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

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Mack Sperling, who writes the North Carolina Business Litigation Report, for letting me know about the Fourth Circuit’s unpublished decision last week in Cornett Management Co., LLC v. Firemen’s Fund Ins.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

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

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

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

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

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

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

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You may remember Paul Ratchford, the former president of The Greenbrier, who was terminated in 2007 after less than one year on the job. He filed suit against CSX Corporation, the resort’s then-owner and some individual officers, and alleged several causes of action, including a violation of the West Virginia Wage Payment and Collection Act because CSX allegedly failed to pay him his severance of $700,000 and the value of 1,200 shares of CSX stock within 72 hours of his termination, as the statute requires. I wrote about Ratchford's termination and lawsuit in this post.

Last year, the Circuit Court of Greenbrier County granted CSX’s motion to dismiss and denied Ratchford’s motion for partial summary judgment on the grounds that under the Wage Payment and Collection Act, Ratchford’s severance and stock were not “wages” or “fringe benefits” that would entitle Ratchford to treble damages.

Ratchford appealed the dismissal to the Supreme Court of Appeals of West Virginia. Here are his petition for appeal and CSX’s response in opposition. On October 30, 2008, the Supreme Court refused his petition for appeal 4-0 with Justice Brent Benjamin disqualified.

That left Ratchford’s claims for breach of contract, wrongful discharge, tortious interference with a contractual relationship, intentional infliction of emotional distress, California labor statute violations, and fraud.

Ratchford sued at least two West Virginia residents, which destroyed diversity, but CSX Hotels, Inc.’ s bankruptcy in March created federal jurisdiction under 28 U.S.C. § 1334. In April, CSX filed this notice of removal.

Due to CSX Hotels’ sale of The Greenbrier to Jim Justice, the bankruptcy court dismissed CSX’s bankruptcy petition as moot. Ratchford claimed that without the bankruptcy proceeding, the federal court was deprived of jurisdiction to adjudicate his claims.

Although United States District Court Judge Thomas E. Johnston remanded Ratchford’s civil action, his order points out that a remand in these circumstances is not automatic:

Plaintiff [Ratchford] contends that in the absence of a bankruptcy debtor as a party to the action, the Court is “divest[ed]” of jurisdiction to adjudicate the state law claims… This assertion is not necessarily accurate. It is well-established that once a court obtains jurisdiction over a matter, jurisdiction “remains … even if subsequent events eliminate the original basis for federal jurisdiction.” Chapman v. Currie Motors, 65 F.3d 78, 81 (7th Cir. 1995). The Court can continue to exercise jurisdiction over this case, but it does not necessarily follow that it should.

(Emphasis added.)

The Court explained that it had discretion to continue to exercise supplemental jurisdiction over Ratchford’s remaining claims under 28 U.S.C. § 1367(a), abstain from exercising its supplemental jurisdiction under 28 U.S.C. § 1367(c)(3), or remand the action under 28 U.S.C. § 1452(b).

The Court determined that remand under § 1452(b) was appropriate because “the equities weight heavily in favor of remand[.]” Among the factors the Court looked at were the relative lengths of time the case had been in state court versus federal court, the fact that all of Ratchford’s claims are grounded in state law, and the fact that the defendants did not oppose the remand.

So remember that just because the original basis for federal jurisdiction disappears, that does not necessarily mean that the court loses jurisdiction. And for a case where the court elected to exercise its supplemental jurisdiction, take a look at former Chief Judge Charles H. Haden, II's opinion in Greiner v. Columbia Transmission Corp., 41 F.Supp.2d 625 (S.D.W.Va. 1999), which Judge Johnston cited in his order.

 

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United States District Court Chief Judge Joseph R. Goodwin recently ruled in Jones v. Dominion Resources Services, Inc., 601 F.Supp.2d 756 (S.D.W.Va. 2009), on the class counsel’s motion for attorney’s fees and expenses, and his order entered on March 6, 2009 is important for attorneys who prosecute and defend class actions in West Virginia.

Jones was a class action filed by gas well owners who alleged that gas companies cheated them out of their royalties. Earlier this year, the parties agreed to a settlement creating a common fund of between $40 and $50 million and awarding attorney’s fees not to exceed 25% of the total settlement. Class counsel sought an award of attorney’s fees equal to 25% of the settlement, which they estimated at $50 million, plus reimbursement of $91,883.50 in expenses and a $25,000 incentive award for each of the three named class representatives. Here is the settlement website.

In considering the motion, Judge Goodwin noted initially that the Fourth Circuit Court of Appeals has not stated a preference between the “lodestar” method and the “percentage of fund” method, so he had complete discretion to determine how to compensate class counsel. He also discussed how each method is applied and its relative advantages and disadvantages. 

He found that the percentage method was appropriate and would also apply the lodestar crosscheck as “an element of objectivity.”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Emphasis added.)

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

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

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

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

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

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

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

(Emphasis added.)

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

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

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

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

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

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

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

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

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

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

(Emphasis added.)

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

(Emphasis added.)

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

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

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

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

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

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

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

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

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

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

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

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

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

(Emphasis added.)

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

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

(Emphasis added.)

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

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

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

(Emphasis added.)

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

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

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

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

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A couple months ago, I wrote about the furor over the bonuses paid to some AIG employees, which resulted in the House of Representatives passing a bill that would tax the bonuses at 90%. Although that crisis passed, it looks like another financial services company got the hint. 

According to several news reports today, Citigroup has told approximately five former executives that they are not going to receive severance payments that Citigroup is contractually obligated to make.

As reported by David Enrich in The Wall Street Journal, Citigroup has cancelled the payments because it doesn’t want to risk a public uproar, and is “wagering that the former executives will conclude that it would be publicly embarrassing for them to file lawsuits against the struggling, taxpayer-backed company seeking the money.” 

I’m not sure that Citigroup is going to win that wager. First of all, Citigroup is deciding on its own, without any pressure or demand from the government, not to make the severance payments. Thus, Citigroup is breaching the agreements of its own volition and can’t claim that the government is coercing or requiring it not to make the payments.

Second, the amounts involved are more than enough incentive for the executives to pursue litigation regardless of whether the attendant publicity embarrasses them. The severance payments total approximately $100 million, of which Citigroup has paid more than half. But that leaves a lot of money to fight over. For example, one executive, Michael Klein, was owed $21.3 million in cash on March 31 and another $7.5 million on October 5, although it isn’t clear whether Citigroup made the March payment to Klein. So, Klein is losing at least $7.5 million due to Citigroup’s decision.

I think at least some of the executives will file suit against Citigroup, assuming that Citigroup does not reconsider its decision and pay them their severance payments.

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In a lawsuit filed last month in United States District Court for the Northern District of West Virginia at Wheeling, Handling Systems International, Inc. sued American Electric Power Company, Inc., American Electric Power Service Corporation, and Ohio Power Company for their intentional and negligent spoliation of evidence regarding a fatal industrial accident.  Handling Systems Int'l, Inc. v. American Electric Power Co., Inc., Civil Action No. 5:09-CV-00043 (N. D. W. Va. April 28, 2009). 

In 2006, William Oshie, an employee of American Electric Power Service Corporation, was killed in an industrial accident at the Mitchell Power Plant, which the defendants own and operate.  In its complaint, HSI alleged that the defendants controlled and conducted the investigation into Mr. Oshie’s death, but failed to act in accordance with their own policies and procedures. 

Specifically, HSI alleged that

the defendants’ failure to follow their own corporate policies and procedures was deliberate and took place for the specific purpose of allowing the mishandling, discarding, destruction, mutilation, or significant alteration of potential evidence related to the potential civil action and/or state and/or federal regulatory penalties, including, but not limited to, the significant alteration and destruction of the accident scene itself that was located within the Mitchell Plant in Marshall County, West Virginia.

HSI claimed that the defendants “ignored, mishandled, discarded, destroyed, mutilated or significantly altered” physical evidence, photographs, notes and notebooks, and internal memoranda and emails relating to Mr. Oshie’s death and the defendants’ investigation.

HSI also claimed that the defendants’ acts and/or omissions “were done for the specific purpose of defeating HSI’s ability to prevail in a future civil action and/or to avoid state and/or federal regulatory investigation and/or penalties.” 

In its claim for intentional spoliation, HSI alleged that by spoliating the evidence, the defendants “inten[ded] to defeat HSI’s ability to defend itself and/or to prevail” in a civil action that is pending in the Circuit Court of Marshall County, West Virginia.  (I assume that the Marshall County action is a wrongful death lawsuit with HSI and the power companies as defendants.)

HSI alleged In its claim for negligent spoliation that, “there was a significant alteration and/or destruction of potential evidence related to the potential civil action and/or state and/or federal regulatory action, including, but not limited to, the accident scene itself that was located within the Mitchell Plan in Marshall County, West Virginia.”  As a result, HSI has been “rendered unable to prevail in the pending civil action and/or its ability to prevail has been significantly prejudiced in the pending civil action.” 

In an earlier post, I wrote about the negligent spoliation of evidence, and discussed the Supreme Court of Appeals of West Virginia’s holding in Hannah v. Heeter, 584 S.E.2d 560 (W. Va. 2003).  In Hannah, the Court held that the negligent spoliation of evidence is not a stand-alone tort when alleged to have been committed by a party to litigation, but is a stand-alone tort when committed by a third party with a special duty to preserve the evidence (which is what HSI alleged against the power companies).  The intentional spoliation of evidence is a stand-alone tort regardless of whether it was committed by a party in the litigation or a third party.

I wish HSI had been more specific about the allegations in the Marshall County lawsuit and how the power companies' alleged spoliation of evidence adversely affected its ability to defend itself or prevail in that action.  If I get a copy of the complaint, I’ll make it available and discuss its allegations.

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On January 29, 2009, former Motorola CFO Paul Liska gave a presentation to the audit committee of its board of directors, in which he addressed the poor performance of the Mobile Division and express concerns about the accuracy of predictions of its future performance. 

Liska's position is that his criticism of the Mobile Division and its CEO, Sanjay Jha (who is also Motorola's co-CEO) was intended to warn the board

that the Mobile Devices presentation still lacked the normal and customary specificity expected in business plans, making it impossible to fully verify its reasonableness and accuracy.  If approved and presented to the rating agencies (and public), Liska believed that the Mobile Devices' "plan" was likely to lead to the continued deterioration of Motorola's credit and, when shown to be unsupportable and/or misleading, to the possible ruin of the entire company.

I think it's safe to say that Liska did not expect Motorola's reaction to his presentation, which was to discharge him without cause as CFO on January 30.  Liska claims that Motorola's co-CEO Greg Brown told him that he "had fired a shot heard around the world."

In an earnings call on February 3, Brown was complimentary of Liska's service to Motorola and attributed his departure to "environmental changes."  But that benign reason isn't what Motorola reported to the SEC in this March 3 proxy filing, in which it advised at page 86 that "[o]n February 2, 2009, Mr. Liska was replaced as Chief Financial Officer.  On February 19, 2009, Mr. Liska was involuntarily terminated for cause." 

The Wall Street Journal's Sara Silver wrote this article on March 4 about the discrepancy in Motorola's reasons for terminating Liska.

The difference in the basis for Liska's termination is critical because his employment agreement provides that if he is terminated other than for "cause" (as defined in the agreement) within two years of his hiring, he would receive a severance payment equal to his annual base salary of $750,000 for one year and his annual incentive bonus calculated as 95% of his annual base salary for one year, or nearly $1.5 million.

If Liska was terminated for cause, he would not receive that severance payment.  And perhaps more importantly, as "cause" is defined in his employment agreement, he would have a lot of explaining to do to potential employers.  The agreement provides that cause shall mean:

(i) your willful and continued failure to substantially perform your duties, other than any such failure resulting from incapacity due to physical or mental illness, which failure has continued for a period of at least 30 days; or (ii) your willful engagement in (A) in any malfeasance, dishonesty or fraud that is intended to or does result in your substantial personal enrichment  or a material detrimental effect on the Company's reputation or business or (B) gross misconduct; (iii) your indictment for, or plea of guilty or nolo contendre to (A) a felony in the United States or (B) a felony outside the United States, which regardless of where such felony occurs, the independent directors of the Board reasonably believe has had or will have a detrimental effect on the Company's reputation or business or your reputation; or (iv) your breach of one or more restrictive covenants in any written agreement between you and Motorola.

Liska filed suit against Motorola in the Circuit Court of Cook County, Illinois, and alleged in his complaint claims for retaliatory discharge and breach of contract.  Liska claims that by terminating him, Motorola "violated a clearly mandated public policy - i.e., the policy that favors full disclosure, truthfulness and accuracy in the financial reports and statements made by businesses to the government and to the public."

That Motorola is not going to let Liska take the high ground is clear from its answer and affirmative defenses, which first defines a "whistleblower" and an "extortionist," then proceeds to explain the difference between the two:

The difference between a whistleblower and someone whose actions are akin to an extortionist is simple -- a whistleblower reports improper conduct because he believes it is the right action to take, while an extortionist threatens to disclose alleged improper conduct unless he is paid a sum of money to remain quiet.  This Answer demonstrates that Plaintiff Paul Liska's conduct since at least December 2008 is not that of a "whistleblower" who was fired in retaliation.  Rather, his conduct is more akin to an (attempted) extortionist.

But wait, there's more:

Paul Liska joined Motorola as its Chief Financial Officer in March of 2008.  During his brief tenure, he proved himself to be erratic, unprepared, abrasive, divisive -- and often simply absent and "unavailable."  By mid-December Motorola management had made the decision to remove him as Chief Financial Officer and a search had begun to locate his replacement.  After Mr. Liska learned of this decision in December, he devoted himself to an extortion-like scheme designed to portray himself as a whistleblower and demand millions in return for his silence.

And those paragraphs come in the first two pages of the answer.

At this point in the case, which is admittedly very early, I think Motorola has more questions to answer than does Liska.  He has a plausible explanation for his termination, including Motorola's decision to terminate him for "cause," especially after Greg Brown, Motorola's co-CEO, praised Liska in the earnings call on February 3.

On the other hand, I'm not sure why, if Motorola had decided in December 2008 to remove Liska as CFO -- after he had been on the job for only eight months -- it didn't do so, rather than risk the sort of situation that it's dealing with now.  And Motorola's motivation in changing the reason for Liska's termination is questionable, to say the least.

For some additional information on the termination and the lawsuit, here are an article by Associated Press writer Peter Svensson, and some discussion by Mark P. Loftus on his Illinois Lawyer Blog.   

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To the right is a picture of the north entrance of The Greenbrier, which bills itself as "America's Resort."  But after some surprising developments last week, it may be known soon as Jim Justice's resort.

CSX has owned The Greenbrier since 1910, when the railroad's predecessor, the Chesapeake and Ohio Railway, bought it.  Last year, the resort, a victim of the downturn in demand for luxury resort lodging and its parent's loss in railroad freight volume, lost $35 million. 

Earlier this year, CSX hired Goldman Sachs to analyze its options regarding the resort.  What CSX and Goldman apparently determined was that CSX didn't want to, or couldn't afford to, keep the resort, so in March, The Greenbrier Hotel Corporation, the CSX entity that owns the resort, filed Chapter 11 bankruptcy in United States Bankruptcy Court in Richmond, Virginia.  In re: Greenbrier Hotel Corporation, Case No. 09-31703 (E. D. Va.).

Contemporaneously with that filing, the hotel corporation announced that it would sell the resort to Marriott Hotel Services, Inc., in a deal that would provide Marriott up to $50 million over two years to operate the resort.  Ultimately, Marriott would pay CSX between $60 and $130 million, depending on the hotel's financial performance, over seven years.  

At least, that was the deal that everyone thought was in place until last Thursday, when Jim Justice, a West Virginia coal operator, announced that his family-owned company, Justice Family Group, LLC, had purchased the resort and 80% of The Greenbrier Sporting Club from CSX for $20.1 million.   Here is Justice's letter to the resort's employees and West Virginia Governor Joe Manchin's statement regarding the sale.  Justice has also agreed to pay a $2.6 million break-up fee to Marriott.

Not surprisingly, Marriott disagrees that Justice has a binding contract to purchase The Greenbrier, and said that it expects CSX to follow through with its agreement with Marriott.   Justice has said that he will ask the bankruptcy court to dismiss The Greenbrier's bankruptcy, but according to this story from Hotel Online, the assistant United States Trustee explains that the bankruptcy must still run its course, including an auction scheduled for June 12.  Here is the hotel's motion to dismiss the bankruptcy cases and shorten the notice period for hearing on the motion, which was filed last Friday.

If the auction goes forward, don't automatically assume that Marriott will outbid Justice.  Marriott is in a stronger position financially, but Justice completed a deal earlier this year in which he sold his his companies' coking-coal interests to Mechel OAO, a Russian mining and metals company, for $436 million in cash and 83.3 million preferred shares of its stock.

And although $20 million for The Greenbrier is a bargain, Justice may still be willing to pay more for the resort than Marriott, particularly if Marriott has to sue CSX to enforce its contract.  On the other hand, Marriott appears to have a solid tortious interference claim against Justice, especially since Marriott said, as of last Friday, that it didn't know anything about a break-up fee.

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

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

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

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A lawsuit filed last month in federal court for the Northern District of West Virginia involves the two logos shown at the right and the similarities, or lack thereof, between them. 

At the far right, obviously, is the logo for Reese's Peanut Butter Cups, which are made by the Hershey Company, the well-known candy manufacturer. 

The logo to the near right is that of Reese's Nursery and Landscaping, located in Ranson, West Virginia and operated by Reese Clabaugh.

Here is the complaint filed on March 19, 2009, in which Hershey's alleges causes of action for federal trademark infringement, federal false designation of origin, federal trademark dilution, and unfair competition.  Hershey Co. v. Reese's Nursery and Landscaping, Civil Action No. 3:09-CV-00017 (N. D. W. Va. 2009).

Hershey claims that the landscaping company's logo "infringes and dilutes the well-known trade dress of Hershey's REESE'S line of products."

There is some similarity between the lettering of the two logos, and although the nursery's logo shown above is in black (or dark brown) and white, it has also used a logo where "Reese's " and the image of the tree were in orange and yellow. 

But where is the possibility of any risk of confusion, which is an essential part of demonstrating infringement?  Hershey's manufactures and sells a variety of candy products; Reese's nursery provides lawn care and landscaping services, and sells lawn and garden products.  I don't see how someone can confuse the two in such a way that Hershey's is harmed. 

Doug Rothschild at Cobalt LLP's blog wrote this post about the complaint, in which he noted that, perhaps in response to the lawsuit, the nursery has changed the colors of its logo, but questioned how much damage Hershey's has actually suffered.

And take a look at Martin Schwimmer's The Trademark Blog, which has the nursery's original logo and some interesting comments about the case. 

All in all, this lawsuit makes me think that Reese Clabaugh isn't the only one shoveling manure.

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I have been wanting to address the issue of conflicts in representation, and the post yesterday by Kevin LaCroix, who writes The D&O Diary, entitled "A Case of Divided Loyalties" provides me with that opportunity.   On the surface, the issue is straightforward: the possibility that a conflict of interest could develop when a lawyer or firm represents a corporation and one or more of its officers or directors.  I would expand the scope to include the representation of witnesses who are employees of a corporation.

Kevin's post focuses on a recent California federal court decision in U.S. v. Nicholas, 2009 WL 890633 (C.D. Cal. 2009), which arises from the Broadcom Corporation options-backdating case.  In Nicholas, the law firm of Irell & Manella represented Broadcom and its CFO, William Ruehle. 

As Kevin reports, the Court found "at least" three clear violations of Irell's duty of loyalty to Ruehle: 

• it failed to advise him of the conflict and obtain his written waiver;
• it interrogated him for the benefit of another client (Broadcom, his employer); and
• it disclosed without Ruehle's consent his privileged communications to a third party.

This paragraph from the Court's opinion sums up the situation (I apologize for its length, but it's worth it):

Irell's ethical breaches of the duty of loyalty are very troubling. Mr. Ruehle's confidential and privileged information has been disclosed to numerous third parties, most notably the Government in connection with its criminal prosecution against him.  The Government's case against Mr. Ruehle is a serious one, and Mr. Ruehle faces a significant prison sentence if convicted on all counts charged in the indictment.  It must be disconcerting to Mr. Ruehle to know that his own lawyers at Irell disclosed his confidential and privileged information to the Government, lawyers whom Mr. Ruehle trusted and believed would never do anything to hurt him.  And now the Court has had to intervene and suppress relevant evidence in the Government's case against Mr. Ruehle. The Government's burden is not an easy one, as it has to prove the charges against Mr. Ruehle beyond a reasonable doubt. Suppressing relevant evidence is obviously not helpful to the Government in that regard, but more importantly, it hinders the adversarial process and the jury's search for the truth.  Irell should not have put the parties and the Court in this position. The Rules of Professional Conduct are not aspirational. The Court is at a loss to understand why Irell did not comply with them here. Because Irell's ethical misconduct has compromised the rights of Mr. Ruehle, the integrity of the legal profession, and the fair administration of justice, the Court must refer Irell to the State Bar for discipline.  Mr. Ruehle, the Government, and the public deserve nothing less.

(Emphasis added.)

You read that correctly.  The Court referred the firm -- not just the lawyers involved, but the firm -- to the State Bar for discipline.  How would you like to be the managing partner or ethics partner who has to inform the firm's malpractice carrier about this opinion?

The case I had been thinking about, which Kevin also mentions, involves Laura Pendergest-Holt, who was the chief investment officer for the Stanford Financial Group.  That  company and related entities have been charged in an $8 billion Ponzi scheme. 

As part of the SEC's investigation into the Stanford Financial Group, Pendergest-Holt testified and was represented by Thomas Sjoblom of Proskauer Rose, LLP, who also represented Stanford Financial Group.  After Pendergest-Holt testified before the SEC, she was charged in a criminal complaint with obstructing its investigation by giving false testimony, and was arrested.

She has sued Sjoblom and Proskauer for malpractice, and alleged that she was not informed of her Fifth Amendment right against self-incrimination, nor was she informed that she had no attorney-client relationship with Sjoblom, nor that her interests were adverse to her employer's (Sjoblom's client).  Here is Pendergest-Holt's amended complaint against Sjoblom and Proskauer.

According to Zach Lowe's story from last month in The AmLaw Daily, entitled "Lessons From the Stanford Scandal: Bring Your Own Lawyer," Sjoblom took pains to advise the SEC that he was representing Pendergest-Holt "insofar as she is an officer or director of one of the Stanford-affiliated companies," but did not explain to her that he was not representing her personally.  Sjoblom has since withdrawn from the case.

These cases teach that the safest practice is for an officer or director to request or obtain his or her own counsel.  Some corporations (and their counsel) will simply want to assign another lawyer from the corporate counsel's firm to represent the officer or director, and theoretically that can work (the Chinese wall approach). 

But my opinion is that the individual's lawyer should be from another firm, so that the representation is truly independent.  I think some firms fear that if they refer an officer or director or employee to another firm for representation, the new firm may gain access to the corporate client.  And they may be right.  But that doesn't mean that the officer or director or employee shouldn't have separate, independent counsel.  And if you don't think so, ask William Ruehle or Laura Pendergest-Holt.

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Before I get to my post, I want to note a change to the Supreme Court of Appeals of West Virginia's schedule this week.  The Court has canceled its motion and argument dockets for tomorrow, March 25, so that the justices and staff can attend the funeral of Justice Joseph P. Albright, who died last Friday. 

The Court has rescheduled those cases, as reflected on its updated motion and argument dockets.

My post deals with a West Virginia federal district decision that Rob Hoskins wrote about yesterday at ERISABoard.  Rob's analysis focused on the substantive issues, but I think the procedural aspect of the case is more compelling. 

When I read Dunlap v. Ormet Corp., Civil Action No. 5:08-CV-00065 (N. D. W. Va., March 19, 2008) (no Westlaw cite available), I was amazed, and not in a good way.  In fact, I don't know why Dunlap even had a lawyer.  Perhaps you'll have a better answer to the question than I do.

Dunlap's lawyer filed her suit for death benefits payable by an employer-sponsored benefit plan in state court.  The defendants removed the case to federal court based on ERISA preemption.  The plaintiff did not object to the removal, which was reasonable in view of the subject matter.

The parties were unable to agree on the scope of discovery, so the Court ordered the parties to brief the issue.  The corporate defendants submitted memoranda in support of their positions, but the plaintiff did not file any brief in support of her position that, presumably, she was entitled to engage in discovery.  The Court determined that its review was limited to the administrative record and that discovery beyond the record was unnecessary.

Ormet filed a motion to dismiss accompanied by documents beyond the pleadings, which converted the motion to one for summary judgment, and the Unum defendants moved for summary judgment.  The plaintiff did not file a response to either motion, nor did she request an extension of time to do so.

Then, Ormet filed a supplemental memorandum in support of its position that it was entitled to dismissal "by default," and the Unum defendants filed a supplemental memorandum discussing a recent Supreme Court case that supported their position.  The plaintiff did not respond to either supplemental memorandum.

The Court rejected Ormet's position and rendered a decision on the merits, which granted Ormet's motion.  The Court also granted the Unum defendants' motion for summary judgment.  Finally, the Court denied the defendants' motion for attorney's fees, and concluded that the dismissal of the claims against the corporate defendants deprived the Court of supplemental jurisdiction over the individual defendants, and dismissed without prejudice the plaintiff's claims against them.

Unfortunately, this sort of result happens more often than you would think in ERISA cases.  The outcome may not be this extreme, but often, a lawyer who doesn't handle ERISA cases regularly -- or, sometimes, at all -- gets involved and quickly realizes that he or she misunderstood the scope of preemption, the substantive law, the remedies, etc.  But the way to deal with that situation, if you're that lawyer, is not what Dunlap's lawyer did.  You can talk to the defendant's lawyer and try to reach a resolution.  Or you can bring in more experienced counsel and try to salvage the case.  Or you can try to seek relief from the court, as the plaintiff did in Henry v. UBC Product Support Center, Inc., which I wrote about in January.   But you can at least respond to the defendants' pleadings.

I'm not trying to brand ERISA as the most complicated area of law imaginable.  It's intricate, as are a lot of areas of law.  But it always surprises me when a lawyer who would never consider representing a client in a trademark infringement case because he or she doesn't practice intellectual property law will represent a plaintiff in an ERISA case because the lawyer thinks it's like a bad faith case or a personal injury case, then realizes too late that it's impossible to dabble in ERISA.

So I'm still not sure what benefit the plaintiff gained from having a lawyer and from filing suit.  She shouldn't have represented herself, because that's almost always a certain path to defeat, but I'm at a loss to know how Dunlap's interests were represented.

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The details of the settlement between David Ridpath and Marshall University were released last week, after Andrew Clevenger questioned, on the Charleston Gazette’s new Sustained Outrage blog, what was taking so long, considering that the parties had agreed to settle around the beginning of February. 

Marshall will pay Ridpath $200,000 and will write a letter of clarification to the NCAA Committee on Infractions, which absolves Ridpath of any responsibility for major violations that resulted in four years’ probation for Marshall’s athletic program and stripped the football and basketball programs of scholarships.  Clevenger wrote this post after the terms had been disclosed.

The settlement ends what may have been the demise of Ridpath's professional career and an episode that reflects very poorly on Marshall and its leadership during the time Ridpath was employed there.

Marshall hired Ridpath as its compliance director for its athletic department in 1997.  In 1999, when instances of academic fraud in Marshall’s football program surfaced, Ridpath notified the NCAA, which initiated an investigation. 

Marshall reassigned Ridpath in 2001, making him its director of judicial programs, although he lacked the background for the position, and giving him a raise, which made his salary $15,000 more than his predecessor in the position.  And even though Marshall had agreed to tell the NCAA and to state publicly that Ridpath’s reassignment was not the result of any wrongdoing on his part, Marshall’s special legal counsel later informed the NCAA that Ridpath’s reassignment had been a “corrective action” taken by Marshall in order to remedy its violations of the NCAA’s rules.

Ridpath’s reassignment by itself was problematic, but Marshall’s statement was intended to blame Ridpath for Marshall’s violations – the same ones he reported to the NCAA in 1999 in his capacity as compliance director.

In July 2003, Marshall relieved Ridpath of his responsibilities as adjunct professor in the Exercise and Sports Science Department (a position he had assumed around the time he was hired as compliance director), but not as director of judicial programs, apparently as a result of negative comments he made about Marshall during the NCAA investigation.  

Ridpath first filed suit in 2002, but voluntarily dismissed the action in July 2003.  A month later, he filed another action against Marshall, its then-president, Dan Angel, its then-football coach, Bob Pruett, its general counsel, Layton Cottrill, and others. 

Here is Ridpath's amended complaint, in which he asserted claims for violation of his right to due process, his right to First Amendment expression, and for civil conspiracy, all under 42 U.S.C. § 1983, as well as for breach of contract, fraud, outrageous conduct, tortious interference with a contract, legal malpractice (against Marshall’s attorneys who represented both Ridpath and the university before the NCAA and assured Ridpath he did not need separate counsel), and violation of public policy.  Ridpath v. Board of Governors Marshall University, Civil Action No. 3:03-CV-02037 (S.D.W.Va. 2003).

Continue Reading...

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 Last week the Supreme Court issued its decision in Wyeth v. Levine, 2009 WL 529172 (U.S. Vt.), which affirmed the Vermont Supreme Court’s ruling that Diana Levine’s state law claims alleging defective pharmaceutical packaging were not preempted by federal law.  Justice John Paul Stevens wrote the 6–3  majority opinion, Justices Stephen Breyer and Clarence Thomas wrote separate concurrences, and Justice Samuel Alito wrote a dissent in which Chief Justice John Roberts joined. Here is my post from when the case was argued last November.

The Court rejected Wyeth’s theories that first, it could not have modified the label placed on the drug once it was approved by the Food and Drug Administration and that Wyeth could not comply with both state laws regarding failure-to-warn and federal labeling duties and second, that requiring Wyeth to comply with a state law requiring a stronger warning than that approved by the FDA would obstruct the purposes and objectives of federal drug labeling regulations.

Here are SCOTUSBlog’s initial post about the decision and its analysis.  And here is The Wall Street Journal Law Blog's discussion, which includes an interview with the paper's Supreme Court reporter, Jess Bravin, and places Wyeth in the context of earlier federal preemption decisions.

Other blog posts include this one from the  Drug and Device Law blog, which concludes that Levine doesn't make preemption impossible, just more difficult, and this one from the Pharmaceutical Executive blog, which describes Wyeth as having "walloped" the pharmaceutical industry.

Since the case was argued, Pfizer has announced that it is acquiring Wyeth (here is Wyeth's press release about the acquisition, which has far more information than anyone could possibly want or need), so Wyeth will cease to exist as an independent company, but I tend to agree with those who have suggested that Wyeth's counsel, whether in-house or outside, made a bad decision in appealing from the Vermont Supreme Court, given the nature and circumstances of Ms. Levine's injury.  I realize it's easy to make that observation now that the Court has ruled, but all things considered, Wyeth should have settled with Ms. Levine -- her verdict was $6.7 million -- and avoided the risk of making bad law. 

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I want to get to a few things that have accumulated on my desk over the past few days, so I’ll start with the ongoing legal problems of a Pittsburgh, Pennsylvania law firm that has represented thousands of plaintiffs in asbestos litigation in West Virginia, among other states.  

Peirce, Raimond & Coulter, P.C. is a defendant in a declaratory judgment complaint filed last September by Lumbermens Mutual Casualty Company, in United States District Court for the Western District of Pennsylvania.  Lumbermens Mutual Casualty Company v. Peirce, Raimond & Coulter, P.C., Civil Action No. 2:08–CV-1257 (W.D.Pa. 2008).

Here is the complaint, in which Lumbermens, as Peirce, Raimond & Coulter, P.C.’s errors and omissions carrier, asks for a declaratory judgment that it is not obligated to defend or indemnify the firm and its members in a lawsuit filed by CSX Transportation, Inc.  In that lawsuit, which is filed in United States District Court for the Northern District of West Virginia, CSX Transportation, Inc. alleges that the Peirce firm and its members were part of a scheme to prosecute fraudulent or unmeritorious asbestosis claims.  Here are some of allegations from the amended complaint:

 The defendants listed herein are well-organized and financed asbestos personal injury attorneys and medical experts who have orchestrated a scheme to inundate CSXT and other entities with thousands of asbestosis claims without regard to their merit.

Due to the sheer volume of claims filed as well as the number of claimants included in any one particular lawsuit CSXT and others were unable to adequately defend or even evaluate the merits of each claim on an individual basis.  Instead, in an effort to alleviate the stress placed on the judicial system by these mass filings, CSXT was forced to engage in a large scale mediation process with only limited information provided by the claimants’ own attorneys.

This case arises from the successful efforts of the defendants to deliberately fabricate and prosecute objectively unreasonable, false and fraudulent asbestosis claims against CSXT.  Specifically, the defendants orchestrated an asbestosis screening process deliberately intended to result in false positive diagnoses and then knowingly prosecuted claims against CSXT with no basis in fact.  As will be explained more fully below, this conduct violated the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., and also supports claims for common law fraud and conspiracy.

 CSX Transportation v. Gilkison, Civil Action No. 5:05–CV-00202 (N.D.W.Va. 2005). 

CSXT’s lawsuit has received attention for naming Dr. Ray Harron as a defendant.  Dr. Harron, a retired radiologist from Bridgeport, West Virginia, is alleged to have provided false positive diagnoses of asbestosis in thousands of plaintiffs, which formed the basis for their lawsuits against CSXT. 

Dr. Harron has already been accused of falsifying x-ray diagnoses of silicosis, as described by this 2006 story by Mike Tolson in the Houston Chronicle and this 2006 story by Wade Goodwyn on NPR.org.  And although Goodwyn’s article provides a link, here is the 249–page opinion by United States District Judge Janis Graham Jack.

But back to CSXT’s lawsuit.  The defendants have made several motions to dismiss, which have been granted and denied.  But most recently, the court denied Dr. Harron’s motion to dismiss the remaining claim against him for common law civil conspiracy on the grounds that the court lacked subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) (the court previously granted his motion to dismiss a claim for civil RICO conspiracy).

in a nutshell, Dr. Harron alleged that the plaintiff had not satisfied the requirement of proving that the amount in controversy is at least $75,000, as required for federal diversity jurisdiction.  Judge Frederick P. Stamp, Jr. disagreed, and in his order found that CSXT’s legal expenses of nearly $68,000 (so far) in investigating and prosecuting its claims, coupled with the possibility of punitive damages, satisfied the amount in controversy requirement.  So it looks like Dr. Harron will remain a defendant for at least a while longer.

Finally, let me offer my belated congratulations to Marc E. Williams, one of CSXT’s lawyers and my law school classmate.  Marc, who practices at Huddleston Bolen LLP, is the 2008–2009 president of DRI, the membership organization for civil litigation defense lawyers. 

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Although the Supreme Court heard arguments on Tuesday in Caperton v. A. T. Massey Coal Company, Massey wants the Court to review some additional information, namely, Chief Justice Benjamin's voting record in appeals involving Massey.

Yesterday Massey filed a motion for leave to file a supplemental brief in order to

present[] the Court with information pertinent to this matter — specifically, a press release detailing Justice Benjamin’s voting record in matters involving Massey Energy Company and its affiliates — that was issued by the West Virginia Supreme Court of Appeals after briefing was completed.  Justice Benjamin’s voting history in Massey cases bears significantly on respondents’ contention that, even if the Due Process Clause requires recusal when there is a “probability of bias,” there was no such probability here.

On Monday, Jennifer Bundy, the Supreme Court of Appeals of West Virginia's public information officer, issued a press release entitled, “Summary of Chief Justice Benjamin’s Dispositive Voting Record Regarding Massey Energy Cases from 01/01/2005 to 12/31/2008,” which was “prepared in response to press inquiries about Chief Justice Benjamin’s voting record in cases involving Massey Energy.”

According to the release, Chief Justice Benjamin voted against the interests of Massey Energy or its subsidiary 81.6% of the time, and in favor of the interests of Massey Energy or its subsidiary 18.4%. 

Caperton responded in opposition to Massey's brief yesterday and took the opportunity to remind the Court of some apparent inconsistencies in Massey’s brief, by noting the Court’s definition of “new matter”:

Such “new matter” might include a statement made by the CEO of a litigant — made after the litigant’s brief expressly denied that the CEO and a particular judge “even knew one another, before or after the election,” much less that the judge “solicited or encouraged [the CEO’s] activities” — acknowledging that the CEO and the judge had met privately before the election and discussed, specifically, “raising money.”  Compare, e.g., Resp. Br. 55–56, with Adam Liptak, Justices Hear Arguments on Money-Court Nexus, New York Times, March 4, 2009, at A18.  That would be new information “that was not available in time to be included in a brief,” S. Ct. R. 25.5, and it would tend to reinforce petitioners’ argument that the CEO had set out to pick a judge for his own case and that any reasonable observer would conclude that a judge selected under those circumstances quite probably would be biased in favor of the CEO who spent so much to elect him.

Caperton's brief also asserts that in the only Massey cases where Chief Justice Benjamin's vote was outcome-determinative, i.e., he voted with the majority in a 3-2 vote, he voted for Massey.

Here are Andrew Clevenger’s article in Tuesday’s Charleston Gazette discussing the release and his article in today’s edition discussing Massey’s brief.

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I think this comment by Justice John Paul Stevens sums up Caperton v. A. T. Massey Coal Co., which was argued today before the Supreme Court:

“The whole point of this case is it [actual bias] has not been recognized.  We have never confronted a case as extreme as this before.  This fits the standard that Potter Stewart articulated when he said ‘I know it when I see it.’”

And that is what the justices are grappling with. 

The issue is whether Hugh Caperton and his companies were denied their right to due process when Supreme Court of Appeals of West Virginia Justice Brent Benjamin refused to recuse himself from Massey’s appeal of $50 million jury verdict in Caperton's favor. 

Here are the transcript of the argument and a post from The Wall Street Journal Law Blog, which has an interview with the Journal’s Supreme Court reporter, Jess Bravin, who attended the argument and explains the significance of the justices’ questions and comments.  By the way, his discussion of Justice Stevens’ professional background may help to explain the comment referenced above.

For more analysis, here is SCOTUSBLOG’s excellent analysis of the argument, as well as an article by USA Today reporter Joan Biskupic, and the Associated Press’ story in the Charleston Gazette. 

The transcript really captures the differences between the parties’ positions.  Caperton argues that because actual bias on the part of a judge or justice is impossible to prove, the applicable standard needs to be one that focuses on the appearance of a probability of bias. 

Caperton argues that Blankenship’s $3 million contribution to a group that opposed Justice Benjamin’s opponent created the appearance of a probability of bias against Caperton in his case against Massey, which required Justice Benjamin’s recusal.

On the other hand, Massey argues that the appearance of impropriety, without any proof of actual bias, could never raise a constitutional issue, which means that Caperton’s right to due process was not violated by Justice Benjamin's refusal to recuse himself.

For what it’s worth, Justice Anthony Kennedy, who has been the critical fifth vote in several important decisions, said that it seemed to him that litigants have an entitlement to confidence in judges’ decisions under the Due Process Clause.   

Massey’s counsel, Andrew Frey, suggested that the justices ask themselves “if you were in Justice Benjamin's situation, do you really think that you would be incapable of rendering an impartial decision in a case involving Massey?  Because if the answer to that is no, if the answer to that is that you would not be incapable of rendering an unbiased decision, then there’s no justification for saying that Justice Benjamin would —”

Caperton’s counsel, former Solicitor General Theodore Olson, countered that the appropriate question for the justices was, “[i]f this was going to be the judge in your case, would you think it would be fair and would it be a fair tribunal if the judge in your case was selected with a $3 million subsidy by your opponent?”

The Court's opinion may depend on which question the justices answer.

 

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When Chesapeake Energy Corporation announced a few days ago that it was laying off 215 of the 255 employees in its Charleston, West Virginia regional office, it cited two reasons.  First, Chesapeake pointed out that the price of natural gas has declined, which is demonstrably true.  But the second reason it cited is more troublesome.  Chesapeake said that the Supreme Court of Appeals of West Virginia’s decision last year not to review the $404 million verdict in Tawney v. Columbia Natural Resources, LLC means that West Virginia is not a good place to do business.

You may recall that last year, Chesapeake blamed the Supreme Court of Appeals when it decided to cancel construction of its $40 million regional headquarters in Charleston. 

I thought that Chesapeake was being punitive when it claimed the Supreme Court was responsible for its decision not to build its headquarters,  Now I think that Chesapeake is being disingenuous in continuing to blame the Supreme Court for the layoffs,  

Because Chesapeake is represented by competent counsel who are familiar with the West Virginia Rules of Appellate Procedure, and have presumably explained them to their client, Chesapeake knows that its complaint that the Supreme Court refused to hear its appeal is simply wrong.  Chesapeake is upset that the Supreme Court did not reverse the verdict.  But Chesapeake can’t or won't come out and say that, so it claims that its appeal was not “heard.”

The fact is that the Court considered Chesapeake’s petition for appeal, but chose not to accept the appeal.  And since Chesapeake’s appeal was discretionary, the Court was not obligated to accept it. 

This February 25 post from the American Gas Association’s True Blue-Natural Gas blog sums up the shape of the current market, which, I submit, is far more responsible for Chesapeake’s problems than any decision the Supreme Court made -- or didn't make. 

But Chesapeake has other problems, too.  Here is a class-action complaint filed last week in the Southern District of New York against Chesapeake, its officers and directors, and underwriters, which alleges various securities laws violations that have caused Chesapeake’s stock to drop 80% from its offering price in July 2008.  Safron Capital Corporation v. Chesapeake Energy Corporation, Civil Action No. 1:09-CV-01826 (S.D.N.Y. February 25, 2009). 

 

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Here is the petitioners' reply brief, which they filed today. 

Also, in this order entered last Friday, the Supreme Court of the United States denied Alabama Attorney General Troy King's motion to participate in the oral argument and to divide the argument time.  King filed an amicus brief on behalf of Alabama and six other states in support of the respondents.  The Court also granted the Supreme Court of Louisiana's motion for leave to file an amicus brief out of time, which I discussed last week.

Oral argument is scheduled for next Tuesday, March 3.

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The Supreme Court of Appeals of West Virginia was scheduled to hear arguments today in The Book Exchange's appeal of the dismissal of its lawsuit against West Virginia University and Barnes & Noble, but the parties settled their dispute yesterday.  For a recap of the issues, here are the circuit court's order, the Book Exchange's brief, WVU's brief, B&N's brief, and The Book Exchange's reply brief, all courtesy of the Supreme Court's website.

According to Cheryl Caswell's article in today's (Charleston) Daily Mail, WVU will have to obtain prior authorization from a student before setting aside a portion of his or her financial aid money to purchase textbooks and other items in WVU's bookstore.  The Book Exchange had claimed that WVU's practice of withholding up to $500 per semester from a student's financial aid and requiring that the funds be spent at WVU's bookstore was unfairly competitive.  If a student does not wish to participate in the program, the funds will be distributed directly to the student.  The Book Exchange will not receive any money in the settlement.

Here is my post discussing the circuit court's dismissal of The Book Exchange's claims for state antitrust violations, unfair trade practices, and consumer protection law violations.

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 You may have thought -- or hoped -- that you wouldn’t hear any more about John A. King, the discredited surgeon and defendant in 124 malpractice lawsuits that have resulted in settlements of more than $100 million.  But you would not be so lucky.

According to Paul J. Nyden’s article in the February 1 (Charleston, WV) Sunday Gazette-Mail, a qui tam (whistleblower) complaint filed on May 12, 2006 alleged that King performed unauthorized experimental surgeries on 26 of his patients. 

On November 17, 2008, United States District Judge John T. Copenhaver, Jr. unsealed the complaint, which was filed in the Southern District of West Virginia against medical device manufacturer EBI, L.P. on behalf of eight of King’s former patients whose medical expenses were submitted for payment to or paid by Medicare or Medicaid.   United States ex rel. Lisa Coiner v. EBI L.P., Civil Action No. 2:06-CV-0353.

Here is the complaint, which alleges that:

In sum and substance, King and [his former physician assistant David] McNair took studies that failed in laboratory animals, and then, without any reasonable basis to conclude that they would be successful, began to experiment on humans.

The complaint also alleges that EBI “established a system of kick-backs to physicians who prescribe EBI Ionic Spacers.  These kick-backs are administered by the EBI sales department, and frequently disguised as consultantships although unrelated to any scientific or educational activity.  The kick-backs have taken the form of cash payments, travel benefits, entertainment and other benefits.”

And as if all of that weren’t enough, the complaint alleges that King and McNair failed to obtain the patients’ informed consents and institutional review board approval that are required for an experimental treatment protocol, such as the surgery that King and McNair performed. 

According to the docket, the United States is not intervening in the case at this time, and EBI’s answer is due on or before March 10.

That story was followed by one on February 2, in which Nyden reported that the United States Trustee for King’s bankruptcy in Alabama had filed a notice of intent to abandon claims made by King in his lawsuits against various defendants, including HCA, Putnam General Hospital, individual physicians, and corporate officials.  That means that King will not be able to recover from the defendants in those actions. 

Additionally, a hearing was scheduled for yesterday before United States Bankruptcy Judge Thomas Bennett on King’s defense to the Internal Revenue Service's claim that he owes more than $1 million in unpaid taxes. 

Then, Nyden reported on February 4 that, in what has become a routine occurrence, King has sued the lawyer he had hired to represent him in lawsuits against three other law firms and HCA.

Representing himself this time, King filed suit on January 28 against Lance Rollo in United States District Court for the Northern District of West Virginia.  Here is the complaint, in which King alleges claims for negligence/malpractice and breach of contract by Rollo in representing him against his former lawyers and HCA (I have omitted the 27 exhibits attached to the complaint).  King v. Rollo, Civil Action No. 1:09-CV-0015.

King seeks $25 million compensatory and $25 million punitive damages from Rollo, but hasn’t attempted to serve the complaint.

The Credentialing Resource Center Blog points out that at this rate, King won't have anyone left to sue,  And the NY Medical Malpractice and Accidents blog is right that you can't make this stuff up.

Finally, in a bit of good news, Nyden reported yesterday that the Pennsylvania Board of Osteopathic Medicine has scheduled a hearing on April 6 to determine whether to revoke King's license.  King’s defense to the proceeding is that Pennsylvania cannot revoke his license, as he had already voluntarily withdrawn it in October 2008.  Fortunately, the withdrawal of his license does not prevent the Board from revoking it. 

King has already lost his medical licenses in Alabama, Indiana, Michigan, Ohio, Texas, Virginia, and West Virginia; his licenses expired without any formal action in Georgia and New Jersey.  But incredibly, he still holds licenses in Florida, New York, and Tennessee. 

 

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As we get closer to March 3, when the United States Supreme Court will hear arguments in Caperton v. A. T. Massey Coal Company, a state appellate court has weighed in on the controversy, but it’s probably not the court or for the reason you’d expect. 

According to this article by John O’Brien in today’s LegalNewsline.com, the Louisiana Supreme Court has moved for leave to file an amicus brief in the case, in order to refute allegations contained in a Tulane Law Review article that was cited in a brief filed by several amici on behalf of Caperton.  

Here’s the backstory.  In March 2008, the Tulane Law Review published an article entitled “The Louisiana Supreme Court in Question: An Empirical and Statistical Study of the Effects of Campaign Money on the Judicial Function,” by Vernon Valentine Palmer and John Levendis.

The first paragraph of the article’s executive summary says:

This empirical and statistical study of the Louisiana Supreme Court demonstrates that the court has been significantly influenced — wittingly or unwittingly — by the campaign contributions from litigants and lawyers appearing before it.  In a statistical sense, campaign donors enjoy a favored status among parties before the court.  Facing an aggregate of $1.3 million in political donations in the cases under review, the justices did not find reason to disqualify or recuse themselves.

No wonder, then, that the amicus brief submitted by the Brennan Center for Justice at NYU School of Law, the Campaign Legal Center, and the Reform Institute cited the article as support for their position that Supreme Court of Appeals of West Virginia Chief Justice Brent Benjamin should have recused himself from the Caperton case.

The only problem is that the article has been criticized for its miscalculations and flawed methodology, which prompted Tulane Law School Dean Lawrence Ponoroff to apologize to the Louisiana Supreme Court last September. 

On February 9, the Louisiana Supreme Court moved for leave to file its amicus brief out of time, in which it described the purpose for its brief:

The Louisiana Supreme Court’s purpose in filing its amicus curiae brief is to apprise this Honorable Court that the Tulane Law Review article has been thoroughly refuted because of its flawed methodology, error-laden data selection, and faulty analysis.  See, e.g., Robert Newman, Janet Speyrer & Dek Terrell, A Methodological Critique of The Louisiana Supreme Court in Question: An Empirical and Statistical Study of the Effects of Campaign Money on the Judicial Function, 69 LA. L. REV. 307 (2009); and because of its erroneous data collection, selection and analysis, see Kevin R. Tully & E. Phelps Gay, The Louisiana Supreme Court Defended: A Rebuttal of The Louisiana Supreme Court in Question: An Empirical and Statistical Study of the Effects of Campaign Money on the Judicial Function, 69 LA. L. REV. 281 (2009).  Due to the grave errors in the article, the Dean of the Tulane Law School issued a formal written apology  to the Louisiana Supreme Court and to its Justices.  And, the Tulane Law Review posted an Erratum on its website expressing deep regret over the article’s errors.

Here’s the Erratum on the law review’s website:

The Louisiana Supreme Court in Question: An Empirical Statistical Study of the Effects of Campaign Money on the Judicial Function, published in Volume 82 of the Tulane Law Review at 1291 (2008), was based on empirical data coded by the authors, but the data contained numerous coding errors.  Tulane Law Review learned of the coding errors after the publication.  Necessarily, these errors call into question some or all of the conclusions in the study as published.  The Law Review deeply regrets the errors. 

Counsel for the Louisiana Supreme Court and the writers of its amicus brief are Kevin R. Tully and E. Phelps Gay, who also wrote one of the two rebuttals to the Tulane Law Review article published this year in the Louisiana Law Review.

On a lighter note, if such a thing exists in the case, is this front-page article from Monday’s USA Today by Joan Biskupic, entitled “At the Supreme Court, a case with the feel of a best seller.”

Also today, The Wall Street Journal Law Blog published this post about Andrew Frey and Theodore Olson, who will argue for the parties at the Supreme Court.  Frey and Olson are two of the most experienced and best known appellate lawyers in the country, which should make for an excellent argument.

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In its February issue, the ABA Journal has a feature by John Gibeaut entitled "Caperton's Coal," about, what else, Hugh Caperton and Harman Mining's lawsuit against Massey, and its aftermath.

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Five amicus briefs were filed yesterday in support of A. T. Massey Coal Company.  They are:

• Brief of Amicus Curiae Center for Competitive Politics in Support of Respondents;
• Brief of Law Professors Ronald D. Rotunda and and Michael R. Dimino as Amici Curiae in Support of Respondents;
• Brief of the States of Alabama, Colorado, Delaware, Florida, Louisiana, Michigan, and Utah as Amici Curiae in Support of Respondents;
• Brief of Ten Current and Former Chief Justices and Justices as Amici Curiae in Support of Respondents; and
• Brief of Amicus Curiae James Madison Center for Free Speech Supporting Respondents.

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I’ll get back to posting from LegalTech New York, but I want to talk about an order entered last Friday by Supreme Court of Appeals of West Virginia Chief Justice Brent Benjamin.

As most everyone knows, the United States Supreme Court will hear arguments on March 3 in Caperton v. A. T. Massey Coal Co. on the issue of the effect of Massey chairman Don Blankenship’s $3 million in contributions to an organization that ultimately benefited Chief Justice Benjamin’s 2004 campaign for the Court. 

Now, confronted with a motion to disqualify him from State ex rel. Central Energy Company v. The Honorable Ronald E. Wilson and Mountain State Carbon, LLC, No. 082333 (Central Energy Company is a Massey subsidiary), Chief Justice Benjamin has temporarily recused himself from all cases involving Massey, pending the Supreme Court’s decision in Caperton. 

Here are the recusal order and a 14-page memorandum, in which Chief Justice Benjamin explained that, although he does not believe that his disqualification is warranted “based upon the motion as presented, the facts and records of this case, these parties’ previous actual record before me, and the current law of West Virginia and the United States[,]”

It would be personally and judicially disrespectful to the United States Supreme Court and its Justices for me to proceed in this or any other matter involving Massey Energy Company while the Caperton matter is pending.  It would likewise be improper for this Court to delay matters involving Massey Energy Company, particularly matters such as this involving injunctions, while the Caperton matter is pending before that Court.

Justice Robin Davis will serve as acting Chief Justice in matters involving Massey and will appoint a replacement while Caperton is pending before the Supreme Court.

Also, on Monday, AmericanLawyer.com's Andrew Longstreth discussed the Caperton appeal and asked Andrew Frey of Mayer Brown, who will argue for Massey before the Supreme Court , about the disparity in the number of amicus briefs filed in support of Caperton and Massey.  Frey said that he anticipates “three or five” briefs in support of Massey, including the one to be filed by Alabama Attorney General Troy King on behalf of the National Association of Attorneys General, which I discussed last week.

 

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The E-Discovery Town Hall presentation yesterday afternoon at LegalTech New York featured questions submitted in advance on YouTube, including one by Cambridge University professor Stephen Hawking.  Here are some of the panelists' introductions and some of the questions, although not Professor Hawking's, unfortunately. 

The panel was moderated by Patrick Oot, director of electronic discovery and senior litigation counsel for Verizon.  The panelists were:

• Browning Marean, a partner at DLA Piper;
• Patrick Zeller, vice-president and deputy general counsel for Guidance Software, Inc.;
• Craig Ball, a lawyer and certified computer forensic expert;
• George Rudoy, director of global practice technology and information services at Shearman & Sterling;
• Ken Withers, director of judicial education and content at the Sedona Conference; and
• Theresa Beaumont, discovery counsel at Google. 

Much of the discussion centered on the costs associated with e-discovery review and production, which can dwarf such costs in conventional, i.e., paper, litigation.  Craig Ball suggested that uncertainty drives decision about data collection, which results in unnecessary costs.  In other words, if you're not sure what your client will need to produce, you may err on the side of including too much information in your review.  He recommended that litigants "push for compulsory collaboration in the data collection process," but that as to evidence preservation issues, "you're on your own."

Craig also recommended the use of special masters.  Their advantage is that they are neutral and technologically savvy and can assist in mediating a settlement where e-discovery costs will be substantial, which seems to be nearly any case involving e-discovery.

Also generating discussion was Federal Rule of Civil Procedure 26's meet and confer obligations.  In response to a question about whether there is any standard checklist for the meet and confer, Ken Withers said there is no 3x5 laminated card you can pull out of your pocket and consult, but that certain basic considerations apply in most every case.  

He said that everyone participating in the conference must have a good grasp on his or her client's "data holdings."   He also said that too many lawyers treat the meet and confer obligation as perfunctory, which usually has disastrous results, for the lawyers and the client.

Lastly, the presentation mentioned the conflicts that can develop between clients and their counsel.   Browning Marean pointed out that lawyers need to know the scope of their client's response to discovery.  In e-discovery particularly, where more document review and production can translate into huge sums of money, a client may want to narrow its discovery responses in order to reduce expenses, while its lawyer may view the issue more broadly and recommend -- or insist -- on broader responses.  This conflict can also arise between in-house counsel and outside counsel, and needs to be resolved as soon as possible.

By the way, Professor Hawking's question was whether lawyers could rely on key-word searching in document production; the answer, at least according to Craig Ball, is no, unless the lawyer is also a linguist, statistician, or computer scientist.

The presentation will be available at LegalTech on Demand, which can be accessed on LegalTech.

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A. T. Massey Coal Company filed its merits brief yesterday, which leaves only the filing of amicus briefs in support of Massey's position, which are due by next Wednesday, February 4.

It doesn't seem likely that Massey will attract as many amici as the plaintiffs did, which I provided in this post, but one brief that will be filed on its behalf will come from Alabama Attorney General Troy King for the National Association of Attorneys General.

Dan Schweitzer, Supreme Court counsel for the NAAG, sent out this email, which enclosed a memorandum describing the proposed brief.

Here is the memorandum's description:

To be clear, Alabama will not be taking sides in the election vs. appointment vs. merit-selection debate in this brief.  Nor will Alabama be attempting to downplay the seriousness of the allegations of impropriety here.  Instead, Alabama will focus solely on the following federalism point: Once a state has chosen its preferred method of selecting judges -- whatever that method is -- states should have the ability to police judicial participation through carefully constructed state recusal policies.  In other words, making recusal a federal issue by "constitutionalizing" it is unnecessary and, as a practical matter, unwise.

The memorandum also outlines potential arguments to be raised in the brief:

• It would be extraordinarily difficult to craft a meaningful "principle" underlying a generic federal due process right to recusal.
• Federalizing the issue burdens the courts.
• Federalizing the issue is unnecessary because the States are currently handling the issue with their own rules and regulations.
• Making the failure to recuse a potential constitutional rights violation will effectively cause many judges to recuse unnecessarily.

Here is The Wall Street Journal's Law Blog's post from last week about the memorandum (with a now-outdated photograph of the Supreme Court of Appeals of West Virginia), including a link to Paul J. Nyden's article in the Charleston Gazette.

I'll post the NAAG amicus brief and any others.

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According to Womble Carlyle's Trade Secrets Blog, Mobile (Alabama) County Circuit Judge Robert Smith has upheld a $192 million verdict against chemical manufacturers Ineos Phenol and Ineos Americas LLC for their theft of trade secrets owned by Dr. Sven Peter Mannsfeld.

Mannsfeld  filed suit in 2006 after learning in 2004 that his idea, which recycles hazardous waste into building products for making tires and other items, had been patented by the defendants, who listed their employees as the inventors.  Mannsfeld is retired as the president of Degussa Corporation, a multinational chemical manufacturer now known as Evonik Degussa, which had a plant next to Ineos' in a Mobile-area industrial park.

The verdict, which was returned last October following a two-week trial, consisted of $25 million for "historic" damages and $167 million in future damages through 2005. 

Judge Smith entered his order last Friday, and the defendants have 42 days to appeal to the Alabama Supreme Court.  They have denied any theft of Mannsfeld's idea and will appeal.

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Here are the amicus briefs that have been filed thus far in Caperton v. A. T. Massey Coal Company, Inc.:

Brief of 27 Former Chief Justices and Justices in Support of Petitioners;

Brief of Public Citizen in Support of Petitioners;

Brief of Justice At Stake, the American Judicature Society, Appleseed, Common Cause, the Constitutional Accountability Center, the Institute for the Advancement of the American Legal System, the League of Women Voters, the National Ad Hoc Advisory Committee on Judicial Campaign Conduct, the Alabama Appleseed Center for Law & Justice, the Colorado Judicial Institute, Democracy North Carolina, the Fund for Modern Courts, the Illinois Campaign for Political Reform, Justice For All, the League of Women Voters of Michigan, the League of Women Voters of Wisconsin Education Fund, the Massachusetts Appleseed Center for Law & Justice, the Michigan Campaign Finance Network, Missourians for Fair and Impartial Courts, the NC Center for Voter Education, Ohio Citizen Action, Pennsylvanians for Modern Courts, Texans for Public Justice,the Washington Appellate Lawyers Association, Washington Appleseed, Wisconsin Democracy Campaign, Chicago Appleseed, and the Chicago Council of Lawyers in Support of Petitioner;

Brief of the Brennan Center for Justice at NYU School of Law, the Campaign Legal Center, and the Reform Institute in Support of Petitioners;

Brief of the American Academy of Appellate Lawyers in Support of Petitioners;

Brief of the Committee for Economic Development, Intel Corporation, the Lockheed Martin Corporation, PepsiCo, Wal-Mart Stores, Inc., the Defense Trial Counsel of Indiana, the Illinois Association of Defense Counsel, and Transparency International – USA in Support of Petitioners;

Brief of the National Association of Criminal Defense Lawyers in Support of Petitioners;

Brief of the American Bar Association in Support of Petitioners;

Brief of the American Association for Justice in Support of Petitioners;

Brief of Center for Political Accountability and the Carol and Lawrence Zicklin Center for Business Ethics Research in Support of Petitioners; and

Brief of the Conference of Chief Justices in Support of Neither Party

January 5 was the deadline for amicus briefs in support of the  petitioners.  The respondents' merits brief is due by January 28, and amicus briefs supporting their position are due by February 4.

Also, in a story by Justin Anderson in today's (Charleston, West Virginia) Daily Mail, Richard A. Brisbin, Jr., associate professor in the Political Science Department at West Virginia University, discusses the political agendas of some of the groups that have filed amicus briefs.

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Two recent decisions from federal courts in West Virginia illustrate some procedural and substantive pitfalls that can arise in ERISA cases.

In Conner v. Elkem Metals Co., 2008 WL 5122197 (S. D. W. Va. 2008), which originated in the Southern District, Conner retired in 2000 and was told by an employee in the benefits department that his pension would be $300 per month, but that if he waited four years to receive his pension, his benefits would be substantially larger.

Conner later learned that his actual pension when he retired would have been $917 per month, and that the benefits department employee misrepresented the amount to him.  Conner filed suit and alleged that his employer negligently or intentionally misrepresented the amount of his benefits.  The defendants' motion for summary judgment asserted that Conner had "failed to invoke any of the remedial schemes afforded by Section 502(a) of ERISA." 

The district court discussed Conner’s requirement to exhaust his administrative remedies and whether his causes of action were preempted, and concluded that even if Conner had exhausted his administrative remedies, the defendants’ motion for summary judgment should be granted because Conner had failed to state a valid cause of action under ERISA. 

But here’s the interesting issue with the court’s decision.  As Rob Hoskins observed at ERISABoard, there is no requirement in the Fourth Circuit that a plaintiff has to exhaust administrative remedies in a breach of fiduciary claim.  But apparently, neither party informed the court of the law.

Further, in Griggs v. E. I. DuPont de Nemours and Co., 237 F.3d 371 (4^th Cir. 2001), the Fourth Circuit held that the proper remedy for breach of fiduciary duty is reinstatement, i.e., returning the parties to the positions they would have been in but for the misrepresentation.  The district court refers to Griggs throughout its opinion, but does not discuss reinstatement, which may be an example of the court choosing not to grant relief that was not requested by the plaintiff.

The decision from the Northern District, Henry v. UBC Product Support Center, Inc., 2008 WL 5378321 (N. D. W. Va. 2008), deals with a procedural problem created by the plaintiff’s inadvertent pleading.

Henry alleged that her employer wrongfully terminated her based on her age and disability.  She also alleged that she and her husband were disabled and covered by her employer’s health insurance, and that her employer harassed and constructively discharged her based on their disabilities and status of their coverage, a claim intended to bolster her allegations of her employer's discrimination against her.

The defendants removed the action on the grounds that Section 510 of ERISA prohibits discrimination against a plan participant for exercising any right to which he or she is entitled, and that jurisdiction of such a claim is exclusively federal.  Even though Henry did not explicitly state a claim under ERISA, “complete preemption” made removal appropriate. 

And if that wasn't bad enough for the plaintiff, the defendants asserted that the court also had jurisdiction of the remaining counts, which alleged state law claims, because the court could assert supplemental jurisdiction over them.  

Faced with this situation, Henry moved to amend the complaint in order to withdraw the count asserting discrimination under ERISA and to remand the case.

The court determined that Henry’s claim of discrimination was preempted by ERISA, which gave the court sole and exclusive jurisdiction.  The more difficult issue was Henry's motion to amend, which was filed solely to deprive the court of jurisdiction, a fact not lost on the court:

This Court does not doubt that, as were the motions filed by the plaintiffs in CSX Hotel and Savilla, Henry’s motion to amend is motivated in no small part by a desire to eliminate any basis for federal jurisdiction from her case.  Nevertheless, the Court cannot find that her motion is made in bad faith.  As she admits, Count Three is inartfully drafted; it does not directly state a claim that would fall under ERISA, but rather implies such.  Although the Court has already found that the count, as drafted, is sufficient to invoke ERISA preemption, it is not unreasonable to conclude that Henry never intended to state such a claim.  Moreover, it is understandable that her attorney, perhaps unfamiliar with how ERISA cases are litigated, would want to limit the scope of the case to avoid the claim.  Accordingly, the Court GRANTS Henry’s motion to amend, finds that it was made in good faith, and ORDERS the Amended Complaint to be deemed filed.

Because the court granted the motion to amend, it declined to assert supplemental jurisdiction over the other counts on the grounds that “the principles of economy, convenience, fairness and comity favor remand. Indeed, should novel questions of state law under the WVHRA [West Virginia Human Rights Act] arise in this case, West Virginia courts certainly will be better positioned to answer them."

I don't doubt that Henry and her lawyer never intended to assert a claim under ERISA, but  they dodged a bullet by being allowed to amend their complaint and being remanded to state court.

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

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

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

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

Happy New Year to everyone!

 

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

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

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

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

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

Continue Reading...

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On Friday, when the Supreme Court decided to hear Hugh Caperton and Harman Mining's appeal from the reversal of their $50 million verdict against A. T. Massey Coal Co., Don Blankenship, Massey Energy's chairman, was embroiled in another lawsuit. 

The families of two coal miners killed in an accident in January 2006 sued their employer, Aracoma Coal Company, Inc., Massey Energy, A. T. Massey, and Blankenship individually.   The plaintiffs contend that Blankenship is at fault because he emphasized increased coal production over proper safety procedures, according to Ken Ward, Jr.'s article in Tuesday's Charleston Gazette.  Aracoma is a subsidiary of Elk Run Coal Company, Inc., which is a subsidiary of A. T. Massey Coal Company, Inc.

Blankenship was present at the trial on Friday, but his testimony was presented via videotape -- although his lawyers attempted to convince Logan County Circuit Court Judge Roger L. Perry to allow him to testify in person, which Judge Perry did not allow.  Blankenship's lawyers may present his testimony live during his case-in-chief.

According to Ward's article in yesterday's Saturday Gazette-Mail, Blankenship involved himself in seemingly small details of Massey's operations, such as whether to waive its usual policy and hire three workers who did not have high school diplomas.  What may be more helpful to the plaintiffs, though, is Blankenship's testimony that he receives faxed production reports from Massey mines every two hours and monitors profit and loss statements from each mine on a daily basis.

The wrongful-death case has created an insurance coverage dispute between Aracoma and its insurer, American International Specialty Lines Insurance Co.  In this complaint, Aracoma seeks a declaration that its policy with AISLIC covers the January 2006 fire in which the two miners died.  Aracoma Coal Company, Inc. v. American International Specialty Lines Insurance Co., Civil Action No. 08-C-322-O (Circuit Court of Logan County, West Virginia, October 29, 2008).

AISLIC's policy provides Massey with general liability coverage of $15 million per occurrence limit of liability with a $10 million per occurrence retention, and  employer's liability/stop gap coverage of $20 million per occurrence with a $5 million per occurrence retention.  Aracoma, as a Massey subsidiary, is an insured under the policy.

Aracoma claims that in the course of settlement negotiations, the plaintiffs offered to settle within the applicable limits of coverage under the West Virginia stop gap portion of the policy, which would result in a full and complete release of Aracoma, as well as the other defendants.  Aracoma agreed to pay the $5 million retention toward the claim.

But AISLIC refused to agree to such a settlement, and instead insisted that the other Massey defendants pay all or a portion of the $10 million retention applicable under the general liability portion of the policy before it would proceed on Aracoma's behalf.

Aracoma alleges that AISLIC's conduct has exposed it to a verdict in excess of its policy limits so that AISLIC can obtain a settlement more favorable to itself.  The complaint seeks a declaratory judgment that AISLIC cannot refuse to settle the claims against Aracoma by first requiring payment under the general liability portion of the policy, and alleges common law and statutory bad faith causes of action.

Ward wrote about the insurance dispute in Wednesday's Charleston Gazette.  But according to a story he wrote for Thursday's edition, Massey took issue with the the suggestion that Aracoma had agreed to settle with the plaintiffs for $20 million.  Massey's general counsel, Shane Harvey, would not reveal the amount the parties had agreed to, but put the settlement range at somewhere between $1 and $20 million.  Harvey  expressed concern that the article could "influence jurors and prevent fair trials."

There are a couple of things I don't understand about the lawsuit and Massey's reaction to Ward's article.  Aracoma is the party that made the allegations about AISLIC's actions, particularly that the plaintiffs had offered to settle within the limits of liability.  Ward's article doesn't state that the parties had agreed to settle for $20 million, simply that they had agreed to settle within the policy limits.

But if Massey is so worried about the article's possible effect on the jurors, then why did Aracoma file its declaratory judgment action in the same state court where the wrongful death cases were pending, a few days before those cases went to trial?  The wrongful death and insurance coverage cases would understandably attract media attention, and the surest way to avoid any such attention would be to have waited until the underlying trial was concluded. 

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

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

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

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

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

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

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

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

 

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Here's an update on Samuel Juniper's lawsuit against his employer, M&G Polymers USA, LLC.  If you’ve forgotten, Juniper successfully sued M&G last year after Aetna, M&G’s health insurer, denied $40 in charges for three venipunctures, then provided Juniper with various and conflicting reasons for the denials.  I wrote about the lawsuit in this post.

On October 10, the Fourth Circuit Court of Appeals affirmed the Southern District of West Virginia’s ruling in Juniper's favor.  The Fourth Circuit adopted the district court's reasoning in an unpublished per curiam opinion.  Juniper v. M&G Polymers USA, LLC, 2008 WL 4538161 (4th Cir. 2008).  

District Judge Robert C. Chambers had accepted Magistrate Judge Maurice G. Taylor, Jr.'s recommended decision that Juniper's motion for summary judgment be granted and M&G's be denied.  The court found that the "decision [to deny the charges] was arbitrary, not supported by evidence, inconsistent with earlier interpretations of the plan and not reasonable."  Juniper v. M&G Polymers USA, LLC, 495 F.Supp.2d 590 (S. D. W. Va. 2007). 

The ContractsProf Blog posted about the decision, which it described as "David Defeats Goliath."   And the ABA Journal reported that Juniper intends to frame his $40 check when he receives it.

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Because this blog focuses on business litigation, I couldn’t pass up this item from Larry Bodine, who writes the Law Marketing Blog.

According to Larry, if you want to develop more business from corporate clients, emphasize your ability to settle, not litigate, a case.  He explains that corporations want to manage their risk and avoid the exposure that a trial can present, so your skills as a litigator may not be beneficial as you think.

This approach is a sharp contrast to the one taken by many lawyers who represent individuals in personal-injury and consumer actions, and want to emphasize that they will go to court and hold the bad actor accountable.  Many times, that’s what plaintiffs look for in a lawyer. 

Larry also referenced Jonathan Glater’s article in The New York Times entitled “Study Finds Settling Is Better Than Going to Trial,” which reported that a survey conducted by DecisionSet found that plaintiffs were wrong, i.e., they received less from the jury than the defendant's final offer, to go to trial in 61% of cases surveyed, while defendants were wrong, i.e., a jury awarded the plaintiff more than the defendant's final offer, in 24% of cases.  Here is the study, which was published in the Journal of Empirical Legal Studies. 

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This is an update to my post about the lawsuit filed in June 2007 by two documentary film makers from Huntington, West Virginia against Warner Bros. Pictures and other defendants, which alleged that their documentary, "Ashes to Glory" was unfairly used in the movie "We Are Marshall." 

Deborah Novak and John Witek  alleged 24 specific similarities between their work and the movie.  They sued for copyright infringement, breach of contract, fraud, and unfair trade practices.

The United States District Court for the Central District of California disagreed, though, and on October 20, granted the defendants' motion for summary judgment against all of the plaintiffs' claims.  Novak v. Warner Bros. Pictures LLC, Civil Action No. 07-CV-04000 (C. D. Cal. 2007).

Judge Gary Alan Feess concluded that the plaintiffs were unable to prove that the two works are "substantially similar," which is required in order to establish a claim for copyright infringement:

Though the two works tell the story of the November 14, 1970 air plane crash, that event, and the events that preceded and followed, are all matters of public record which cannot be copyrighted.  Copyright protects only an author's original expression and not historical facts or events which means, as noted by the Supreme Court that "the fact/expression dichotomy limits severely the scope of protection in fact-based works."  Feist Publications, Inc. v. Rural Tele. Serv. Co., 499 U.S. 340, 340 (1991).  Here, Plaintiffs have created and produced a fact-based narrative that recounts, in an historically accurate way, what happened before and after the 1970 air plane crash.  Defendants, on the other hand, have produced a dramatic recreation of the events that, though based on the historical record including the documentary, does not appropriate Plaintiffs' expressive elements and makes no pretense of being historically accurate.  Thus, even though the two works have the same story as their subject, they are not "substantially similar" as that phrase is used in copyright jurisprudence.

The court also rejected the plaintiffs' breach of contract claim, on the grounds that after failing to reach an agreement with Thunder Road Film Productions for an option or purchase of the rights to "Ashes to Glory," the plaintiffs contacted other production companies.  The court reasoned that if  the plaintiffs knew they didn't have an agreement with Thunder Road, "plaintiffs cannot now, with the success of 'We Are Marshall' itself an historical fact, revive a claim that they never believed they had in the first place."

In order to establish whether the two works are substantially similar, the court engaged in a very thorough comparison of their styles of presentation, content, characters, and plot.  But simply because the producers of "We Are Marshall" were aware of and had seen "Ashes to Glory"  does mean that the defendants infringed on the plaintiffs' copyright or breached an implied contract. 

Here are posts from The Hollywood Reporter, Esq. Blog and the Movie Blog, both of which conclude that Judge Feess got it right.

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

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

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

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

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

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

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

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

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

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

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

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

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

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There is some irony in the story being reported by the Associated Press’ Lawrence Messina about a lawsuit brought by Progressive Minerals LLC against several officers of Global Empire Investments and Holdings LLC.  Progressive Minerals LLC v. Rashid, Civil Action No. 5:07-CV-108 (N. D. W. Va. August 24, 2007).  But first, a description of what's involved in the case.

Here is the complaint, in which Progressive asserts that it paid a $750,000 “commitment fee” to Global for its assistance in providing $200 million in financing for Progressive’s purchase of a coal mine in southern West Virginia from Justice Energy Company, Inc.

But after Global accepted the fee, it never provided the loan.  And while Progressive was waiting to hear from Global, Progressive learned that Global had filed for Chapter 11 bankruptcy in Texas and listed assets consisting of three bank accounts totaling $3,369.24 and two office buildings assessed at $5.4 million but with secured debt of $12.8 million against them.  In other words, not quite a “global empire.”

Judge Frederick P. Stamp, Jr. recently dismissed two defendants for lack of personal jurisdiction, but denied the motion as to a third.  He also entered a scheduling order that sets a bench trial to begin on October 14, 2009.

The irony in the lawsuit stems from the fact that Progressive’s president is former West Virginia Governor Arch A. Moore, Jr., whose own past suggests that he would recognize a swindle when he sees one.  In 1990, he pled guilty to five felonies resulting from corruption while in office and served three years in prison and on home confinement.

In 1993, the Fourth Circuit affirmed the District Court’s denial of his petition for a writ of habeas corpus based on ineffective assistance of counsel provided by his lawyer, William Hundley.  U.S. v. Moore, 993 F.2d 1541 (4th Cir. 1993).

I always thought that Moore’s ineffective assistance claim was ridiculous, considering that Hundley had been the former chief of the Organized Crime Division of the Department of Justice under Robert F. Kennedy and was a noted criminal defense lawyer in Washington, D.C.   Plus, he had represented Moore on two earlier occasions.

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After the Supreme Court of Appeals of West Virginia rejected Chesapeake Energy Corporation's petition for appeal from the $404 million verdict in Estate of Garrison G. Tawney v. Columbia Natural Resources, LLC, Chesapeake and NiSource, Inc. filed a petition for certiorari with the United States Supreme Court. 

But on Thursday, Judge Tom Evans of the Circuit Court of Roane County, West Virginia preliminarily approved a settlement in which the defendants will pay $380 million and drop their appeals.  Here are NiSource's press release announcing the settlement, Associated Press reporter Tim Huber's article in the Fort Worth (Texas) Star-Telegram, and Ken Ward, Jr.'s article in yesterday's Charleston Gazette. 

NiSource will pay $338.8 million of the settlement, with Chesapeake paying the balance of $41.2 million.

Class members may still object to the settlement or opt out.  Judge Evans has scheduled a final fairness hearing for November 22.

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

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

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

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

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

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

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

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

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Following the Supreme Court of Appeals of West Virginia's decision last month to hear DuPont's appeals from the $400 million verdict in Perrine v. DuPont, the medical monitoring class action from Harrison County, West Virginia, DuPont got more good news last week.

According to Ken Ward, Jr. in last Friday's Charleston Gazette, United States District Chief Judge Joseph R. Goodwin has denied the plaintiffs' motion to certify a class consisting of everyone who was a Parkersburg, West Virginia water customer for at least one year since November 1, 2005.  The plaintiffs alleged that Parkersburg's water supply was contaminated with perfluoroctanoic acid, also known as C-8, a substance used by DuPont in the manufacture of various industrial and consumer products, and sought medical monitoring for illnesses related to C-8 exposure.  Here is Judge Goodwin's order, which was entered on September 30, 2008.  Rhodes v. E. I. du Pont de Nemours and Company, Civil Action No. 6:06-CV-00530.

Judge Goodwin summarized his ruling in this way: 

The plaintiffs have presented compelling evidence that exposure to C-8 may be harmful to human health, and the evidence certainly justifies the concerns expressed by the plaintiffs in this case.  What the plaintiffs misunderstand, however, is what they must show in order for me to certify the case.  I cannot certify a class based on some potential harm to the general public, rather, there must be specific injuries to each member of the proposed class.  The fact that a public health risk may exist is more than enough to raise concern in the community and call government agencies to action, but it does not show the common individual injuries needed to certify a class action.

The Class Action Defense Blog published by MIchael J. Hassen has this thorough discussion of Judge Goodwin's decision.

Rule 23(f) of the Federal Rules of Civil Procedure entitles either party to appeal the grant or denial of certification within ten days of the decision by filing a petition for permission to appeal the ruling. The appeal is limited to the issue of class certification except that a court may review a legal or factual issue that addresses the merits of the case if the issue also addresses the merits of the certification. 

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Not even the rich and famous (or their beneficiaries) are immune from the decisions of insurance companies.  John S. LaViolette, a Los Angeles attorney who was appointed by actor Heath Ledger as the custodian of a $10 million life insurance policy for the benefit of Ledger’s three-year-old daughter, Matilda, has sued ReliaStar Life Insurance Company on the grounds that the company is avoiding paying the policy proceeds by continuing to investigate whether Ledger’s death in January was suicide. 

Laviolette filed the complaint in California state court on July 23, 2008, and Reliastar removed it on August 21, 2008.  LaViolette v. ReliaStar Life Insurance Company, Civil Action No. 2:08-CV-05514 (C.D. Cal. 2008).   

As reported by James Barron in The New York Times, the New York City Office of the Chief Medical Examiner ruled in early February that Ledger’s death was accidental and resulted from the “abuse of prescription medications.”

LaViolette contends that by waiting until after Ledger’s death to request information about his medical history, ReliaStar has engaged in post-claim underwriting, which means that an insurance company denies benefits or rescinds a policy after discovering alleged misrepresentations or inaccuracies in an insured’s application that would have affected the insurer’s decision to issue the policy.  

In its answer, ReliaStar claims that two provisions entitle it to investigate the circumstances of Ledger’s death:

• the “incontestability” clause, which gives ReliaStar the right to contest the validity of the policy “based on material misrepresentations made in the initial application” for a period of two years from the date the policy was issued, which was June 2007; and
• the suicide provision, which requires ReliaStar only to refund the premiums paid if the insured commits suicide within two years from the date the policy was issued. 

The complaint seeks a declaratory judgment regarding ReliaStar’s alleged post-claims underwriting and alleges bad faith by ReliaStar in failing to pay the policy proceeds. 

TMZ.com reports that ReliaStar is focusing on Ledger's answers to questions about his use of prescription medications when he applied for the policy and his use of illegal drugs.

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    Charleston Area Medical Center’s Board of Trustees has voted to pay $11.5 million to Dr. R. E. Hamrick, Jr. by September 5, and bring an end to his lawsuit against the hospital arising from the revocation of his privileges in 2004 when he attempted to self-insure his medical professional liability coverage.   Here is Eric Eyre's article in yesterday's Charleston Gazette.

    Last month, the Circuit Court of Kanawha County reduced the jury’s verdict of $5 million in compensatory damages and $20 million in punitive damages to $2 million and $8 million, respectively.  The additional $1.5 million represents interest at 8.25% that has accrued since the verdict in February.  Here are my posts regarding the trial court’s rulings and the original verdict.

    CAMC will pay at least $2 million of the settlement from its cash reserves, but is responsible for payment of the entire amount by the agreed-to deadline.  Whether CAMC's insurance coverage pays any of the settlement is far from certain, considering the declaratory judgment actions filed by two of CAMC’s insurers, which claim that they have no obligation to indemnify CAMC for any payment made to Hamrick.  If the insurance companies prevail in those actions, CAMC will end up paying the entire amount.

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    Here is the brief filed last week by the plaintiffs in opposition to the amicus brief filed by West Virginia Governor Joe Manchin.  The plaintiffs' brief attaches as exhibits documents received from the Governor's office through a Freedom of Information Act request, which the plaintiffs contend show an inappropriate relationship between the Governor and DuPont:

In conclusion, the "Governor's filing" is, in truth, the product of an orchestrated scheme by DuPont to further argue its position on the issue of punitive damages from a respected and supposed neutral party when in reality the filing is a feigned pleading that parrots the arguments that DuPont has put forth in its petition for appeal.

    As I discussed in my post earlier today, Manchin's brief asks the Supreme Court of Appeals of West Virginia to grant DuPont's petition for appeal in order to address the question of the level of appellate review required by the Due Process Clause of the Fourteenth Amendment for a punitive damages award. 

    In other words, does DuPont receive due process if the Supreme Court of Appeals considers DuPont's petition for appeal from the award (among other issues), but rejects it, thus precluding any further appellate review in West Virginia?   Or does DuPont's appeal have to be considered on its merits, even if such review results in an affirmance?

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    I had intended to write this post a few weeks ago, and because the issues have been back in the news recently, I have another chance to discuss them.

    Last year, a Harrison County, West Virginia jury returned a verdict for $196.2 million in punitive damages against DuPont in a class action with more than 7,000 members who sought damages for medical monitoring and property damage claims, as a result of DuPont's operation of a zinc smelter that released harmful quantities of cadmium, arsenic, and lead.  The jury earlier had awarded $55.5 million for the plaintiffs’ property damage claims and found that that a medical monitoring program was appropriate, which will cost approximately $130 million.  Here is my post dealing with the trial court’s rulings on the parties’ post-trial motions.

    Since then, the parties have prosecuted appeals from the court’s rulings. I’ll discuss those appeals, but the filings that have been getting attention are two amicus briefs filed in the case.

    In June, West Virginia Governor Joe Manchin filed an amicus brief in support of DuPont’s petition for appeal from the jury’s verdict: “Because the disposition of cases involving punitive damages at the petition stage raises significant due process concerns, the Governor respectfully requests that this Court grant the petition to clarify the law regarding the constitutionally mandated appellate review of punitive damages.”  Here is the Governor’s brief, courtesy of his counsel, Carte Goodwin.

    You will note that Manchin is careful not to advocate a particular result, even as he asks the Court to accept DuPont’s appeal.  His purpose in doing so, he maintains, is that because the United States Supreme Court held in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003), that the Fourteenth Amendment’s Due Process Clause guarantees the right to de novo appellate review of a punitive damages award, DuPont’s right to such review may be compromised, if not violated, by the Supreme Court of Appeals of West Virginia’s “mere” consideration of DuPont’s petition for appeal. 

Consequently, the Governor is interested in one of the central issues highlighted by this case and other petitions seeking review of punitive damages awards: What sort of appellate review is required by the Due Process Clause?

    It is the “this case and other petitions seeking review of punitive damages awards” that provides the context for Manchin's brief.  In May, the Supreme Court of Appeals refused petitions for appeal in two widely-publicized cases where juries had returned substantial verdicts: the natural gas royalty class action against Columbia Natural Resources, LLC and other defendants, where a jury returned a verdict for about $404 million, including $270 million in punitive damages, and a breach of contract case against Massey Energy Company, where a jury returned a verdict of $219 million, including $100 million in punitive damages.  Here is my post about the Court’s action.

    Manchin does not want DuPont’s petition for appeal to become the third one rejected by the Court without what he and DuPont regard as adequate appellate review, which they hope would result in a reversal of the jury's verdict.  The problem from their perspective, however, is Rule 7 of the West Virginia Rules of Appellate Procedure, which provides that the Court may refuse or grant a petition for appeal, and that a refusal precludes any further appellate review in West Virginia. 

    Just as Governor Manchin tries not to advocate a particular outcome – even though the relief he requests benefits DuPont more than the plaintiffs -- he is careful not to criticize the Supreme Court of Appeals too pointedly for its procedure for considering appeals.  But he does makes this observation:

More to the point, it is unclear whether this Court’s periodic practice of determining the validity of a punitive damages award solely through consideration of a petition for appeal could withstand constitutional scrutiny today.  Unfortunately, the United States Supreme Court has not explicitly addressed whether this aspect of our process provides litigants with “meaningful and adequate” appellate review.

(Emphasis in original.)

The Governor expands on the point in footnote 4:

This is understandable – and the concern especially pronounced – given the unique structure of West Virginia courts, where no civil litigant is provided an appeal as a matter of right and – lacking any intermediate appellate courts – this Court is the only appellate tribunal that can provide the level of review mandated by State Farm.  And yet, this Court may grant or refuse a petition for appeal in its sole discretion.  See Rule 7, West Virginia Rules of Appellate Procedure.  By contrast, forty-eight States offer civil litigants at least one appeal as a matter of right, either to an intermediate appellate court or to the State’s highest court….

    Not surprisingly, the plaintiffs are asking the Supreme Court to ignore Manchin's brief, according to this article by Ken Ward, Jr. in last Thursday’s Charleston Gazette.  Ward’s article referred in turn to this article by Ian Urbina in last Wednesday’s New York Times, which detailed contacts between Manchin and officials from DuPont and said that Manchin asked DuPont to provide a draft brief to his office, which would render his assertion that he is not advocating for a particular party less than credible.  Urbina quoted well-known legal ethicist and New York University law professor Stephen Gillers as saying that Manchin’s action was the first he could find where a state’s governor, as opposed to its attorney general, took such action.

    Last week, the plaintiffs filed a brief, also referred to in Ward’s article, in which they asked the Court not to consider Manchin’s brief.  I don’t have the plaintiffs’ brief yet, but as soon as I get it, I’ll upload it. 

    A second amicus brief that has created some controversy, although not as much as Governor Manchin’s, was filed by the West Virginia State Medical Association in support of DuPont’s petition for appeal.  Here is the WVSMA amicus brief.

    The WVSMA’s position is that the medical monitoring plan proposed by the plaintiffs and accepted by the trial court will cause more incidents of cancer than it will detect:

Although WVSMA is also concerned about the arbitrary nature of the large punitive damages award and other issues in this case, this brief is limited to the public health issues raised by the medical monitoring plan ordered by the Circuit Court.  WVSMA is concerned that this plan places the plaintiff class in unnecessary danger by approving biennial computed tomography (“CT”) scans that will likely cause more cancer than they will ever find.  Review is warranted because the trial court failed to appropriately weigh the health risks involved in the medical monitoring program when it considered whether the proposed testing was ‘reasonably necessary.”

Specifically, the WVSMA argues that as many as 70 class members could develop cancer if they fully participate in the screening program for 40 years, while 10 cases of cancer would have been detected by the program. 

    The WVSMA asks that the Court accept DuPont’s petition in order to determine whether all of the tests in the proposed medical monitoring program are “reasonably necessary,” meaning whether a qualified physician would prescribe them.

    Regarding the underlying issues, the plaintiffs are appealing the trial court’s grant of summary judgment in the defendants’ favor, which found that releases and easements executed in the 1920s in favor of an earlier owner of the smelter immunized it against certain plaintiffs’ claims.  Here are the plaintiffs’ petition for appeal, which is scheduled to be considered by the Supreme Court on September 9, and DuPont's response in opposition. 

    DuPont is prosecuting two appeals.  One addresses the size and nature of the jury's verdicts and rulings made by the trial court before, during, and after the trial.  Here is DuPont's petition for appeal.  

    In the other appeal, DuPont appeals the trial court's order that required it to indemnify T. L. Diamond and Company for more than $800,000 for costs and expenses that Diamond incurred in connection with the plaintiffs' medical monitoring and property damage claims, based on a contract between DuPont and Diamond.  Here are DuPont's petition on that issue, and the plaintiffs' response in opposition.   Neither of DuPont's appeals has been scheduled on a motion docket yet.

 

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    A complaint filed last month in the Circuit Court of Kanawha County, West Virginia raises an interesting question: if an employee has not signed a non-compete or non-solicitation agreement, can her former employer sue her for going to work for a competitor and taking some of her former employer’s clients with her?  That’s the issue presented by Job Squad, Inc. v. Champion Industries, Inc., Civil Action No. 08-C-1123 (June 10, 2008).  Here are the complaint and the answer and counterclaim, courtesy of the plaintiff’s counsel, Lisa Kerr. 

    Job Squad, Inc. is a non-profit community rehabilitation program, which operates a presort mail service in Charleston, West Virginia.  Rhonda Copen was employed by Job Squad, Inc. until she resigned on March 26, 2008 and went to work for Champion Industries, Inc.  Champion is a printing and office stationery company, which operates several businesses, including The Herald-Dispatch, the Huntington, West Virginia daily newspaper.

    Shortly after Copen began work for Champion, at least two of Job Squad’s customers, BB&T and TicketMaster, terminated their accounts and moved to Champion. 

    Job Squad has alleged in its complaint that Copen and Champion  misappropriated its confidential financial information in violation of West Virginia Code §§ 47-22-2 and 47-22-3, which deal with trade secrets, and have monopolized or attempted to monopolize the commercial mailing business within West Virginia in violation of West Virginia Code § 47-18-4.  Job Squad has also alleged that Copen and Champion tortiously interfered with its business relationships.

    In addition to compensatory and punitive damages, Job Squad has also asked for a preliminary injunction that would require Copen and Champion to cease and desist from competing with Job Squad in the presort mail business; providing presort mail services to Job Squad's current or former customers; using Job Squad’s confidential information; and communicating with its employees or customers.

    Job Squad did not allege that the defendants violated any non-compete agreement or non-solicitation agreement, and that may be the crux of their defense.  Copen and Champion have denied any liability to Job Squad, and have asserted a counterclaim for tortious interference with Champion’s existing and/or expected contractual and business relationships with its customers. 

    The Trade Secrets Vault blog from the Franklin Pierce Law Center wrote about the lawsuit in this post earlier this month.

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    Earlier this month, Richard X. Bove, a well-known financial institutions analyst for Ladenburg Thalmann & Co., Inc., issued a report entitled “Who Is Next?,” in which he identified other financial institutions that could be at risk in the wake of IndyMac’s failure.  Among the financial institutions Bove identified was BFC Financial Corporation, a holding company for BankAtlantic, which is headquartered in Fort Lauderdale, Florida.

    BFC, one of two holding companies for BankAtlantic, was on the list because it was in Bove’s “danger zone,” but BankAtlantic was not on Bove’s list.  Its absence did not stop BankAtlantic from filing suit on Monday against Bove and Ladenburg Thalmann in Broward County Circuit Court (Fort Lauderdale), alleging defamation and negligence.  BankAtlantic v. Bove, Civil Action No. 0832714 (July 21, 2008).   Here is an excerpt from the complaint:

The hysterical market conditions that existed when the Bove Report ["Who Is Next?"] was published, republished and promoted by the firestorm of media attention intentionally generated by Bove and Ladenburg, made it particularly critical that those seeking wide audiences to comment on the financial condition of financial institutions be careful for the harm careless assertion of false facts can cause.  BankAtlantic and Bancorp bring this action not simply to collect the damages they have suffered to their reputations as a consequence of these inexcusable wrongs, but also to deal with the current reality that exists in this marketplace -- a falsehood, when widely circulated, becomes its own truth as it is repeated over and over again, at some point replacing the truth altogether.  BankAtlantic for the benefit of its customers and employees and Bancorp for the benefit of its shareholders cannot let the lie become the truth.

    According to this story on ABC News’ website, Eugene Stearns, BankAtlantic’s lawyer, declined to provide a copy of the complaint because he “can’t republish the defamation.”  That’s the same answer he (very politely) gave me when I called to ask him for a copy of the complaint.  Mr. Stearns’ theory is because Bove’s report was defamatory, then by disseminating the report, even by sharing the complaint, he makes his client’s situation worse. 

    This case has attracted a lot of attention from the financial press, which is concerned that Bove and his company are being sued because Bove expressed an opinion that BankAtlantic didn’t like, but which wasn't libelous or defamatory, and which may make other media outlets targets of future lawsuits.

    The observation made in this post in Alphaville, the Financial Times’ blog, sums it up:

"Regardless of who has the legal upper hand, it is clear, as the FT notes, that as problems grow in the US banking industry, so does the sensitivity of banks to commentary on their financial health.

How far they can go to quell their critics, however, is a critical question raised by the Bove case for all in the banking, broking [sic] and legal industries."

    These legal theories have been addressed very recently, as noted in Bloomberg.com’s story by Edvard Petterson, which considers BankAtlantic's lawsuit in the context of a North Carolina appeals court decision that held that analysts couldn’t be sued for expressing their opinions.  Nucor Corp. v. Prudential Equity Group, LLC, 659 S.E.2d 483 (N.C. App. 2008). 

    In that case, Nucor, a steel manufacturer whose stock is traded on the New York Stock Exchange, sued Prudential and two of its analysts (one of whom had worked at Nucor previously) for making statements about possible antitrust violations committed by Nucor, and alleged claims for libel and unfair and deceptive trade practices. Prudential filed a 12(b)(6) motion to dismiss, which the court granted as to both claims. 

    The Court of Appeals of North Carolina found that the allegedly libelous statements, “construed only in the context of the document in which they are contained, ‘stripped of all insinuations, innuendo, colloquium, and explanatory circumstances[,]’” were not defamatory and affirmed the trial court.

    Nucor's claim for unfair and deceptive trade practices had been based on the alleged libel and thus could not serve as the basis for relief.  Nucor also alleged that its former employee’s alleged misappropriation of confidential information constituted tortious conduct that could support its claim for unfair trade practices, but Nucor did not allege in its complaint that its former employee had committed any such acts nor did it allege that the misappropriation proximately caused any injury. The court found that, at best, Nucor had alleged that its employee had breached his confidentiality agreement, which did not constitute an unfair or deceptive trade practice.

    Andrew Ross Sorkin, who writes the DealBook blog for The New York Times, wrote a column on July 8 entitled “Psst! Hear The Rumor Of the Day?,”  which discussed the rumor du jour tendency on Wall Street, especially since Bear Stearns’ meltdown in March, and a precipitous drop in Lehman Brothers’ stock price amid recent takeover rumors.  Coincidentally, Sorkin quoted Bove in the column for the proposition that “absurd rumors can have legs,” which seems to be the point of BankAtlantic's lawsuit. 

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

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

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

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

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

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

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

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

(Emphasis in original.)

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

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

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    It turns out that Charleston Area Medical Center is facing two lawsuits over insurance coverage for Dr. R. E. Hamrick, Jr.’s $25 – now $10 – million verdict, not one, as I wrote yesterday. 

    In May, Employers Reinsurance Corporation now known as Westport Insurance Corporation filed a declaratory judgment action in federal court against CAMC and its captive insurer, Vandalia Insurance Company, to determine whether it owes any duty to CAMC.  Employers Reinsurance Corporation v. Charleston Area Medical Center, Inc., Civil Action No. 2:08-CV-0303. 

    ERC reinsures CAMC's $25 million policy with Vandalia, and its policy with Vandalia requires that it be given “prompt, written notice” of any loss, occurrence, claim, event, etc. that has a “reasonable possibility of resulting in a claim for indemnity hereunder.”

    ERC claims that CAMC did not notify it of Hamrick’s lawsuit until February 11, 2008, which was four days after the jury returned its verdict for $25 million.  ERC argues that it did not receive the notice required by its policy with Vandalia and that it is entitled to a declaratory judgment that it has no obligation to indemnify Vandalia for any payments made to CAMC nor any obligation to directly indemnify CAMC.

    Neither defendant has responded to the complaint yet.  Because this action was filed before Executive Risk Indemnity’s lawsuit and involves the same subject matter, the two suits are likely to be consolidated before United States District Court Judge Joseph R. Goodwin. 

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    In February, a Kanawha County (Charleston), West Virginia jury awarded Dr. R. E. Hamrick, Jr. $25 million in compensatory and punitive damages when it determined that Charleston Area Medical Center improperly revoked his privileges and damaged his reputation due to his efforts in 2004 to self-insure his professional liability for $1 million.  Here is my post about the verdict.

    CAMC filed post-trial motions to reduce the verdict and for a new trial, which were argued in April.  Judge Jack Alsop, who is presiding over the case after the seven Kanawha County Circuit Court judges recused themselves, ruled on the motions last week, and offered mixed relief to CAMC.

    In its order granting CAMC’s motion for remitittur of damages, the court found that the compensatory damage award of $5 million “shocks the conscience” and was not supported by the evidence because Hamrick “has invariably admitted he has suffered no pecuniary harm or financial loss as a result of CAMC’s actions.  There was no evidence adduced at trial of any type of emotional distress or physical harm. Dr. Hamrick’s reputation as one of the area’s finest surgeons was minimally reduced, if in any way.”   

    CAMC had requested that the compensatory damages award of $5 million be remitted to $1 million.  The court found that Hamrick had asserted two causes of action, invasion of privacy and defamation, and was entitled to $1 million for each cause of action, and reduced the award to $2 million. 

    The court did not engage in as much analysis of the punitive damages verdict of $20 million, but did find that:

“CAMC’s misconduct [against Hamrick] was not an isolated event as to Dr. Hamrick, but was continual over a period of three to four years. There is limited evidence of any similar misconduct as to the treatment of other physicians with privileges at CAMC. Even with this, the degree of reprehensibility, it does not warrant an award of twenty million dollars in punitive damages.”

The court decided to maintain the same 4:1 ration of punitive damages to compensatory damages, and remitted the punitive damages award to $8 million, for a total award of $10 million.

    In considering CAMC’s motion for a new trial, the court rejected CAMC’s arguments that the jury had a “mistaken view of the case,” that the court improperly allowed Hamrick’s expert to testify, that the court misapplied the law of the case doctrine, that the court allowed testimony regarding alleged profanity about Hamrick, and otherwise denied CAMC the opportunity to present evidence, and denied its motion.  Here are the order denying the motion for a new trial, and the final order, from which either or both parties can appeal.

    CAMC is also fighting another lawsuit resulting from the verdict.  In June, Executive Risk Indemnity, Inc., which reinsures Vandalia Insurance Company, CAMC’s captive insurer, filed a declaratory judgment action in United States District Court for the Southern District of West Virginia, alleging that it has no duty to defend or indemnify CAMC as a result of the verdict.  Executive Risk Indemnity, Inc. v. Charleston Area Medical Center, Inc., Civil Action No. 2:08-CV-00810. 

    Executive filed suit against CAMC, Vandalia, and Employers Reinsurance Corporation, now known as Westport Reinsurance Corporation.  Its complaint also asserts that, if the court finds that coverage is available, Vandalia and Employers Reinsurance Corporation, it is entitled to equitable contribution for all or part of the verdict.  None of the defendants has responded to the complaint yet.

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    Various media reports today indicate that West Virginia University has settled its lawsuit against its former head football coach, Rich Rodriguez, for $4 million, the cost of the buyout in his contract. The settlement occurred yesterday at a court-ordered mediation.  Here is Associated Press reporter Vicki Smith’s story about the settlement.

    Also, according to this story in the Detroit Free Press, Rodriguez’s new employer, the University of Michigan, will pay $2.5 million of the amount immediately.  Rodriguez will pay the balance in three payments of $500,000 each, with the first to be paid in 2010.  UM also will pay Rodriguez’s attorney’s fees.

    Yesterday was the deadline set by the Circuit Court of Monongalia County for Rodriguez to disclose whether UM or any other entity had agreed to pay the buyout on his behalf.  Adding to the pressure on Rodriguez was a hearing scheduled today in Michigan on subpoenas that WVU’s lawyers had issued for the depositions of UM President Mary Sue Coleman and UM Athletic Director Bill Martin. 

    In the interest of completeness and for what they’re worth, here are the deposition transcripts of WVU President Mike Garrison, West Virginia Board of Governors members Steve Farmer and Parry Petroplus, WVU Chief of Staff Craig Walker, and WVU Assistant Athletic Director Mike Parsons. 

    Finally, this is unrelated to the parties' settlement, but I have to comment on the Transcript License Agreement present on page 2 of some of the transcripts.  The agreement provides that:

By signing the Transcript Order Form to receive and pay for a copy of this transcript, (and/or video) I agree that [sic] I nor any person, attorney, paralegal or expert witness may make, copy and/or distribute to others or upload to any internet websites or deposition repositories for future sales, monetary gain or any other purpose any copies of this transcript (and/or video) without paying Streski Reporting & Video Service, a division of MDStreski, LLC, the ordinary and customary charges for any and all additional copies viewed on line or downloaded by any third party. 

    I have some questions. First, is this agreement even enforceable?  Who owns a deposition transcript – the reporter who transcribes the deposition and prepares the transcript or the parties who hire the reporter?  And how much are the ordinary and customary charges “for any and all additional copies viewed on line or downloaded by any third party”? 

    I don't see how a court reporter has any ownership interest in a transcript or video that could be enforced by such an agreement.  A transcript isn't a software program that a developer like Microsoft owns and licenses to a user.  But maybe those video depositions posted on YouTube
are making court reporters rethink their traditional role. 

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

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

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

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

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

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

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

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    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 a post from earlier this month at Akin Gump’s SCOTUSBLOG, which reviewed several petitions scheduled to be reviewed by the Court on February 15, and included PDFs of the parties’ briefs and the amicus briefs.  Philip Morris USA, Inc. is the last petition listed.

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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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    When I last wrote about West Virginia University’s lawsuit against Rich Rodriguez, its former head football coach, WVU had filed an amended complaint in order to assert a claim for breach of contract based on Rodriguez’s failure to make the first one-third payment of his $4 million buyout by January 18.  Since then, there have been some significant developments in the lawsuit. For simplicity, I will review them in chronological order.

    On January 29, Rodriguez filed a letter of credit for $1.5 million with the Court, presumably to show his good faith in dealing with WVU and also to attempt to satisfy WVU's claim for less than $4 million.  WVU has been adamant that it will not settle for less than the full amount of the buyout, and as the case has developed, nothing has happened to weaken WVU’s position.

    Also on January 29, WVU moved for leave to conduct jurisdictional discovery on the issue of Rodriguez’s residency, in order to defeat the removal of the action to federal court based on Rodriguez’s position that he and his wife established their residency in Michigan prior to WVU filing suit against him in West Virginia state court on December 27, 2007.  WVU had moved to remand the action on January 17 on the grounds that first, it was not a citizen of West Virginia for purposes of diversity jurisdiction and that second, Rodriguez was still a citizen of West Virginia when WVU filed suit.  Here are WVU's motion and memorandum in support.

    On February 1, Rodriguez answered the amended complaint and asserted a counterclaim against WVU and filed a third-party complaint against the West Virginia University Foundation, the fund-raising arm of WVU.  Rodriguez attached as an exhibit another letter of resignation to Ed Pastilong, WVU’s athletic director, dated January 10, 2008, in which he elaborated on his reasons for leaving WVU so abruptly:

On [sic] my resignation letter dated December 18, 2007, I did not list some of the reasons for my resignation.  It was not until I read that lawsuit against me by the West Virginia University Board of Governors did [sic] I realize that I needed to put in writing my reasons that I felt that West Virginia University has material [sic] and substantial [sic] breaches [sic] in [sic] our Agreement.

On February 4, Rodriguez filed his response to the motion to remand, and on February 8, WVU filed its reply.

    United States District Judge John Preston Bailey didn’t waste any time in ruling on the motion to remand, and entered an order on February 11 that granted the motion and denied as moot WVU’s motion to conduct discovery.

    Much to Rodriguez’s chagrin, I imagine, Judge Bailey did not reach the issue of whether Rodriguez had established residency in Michigan by the time he was sued, but focused on WVU's status.  In finding that WVU was an arm or alter ego of the State of West Virginia, which defeated diversity jurisdiction, Judge Bailey acknowledged that “’almost universally’ courts have found that public state universities are ‘arms of the state.’”  Thus, Rodriguez's removal of the suit was improper as the Court did not have jurisdiction.  Judge Bailey denied WVU's motion for attorney's fees and costs against Rodriguez, however, because he found that Rodriguez had a colorable basis for removal and did not remove the action in bad faith. 

    The action is back in the Circuit Court of Monongalia County in Morgantown before Judge Robert B. Stone.  West Virginia University Board of Governors v. Rodriguez, Civil Action No. 07-C-851.

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    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 Friday, January 18 was the deadline for former West Virginia University head football coach Rich Rodriguez to pay the first third of his $4 million buyout to WVU.  Rodriguez and his representatives had indicated that he would not pay the buyout because of his belief that WVU did not satisfy its obligations under his contract, so it was no surprise when he did not make the payment.  Neither was it a surprise when WVU amended its complaint to assert a claim for breach of contract due to Rodriguez’s failure to pay.  Here is the amended complaint.

    The news this week about Rodriguez has focused on the apparent deterioration of his relationship with WVU in 2007, according to an exchange of e-mails obtained by the Associated Press.  Here is the AP story in yesterday's Charleston Daily Mail.

    Rodriguez’s agent was quoted earlier this week as promising a “bombshell” when Rodriguez files his response to the complaint.  Beyond the counterclaim that Rodriguez is certain to file, the specific allegations that Rodriguez will make against WVU and its personnel are unknown.          

    WVU has added to its legal team the lawyer who represented former WVU head basketball coach John Beilein in negotiations over his buyout with WVU.  Robert Fitzsimmons of Wheeling was able to reduce the amount of Beilein’s buyout from $2.5 million to $1.5 million, payable in installments of $300,000 over five years.  Beilein’s contract did not have any time frame for him to pay the buyout.

    WVU likely agreed to accept a reduced amount because it was able to hire a new coach, Bob Huggins, very soon after Beilein’s departure, which enabled the school to avoid the problems typically associated with hiring a new coach.  That was not the situation with Rodriguez's departure, however, which may explain, at least partially, the university's aggressive stance with him.

    Also, Northern District Chief Judge Irene M. Keeley, to whom the Rodriguez case had been assigned, recused herself and reassigned the case to Judge John Preston Bailey, who sits in the Northern District’s Wheeling Division.

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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.