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Although the Supreme Court of Appeals of West Virginia's decision on November 12 in Caperton v. A. T. Massey Coal Co., Inc., 2009 WL 380607 (2009), has received most of the attention, the court issued another decision that day that was also a victory, at least indirectly, for Massey.  

In Associated Press v. Canterbury, 2009 WL 3805646 (2009), the Associated Press had appealed the Circuit Court of Kanawha County's ruling that it could have access to only five of 13 emails exchanged between Massey chairman Don Blankenship and Supreme Court of Appeals Justice Elliott E. "Spike" Maynard while Maynard was on the court. (He was defeated in the primary in May 2008.) The circuit court determined, after conducting an in camera review, that the remaining eight emails  did not relate to Maynard's duties as a justice or any other matter that would permit disclosure under West Virginia's Freedom of Information Act.

In February 2008, the AP submitted a FOIA request to Steve Canterbury, the Supreme Court of Appeals' administrative director, for all emails between Blankenship and Maynard between January 1, 2006 through February 2008, which included the period that Blankenship and Maynard had vacationed in Monaco while Massey's first appeal of the $50 million verdict was pending before the court. Canterbury denied the request on the grounds that such disclosures were not subject to disclosure, and the AP sought declaratory and injunctive relief.

Following an evidentiary hearing, the circuit court reviewed in camera the 13 emails during the requested period, and found that five involved Maynard's campaign for re-election and thus were public records subject to disclosure, while eight were not public records and not subject to disclosure.

Justice Robin Davis, who also wrote the majority opinion in Caperton, wrote the majority opinion, which was joined by Chief Justice Brent Benjamin and Justices Thomas McHugh and Menis Ketchum. Justice Margaret Workman concurred in part and dissented in part. 

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A couple of years ago, I discussed State ex rel. Johnson & Johnson Corp. v. Karl, in which the Supreme Court of Appeals of West Virginia declined to adopt the learned intermediary doctrine. In case you've forgotten, the learned intermediary doctrine provides that a drug manufacturer does not have a duty to warn each patient who receives its prescription drug when the manufacturer appropriately warns the prescribing physician of the drug's dangers.

Johnson & Johnson is once again a topic of discussion, this time in the influential Drug and Device Law blog written by Jim Beck and Mark Herrmann. In a post entitled Why Drug Companies Should Beware Of Doing Business In West Virginia, they point out that  a recent decision from United States District Court for the Southern District of West Virginia held that West Virginia public policy prohibits the application of the doctrine even to patients treated outside of West Virginia.

Here are the relevant facts of Woodcock v. Mylan, Inc.,2009 WL 3271252 (S.D.W.Va. October 16, 2009), as related by Beck and Herrmann:

An Alabama physician prescribes a drug to an Alabama resident. The resident uses the drug in Alabama and is allegedly injured by the drug there. Alabama law recognizes the learned intermediary doctrine, for its own sound policy reasons. But the plaintiff sues in West Virginia, which is the only state that rejects the learned intermediary doctrine. A recent case [Johnson & Johnson] says that the drug company does not get the benefit of the learned intermediary doctrine because the doctrine is repugnant to West Virginia public policy.

Mylan moved to dismiss Woodcock's case based on a choice-of-law provision and the sufficiency of the complaint. Chief Judge Joseph R. Goodwin held that Alabama law governed all of the plaintiff's claims except her marketing defect -- failure to warn -- claim, and denied the motion. He reasoned that because West Virginia has rejected the learned intermediary doctrine based on public policy grounds, applying Alabama law to the plaintiff's claim would violate West Virginia's public policy, so West Virginia law applies.

But I disagree with Beck and Herrmann's characterization of West Virginia as the only state that has rejected the doctrine. According to then-Chief Justice Robin Davis, who wrote the majority opinion in Johnson & Johnson, "the total number of jurisdictions recognizing the learned intermediary doctrine, either by decision of the highest court or by statute, is only twenty-two." In addition, "[t]he highest courts of six other states have either referred to the doctrine favorably in dicta, or have adopted it in a context other than prescription drugs; but, they have not expressly adopted it with respect to prescription drugs." She then identified the remaining 22 states, including West Virginia, that have not adopted the doctrine,  and summarized its adoption as follows:

Thus, while the doctrine is widely applied among lower courts, the number of high courts who have followed suit and expressly adopted the doctrine, while admittedly in the majority, do not make up the overwhelming majority that has often been suggested by courts and commentators. (Emphasis in original.)

So unless 21 other states have adopted the doctrine in the approximately two and a half years since Johnson & Johnson was decided, West Virginia is not the only state to have rejected the doctrine.

Beck and Herrmann also offer several solutions to drug companies that want to avoid being sued in West Virginia, starting with, somewhat sarcastically, their recommendation to avoid doing business in West Virginia. Other than that, they suggest a focus on the constitutional implications of choice-of-law provisions and public policy arguments.

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Last month I wrote about litigation initiated by Wal-Mart against several insurance companies regarding “dead peasant,” or corporate-owned, life insurance policies purchased by Wal-Mart on 350,000 of its employees.

But a story in Tuesday’s Insurance Law 360 (subscription required) alerted me to a recent decision from the Eleventh Circuit Court of Appeals that could affect similar litigation pending against Wal-Mart in Florida. (Incidentally, although a subscription is required for the full text of stories from Insurance Law 360, if you don't want to subscribe, I highly recommend the free daily digest of top stories, which is emailed every morning, and is available for several practice areas. You can sign up at Law 360,)

In Atkinson v. Wal-Mart Stores, Inc., 2009 WL 3320322 (October 16, 2009), the court certified to the Florida Supreme Court the following question:

Whether the amendments to Fla. Stat. § 627.404 apply retroactively and enable the representative of an insured to sue for COLI benefits received by a party lacking an insurable interest or whether the amendments create a new cause of action such that a family would lack standing to sue for benefits obtained prior to the enactment of the amendments.

The background is that in 2008, the Florida legislature amended the statute as described in the proposed certified question. Under the prior version of the statute, a cause of action did not exist for an insured’s representative to sue for COLI benefits received by a party lacking an insurable interest, which typically would be the insured’s employer.

Based on the following facts provided by the Eleventh Circuit, the amount of money at stake is significant, perhaps even to Wal-Mart:

        In 1993, Wal-Mart adopted a corporate owned life insurance (“COLI”) program through which the company would purchase life insurance policies for its employees. Wal-Mart funded the policies, at no cost to the employees. The policies provided benefits of $5,000 to $10,000 to the decedents’ beneficiaries, with the remainder of the policy amount paid to Wal-Mart. By 2000, as the result of new regulations, Wal-Mart had discontinued the COLI program.

        Rita Atkinson and Karen Armatrout worked as a rank-and-file Wal-Mart employees paid hourly wages. Neither opted out of the COLI program and Wal-Mart obtained life insurance policies upon both. Atkinson died in 1996. After payment under her policy to her estate, Wal-Mart received the remainder of the benefits totaling $66,048.70. Armatrout died in 1997 and Wal-Mart received $72,820.30 in benefits under her policy.

A footnote indicated that employees were notified that they could opt out of the program, but the court does not indicate how large the putative class is or the amount at issue. But the opinion notes that Wal-Mart made over $135,000 from the policies on Atkinson and Armatrout, two “rank-and-file” employees, while each employee’s beneficiaries received, at most, $10,000. So there’s a lot of money at stake in COLI policies.

The plaintiffs filed a putative class action in Florida state court against Wal-Mart last year, and Wal-Mart removed the action. The United States District Court for the Middle District of Florida denied certification and dismissed the complaint on the grounds that, based on the law in effect in 2000, the plaintiffs' cause of action did not exist and the legislature gave no indication when it amended the statute that the amendment was to be applied retroactively.

The plaintiffs have appealed the dismissal of their action, and although the Eleventh Circuit's opinion doesn't say one way or the other, it appears that it is certifying the question to the Florida Supreme Court on its own motion.

Jeff Kuntz at The Florida Legal Blog, which focuses on appellate litigation in Florida state and federal courts, wrote about the Eleventh Circuit's opinion in this post. And from Tales of a Fictional Pirate Captain,here's an extensive list of companies that may have purchased COLI policies. I don't know how accurate or up to date the list is, but the sheer number of companies listed gives you an idea of how extensive the practice has been.

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 Although I had heard of “dead peasant” or "janitor" insurance policies or, as they known more euphemistically, corporate-owned life insurance (COLI) policies, Arianna Huffington’s reference to them in her review of Michael Moore’s new film, Capitalism: A Love Story, prompted me to do some research. And what I learned, among other things, is that protracted litigation about the validity of several hundred thousand policies involves three corporations whose names you won't be surprised to hear: Wal-Mart, Hartford Life Insurance Company, and AIG Life Insurance Company. But before I discuss that lawsuit, let me provide some background.

In its simplest form, a dead peasant policy is a life insurance policy that a company takes out on an employee, usually without the employee's knowledge or permission. When the employee dies, his or her employer receives the life insurance benefits. In this post, the Contingent Fee Business Litigation Blog explains how the policies got their name. An earlier post contains a link to an article in the National Law Journal that discusses issues involved in COLI litigation. Also, Mike Myers, whose firm publishes the blog, recently launched a site that answers questions about the policies.

Jere Beasley, in his eponymous blog, describes some of the litigation about the policies and points out that in 2006, Congress passed the Pension Protection Act, which requires employers to obtain the consent of their rank-and-file employees who are insured under a COLI policy.

And here is George Washington University law professor Jonathan Turley's post about a lawsuit filed by the widow of an employee who was insured under such a policy. The Wall Street Journal Law Blog also wrote about the lawsuit, and described the policies as "the next big thing in insurance litigation." 

As for the litigation I mentioned at the beginning, Wal-Mart sued Hartford, AIG, and several brokers and agents in Delaware Chancery Court in 2002 for what Wal-Mart felt were insufficient returns on the 350,000 COLI policies that it bought between 1993 and 1995. Wal-Mart's first lawsuit was dismissed on statute of limitations grounds, but the Delaware Supreme Court reversed on the grounds that the issue could not be decided on the pleadings.

On remand, the court granted the insurers' renewed motion to dismiss for failure to state a claim, and the Supreme Court affirmed, except for Wal-Mart's claim for equitable fraud. Following remand and a transfer from Chancery Court to Superior Court, Wal-Mart moved to amend to assert a common-law fraud claim based on "structural flaws" associated with the insurers' inducements to Wal-Mart to purchase the policies.

The Superior Court dismissed the amended complaint on the grounds that the applicable three-year statute of limitations barred Wal-Mart's claim, which had accrued, at the latest, in July 1995 and was not saved by Delaware's "discovery rule."

But on May 12, 2009, for the third time, the Supreme Court reversed the dismissal, finding in a summary opinion that "material issues of fact" precluded judgment in the insurers' favor on statute of limitations grounds. Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 979 A.2d 858 (Del. 2009).

Wal-Mart's case goes back to Superior Court for further proceedings. I haven't been able to locate any estimate of the money at issue, but with 350,000 policies involved, it's pretty easy to get to several hundred million dollars, if not substantially more.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Emphasis added.)

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

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

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

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

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

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

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

(Emphasis added.)

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

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

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

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

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

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

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

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

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

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

(Emphasis added.)

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

(Emphasis added.)

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

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

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

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

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

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

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

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

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

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

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

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

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

(Emphasis added.)

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

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

(Emphasis added.)

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

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

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

(Emphasis added.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But wait, there's more:

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

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

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

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

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

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On Thursday, I had the pleasure of  attending a lecture by H. Rodgin Cohen, chairman of Sullivan & Cromwell LLP, as part of the University of Charleston Speakers Series.  Cohen, a native of Charleston, is regarded as one of the, if not the, best banking and financial institutions lawyer in the country.

By way of background, Cohen is the subject of this month's cover story in The American Lawyer, which identifies him as "The Man To Call."  The magazine also named him as its Dealmaker of the Year for 2008.  Cohen also gave this interview a few days ago to Dan Freed of TheStreet.com.  Lastly, in advance of his lecture, (Charleston, West Virginia) Daily Mail Business Editor George Hohmann interviewed Cohen for this article.

Cohen divided his speech, entitled "The Financial Crisis - Causes, Cures and Prevention" into five sections: an overview of the crisis, its causes, the response, potential cures, and the prevention of future crises. 

Here are a few of the causes he identified, which he described as a "search for solutions rather than villains":

• Gorging on leverage almost unchecked;
• A sharp decline in credit standards and a virtual abdication of the credit review function;
• A change in the basic business model from originate-to-hold to originate-to-sell;
• Diversification of risk without transparency;
• Human failure, greed, and corruption; and
• The failure to recognize the enormous impact of the sharp decline in housing prices, which he described as the factor that had the greatest impact:

In discussing the government's response, Cohen said that it was inappropriate to conclude that the programs have been unsuccessful because the situation would have been a lot worse without them.  But he agreed that the response appeared to be reactive rather than proactive.

He noted another flaw in the government's response in that the Federal Reserve followed the classic approach of providing additional liquidity to the market without recognizing that this was not a classic situation.

Cohen proposed several potential cures, including a willingness to recognize that $700 billion (for the bailout last fall) is not sufficient and to act accordingly.  He predicted that the markets and the American people would accept, with transparency, another Troubled Assets Relief Program of $300-500 billion.  He also thinks that an enhanced mortgage foreclosure mitigation program is essential.

Cohen was critical of what he called "AIG Hysteria Week," when the House of Representatives passed legislation last month that imposed a 90% tax on certain AIG employees' bonuses, and showed a willingness to act "contrary to the rule of law" and to enact "indiscriminate and devastating legislation."

In terms of preventing future crises, Cohen noted a corollary to Gresham's law that no regulation or bad regulation drives out good regulation.

As a fundamental solution, Cohen proposes the creation of a super-regulator or super-regulatory body that would serve as a systemic risk regulator.  He said the critical questions for such a body are what should a super-regulator do, who should the super-regulator be, and who should be subject to a super-regulator.  From his perspective, the obvious choice is the Federal Reserve, which is the only entity that is set up to take on such such broad duties.

Cohen criticized corporate governance, which he said failed at risk management, and proposed three reforms: every financial institution should have a separate risk management committee; risk management at a financial institution should be a separate staff function with a direct reporting line to the risk management committee; and a board of directors must understand that when a unit is experiencing growth that is not shared by the rest of the corporation, that is a red flag. 

He also pointed out that compensation should be the responsibility of a corporation's board of directors, not legislators or regulators.  Cohen admitted that it was difficult to understand why a successful CEO who makes whatever amount of money is objectionable when compared to the salary of a utility outfielder in major league baseball.  (In discussing proposals in Congress to limit a CEO's compensation to the president's annual salary of $400,000, Cohen shared what Babe Ruth said in 1930 when asked how he felt about making $80,000 a year when the President of the United States made $75,000: "I know, but I had a better year than Hoover.")

Cohen declined to explain why he withdrew his name`from consideration as deputy Treasury Secretary, the No. 2 position in the department, except to say that his wife was delighted and his dog was even happier.  (There has been speculation that Cohen's representation of many banks and financial institutions would have been problematic for his confirmation.)

A couple of other observations: 

Cohen noted that nationalization of certain banks is a possibility, but is a last resort because "government is not a good owner," and said that key metrics for him in gauging the nation's recovery from the crisis are a firming-up of housing prices and the level of foreclosures.

I'm not aware that the text of the speech is available, but if it is, I'll upload it.  Cohen's remarks are certainly worth reading and studying.

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As an update to my earlier post on the AIG bonuses, Catherine Rampell posted on TNYT's Economix blog a short time ago that the AIG employees' bonuses may still be taxed even if the employees return them, according to the concept of "constructive receipt."  She points out that whether the IRS actually taxes the bonuses depends on if they want to be "sticklers," but that its authority to do so exists.

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The political issue dominating news coverage is the payment of $165 million in bonuses to AIG employees, some of whom no longer work for company. 

Apparently, because the bonuses have been distributed, AIG cannot withhold the money and force its disgruntled employees to sue to obtain the bonuses.  So now, talk has turned to the government recovering the bonuses by taxing the recipients in an amount close to or equal to the amount of the bonuses. 

Such a remedy requires Congressional action, but if you've watched any cable network for more than 30 seconds during the past day, you’ll learn that there’s no shortage on Capitol Hill of eagerness to enact such legislation.  (Although as I write this, I'm hearing that Republicans in the House will oppose such a provision.)

That leads to the question of whether such legislation is constitutional.  Here is The Wall Street Journal Law Blog’s interview yesterday with constitutional law scholar and Harvard Law Professor Laurence Tribe, who addresses the government’s possible grounds for recovering the bonuses.

Today's Journal's Deal Journal has an interview with UVA Law Professor George Geis, who teaches contracts and corporate finance, about whether and how the government can recover the bonuses.

Earlier in the week, The New York Times' Room for Debate blog presented this collection of opinions from several experts on how to get the money back.

And in yesterday’s Times’ Deal Book blog, the Deal Professor, Steven M. Davidoff, analyzes AIG’s bonus contract and questions who negotiated the contract for AIG and why, considering that the bonuses weren’t tied to the employees’ performance or their group’s performance – as we have all learned to our amazement.

Finally, for a contrary point of view, Andrew Ross Sorkin, who writes the Times´Deal Book blog, argues that the bonuses should be paid because not to do so is worse than the alternative. 

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

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

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

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

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

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

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

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

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

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

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

And that is what the justices are grappling with. 

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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The Supreme Court of the United States heard arguments yesterday in Wyeth v. Levine, No. 06-1249, which again presents the issue of federal preemption, this time in the context of state law claims resulting from allegedly defective pharmaceutical packaging. 

Wyeth has generated an enormous amount of discussion and analysis.  Here is the transcript of the argument in Wyeth, and the two other cases argued yesterday.  For background, here are SCOTUSBLOG's post from yesterday, which had previewed the argument, and The Wall Street Journal's Law Blog's analysis of the argument.  News coverage of the case today includes Jess Bravin's article in The Wall Street Journal and David G. Savage's article in the Los Angeles Times.

Kimberly A. Krawolec, who blogs at The UCL Practitioner, posted today about the case.  And The Wall Street Journal's Health Blog questions how the outcome of the presidential election might affect the Court's decision.

The Supreme Court will decide Wyeth against the backdrop of its decision earlier this year in Riegel v. Medtronic, Inc., 128 S.Ct. 999, 169 L.Ed.2d 892 (2008), in which the Court held that state common-law claims challenging the safety or effectiveness of a medical device marketed in a form that received premarket approval from the United States Food and Drug Administration were barred by the applicable federal law’s preemption clause.

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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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 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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 As I wrote yesterday, here is Dr. Steven Hatfill’s motion to dismiss Toni Locy’s appeal, which was filed in the D. C. Circuit Court of Appeals last Thursday (there is an accompanying motion for leave to file out of time), courtesy of Samantha Fredrickson at the Reporters Committee for Freedom of the Press.

Hatfill wants the court to dismiss Locy’s appeal of Judge Reggie Walton’s contempt order as moot because he settled his lawsuit against the government and no longer needs to know the names of Locy’s sources.  The district court is willing to vacate the contempt order, once it regains jurisdiction of the case, which means, according to the motion, “[b]ecause Locy has not suffered and will not suffer any sanction under the order of contempt, there is no longer any need for this Court to rule on the merits of her appeal.”

But there is, as the motion calls it, an “ancillary issue [that] remains in dispute between Locy and Hatfill.”  The district court has indicated that it will award Hatfill his attorney’s fees incurred in connection with the issue, and Hatfill intends to seek them from Locy as soon as the district court regains jurisdiction.

Hatfill is concerned that, despite his settlement with the government, the court of appeals will rule on Locy’s appeal, presumably in her favor, which would eliminate the basis for his motion for attorney’s fees:

In this case, it would be the tail wagging the dog if this Court were to issue a decision addressing whether the district court properly held Locy in contempt to reach an ancillary dispute regarding fees that has not been reduced to any order (and which is therefore not yet appealable )…  On the only order now on appeal, which is the only order that has been entered against Locy [the district court’s contempt order], there is nothing remaining to adjudicate.

Assuming that the court of appeals dismisses Locy’s appeal and Hatfill files his motion for attorney’s fees, the district court appears inclined to grant the motion, which could be disastrous for Locy.  The court imposed some onerous fines against her (stayed by the court of appeals), and held that only she, as opposed to USA Today, the news organization that employed her, could pay the fines.  And I'm sure Hatfill's lawyers have not been cheap.

 

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 You may have read that Dr. Steven Hatfill settled his lawsuit against the United States in June for $5.85 million.  The government had identified Hatfill as a person of interest in the 2001 anthrax attacks -- falsely, as it turns out, which resulted in his lawsuit.

In prosecuting his lawsuit, Hatfill sought to compel Toni Locy, a former USA Today reporter, to divulge her sources for articles that had discussed the government’s interest in Hatfill.  Locy refused to give up her sources, which resulted in United States District Court Judge Reggie Walton entering a contempt order against her.  Here is my post from March about the proceedings involving Locy. 

She appealed the order, and the D. C. Circuit Court of Appeals stayed the order and heard oral argument on Locy’s appeal in May, but has not issued a decision.

I suspect most people, including me, assumed that Hatfill’s settlement would moot Judge Walton’s order, but that may not be so.  According to Scott Shane's article in yesterday’s New York Times about Bruce Ivins (whom the government has identified as the actual anthrax killer), Hatfill has asked the Court of Appeals to dismiss Locy’s appeal, which would allow Judge Walton’s order to stand. 

The Reporters Committee for Freedom of the Press' blog explains that Hatfill's motion could force Locy to pay his attorney’s fees, an amount that could dwarf what Locy would have owed under the contempt order. 

Starting this fall, Locy became the Donald W. Reynolds Professor of Legal Reporting at Washington and Lee University in Lexington, Virginia.  She formerly held the Shott Chair of Journalism at West Virginia University's P. I. Reed School of Journalism.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Emphasis in original.)

The Governor expands on the point in footnote 4:

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

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

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

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

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

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

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

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

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

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

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

 

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    An issue that always has to be addressed in ERISA disability claims is the standard of review to be applied to the plan administrator’s decision.  If the plan language does not confer discretion on the administrator, then the court reviews any decision under a de novo standard.  However, if the plan gives discretion, then the administrator’s decision is reviewed under an abuse of discretion standard.  

    But there can be another scenario, one that has confounded litigants, lawyers, and courts for years.  It is where the plan administrator, which makes the decision about a claimant’s entitlement to benefits, is also the plan insurer and therefore responsible for paying benefits.

    Courts have long recognized the conflict of interest that exists, even if they have not been sure how to deal with it.  That’s why the Supreme Court of the United States’ decision in Metropolitan Life Insurance Company v. Glenn, 2008 WL 2444796 (June 19, 2008),was so eagerly awaited.

    In Glenn, Metropolitan (“MetLife”) administered Sears, Roebuck & Company’s long-term disability plan and also paid the benefits.  Sears’ plan’s language conferred discretion on Metropolitan, which meant that its decision whether to award benefits would be reviewed under the abuse of discretion standard.

    Wanda Glenn applied for and received LTD benefits because she was able to show that she could not perform the material duties of her own job (the “own occ” standard).  After 24 months, however, the plan’s standard for proving disability changed, and required her to prove that not only could she not perform her own job, but that she could not perform the material duties of any gainful occupation for which she was reasonably qualified (the “any occ” standard).

    MetLife found that she did not satisfy this standard and denied her claim for benefits.  The District Court for the Southern District of Ohio affirmed the denial, and Glenn appealed to the United States Court of Appeals for the Sixth Circuit.

    In reversing the denial of Glenn’s benefits, the Sixth Circuit relied on a combination of factors, including MetLife’s conflict of interest (the others factors were specific to the treatment of Glenn’s claim).   MetLife appealed to the Supreme Court.

    In an opinion written by Justice Stephen Breyer for a majority of five justices, the Court affirmed the Sixth Circuit and identified two questions to be answered: the first, posed by MetLife, is “whether a plan administrator that both evaluates and pays claims operates under a conflict of interest in making discretionary benefit determinations.”  The second question, posed by the Solicitor General, is “’how’ any such conflict should ‘be taken into account on judicial review of a discretionary benefit determination.’”  

    Personally, I find the second question to be much more significant than the first.  Courts have noted for years the existence of a conflict of interest when the “entity that administers the plan, such as an employer or an insurance company, both determines whether an employee is eligible for benefits and pays benefits out of its own pocket.”  The real issue is how a court is supposed to deal with the conflict.

    The Court relied on principles of trust law in concluding that “for ERISA purposes a conflict exists,” and identified several reasons. 

The employer’s own conflict may extend to its selection of an insurance company to administer its plan (an employer may be more interested in a company that offers low rates instead of one that has accurate claim processing);

ERISA imposes higher-than-marketplace quality standards on insurers (ERISA requires a plan administrator to adhere to a special standard of care; and

A legal rule that treats insurance company administrators and employers alike in respect to the existence of a conflict can nonetheless take account of the circumstances to which MetLife points so far as it treats those, or similar, circumstances as diminishing the significance or severity of the conflict in individual cases

    Regarding the thornier problem of how to account for a conflict, the Court repeated its statement from Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), that a conflict “should be weighed as a factor in determining whether there is an abuse of discretion.”

    The Court pointed out that the standard of review should not change, however, which “in practice could bring about near universal review by judges de novo-i.e., without deference-of the lion’s share of ERISA plan claims denials.”  Rather, the Court envisioned that a conflict of interest is a “factor” to be considered in addition to other considerations.  This was the approach taken by the Sixth Circuit; it considered the conflict, but may not have found it to be determinative of Glenn’s appeal in view of other factors.

    Interestingly, in his partial concurrence, Chief Justice John Roberts cautioned that the majority’s approach would bring about a change in the standard of review:  “The end result is to increase the level of scrutiny in every case in which there is a conflict-that is, in many if not most ERISA cases-thereby undermining the deference owed to plan administrators when the plan vests discretion in them.” 

    If you're interested in knowing more about MetLife v. Glenn (and who wouldn't be?), I recommend the knowledgeable and insightful comment and analysis of Roy Harmon at Health Plan Law, Brian King at ERISA Law Blog,  Steven Rosenberg at Boston ERISA & Insurance Litigation Blog, Paul Secunda at Workplace Prof Blog, Suzanne Wynn at Pension Protection Act Blog, and Mark DeBofsky at DDBlog.

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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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    Mike Garrison's "resignation" today as president of West Virginia University
presents a timely opportunity to review his employment agreement, including its provisions for severance pay.  I put resignation in quotation marks not to be sarcastic, but because Garrison's announcement about his departure was vague.  Here is Garrison's  statement, in which he says that he will stay in office until September (presumably September 1), but for whatever reason, does not affirmatively state he is resigning.

    There was some question whether September was chosen in order to entitle Garrison to additional or supplemental compensation if he stayed in office at least one year (he took office on September 1, 2007, which was moved up from his original start date of September 21).  Here is the May 10, 2007 letter from the West Virginia University Board of Governors to Garrison, which serves as his employment agreement. 

    The agreement, which describes Garrison's service as "at the will and pleasure of the Board," requires him, in the event of his resignation, to give "at least sixty days notice before [his] last day in the office."  Garrison's term as president under the agreement was scheduled to end on June 30, 2010.

    This recent article in the Daily Mail reported that Garrison would receive his yearly salary of $255,000 if he was discharged without cause by the Board of Governors prior to June 30, 2008.  If he was discharged without cause after June 30, 2008 but before June 30, 2010, he would be entitled to six months' salary.  A termination for cause, as defined in the employment agreement, would not entitle Garrison to any further compensation. 

    Because the employment agreement is silent regarding any compensation owed to Garrison if he resigns, he is entitled to only his annual compensation and associated benefits through the remainder of his time as president.

    I think Garrison's decision not to state that he is resigning  has some significance, but I cannot see how he is entitled to continued compensation as WVU's president after he voluntarily leaves the position, regardless of how he describes his departure. 

   

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

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

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

    Here are some excerpts from Beilein’s letter:

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

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

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

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

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    Apparently, the negative publicity surrounding Wal-Mart’s decision to pursue reimbursement for Debbie Shank’s medical expenses from the remainder of her personal injury settlement made it rethink its position, as Wal-Mart announced yesterday that it would not attempt to collect any funds from Shank.

    Here is the letter from Pat Curran, Wal-Mart’s Executive Vice President ? People (yes, that’s really her title), to Jim Shank, in which she explained that, “Occasionally others help us step back and look at a situation in a different way.  This is one of those times.”   I imagine that’s true, particularly when the “others” are CNN, MSNBC, The Wall Street Journal, and the websites and blogs that are devoted to following and scrutinizing Wal-Mart’s activities. 

    For more background, here is the Associated Press story in yesterday's Wall Street Journal, which quoted Roger Baron, who teaches at the University of South Dakota School of Law and specializes in reimbursement and subrogation issues.  Professor Baron points out that since the United States Supreme Court’s decision in 2006 in Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006), health plans have become “very aggressive” about subrogation.  The Wall Street Journal Law Blog also weighs in today on Wal-Mart’s change of heart.

    Wal-Mart did the right thing by realizing that in this situation, its position was inequitable.  But I have no doubt that if Wal-Mart had not been subjected to so much criticism, it would have continued to pursue its subrogation claim against whatever remains of Debbie Shank's personal injury settlement. 

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    CNN has picked up on the story of Debbie Shank, whose fight with Wal-Mart over reimbursement of her medical expenses was on the front page of The Wall Street Journal last November.  At that time, I wrote about her unsuccessful efforts to reach a compromise with Wal-Mart regarding its health plan’s right to be repaid for medical expenses incurred in connection with Ms. Shank’s motor vehicle accident, which left her severely brain-damaged.  In August, she lost her appeal before the Eighth Circuit Court of Appeals, and last week, the Supreme Court of the United States denied her petition for a writ of certiorari.  James A. Shank, et al. v. Administrative Committee of the Wal-Mart Stores Inc. Associates' Health and Welfare Plan, No 07-791.

    CNN focuses on the human interest aspect of her story and doesn’t try to grapple with the policy issues, but the statement from Wal-Mart’s spokesman seems inaccurate:

Wal-Mart’s plan is bound by very specific rules … We wish it could be more flexible in Mrs. Shank’s case since her circumstances are clearly extraordinary, but this is done out of fairness to all associates who contribute to, and benefit from, the plan. 

    Undeniably, Wal-Mart has the right to pursue its subrogation interest against Ms. Shank’s recovery, but nothing forces Wal-Mart to seek reimbursement of the entire amount, or an amount equal to the remaining settlement.  The implication that Wal-Mart was required to pursue the recovery of its entire claim is incorrect.  In fact, health plans routinely negotiate in these circumstances like these in order to receive some recovery, without leaving the plan participant or beneficiary in circumstances as dire as Ms. Shank's, and Wal-Mart clearly could have done that here.  

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    A few weeks ago, photographs surfaced that showed Supreme Court of Appeals of West Virginia Chief Justice Elliott E. “Spike” Maynard and Massey Energy Company Don L. Blankenship vacationing together in Monaco and, to put it mildly, created a controversy about the Supreme Court’s decision in Caperton v. A. T. Massey Coal Company, Inc., in which Chief Justice Maynard was in the majority.  On the plaintiffs’ motion, the Supreme Court agreed to reconsider its decision, and the parties argued the case again last week.  Chief Justice Maynard and Justice Larry Starcher recused themselves from the Court’s reconsideration of the appeal. 

    Apparently, the photographs have had a more profound effect, as the Federal Bureau of Investigation and the United States’ Attorney’s office for the Southern District of West Virginia are investigating the relationship between the Chief Justice and Blankenship.  The Wall Street Journal reported on the investigation last Thursday, as part of a story on the Caperton rehearing.  On Friday, in The Charleston Gazette, Paul J. Nyden reported that Court employees and at least one justice had been interviewed.  According to Nyden's article, Chief Justice Maynard has questioned the Journal’s story and discounted the existence of the investigation, although he said he would welcome an independent investigation so that he could show that he received nothing from Blankenship. 

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    This post is not about business litigation, but about a situation playing out in the federal courts in Washington, D.C. that presents some significant issues in media law.  Toni Locy, a former USA Today reporter who holds the Shott Chair of Journalism at the Perley Isaac Reed School of Journalism at West Virginia University, is currently embroiled in a struggle to protect the anonymity of her sources, without putting herself in jeopardy.

    For background about Locy's situation, here is a link to The Wall Street Journal Law Blog’s stories and to the Associated Press story in the Washington Post.  (In the interest of disclosure, I worked with Locy at the Daily Athenaeum, the student newspaper at WVU, many years ago.  She was the managing editor, while I was a lowly staff writer.)  When Locy worked for USA Today, she wrote about Dr. Steven Hatfill, who was alleged to have played a role in the 2001 anthrax attacks.   In fact, in 2002, the FBI and then-Attorney General John Ashcroft described Hatfill as a “person of interest.”  Hatfill did not have any involvement in the attacks, however, and filed suit in the District of Columbia against the United States for violating his privacy by leaking information to the press.  Hatfill v. Mukasey, et al., Civil Action No. 1:03-CV-1793 (RBW).  As part of his lawsuit, Hatfill wants to know the names of Locy’s sources at the FBI and the Department of Justice.  

    United States District Judge Reggie B. Walton (who presided over the I. Lewis “Scooter” Libby trial, during which former New York Times reporter Judith Miller was jailed for 85 days for refusing to cooperate with Special Prosecutor Patrick Fitzgerald’s investigation) ordered Locy to reveal her sources.  She refused to do so, however, and on February 19, Judge Walton held her in contempt.  At that time, he threatened to fine her, beginning at midnight yesterday, $500 per day for seven days, increasing thereafter to $1,000 per day for seven days, and finally increasing to $5,000 per day for seven days if she continued to refuse to identify her sources.  He also threatened to order that she had to pay the fines personally and could receive no financial assistance from USA Today or any media organization or anyone else.  That requirement is no small matter, considering that she could be facing fines of at least $45,500, but makes only $75,000 per year. 

    Last Friday, Judge Walton entered an order assessing the fines as described above and requiring Locy to pay them personally,"to maximize the potential that Ms. Locy will ultimately comply with the Court's order that she reveal her sources at the DOJ and FBI who disclosed information to her about the anthrax investigation."  He also refused to stay payment of the fines while Locy’s lawyers appealed his ruling .

    Locy’s lawyers yesterday filed an emergency motion to stay with the United States Court of Appeals for the District of Columbia Circuit, which entered an order this afternoon staying the payment of the fines while she prosecutes an appeal.  A hearing is scheduled before Judge Walton on April 3.

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    Robert Martin used to work for Al Minor & Associates, an actuarial firm in Ohio, as a pension analyst, which gave him access to the firm’s approximately 500 clients.  After working for Minor for four years, Martin started his own company, providing the same type of services as Minor, then resigned a year later without taking any documents containing confidential client information.  But he successfully solicited 15 of Minor’s clients using information that he had memorized.

    Minor sued Martin for misappropriation of trade secrets based on Martin's use of the information he had memorized.  The trial court ruled in favor of Minor, and Martin appealed to the Franklin County Court of Appeals, which affirmed the denial of equitable relief to Minor, but affirmed a verdict in Minor’s favor of $25,973, representing fees not generated from the former clients Martin had solicited based on the information he had memorized while working for Minor. 

    Martin appealed to the Supreme Court of Ohio, which held unanimously this week that “the client information at issue in this case did not lose its status as a trade secret, or the protection of the UTSA, because it had been memorized by a former employee.”   Al Minor & Associates, Inc. v. Martin, 2008 WL 343482 (February 6, 2008).

    The Court rejected Martin’s argument that the memorized information could not constitute a trade secret and that his right to compete was being unfairly infringed, and agreed with Minor that public policy favors the protection of trade secret information, regardless of whether it is written or memorized, and that the analysis should focus on the nature of the information at stake, and not its format.

Information that constitutes a trade secret pursuant to R.C. 1333.61(D) does not lose its character as a trade secret if it has been memorized.  It is the information that is protected by the UTSA, regardless of the manner, mode, or form in which it is stored – whether on paper, in a computer, in one’s memory, or in any other medium.

    The Court was persuaded by the fact that the Ohio legislature had not chosen to distinguish between formats of information, nor had the legislature specifically excluded memorized information from protection under the UTSA.

    West Virginia is among more than 40 states that have adopted the UTSA, and its act is located at West Virginia Code §§ 47-22-1, et seq.  For further reference, here is a discussion of the decision on Womble Carlyle’s Trade Secrets Blog.

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    The Supreme Court of Appeals has voted 5-0 to rehear A.T. Massey Coal Company, Inc.’s appeal of the  $50 million verdict obtained in 2002 by Hugh Caperton and companies he operated.  The Court originally ruled 3-2 in November to reverse the verdict.  The case will be reargued on March 12.

    Circuit Court Judge Donald Cookman was appointed to replace Chief Justice Elliott E. “Spike” Maynard, after the Chief Justice recused himself amid allegations that his personal friendship with Massey Energy Company chairman Don Blankenship would affect his ability to be impartial.  Justice Brent Benjamin, who appointed Judge Cookman, rejected a request by the Harman companies that he recuse himself, based on Blankenship's involvement in his 2004 campaign.

    Here is the Associated Press story, which includes Massey’s statement about the Supreme Court's decision to reconsider the verdict.

    Also, I need to correct my post last Saturday about Justice Benjamin's refusal to recuse himself.  In his statement, he said, in part, that, "Simply conclusory accusations and assumptions are plainly  insufficient to support a motion for disqualification[,]"  not "simply accusatory accusations," as I wrote.

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    The situation regarding the composition of the Supreme Court of Appeals when it takes up the plaintiffs’ motions for reconsideration in Caperton v. A.T. Massey Coal Company, Inc. has been clarified by Justice Brent Benjamin’s decision yesterday afternoon not to recuse himself from the case, as the Harman companies had requested.  I do not have the text of Justice Benjamin’s statement or any order from the Supreme Court, but Paul Nyden’s  article in today’s Saturday Gazette-Mail quotes from the statement. 

    Here is the statement as quoted in the Nyden article:

The motion seeking disqualification comes over three years after the 2004 election and focuses entirely on that election. It contains nothing about this justice’s record on the court. There are no allegations that this justice has, or has had, any relationship with Mr. Blankenship or any Massey company in his 20-plus years of private practice. Simply accusatory accusations and assumptions are plainly insufficient to support a motion for disqualification.

    The plaintiffs, Harman Development Corporation, Harman Mining Corporation, and Sovereign Coal Sales, Inc., renewed their motion to disqualify Justice Benjamin based on the involvement of Massey Energy Company chairman Don Blankenship in the 2004 election in which Justice Benjamin defeated incumbent Justice Warren McGraw.  Blankenship provided significant support to Justice Benjamin’s campaign.  Here is the companies' motion to disqualify Justice Benjamin filed in October 2005. 

    Also yesterday, Justice Benjamin, who is acting chief justice in this case due to Chief Justice Maynard’s recusal, appointed Circuit Court Judge Donald H. Cookman to serve as the fifth justice when the Court holds its rehearing conference on January 24.

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    Supreme Court of Appeals of West Virginia Chief Justice Elliott E. "Spike" Maynard has recused himself from further participation in Caperton v. A.T. Massey Coal Company, Inc., et al., in which the Supreme Court reversed the plaintiffs' $50 million verdict   The plaintiffs have filed motions for reconsideration, which the Court will take up on January 24.  Here is the order entered by the Clerk and Chief Justice Maynard's memorandum to the Clerk.  

    Here is the text of the memorandum:

It is not enough to do Justice--Justice also must satisfy the appearance of Justice.  I have decided to voluntarily recuse myself from this case.  I will recuse myself despite the fact I have no doubt in my own mind and firmly believe I have been and would be fair and impartial in this case.  I know that of a certainty.

The issue, because of the controversy surrounding this case, is no longer an issue of whether I can be fair and impartial.  Rather it has now become an issue of public perception and public confidence in the courts.  Above all else, I am very concerned about how the public views this court.

Without question, the Judicial Branch of state government should always be held in the highest public confidence and trust.  The mere appearance of impropriety, regardless of whether it is supported by fact, can compromise the public confidence in the courts.  For that reason -- and that reason alone -- I will recuse myself from this case.

    The issue of the Chief Justice's friendship with Massey Energy Company chairman Don Blankenship and his continued participation in the case has attracted a lot of attention, as reflected by Adam Liptak's article today in The New York Times  and this entry on The Wall Street Journal Law Blog.   Here is Associated Press reporter Lawrence Messina's article today. 

    In another development, Harman Mining Development Corporation, Harman Mining Corporation, and Sovereign Coal Sales, Inc. yesterday renewed their motion to disqualify Justice Brent Benjamin from participation in the case.  The plaintiffs first made the motion in October 2005, at which time Justice Benjamin declined to recuse himself.  The renewed motion focuses on the role played by Blankenship in Justice Benjamin's election in 2004, when "Blankenship invested more than $3 million in direct or indirect support of Justice Benjamin -- more than any person, other than a person seeking his own election, had ever spent to effect the outcome of a state judicial race, certainly in West Virginia and perhaps in the United States."   Here is the renewed motion, which had also sought the Chief Justice's disqualification.  As of today, Justice Benjamin has not indicated whether he will recuse himself.

    As Adam Liptak noted, Chief Justice Maynard did not indicate whether he was withdrawing his vote or making his disqualification retroactive, as the plaintiffs had requested.  Furthermore, when a Supreme Court justice recuses himself or herself, the chief justice appoints the substitute justice.  But here, where the chief justice has recused himself, I don't know whether the justice with the most seniority (Robin Davis) or the one next in line for chief justice (Brent Benjamin) makes the appointment.   Of course, that issue is complicated by the motion pending against Justice Benjamin.

    I think Chief Justice Maynard is going to have to address the remainder of the plaintiffs' motion, i.e., advise whether his recusal is retroactive to the oral argument in September, which would require the parties to start over, or whether he intends his recusal to apply only to the plaintiffs' motions for reconsideration.

    These are my posts from earlier this week about the Maynard disqualification issue and the plaintiffs' motions for reconsideration of the Court's decision.

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    Hugh Caperton, whose verdict against A.T. Massey Coal Company, Inc. for $50 million was reversed by the Supreme Court of Appeals of West Virginia by a vote of 3-2, yesterday filed an amended motion to disqualify Chief Justice Elliott E. “Spike” Maynard from participating in the plaintiffs’ petitions for reconsideration of the Court’s decision and seeking the withdrawal of his vote in Massey’s favor.

    The basis for the amended motion is that Caperton “has become aware of the existence of thirty-four (34) photographs which depict Chief Justice Maynard and Mr. Blankenship vacationing together in the Kingdom of Monaco during the time period of July 3-5, 2006.  Copies of twenty-four of these photographs are attached hereto as Exhibit A.”  The motion also states that, “[t]en (10) of the photographs also depict, in addition to Chief Justice Maynard and/or Mr. Blankenship, two females apparently traveling with them as companions.”  Those photographs have been filed under seal.   

    The motion and the underlying relationship between Chief Justice Maynard and Blankenship are the subject of a story today in The New York Times by Adam Liptak, entitled “Motion Ties W. Virginia Justice to Coal Executive.”   For more local coverage, here are stories by Paul J. Nyden in today’s Charleston Gazette and by Associated Press reporter Lawrence Messina. 

    Yesterday I wrote about the petitions for reconsideration filed by Caperton and his companies, as well as Caperton’s motion to disqualify Chief Justice Maynard, which was filed earlier this month, which alleged that less than two weeks before the Court issued its decision in Caperton’s appeal, Chief Justice Maynard and Blankenship had been seen having dinner together.

    The standard for disqualification of a Supreme Court justice is governed by Rule 29 of the West Virginia Rules of Appellate Procedure, which provides that, “[a] justice shall disqualify himself or herself, upon proper motion or sua sponte, in accordance with the provisions of Canon 3(E)(1) of the Code of Judicial Conduct or, when sua sponte, for any other reason the justice deems appropriate.”  Canon 3(E)(1) provides that, “[a] judge shall disqualify himself or herself in a proceeding in which the judge’s impartiality might reasonably be questioned ….” 

    Caperton’s amended motion alleges that:

It is beyond the realm of human comprehension that any judge could claim any semblance of impartiality when, before casting the deciding vote in a $76 million case, he accompanies the CEO of the litigant on the hook for that judgment on a luxurious trip to the French Riviera.  As if that were not enough, he then consciously chooses not to disclose the very fact of the trip.  Apparently unsatisfied, he then casts the deciding vote in support of a “majority” opinion which was not only expressly intended to deprive Mr. Caperton, by reason of a dismissal “with prejudice” of any further opportunity to obtain justice, but also to bestow a $76 million windfall upon Massey and good friend Don Blankenship.

    Rule 29 provides that the justice whose disqualification is sought “shall promptly notify the Clerk of the Supreme Court of his or her decision on the motion for disqualification and the Clerk of the Supreme Court shall promptly notify the other justices and the parties of such decision.”  As soon as Chief Justice Maynard makes his decision, which most likely will be in the form of an order, I’ll post it here.   

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    Last month, I wrote about a decision from federal court for the Northern District of West Virginia in which the court awarded death benefits to a widow whose husband died of a drug overdose.  Judge Irene Keeley held, in a thorough opinion, that the husband’s death was accidental, not intentional, and that his widow was entitled to benefits.  Judge Keeley’s analysis centered on whether the decedent could reasonably have expected to die from his overmedication. She concluded that he could not, as he was trying to relieve his pain, “not to inflict any type of injury, much less to cause his own death.”

    Contrast that decision with this one from the Sixth Circuit Court of Appeals, which recently ruled that MetLife did not act arbitrarily and capriciously in denying a claim for death benefits on the grounds that its insured’s death, which occurred while he was driving with a blood alcohol content of three times the legal limit, was not an “accident” within the meaning of its Personal Accident Insurance (PAI) policy.  Lennon v. Metropolitan Life Insurance Company, 2007 WL 2934993 (6th Cir. 2007). 

    In Lennon, the district court had held that even though the driver had a blood alcohol content of 0.321 (which was more than three times Michigan’s limit of .10), he “did not reasonably expect to lose his life and that his death was thus accidental.”

    MetLife argued that driving in an impaired state made serious injury or death “reasonably foreseeable,” and therefore Lennon’s death was not an accident within the meaning of the PAI plan.  MetLife also argued that Lennon’s impaired condition, which was caused by his voluntary consumption of alcohol, constituted intentional self-inflicted injuries under the plan, which were excluded from coverage.

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

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

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

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

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

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    In the Saturday Gazette-Mail (Charleston, West Virginia), Tom Searls has a nice recap on Camden-Clark Memorial Hospital's appeal to the Supreme Court of Appeals from a $6.5 million verdict in a medical malpractice trial.  I wrote yesterday that the Court rejected the petition by a vote of 3-2.

    Also in the paper is an article on Marshall University's decision to start disciplining students who are accused of downloading songs illegally.  Marshall's decision was apparently prompted by the lawsuits filed by some record companies against two students, which I wrote about earlier today.  Although 20 Marshall students received pre-litigation settlement letters from the Recording Industry Association of America (RIAA) in February, and nine more received them last month, Marshall had not previously taken any disciplinary action.  According to Stephen Hensley, the dean of student affairs, who is quoted in the article, the students' use of Marshall's network to download and/or distribute the songs violates the university's code of conduct and carries the risk of disciplinary action.

    Marshall needs to be careful in how it proceeds.  It has an interest in upholding its code of conduct and giving students a disincentive from engaging in similar conduct, but it cannot and should not rely solely on the RIAA's allegations against a student as the basis for any disciplinary action.  As noted in a 2005 post in the blog, Ars Technica,

But the RIAA has been wrong before, as it was in its 2003 suit against Sarah Seabury Ward, a sixty-something sculptor who was accused of downloading gangsta rap. The suit was eventually withdrawn, but the case (and others like it, including one against a dead grandmother) does shed some doubt on the RIAA's ability to correctly identify the infringing party.   With Santangelo's case now headed for trial, a judge's ruling may provide more clarity about what the RIAA can and cannot do in its war on musical piracy.

    There is also an equal protection issue.  It isn't clear from the Gazette-Mail article whether Marshall is going to discipline only the two students who have been sued or the nine who received the RIAA's pre-litigation settlement letters.  But if it's going to act against the nine who received the letters last month, what's it going to do about the 20 students who received the letters in February?   Dean Hensley's explanation that, "We were new at it then, and we're not so new at it now," isn't very reassuring. 

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    The Charleston (West Virginia) Gazette reported yesterday that record companies, including Sony BMG Music Entertainment and Warner Bros. Records, Inc., have filed lawsuits against two Marshall University students for copyright infringements based on the students’ alleged illegal file sharing. The plaintiffs allege that on January 18, 2007, Tristan Hicks downloaded and/or distributed 487 songs, and on January 19, 2007, Jonathan P. Shrewsberry downloaded and/or distributed 240 songs. 

    The plaintiffs seek an injunction against each defendant prohibiting any further infringement of copyrighted materials and requiring the destruction of all such recordings, statutory damages for each infringement of each copyrighted recording, and costs and attorney’s fees.  Here are the complaints against Shrewsberry and Hicks, which were filed on September 18.

    Apparently, the Recording Industry Association of America (RIAA) sent pre-litigation settlement letters to Shrewsberry and Hicks.  According to the RIAA, those letters give “students the opportunity to resolve copyright infringement claims (www.p2plawsuits.com) against them at a discounted rate before a formal lawsuit is filed.  Each pre-litigation settlement letter informs the school of a forthcoming copyright infringement suit against one of its students or personnel and requests that university administrators forward the letter to the appropriate network user.”  

    The RIAA sent out 403 letters to 22 universities this week, and filed 24 copyright infringement lawsuits, including presumably those against Shrewsberry and Hicks.  As of March 2007, Marshall was on the RIAA’s list of the top 25 universities to receive copyright infringement complaints.

    I realize that what Shrewsberry and Hicks are alleged to have done violates the recording companies' copyrights, and I am not condoning their conduct.  But I have always felt that the RIAA lawsuits are a misguided effort to enforce its members' copyrights.  And I'm not alone.  Here's what the Electronic Frontier Foundation has to say about the RIAA's approach.

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

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

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

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

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

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    Remember this?  Time magazine selected Cynthia Cooper, Sherron Watkins, and Coleen Rowley as its Persons of the Year in 2002 for their courage and determination in coming forward and reporting financial and ethical improprieties at their respective employers, WorldCom, Enron, and the FBI. 

    Things certainly have changed.  An Associated Press story published in today's Sunday Gazette-Mail (Charleston, WV) describes what happened to employees of military contractors in Iraq who have reported fraud and corruption committed by their employers: "They have been fired or demoted, shunned by colleagues, and denied government support in whistleblower lawsuits against contracting firms."

    What  may be most distressing about their treatment is the lack of support from the government.  The article reports that the government has not joined a single qui tam suit alleging Iraq reconstruction abuse, estimated in the tens of millions, even though at least a dozen such lawsuits have been filed since 2004.  The government can join the case, as the Department of Justice has done in cases involving Medicare and Medicaid fraud and domestic contractor overbilling.  But cases against Iraq reconstruction contractors seem to be off limits.  And if the government doesn't join the case, the perception, right or wrong, is that the case doesn't have much merit.

    Qui tam lawsuits, which are brought under the Federal False Claims Act, 31 U.S.C. § 3729 et seq., seek to recover on behalf of the government and the plaintiff and provide for treble damages.  Take a look at The Whistleblower Law Blog written by Brian F. LaBovick, which has a lot of information on this area of law.
       

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    Last week, I wrote about the three Kentucky lawyers who are accused of taking an extra $65 million from their Fen-Phen clients.  On August 10, United States District Judge William O. Bertelsman granted the defendants’ request for a continuance of their October 15 trial, but ordered the defendants taken into custody until their new trial in January 2008.  He was concerned that if the defendants remained free on bond, they were flight risks and also could conceal the monies they allegedly took from their clients.  Then, on August 14, he set a hearing for August 21 regarding the defendants’ detention based on information that had just come to light. 

    Since then, on August 15, the defendants filed their notices of appeal with the Sixth Circuit Court of Appeals from the District Court’s order revoking their bond and remanding them into custody.

    Also on August 15, the defendants filed emergency motions objecting to the jurisdiction of the District Court to proceed with the hearing on August 21 in light of their notices of appeal.  On August 20, the Court granted the defendants’ emergency motions to the extent that it agreed that the notices of appeal may deprive the court of jurisdiction and therefore unable to hold the detention hearing on August 21.  The Court canceled the hearing, but did not take any action regarding the defendants’ detention, however, so they remain in custody.  

    Finally, on August 20, the defendants moved to recuse Judge Bertelsman under 28 U.S.C. § 144 on the grounds that he has a “personal bias or prejudice either against him [the defendant] or in favor of any adverse party.”  Here is defendant William J Gallion’s affidavit, which was submitted in support of the motion to recuse.  As of today, there haven't been any new filings.

    A couple of observations.  First, as I read 28 U.S.C. § 144, if the affidavit is “timely and sufficient,” then Judge Bertelsman’s recusal is mandatory: “such judge shall proceed no further therein, but another judge shall be assigned to hear such proceeding.”   So it seems that the judge whose recusal is being sought determines whether the affidavit is adequate, which may not be a good position for the defendants. 

    Second, Judge Bertelsman’s concern for the individuals who were clients of the defendants is obvious in his order, as reflected by his discussion of the Crime Victims' Rights Act.  He was troubled that the defendants' clients have to wait on the outcome of the criminal trial in order to have their civil claims resolved. 

    While his concern for the interests of the individuals is laudable, it has come at the expense of the defendants’ rights.  Pretrial detention serves no purpose in this case, which is what I predict the Sixth Circuit will hold.  Interestingly, Gallion's affidavit says that after Judge Bertelsman revoked the defendants' bond and ordered them into custody, Gallion's lawyer told the Court that in that case, they'd go to trial on October 15.  But according to Gallion, Judge Bertelsman continued walking off the bench and didn't respond.  

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    More twists in the case involving the three Kentucky lawyers who are awaiting trial on charges they took an extra $65 million in fees from their Fen-Phen clients. 

    In June, I wrote about the wire fraud indictments issued against William J. Gallion, Shirley A. Cunningham, Jr., and Melbourne Mills, Jr. by a federal grand jury in Covington.  The three are awaiting trial, which had been set to begin on October 15, and had been free on their own recognizance. Their lawyers requested a continuance to have additional time to review documents, and the prosecution joined in the request.

    According to The (Louisville) Courier-Journal, United States District Judge William O. Bertelsman expressed concern about the incentive for the defendants to transfer the funds to an off-shore account or themselves to flee if they remained free on bail, and advised the defendants and their counsel that if he granted their motion, he would revoke their bail. (The defendants had already surrendered their passports.)  Following a hearing on the motion, Judge Bertelsman granted the continuance and ordered the defendants taken into custody and incarcerated in the Boone County Jail.  Trial is now set for January 7, 2008.

    But as of Tuesday afternoon, there’s another development.  The Courier Journal reports that based on new information that was not available last week, and which he did not describe, Judge Bertelsman has set a hearing for next Tuesday. He has also ordered Gallion, Cunningham, and Mills to submit complete financial statements prior to the hearing.  The defendants' lawyers had already filed notices of appeal for the order revoking their clients' bail, and did not request next Tuesday's hearing. 

    The Courier-Journal  has another article that features commentary from well-known legal ethics experts about the ruling.  Judge Bertelsman's comments at last Friday's hearing, as also described in the article, demonstrate a concern for the public's perception of the legal profession as a whole.  But, as the ethics experts pointed out, his concern should be for the individual defendants.

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    A reference to West Virginia in connection with today’s recall of Mattel toys got my attention. By way of background, the U.S. Consumer Product Safety Commission today ordered the recall of more than 20 million toys manufactured by Mattel, Inc. because of concerns about the amount of lead and other toxins in the toys.  Earlier this month, the CPSC ordered the recall of 1.5 million toys manufactured by Mattel’s Fisher-Price division.  Mattel has already taken out full-page ads in several newspapers in which its CEO reiterates its concern for and commitment to children’s safety.

        The reference to West Virginia came in The Wall Street Journal's Law Blog's interview of Victor Schwartz regarding the prospect for litigation created by the recall.  Schwartz, is a partner at Shook, Hardy & Bacon, but is perhaps better known as the spokesperson for the American Tort Reform Association (the organization that listed West Virginia as its number one “Judicial Hellhole” in 2006).

        Schwartz opined that medical monitoring for the children who played with the toys probably would not be effective. He pointed out that “medical monitoring has been rejected by most courts,” but that in those states where it existed, namely West Virginia and Missouri, he suggested offering to set up a fund to help the child’s family with medical expenses, but not to offer cash, since "most people just take cash and run out and buy a pick-up truck.”

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    Daily Kos, perhaps the best known of the liberal blogs, offers a political perspective on the reason the Department of Justice has challenged the Charleston Gazette's 2004 purchase of the Daily Mail:

    "Of all the media mergers that have happened over the last six years, the Justice Department decides to punish a paper known for its investigative journalism, and restore one known for parroting conservative talking points.  How's that for a coincidence?"

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    In 2004, the Daily Gazette Company, publisher of the Charleston Gazette (the morning newspaper), purchased the Daily Mail  (the afternoon newspaper), from MediaNews Group, Inc.  Yesterday, the United States Department of Justice filed an antitrust lawsuit against the Daily Gazette Company and MediaNews Group, Inc., seeking to overturn the sale.  According to the Associated Press, the DOJ contends that the sale violated  three provisions of antitrust law:

    "The first argues the transaction resulted in a monopoly over the sale of daily papers and advertising in Charleston. The second argues the transaction eliminated the incentives and ability of MediaNews to compete with the Gazette. The third argues the Gazette will continue to maintain unlawful monopoly power."

    The DOJ seeks to restore the competition between the newspapers by reversing the sale and returning the papers (and their parent companies) to their prior positions.

    Lawrence Messina, another AP reporter, posted about the lawsuit on his blog, Lincoln Walks at Midnight, and has links to the stories appearing in today's editions of the Gazette and the Daily Mail.

    Under the purchase agreement, MediaNews no longer shares in the Daily Mail's profits, but provides "management and supervision" for a fee. The newspapers operated under a Joint Operating Agreement from 1958 until the sale in 2004.

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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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