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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Emphasis in original.)

The Governor expands on the point in footnote 4:

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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    There is already one casualty from the Supreme Court of Appeals of West Virginia's rejection of Chesapeake Energy Corporation’s petition for appeal from the $404 million verdict in Estate of Garrison G. Tawney v. Columbia Natural Resources, LLC.

    Today, Chesapeake announced that it is canceling plans to build a $35 million regional headquarters in Charleston, and blamed the Supreme Court’s decision not to hear its appeal.   Here is George Hohmann's article about the decision in today's (Charleston) Daily Mail.

   Chesapeake issued this media statement today:

On Thursday May 22nd, the West Virginia State Supreme Court issued a unanimous (5-0) decision against hearing NiSource and Chesapeake's appeal in the Tawney case.  Chesapeake inherited the lawsuit when it purchased Columbia Natural Resources in 2005.

This decision was stunning, as it means we will not have the opportunity to challenge the verdict issued in Roane County in January, 2007.  While we hold a less significant amount of the liability in the verdict, we do believe it sends a profoundly negative message about the business climate in the state.  The reality of this decision is that nobody in West Virginia, similarly situated, has a guaranteed right of appeal in the judicial system.  Chesapeake plans to join NiSource in appealing the case to the U.S. Supreme Court.

As a result, Chesapeake Energy has made the decision to cancel plans to build a new regional headquarters building in Charleston, WV.

We remain committed to our people and our operations in West Virginia and the Appalachian Basin. Chesapeake's Eastern Division will continue to be managed from Charleston, but we will do it from leased space.

--Scott Rotruck, Vice President -Corporate Development

    I have no doubt that Chesapeake is frustrated by the rejection of its appeal, but that was always a possibility.  Unlike federal district court, with its right of appeal, nearly all appeals from West Virginia state courts are discretionary. 

    Chesapeake’s reaction strikes me as a case where its assessment of the success of its appeal may have been based on considerations such as the amount of the verdict, its investment in the local economy, or the prominence of the defendants, and Chesapeake is dismayed that the Supreme Court did not agree with its view.

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    Last week, the Supreme Court of Appeals of West Virginia rejected appeals in two widely-publicized cases.  In Estate of Garrison G. Tawney v. Columbia Natural Resources, LLC, No. 080482, Columbia and NiSource, Inc. appealed the jury’s verdict of $404,335,138, which included punitive damages of $ 270 million.  Here is my post about the verdict.

    In Tawney, which the Court rejected by a vote of 5-0, Justice Robin Davis recused herself because her husband is counsel for the plaintiffs, and Justice Brent Benjamin recused himself because his former firm represents some of the defendants.  Raleigh County Circuit Court Judge H. L. Kirkpatrick and Cabell County Circuit Court Judge Dan O’Hanlon were appointed in their places.

    In Wheeling-Pittsburgh Steel Corporation v. Central West Virginia Energy Company, Nos. 080182 and 080183, Central West Virginia and Massey Energy Company appealed the verdict of $219 million, resulting from the jury’s finding that the defendants breached their contract with Wheeling-Pittsburgh Steel Company and committed fraud.  That verdict included punitive damages of $100 million.  Here is my post about that verdict.

    In Wheeling-Pittsburgh, which the Court also rejected by a vote of 5-0, Chief Justice Elliott E. “Spike” Maynard recused himself because of his relationship with Massey chairman Don L. Blankenship, and retired Greenbrier County Circuit Court Judge Frank Jolliffe was appointed in his place. 

    At this point, the remedy for the defendants in both cases is to petition the Supreme Court of the United States for review.  According to Veronica Nett, writing in yesterday's Sunday Gazette-Mail, the defendants in Tawney intend to appeal on the grounds that the punitive damages were excessive.  But a two-to-one ("single digit") ratio of punitive damages to compensatory damages does not appear to be inherently excessive, according to State Farm Mut. Ins. Co. v. Campbell, 538 U.S. 408 (2003), 

    Massey is considering an appeal to the Supreme Court, according to the Associated Press' Tim Huber, but has not yet made a decision. 

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    Last year, a jury returned a verdict for $196.2 million in punitive damages against DuPont in the final phase of a trial in which 7,000 Harrison County, West Virginia residents claimed that DuPont injured them and contaminated their property by releasing substances including cadmium, arsenic, and lead at its zinc smelting site.  The jury also awarded $55.5 million for the plaintiffs’ property damage claims and approved a medical monitoring program.

    DuPont’s efforts to overturn the jury’s determinations through post-trial motions have not been successful.  Here are the relevant orders entered by the Circuit Court of Harrison County on February 25:

Final Order Regarding the Scope, Duration and Cost of the Medical Monitoring Plan

Order Regarding Plaintiffs’ Counsels’ Fees and Litigation Expenses and Class Representatives Award and Incentive Payments

Order Denying Dupont’s Motion for Judgment as a Matter of Law, or, in the Alternative, to Decertify the Class

Order Denying Motion for New Trial

Order Denying Dupont’s Motion to Vacate or Reduce Punitive Damages Award under Garnes v. Fleming Landfill

    The plaintiffs presented evidence regarding the medical monitoring plan at a hearing in January, and offered the testimony of a specialist in occupational and environmental medicine, a certified life care planner, and a forensic economist.  DuPont offered the testimony of a certified public accountant, who had expertise in projecting future medical costs.  But as the following footnote in the medical monitoring order makes painfully clear, DuPont would have been better off without any expert testimony:

Of the plethera [sic] of witnesses that testified at the scores of hearings and trial in this matter, the Court finds Mr. Meneberg [DuPont’s expert] to be the least credible of all. It is clear that if one has the money, Mr. Meneberg will provide an opinion whether it is within his field of expertise or not and whether there is any factual or professional basis for the opinion or not. In the sixteen years as a sitting trial judge, Mr. Meneberg is the biggest ‘hack’ to have testified before this Court. 

    The order approving the medical monitoring plan provides that the plan will be reviewed every five years, will have a duration of 40 years (during which the circuit court will retain jurisdiction), will cost $129,625,819.00, and will be funded on a “pay as you go” approach, which had been advocated by DuPont, rather than on the fully-funded basis that the plaintiffs had wanted.  Under the “pay as you go” approach, DuPont will make payments, which will be escrowed, then disbursed and replenished, as the plan proceeds, depending upon such factors as participation and cost, rather than pay for the entire cost of the plan at the outset.

    The circuit court also awarded the plaintiffs attorneys’ fees of $127,108,410.64 and expenses of $7,904,646.65 from the common fund of $381,363,341.25 (which consists of the total of the cost of the medical monitoring plan, the punitive damages award, and the property damage award).  Also, in its order, the circuit court denied the class representatives’ motion for incentive payments to each one (there are 10) of $75,000.00 for their “cooperation and assistance,” which would have come from the common fund.  However, the Associated Press reported earlier this month that, at the plaintiffs' counsel's request, the circuit court reconsidered and approved an incentive payment of $50,000 to each class representative, with the funds to be paid from the attorneys’ fees rather than the common fund.

    DuPont is appealing the verdicts and the post-trial rulings, according to this statement from its general counsel, Stacey J. Mobley.  I will confirm the status of DuPont’s petition for appeal, and post the petition and the plaintiffs’ response as soon as they are forwarded to the Supreme Court of Appeals.  The Supreme Court’s Spring Term ends on June 26, which means that the appeal, if granted, will not be argued and decided until the Fall Term.

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    Last month, following the recusal of Chief Justice Elliott E. “Spike” Maynard, the Supreme Court of Appeals agreed 5-0 to reconsider its reversal of the $50 million verdict against A.T. Massey Coal Company, Inc.   The appeal will be reargued on March 12.  Here are the supplemental briefs filed by Massey, Hugh Caperton, and the Harman companies, and the United Mine Workers of America’s supplemental amicus brief.

    In addition to Chief Justice Maynard, whose recusal was sought by the plaintiffs, Massey had moved to recuse Justice Larry Starcher, who dissented from the Court’s original ruling in November.  Massey’s motion was based on statements made by Justice Starcher, which it alleged demonstrated bias on his part against Massey chairman Don L. Blankenship.  Last Friday, Justice Starcher agreed to recuse himself from further participation in the case.  Here are the Supreme Court’s press release and Justice Starcher’s opinion, and Paul Nyden’s article in the Saturday Gazette-Mail. 

    Justice Starcher also made clear his belief that Justice Brent Benjamin, who last month had rejected the plaintiffs’ request to recuse himself, should still do so in order to protect the integrity of the Court:

I repeat – the pernicious effects of Mr. Blankenship’s bestowal of his personal wealth and friendship have created a cancer in the affairs of this Court.  And I have seen that cancer grow and grow, in ways that I may not fully disclose at this time.  At this point, I believe that my stepping aside in the instant case might be a step in treating that cancer – but only if others as well rise to the challenge.  If they do not, they I shudder to think of the cynicism and disgust that the lawyers, judges, and citizens of this wonderful State will feel about our justice system.

And I reiterate that unless another justice also steps aside in this case, my replacement on the Court will be selected by the justice whose campaign was supported by something close to $4,000,000 from monies that came from one side of the case.  Perhaps, a serious read of the United States Supreme Court case, Aetna Insurance Co. v. Lavoie, 475 U.S. 813, 106 S.Ct. 1580, 89 L.Ed.2d 823 (1986), is in order before such a decision is made.

    I don’t know whether Justice Benjamin read the Aetna decision, but yesterday, he rejected a request that he recuse himself from another appeal involving Massey, and by way of explanation, relied on his refusal last month to recuse himself from the Caperton case.  Here is the Associated Press’ story regarding Justice Benjamin’s refusal to recuse himself.

    Justice Benjamin’s decision not to recuse himself was made in Wheeling-Pittsburgh Steel Corp., et al. v. Central West Virginia Energy Company, et al., Nos. 080182 and 080183, which are the defendants’  appeals from the jury’s verdict of $220 million.  Here are the petitions for appeal filed by CWVEC and Massey.

    In that case, Wheeling Pitt sued Massey and one of its subsidiaries for breach of contract after they refused to deliver a set amount of metallurgical-grade coal to Wheeling-Pitt on a monthly basis.  The jury awarded $119.85 million in compensatory damages and $100 million in punitive damages.  Based on Chief Justice Maynard's feeling that his partiality could reasonably be questioned due to his friendship with Blankenship, he recused himself last month, which Paul Nyden reported in the Charleston Gazette.

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    A Kanawha County (Charleston), West Virginia jury has awarded $5 million in compensatory damages and $20 million in punitive damages to a surgeon who claimed that Charleston Area Medical Center damaged his reputation and improperly revoked his privileges over a dispute about his professional liability coverage.  CAMC has promised to appeal the verdict.  Here are Eric Eyre’s article about the verdict in yesterday’s Charleston Gazette and his article from last week when the trial began.

    The trouble started in 2004 when Dr. R. E. Hamrick, Jr. decided to self-insure his professional liability coverage by placing $1 million in a trust account.  CAMC challenged his right to do so, and revoked his privileges on September 10, 2004.  Hamrick appealed the revocation, and the Supreme Court of Appeals of West Virginia issued a preliminary injunction on September 16, 2004, ordering CAMC to reinstate his privileges, and subsequently entered a standing order that enabled him to continue to care for his patients.

    Hamrick filed suit against CAMC, alleging, inter alia, that it engaged in misconduct regarding his professional liability insurance and damaged his reputation by revoking his privileges.  In 2005, the circuit court ruled that CAMC failed to show that Hamrick’s self-insurance was actuarially unsound or violated the Medical Professional Liability Act, and granted summary judgment in his favor.  The Supreme Court voted 5-0 not to hear CAMC’s appeal.

    In 2006, CAMC changed its policy to allow physicians to insure themselves, and the West Virginia Legislature enacted § 55-7B-12 of the Medical Professional Liability Act, which authorizes a physician to self-insure by establishing an irrevocable trust of not less than $1 million.

    Assuming that the judgment order is entered without too much delay, CAMC's petition for appeal will be considered during the Supreme Court's Fall Term, which starts in September. 

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   The Alabama Appellate Watch blog, which is published by Lightfoot Franklin & White, LLC, reports that earlier this week, the Supreme Court of Alabama reversed a $3.5 billion punitive verdict rendered against ExxonMobil Corporation in 2003.  Lightfoot Franklin was among the counsel for ExxonMobil in the appeal.  There is a separate post that provides news coverage of the decision. 

    The case was first tried in 1999 and resulted in a compensatory damages verdict of $87 million and a punitive damages verdict of $3.42 billion in favor of the plaintiff, the Alabama Department of Conservation and Natural Resources.  The Supreme Court reversed on the grounds that the trial court had improperly admitted a confidential letter from Exxon's in-house counsel and ordered a new trial. 

    In the retrial in 2003, which was the subject of this appeal, the jury awarded punitive damages of $11.8 billion and compensatory damages of $102.8 million for the plaintiff.  The State claimed that Exxon deliberately underpaid royalties that were due the State from natural gas wells that Exxon drilled in State-owned waters along the coast.  The trial court reduced the punitive award by $8.5 billion based on an impermissibly high ratio of compensatory to punitive damages.

     The Supreme Court held that the plaintiff had not proven that Exxon committed fraud and reversed the entire punitive damage award, which had been based on the jury's finding that Exxon defrauded the State.  The Court affirmed the award of compensatory damages for breach of contract, but reduced that verdict from $63.7 million to $51.9 million, and remanded the matter to the trial court with directions to award compensatory damages and interest consistent with the opinion, which, according to an attorney for the State, would amount to approximately $80 million.

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    I provided the wrong date for the Supreme Court of Appeals' argument for A. T. Massey Coal Company's appeal from the $50 million verdict in Boone County.  I wrote that the argument was set for October 3, which was incorrect.  The argument is set for tomorrow, October 10.  There is a fairly short motion docket, which will begin at 10:00, so the Massey argument, which is the first one on the argument docket, should start around 10:30 or so.  I apologize to anyone who tried to watch or listen to the argument and wondered why nothing was happening.

    Also, in an entry last week on his New York Attorney Malpractice Blog, which referenced my post about Massey's lawsuit against Wyatt, Tarrant & Combs, LLP and McGuire Woods LLP, Andrew Bluestone pointed out that one can watch a webcast of arguments before the Supreme Court.  The webcast can be accessed from several locations within the Supreme Court of Appeals' website, including the home page, opinion page, and calendar and dockets page.  The Court's proceedings can also be heard by dialing in to 304-558-1313.

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    The Supreme Court of Appeals hears argument today in an appeal from a $50 million verdict against A. T. Massey Coal Company and several of its subsidiaries, which was rendered in 2002.  The parties’ briefs are posted on the Court's website.

    The case was brought by Hugh Caperton as an individual, and by his company, Harman Development Corporation, which owned Harman Mining Corporation, and Sovereign Coal Sales, Inc., against Massey and its affiliates.  In short, Caperton alleged that Massey put him and his companies out of business and caused him significant personal damage. 

    The Boone County, West Virginia jury awarded the Harman corporate entitles compensatory damages of $29.7 million, consequential damages of $3 million, and punitive damages of $2 million.  The jury awarded Caperton compensatory damages of $3.4 million, general damages of $7.5 million, consequential damages of $425,000, and punitive damages of $4 million.  I will write more about the case after the Court issues its decision (probably late next month), but I wanted to point out that the argument takes place today. 

     In addition to its appeal of the verdict, Massey has sought relief in the case in federal court as well, for alleged constitutional violations.  The SW Virginia Law Blog has a post from last July about Massey’s lawsuit against the court reporter at the trial for her alleged failure to provide an adequate transcript of the trial, which Massey alleged was a violation of 42 U.S.C. § 1983 because the reporter was acting under color of state law.  The case was resolved after the court reporter was able to produce a transcript that satisfied Massey. 

    Massey also sued the Supreme Court of Appeals in federal court last year, seeking to have Rule 29 of the West Virginia Rules of Appellate Procedure declared unconstitutional.  Rule 29 deals with the disqualification of justices, and Massey claimed that it was denied due process when Justice Larry Starcher refused to disqualify himself from an appeal involving Massey (and which resulted from the Caperton/Harman litigation).  Here is Massey's complaint for declaratory and injunctive relief.  The case, Massey Energy Company, et al. v. Supreme Court of Appeals of West Virginia, Civil Action No. 2:06-CV-0614, is pending before United States District Judge John T. Copenhaver, Jr.

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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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    As a follow up to yesterday's post, the Supreme Court of Appeals refused, by a vote of 3-2, Camden-Clark Memorial Hospital's petition for appeal from an adverse jury verdict of $4,834,380.00, which was rendered last year in a medical malpractice case. 

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    Yesterday on the Supreme Court of Appeals' motion docket, Camden-Clark Memorial Hospital presented its petition for appeal from a verdict in an action alleging wrongful death due to medical malpractice.  In March 2006, the Wood County jury returned a verdict of $6.5 million, which was subsequently reduced to $4,834,380.00 to reflect an offset from a settlement with another party.   Bernard Boggs, Administrator v. Camden-Clark Memorial Hospital Corp., Nos. 063408 and 070578. 

    In addition to the jury verdict's in the underlying action that was before the Court yesterday, this is the case that also resulted in an award of sanctions against the hospital and its counsel for more than $1.3 million a few months ago.

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    In January, a jury in Roane County, West Virginia determined that natural gas producers had failed to honor their leases with gas well owners, and awarded a class of more than 10,000 natural gas well owners a total of $404 million in damages.  The plaintiffs contended that Columbia Natural Resources, LLC, formerly owned by NiSource, Inc., and now owned by Chesapeake Energy Company, systematically and deliberately underpaid them in violation of their leases by withholding the production costs from the royalties paid to the plaintiffs.  The jury's verdict included compensatory damages of $134 million and punitive damages of $270 million.

    Roane County Circuit Judge Thomas C. Evans, III entered an order affirming the verdict on June 27, 2007.  Estate of Garrison G. Tawney, et al. v. Columbia Natural Resources, LLC, et al., Civil Action No. 03-C-10E (Circuit Court of Roane County, West Virginia).  Once the court enters the final order, the defendants have four months to file their petition for appeal with the Supreme Court of Appeals of West Virginia.

    In response to the outcry against the verdict by natural gas producers, West Virginia Governor Joe Manchin proposed a bill for the Legislature’s consideration during its three day special session, which ended yesterday, which, among other things, would have given the producers an implied covenant in all oil and natural gas leases that allows companies to deduct reasonable post-production costs when calculating royalties to the landowners.  (The deduction of these costs formed the basis for the plaintiffs' claims in Tawney.)

    The Legislature chose not to take any action on the bill, on the grounds that it was too complicated to be considered in such a short session.  In all likelihood, the Governor will resubmit the bill when the Legislature’s regular 60 day session begins in January 2008.  Here is The Charleston (West Virginia) Gazette’s story this morning on the bill’s fate, as well as posts from Monday and yesterday by AP Larry Messina, who blogs at Lincoln Walks At Midnight.  But it’s clear that the opposition to the bill voiced by the landowners, who include individuals and businesses, also was a consideration in the Legislature’s decision not to consider the bill.

    What is not clear is whether the bill would apply to the jury’s verdict in Tawney.  Messina posted this compilation of stories earlier in the week, including another Gazette article that said that the bill would effectively overturn the verdict because the implied covenant would be retroactive and would apply to the defendants in the action.  But the bill specifically provided that its provisions would apply only in cases where there had been no jury verdict or final decision or judgment by a court of competent jurisdiction. 

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    Brooke County (Wellsburg) Circuit Judge Martin Gaughan has affirmed the jury's verdict of $100 million in punitive damages against Massey Energy Corporation and its subsidiary, Central West Virginia Energy Company in the lawsuit filed by Wheeling-Pittsburgh Steel Corporation, according to Associated Press reporter Tim Huber.  I wrote about the verdict last month. 

    In a ruling entered last Thursday, the court entered judgment on the punitive damages verdict.  The court found that the defendants' conduct warranted punitive damages, and that the award bore a reasonable relationship to the harm caused by the defendants, as well as to the jury's award of compensatory damages.  The court also entered judgment on the compensatory damages verdict of $119.85 million, but offset the verdict by nearly $4.5 million to account for a dispute over the price of coal.  The court also found that the plaintiff was entitled to an additional $24 million in pre-judgment interest.  Here is a copy of Judge Gaughan's order, courtesy of plaintiff's counsel, David B . Fawcett, who advises that additional post-trial motions are forthcoming. 

    I noted that Massey had announced that its second quarter earnings would be affected because it had reserved only $16 million to cover any loss, and it would have to increase its reserve.  But according to Huber's article, Massey has decided not to increase its reserve over $16 million because it believes it has strong grounds for an appeal. 

    The West Virginia Rules of Appellate Procedure provide that the defendants have four months from the date of the final order to file their petition for appeal with the Supreme Court of Appeals of West Virginia.  The petition is discretionary, meaning that the court first decides whether to accept  the appeal, rather than as a matter of right, as in federal court.   With additional post-trial motions to be filed, however, the circuit court has not yet entered the final (appealable) order in the case.

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    The big news in West Virginia is Wheeling Pittsburgh Steel Corporation’s verdict on Monday for nearly $220 million against Massey Energy Corporation and one of its subsidiaries, Central West Virginia Energy Company.  Following a month long trial in Wellsburg, Brooke County, the jury awarded Wheeling Pitt $119.85 million for its compensatory claims and $100 million in punitive damages.  I wrote about the trial last month, when Massey chairman Don Blankenship testified.

    Wheeling Pitt claimed that Massey and its subsidiary breached a contract to provide Wheeling Pitt with 104,000 tons of metallurgical-grade coal per month for its coke ovens. Ken Ward, Jr.’s article in yesterday’s Charleston(WV) Gazette gives some background.

    In reaction to the verdict, Blankenship said that, "We recognized that a trial in Wheeling Pitt's backyard would be challenging, but we were still surprised at the outcome."  His comment parallels what I wrote, in questioning what effect his testimony would have on the jury.  Now we know: apparently not much, at least in Massey's favor.

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