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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here is the complaint, which alleges that:

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

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

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

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

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

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

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

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

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

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

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

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

 

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I hope everyone is enjoying their holidays.  I haven’t written in the past few weeks due to a death in my family, but I’m back in my office and resuming work, including catching up on decisions and developments.  The Supreme Court of Appeals of West Virginia’s Fall Term ended on December 10, so I’ll be writing about some of its opinions in the next few days.  By the way, the Court’s Spring Term starts on January 13, with the first argument docket that day.

The first opinion I want to write about is Turner ex rel. Turner v. Turner, 2008 WL 5273080 (December 15, 2008), a 4-1 decision by Chief Justice Elliott E. "Spike" Maynard, which was one of the last opinions issued for the term.

Turner is unique because it’s a state court appellate decision dealing with ERISA, which ordinarily and almost exclusively is adjudicated in federal court. 

In Turner, City Hospital, Inc. moved to intervene in the settlement of personal injury claims asserted on behalf of the minor children of City Hospital’s employee, Diane Turner.  City Hospital's health plan had paid most of the children’s medical expenses.  The settlement provided that Diane Turner agreed to waive her interest in the settlements and settle the claims within policy limits as long as the Circuit Court of Berkeley County precluded City Hospital from asserting a lien on the settlement proceeds that was inconsistent with West Virginia law.

Not surprisingly, City Hospital objected to the settlements and challenged the circuit court’s jurisdiction to consider the petitions for approval of the settlements because ERISA governed City Hospital’s health plan's claims.

The circuit court concluded that it had jurisdiction to approve or reject the proposed settlements, but did not have jurisdiction to decide the issue of City Hospital’s lien, based on its request for what was essentially equitable relief, which was governed by 29 U.S.C. § 1132(e)(1).  Diane Turner appealed that ruling on behalf of herself and her minor children.

There was a preliminary issue of whether the circuit court’s order was a final order for purposes of prosecuting an appeal, which is not germane to the resolution of the ERISA issue.  The Supreme Court concluded that the order “had the nature and effect of ending the litigation between the appellants and City Hospital with regard to City Hospital’s reimbursement/subrogation claim[,]” and could be appealed.

The more significant issue, as identified by the Court, was “whether the circuit court properly determined that it does not have jurisdiction pursuant to ERISA to decide, limit, or enforce City Hospital’s employee health plan’s subrogation rights to the proposed minor settlements submitted on behalf of Dylan, Rhiannon, and Ronan Turner.”

The Court first distinguished between ordinary preemption and complete preemption.  Because the circuit court did not find that the issue was preempted under § 1144(a) (ordinary preemption), the Court analyzed the issue under § 1132(e)(1) and controlling federal precedents.  The Court concluded:

Based on the clear language of § 1132(a)(3) in conjunction with § 1132(e)(1), and the Supreme Court’s application of these provisions, this Court now holds that an action by a fiduciary or administrator of a plan under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., to obtain appropriate equitable relief to enforce the terms the ERISA plan pursuant to 29 U.S.C. § 1132(a)(3), must be brought in the federal courts of the United States as provided for in 29 U.S.C. § 1132(e)(1).

The Court’s holding, which was incorporated in new Syllabus Point 3, left the remaining issue of whether City Hospital’s claim had to be brought under § 1132(a)(3).  The Court looked to the Supreme Court's decision in Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006), which presented a situation similar to Turner, i.e., "a fiduciary seeking reimbursements for amounts an ERISA health plan paid for the medical expenses of beneficiaries, who were injured in an automobile accident, from proceeds of the beneficiaries' settlement with the tortfeasors."

Guided by Sereboff, the Court found that the relief sought by City Hospital -- reimbursement for expenses paid on behalf of its plan's beneficiaries -- is the type provided for in § 1132(a)(3), which meant that a claim in state court arising from City Hospital's plan's subrogation/reimbursement would duplicate a § 1132(a)(3) action, which must be brought in federal court.

The Court did not devote any consideration to the Turners' arguments that the circuit court had jurisdiction, with one exception: the Turners asserted that, assuming approval of the settlements, the funds would not be paid to Diane Turner, but would be held in trust for her children.  Thus, the funds would never be available to her and could not be the subject of a claim by City Hospital under § 1132(a)(3).

The Court noted that City Hospital acknowledged that it could not seek proceeds that had not been paid to Diane Turner, but found that City Hospital's request that the circuit court preserve the funds in a separate account while City Hospital pursued an action in federal court addressed that concern.  Plus, West Virginia Code § 44-10-14(g) would prevent settlement funds from being transferred to minors' trust accounts in a way that liens, such as City Hospital's, would not be satisfied.

I question, as did Rob Hoskins at ERISABoard, why City Hospital didn't go ahead and file an action in federal court in order to assert its lien(s) against the Turner children's settlement proceeds, which may have mooted some or all of this action.  I also agree with him that in certain circumstances, a plan or its fiduciary can have state law claims that are not preempted.  But Turner makes clear that a plan fiduciary's action to obtain equitable relief under 29 U.S.C. § 1132(a)(3) must be filed in federal court.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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    In January, I wrote about the so-called tripartite relationship among an insured, the insured’s lawyer retained and paid by the insurance company, and the insurance company, and an appeal before the Supreme Court of Appeals that illustrated some of the perils of the relationship.

    The Court  has issued its decision in Horkulic v. Galloway, 2008 WL 481000 (W.Va. 2008), which involved a dispute between the lawyer for William Galloway, the defendant in a legal malpractice case, and TIG Insurance Company, which insured Galloway and had retained his lawyer, William Wilmoth.  Galloway’s lawyer claimed that a settlement had been reached with plaintiff Jeffrey Horkulic, in which Galloway would confess judgment in the amount of $1,500,000, but that Horkulic would accept Galloway’s policy limits of $500,000 in satisfaction of his claim, would not pursue Galloway’s personal assets, and would not record the judgment. 

    TIG argued that the purported settlement would enable Horkulic to use Galloway’s confession of judgment in a separate bad faith action in order to establish the value of that claim, and appealed the Circuit Court of Hancock County’s order approving the settlement, including Galloway’s confession of judgment. 

    in a unanimous opinion by Justice Joseph Albright, the Court noted the difficulties presented by the parties' relationships:  

In the present case, TIG was not permitted to participate in the settlement enforcement hearing and thus cannot be deemed to have had a full and fair opportunity to litigate the issue.  More specifically, the order in question expressly declares that TIG will have the opportunity to challenge the $1.5 million confessed judgment by Mr. Galloway.  This case presents the classic tripartite configuration in which a party to a bifurcated bad faith action was not a party in the underlying action, despite the reality that such entity furnished counsel for the defendant in the underlying action.  The fact remains that Mr. Wilmoth, as counsel for Mr. Galloway hired through TIG, was not protecting the interests of the insurance company, TIG, while the settlement negotiation matters were being litigated in the lower court.  His duties as counsel ran solely to the interests of Mr. Galloway.

    The Court did not reverse the circuit court's order approving the settlement, but clarified TIG's right to challenge Galloway's confession of judgment:

Based upon the foregoing, we hold that a consent or confessed judgment against an insured party is not binding on that party's insurer in subsequent litigation against the insurer where the insurer was not a party to the proceeding in which the consent or confessed judgment was entered, unless the insurer expressly agreed to be bound by the judgment.  Therefore, an attack on the consent or confessed judgment in the subsequent litigation by an insurer who did not expressly agree to such judgment is a permissible direct, not collateral, attack on the consent or confessed judgment ...  The primary issue to be resolved in this appeal is the extent to which the specific August 25, 2006 order [approving the settlement] under inquiry may be utilized against TIG when the bifurcated bad faith claim is ultimately litigated.  Thus, subsequent to the filing of this opinion, the lower court will progress forward on the course it previously set, dissolving the stay and proceeding with discovery on the bad faith claim.

    In other words, because TIG did not agree to be bound by Galloway's confession of judgment, TIG is free to challenge it during the litigation of the bad faith case.  But because the  bad faith case has not been litigated yet,  the Court cannot predict what effect, if any, the confession of judgment will have.

    In addition to TIG's appeal of the order approving the settlement, it had also sought a writ of prohibition against the circuit court's award of attorney's fees to Horkulic's counsel for  having  to enforce the settlement.  The circuit court awarded fees of $500 per hour for 101.5 hours and $54.00 in expenses.  TIG's challenge was based on its lack of opportunity to participate before the circuit court and that the award was excessive.

    The Supreme Court granted the writ based on TIG's lack of participation: "Thus, under the facts of this case, we find that the lower court erred in granting attorney fees against TIG without allowing TIG to participate in the evidentiary hearing addressing the pertinent issues culpability [sic] for the extensive delays of this case.  It is appropriate to grant a writ of prohibition and to remand this matter for a full evidentiary hearing to determine the extent of TIG's culpability in delaying the settlement." 

    Although the Supreme Court did not explicitly address the amount of the award, under West Virginia case law, such as Aetna Cas.& Sur. Co. v. Pitrolo, 342 S.E.2d 156 (W.Va. 1986), part of the circuit court's inquiry will necessarily focus on the reasonableness of the fees.

    Justice Robin Davis concurred on behalf of herself and Chief Justice Elliott Maynard in order to point out that by granting TIG's petition for a writ of prohibition, "this Court has made no determination with respect to the reasonableness of those fees." 

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    A post earlier this week in Stephen D. Rosenberg’s Boston ERISA & Insurance Litigation Blog ties in nicely with an appeal argued in front of the Supreme Court of Appeals of West Virginia on Tuesday, which was the first day of the Court’s Spring Term.  Here is the Court’s calendar for the entire term.

    The post was entitled “The Three Rules of the Tripartite Relationship,” which refers to the relationship established when an insurance company’s policyholder is sued, and the insurance company provides a defense as required by the policy.  Even though the policyholder’s lawyer is retained and paid by the insurance company, he or she represents the policyholder’s interests exclusively.  But the tripartite relationship has the potential to create conflicting loyalties on the part of the policyholder’s counsel, whose obligation to represent the policyholder may be at odds with the interests of the insurance company that has retained him or her. 

    Stephen linked to an article entitled "On the Horns of a Defense Counsel Dilemma," and also proposed three rules of thumb that should govern the tripartite relationship.  Roy Harmon, who writes Health Plan Law, also wrote about the arrangement yesterday with a post entitled "Appointed Defense Counsel: The Small Print Enlarged."

    The tripartite relationship was at issue before the Supreme Court of Appeals in Jeffrey A. Horkulic, et al. v. William O. Galloway, et al., No. 33352, which involved an underlying legal malpractice claim.  Defendant Galloway’s malpractice carrier, TIG Insurance Company (“TIG”), appointed counsel for him, and he also retained his own private counsel.  A dispute developed between Galloway’s appointed counsel and TIG as to whether a settlement with Horkulic had been reached.  Galloway’s appointed counsel said the parties had reached a settlement, while TIG’s claims adjuster said they had not.

    The sticking point between Galloway and TIG was a provision that Galloway would confess judgment in the amount of $1,500,000, but that the plaintiff would accept Galloway’s policy limits of $500,000 in satisfaction of his claim, would not pursue Galloway’s personal assets, and would not record the judgment.  TIG's objection was that the plaintiff, who had also filed a third-party bad faith claim against TIG, would be able to use the confession of judgment in the bad faith case in order to establish his damages.  The Circuit Court of Ohio County entered an order approving the settlement, including Galloway's confession of judgment, and TIG appealed.

    As you can see from the circuit court’s order, as well as the parties’ briefs (here are TIG's brief, the plaintiff’s brief, and TIG's reply brief), the plaintiff’s appointed counsel clearly was at odds with TIG, the entity who retained and paid him. This conflict is what can make the tripartite relationship so problematic. 

    At the oral argument, which I watched via the Court’s webcast, TIG argued that it would be unable to challenge the confession of judgment during the prosecution of the third-party bad faith case, for the purpose of determining the plaintiff’s damages.  The plaintiff’s counsel repeatedly assured the Court that TIG could object to the judgment, but as some members of the Court observed, until the bad faith case is underway and the confession of judgment becomes an issue, TIG’s concern may be premature.

    Finally, one other issue that was consolidated for hearing on Tuesday with the underlying appeal was State ex rel. TIG Insurance Company v. The Honorable Arthur M. Recht, et al., No. 33353, which was TIG’s petition for a writ of prohibition against the circuit court’s award of attorney’s fees to Horkulic’s lawyer.  The circuit court ordered TIG to pay attorney’s fees at the rate of $500 per hour for the work involved in enforcing the plaintiff’s settlement with TIG, which amounted to $50,750.  Here are TIG’s petition, Galloway's response, and the plaintiff’s response.  (Incidentally, Galloway's position was that the circuit court did not exceed its authority in awarding attorney's fees and that the amount of the award was not excessive.)  The Supreme Court was not alarmed about the amount of the hourly rate, so I don’t anticipate that the Court will disturb the award.

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    This is an update to a post last November on www.health-insurance-litigation.com about allegations of patient-dumping by Kaiser Permanente in Los Angeles.  The Los Angeles Times reported on Wednesday that Kaiser has agreed to a settlement of civil and criminal charges brought by the Los Angeles City Attorney.  The first-of-its-kind settlement "requires the HMO to establish new discharge rules, provide more training for employees and allow a well-known former U.S. attorney to monitor its progress."

    Under the proposed settlement, Kaiser will pay a small civil fine and some investigative costs to the city, and make a larger contribution to a charitable foundation.  The pending criminal charges will be dismissed, and Kaiser's compliance will be monitored on an on-going basis. 

    I said it in November, and I'll say it again: you have watch the patient, Carol Reyes, being dumped to believe it.  YouTube has the tape recorded by the "dumping cam" installed by the homeless mission where Reyes was dumped.  The camera was there because the area was such a popular place for hospitals and police departments outside Los Angeles to dump people,

   

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