For the past decade, West Virginia has been included among the top 5 Judicial Hellholes. Since it hit the #1 spot five years ago, there have been some modest improvements, including a slight expansion of the appellate rights of litigants, an occasional well-reasoned decision that does not expand liability, and replacement of the state’s notoriously plaintiff-friendly attorney general. Yet the past year indicates that the state’s high court has not changed its ways, as it broke a century of precedent to expand the liability of home and business owners and granted undefined powers to the state’s attorney general. The litigation climate in the Mountain State remains one where businesses are subject to pro-plaintiff rulings, fear excessive liability, and lack full appellate review.
PROPERTY OWNERS HAVE NEW DUTY TO GUARD AGAINST OBVIOUS HAZARDS
West Virginia courts have repeatedly adopted rules that are out of the mainstream and impose excessive liability. In past years, for example, its high court allowed cash awards to uninjured people who brought speculative medical monitoring claims and rejected a widely accepted principle that drug companies have an obligation to educate doctors, not directly warn patients, of potential side effects of their products. This year, the West Virginia Supreme Court of Appeals abandoned over a century of state precedent by abolishing the rule that a property owner has no duty to protect people from open and obvious hazards that they may encounter on their property.
The case arose when the plaintiff, who could not walk without the aid of a cane and was falling on a daily basis, fell down stairs in a store parking lot. He alleged that the owner was liable because the stairway lacked guardrails, which were required by local ordinance. The lot owner, however, had removed the guardrails because skateboarders had taken to using them for stunts and had damaged them. The owner was afraid that the skateboarders or someone else would get hurt. New guardrails were scheduled to be installed two weeks after the plaintiff ’s fall. Well settled West Virginia law provided that there is no duty to warn against “open and obvious” dangers and the trial court dismissed the case.
The West Virginia Supreme Court of Appeals reversed. A 3-2 majority abolished the “open and obvious danger doctrine,” finding instead that property owners have a duty to protect people from all hazards, obvious or not. A person’s decision to ignore an obvious risk might lead a jury to reduce his or her damages, but would not impact
the owner’s legal duty to provide such protection in the first place.
Under this ruling, those who own property in West Virginia have significantly
greater liability exposure. For example, people will need to consider how to protect guests from natural conditions on their property, such as a stream, a hole, or a cliff, or hazards within their house or business, such as a stairway, no matter how obvious.
Justice Allen H. Loughry II dissented from the creation of this new duty. He recognized that his colleagues have “saddled property owners with the impossible burden of making their premises ‘injury proof ’ for persons who either refuse or are inexplicably incapable of taking personal responsibility for their own safety.” “Ordinary homeowners,” Justice Loughry recognized, “will pay the highest price for the majority’s pandering to persons who ignore the risk associated with open and obvious hazards that ordinary, hard-working citizens encounter every day and invariably utilize their common sense and good judgment to avoid.” Justice Loughry, unlike his colleagues, recognized the practical effect of the ruling. Before changing this rule, West Virginia judges could dismiss meritless lawsuits where the plaintiff complained of an injury that resulted from ignoring an obvious hazard. Now, every slip-and-fall claim filed in West Virginia may require a full jury trial no matter how irresponsible the plaintiff ’s conduct in accepting a known risk. As Justice Loughry observed, “It is decisions like this that have given this state the unfortunate reputation of being a judicial hellhole.”
PUNISHED FOR MOUNTING A DEFENSE
In late 2012, the West Virginia Supreme Court of Appeals affirmed a trial court decision that allowed state courts to inflate punitive damage awards against companies that defend themselves in court.
The case involved an individual’s claim that she was misled by a national home mortgage lender’s representations when refinancing her home. Following a trial by Ohio County Circuit Court Judge Arthur M. Recht without a jury, the lender was found liable for unconscionable practices. Judge Recht not only awarded the plaintiff about $17,000 in res- titution, he voided the remainder of the $144,800 loan obligation on her home. Judge Recht also awarded the plaintiff nearly $600,000 in attorney fees and costs under West Virginia’s Consumer Credit and Protection Act.
Effectively giving the plaintiff the house, in addition to compensating her for actual losses, is highly question- able. But what raises even greater concern is how the court calculated the punitive damage award. U.S. Supreme Court case law requires some level of proportionality between a plaintiff’s injury and the punishment imposed on a defendant. For that reason, it appears that Judge Recht decided that the company should pay three times the plaintiff’s compensatory damages as punitive damages. Rather than apply this multiplier to the plaintiff ’s actual loss of $17,000, or the loan obligation of $144,000, the judge took both of these amounts, added in $600,000 in attorneys’ fees claimed by the plaintiff’s lawyers, and multiplied by three. The result: A wholly absurd award of $2.2 million for punitive damages.
The West Virginia Supreme Court of Appeals found that the plaintiff’s attorney fees were “compensatory in nature” and therefore could be properly included in calculating, or reviewing the excessiveness of, a punitive damage award. The court’s reasoning fails to recognize that, generally, consumer protection statutes authorize recovery of attorneys fees to further specific public policies, such as facilitating claims involving small consumer purchases or to punish those who employ deceptive practices. Such awards do not reflect actual harm to a consumer. As a result of this ruling, in cases where attorneys’ fees are recoverable, it is likely that West Virginia courts will award inflated, unconstitutionally-excessive punitive damage awards.
To its credit, the high court reversed the punitive damages award on the ground that Judge Recht had failed to conduct a “meaningful and adequate” analysis in awarding punitive damages, which requires written findings explaining his reasoning. It sent the case back to the trial court for further consideration.
But in “Wild, Wonderful, West Virginia,” winning an appeal can be a lot like losing… only worse.
Since Judge Recht had retired before the high court ruled, the case was reassigned to Judge David J. Sims. In June, Judge Sims actually increased the multiplier from 3 to 3.5, and then applied it to compensatory damages of $116,276.72 and attorney fees and costs that had grown to $875,233. The result: a $3.5 million punitive damages award largely based on the plaintiff ’s legal expenses, rather than actual harm resulting from the defendant’s conduct.
Apparently, West Virginia courts are punishing companies for having the audacity to defend themselves and exercise their right to appeal. But hope springs eternal in West Virginia. The company has filed another appeal.
STATE AG GAINS OK TO HIRE CONTINGENCY-FEE LAWYERS, MORE POWER
As lauded among the Points of Light (see p. 54), new West Virginia Attorney General Patrick Morrisey has abandoned the practices of his predecessor, Darrell McGraw, who frequently hired contingency-fee lawyers to represent the state. Morrisey’s new policy, which requires open bidding and provides transparency in such arrangements, deserves commendation. But a West Virginia Supreme Court of Appeals ruling this year, in a challenge to AG hiring practices under McGraw that Morrisey inherited, resulted in a ruling that not only upheld the AG’s authority to hire contingency-fee lawyers to enforce state law, but significantly expanded the AG’s ability to do so by abandoning past precedent.
Here is the background. In 2011, then-Attorney General Darrell McGraw, appointed plaintiffs’ lawyers from three firms as “special assistant attorneys general” to pursue an action against credit card issuers claiming that use of “payment protection plans” violates the state’s Consumer Credit and Protection Act. He retained the plaintiffs’ lawyers through a three-paragraph letter giving them authority to initiate and maintain the action and select whichcredit card companies to sue. The letter required only that the private lawyers keep the AG’s office “apprised of any and all actions taken” and anticipated “ongoing discussions regarding tactics and strategy.” The letter did not set a specific amount of compensation for the private lawyers, but “contemplated that you will advance all expenses associated with the maintenance of the action” and “subject to the approval of the court . . . earn a proper, reason- able and customary fee.” The plaintiffs’ lawyers filed suit on behalf of the state in August 2011 and sought, among other relief, civil penalties of up to $5,000 per alleged violation, a remedy that is available only to the state. Also before the court was McGraw’s use of a similar arrangement to sue a pharmaceutical maker for allegedly engaging in unfair and deceptive acts in the marketing of the diabetes drug Avandia.
In June, the court unanimously (with one recusal) rejected the petition and granted new powers to the AG. The court summarily rejected claims that the state’s use of private lawyers who have a financial interest in collecting the highest monetary award violates due process. It then focused on whether and when state law authorizes the AG to hire outside lawyers. It found that contingency-fee lawyers hired by the state, who would be precluded by the state’s ethics laws from using their office for private gain, are not public employees subject to such safeguards. The court also down- played the potential for a conflict between the public interest and private financial motivations since the agreements did not specifically tie the lawyer’s compensation to the amount of the penalties inflicted. Ignoring practical realities, the court found the private lawyers merely make “recommendations” to the AG on the direction of the case.
The outcome of this case is a more powerful West Virginia Attorney General. The court used the Petitioners’ challenge to the AG’s statutory authority to hire outside counsel to declare broadly that the AG has inherent common law powers and is not constrained by legislative appropriations. Ironically, the court overruled a prior decision authored by then Justice McGraw that had constrained the AG’s authority. Now West Virginia’s AG has undefined powers. Those powers include hiring outside counsel when not authorized to do so by the legislature and paying the private lawyers without the need for a legislative appropriation. Fortunately, Morrisey has adopted a policy for the hiring of outside counsel that addresses these concerns. But future West Virginia Attorneys General will inherit an office with more power, less constraints, and could choose to abandon Morrisey’s policies and go back to the practices of McGraw or worse.
STILL NO INTERMEDIATE APPELLATE COURT
A survey conducted by West Virginia Citizens Against Lawsuit Abuse found that most voters support creation of an intermediate appellate court and the right to appeal an adverse decision. Despite limited judicial reforms that have modestly expanded review in the state’s sole appellate court, West Virginia remains among only two states in the country where one does not have an absolute right to appeal.
The state’s Chief Justice Menis Ketchum, along with the plaintiffs’ bar, opposes such
a proposal, claiming that providing litigants with the same ability to appeal found in
other states is unnecessary and would be a waste of money. They contend that previous tweaks to the appellate system, which require the Supreme Court of Appeals to provide at least a short summary of its decisions to reject appeals, is working. And since personal injury lawyers serve as Senate President, Speaker of the House and Chair of the House Judiciary Committee, efforts to expand the right to appeal have, for the foreseeable future, a snowball’s chance in a hellhole. For example, this year a resolution was introduced in the West Virginia House of Delegates that would have simply funded a year- long study of “the effectiveness and efficiency of the Supreme Court Rules on the Appeals process in West Virginia.” It passed the House (though an amendment specifically requiring consideration of an intermediate appellate court was rejected), but the Senate killed it by taking no action.
MORE OF THE SAME OLD, SAME OLD
Meanwhile, West Virginia courts continued issuing troubling rulings in a number of areas previously profiled in this report.
- West Virginia courts allow personal injury lawyers to circumvent the no-fault workers’ compensation system and sue an employer for damages. The workers’ compensation system is supposed to provide a tradeoff. Workers get prompt payment for injuries without having to show their employer was at fault, while employers do not have the extent of liability exposure present in a personal injury lawsuit. This system is not functioning properly in West Virginia. The latest example is a West Virginia Supreme Court of Appeals decision in November that expansively interprets an exception to the workers’ compensation system that allows a lawsuit when a company acts with a “deliberate intent” to cause harm. That exception is intended to allow lawsuits if an employer intentionally harms a worker or engages in conduct that it knows is highly likely to result in an injury. But in the recent decision, a divided court found the exception applied to conduct that shows only ordinary, simple negligence or a lack of oversight. As the level-headed Justice Loughry observed in dissent, “The majority’s opinion constitutes . . . yet another step toward its ultimate goal of rendering our deliberate intent statute a meaningless codification of simple workplace negligence standards.” Justice Loughry criticized his colleagues’ judicial activism, observing that “[t]his is quite simply not the type of workplace oversight for which a statutory deliberate intent is designed to provide redress.”
- In April, Kanawha County Circuit Judge Paul Zakaib Jr. denied a new trial in a nursing home abuse lawsuit that resulted in an award of over $91 million, finding the award was not excessive or unconstitutional. Last year’s Judicial Hellhole report highlighted the monster verdict, which could adversely affect the availability of affordable nursing home care in the state. The case is now on appeal to West Virginia’s sole appellate court. It calls into question whether the state’s $500,000 limit on subjective noneconomic damages applies to nursing homes.
- Numerous asbestos lawsuits are filed in the Kanawha Circuit Court. Each one typically targets dozens of defendants. In one recent case, a plaintiff claimed that 154 companies are responsible for his development of lung cancer. In June, Judge Ronald E. Wilson, who handles the state’s asbestos litigation, was named “Judge of the Year” by the West Virginia Association for Justice, the group that represents the state’s personal injury lawyers. Needless to say, such recognition hardly makes defendants confident that they will get a fair shake in his courtroom.
- A federal jury late last year found that two prominent Pittsburgh attorneys, Robert Peirce and Louis Raimond, and a discredited radiologist, Ray Harron, conspired to generate fraudulent asbestos lawsuits in West Virginia. The jury awarded $429,000 to the company that fought back against the fraud, CSX Transportation. In October, U.S. District Court Judge Frederick Stamp of the Northern District of West Virginia tripled the award, to nearly $1.3 million, as permitted under the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. Holding individuals responsible for bringing fraudulent claims took eight long years of litigation. It has not ended yet. The RICO verdict is now before the U.S. Court of Appeals for the Fourth Circuit.