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

I hope everyone has enjoyed a safe and happy Fourth of July weekend.

Let me try and ease you back into the work week with a discussion about a Fourth Circuit decision issued a few months ago, which addressed the timeliness of a removal petition involving multiple defendants, and which fellow West Virginia blogger Brian Peterson discussed on his West Virginia Legal Weblog.

As you probably know, removal is the procedure by which one or more defendants transfer an action filed in state court to federal court, based on diversity jurisdiction, federal question jurisdiction, or federal preemption.   

The removal statute, 28 U.S.C. § 1446, provides that:

The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.

But how do you determine when a removal petition is timely if there are multiple defendants, who will rarely be served simultaneously? Do you calculate the 30-day limit based on when the first defendant was served, when the last defendant served, or something in between? 

In Barbour v. International Union, 594 F.3d 315 (4th Cir. 2010), the Fourth Circuit answered the question by going with the last-served defendant, although the opinion is a little convoluted (and includes a detailed discussion of what constitutes dicta in a decision. So for those of you who have been waiting for a detailed discussion of dicta,  your wait is over.

In Barbour, the plaintiffs sued three defendants, an international union and two of its local unions. The international union was served on March 20, 2008 and one of the locals was served on March 29, 2008. On April 30, 2008, all three defendants filed a joint notice of removal, even though the other local union had not been served.

The plaintiffs moved to remand on the grounds that the removal was not timely. (They also challenged the basis for federal jurisdiction, which I will not address, although that ended up being the basis for the circuit court's decision that remand was appropriate.) The district court denied the motion to remand and the motion for reconsideration and expressed its belief that the case represented an "excellent opportunity for the Fourth Circuit to clarify whether the 'first-filed' 'dictum' in McKinney v. Bd. of Tr. of Mayland Cmty. Coll., 955 F.2d 924 (4th Cir. 1992), means what it actually seems to say."

The "first-filed" "dictum" in McKinney referred to this language in footnote 3:

[W]here B is served more than 30 days after A is served, two timing issues can arise, and the law is settled as to each. First, if A petitions for removal within 30 days, the case may be removed, and B can either join in the petition or move for remand. See 28 U.S.C.§ 1448. Second, if A does not petition for removal within 30 days, the case may not be removed.

(Emphasis in original.)

So according to McKinney, the removal petition filed by the Barbour defendants would not be timely because the international union, as the first-served defendant, did not petition for removal within 30 days.

But the Barbour court regarded the McKinney language as non-binding dicta, and that since McKinney, the United States Supreme Court had decided Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344 (1999). Plus, the defendants served first in McKinney had timely filed their notice of removal within 30 days of being served, so the issue there was whether the defendants who were served later could join in the removal to make it unanimous, even if their agreement came more than 30 days after the first defendants were served, but within 30 days of service on the later-served defendants.

The Barbour court was also persuaded by decisions from the Sixth, Eighth, and Eleventh Circuits, all of which had held that the last-served defendant was preferable.

The court was also concerned that:

Under either the pure first-served defendant rule or the McKinney rule, Local 1212's [the later-served local] right of removal would have been waived by the International Union's failure to file a notice of removal within 30 days of being served even though it was not yet within the court's jurisdiction. Such prejudice to Local 1212's rights would violate the spirit, if not the letter, of the "bedrock principle" that "a defendant is not obliged to engage in litigation unless notified of the action and brought under a court's authority, by formal process."

Consequently, the court adopted the last-served defendant rule and held that "in cases involving multiple defendants, each defendant, once served with formal process, has thirty days to file a notice of removal pursuant to 28 U.S.C. §1446(b) in which earlier-served defendants may join regardless of whether they have previously filed a notice of removal.

In a footnote to the excerpt above, the court addressed the concern that a plaintiff may have that multiple defendants are receiving an unfair number of opportunities to remove an action:

In our view, this rule does not work an injustice on a plaintiff who, by serving the defendants as contemporaneously as possible, can minimize any significant disruption, either to their case or proceedings in the state court. Thus, while any such burden is minimal, all defendants have their opportunity to remove the case protected. See Stravitz, supra, at 210 ("[T]he only rule that balances plaintiff-oriented policies of unanimity and timelessness with a defendant's procedural right to remove is the true last-served defendant rule ....").

Emphasis in original.

I think the operative words in the footnote are "by serving the defendants as contemporaneously as possible," which seems to imply that an injustice may occur if a plaintiff doesn't serve the defendants contemporaneously. Sometimes, it may not be desirable or possible to serve all the defendants contemporaneously, in which case the later-served defendant rule enables a defendant that may have wanted to remove the action, but didn't to have another chance to do so. 

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In March, the Supreme Court of Appeals issued its decision in Perrine v. E.I. du Pont de Nemours and Co., 2010 WL 1170661 (W. Va., March 26, 2010), which, among other things, reduced the punitive damages award of nearly $200 million by 40 percent on the grounds that punitive damages were not recoverable in a claim for damages for medical monitoring. Here is my post discussing the decision.

DuPont filed a petition for rehearing in April, in which it sought to have the amount of punitive damages allocated to medical monitoring increased to 70 percent on the grounds that first, the Court should not have considered statements made during oral argument regarding the allocation of 40 percent of the punitive damages to medical monitoring, and second, that evidence showed that 70 percent of the punitive damages should have been awarded for medical monitoring.

Earlier this month, the Court denied the petition, which is not unusual. But what is unusual is that the Court issued this unanimous per curiam opinion addressing DuPont's arguments, which was not a good sign for DuPont. Perrine v. E.I. duPont de Nemours and Co., 2010 WL 2243936 (W. Va., June 2, 2010).

During oral argument, the Court had asked plaintiffs' counsel if the trial court had allocated the punitive damages between the medical monitoring claims and the property damage claims. Counsel said the trial court had allocated 40 percent of the punitive damages to medical monitoring. During his argument, DuPont's counsel did not address the plaintiffs' counsel's representations. But in its petition for rehearing, DuPont contended that the trial court made no allocation of punitive damages, and so the Supreme Court should allocate 70 percent of the damages to medical monitoring claims.

The Court first explained that principles of appellate procedure prevented a party from moving for rehearing to address issues that could have been raised before the appeal was concluded. The Court refers to this principle later in the opinion as the "raise or waive" rule. The Court determined that, "as a result of DuPont's silence during oral argument, it has waived its right to contest the issue of an allocation of punitive damages by the circuit court."

DuPont also argued that the Court could not consider the plaintiffs' counsel's statements (regarding the allocation) during oral argument because "'statements by counsel during argument do not constitute evidence.'" The Court disagreed, and stated that "This contention by DuPont shows a lack of understanding of the purpose of appellate oral argument and the discretionary weight that is given to argument of counsel."

The Court explained that the purpose of oral argument was to assist the court in understanding the parties' arguments, and that the Court had even ruled on cases based on representations made during oral argument where the record was silent. Thus, the Court affirmed that it "may rely on representations made by counsel during oral oral argument regarding an issue that is not addressed in the record on appeal."

The other issue that DuPont raised was that while the parties' appeals were pending and prior to oral argument, the parties had conducted proceedings before a special master to address the allocation of punitive damages. DuPont referred to a letter dated August 29, 2008 from plaintiffs' counsel suggesting that 70 percent of the punitive damages should be allocated to medical monitoring claims, and that in a report issued on November 25, 2008, the special master had adopted that recommendation.

Initially, the Court characterized the special master's report as nonbinding because DuPont had not alleged that the circuit court had adopted the report's recommendations, and, in fact, the report itself asked that no action be taken regarding its recommendations until all appeals were resolved or the parties settled the case.

With that characterization in mind, the Court concluded that the evidence was untimely, as DuPont apparently was aware of the report, which was submitted to the circuit court on November 25, 2008, from that date until oral arguments on April 7, 2009, but failed to file a motion with the Court to supplement the record with the report.

The Court reiterated that DuPont had failed to challenge the plaintiffs' allocation of punitive damages during oral argument, and had not informed the Court that no allocation had been made and that the special master had adopted the plaintiffs' counsel's suggestion that 70 percent of the damages be allocated to medical monitoring claims.

The Court did not explicitly accuse DuPont's counsel of acting improperly, but cited multiple cases that held that a party could suffer the consequences of its counsel's decision to remain silent, and concluded its analysis by identifying two reasons for the "raise or waive" rule. The first is: 

"to prevent a party from obtaining an unfair advantage by failing to give [a] court an opportunity  to rule on the objection and thereby correct potential error[,]"

and the second is to:

"prevent[] a party from making a tactical decision to refrain from objecting and, subsequently, should the case turn sour, assigning error (or even worse, planting an error and nurturing the seed as a guarantee against a bad result."

The raise or waive rule "has equal force and application at the appellate level," so if your opponent says something during oral argument that you disagree with or believe is not supported in the record, you need to register your disagreement at the time or risk having your silence constitute a waiver.

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Yesterday I attended a presentation by Supreme Court of Appeals of West Virginia Clerk Rory Perry, II on the court’s revised Rules of Appellate Procedure, which were released for public comment. The seminar was the first of ten that Rory will give across the state over the next two weeks in order to familiarize members of the Bar and the public with the revisions, which are extensive. Here are the revised rules, the court's press release regarding the rules, and its description of the seminars and public comment period. I have also included a diagram prepared by the clerk's office, which Rory described accurately as looking like a "subway map," of how appeals from circuit court under revised Rule 5 will be handled.

There are 43 revised rules, as opposed to the current 29. Eighteen of the rules are completely new, while nearly all of the rest have been modified. In fact, only two of the current rules are unchanged. Following the public comment period, which ends on July 19, the rules become effective on December 1, 2010.

Although the press release notes that the revised rules "are not a response to criticism from any party or special-interest group[,]" the court was criticized earlier this year for what the West Virginia Chamber of Commerce contended is the current rules' failure to provide a party with an appeal as of right, as opposed to the right to appeal, which is what currently exists.

Under the revised rules, the biggest (substantive) change from current practice is that in every properly-filed appeal, the court will issue a decision on the merits, as opposed to its current practice, where appeals that the court decides not to hear on the merits are refused, with no explanation for the court's action. However, Rory pointed out that currently even when the court refuses a petition for appeal, it does so only after the petition has been considered by every member of the court and their clerks and considered at a conference. (That has not always stopped disgruntled litigants from maintaining that their rights have been prejudiced.)

Revised Rule 5(h), which deals with the court's consideration of an appeal from circuit court, describes how the court will rule on appeals -- this same description, which Rory described as thematic, appears in other rules:

After the response brief or summary response has been filed in accordance with Rule 10, and any reply brief deemed necessary has been filed (or the time for filing a reply has expired), the appeal will be deemed to be mature, and the Court will fully consider the written arguments of all parties to the appeal. Thereafter, the Court will: (1) decide the case on the merits without oral argument; or (2) set the case for oral argument and then decide the case on the merits; or (3) issue an appropriate order after considering any written and oral arguments made by the parties (e.g. the appeal is premature because it is an appeal from an interlocutory ruling, or the appeal is dismissed because the case has been settled).

(Emphasis added.)

Under the revised rules, the court's motion docket, where the court invites a petitioner to present argument, is being eliminated. Oral argument by both parties will be permitted under Rules 19 or 20. Rory explained that appeals on the Rule 20 docket, which is basically the court's current argument docket, will be more likely to be precedent-setting, as opposed to appeals under Rule 19, which will be more law-of-the-case variety.

Other significant changes are in Rule 6, assembling the record, and Rule 7, preparing the appendix, which are intended to enable the parties and the court to identify with specificity the relevant documents on appeal and then to cite to those documents, similar to current practice in federal appellate courts.

Although the current rules specifically provide for appeals in abuse and neglect, workers' compensation, and family court cases, those rules have been modified as Rules 11, 12, and 13, respectively. The court has created new Rule 14 dealing with public service commission appeals and new Rule 15 dealing with human rights commission appeals.

In order to learn in detail about the revised rules, I encourage you to attend one of the eight remaining seminars (the schedule in listed in the press release and on the court's website). In addition to being informative and an efficient use of your time (90 minutes), the seminar provides 1.8 hours of CLE credit at no cost. Also, for further assistance, comments by the clerk are provided for every rule and summarize the effect of the revision. The comments are not a substantive part of the rules, though.

Every facet of the appellate process is more complicated under the revised rules, which I don't say as a criticism, but as an observation that prosecuting or defending an appeal in West Virginia will take more time and care, and necessarily cost more money, than in the past. Because West Virginia has only one appellate court (which I don't think will change for the foreseeable future), there has not been the need -- or at least the opportunity - for a dedicated appellate advocacy bar (leaving aside practitioners' specializations).

In West Virginia, more often than not, if you handled the case before the trial court, you would handle the appeal, unless you or your client decided that a change of counsel was advisable. But the revised rules may contribute to the development of a dedicated appellate practice bar, because some lawyers, particularly those who handled an appeal only occasionally, may decide that lawyers who practice before the court more regularly are better able to represent a party on appeal.

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Congratulations to Charleston lawyer Eric Snyder of Bailey & Glasser LLP, who was the subject of a  post on Friday in The Wall Street Journal Law Blog, which discussed his success thus far in litigation against Toyota. The post was updated to reflect that United States District Judge James V. Selna of the Central District of California, who will preside over the consolidated sudden-acceleration litigation against Toyota, entered an order appointing plaintiffs' counsel, which includes Bailey & Glasser name partner Ben Bailey as part of the lead counsel committee prosecuting economic losses. Judge Selna also appointed a separate lead counsel committee for personal injury and wrongful death claims. 

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I have not written since early last month -- and have no excuse to offer for my dereliction -- but thanks to a much-anticipated decision released this afternoon by the Supreme Court of Appeals of West Virginia, there is plenty to discuss. 

The Court has issued its opinion in Perrine v. E.I. du Pont de Nemours and Co., Nos. 34333, 34334, and 34335 (March 26, 2010), the class-action medical-monitoring action filed by thousands of Harrison County, West Virginia residents who claimed that their health and property were damaged by a zinc smelter operated by DuPont.

Circuit Judge Alan Moats, sitting by assignment, wrote the majority opinion, which is 179 pages and has a table of contents. In a nutshell, the Court reversed the circuit court's summary judgment in favor of the plaintiffs on the statute of limitations, and remanded the case to the circuit court for another trial limited to that issue. If the plaintiffs prevail, "the remaining issues pertaining to liability and compensatory relief are affirmed[.]" Those issues would include compensatory damages of $55.5 million for property damage and $130 million for medical monitoring.

But the Court reversed the punitive damages award of $196.2 million on the grounds that they are not proper in a medical monitoring action, and so reduced them by 40%. The Court also found that mitigating circumstances justified a reduction in the punitive damages award and remanded the case on that issue. After the Court issues its mandate, the plaintiffs have 30 days to decide whether they will accept a punitive damages remittitur of $20 million, resulting in a total punitive damages award of $97.72 million, or submit to a new trial on punitive damages only.

The Court also affirmed the trial court's rulings that DuPont owes indemnification to a former owner of the smelter, and that certain plaintiffs' property-damage claims are barred by the statute of limitations.

The opinion was joined in its entirety by Circuit Judge Derek Swope, also sitting by assignment. Each of the three other justices, Chief Justice Robin Davis and Justice Menis Ketchum and Justice Margaret Workman concurred, in part, and dissented, in part, in the decision.

I will write a longer post once I've had an opportunity to study all of the opinions.

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I have previously written about the significance of the United States Supreme Court's decision in Ashcroft v.Iqbal, 129 S.Ct. 1937 (2009), and its effect on federal pleading standards for both plaintiffs and defendants. And with the issuance last week of Francis v. Giacomelli, 2009 WL 4348830 (4th Cir. 2009), the Fourth Circuit has now weighed in and made clear that a plaintiff has a much heavier burden to satisfy in pleading its case.

I will not discuss Francis in great detail; for that analysis, I refer you to Mack Sperling's post at the North Carolina Business Litigation Report; Rob Hoskins' post at ERISABoard (registration required);  and Jay O'Keeffe's post at DeNovo: A Virginia Appellate Law Blog.

I want to reiterate two points that Jay made. If you're a plaintiff, make the factual allegations in your complaint as specific as possible. Do not rely on generalizations or conclusory statements. A federal judge is not going to accept unsupported assertions or make assumptions in your client's favor to keep your case in court. If you're a defendant, file a motion to dismiss. You won't always prevail, but your odds have surely improved with Iqbal and Francis, and cases that a few months ago would not have been at risk of being dismissed now may end up getting tossed.

I have already encountered Iqbal in my own practice, and judging from Jay's statistics, the decision will be relied upon increasingly. Add to that the effect of Francis, and pleading for plaintiffs in federal courts, at least in the Fourth Circuit, is more arduous than ever.

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Today I want to bring to your attention two new decision from the Supreme Court of Appeals of West Virginia, which deal with the substance and procedure of the arbitration process.

In the first opinion, State ex rel. Clites v. Clawges, 2009 WL 3320488 (W.Va. 2009), Clites was hired as a customer service representative of TeleTech, and participated in a group employee orientation session that included the discussion and completion of employment-related paperwork. After nearly three years of employment, however, TeleTech terminated Clites. She filed suit and alleged that her termination was due to a sexual harassment complaint she had filed against TeleTech.

TeleTech moved to dismiss and/or stay Clites' lawsuit because she had signed an arbitration agreement that required her to arbitrate and to give up her right to a jury trial. The agreement provided that the arbitration would be conducted by an American Arbitration Association arbitrator in the city where the employee is employed, and that each party would bear its own fees and costs, except that the arbitrator would have discretion to award fees and costs to the prevailing party as provided by law.

The Circuit Court of Monongalia County, West Virginia denied the motion to dismiss and granted the motion to stay. The court found that the arbitration agreement was a contract of adhesion, but that TeleTech had stipulated through an affidavit that the arbitration would take place in Morgantown, West Virginia and that TeleTech would pay for all costs that would not be incurred by Clites in court, such as the cost of the arbitrator, the hearing room, and stenographer.

Clites sought a writ of prohibition against the court's order on the grounds that the arbitration agreement was a contract of adhesion with unconscionable terms and therefore was unenforceable. She asserted that a reference in the agreement to Denver, Colorado required the arbitration to take place there and that she was responsible for fees and costs in excess of what she would have to pay in a civil action.

Continue Reading...

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Regardless of your area of specialty, if you practice in federal court, you will be affected by amendments to the Federal Rules of Civil Procedure that take effect on December 1, 2009. Of particular importance are changes to calculating deadlines under Rule 6.  My thanks to Mack Sperling at the North Carolina Business Litigation Report for his thorough discussion of the amendments in this post.

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My thanks to Mack Sperling at North Carolina Business Litigation Report and Rob Hoskins at ERISABoard for the heads-up on a new decision from the Fourth Circuit Court of Appeals that changes the standard for injunctive relief.

In Real Truth About Obama, Inc. v. Federal Election Com’n, 2009 WL 2408735 (4th Cir. 2009), the court held that its decision in Blackwelder Furniture Co. of Statesville v. Seilig Mfg. Co., Inc., 550 F.2d 189 (4th Cir. 1977), with its balance-of-hardship test, could no longer be applied in granting or denying preliminary injunctions in the Fourth Circuit, in light of the United States Supreme Court's decision in Winter v. Natural Resources Defense Council Inc., 129 S.Ct. 365 (2008).

Mack’s post about Real Truth includes a chart that shows the differences between the Blackwelder standard and the one established by Winter, in which the Supreme Court held that alleged irreparable harm to marine mammals that resulted from the Navy’s training exercises using a particular frequency of sonar was outweighed by the public interest and the Navy’s interest in effective, realistic training of its sailors.

In Winter, the Ninth Circuit had applied a standard that allowed the district court to issue a preliminary injunction based only on the “possibility” of irreparable harm if the plaintiff demonstrated a strong likelihood of prevailing on the merits. The Supreme Court held that this standard was too “lenient” and that the appropriate standard required a plaintiff to demonstrate the “likelihood” of irreparable harm.

The Supreme Court held that a plaintiff seeking a preliminary injunction must establish that it is likely to succeed on the merits, that it is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in its favor, and that an injunction is in the public interest.

In Real Truth, Judge Paul Niemeyer wrote for a unanimous court that, “[o]ur Blackwelder standard in several respects now stands in fatal tension with the Supreme Court’s 2008 decision in Winter.”

Specifically, he found that Winter’s requirement ”that the plaintiff clearly demonstrate that it will likely succeed on the merits is far stricter than the Blackwelder requirement that the plaintiff demonstrate only a grave or serious question for litigation.” (Emphasis in original.) The court also noted that each of Winter’s four requirements must be established, while Blackwelder had allowed its factors to be applied more flexibly, to the extent that not all of the factors were necessarily satisfied.

Although a party seeking injunctive relief in the Fourth Circuit must satisfy all four of Winter's -- and Real Truth's --   requirements, I think the requirement that a party must now demonstrate a likelihood of success on the merits will be the most difficult to satisfy. 

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This is an update to my post a couple of weeks ago about the significance of the Supreme Court’s decision in Ashcroft v. Iqbal, which now requires complaints to be more fact-specific. According to The BLT: The Blog of Legal Times, Senator Arlen Specter (D-Pa.) has introduced a bill that would undo the effect of Iqbal and Bell Atlantic Corp. v. Twombly, and return to the pleading standard set forth in Conley v. Gibson for motions under Federal Rule of Civil Procedure 12(b)(6) and (e).

And in a related post on The AmLaw Litigation Daily blog, two more products liability suits have been dismissed under the new Iqbal standard, which writer Alison Frankel describes "as the best thing to happen to the products liability defense bar since Daubert."

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I haven't written too much lately, which will change, but I did want to write a brief post about an article in yesterday's New York Times that caught my eye. In his Sidebar column, Adam Liptak, who covers the Supreme Court for the Times, wrote about Ashcroft v. Iqbal, which he described as "the most consequential decision of the Supreme Court's last term."  Liptak noted that the decision didn't receive much attention when it was released, and what attention it did receive was due to its subject matter.  Here is my post from last month about Iqbal.

Liptak quoted Thomas Goldstein, the primary author of SCOTUSBlog and an appellate lawyer at Akin Gump, who said that Iqbal is the "most significant Supreme Court decision in a decade for day-to-day litigation in the federal courts[.]"

The decision's significance is that a plaintiff must now state a "plausible" claim for relief, which the reviewing court must consider in light of its "judicial experience and common sense." Those words may not appear to impose much of a burden, but they mean that a large number of cases that would have survived a motion to dismiss before Iqbal will be dismissed. According to Liptak, the case has been cited more than 500 times in the past two months.

If you're a plaintiff in federal court, your complaint must be specific and state a claim that is plausible, which can be difficult based on the limited amount of information that is often available when suit is filed. If you're a defendant in federal court, chances are good that you will rely on Iqbal as support for your motion to dismiss, and that the court will grant your motion.

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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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The United States Supreme Court’s recent decision in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009), dealt with a detainee’s claims that he had been discriminated against and treated harshly during his detention. But the Supreme Court dismissed his complaint for failure to state sufficient facts to support his claims against former Attorney General John Ashcroft and FBI Director Robert S. Mueller, III.

For background on the case, here is SCOTUSBlog's analysis of the decision and its effect on future claims that attempt to impose liability on high-ranking officials for the conduct of their subordinates.

Even though Iqbal's facts are unique, I am interested in it because of its language that is troublesome to plaintiffs in federal lawsuits in general.

According to Tony Mauro, who wrote last month about the decision in The National Law Journal, Iqbal “could make it significantly harder for plaintiffs in a broad range of cases to survive defendants’ motions to dismiss….”

The reason is that the opinion appears to expand on the Supreme Court’s 2007 decision in Bell Atlantic Corp. v. Twombly, 550 U.S.544 (2007), which held that initial pleadings must state a claim that is “plausible on its face,” a change from Conley v. Gibson, 355 U.S. 41 (1957), which had interpreted Rule 12(b)(6) of the Federal Rules of Civil Procedure to require dismissal of a complaint only if the plaintiff could prove “no set of facts” that would entitle him or her to relief. Because Twombly had arisen in an action alleging violations of the Sherman Act, practitioners questioned whether the holding applied outside of antitrust litigation.

But Iqbal, which, like Twombly, was written by Justice Anthony Kennedy, makes clear that it applies far beyond antitrust cases, and, according to Alan Morrison, incoming dean and professor of law at George Washington University Law School, “is an invitation to raise a Twombly issue in every case.” 

I have not read Iqbal’s complaint, but according to Mauro’s article, it was extremely detailed and should have been able to withstand the motion to dismiss. As a practical matter, plaintiffs often do not have access to a lot of information when they file suit, which requires them to make “bare-bones” allegations in their complaints. Iqbal increases the possibility of dismissal due to their lack of detail. 

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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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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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As an update to my earlier post about Fola Coal Company, LLC’s motion to disqualify Judge Robert Chambers based on his past membership in the West Virginia Highlands Conservancy, Judge Chambers entered an order on Monday, in which he denied Fola’s motion.

He found that Sierra Club v. Simkins Indus., Inc., 847 F.2d 1109 (4th Cir. 1988), was the controlling authority and noted its statement that "litigants are entitled to a judge free of any personal bias, but not to a judge without any personal history before appointment to the bench."

Fola had attempted to distinguish Sierra Club by arguing that there was no mention in that case of the judge's financial support of the organization and that the instant case was just starting.  But Judge Chambers pointed out that his own financial support of WVHC was only minimal -- probably similar to the judge's in Sierra Club -- and that the stage of the proceedings did not affect the applicability of Sierra Club to the situation.

Ken Ward, Jr. wrote about Judge Chambers' decision in this morning's Charleston Gazette.

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 My thanks to Rob Hoskins for his post at www.ERISABoard.com about a recent decision from the Northern District of West Virginia that presents a twist on the typical removal-remand scenario. 

Before I get to the case, though, let me plug ERISABoard, which is a discussion forum for attorneys who are interested in ERISA issues.  (I am a moderator on a couple of forums.)  Currently the membership is limited to attorneys, but if your practice includes ERISA and employee benefits issues, I encourage you to join the nearly 400 lawyers who have already registered, and participate in the discussion.  Registration is free. 

Now, back to Consol Energy, Inc. v. Corley, 2008 WL 4610329 (N. D. W. Va. October 15, 2008), which reminds us that although the plaintiff is the “master of the claim,” its choice about where to file suit is not without consequences.

Consol filed suit against James Corley in West Virginia state court in order to recover more than $70,000 in alleged overpayments of long-term disability benefits.  Corley filed an answer and counterclaim, and alleged that Consol had wrongfully denied or withheld benefits under ERISA.  Consol relied on that allegation to remove the action to federal court on the grounds that federal question jurisdiction existed.  Corley moved to remand.

Here is the district's court analysis:

The issue before this Court is one of removal, and a peculiar removal at that, because it is the plaintiff in this case, and not the defendant, that is seeking removal of this action to federal court.  Consol removed this action to this Court, arguing that federal jurisdiction is proper.  Specifically, Consol asserts that Corley's counterclaim alleges violations of ERISA without particularly identifying the provisions upon which he bases his claim.  Thus, Consol argues that because Corley's counterclaims can be construed under several ERISA provisions that a federal court maintains exclusive jurisdiction over, jurisdiction in this Court is appropriate.  This Court disagrees and instead, finds that remand of this action to the state court is necessary.  (Emphasis in original.)

Simply put, a plaintiff cannot remove an action to federal court on the grounds that the counterclaim permits removal: "Once a plaintiff, always a plaintiff.  Likewise, once a defendant, always a defendant."   Because Consol, as the plaintiff, chose to file its complaint in state court, that's where its case must be heard, even if Corley's counterclaim asserts federal question jurisdiction.

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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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 Does a judge’s past membership in an organization require his disqualification from a case in which the organization is a party?  That’s the issue presented by Fola Coal Company, LLC’s motion to disqualify United States District Judge Robert C. Chambers from a case involving a challenge by the West Virginia Highlands Conservancy (WVHC) and other organizations to a mining permit issued to Fola by the United States Army Corps of Engineers.  Ohio Valley Environmental Coalition v. U. S. Army Corps of Engineers, Civil Action No. 3:08-CV-0979 (S. D. W.Va. 2008).  Here are Fola’s motion and memorandum in support. 

Fola’s motion is based, as it admits, not on any first-hand information, but on Judge Chambers’ entry in the Almanac of the Federal Judiciary, which lists “West Virginia Highlands Conservancy” in his Other Activities, and an article in the (West Virginia) State Journal that raised the issue of Judge Chambers' membership, based on his statement that he formerly belonged to WVHC and probably donated to the group.

Fola alleges that, “[it] believes that, given Judge Chambers’ past membership in and financial support of WVHC (if the reports are accurate), his impartiality might reasonably be questioned in connection with this action.”

Fola attempts to distinguish the Fourth Circuit’s decision in Sierra Club v. Simkins Indus., Inc.,  847 F.2d 1109 (4^th Cir. 1988), on the grounds that the judge in that case first disclosed his membership in the Sierra Club and offered to recuse himself. The defendant refused the judge’s offer, then made a post-trial motion to recuse him. Fola claims that its case “is still in the starting blocks,” which makes Sierra Club inapplicable.

Continue Reading...

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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 Supreme Court of Appeals of West Virginia issued a decision in March that didn’t attract a lot of attention, which may be due to the rather straightforward procedural issues presented by the appeal.  But the facts in Hoover v. Moran, 2008 WL 696879 (March 14, 2008), make the decision worth studying.

    Johnnie Hoover worked as a mechanic, welder, and equipment operator for Peter Moran’s company, Princess Beverly Coal Company, from 1984 until 2000.  At various points from the mid-1980s until the early 1990s, Hoover alleged that he lent Moran money to cover the payroll and pay other debts.

    In February 1985, Hoover loaned Moran $20,000 to be repaid within 60 days.  Before the repayment date, Hoover alleged that Moran asked for more time to repay him and agreed, as consideration for the extension, to pay Hoover 10% of the profits from the sale of the company if it were ever sold.  The parties did not put the agreement in writing and Hover was repaid at some point.

    In 1997, Hoover and Moran attempted to negotiate Hoover’s claim of an interest in the proceeds from the company’s sale, but they could not reach an agreement.  Two years later, Princess Beverly was sold for $11.6 million.  Hoover sued Moran and the company in 2002, alleging breach of the oral agreement.

    The defendants moved to dismiss for failure to state a claim.  Before the circuit court could rule on the motion, however, Princess Beverly filed for bankruptcy in November 2002, and received an automatic stay against Hoover’s litigation.  Subsequently the parties voluntarily dismissed Princess Beverly from the case.  Then, the circuit court, on its own motion, dismissed the case against Moran due to inactivity for more than one year.

    Hoover moved to reinstate the case, and the circuit court granted his motion in August 2006.  The parties supplemented their briefs on Moran’s pending Rule 12(b)(6) motion.  Moran argued that the action did not state a claim against him in his personal capacity, and that in order to be enforceable, the alleged agreement between him and Hoover had to be in writing.                   

    Following a hearing on the motion, the circuit court granted Moran’s motion to dismiss on the grounds the complaint failed to state a claim against him in his personal capacity.  Hoover’s motion for reconsideration was denied, and he prosecuted an appeal from the circuit court’s order.  Moran also prosecuted a cross-appeal from the order reinstating the action.

    As to the dismissal of the complaint for failure to state a claim against Moran as an individual, the Supreme Court, in a per curiam opinion, found that Hoover’s allegations against Moran and Princess Beverly, although somewhat ambiguous, “sufficiently placed Mr. Moran on notice that he was being sued in his individual capacity[,]”  and reversed the dismissal on that basis. 

    The Court also rejected Moran’s argument that the action was barred because the statute of frauds contained in the Uniform Commercial Code required the agreement to be in writing, finding that the doctrine of promissory estoppel applied to Hoover’s claim.  Hoover alleged that after he and Moran reached their agreement that Moran would pay Hoover 10% of the profits from the sale of Princess Beverly, Moran borrowed an additional $31,000 from Hoover, which Hoover was willing to lend because of the agreement:

“To the extent that Mr. Hoover’s allegations are true, an injustice would occur were we to allow the statute of frauds contained in W. Va. Code §46-8-319 to defeat his cause of action.  We believe that under the doctrine of promissory estoppel, Mr. Hoover should have his day in court notwithstanding the possible application of the statute of frauds writing requirement of W. Va. Code §46-8-319.”

    Moran did not fare any better in his appeal of the reinstatement of the action.  The circuit court had reinstated the action because neither Hoover nor his counsel received notice of the dismissal as required by Dimon v. Mansy, 479 S.E.2d 339 (W.Va. 1996), which Moran did not dispute.   Absent such notice, which is intended to give the parties an opportunity to be heard before the case is actually dismissed, the Supreme Court held that the reinstatement of the case was appropriate.

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    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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    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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    The Supreme Court of Appeals issued its decision on November 15 in State of West Virginia ex rel. Chemtall, Inc. v, Madden, 2007 WL 4098937 (W.Va.), which was argued at the beginning of the term.  Here is my post regarding the argument. This opinion is the third one from the Supreme Court regarding this case, which is significant, given that the case has not gone to trial yet, even though it was filed in 2003.

    The per curiam opinion addressed the petition for a writ of prohibition and/or mandamus filed by the defendant suppliers and/or manufacturers of polyacrylamide against the Circuit Court of Marshall County regarding two of its orders.  The first order permitted water treatment workers to intervene in the action based on their exposure to polyacrylamide, which is the same exposure claimed by the class of former coal preparation plant workers.  The second order permitted the use of a punitive damages multiplier for the plaintiffs’ medical monitoring claims and allowed for the common adjudication of claims that arose under West Virginia and Pennsylvania’s medical monitoring claims.

    In this decision, the Court denied the defendants’ requested relief.  First, the Court held that its prior decision in Stern v. Chemtall, Inc., 617 S.E.2d 876 (W.Va. 2005), was intended to permit the intervention of water treatment workers in the action.  The Court noted that there were facts common to both groups of workers, such as exposure to the same chemical and the risk of contracting the same diseases, which made intervention appropriate.  The Court also noted that the circuit court had not “indicated how it intends to manage any differences with regard to these two groups of plaintiffs[,]” which would make a ruling premature.

    As to the issue of punitive damages, the petitioners challenged the circuit court’s proposed trial plan as violating their due process rights because a jury would not consider a plaintiff’s individualized harm in assessing the damages and would not first find actual liability against any defendant. 

    The Court emphasized that the circuit court’s trial plan did not guarantee a result contrary to Phillip Morris USA v. Williams, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007), which addressed whether the United States’ Constitution’s Due Process Clause permits a jury to award punitive damages based in part on its desire to punish the defendant for harming persons who are not before the court.  The Court again emphasized that as no trial had taken place, “[n]o evidence has been adduced, none of the petitioners have been found liable for any tortious conduct, and punitive damages have not been assessed. Therefore, a decision on the constitutionality of punitive damages at this point would amount to nothing more than an exercise in speculation.”

    The Court also declined to rule on the petitioners’ claim that punitive damages are not available in cases where the plaintiffs sought only medical monitoring damages, expressing its belief that “appellate review of this issue is better left to the review of a verdict after complete development of all the facts and testimony and after a trial of all the issues."

    Likewise, in addressing the petitioners’ argument about the adjudication of claims arising under West Virginia and Pennsylvania law, the Court reaffirmed the circuit court’s discretion to manage its docket, such that “[w]e believe that the circuit court below is fully capable of formulating procedures that effectively address any differences in West Virginia and Pennsylvania law.”

    In the final paragraph of the opinion, the Court makes clear its exasperation with the parties: “We hope the litigants understand and appreciate the difficulty this Court faces in trying to decide so many issues pre-trial, in the limited context of extraordinary remedies, and in the absence of a meaningful, fully-developed factual record.  Accordingly, we trust the lawyers and parties will now focus vigorously on letting these cases be tried by a trial court.  Having disposed of the issues raised herein, we are confident that the parties can now proceed to trial without further delay and without the necessity of additional guidance from this Court.”

    In other words, don’t come back unless you've tried the case.

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    In a ruling issued last month, the Supreme Court of Appeals of West Virginia ruled that a circuit court should have given the plaintiffs the opportunity to amend their complaint against two local hospitals in accordance with the West Virginia Medical Professional Liability Act (MPLA), rather than suffer the dismissal of their lawsuit for failure to comply with its provisions.  Blankenship v. Ethicon, Inc., 2007 WL 30344262 (W.Va.).

    In 2003, the plaintiffs filed suit against several defendants, including Charleston Area Medical Center and Herbert J. Thomas Memorial Hospital, resulting from the implantation of contaminated sutures.  The plaintiffs asserted several causes of action against the defendants, including product liability claims for negligence, strict liability, and breach of express and implied warranties, violations of the West Virginia Consumer Credit and Protection Act, and the intentional infliction of emotional distress.  The plaintiffs sought compensatory and punitive damages and equitable relief in the form of an investigation by the hospitals to investigate and determine “what patients were implanted with the Vicryl sutures and to then inform the patients so identified of the defective condition of those sutures.”

    The hospitals alleged that any claims against them must be pled according to the MPLA, which required the plaintiffs to obtain a certificate of merit for their claims and to provide the hospitals with pre-suit notice of the action. The hospitals moved for summary judgment on the grounds the plaintiffs’ claims were barred by their failure to comply with the MPLA.

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    You may not recognize Julie Roehm’s name, but chances are you know about her employment and termination by Wal-Mart, and the litigation that has revealed Wal-Mart’s aggressive surveillance practices.

    In January 2006, Wal-Mart hired Roehm, a highly-regarded advertising executive, from Daimler Chryler Corporation, as its senior vice-president of marketing communications. By all accounts, she was shaking things up at a company that understood that it needed to move past its 1950s model of marketing. 

    But in December, Wal-Mart fired Roehm and her protégé, Sean Womack, and terminated its relationship with DraftFCB, an advertising agency she had hired.  Wal-Mart alleged that Roehm and Womack had an impermissible personal relationship, and that DraftFCB had provided gifts to Roehm, in violation of Wal-Mart’s stringent gratuity policy. Here is The Wall Street Journal’s article from December 11, 2006, which provided some background. According to the article, Roehm did not have an employment contract or any severance agreement with Wal-Mart.

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    Discovery regarding insurance reserves is a complicated issue.  A party in litigation against an insurance company in a bad faith or unfair trade practice case will often make a discovery request for the reserve set by the insurance company for the underlying claim on the theory that the reserve reflects the insurance company’s true valuation of the claim.  David Rossmiller at Insurance Coverage Law Blog has written about rulings made by federal courts in California (as described by J. Craig Williams at May It Please The Court) and Missouri in discovery disputes over reserve information.

    The issue has been addressed recently by the Supreme Court of Appeals of West Virginia in State ex rel. Erie Ins. Property & Cas. Co. v. Mazzone, 2007 WL 1661461 (W. Va. 2007), in which Erie Insurance Company sought a writ of prohibition to prevent enforcement of the circuit court’s order requiring disclosure of its insurance reserves to the plaintiff in a third-party bad faith case.

    Erie claimed that its reserve information constituted opinion work product, which, under West Virginia Rule of Civil Procedure 26(b)(3), may be disclosed “only upon a showing that the party seeking discovery has substantial need of the materials … and that the party is unable to without undue hardship to obtain the substantial equivalent of the materials by other means.”  Erie also contended that reserve information is generally treated as opinion work product. 

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    I wrote last week about the video that was posted on YouTube on June 26, which consisted of clips from depositions of six medical malpractice plaintiffs followed by clips from surveillance videos of five of them, which purport to show contradictions between their testimony and their activities.  The plaintiffs are suing Dr. John King for malpractice.  Also, last week, a jury ruled that the hospital that hired and credentialed King and HCA, its corporate parent, could be defendants in the lawsuits.

    According to a story in the Saturday Gazette-Mail (Charleston, WV), lawyers for HCA sent a letter last Thursday to Putnam County Circuit Judge O.C. Spaulding, in which they denied that their client had anything to do with the video.  The video posted on June 26 came after the circuit court imposed a gag order and sealed the pleadings on June 8.  That order was necessitated, at least in part, by an earlier video posted on YouTube that purported to show surveillance of one of the plaintiffs, but actually was another of a person unrelated to the litigation.  That video had been released by a media consultant retained by the defendants. 

    In the letter, HCA's lawyers advised the court that they had informed their media consultant, who has not been identified, and a group known as the Center for Individual Freedom of the court's June 8 gag order.  However, two other groups, the Evergreen Freedom Foundation and the National Federation of Republican Assemblies, mentioned the June 26 video in e-mails sent to the Associated Press on July 20, in which they decried lawsuit abuse.  A representative of the Republican group denied receiving the video or having any contact with anyone involved in the malpractice cases.

    I think HCA's lawyers' letter raises more questions that it answers.  The video was made by someone who had access to both the plaintiffs' video depositions and their surveillance videos, which would seem to be a pretty small number of people.  And I'm willing to bet that the defendants had not shared the surveillance videos with the plaintiffs.  I suspect that a third party, who was furnished with the deposition videos and the surveillance videos, made the YouTube video and posted it.  The court needs to find out who's responsible so that it can prevent this conduct from continuing to occur. 

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    In June, I wrote about the gag order imposed by Putnam County Circuit Judge O.C. Spaulding in the medical malpractice cases pending against Dr. John King.  The order was prompted, at least in part, by a video that appeared on YouTube, which purported to show one of the plaintiffs pushing a shopping cart, which she apparently had testified she was no longer able to do.  The trouble was the woman in the video wasn't the plaintiff, she was someone unrelated to the litigation.  At a hearing on June 8, the defense lawyers admitted to giving materials to their media consultant, who provided them to (unnamed) third parties.  The court also entered an order, effective June 8, sealing all pleadings filed in the cases.

    Now, according to Associated Press reporter Larry Messina, whose story appeared in yesterday's Charleston (West Virginia) Gazette, on June 26 (more than two weeks after the gag order was entered), another video was posted on YouTube, which consisted of clips from six of the plaintiffs' depositions, followed by clips from surveillance videos of five of the plaintiffs, showing them purportedly engaged in activities they said they couldn't perform.  Messina's attempts to reach the poster were not successful, and I was unable to find the video today on YouTube when I searched for it.  Judge Spaulding is apparently aware of the video, but has not indicated how he intends to proceed.

    Obviously, the video was intended to portray the plaintiffs negatively, but even if its goal was to make them look sympathetic, it is prohibited by the gag order.  Judge Spaulding should make a serious inquiry into how the video ended up on YouTube, and sanction whomever is responsible.  The other Putnam County judge presiding over the King malpractice cases, Edward Eagloski, has already revoked the pro hac vice admission of a Texas lawyer who had appeared on behalf of the defendants, and the same thing could easily happen here.

   

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    This morning's Charleston (West Virginia) Gazette has a story by Paul Nyden about the jury's verdict finding Putnam General Hospital liable for negligently hiring and credentialing Dr. John King.  Nyden points out that Putnam General lost its credentialing files for King, which resulted in an adverse inference instruction being given to the jury (meaning that the jury may infer that because the hospital lost the file, its contents hurt the hospital and helped the plaintiffs).

    Putnam General's lawyer argued in his closing that King had not done anything wrong, which probably came as a surprise to the jurors, who, being from Putnam County, have been exposed to media reports for the past few years about the results of King's brief time at Putnam General, such as patients who had limbs amputated needlessly, patients who had surgeries to implant hardware that had not received FDA approval, and patients left in such precarious positions medically that they literally can't find other doctors to assume their care. 

    The dilemma for Putnam General is that if it argued in this trial that King was a horrible surgeon, it is at least implicitly conceding liability for hiring and credentialing him.  On the other hand, if Putnam General took the approach (which it did)  that it did nothing wrong and would hire King again if given the opportunity, it has no credibility with the jury. 

    Considering that the jury's verdict means that Putnam General is now a co-defendant in 122 medical malpractice suits in Putnam County and could be liable for punitive damages, its exposure (or more precisely, HCA's exposure as the owner of Putnam General) could reach into the tens or hundreds of millions of dollars.

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    Following a two week trial, a jury has determined that Putnam General Hospital is liable for hiring and credentialing Dr. John King, who is a defendant in more than 110 medical malpractice lawsuits.  Last month, I wrote about the lawsuit and the controversy surrounding Dr. King's employment.

    According to the (Charleston) Daily Mail, the jury deliberated for about an hour before determining that Putnam General Hospital (now known as CAMC Teays Valley Hospital) will be a co-defendant with King in 122 lawsuits against him, based on its negligence in hiring him and giving him privileges to perform orthopedic surgery.  The jury also determined that the plaintiffs can seek punitive damages against Putnam General.  The medical malpractice trials start in September.

    This verdict is a blow to Hospital Corporation of America, Inc., which formerly owned Putnam General, and has been trying to put as much distance between itself and Dr. King as possible.  I noted in my earlier post that Judge O. C. Spaulding had ruled that the plaintiffs' lawyers would not be permitted to mention HCA's formerly ownership of Putnam General or that HCA had paid an $840 million fine in December 2000 for alleged unlawful Medicare and Medicaid billing practices. 

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   Tennessee litigator John Day, who blogs at Day On Torts, has a post today about the effect of judicial estoppel in a debtor's bankruptcy case.  The debtor, Gardner, failed to disclose the existence of a pending personal injury action when he filed for bankruptcy, then failed to disclose the action in a meeting with creditors.  Gardner received a Chapter 7 discharge of his debt.  When Gardner's personal injury lawyer subsequently learned that Gardner had failed to disclose the action, Gardner's bankruptcy was reopened in order to list the case as an asset.  At that point, the lawyers defending the personal injury case moved to dismiss on the grounds that judicial estoppel barred Gardner from prosecuting the action.  The district court granted the motion, which was affirmed by the Tenth Circuit Court of Appeals.

    The doctrine of judicial estoppel bars a party from asserting inconsistent positions in different proceedings, and has been applied in the Southern District of West Virginia in an action that is factually very similar to Gardner's, with identical results.  In Casto v. American Union Boiler Company of West Virginia, 2006 WL 660458 (S.D.W.Va. 2006), the District Court granted the defendant's motion for summary judgment against Casto's claim for age discrimination (which had been removed to federal court) because Casto had failed to disclose its existence when he filed for Chapter 7 bankruptcy protection. 

    Casto did not appeal the ruling (probably wisely), but the Fourth Circuit has previously endorsed the application of judicial estoppel in a case involving inconsistent allegations in a claim for Social Security disability benefits and an action alleging age discrimination.  King v. Herbert J. Thomas Mem'l Hospital, 159 F.3d 192 (4th Cir. 1998).

    The sometimes painful lesson is that if a client is contemplating bankruptcy and is a plaintiff or claimant in a pending matter, the client must be absolutely forthcoming about the existence of the action when dealing with the bankruptcy court.  Sometimes an omission can be attributed to ignorance (which may be persuasive, as intent is one of the factors that must be proven for judicial estoppel to apply), but it's much better to be able to avoid the entire analysis.

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    Over the past couple of weeks, there have been more developments in the litigation against Dr. John King. If his name is not familiar to you, Dr. King was an orthopedic surgeon who practiced at what was formerly Putnam General Hospital (now CAMC Teays Valley Hospital) in Hurricane, West Virginia in 2002 and 2003. (You can Google him and learn much, much more.)

    Although Dr. King only practiced at Putnam General for approximately seven months, he is a defendant in more than 110 medical malpractice lawsuits. The plaintiffs have also made claims against Putnam General Hospital, its former parent, Hospital Corporation of America, Inc., and other corporate entities within the HCA chain. Because of the number of cases and the complexity of the issues, the judges in Putnam County have been holding hearings on a weekly or bi-weekly basis. Continue Reading...

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     A West Virginia state court judge has awarded sanctions of $1.3 million against Camden-Clark Memorial Hospital, located in Parkersburg, West Virginia, and its lawyer for their conduct before and during a 2006 medical malpractice trial. Chief Judge Robert A. Waters of the Circuit Court of Wood County found that the hospital and its lawyer engaged in extensive misconduct in several areas.  A copy of the Court’s 54 page order is here. 

    The Court found that the hospital had:

• defrauded the plaintiff, as found by the jury by clear and convincing evidence;
• violated multiple court orders, as found by the Court on December 19, 2005 (at an earlier hearing);
• made numerous material misrepresentations of fact and law to the plaintiff and the Court, both before and during the trial of the action;
• concealed important evidence until the commencement of trial and even in the middle of trial, including the very documents the hospital had been ordered to produce by the Court;
• destroyed, concealed or altered material evidence in advance of trial, including cardiac monitor strip times and nurse's notes;
• advanced frivolous defenses before the Court; and
• wasted countless hours of the Court's time, as well as that of the plaintiff and his counsel, through all of the above misconduct.

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    In response to the Supreme Court of Appeals' decision in Morris v. Crown Equipment Corp., 633 S.E.2d 292 (W.Va. 2006), the West Virginia Legislature has amended the venue statute, West Virginia Code § 56-1-1 and created § 56-1-1a, which is entitled "Forum non conveniens."  The new statute enables the trial court to decline to exercise jurisdiction under the doctrine of forum non conveniens and to stay or dismiss the action or dismiss any plaintiff if the court finds that in the interest of justice and for the convenience of the parties, the claim or action would be more properly heard in a forum outside West Virginia. 

    The statute also provides that a plaintiff's choice of forum is entitled to great weight, but the plaintiff's preference may be diminished when the plaintiff is a nonresident and the cause of action did not arise in West Virginia.   The statute identifies eight factors for a court to consider when deciding whether to grant a motion to stay or dismiss an action or to dismiss a plaintiff from an action.  
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