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

    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.

Continue Reading...

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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.  

Tags: Attorney Fees, Courts, Criminal Litigation, Public Policy

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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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