum in support of the motion to strike and the motion for certification. 

    The district court denied the motions to strike and for certification in this order.  The Supreme Court filed an interlocutory appeal of the order denying its motion to dismiss and also prosecuted a petition for a writ of mandamus that would require the district court to dismiss the complaint.

    Last month, the Fourth Circuit Court of Appeals denied the Supreme Court’s petition for a writ of mandamus. Then, two weeks ago, the Fourth Circuit dismissed the appeal of the denial of the motion to dismiss.

    The (Charleston) Daily Mail wrote about the Fourth Circuit’s rulings, and also reported that the court’s legal fees have already reached nearly $250,000.  The district court had stayed discovery in the case pending the outcome of the appeal, but the plaintiffs asked the court to lift the stay shortly after the Fourth Circuit issued its decision. 

    In a scheduling order entered last November, the district court had allotted about four months for discovery, if deemed necessary by the parties, followed by briefing of the plaintiff’s motion for summary judgment.  The delay created by the appeal to the Fourth Circuit has caused several of those dates to pass, however, which will require the issuance of a new order. 

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    I’m late with this, but the uproar over the Supreme Court’s decision in Caperton v. A. T. Massey Coal Company, Inc. diverted my attention from the hearing last week in West Virginia University Board of Governors v. Rodriguez.  As far as I can tell from media accounts (I did not attend the hearing), the hearing was something of a draw.  

    According to the Associated Press story in last Friday's Charleston Gazette, Monongalia County Circuit Judge Robert Stone ruled that Rodriguez can present evidence that he was fraudulently induced to sign the contract that contained the $4 million buyout requirement, and granted WVU’s request to compel the production of documents related to Rodriguez’s hiring and contract negotiations with the University of Michigan.  

    Judge Stone also dismissed the West Virginia University Foundation, Inc. as a third-party defendant, although the basis for the dismissal is not clear.  Rodriguez had claimed that the only way to determine whether WVU had actually been harmed by his departure was to look at the Foundation’s books.  Rodriguez also claimed that the Foundation was a necessary party because it was “always the parties’ intent” that the Foundation would receive any payments pursuant to the buyout. I’m not sure that makes the Foundation a necessary party, but Rodriguez may be trying to get the same deal as John Beilein, who makes his buyout payments to the Foundation (and presumably receives a tax benefit as a result).  

    Judge Stone also declined to rule on the motion to expedite the trial schedule, and cautioned the parties that their hopes for a mid-summer trial were not realistic.  The parties were supposed to confer earlier this week to talk about a schedule, but apparently that didn’t happen.  The deposition of Ed Pastilong, WVU’s Athletic Director, is scheduled for April 18, while Rodriguez’s is scheduled for April 21.  Interestingly, WVU wants an agreement  to maintain the confidentiality of the videotape and written transcript, but Rodriguez has not signed on yet. 

    Finally, an Associated Press story by John Raby in today’s Gazette reports that neither Bob Huggins, WVU’s basketball coach who was hired last April to replace John Beilein, not Bill Stewart, the football coach who replaced Rodriguez, has signed a contract for his position, although each has signed a term sheet.  Here are summaries of the term sheets, which the AP received through a Freedom of Information Act request. 

    I would think that WVU’s experience would make it eager to have the coaches sign the contracts (which seems to be the attitude of other universities and professional franchises), but according to Raby’s article, handshake agreements are good enough for Athletic Director Pastilong.

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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 addition to Paul Ratchford’s lawsuit claiming that he was forced out of his job as president of The Greenbrier, CSX Transportation, Inc. is also defending an action filed on March 25, 2008 by Archer Daniels Midland Company, which alleges that CSX and four other railroads violated federal and state antitrust laws.  The other defendants are Union Pacific Railroad Company, BNSF Railway Company, Norfolk Southern Railway Company, and Kansas City Southern Railway Company.   Archer-Daniels-Midland Company v. Union Pacific Railroad Company, et al., Civil Action No. 08-CV-00857 (D.Minn.).

    Here is the complaint, which was filed in United States District Court in Minnesota, and which alleges that the railroads engaged in “a conspiracy to fix prices of rail fuel surcharges” in violation of the Sherman Act, the Clayton Act, and Minnesota antitrust law, and “imposed upon ADM rail fuel surcharges that constitute unreasonable ‘practices’” because they did not correspond with actual fuel costs and were in excess of actual fuel costs. 

    ADM is not alleging that the rail fuel surcharges are illegal; according to the complaint, the surcharges are "itemized charges for transportation services assessed by railroads to shippers -- including ADM -- that are designated for the sole purpose of recovering unanticipated costs associated with sharp increases in fuel prices."   Rather, ADM's allegation is that the railroads improperly conspired to fix the rail fuel surcharge prices and agreed not to compete against each other with their prices:

Defendants used the rail fuel surcharges as a means of extracting profit, rather than for their designated purpose of recovering unexpected costs from fuel... ADM has paid over a quarter of a billion dollars in rail fuel surcharges to Defendants since 2003.

CSX has denied that its fuel surcharge practices violate any laws or regulations.  Todd Sullivan wrote about the lawsuit at the stock investing blog, Seeking Alpha, and suggests that ADM's lawsuit may serve as a model for smaller shippers who are affected by high fuel costs more acutely than large corporations like ADM.  The Sherman and Clayton Acts provide for treble damages if a plaintiff prevails under those statutes.

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    Less than one year after being named as president of The Greenbrier, the CSX Corporation-owned resort in White Sulphur Springs, West Virginia, Paul Ratchford resigned.  His departure was unexpected, as reflected by this editorial entitled, "Ratchford - We barely knew him," which appeared in The (Beckley, West Virginia) Register- Herald on September 19, 2007.  One sentence stands out: “We don’t know the details surrounding his departure and likely never will.”

    That statement is no longer true, thanks to a lawsuit filed in the Circuit Court of Greenbrier County, West Virginia last week by Ratchford against CSX, its West Virginia subsidiary, and several individuals.  Here are the complaint, courtesy of the plaintiff’s counsel, Barry L. Bruce, and the Associated Press story on the lawsuit. 

    Ratchford has asserted claims for violation of the West Virginia Wage Payment and Collection Act, breach of contract, wrongful discharge, tortious interference with contractual relationship, intentional infliction of emotional distress, California labor statute violation, and fraud.  He seeks damages of $50 million.

    Ratchford alleges that after being recruited to The Greenbrier from his position as general manager of the Ritz Carlton resort in Half Moon Bay, California, and receiving assurances that, if he desired, he could remain as president of The Greenbrier for the rest of his career, he was terminated by Michael Ward, CEO of the CSX Corporation, “without cause or explanation and within a 45 second conversation” on September 18, 2007. 

    Here are some of Ratchford’s allegations in support of his wrongful discharge claim:

During the Plaintiff’s investigation into how to return the Company [The Greenbrier] to profitability, he uncovered that the executives of CSX and/or CSX Corporation were receiving an enormous amount of free benefits for themselves, their families, and their friends all at great expense to the Greenbrier.

CSX executives were receiving free meals and excessive discounts from the food and beverage outlets and greatly discounted merchandise from the Greenbrier shops.  None of such benefits were attributed as “income” to said executives, all in contravention of West Virginia tax laws.  Said executives were also receiving hotel rooms free or at greatly discounted rates.  Executives had accounts with the Greenbrier known as “city ledger accounts”, all of which were not paid or paid at a fraction of their cost to said executives.  Plaintiff also learned that CSX Corporation executives and families, including retired executives and directors, received highly discounted rooms and meals, all without counting same as income.

Plaintiff immediately discontinued these policies and reported his findings to Michael Ward and others at CSX Corporation.

Plaintiff advised Defendant, Michael Ward, he was going to stop the aforesaid policy and institute a policy that all employees would be limited to a flat 25% discount which was approved by Michael Ward.

Plaintiff’s investigation uncovered that executives of CSX and CSX Corporation were receiving "free” medical/physical examinations from The Greenbrier Clinic, an independently owned and operated business, in exchange for said business not having to pay fair market rent to the Company.  Again, the employees receiving these benefits did not count same as income in contravention of West Virginia tax laws.

    In support of his claim for fraud, Ratchford alleges that:

As a direct and proximate result of CSX and/or CSX Corporation’s fraud, the Plaintiff has suffered the equivalent of a career death sentence in the resort  industry.   Plaintiff suffers from Post Traumatic Stress and has come under a psychologists’ [sic] care.  Plaintiff purchased a home in West Virginia as he had full intention to stay at the Greenbrier for the rest of his working career; a decision that was completely reasonable given Ted Kleisner and Bruce Rosenberger’s statements to Plaintiff about the President’s position.

    Ratchford has attached as an exhibit to the complaint his offer letter, which provided, inter alia, that if  his employment was terminated by CSX, other than for cause, or if he terminated his employment for good reason, prior to completing five years of employment, he would receive a lump sum severance payment equal to two times his annual base salary (which was $350,000 per year when he started in 2006).  Both "cause" and "good reason" are defined in the letter.   Ratchford received his severance pay of $700,000 on October 26, 2007, but alleges that because the payment was made more than 72 hours after his termination, it violated the the West Virginia Wage Payment and Collection Act.

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    There have been some significant developments this week in the medical malpractice lawsuits against discredited surgeon John A. King, which were removed to federal court as a result of the bankruptcy petition filed by King last year in Alabama.

    On Wednesday, the plaintiffs represented by the firm of Curry & Tolliver informed the United States District Court that they had negotiated the settlement of their claims with several parties, including David McNair (King’s physician’s assistant) and the corporate entities consisting of Teays Valley Health Services, Inc. d/b/a Putnam General Hospital, HCA, Inc., Healthtrust, Inc.-The Hospital Company, and Hospital Corp., LLC.  The plaintiffs’ motion to lift the stay also identified several cases in which further proceedings, such as the appointment of a guardian ad litem or court approval of a wrongful death settlement, are necessary. Here are the plaintiffs’ motion and Paul J. Nyden’s article in yesterday's Charleston Gazette.   

    The motion did not disclose the amount of the settlements, and informed the Court that Curry & Tolliver’s clients’ claims against King, Robert Edwards a/k/a Bob Edwards, Wright Medical Technology, Inc., and EBI L.P. would continue.  The latter two defendants manufactured spinal implant devices used by King in some of the surgeries.  Additionally, the claims of the remaining 54 plaintiffs, who are represented by other counsel, will continue against all defendants, although Nyden reported that those cases could soon settle against HCA and Putnam General.

    On Thursday, the district court granted the plaintiffs’ consolidated motion to remand the actions to the Circuit Court of Putnam County, West Virginia, finding that equitable remand was appropriate, even though the civil actions are related to King’s Chapter 7 bankruptcy and therefore conferred subject matter jurisdiction on the Court under 28 U.S.C. §§ 1334(b) and 1452(a).  Here are Judge John T. Copenhaver, Jr.'s Memorandum Opinion and Order and Nyden’s article in today's Gazette.

    The district court acknowledged that the defendants’ concerns about “an irremediable taint present in the jury pool” were “no small matter,” but found that other factors argued in favor of remand.  Specifically, the court found that remand “presents no significant [bankruptcy] estate administration concerns.”  Second, although “some discrete issues respecting federal law have arisen in this action and mass removal,” those issues are “quite limited[,]” (compared to the number of issues that are “routine factual questions presented under state law negligence and damage theories that state circuit courts encounter with some frequency.”  Third, the court recognized the extensive efforts already undertaken by the state court judges to prepare the cases for trial: “A forum switch at this juncture would require perhaps multiple judicial officers in this district to familiarize themselves with the voluminous record and rulings made in the circuit court.  Comity is necessarily threatened in such a setting.”  Thus, the court concluded “that a majority of the applicable factors weigh[ed] in favor of equitable remand[,]” and remanded the 124 actions to circuit court.

    Finally, one other story in the Gazette this week about King discussed a development, which, because of its relative insignificance, I have saved for the end of this post.  According to Nyden’s article in Wednesday’s edition, King has applied to become a real estate appraiser in Tennessee, Before you start laughing, his application “for trainee registration and exam approval” was approved unanimously by the Tennessee Real Estate Appraiser Commission at its December meeting.  King’s plan is to work as a physician for 10 to 12 days per year and spend the balance of the year working as an appraiser.

    Apparently, King did not tell the commission about the medical malpractice lawsuits pending against him in West Virginia or Alabama, but, according to the minutes of the December meeting, did explain that he had to leave West Virginia because “’he was a whistleblower against a group of physicians who were participating in health-care fraud[,]’” who “’made false accusations against him to the West Virginia Medical Board that led to other medical boards suspending his license.’”

    Not surprisingly, the commission’s administrative director has sought guidance from the national Appraisal Foundation about how to process King’s application.

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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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    Some Dairy Queen franchise owners, including those in West Virginia, have filed suit against International Dairy Queen, Inc. as a result of its alleged effort to force them to make changes to their restaurants and their operations.  (I will resist the temptation, as Associated Press reporter Tim Huber did not, to describe Dairy Queen’s as a dilly of a problem.)  The Michigan Dairy Queen Operators’ Association, et al. v. International Dairy Queen, Inc., et al., Civil Action No. 1:08-CV-0036.

    Dairy Queen International, Inc., which is owned by Berkshire Hathaway Inc., wants its franchisees to increase the size of their restaurants and make other changes, such as adding table service.  But the franchisees claim that the changes would cost each owner between $275,000 and $450,000 to remodel its store, and require other expenses, such as the cost of updated equipment to conform to new menu specifications, additional labor and training costs, and the loss of revenue when the conversion to the new restaurant format takes place.   

    According to the plaintiffs’ amended complaint for declaratory judgment and injunctive relief,

    On behalf of their members (hereinafter “Member Franchisees” or individually “Member Franchisee”) whose franchise agreements do not contain arbitration clauses, the Plaintiffs seek declaratory and injunctive relief to prohibit Defendants from forcing their Member Franchisees to make an expensive conversion to a DQ Grill & Chill or a DQ/Orange Julius Treat Center on terms that are commercially unreasonable in view of the expense, on the one hand, and the lack of a reasonable rate of return, on the other hand.  Defendants’ attempts at forced conversion constitute a material breach of the existing franchise agreements and the duty of good faith and fair dealing that is implied as a matter of law in every contract.  Without the relief being requested in this action, the Member Franchisees are suffering, and will continue to suffer, irreparable damage through the actual or threatened losses of: (i) their coerced investments in the brand conversions; (ii) the business and goodwill that they have developed and nurtured as Dairy Queen franchisees; and (iii) the opportunity to realize the equity in their Dairy Queen franchises by sale.

    West Virginia Dairy Queen franchisees are members of North Eastern Store Owners, Inc., which also includes store owners from Virginia, Pennsylvania, Ohio and Kentucky.  Here is Jenni Vincent's story from the Martinsburg Journal, which provides some additional information on the West Virginia owners' involvement in the lawsuit.

    The lawsuit has just gotten started and so it's too early to predict the outcome,  but according to consultant Richard Adams, who is quoted in Huber's article, "Very seldom do the franchisees win an outright victory," [he]  says.  "It's usually something that's settled out of court."

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    I think I’m going to avoid predicting how an appellate court will rule in a particular matter, and instead focus on the issues presented.  Yesterday, I wrote that Camden-Clark Memorial Hospital’s petition for appeal from a $1.3 million sanctions award was being considered by the Supreme Court of Appeals, and that I thought that the Court would accept the petition.

    According to the Court's website today, the Court refused the petition by a vote of 5-0.

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    Last spring, the Circuit Court of Wood County, West Virginia awarded $1.3 million in sanctions against Camden-Clark Memorial Hospital and its lawyer for their alleged misconduct before and during the trial of a medical malpractice action (which itself resulted in a verdict of $6.5 million).

    The Supreme Court of Appeals today considered the hospital’s petition for appeal from the sanctions award.  The Court did not have the vote posted on its website by the end of the day, but it should be posted tomorrow.  Here are the hospital’s petition for appeal and the plaintiff’s response in opposition, courtesy of plaintiff's counsel, Chris Regan.

    Even though the Court rejected the hospital’s petition for appeal from the underlying malpractice verdict, I think the Court will accept this petition because of the amount of the award and in order to review the alleged (mis)conduct at issue in the case.  It is rare enough in West Virginia for a trial court to award sanctions, but to do so in this amount is startling.  

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    In an order entered today, the Supreme Court of the United States rejected a request by tobacco companies to get involved in a mass tort action pending in the Circuit Court of Ohio County, West Virginia.   Philip Morris USA, Inc. v. Accord, No. 07-860.

    The tobacco companies had filed a petition for a writ of certiorari from the Supreme Court of Appeals of West Virginia’s November 7, 2007 ruling that denied their request for a writ of prohibition to prohibit the circuit court from proceeding on March 18 with the first phase of a consolidated mass trial.

   The tobacco companies objected to the circuit court's case management plan, and specifically its use of  “reverse bifurcation,” whereby the jury will determine whether, as a group, the plaintiffs are entitled to punitive damages before there has been a finding that any individual plaintiff is entitled to compensation.  A different jury will then determine issues unique to each plaintiff.   Reverse bifurcation has been used in other West Virginia mass tort cases, including asbestos and Fen-Phen litigation.

    Here are The Wall Street Journal’s article on the effect of the Supreme Court’s decision and