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West Virginia Supreme Court

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West Virginia’s Supreme Court of Appeals is the main contributor to the state civil justice system’s poor reputation. The state’s only appellate court rarely misses an opportunity to abandon traditional tort law constraints and embrace novel theories of liability. The court issued several more lawsuit-encouraging rulings in late 2013 and 2014. And while biased decisions by trial courts usually spur a jurisdiction’s reputation as a Judicial Hellhole, it’s interesting to note that in three of the five West Virginia cases profiled in this year’s report, lower courts applied sound principles but were reversed by the high court. West Virginia’s trial lawyer-dominated legislature for years had also contributed to the state’s pro-liability, anti-business atmosphere, but voter’s in 2014 appear to have endorsed a climate change.

OPENLY AND OBVIOUSLY ABANDONING PERSONAL RESPONSIBILITY

As the Judicial Hellholes report went to press in November 2013, the high court ruled 3-2 that a parking lot owner who removed for repair stairway handrails damaged by skateboarders is subject to liability when a person with significant mobility issues attempts to navigate them. The decision reversed Berkeley County Circuit Court Judge Gina M. Groh, who had found that, as a fundamental principle of West Virginia premises liability law, “a property owner is not liable for injuries sustained as a result of dangers that are ‘obvious, reasonably apparent, or as well known to the person injured as they are to
the owner’” and dismissed the case. The high court responded by abolishing the open and obvious danger doctrine in Hersh v. E-T Enterprises. In dissent, Justice Allen H. Loughry II found that “[i]t is decisions like these that have given the state the unfortunate reputation of being a ‘judicial hellhole’” and place an “impossible burden” on property owners of making their premises “injury proof.”

Shortly after last year’s Judicial Hellholes report was published, Justice Brent Benjamin filed his own dissenting opinion in Hersh, expressing concern with the ruling’s “real world impact,” which would require a full jury trial to decide premises liability cases where the law would not ordinarily recognize a duty of care. “With this decision, our traditional concept of personal responsibility now no longer exists in the realm of premises liability,” he said. “Where the open and obvious doctrine once operated to prevent meritless suits from proceeding through the court system, I fear that the elimination of the doctrine will throw open the courthouse doors to frivolous claims.”

WHO NEEDS SCIENTIFIC EVIDENCE WHEN YOU HAVE A PAID ‘EXPERT’?

One day after the high court decided Hersh, it also reversed a decision of Marshall County Circuit Court Judge David W. Hummel. Judge Hummel had taken seriously his responsibility to keep junk science out of the courtroom. In Harris v. CSX Transportation, he granted summary judgment for the railroad because, he found, the plaintiffs’ three expert witnesses failed to show scientific evidence supporting their theory that exposure to diesel fumes could cause railroad workers to develop multiple myeloma, a plasma cell cancer.

In support of Judge Hummel, Justice Loughry observed in dissent that the plaintiffs’ experts relied on studies that did not even mention the disease and relied on animal studies that suggested only the “biological plausibility” of a tie to it. Only one of the three plaintiffs’ experts even asserted a causal link, but did not rely on any published, peer reviewed study. “Daubert commands that in court, science must do the speaking, not merely the scientist,” Justice Loughry continued. He concluded that the majority had “simplistically view[ed] the mere qualification as an expert as all that was necessary to get the opinions of these experts before the jury.”

The Harris decision led a lawyer, who also holds chemistry and biology degrees, to lament that the court deleted verifiable testing from the scientific method and substituted human judgment for objective evidence of cause and effect. “So now, in West Virginia, it’s enough for an expert to say in response to the question: Has your hypothesis been tested? ‘Yes, I have weighed the data that gave rise to the hunch in my brain pan and I can now report that it convincingly passed that test and may reliably be considered ‘scientific knowledge.’”

In other words: Scientific, shmientific.

WHAT THE CLASS HAS IN COMMON: NO INJURY

In order to certify a class action, which often pressures a defendant to settle out of fear of a potentially catastrophic verdict at trial, a judge must find that there are questions of law or fact common to the proposed class members. In 2014, West Virginia’s Supreme Court of Appeals took an uncommon approach to commonality: it certified a class where the class members shared this fact: they experienced no injury.

In Tabata v. Charleston Area Medical Center, a hospital accidently allowed a patient database to become publicly accessible on the internet. There was no evidence that anyone had actually accessed the database, which could be found through advanced searching techniques. Kanawha County Circuit Court Judge James C. Stucky threw out the case, finding “Plaintiffs have not shown that the members of the class have suffered any injury, much less a similar injury….” Citing to numerous courts from across the nation, Judge Stucky found “the risk of future identity theft, especially when not accompanied by any present injury, is not an injury in fact.”

The high court reversed Judge Stucky in a 4-1 decision in May 2014, relying on the class members’ complete lack of injury to mindbendingly justify class certification. The majority noted that the class members had “no evidence of unauthorized access of their personal and medical information, no evidence of actual identity theft, and no evidence of economic injury arising from the alleged wrongdoing,” but nevertheless found their interest in privacy was sufficiently violated to bring a claim.

A dissenting Justice Menis Ketchum II called the case a “typical example of a frivolous class-action lawsuit.” He noted that the plaintiffs’ lawyer admitted that no unauthorized person accessed the medical records or personal information, which was quickly secured by the medical center when it learned of the mistake. “No harm, no foul,” he would have ruled.

Paul Bond, a partner in Reed Smith’s data privacy, security and management group in Princeton, New Jersey, calls the decision a “breakthrough for plaintiffs’ counsel.” Now, any accidental data breach allows for a massive lawsuit in West Virginia, even if lawyers cannot find a single person who actually suffered an injury of any kind as a result. “Plaintiffs attorneys who have a choice of any venue to litigate over a data security breach would naturally choose a West Virginia state court in light of this precedent.”

RECOVERY OF INFLATED DAMAGES IN PERSONAL INJURY CASES

Everyone who has gone to a doctor or hospital knows that medical bills initially list prices that are double, triple, even six times the amount of what is ultimately accepted by the healthcare provider as full payment from a private insurer, Medicare or Medicaid. Those who do not have health insurance (even though most people are now required to obtain health insurance under the Affordable Care Act) often receive significant write-offs or discounts from providers. Much like buying a new car, no one pays the full “sticker price.” That reality is lost on West Virginia’s high court, which ruled in June that jurors can only consider the prices listed on medical bills when calculating awards for damages. The ruling blindfolds jurors from learning the actual value of treatment and requires them to reach inflated verdicts in personal injury cases.

The high court’s decision in Kenney v. Liston affirmed a ruling by Monongalia County Circuit Court Judge Susan Tucker that prevented a defendant from showing that the bills for the plaintiff ’s medical treatment after a car accident were either reduced by the provider or paid by the health insurer at a discounted rate. Another 4-1 majority found that the “collateral source rule” entitles a plaintiff to recover the billed rate for medical services because the discounted rate is a result of the insurance policy for which the plaintiff paid.

The fallacy of this argument, as judges in some states have observed, is that the amount of a health insurance premium is based on an insurer’s payment of a negotiated rate. Policyholders do not pay premiums based on list prices. If they did, insurance rates would be much higher. At a more fundamental level, the law should not permit plaintiffs to recover amounts billed but never paid “for the simple reason that the injured plaintiff did not suffer any economic loss in that amount,” as the California Supreme Court recognized.

“It is difficult to conceive how allowing the plaintiff to present to the jury fictitious evidence of amounts paid for medical services, while preventing the tortfeasor from challenging that evidence, serves the interests of justice,” Justice Loughry wrote in dissent. “Are we to blindly accept the fiction that hospitals and other medical providers routinely and as a matter of freely-negotiated contracts accept less than the reasonable value of their services?” Apparently, the answer is “yes” – at least in Wild, Wonderful West Virginia.

WHERE THERE’S A WILL, THERE’S A WAY

The potential for excessive awards for punitive damages in the Mountain State is illustrated by a $91.5 million verdict in 2011. As discussed in past Judicial Hellholes reports, the preposterous, single-plaintiff verdict stemmed from the death of a very ill 87-year-old woman at a nursing home, which her son’s lawsuit attributed to understaffing. It was the highest ever in the state against a nursing home and one of the largest verdicts in the country in a personal injury case. In June 2014, West Virginia’s high court found that the trial court had committed significant errors. But instead of ordering a new trial, the majority instead used a strained reading of the law to shrink but ultimately sustain as much of the originally gigantic award as it possibly could.

In Manor Care, Inc. v. Douglas, a divided high court found that now retired Kanawha Circuit Court Judge Paul Zakaib had improperly submitted erroneous claims to the jury and gave them a confusing and inadequate verdict form that may have resulted in duplicative damages and an unwarranted punitive damages award. But the majority only cut $5 million from the award as improper, struck $1.5 million that it could not understand, and reduced the punitive damages proportionally from $80 million to $32 million.

Justice Benjamin would not have permitted the punitive damages award, observing in his dissent that Judge Zakaid provided the jury with a confusing verdict form that was “woefully inadequate” to sustain the extraordinary award. The form did not even ask the jury to evaluate whether the nursing home had committed the level of misconduct necessary to permit a punitive damages award, for example. Justice Loughry also dissented, criticizing the decision as a “shockingly result-oriented analysis” in which the majority acted as a “super-jury” by adjusting an award that resulted from an “abominable” verdict form. He also found the court’s evaluation of the punitive damages award failed to apply the due process safeguards mandated by the U.S. Supreme Court. Even Justice Margaret Workman, who agreed with the outcome, had harsh words for her colleagues’ approach. The court could have reached the same result, she said, without “looking positively silly,” by finding a portion of the verdict duplicated damages already awarded, rather than tossing it out “like so much garbage simply because [the court] claims to be confused by it.”

The Douglas decision now smells that much more like plaintiff-friendly garbage in light of an ABC News Nightline investigation that aired December 2, 2014. It revealed that the author of the opinion, Chief Justice Robin Jean Davis, received more than $37,000 in 2012 campaign contributions from a number of out-of-state people of modest means with no apparent connection to West Virginia judicial politics, other than their associations with Michael Fuller, the multimillionaire plaintiff ’s attorney in Douglas. Chief Justice Davis received the contributions as the case was before her Court. Many of the checks came from people who lived in Fuller’s home town in Plant City, Florida and from Mississippi, where his firm is based. And, Nightline reports, as the case headed to the high court, Fuller purchased a Lear jet from Chief Justice Davis’s husband, himself a wealthy trial lawyer, for $1.3 million. With the trimmed but otherwise affirmed award, Fuller’s law firm will receive more than $17 million in fees.

When Nightline pressed the chief justice about why she failed to disclose her husband’s business relationship with an attorney who was appearing before her, she responded, “Why should I?” Well, because “[t]his does not look good for the rule of law,” said James Sample, an expert on judicial ethics at Hofstra University Law School. “A million-dollar sale of an airplane while litigation involving the lawyer who purchases the airplane is pending before the court? Absolutely no question. It’s proper to disclose, and it is improper to not disclose.” “This is a circus masquerading as a court,” Sample said. And as the Charleston Daily Mail concluded, “the report raises enough concern to reinforce the perception of West Virginia’s court system as a judicial hellhole for those who play by the rules, yet heaven for plaintiffs’ attorneys who can manage multiple campaign contributions and million-dollar deals.”

JUDGES PLAY GAME-SHOW HOST

Another Mountain State defendant dreamed of relief from a crazy trial court and took its case to the Supreme Court of Appeals. And at first, the dream seemed to be coming true when the case was remanded for a new trial due to flaws in the punitive damages award. But the dream devolved into a nightmare when the second verdict was even larger than the first. Now, as West Virginia’s wheel of misfortune for defendants continues to spin, the case has returned again to the high court.

It all started with a bench trial five years ago when now retired Ohio County Circuit Court Judge Arthur M. Recht ruled that a mortgage lender had engaged in unconscionable practices in refinancing Lourie Brown’s Wheeling home. She alleged the lender had charged her a high interest rate with an undisclosed balloon payment due in 30 years. The lender responded that the plaintiff received a lower monthly payment and more than $40,000 at closing, which she had used to buy a new car.

Perhaps feeling a bit like a magnanimous game-show host, Judge Recht not only awarded the plaintiff about $17,000 in restitution, he voided the remainder of the $144,800 loan obligation – effectively giving her the home “and a new car!”

“But that’s not all, Johnny!” Judge Recht also awarded the plaintiff nearly $600,000 in attorneys’ fees and legal costs under the state’s consumer protection law. And he imposed punitive damages three times the plaintiff ’s compensatory damages. But instead of using the plaintiffs’ actual loss ($17,000) to make that punitive damages calculation, he threw in as an added bonus both the loan obligation and attorneys’ fees, “bringing your grand total for punitive damages, Lourie Brown, to $2.2 million!” Ding, ding, ding, ding, ding!

When Quicken Loans v. Brown was first considered by the Supreme Court of Appeals in 2012, the court ruled that Judge Recht had failed to conduct a “meaningful and adequate” analysis of the punitive damages award, which requires written findings explaining his reasoning. But the high court nonetheless ruled that trial courts could include plaintiffs’ attorneys’ fees in compensatory-to-punitive-damages calculations when it sent the case back to the trial court for further consideration.

The case went to Judge Recht’s successor, Judge David Sims. And not to be outdone, Judge Sims increased the multiplier from three to three- and-a-half and applied it to attorneys’ fees that had grown to $875,233 during the appeal. So he ultimately entered a $3.5 million punitive damages award that largely punished the mortgage lender for having had the temerity to appeal its case, rather than for actual harm its business practices may have caused.

The high court heard oral argument again in April 2014, and would-be contestants, er, plaintiffs and their lawyers everywhere eagerly await the final decision. Will the Supreme Court of Appeals invite them all to “Come on down!”? Stay tuned.

A PREJUDICIAL PROCEDURE NEVERTHELESS RESULTS IN AN AFFIRMED DEFENSE VERDICT

Only in West Virginia would the judiciary consolidate over one thousand personal injury lawsuits, and then have a jury consider general issues of liability and whether to punish a defendant with punitive damages before individual plaintiffs prove their cases. That is how the West Virginia Supreme Court of Appeals allowed a trial court to use this “creative, innovative trial management plan” to consider cases alleging injuries from smoking against cigarette makers. The use of such mass consolidations and “reverse bifurcation” (deciding punitive damages before liability) in this and other cases was among the reasons why West Virginia earned the #1 Judicial Hellhole ranking in past years. The ultimate outcome of that case – a defense verdict on six of seven claims affirmed in a 3-2 ruling by the high court – suggests that there is hope for fairness in the Mountain State after all.

In November 2014, the state’s high court found that Judge Recht, who’d presided over the case, properly dismissed the complaints of hundreds of plaintiffs who did not provide depositions or submit basic evidence supporting their claims. Those disclosure requirements, the court found, were part of a case management order to stay discovery that the plaintiffs’ lawyers themselves had requested. The high court also affirmed Judge Recht’s instructions to the jury on the standard for finding a product defective and found that the trial court’s instruc- tion on application of the higher “clear and convincing evidence” standard for punitive damages, rather than a lower “preponderance of the evidence” standard, if wrong, was harmless since the jury found the plaintiffs’ case for liability unpersuasive. The high court affirmed Judge Recht’s decision that federal cigarette labeling laws preempted certain claims. It also found that, contrary to the plaintiffs’ lawyers’ assertion, Judge Recht gave them wide latitude to question potential jurors on their feelings about personal responsibility.

While a portion of the case is ongoing, Judge Recht’s handling of the case post-consolidation, the jury’s careful consideration of the evidence, and the West Virginia Supreme Court of Appeals’ narrow affirmance of the decision deserve recognition.

AG IMPROVEMENTS, LEGISLATIVE SHENANIGANS

The retirement voters imposed on long-serving West Virginia Attorney General Darrell McGraw, Jr. in 2012 has not set well with some members of the state’s legislature. McGraw had been known for awarding no-bid contracts to contingency-fee lawyers and using settlement money for his own office’s use and self-promotion. McGraw’s successor, Patrick Morrissey, has since undertaken ethics reforms, including a policy that provides transparency in the hiring of outside counsel. According to AG Morrissey, that policy has already saved the state taxpayers millions of dollars that would have been siphoned off by contingency-fee lawyers.

In a startling show of partisan politics, however, the House of Delegates narrowly passed its own so-called “Attorney General Ethics and Accountability Act.” It would have required the AG to hire outside counsel anytime a company or individual involved in a case had made a campaign contribution to the AG. If enacted, it would likely have led to chaos and substantial cost to taxpayers, as the state’s AG would frequently need to hire outside counsel, without government supervision, rather than follow a rational conflict-of-interest policy.

The bill was so extreme that it sparked a bipartisan group of 36 state attorneys general to send a letter to West Virginia lawmakers expressing concern with the “unprecedented nature of the proposed bill.” The bill, which died in the Senate Judiciary Committee, was a waste of time that the legislature could have more productively used
to improve the state’s poor litigation climate. The legislature’s formidable coalition of practicing personal injury lawyers also placed a higher priority on creating more lawsuits with an ultimately rejected false claims bill than on considering a proposal to create an intermediate appellate court.

Public backlash against such economy- and employment-undermining priorities likely contributed to West Virginia voters’ recent decision to change party control of both houses of the state legislature beginning in 2015. The tectonic shift bodes well for legal reform efforts that can improve West Virginia’s business climate.

AND FINALLY…

In late 2012, a federal jury in the Northern District of West Virginia found two plaintiffs’ lawyers and a radiologist liable for fraud in connection with their filing of bogus asbestos claims against CSX Transportation in West Virginia courts. Their appeal came to an abrupt halt in November 2014, when they agreed to pay the railroad $7.3 million dollars.

The Judicial Hellholes report has closely followed this litigation since the railroad took an unprecedented, encouragingly aggressive approach in responding to suspicious asbestos claims. A federal judge had found in an earlier, separate proceeding that the now deceased radiologist used by the lawyers to validate claims was among doctors who made diagnoses that “were driven by neither health nor justice – they were manufactured for money.” Ray Harron’s diagnoses, Judge Janis Graham Jack found, could “only be explained as a product of bias – that is, of Dr. Harron finding evidence of the disease he was currently being paid to find.”

A Wheeling, West Virginia jury found the lawyers, Robert Peirce and Louis Raimond, along with Harron, had violated the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. It held them jointly liable for $429,240 in penalties. In September 2013, Judge Frederick P. Stamp Jr. tripled the damages, as required by RICO, to $1,287,721.41. A prevailing plaintiff is also entitled to attorneys’ fees under the federal racketeering law, and CSX requested $10 million to cover the lengthy litigation. Judge Stamp, however, held off on the fee request until the lawyers and doctors had a chance to appeal.

The U.S. Court of Appeals for the Fourth Circuit considered the case on October 28. Oral argument went poorly for the asbestos fraudsters’ lawyer. The appellate judges did not seem receptive to the view that RICO cannot apply to plaintiffs’ lawyers and expert witnesses who conspire to make fraudulent claims. Given the likelihood of a loss, the defendants apparently decided to withdraw their appeal, pay the full judgment plus interest, and pay CSX a few million dollars less in attorneys’ fees than they could have been required to pay under RICO.

ATRA hopes CSX’s successful RICO suit will serve as a model for other corporate defendants plagued by litigation that is not only meritless, but fraudulent. Chevron succeeded in 2014 with a similar use of RICO to stop enforcement of a foreign judgment secured through “corrupt means.” And gasket maker Garlock Sealing Technologies also invoked the statute after a federal bankruptcy judge found in 2014 that plaintiffs’ law firms had engaged in a “startling pattern of misrepresentation” in asbestos litigation (see Points of Light, p. 46).