2015 Courtwatch - West Virginia Chamber of Commerce

Transcription

A report prepared for
members of the
West Virginia
Chamber of Commerce
2015
The Impact Of the
West Virginia
Supreme Court of Appeals
On Our State’s Economy
wvchamber.com
A product of the Civil Justice Reform Committee of the West Virginia Chamber of
Commerce – W. Henry Jernigan, Jr., Dinsmore & Shohl LLP, Chair
Webster J. Arceneaux, III Lewis Glasser Casey & Rollins PLLC
[email protected]
Michael E. Caryl
Bowles Rice LLP
[email protected]
Bryan Cokeley
Steptoe & Johnson PLLC [email protected]
Teresa J. Dumire
Kay Casto & Chaney PLLC
[email protected]
Ashley Hardesty Odell
Bowles Rice LLP [email protected]
Ronda L. Harvey
Bowles Rice LLP
[email protected]
Mark H. Hayes
Robinson & McElwee, PLLC [email protected]
Timothy E. Huffman
Jackson Kelly PLLC [email protected]
Thomas J. Hurney
Jackson Kelly PLLC
[email protected]
Stuart A. McMillan
Bowles Rice LLP
[email protected]
Jill Cranston Rice
Dinsmore & Shohl LLP
[email protected]
Mychal S. Schulz
Babst Calland, P.C.
[email protected]
William M. Swann
Kay Casto & Chaney PLLC
[email protected]
legal review team 2015
Legal Review Team 2015
1Arbitration
Schumacher Homes of Circleville, Inc. v. Spencer,
No. 14-0441, 2015 W.Va. Lexis 562 (April 24, 2015)
Banking and Insurance
Quicken Loans, Inc. v. Brown,
No. 13-0764 (2014)
Sostaric v. Marshall,
766 S.E.2d 396 (2014)
3 Contract
East Coast Underground, LLC v. Daniel Utility Const., Inc.,
No. 14-0663, 2015 WL 11228863 (Mar. 13, 2015) (memorandum decision)
4
Deliberate Intent
Ball v. A.L.L. Const., Inc.,
No. 14-0582, 2015 WL 1741165 (Apr. 10, 2015) (memorandum decision)
Clark v. St. Mary’s Med. Ctr., Inc.,
Cunningham v. Felman Prod., LLC,
No. 13-1276, 2014 WL 5311586 (Oct. 17, 2014) (memorandum decision)
Dillon v. Logan Gen. Hosp., LLC,
No. 14-0736, 2015 WL 3673534 (June 12, 2015) (memorandum decision)
CASE DIRECTORY / contents
2
5
Employment
CASE DIRECTORY / CONTENTS
Alcan Rolled Products Ravenswood, LLC v. McCarthy,
No. 13-1080 (October 23, 2014)
Boggess v. City of Charleston,
No. 12-1261 (October 30, 2014)
Citynet, LLC v. Toney,
No. 14-0058 (Feb. 6, 2015)
Constellium Rolled Products Ravenswood, LLC v. Griffith,
No. 13-1084 (June 10, 2015)
Frohnapfel v. Arcelormittal,
772 S.E.2d 350 (2015)
Grim v. Eastern Electric, LLC,
767 S.E.2d 267 (2014)
King v. West Virginia’s Choice, Inc.,
No. 13-1255 (November 7, 2014)
Myers v. Outdoor Express, Inc.,
No. 14-0315 (May 13, 2015)
6 Healthcare
SER Tallman v. Tucker,
No. 14-0948 (February 12, 2015)
Stephens v. Rakes,
No. 13-1079 (June 16, 2015)
Tug Valley Pharmacy v. All Plaintiffs in Mingo County,
No. 14-0144 (May 13, 2015)
7
Insurance & Indemnification
Ayers v. Erie Insurance Company, et al.,
No. 14-0843 (June 12, 2015)
Barrett v. Retton,
2014 WL 6676540, --S.E.2d--(Nov. 21, 2014)
BPI, Inc. v. Nationwide Mutual Insurance Company,
No. 14-0799 (May 20, 2015)
Collins v. Nationwide Mutual Insurance Company, et al.,
No. 14-0357 (February 27, 2015) (memorandum decision)
Elk Run Coal Company, Inc. v. Canopius US Insurance, Inc., et al.,
No. 14-0723 (June 9, 2015)
Schoolhouse Limited Liability Company v. Creekside Owners Association,
No. 13–0812 (May 8, 2014) (memorandum decision)
Tuttle v. State Farm Mutual Automobile Insurance Company, et al.,
No. 14-0427 (April 10, 2015) (memorandum decision)
West Virginia Mutual Insurance Company v. Betty J. Adkins, et al.,
No. 13-0692 (October 15, 2014)
West Virginia ex rel. John D. Perdue v. Nationwide Life Insurance Company, et al.,
No. 14-0100 (June 16, 2015)
8
Taxation
RMLL Enterprises, Inc. d/b/a Jill’s Lounge v. Mark W. Matkovich, State Tax
Commissioner, No. 13-1275 (October 17, 2014) (memorandum decision)
United Hospital Center, Inc. v. Cheryl Romano, Assessor of Harrison County, et al,
233 W.Va. 313, 758 S.E. 2d 240, No. 13-0120 (March 26, 2014)
9
Venue
State ex rel. J.C. ex rel. Michelle C. v. Mazzone,
772 S.E.2d 336 (2015)
10 Workers’ Compensation
Hammons v. West Virginia Office of Insurance Commissioner,
2015 WL 3386875, --SE.2d--(W. Va. May 20, 2015)
In re: Shana H. for Russell H. v. Amfire, LLC,
Slip Op. (February 10, 2015)
CASE DIRECTORY / CONTENTS
State Auto Property & Casualty Insurance Company v. Kober,
No. 14-0556 (June 10, 2015)
Schumacher Homes of Circleville, Inc. v. Spencer,
No. 14-0441, 2015 W.Va. Lexis 562 (April 24, 2015)
What the Court was asked to Decide:
What the Court Decided:
The Supreme Court’s decision written by Justice Ketchum agreed with Mr. Spencer that
the Circuit Court correctly decided the issue of unconscionability. It determined that the delegation provision in dispute did not clearly provide that the arbitrator was the sole party that could
resolve issues about the validity, revocability or enforceability of the arbitration agreement under
state contract law. The Supreme Court also expressed concern that Schumacher Homes had not
properly raised the delegation issue when it only raised the issue at oral argument in the Circuit
Court and it was not mentioned in its pleading or memorandum of law. The Supreme Court issued
three new syllabus points regarding delegation provisions in an arbitration agreement with two
significant points as follows:
5
“delegation provision” is a clause, within an agreement to arbitrate, which explicitly states that the parties to the agreement give the arbitrator the sole power to
decide the validity, revocability or enforceability of the arbitration agreement under
general state contract law.
***
8.
Under the Federal Arbitration Act, 9 U.S.C. § 2, there are two prerequisites for a
delegation provision to be effective. First, the language of the delegation provision
must reflect a clear and unmistakable intent by the parties to delegate state contract
law questions about the validity, revocability, or enforceability of the arbitration
agreement to an arbitrator. Second, the delegation provision must itself not be invalid, revocable or unenforceable under state contract law.
Facts:
In June, 2011, John and Carolyn Spencer signed a form construction contract with Schumacher Homes. The form contract contained an arbitration clause and a delegation provision that
stated as follows:
The arbitrator(s) shall determine all issues regarding the arbitrability of the dispute.
In July, 2013, Mr. and Mrs. Spencer brought a law suit against Schumacher Homes in the
Circuit Court of Mason County alleging that there were defects in their newly built home. Schumacher Homes filed a Motion to Dismiss and Compel Arbitration and the Circuit Court entered an
ARBITRATION
The Circuit Court of Mason County entered an Order on March 6, 2014, refusing to grant
Schumacher Homes of Circleville, Inc.’s Motion to Dismiss and Compel Arbitration. The Circuit Court found the arbitration clause was procedurally and substantively unconscionable and
it refused to order arbitration. The Circuit Court did not address the delegation provision that is
the primary focus of the Supreme Court’s opinion. Schumacher Homes appealed to the Supreme
Court of Appeals of West Virginia and it asked the Supreme Court to consider whether the Circuit
Court erred in concluding that the arbitration agreement was unenforceable. It argued that, under
the delegation provision, the Circuit Court was unable to consider the issue of unconscionability
as that issue was solely reserved for the arbitrator.
order denying the Motion to Compel Arbitration finding that the arbitration provision was unconscionable and unenforceable under state contract law. Schumacher Homes appealed the order
denying arbitration.
ARBITRATION
Holding:
In Justice Ketchum’s decision, he starts out with his familiar disdain for the United States
Supreme Court’s decisions on arbitration stating: “no matter how confounding the Supreme Court’s
arbitration decisions may seem, we are constitutionally bound to apply them to arbitration clauses
that involve interstate transactions.” Slip op. at p. 1. The Court then went through the United States
Supreme Court’s decision on delegation provisions in Rent-A-Center, West, Inc. v. Jackson, 561
U.S. 63, 66, 130 S.Ct. 2772, 2775 (2010) and it concluded that a delegation provision was only enforceable if the intent of the parties was clear and unmistakable to delegate solely to the arbitrator
the questions of validity, revocability or enforceability to the arbitrator.
In examining the delegation provision of the form construction contract signed by Mr. and
Mrs. Spencer set forth above, the Court found that the delegation provision was unenforceable under state contract law because the term “arbitrability” is an ambiguous term. The Supreme Court
cited to prior case law and articles that discuss that the term “arbitrability” has multiple meanings
and that courts have narrowly interpreted the meaning of this term. Because the form construction
contract did not contain a clear delegation provision that stated the arbitrator had the sole authority
to decide validity, revocability or enforceability, the Court upheld the Circuit Court’s decision on
unconscionability.
One additional footnote in this decision merits discussion. At footnote eight, the Court
discusses Senate Bill 37 and the Revised Uniform Arbitration Act, W.Va. Code §§ 55-10-1 to 33.
The Supreme Court notes that under W.Va. Code § 55-10-8(c) a Circuit Court exclusively has the
jurisdiction to decide whether an arbitration provision is enforceable. The Supreme Court stated
that this provision runs afoul of the United States Supreme Court’s decision on delegation provisions and therefore, this new code section is preempted and unenforceable if an agreement has a
valid and enforceable delegation provision.
Impact on Business:
This decision refusing to enforce an arbitration agreement is a mixed one for West Virginia
businesses. In recent years the Court has been more willing to enforce arbitration agreements by
following federal precedents and requiring consumers or other parties to comply with arbitration
agreements. This decision indicates that the Court still views arbitration with disfavor and therefore, it will take a very strict interpretation of the United States Supreme Court’s precedents on
arbitration. With that said, it appears that the Court will grudgingly follow these precedents. With
that caveat, businesses need to act accordingly and if they want to create an enforceable delegation
provision within an arbitration agreement, they must specifically state that the parties agree that
the arbitrator is the sole person who may decide if the arbitration agreement is valid, revocable or
enforceable.
Quicken Loans, Inc. v. Lourie Brown and Monique Brown,
Case No. 13-0764 (W.Va. 2014)
The Court upheld a punitive damage award that on the surface appears to be over 100 times
the amount of the actual compensatory damages. In affirming this punitive damage award, the
Court made several rulings to support this decision. First, the Court determined the costs “within
the meaning of Rule 24 of the West Virginia Rules of Civil Procedure include attorney’s fees when
costs are defined as including attorney’s fees in any statute applicable to the case that allows for
the recovery of costs of a proceeding.” Second, the Court also ruled that Quicken Loans Inc.
(Quicken) had waived its right to argue under federal law that the punitive damage award was excessive and in violation of its constitutional substantive due process rights. (Justice Benjamin, the
author of the opinion, actually questioned if waiver occurred or not in the opinion). In addition, the
Court reviewed the record to find that the conduct and actions of Quicken supported the award and
amount of the punitive damages and decided that the punitive damage award of $2,168,868 was
not excessive and, in particular, pointed out that in relation to the compensatory damage, inclusive
of attorney’s fees, the ratio was 3.5.
Facts:
This case is a follow up to the prior case in which the Court remanded matters to the circuit
court for determination. On July 7, 2006, Plaintiff, Lourie Brown, entered into a loan agreement
with Quicken. The loan totaled $144,800, which was secured by Monique Brown’s home. Plaintiff defaulted on the loan after only two payments, and Quicken instituted foreclosure proceedings. Plaintiff then filed suit against Quicken, alleging that Quicken violated the provisions of the
WVCCPA. Plaintiff also claimed breaches of the covenant in good faith and fair dealing, fraud
and illegal appraisal. The circuit court conducted a six-day bench trial. In its February 25, 2010,
order, the court found in favor of the Plaintiff on all claims except the claim for breach of the covenant of good faith and fair dealing. The court ordered that the Plaintiff did not have to repay the
loan and principal, and the Court awarded $17,476.72 in restitution to Plaintiff. In addition, the
circuit court awarded $596,199.89 to Plaintiff in attorney’s fees and costs. The court then awarded
$2,168,868.75 in punitive damages. The multiplier used by the circuit court between compensatory damages and punitive damages was 3.53. Quicken filed post trial motions and appealed the
order of the circuit court.
While the facts are extensive and were exhaustively set out in the first Quicken case, Quicken essentially loaned the Plaintiff too much money in light of her limited means and value of her
home. The trial court and Supreme Court believed that Quicken knew this, or should have known
this, but continued with the loan. It bears observing that the Court declared the conduct of Quicken
banking and insurance
The Court was asked to decide numerous factors pertaining to both procedural and substantive law in the context of the West Virginia Consumer Credit and Protection Act and decisional law
concerning punitive damages. Namely, the Court was asked to determine whether attorney’s fees
and costs, awarded under West Virginia Code § 46A-5-104 (1994), are compensatory in nature and,
therefore, are used determine the appropriate ratio between compensatory and punitive damages.
Similarly, the Court was asked to determine whether or not attorney’s fees are considered costs
pursuant to Rule 24 the West Virginia Rules of Civil Procedure. Finally and most significantly, the
Court once again addressed the legal analysis of both awarding and determining punitive damages
and the interplay between federal and state decisional law on punitive damages.
BANKING AND INSURANCE
to be fraudulent and reprehensible and clearly believed that Quicken took advantage of the Plaintiff. Based upon the record before it, the West Virginia Supreme Court of Appeals affirmed the trial
court’s order in part and reversed it in part. The reversal was premised on the following conclusions: the circuit court improperly canceled Plaintiff’s obligation to repay the loan principal; the
circuit court failed to support its $2,168,868.75 punitive damage award with the analysis required
by West Virginia case law; and the circuit court failed to offset the compensatory damage award
against the Plaintiff’s pre-trial settlement.
Holding:
The Court reversed the trial court’s decision about relieving the Plaintiff of her obligation
to repay her loan. The Court also reversed the trial court’s order which increased the punitive damage award during the appeal because according to the trial court, the Plaintiff incurred more legal
fees and thus with the 3:53 multiplier increased the punitive damage award. However, the Court
upheld the punitive damage award of $2,168,868. In affirming this amount, the Court ruled that
attorney’s fees are considered compensatory damages and, therefore, there was an appropriate ratio
between the award of compensatory damages and punitive damages. In addition, the Court found
the punitive damages were consistent with the factors under West Virginia law, including, but not
limited to, the reprehensibility of the conduct of Quicken, as well as the wealth of Quicken. The
Court also provided for an offset of compensatory damages that should have been awarded as a
result of a settlement of a co-defendant.
Impact on Business:
The Quicken case covered a myriad of issues. Potentially troubling is the fact that the true
compensatory damages, without attorney’s fees, were approximately $17,000, which, in comparison to the award of punitive damages, is an actual ratio of 124:1, which is clearly unconstitutional.
The Court justified this by finding attorney’s fees to be included as part of compensatory damages.
Without this determination, the damage award is contrary to the rulings of the United States Supreme Court in regard to punitive damages. Further, according to Justice Loughry in his dissent,
the Court still is not abiding by the United States Supreme Court’s holding regarding plainly excessive punitive damage awards. Finally, the issue regarding waiver of arguments under federal law
is perplexing and provided a legal basis to not address the mandates of the United States Supreme
Court.
Sostaric v. Marshall,
766 S.E.2d 396 (2014)
The Court elected not to follow stare decisis and overruled the circuit court and itself. The
Court ruled that the petitioners (deed trust grantors) could assert a defense in the lawsuit seeking deficiency judgment that the property was sold for less than its fair market value at the trust
deed foreclosure sale. In rendering this decision, the Court overruled Syllabus Point 4 of Fayette
County National Bank v. Lilly, 484 S.E.2d 232 (W.Va. 1997).
Facts:
Mr. and Ms. Sostaric signed a Secured Balloon Promissory Note on December 26, 2006,
whereby Ms. Marshall lent them $200,000. The loan was secured by a first deed of trust on real
property owned by the Borrowers, [Mr. and Ms. Sostaric.] The note’s payment terms required that
[t]he full amount of the note is due and payable December 30, 2013. Interest only
payments will be made on a monthly basis. The first interest only payment of
$1208.00 will be due on January 30, 2007 and will continue to be paid monthly
thereafter. The full payment of Two Hundred Thousand Dollars ($200,000.00) will
be due on December 31, 2013.
In addition, there was a default and acceleration clause. The note also allowed for the recovery of attorney’s fees incurred in the collection or enforcement of the note. While Mr. and Ms.
Sostaric made required monthly interest payments for a period of time after signing the promissory
note, they stopped making their monthly payments in October 2010, and subsequently defaulted
on their obligation. Ultimately, the property securing the note was sold at a trustee sale on September 21, 2012.
Ms. Marshall purchased the subject property at the trustee sale for $60,000. Of this amount,
$58,260.75 was distributed to Ms. Marshall, the holder and owner of the note secured by the deed
of trust to apply to principal and interest of the note. Because the trustee sale did not cover the full
amount of the note, Ms. Marshall filed a lawsuit against Mr. and Ms. Sostaric, seeking a deficiency
judgment for the unpaid balance of their promissory note. On January 16, 2014, the circuit court
awarded summary judgment to the Marshalls in the amount sought in the lawsuit.
Mr. and Ms. Sostaric sought an appeal and contended the circuit court’s award of summary
judgment was improper because the deficiency judgment award was not adjusted to reflect the fair
market value of the property securing the debt.
Holding:
The Court reversed the circuit court and prior case law and permitted the defense that the
property did not reflect fair market value. In rendering its decision, the Court emphasized that the
majority of jurisdictions permit the sale price of foreclosed property to be challenged in a defi-
banking and insurance
Whether a trustee grantor may assert as a defense in a lawsuit seeking a deficiency judgment that the fair market value of the secured real property was not obtained at a trust deed foreclosure sale. In addition, the Court was tasked with justifying why it should not adhere to the doctrine
of stare decisis and with having to overrule its prior ruling on this identical issue.
BANKING AND INSURANCE
ciency judgment proceeding. Indeed, the Court went through all of the various states and was able
to identify that the majority of the states in some form or fashion, either by statute or common law,
provide for this defense. The Court also relied on the Restatement (Third) of Property: Mortgages,
§ 8.4, the purpose of which is to prevent the unjust enrichment of the mortgagee. The Court reasoned that allowing a debtor to assert the fair market value of the subject property prevents the
harsh consequences of not only suffering the loss of the real estate but the burden of the deficiency
judgment.
Notwithstanding the majority view and the position of the Restatement, the Court had to
contend with “black letter law” in West Virginia which squarely prohibited this defense. Indeed,
the Court in 1997, held that
[u]nder the current real property foreclosure scheme there is a conclusive presumption that, at the point of a deficiency judgment proceeding, the property sold was
sold for a fair market value. The Lillys [grantors] now seek to have this Court
redefine that presumption so that it becomes rebuttable. This we refuse to do.
Lilly 484 S.E.2d at 240.
The Court ventured away from stare decisis. Interestingly, the Court rejected or found
no merit that trustee foreclosure laws would be unsettled if the Court were to allows grantors to
challenge the value of real property at the deficiency judgment proceeding. Moreover, the Court
emphasized that the legislature in other statutes has provided similar types of defenses pertaining
to consumer goods as well as mobile homes. Ultimately, the Court believed that it had the power to
make law here in light of the legislature’s silence on the issue. The underlying basis for the Court’s
position appears to be based in equity and the Court’s belief that the decision in Lilly creates the potential for a creditor to receive a windfall at the expense of an already financially distressed trustee
grantor such as Mr. and Ms. Sostaric. The Court ultimately believed that it is much better law to allow a trustee grantor to challenge the value of real property at the deficiency judgment proceeding.
Impact on Business:
This case potentially could have had a negative impact in the banking industry as it relates
to foreclosures. Certainly, it has been the practice in West Virginia that a foreclosure sale set the
amount of the deficiency judgment. In other words, there is a presumption that the property sold at
the foreclosure was the fair market value. This ruling upended that process and was concerning to
the banking industry. The legislature ultimately intervened and specifically enacted West Virginia
Code § 38-1-7 which prohibits the trustee grantor from asserting the defense of the fair market
value of a secured real property was not obtained as a trust deed foreclosure sale. Therefore, the
Sostaric case is not the law. On a broader level, the Court ventured away from stare decisis and reversed itself within a fairly short period of time. The Court reasoned that it had the inherent power
to create law in the absence of statutory language to the contrary and believed its role was to fill
that void. Moreover, the Court was persuaded more by the potential inequities of the debtors over
the creditors’ right to collect on loans.
East Coast Underground, LLC v. Daniel Utility Const., Inc.,
No. 14-0663, 2015 WL 11228863 (March 13, 2015) (memorandum decision)
The West Virginia Supreme Court was asked to decide whether additional communication,
beyond the written terms of the contract, is required in order to hold a forum-selection clause enforceable.
The Court affirmed the circuit court’s ruling that a forum-selection clause was enforceable
despite the parties having no communication about it outside of the written terms of the contract.
The Court stated that the petitioner failed to demonstrate that the forum-selection clause was not
reasonably communicated or that enforcement was unreasonable or unjust.
Facts:
On April 18, 2013, East Coast Underground, LLC (“East Coast”) and Daniel Utility Construction (“DUC”) entered into a subcontract that included the following forum-selection clause:
This agreement shall be governed and construed in accordance with the laws of
the State of Arkansas. [Petitioner] does hereby irrevocably consent to the exclusive jurisdiction of the court of the State of Arkansas with respect to any action or
proceedings arising between the parties and expressly covenant, and agrees that the
exclusive jurisdiction for disputes and enforcement actions arising hereunder shall
occur in Pulaski County, Arkansas.
In February of 2014, East Coast filed a civil action in the Circuit Court of Harrison
County to recover money owed for services provided to DUC. In response, DUC filed a motion to
dismiss based on improper venue citing the above mentioned forum-selection clause. East Coast
responded to the motion to dismiss by stating that DUC did not discuss, mention, or communicate
any information regarding the forum-selection clause and that the subcontract was completely
prepared by DUC. However, East Coast admitted that their representatives were “intimately and
exclusively” involved in negotiating, entering, and executing the subcontract.
On June 6, 2014, the circuit court granted DUC’s motion for summary judgment. East
Coast appealed claiming that the forum-selection clause was not enforceable because it was not
reasonably communicated by DUC. East Coast relied on Caperton v. A.T. Massey Coal Co., Inc.,
225 W.Va. 128 (2009), as its authority.
Holding:
In affirming the circuit court’s ruling, the Supreme Court denied East Coast’s claims that,
in order to make a forum-selection clause enforceable, additional communication is required outside of the written terms of the contract prior to the signing of the agreement.
The Court referred to its Caperton holding which outlined a four part test that is to be used
to determine if a claim should be dismissed based upon a forum-selection clause. Steps two (is the
clause mandatory or permissive) and three (are the parties involved subject to the clause) were not
in dispute. However, East Coast did dispute the ruling based on steps one (was the clause reasonably communicated to the party resisting enforcement) and four (would enforcement be unreason-
CONTRACT
CONTRACT
able and unjust). The Court stated that because East Coast admitted to being intimately and exclusively involved in the negotiation, entry, and execution of the contract that their argument failed
to overcome the presumption of enforceability. The Court also referred to the fact that the clause
was in regular sized font and under the section titled “Choice of Law and Venue: Subcontractor’s
Remedies.” Additionally, the contract contained a clause that stated, in part, that “each [party] had
the unlimited right and opportunity to make demands and proposals with respect to any subject
matter…and, as such, each Party shall be deemed to be the drafter of this Agreement.”
For these reasons, the Court held that the circuit court did not commit error by dismissing
the complaint for improper venue.
Impact on Business:
This memorandum decision helps strengthen the validity of forum-selection clauses within
a contract. While this decision does not define what it means for a clause to be “reasonably
communicated,” it does give some guidance as to what the Court may consider when analyzing
whether a forum-selection clause is enforceable.
Ball v. A.L.L. Const., Inc.,
No. 14-0582, 2015 WL 1741165 (April 10, 2015) (memorandum decision)
The Court upheld the Circuit Court’s ruling granting summary judgment in favor of the
defendant.
Facts:
The plaintiff operated a drill for A.L.L. Construction. On the day of the accident, the
plaintiff was performing exploratory drilling by collecting bore samples. The plaintiff’s foreman
showed the plaintiff the path along which to run the drill; however, the plaintiff contended that it
was difficult to see the drill path due to trees and vegetation. After operating the drill for several
hours, the plaintiff encountered a hill. Faced with the decision to turn back or press on, the plaintiff pressed on and ran the drill off of the path and down an embankment. As the drill slid down
the embankment, it overturned and injured the plaintiff’s face and head. During discovery, no
evidence was produced of similar drilling rig roll-overs, complaints about the area or MSHA violations. Additionally, although the plaintiff claimed another drilling company refused to work in
the area due to safety concerns, no evidence was produced to support that fact. The Circuit Court
granted summary judgment, holding the plaintiff failed to establish actual employer knowledge of
an unsafe working condition, violation of a specific safety standard, or intentional exposure to an
unsafe working condition. The plaintiff then moved for reconsideration, supplementing his argument with an expert opinion that alleged specific MSHA violations and arguing that violation of
these MSHA standards imputed actual knowledge of the specific unsafe working condition to the
employer. The Circuit Court rejected those argument because it determined the expert’s opinion
was untimely and the MSHA regulations were inapplicable given MSHA’s decline of jurisdiction
over the accident. The plaintiff appealed, arguing that the court erred in determining that (1) actual
knowledge did not exist, (2) no violation of a safety rule, regulation or standard occurred, and (3)
no intentional exposure occurred.
Holding:
First, the Court determined that no actual knowledge of a specific unsafe working condition
existed, because the defendant inspected and showed a drill path to the plaintiff. Additionally, the
Court found that the plaintiff’s claims that the defendant knew he was unskilled with a drill were
unfounded, because the plaintiff had worked a drill for eight years and was widely known to be
skilled with a drill.
Second, the Court determined that no specific safety rule, regulation or standard was violated because MSHA standards do not apply to exploratory drilling, and the plaintiff failed to provide an alternative standard. Also, because the MSHA standards did not apply, the standards did
not impose a duty to inspect which would have imputed actual knowledge to the defendant.
DELIBERATE INTENT
Whether the Circuit Court of Grant County erred in granting summary judgment to the
defendant employer in this deliberate intent action; specifically, whether the Circuit Court erred in
determining that (1) actual knowledge did not exist, (2) no violation of a safety rule, regulation or
standard occurred, and (3) no intentional exposure occurred.
Finally, the Court determined that no intentional exposure existed because the plaintiff produced no evidence that he was intentionally exposed to a dangerous condition. Indeed, although
the plaintiff claimed that another drilling company avoided the area, the CEO of that drilling
company testified that his company did not drill the area because they were too busy to work that
particular area.
DELIBERATE INTENT
Impact on Business:
This is a memorandum decision, but even so, it is a good decision for business. This ruling
indicates that the Court is taking a firm stance in requiring employees to satisfy all the required elements of a deliberate intent claim, and if the employee does not have the evidence to support any
one of the five required elements, summary judgment is mandated as explicitly stated in the statute.
Furthermore, this decision reinforces employers’ interpretation of Ryan v Clonch and McComas v. ACF Indus., LLC. Those cases hold that “actual knowledge” could be imputed to the
employer if the employer fails to adhere to an affirmative duty to inspect. Plaintiffs lawyers have
tried to broaden the scope of these decisions by arguing that any time an employer doesn’t inspect
a piece of equipment or a work area or whatever allegedly caused the injury, the employer loses
its actual knowledge defense. This decision emphasizes that a specific safety statute or regulation
must impose a duty to inspect in order for the employer to lose the actual knowledge defense.
Clark v. St. Mary’s Med. Ctr., Inc.,
The Circuit Court of Cabell County granted summary judgment in favor of the defendant.
The plaintiff appealed. Summary judgment was upheld in favor of the defendant.
Facts:
The plaintiff worked as a nurse for the defendant. On August 5, 2011, a patient suffering
from Rocky Mountain Fever rose from his bed and urinated on the floor. The plaintiff requested
not to be assigned to care for the patient because he was a large man; however, the supervisor
refused this request, because the plaintiff would tend to the man with several co-workers, and the
patient exhibited no signs of violence. The plaintiff and a male nurse attempted to help the man
back into his bed. To help the man back into his bed, the male nurse interlaced his arm with the
patient’s arm and the plaintiff placed the patient’s arm over her shoulder. The plaintiff alleged that
after placing the patient’s arm over her shoulder, the patient put her into a headlock and injured her
neck; however, the male nurse testified that this could not have happened because his arm was interlaced with the patient’s arm, and another nurse testified that the patient simply removed his arm
from the plaintiff’s shoulder, causing the plaintiff to say “ow” and smack the patient in the head.
The plaintiff claimed that the incident caused her to suffer from thoracic outlet syndrome (“TOS”),
a controversial and obscure medical condition that mimics carpal tunnel and several other degenerative disorders. The plaintiff’s medical records show she suffered from similar symptoms since
1994. The defendant brought a motion for summary judgment, and the Circuit Court granted it
because the court found (1) there was no unsafe working condition, (2) the employer had no actual
knowledge of an unsafe working condition, (3) there was no intentional exposure to an unsafe
working condition, and (4) the plaintiff failed to establish that her injuries were caused by the incident. Additionally, the Circuit Court granted the defendant attorney’s fees because the plaintiff
refused to produce her medical records. The plaintiff appealed, arguing that (1) the court’s findings
on the four deliberate intent factors were erroneous, (2) the court erred in refusing to allow her
more time to secure an affidavit regarding her injuries, and (3) the court erred in sanctioning her.
Holding:
The Court upheld the ruling of the Circuit Court. First, the Court determined that no dangerous condition or employer knowledge of such a condition existed because the plaintiff could
produce no evidence that the man exhibited violent tendencies. Next, the Court determined that
the defendant did not intentionally expose the plaintiff to a dangerous condition because additional
nurses were assigned to help with the patient and intentional exposure is premised on the dangerous condition and knowledge factors, neither of which was present in this case. Third, the Court
determined that no expert testified to a reasonable degree of medical probability that the plaintiff’s
DELIBERATE INTENT
Whether the Circuit Court of Cabell County erred in granting summary judgment to the
employer hospital in this deliberate intent action; specifically whether the plaintiff had presented
evidence to support a finding that a specific unsafe working condition existed; the employer had
actual knowledge of the specific unsafe working condition; the employer intentionally exposed
the employee to the specific unsafe working condition; and whether the exposure caused the employee’s injuries.
injuries were caused by the incident. Fourth, the Court determined that the Circuit Court did not err
by not allowing the plaintiff additional time to acquire a medical affidavit because the plaintiff had
years to secure the document from her treating physician. Finally, the Court determined that sanctions were appropriate because the plaintiff demonstrated an unwillingness to disclose her medical
records and presented no substantive justification for her refusal to comply with court orders to
produce those records.
DELIBERATE INTENT
Impact on Business:
This is another memorandum decision. Even so, it is a good decision for business. Often
plaintiff’s counsel in deliberate intent actions argue that the mere fact the plaintiff was injured
proves that the alleged condition was unsafe. Here, the Court agrees that the patient, “despite being anxious and confused,” did not raise to the level of presenting a high degree of risk and strong
probability of serious injury or death. Among other positive takeaways, this holding indicates that
injury alone is not enough to prove that the condition was unsafe.
Cunningham v. Felman Prod., LLC,
No. 13-1276, 2014 WL 5311586 (Oct. 17, 2014) (memorandum decision)
Whether the Circuit Court erred in granting summary judgment to the defendant employer
in this deliberate intent action; specifically whether res ipsa loquitur applies to deliberate intent
actions.
The Circuit Court of Mason County granted summary judgment in favor of the defendant.
Facts:
On May 12, 2010, the plaintiff, an occupational health and safety specialist working for the
defendant, was working and received a call regarding a fire in a dumpster in the industrial plant
yard. The plaintiff obtained a fire extinguisher, proceeded to the site of the fire and attempted to
extinguish the fire. Four other employees also attempted to put out the fire; however, no supervisors were at the scene of the fire, and no supervisors directed the employees to fight the fire.
After some time, an employee used an industrial vehicle to dump water onto the fire. Upon being
doused with water, the fire exploded allegedly due to trace amounts of strontium in the dumpster.
The plaintiff was thrown to the ground and suffered burns and an injured back. After discovery,
the defendant moved for summary judgment. The defendant argued that no one in management
had actual knowledge that the strontium was in the dumpster or that the plaintiff was attempting to
extinguish the fire. The defendant further argued that no one in management directed the plaintiff
to extinguish the fire. Particularly as to the actual knowledge element, the plaintiff argued res ipsa
loquitur - the thing speaks for itself, i.e., the defendant had to know that the strontium was in the
dumpster because the defendant controlled the storage of strontium. The court granted summary
judgment because the court determined that no issue of material fact existed as to actual knowledge and intentional exposure. Furthermore, the court rejected the plaintiff’s argument that res
ipsa loquitur applied in deliberate intent cases. The plaintiff appealed, arguing that material issues
of fact existed as to actual knowledge and intentional exposure, and that res ipsa loquitur applied
in deliberate intent cases.
Holding:
The Court upheld summary judgment in favor of the defendant. First, the Court stressed
that the threshold to establish actual knowledge in a deliberate intent is high; the plaintiff failed to
meet it because she could not show that any supervisor knew that strontium was in the dumpster,
knew about the potential explosion or her presence at the scene of the fire. Next, the Court held
that the defendant did not intentionally expose the plaintiff to the unsafe condition, because it did
not direct her to work in the unsafe condition with conscious awareness of that unsafe condition.
Finally, the court refused to apply res ipsa loquitur to deliberate intent actions, because no authority exists to apply this negligence theory to a statutorily created right of action.
Impact on Business:
This is a memorandum decision that is a good decision for business. Because deliberate
intent requires a higher standard of proof than negligence claims, the West Virginia Supreme Court
confirmed (as the Court has in the past) that negligence theories do not apply in deliberate intent
actions.
DELIBERATE INTENT
Dillon v. Logan Gen. Hosp., LLC,
No. 14-0736, 2015 WL 3673534 (June 12, 2015) (memorandum decision)
DELIBERATE INTENT
Whether the Circuit Court of Logan County erred in granting summary judgment to the
employer hospital; specifically whether the plaintiff had presented evidence that a specific unsafe
working condition existed and that the employer hospital had actual knowledge of the same.
The Circuit Court of Logan County granted summary judgment in favor of the defendant.
Facts:
On May 1, 2010, the plaintiff was working in a kitchen at Logan Regional Medical Center
when she slipped and fell. As she fell, she grabbed onto the food tray line and injured her back,
buttocks and groin. On April 30, 2012, the plaintiff brought suit, alleging that the defendant created an unsafe working condition by allowing water to accumulate on the floor, failing to use mats
or warning signs and improperly maintaining a floor drain. Furthermore, the plaintiff alleged that
the defendant knew about the condition because falls had been reported in the area prior to her
fall on May 1, 2010. After discovery, the defendant filed a motion for summary judgment and
several affidavits. The first two affidavits were from kitchen management personnel and stated
that employees underwent a training program regarding how to handle wet kitchen floors. Additionally, the defendant submitted several affidavits from other employees (several of whom the
plaintiff claimed had fallen prior to her fall) who stated that they were unaware of any falls prior
to the plaintiff’s fall. The Circuit Court of Logan County granted summary judgment, finding
that the plaintiff failed to produce evidence showing a dangerous working condition or intentional
exposure to a dangerous working condition. The plaintiff appealed, arguing that the trial court
erred by (1) adopting evidence presented by the defendant while ignoring the plaintiff’s evidence,
(2) not allowing a jury to consider the five deliberate intent elements, (3) ruling that safety rules
produced by the plaintiff were general rules and did not satisfy the specific standard requirement
of the deliberate intent statute, and (4) granting summary judgment.
Holding:
The Court affirmed the Circuit Court’s order granting summary judgment in favor of the
defendant. The Court determined that the defendant established that there were no genuine issues
of material fact regarding unsafe working conditions and employer knowledge of unsafe working
conditions. Although the floor in the kitchen area was known to get wet, the employer produced
evidence to show that employees were trained to deal with wet floors. Additionally, the kitchen
had never been cited for unsafe working conditions regarding its handling of water, and there were
no documented falls. Based on the foregoing evidence, the Court determined that an unsafe condition did not exist, and the employer had no knowledge regarding an unsafe working environment.
Impact on Business:
This is a memorandum decision that is good for business. The West Virginia Supreme
Court again considered training of employees in upholding the ruling that no specific unsafe working condition. Particularly, in this case the employees were trained to deal with wet floors. A message to employers in general is that employers should be sure to identify possible hazards in the
workplace and provide training on how to avoid or, if unavoidable, how to handle those hazards.
Alcan Rolled Products Ravenswood, LLC v. McCarthy,
No. 13-1080 (October 23, 2014)
What the Court was asked to decide:
The Court was asked to determine whether Plaintiff’s actions qualified as “gross misconduct” and therefore disqualified him from receiving unemployment compensation benefits.
The Court held that Plaintiff’s actions qualified as “gross misconduct” and therefore disqualified him from receiving unemployment compensation benefits.
Facts:
Plaintiff Terry McCarthy was discharged from employment with Alcan for picket line violence after throwing a “jack rock” from a picket line into the road in an attempt to puncture the tire
of an oncoming supervisory employee’s vehicle. McCarthy filed for unemployment compensation
benefits. He was denied benefits on all three levels of the administrative process based on the recurrent finding that McCarthy’s actions constituted gross misconduct.
On appeal, the circuit court reversed the Board’s decision and awarded unemployment compensation benefits, finding that the act did not rise to the level of gross misconduct. Alcan then appealed to the Supreme Court and challenged the circuit court’s order, asserting that the court failed
to give proper deference to the findings of fact of the ALJ; substituted its findings of fact for those
of the ALJ and the Board; and erred by ruling that McCarthy’s actions did not constitute gross
misconduct.
Holding:
The Court held that the circuit court committed reversible error by substituting its findings
of fact for those of the ALJ. The Court noted that a reviewing court is not permitted to decide the
factual issues de novo or to reverse an ALJ’s decision simply because it would have weighed evidence differently.
The Court found that McCarthy’s act of throwing a “jack rock” into the road constituted
gross misconduct that disqualified him from receiving unemployment compensation benefits. The
Court noted that the pertinent statute contained several enumerated actions constituting gross misconduct as well as a catch-all, “other gross misconduct.” The Court determined that this catch-all
was meant to give wide discretion to the Board in evaluating the fact-specific nature of these offenses. Here, applying the definition, McCarthy’s actions constituted gross misconduct because,
although off the premises, the actions rose to the level of seriousness equal to or exceeding those
specifically enumerated acts constituting gross misconduct. The Court issued a further reminder
that West Virginia employment law is clear that not every terminated employee is qualified to
receive unemployment compensation benefits. An employee discharged for simple misconduct is
partially disqualified from receiving such benefits, whereas an employee terminated for gross misconduct is wholly disqualified.
Impact on Business:
The Court made a common sense decision. An employee should not be entitled to commit
picket line violence and then be compensated for the resultant loss of employment.
EMPLOYMENT
Boggess v. City of Charleston,
No. 12-1261 (October 30, 2014)
employment
The Court was asked to determine whether a public employer is permitted to unilaterally
modify a longstanding policy on the calculation of overtime.
The Court decided that, in the absence of a contractual obligation providing otherwise, a
public employer is permitted to unilaterally modify a longstanding policy affecting the rights of
employees where notice is provided to such employees and where the modification of policy does
not retroactively impair previously earned and vested rights, such as pension plans.
Facts:
In 2011, the City of Charleston changed its methodology for calculating the baseline hourly
rate of pay in order to determine overtime pay for firefighters. The City had previously calculated
its baseline hourly rate of pay by dividing total annual salary by total number of hours worked,
accounting for time off. In a change, the City calculated its baseline hourly rate of pay by dividing total annual salary by the total number of hours the annual salary was intended to compensate,
without deducting time off. The modified method did not reduce Plaintiffs’ annual salaries; it only
altered the mathematical calculations by which the baseline hourly rate of pay was determined.
The firefighters filed a request with the Firemen’s Civil Service Commission to reinstate the
old method of calculation. The Commission found that it lacked jurisdiction. Plaintiffs then filed an
action against the City in the circuit court and, in a petition for writ of mandamus, asserted that the
Commission should be compelled to hear the case. The circuit court found that the Commission did
not have jurisdiction to hear the case. Both parties filed for summary judgment. The circuit court
granted summary judgment in favor of the City, and the Plaintiffs appealed to the West Virginia
Supreme Court.
Plaintiffs argued that the circuit court erred in determining that the Commission did not
have jurisdiction over the matter. Additionally, Plaintiffs contended that the City’s prior method
of calculating the baseline hourly rate of pay for determining overtime wages was contractually
mandated. Lastly, Plaintiffs argue that the circuit court erred by failing to find that the Fair Labor
Standards Act (“FLSA”) prevented an employer from unilaterally changing the method of determining the regular rate of pay.
Holding:
The Court of affirmed the circuit court’s order dismissing the Commission because it lacked
jurisdiction. The Court reasoned that the Commission only has jurisdiction over issues involving
removal, discharge, suspension, or reduction in rank or pay as part of disciplinary measures. Because the change in methodology was not related to disciplinary measures in any way, the Court
found that the circuit court correctly determined that the Commission did not have jurisdiction.
The Court further held that in the absence of a contractual obligation providing otherwise,
a public employer is permitted to unilaterally modify a longstanding policy affecting the rights of
employees where notice is provided to such employees and where the modification of policy does
not retroactively impair previously earned and vested rights, such as pension plans. Specifically,
in this case, the City lawfully passed the modified formula following notice to the firefighters and
the public at large and the modified formula did not retroactively impair a vested right. Thus, the
Court found that the City was not prohibited from unilaterally modifying the method by which
overtime pay was calculated.
Impact on Business:
In the absence of a contractual obligation providing otherwise, a public employer is permitted to unilaterally modify a longstanding policy affecting the rights of employees where notice
is provided to such employees and where the modification of policy does not retroactively impair
previously earned and vested rights, such as pension plans. As long as the change is prospective,
it can be made unilaterally.
Although this is a public sector case, the principle is worth noting. An employer can operate within the rules and change the bargain going forward. Clearly, this was an employer – a
municipality – that made a decision based upon good stewardship.
EMPLOYMENT
The Court finally held that the modified formula was not prohibited by the FLSA, finding
that the applicable portion of the FLSA specifically did not require the consent of the employees
and authorized the adoption of a 212 hour/28 day work period for calculating overtime entitlements, which the City did in this case.
Citynet, LLC v. Toney,
No. 14-0058 (Feb. 6, 2015)
employment
The Court was asked to decide whether the Wage Payment and Collection Act timely payment provisions apply to an employee incentive plan.
The Court found that benefits from an employee incentive plan qualified as “wages” under
the Wage Payment and Collection Act and therefore were subject to the timely payment provisions.
Facts:
Plaintiff Ray Toney, an employee of Citynet, alleged that he was 100% vested in Citynet’s
Employee Incentive Plan (“Plan”) because he had been employed for five years. He further alleged
that he was entitled to cash out his entire vested balance when he left Citynet. In August 2010,
Toney received a letter stating that his vested balance as of January 1, 2010 was $87,000.48. In
October 2011, Toney voluntarily terminated his employment and requested to redeem his vested
balance. Citynet denied the request and told Toney that he could not redeem more than twenty
percent of his vested balance annually and that his request could only be made during a specific
four-month period. As support for its position, Citynet cited two specific terms of the plan that addressed timing of requests and payouts.
Toney filed suit in March 2012, alleging (1) violation of the Plan; (2) willful violation of
the Plan; and (3) a Wage Payment and Collection Act (“WPCA”) violation. Toney filed a motion
for partial summary judgment seeking judgment in his favor for counts one and three. The circuit
court granted partial summary judgment to Toney finding that Toney was entitled to payment of his
entire vested balance in the Plan. The circuit court also concluded that Citynet violated the WPCA.
Citynet then filed a motion for amended judgment under Rules 59(e) and 60(b) of the West Virginia
Rules of Civil Procedure arguing that Toney had misrepresented his vested balance, Citynet had not
breached the Plan, and that the WPCA did not apply. The circuit court denied this motion, and the
case was appealed to the Supreme Court.
Citynet claimed that the circuit court erred by failing to adopt Citynet’s interpretation of
its employee incentive plan; by applying the West Virginia WPCA; and by sustaining its award of
$87,000.48 to Toney without offsetting that amount by the $17,400.10 Toney had already received
from his employee incentive plan account.
Holding:
The Supreme Court of Appeals upheld the circuit court’s order holding that Citynet owed
the entire balance of the plan upon termination of employment and that the WPCA’s treble damages
applied to the judgment. The Court did, however, order an offset of monies already paid to Toney.
In its argument, Citynet identified three errors it alleged that the circuit court made in reaching its decision: (1) the Plan should not have been construed as a contract, (2) the language of the
contract should not have been interpreted as requiring Citynet to pay Toney the full amount of the
vested balance upon his voluntary termination, and (3) the Plan should not have been interpreted
without first allowing Citynet to conduct discovery. The Court rejected these arguments because
(1) the Plan constituted an offer for a unilateral contract to provide vested Performance Units with
a monetary value to employees who remain employed by Citynet for a specific time period; (2) the
language of the contract was unambiguous and plainly entitled Toney to the vested balance of the
Plan; and (3) the circuit court could not have considered any extrinsic evidence obtained through
discovery.
Lastly, the Court found that the circuit court erred in refusing to allow Citynet a reduction in
the amount of the circuit court’s award. The Court reduced the amount by $17,400.10, the amount
that Toney undisputedly already received from his Plan. The Court also adjusted Toney’s liquidated
damages in accordance with his reduced award.
Impact on Business:
Justice Ketchum’s dissent had it right. This well-meaning employer voluntarily offered an
incentive plan and wanted to retain some control so as to protect the solvency of the plan and the
company. A window to redeem and a ninety-day pay out scheme were part of that plan. The Court
clearly ignored parts of the plan so as to enforce other parts.
It should be noted that new legislation expressly allows employers and employees to provide a time frame for the pay out of fringe benefits.
EMPLOYMENT
The Court found that the circuit court did not err in applying the WPCA. Citynet argued
that the timely payment provisions of the WPCA could not be applied to payments under the Plan
because the vested balance constituted fringe benefits part of a compensation package governed by
the terms of employment, not “wages” governed by the WPCA. The Court rejected this argument,
concluding that the WPCA timely payment provision applied because the vested balance constituted “wages” under the WPCA. The Court reasoned that the vested performance units were fringe
benefits that had accrued, were capable of calculation, and were payable directly to Toney, thus
qualifying as “wages” under the WPCA. Additionally the Court found that while an employee’s
entitlement to wages is determined by the terms of employment, the timeliness of the payment of
such wages upon an employee’s separation from employment is governed by the WPCA. Thus, the
Plan could not avoid the WPCA’s requirement of payment “no later than the next regular payday”
by writing in a ninety-day pay out provision.
Constellium Rolled Products Ravenswood, LLC v. Griffith,
No. 13-1084 (June 10, 2015)
employment
The Court was asked to determine whether the facts in this case supported the jury’s finding
of a hostile work environment. The Court was also called to review the jury’s award of punitive
damages.
The Court upheld the verdict in favor of Plaintiffs because it found that the jury could
infer that the alleged harassment in this case was based on the gender of Plaintiffs and that it was
sufficiently severe or pervasive to alter Plaintiffs’ conditions of employment and create an abusive work environment. The Court decided that punitive damages were inappropriate because the
Plaintiffs could not show that Constellium showed a disregard of their rights as women under the
Human Rights Act.
Facts:
Plaintiffs Griffith and Wall worked for Defendant Constellium in the Project Maintenance
Department where they were the only females among seventeen employees. From September 2009
to February 2010, Constellium had a suggestion box which employees could use to submit comment cards anonymously. Constellium would redact the names from the cards, retype them, and
post them along with a response from the CEO on the company bulletin board at the front of the
plant. On October 12, 2009, a male Constellium employee wrote three offensive comment cards
that referenced two female employees. Offensive language, although redacted, was still decipherable. The union complained about the cards and the company promptly removed them. After the
comment cards were removed, the cards were alleged to have circulated around the plant via the
internet and hard copies.
Plaintiffs filed suit in February 2011, alleging gender discrimination in violation of the
West Virginia Human Rights Act, W. Va. Code §§ 5-11-1 et seq. Plaintiffs subsequently amended
their complaint to allege claims for sexual harassment based on a hostile work environment. At
the end of a three-day jury trial, Plaintiffs were awarded $250,000 each for emotional distress as
compensatory damages and $250,000 each in punitive damages. The circuit court denied Constellium’s post-trial motions for judgment as a matter of law or for a new trial. On post-trial review,
the Court upheld the award of punitive damages.
Constellium argued that the evidence at trial clearly established that the alleged wrongful
conduct was not based upon Plaintiffs’ gender; rather, it was directed at their work ethic. Also,
Constellium further argued that the circuit court erred in determining that there was sufficient evidence for the imposition of punitive damages.
Holding:
In a memorandum decision, the Court initially upheld the entire verdict. The Court, however, granted Constellium’s petition for rehearing. On rehearing, the Court affirmed the circuit
court’s ruling on liability and compensatory damages. The Court, however, found that Plaintiffs
failed to meet the higher standard required for punitive damages under the Human Rights Act.
The Court found that there was sufficient evidence to support the jury verdict on liability
because the jury may have inferred that the CEO’s publication of the offensive comments and his
silent endorsement of the gender-specific pejorative language encouraged an abusive environment
based on gender. Thus, compensatory damages were appropriate.
Impact on Business:
This case is a positive only in that the Court upon reconsideration removed a hefty award of
punitive damages from a well-intentioned employer who was trying to promote dialogue between
management and labor. It is a negative inasmuch as it allowed a thin case of, at best, sloppy editing
stand as an example of hostile environment sexual harassment.
EMPLOYMENT
The Court, however, agreed with Constellium that the evidence in this case failed to indicate the type of repeated and continued wrongdoing by an employer that demonstrated a criminal
indifference to the rights of women in the workplace. Thus, punitive damages were inappropriate
and the circuit court’s order was reversed as to the award of punitive damages.
Frohnapfel v. Arcelormittal,
772 S.E.2d 350 (W. Va. 2015)
employment
Does an employee’s complaining about his employer’s alleged violations of the West Virginia Water Pollution Control Act, which in turn is part of the National Pollutant Discharge Elimination System created by Section 402 of the Clean Water Act, support a Harless-type retaliatory
discharge claim?.
The Supreme Court of Appeals of West Virginia recently answered a certified question
from the United State District Court for the Northern District of West Virginia in an employment
case that may have significant reverberation in the energy industry throughout the state. The court
determined that the Act represents a substantial public policy in West Virginia that supports a claim
for retaliatory discharge.
Facts:
In Frohnapfel v. Arcelormittal USA LLC, 772 S.E.2d 350 (W. Va. 2015), Arcelormittal
Weirton (“AM Weirton”), a tin plate manufacturer, employed Frohnapfel as a Technician II Operator in AM Weirton’s Environmental Control/Utilities Department, which oversaw B-Outfall, a portion of the AM Weirton plant that discharged hazardous byproducts from its manufacturing process
directly into the Ohio River. The discharge from B-Outfall was governed by a permit and order
issued under the West Virginia Water Pollution Control Act, W. Va. Code §§ 22-11-1 to -30 (2014)
(“the Act”), which in turn are part of the National Pollutant Discharge Elimination System created
by Section 402 of the Clean Water Act. Part of Frohnapfel’s job responsibilities was to ensure that
AM Weirton operated in compliance with its permit issued under the Act and with other applicable
environmental laws, rules and regulations. Under the Act, Weirton was required to monitor its
discharges from B-Outfall and file reports concerning its discharges with the West Virginia Department of Environmental Protection (“WVDEP”).
Frohnapfel alleged that, in the four years before his termination in April 2013, six (6) incidents occurred which impacted AM Weirton’s duty to comply with the terms of its permit for the
B-Outfall. The court summarized these incidents as follows:
• In February 2009, Frohnapfel complained to management after being instructed to
“scrape labels off barrels and replace them with new labels due to expiration issues”;
• In March 2009, Frohnapfel informed management that a probe was being placed in a
buffer in order to conceal certain PH issues;
• In June 2010, Frohnapfel truthfully responded to an inquiry from the WVDEP concerning the dumping of hazardous waste and was thereafter “summoned to the Office of the
Defendants’ highest ranking management official located in Weirton”;
• In November 2010, Frohnapfel complained regarding the inadequacy of hazardous material incident training, and was thereafter “chastised,” “disciplined,” and disqualified
from receiving a promotion;
• In January 2011, Frohnapfel expressed concern regarding the lack of a containment
area for “Prussian Blue,” a hazardous waste; and
• In June 2012, Frohnapfel questioned a third-party vendor’s practices associated with
the removal of hazardous waste and was thereafter harshly disciplined and temporarily
suspended from work.
Frohnapfel, 772 S.E.2d at 353.
Frohnapfel filed a retaliatory discharge case in the United States District Court for the
Northern District of West Virginia under a so-called “Harless” theory of liability. Under a Harless
claim, “[t]he rule that an employer has an absolute right to discharge an at will employee must be
tempered by the principle that where the employer’s motivation for the discharge is to contravene
some substantial public policy, then the employer may be liable to the employee for damages occasioned by this discharge.” Harless v. First National Bank, 246 S.E.2d 270, 271 (W. Va. 1978).
Frohnapfel alleged that AM Weirton wrongfully terminated his employment because he truthfully
reported violations of its permit issued under the Act and raised concerns with AM Weirton about
those violations.1 Moreover, he claimed that the Act, including both the regulations promulgated
under the Act and the permit issued under those regulations that governed AM Weirton’s discharges, represented a “substantial public policy” that supported a Harless claim.
The District Court denied AM Weirton’s motion to dismiss, found that the Act set forth a
substantial public policy in West Virginia that supported a Harless claim, and agreed to submit a
certified question on that issue to the Supreme Court of Appeals of West Virginia.
Holding:
The primary issue before the Court in Frohnapfhel was whether the Act provides an employer with enough specificity to inform the employer on what is prohibited conduct or not. AM
Weirton argued that the Act’s “statement of public policy contains only broad pronouncements
that are ‘too general to provide any specific guidance’ and ‘so vague that it is subject to different
interpretations’.” Frohnapfel, 772 S.E.2d at 357 (citation omitted).
The Court, however, found AM Weirton’s arguments “to be without merit.” Instead, the
court definitively found “permits issued under the Act’s authority contain the necessary specificity
regarding the permissible levels of various chemical waste effluents. Moreover, it stands to reason
that a regulatory area which involves compliance with federal clean water standards is necessary
so complex that the exactitudes of the governing regulations will not typically be delineated in the
governing legislation. . . . Consequently, we have no difficulty in concluding that the Act’s referential reliance on federal regulations and guidelines for purposes of identifying permissible levels
1
Interestingly, as noted by the court, “the record does not indicate whether Mr. Frohnapfel reported the
alleged permit violations to an external environmental regulator. “ For purposes of the court’s analysis, therefore, it
does not matter whether the violations were reported to anyone outside of the employer. Frohnapfel, 772 S.E.2d at
356, fn. 11.
EMPLOYMENT
In April 2013, Frohnapfel alleged that he and other employees became concerned over a
broken piece of machinery used at B-Outfall, which they believed was allowing hazardous waste
to accumulate. The employees formulated a plan to address this situation and asked Frohnapfel to
present their plan to AM Weirton’s management. When he did so, management told Frohnapfel
that it already had a plan in place to address the situation, whereupon Frohnapfel returned to the
employees, informed them of what transpired at the meeting, and then “remarked, apparently in
reference to management, that ‘opinions are like assholes, everybody has one, and some people
have two.” Unbeknownst to Frohnapfel, when he made these comments, an open microphone
broadcast them throughout his department. As a result of this incident, AM Weirton suspended,
and then terminated his employment.
employment
of discharge does not render the subject legislation too vague for interpretation or compliance
purposes.” Frohnapfel, 772 S.E.2d at 357.
The Court also rejected AM Weirton’s argument that a permit is subject to modification,
thereby making a permit “incapable of ‘providing clear and consistent standards.’” Frohnapfel,
772 S.E.2d at 357. The Court curtly rejected this point by noting that “[t]he mere possibility that
the quantitative levels of a particular effluent may be altered or the list of hazardous chemicals subject to monitoring may be expanded does not ipso facto prevent the Act from presenting standards
that are sufficiently precise for purposes of demarcating public policy.” Frohnapfel, 772 S.E.2d
at 357.
Notably, the Court attempted to limit the scope of its own decision by emphasizing that
“[w]e have not been asked to decide whether an employer can take action against an employee
who seeks on his own, separate from government-specified standards, to be an environmental
watchdog.” Frohnapfel, 772 S.E.2d at 358. Rather, the Court limited its analysis “solely [to] an
employer who discharges an employee for his reporting of violations of a permit issued under
authority of the Act and for his complaints to the employer about those same permit violations.”
Frohnapfel, 772 S.E.2d at 358.
Impact on Business:
Having dispensed with AM Weirton’s arguments, the Court clearly sent a shot over the bow
of every business or enterprise that impacts West Virginia’s waterways:
The employers of this state, including AM Weirton, have long been on notice that
they cannot terminate an employee for his or her efforts to uphold this state’s laws.
[citations omitted] . . . . For more than twenty years, the provisions of the Act have
governed the acts of enterprises such as AM Weirton who utilize this state’s waterways to discard the chemical residue of their manufacturing processes. Given the
clarity of the Act’s provisions that make it unlawful to violate a permit issued under
the Act, it cannot be doubted that AM Weirton was fully apprised of its permitrelated responsibilities under the Act as well as the penalties for non-compliance.
Furthermore, it simply cannot be disputed that those compliance requirements are
rooted in substantial public policy objectives whose aim is directed at providing
for and promoting the public’s health and well-being. Accordingly, we hold that an
employee who alleges he or she was discharged for reporting violations of a permit
issued under authority of the West Virginia Water Pollution Control Act, W.Va.
Code §§ 22-11-1 to -30 (2014), and making complaints to his employer about those
permit violations, has established the predicate substantial public policy required to
prima facie prove that the employer’s motivation for the discharge was the contravention of public policy. See Harless, 162 W.Va. 116, 246 S.E.2d 270 (1978).
Frohnapfel, 772 S.E.2d at 358. Notably, Justice Loughry authored the court’s opinion, and
this language certainly bears his straight-forward, strong style of writing.
Notwithstanding the strong language used by the court in Frohnapfel, it must be remembered that the decision does not mean that AM Weirton is liable to Frohnapfel for wrongful discharge, or even that AM Weirton actually wrongfully discharged Frohnapfel. Rather, the Court
ruled that Frohnapfel’s allegations that he was terminated for reporting violations of AM Weirton’s
permit states a prima facie case for retaliatory discharge under a Harless claim. On remand, AM
Weirton is still entitled to show that it terminated Frohnapfel for a legitimate, non-discriminatory
business reason, i.e., using profanity over the loudspeaker system.
Nonetheless, the Frohnapfel decision is troubling in a number of respects. First, the Court
determined that the “complaints” made by an employee need not be made to anyone outside the
company; i.e., if an employee simply notified an employer about violations of the employer’s
permit, such would support a Harless claim -- even if, as with Frohnapfel, reporting such violations appears to be a part of the employee’s job duties. Second, while an employee who reports
permit violations certainly cannot guarantee the continuation of his employment, such reporting
gives a cloak of protection to that employee that would chill any effort to terminate the employee
absent gross misconduct. In other words, employers that terminate an employee who reported
permit violations are virtually guaranteed a retaliatory discharge lawsuit, which may inhibit an
employer from making an adverse decision concerning the employee. Finally, the rationale used
in Frohnapfel can extend to other permits or licenses issued by the DEP or other state agencies,
which significantly extends the “substantial public policy” exception to “at will” employment.
EMPLOYMENT
In addition, the Frohnapfel court deliberately did not address whether complaints about
permit violations that are untrue, i.e., hazardous waste levels that turn out to be within permit levels, are sufficient to support a retaliatory discharge claim. While it is difficult to believe a court
would find a false accusation of permit violations sufficient to support a Harless claim, the strong
language used by the court in Frohnapfel to describe the public policy in the Act certainly does not
foreclose this possibility.
Grim v. Eastern Electric, LLC,
767 S.E.2d 267 (W. Va. 2014)
employment
May a contractor be held liable in a civil action for non-payment of prevailing wages on a
public improvement construction project when the public authority fails to include prevailing wage
specifications in the contract?
The Court first determined that claims under the PWA are subject to a five-year statute of
limitations period pursuant to W. Va. §55-2-6 (2008) because the claims “flow from the work performed on a public works construction project let to contract.” Grim, 767 S.E.2d at 276. Next, the
Court noted that “an honest mistake or error shall not be construed as a basis for recovery under
this subsection [W.Va. Code §21-5A-9(b)]” represents an affirmative defense that may be pled by
a contractor/employer, which also bears the burden of proof on that defense, examined whether
“a contractor can be held liable in a civil action for non-payment of prevailing wages on a public
improvement construction project when the public authority fails to include prevailing wage specifications in the contract, and found that “the omission of prevailing wage specifications in the contract is not fatal to petitioners’ PWA claims; the PWA’s coverage is determined exclusively by the
statute as it applies to the facts.” The Court rejected the plaintiffs’ WPCA claim as “the amount of
wages payable to an employee pursuant to the provisions of the WPCA is determined exclusively
by the terms of the employment agreement.”
Facts:
In Grim v. Eastern Electric, LLC, 767 S.E.2d 267 (W. Va. 2014), Eastern Electric responded to a Request for Quotation (“RFQ”) from the West Virginia Department of Administration
(“WVDOA”) for a contract “to provide electrical construction, maintenance, and repair services
to a variety of equipment housed in numerous [WVDOA] owned facilities located throughout
West Virginia[.]” When preparing its bid, one of Eastern Electric’s members contacted a senior
buyer with the WVDOA’s purchasing division and the Operations and Maintenance Manager of
the WVDOA’s General Services Division to inquire whether prevailing wages applied to the work
contemplated by the RFQ, and each informed him that prevailing wages did not apply. As such,
Eastern Electric submitted a bid that did not include prevailing wages.
The WVDOA accepted Eastern Electric’s bid, and the resulting contract “did not specify
that prevailing wages were applicable to the work being performed, and did not include the general boilerplate language usually included in prevailing wage contracts.” In addition, a prevailing
wage schedule was not included in the contract. Thereafter, electrical work commenced under the
contract at numerous state government buildings, including the State Capitol and the Governor’s
Mansion, which continued until May 2009 as the parties renewed the contract in 2008. The actual
work under the contract consisted of demolishing existing wiring, lighting and receptacles and
replacing them with new components.
In February 2009, the West Virginia Division of Labor (“WVDOL”), after receiving complaints from some of Eastern Electric’s employees, started an investigation into whether prevailing
wages should have been paid for at least some of the work performed under the contract. After
learning of this investigation, Eastern Electric met with WVDOA officials who assured Eastern
Electric that the work performed under the contract was not subject to prevailing wages. Recogniz-
Holding:
The Court first determined that claims under the PWA are subject to a five-year statute
of limitations period pursuant to W. Va. §55-2-6 (2008) because the claims “flow from the work
performed on a public works construction project let to contract.” Grim, 767 S.E.2d at 276. Next,
the Court -- virtually without discussion -- found that the PWA’s provision that “an honest mistake
or error shall not be construed as a basis for recovery under this subsection [W.Va. Code §21-5A9(b)]” represents an affirmative defense that may be pled by a contractor/employer, which also
bears the burden of proof on that defense. Grim, 767 S.E.2d at 277. In Grim, Eastern Electric
(understandably) argued that its failure to pay prevailing wages was the result of an “honest mistake or error” because it relied upon the opinions of senior officials in the WVDOA and because,
when the WVDOA let the contract, it did not require the payment of prevailing wages and contained none of the language typically used in contracts that required the payment of prevailing
wages.
The Court then examined whether “a contractor can be held liable in a civil action for
non-payment of prevailing wages on a public improvement construction project when the public
authority fails to include prevailing wage specifications in the contract.” Grim, 767 S.E.2d at 277.
After noting that it is “imperative” for the public agency to adhere to the PWA’s requirements for
prevailing wages “so that the contractor may know in advance of submitting its bid what the appropriate labors costs will be[,]” the Court then found that “the omission of prevailing wage specifications in the contract is not fatal to petitioners’ PWA claims; the PWA’s coverage is determined
exclusively by the statute as it applies to the facts.” Grim, 767 S.E.2d at 278, 279.
The Court recognized, however, that a contractor may escape liability under the PWA for
failing to pay prevailing wages if it can prove its failure was the result of “an honest mistake or
error,” which the Court defined as a mistake that was “unintentional.” Grim, 767 S.E.2d at 280.
Remarkably, however, the Court then stated that “this affirmative defense is available only to contractors who act in good faith but make honest mistakes or errors.” Grim, 767 S.E.2d at 280. To
further “clarify” its ruling, the Court advised that contractors “should be careful to ascertain they
are in compliance with the PWA and should inquire whether the public authority complied with
its statutory duties to consult with the Division of Labor.” Grim, 767 S.E.2d at 280 (emphasis
added). In fact, the Court admonishes, “[i]f a contractor is told by any State agency official that
the work to be performed is not subject to the prevailing wage law, as it is asserted occurred here,
it would be well-advised to ascertain that the person who is making that representation has the
authority to do so and that it be well-documented.” Grim, 767 S.E.2d at 280.
Other factors that the Court identified as bearing on the “honest mistake or error” defense
to a claim under the PWA are “whether the contractor had experience with public work construction projects governed by the PWA; whether the mistake was due to clerical or mathematical
errors; whether there was a genuine misunderstanding after due diligence by the contractor regarding whether the Prevailing Wage Act applied to the type of work performed; and whether the
EMPLOYMENT
ing that it would lose money under the contract if it had to pay prevailing wages, however, Eastern
Electric terminated the contract in May 2009, and in August 2009, the WVDOL issued a letter that
an audit found that some of the work performed by Eastern Electric should have resulted in the
payment of prevailing wages, with the result that Eastern Electric owed $135,330 to its workforce
for the work subject to prevailing wages. In July 2011, some of Eastern Electric’s employees
filed suit claiming (1) amounts due under the West Virginia Prevailing Wage Act (“PWA”), which
represented the difference between wages actually paid and the prevailing wages that should have
been paid, and (2) a violation of the West Virginia Wage Payment and Collection Act “(WPCA”).
employment
contractor made any real analysis of whether the work to be performed under the contract was the
type subject to prevailing wage.” Grim, 767 S.E.2d at 280-281.
Finally, the Court rejected the plaintiffs’ WPCA claim as “the amount of wages payable
to an employee pursuant to the provisions of the WPCA is determined exclusively by the terms
of the employment agreement.” Grim, 767 S.E.2d at 281 (emphasis in original). As the contract
between Eastern Electric and the WVDOA called for the payment of non-prevailing wages, and as
the wages that should have been paid pursuant to the PWA was determined by the PWA, and not
the contract, the WPCA did not apply to the amounts payable pursuant to the statute.
Impact on Business:
The Grim decision is troubling because, in effect, it made Eastern Electric the guarantor
of the WVDOA’s decision that the PWA did not apply to the work contemplated by the WVDOA.
While the statutory duty to determine whether a project is subject to prevailing wages rests with
the state agency letting the contract, the Court in Grim basically tells contractors that state officials
cannot be trusted to fulfill that statutory duty. In fact, the court noted that contractors should “inquire whether the public authority complied with its statutory duties to consult with the Division of
Labor[,]” but “[i]f a contractor is told by any State agency official that the work to be performed
is not subject to the prevailing wage law, . . . it would be well-advised to ascertain that the person
who is making that representation has the authority to do so and that it be well-documented.”
Perhaps most surprising of all, the Court surmised that “[t]he cost of defending a PWA
claims alone should provide sufficient incentive for a conscientious contractor to contact the Division of Labor if it is uncertain whether prevailing wages are required under the contract up for
bid[]” -- despite the Court’s acknowledgement that “the Legislature did not delegate to the Division
of Labor the authority to promulgate rules and regulations to interpret the PWA.” In other words,
the Court advises contractors to consult with a state agency on the interpretation of the PWA when
the Legislature has declined to give that state agency the authority to interpret the PWA.
The impact of Grim is fairly obvious. Rather than be a state agency’s guarantor, private
contractors should insist that contracts with the state that could even arguably be considered “public works” projects include prevailing wages. That, in turn, will increase the cost of every public
construction project let by the state, even with the “new” method of determining prevailing wages.
More worrisome, however, is the willingness with which the Court allowed a private business to
be the guarantor of the decision by a state agency to not do something, though whether the state
agency needed to do something was solely within the state agency’s discretion. If the principle in
Grim is extended to other decisions by state agencies that enter into contracts with private businesses, the uncertainly created will increase the cost of the State to enter into those contracts.
King v. West Virginia’s Choice, Inc.,
No. 13-1255 (November 7, 2014)
The Court was asked to determine the meaning of the phrase “subject to” in the exclusionary proviso in the definition of “employer” of the West Virginia Minimum Wage and Maximum
Hour Standards (MWMHS”).
The Court found that the phrase “subject to” in the exclusionary proviso of the MWMHS’s
definition of “employer” means “under the authority of, or governed or affected by.” The Court further decided that the phrase meant subject to any portion. Thus, the Court found that an “employer”
under the MWMHS does not include any employer who has eighty percent of its employees are
governed or affected by any portion of the federal Fair Labor Standards Act (“FLSA”).
Facts:
West Virginia’s Choice (“WVC”) is a West Virginia corporation that provides in-home
companionship services to persons who are unable to care for themselves due to either age or infirmity. WVC has as many as 200 employees, all of whom are referred to as in-home direct care
workers. Plaintiff Carol King was hired by WVC as an in-home direct care worker on January 14,
2011.
King filed a class action complaint against WVC in the circuit court seeking declaratory
and injunctive relief, as well as damages for unpaid “overtime” compensation for herself and all
other similarly situated employees. King alleged that WVC violated the state’s MWMHS by failing to pay her for hours worked in excess of forty hours per week at a rate of one and one-half
times her regular rate, as provided in W. Va. Code § 21-5C-3. King’s damages claim was entirely
dependent upon whether WVC qualified as an “employer,” as defined by the MWMHS. WVC submitted its motion for summary judgment. The circuit court granted summary judgment in favor of
WVC, finding that WVC was not an employer under the MWMHS, and, therefore, the MWMHS
did not apply.
King appealed to the West Virginia Supreme Court, arguing that the circuit court erred in
finding that she was not entitled to overtime compensation under the MWMHS because she was
subject to the federal FLSA.
Holding:
The Court affirmed the circuit court’s order granting summary judgment to Defendant
WVC. The Supreme Court first found that the phrase “subject to” in the exclusionary proviso of
the MWMHS’ definition of “employer” means “under the authority of, or governed or affected by.”
The term “employer” is defined in the MWMHS with an exclusionary proviso stating that the term
does not include “any . . . corporation . . . if eighty percent of the persons employed by him are subject to any federal act relating to minimum wage, maximum hours and overtime compensation.” W.
Va. Code § 21-5C-1(e) (emphasis added). The Court reasoned that by the unambiguous, plain language of the statute, the term “subject to” means “governed or affected by” and not “entitled to.”
As a result, the Court found that the Legislature purposefully created a distinction between those
employers with eighty percent or more of their employees being subject to the minimum wage and
EMPLOYMENT
employment
overtime provisions of the FLSA and those with less than eighty percent subject to the minimum
wage and overtime provisions of the FLSA.
The Court then concluded by applying this meaning to the phrase “subject to” in the exclusionary proviso that WVC was not an “employer” under the MWMHS, and accordingly, the
MWMHS did not apply. The Court found that although some of WV Choice’s employees may
be exempt from the overtime provisions in the FLSA, its employees remained subject to other
provisions in the FLSA. Thus, eighty percent of WVC’s employees were subject to the FLSA.
Further, the Court found that the WVC was an FLSA-regulated employer because its employees
were engaged in interstate commerce. The Court thus affirmed the circuit court’s order finding that
the MWMHS did not apply to WVC.
Impact on Business:
This decision limits the scope of application of the MWMHS because employers with
eighty percent of employees subject to any portion of the FLSA are exempt from MWMHS coverage. This is beneficial to employers because a greater number will not have to abide by the strictures of the MWMHS.
It should be noted that, at the time of this writing, the West Virginia Division of Labor
has proposed regulations which interpret several provisions of the MWMHS differently than their
FLSA equivalents.
Myers v. Outdoor Express, Inc.,
No. 14-0315 (May 13, 2015)
The Court was asked to determine whether a commission-based employee with slow sale
seasons was eligible for unemployment compensation benefits due to being partially unemployed
during the slow periods.
The Court decided that commission-based employees with slow sales periods are not eligible for unemployment compensation benefits for those periods. The Court reasoned that positions with slow sales periods do not qualify as seasonal employment and thus do not result in the
employee being partially unemployed.
Facts:
Larry Myers worked as a sales associate at Outdoor Express selling recreational vehicles.
Myers worked on a commission basis and thus sometimes would go weeks with no pay if he did
not make a sale. Outdoor Express issued “low-earning reports” for Myers during these periods.
Myers filed for and received unemployment compensation benefits for those periods where he did
not make a sale. Specifically, twenty-two claims for unemployment compensation benefits were at
issue in this case.
In November 2012, the deputy commissioner found that Myers was neither totally nor
partially unemployed during the periods in question and was, therefore, ineligible for unemployment compensation benefits on all twenty-two claims. The deputy required Plaintiff to repay his
amounts received. The ALJ, Board of Review, and circuit court all affirmed the deputy’s decision.
On appeal to the West Virginia Supreme Court, Myers argued first that he was eligible for
unemployment compensation based on seasonal employment. Second, Myers contended that he
met the eligibility requirement for unemployment compensation benefits because, during the periods for which he filed a claim, he did not perform a service for which wages were payable even
though he was present on the premises of Outdoor Express. Third, Myers contended that the circuit
court erred in directing that he pay Workforce West Virginia the entire $39,713 in overpayments.
Holding:
The Court affirmed the circuit court’s order concluding that Myers was ineligible to receive
unemployment compensation benefits because he was neither totally nor partially unemployed
during the periods in question, but found that the repayment amount was improperly calculated
and remanded the case for recalculation.
In analyzing whether Myers was ineligible to receive unemployment compensation benefits, it was undisputed that he was not totally unemployed during the periods in question. The
Court found that the seasonal aspect of his sales did not render him partially unemployed because,
although Myers’s sales of recreational vehicles were seasonal in the sense that there were fewer
sales during the colder months, his employment relationship with Outdoor Express was not seasonal within the meaning of the statute. Outdoor Express did not reduce Myers’s hours, and the
possibility of a sale during the slow periods was always present.
EMPLOYMENT
employment
The Court further reasoned that Myers did not meet the definition of being partially unemployed because the statutory definition of partial unemployment refers to whether a claimant for
unemployment compensation benefits has obtained wages “payable” to him, rather than whether
the claimant has, in fact, been paid. Myers did not report any commissions earned or payable in
conjunction with his claims for benefits for the periods in question. Consequently, he was not eligible to receive unemployment compensation benefits.
Lastly, the Court found that the amount repayable was improperly calculated because a
two-year statute of limitations applied according to West Virginia Code § 21A-10-21 (1989). The
Court remanded for recalculation of the repayment amount.
Impact on Business:
Employers with slow seasons that have commission-based employees should be leery in
filing low-earnings reports and should consult with local unemployment compensation offices
before doing so. Unless an employee’s ability to earn commission is substantially inhibited (e.g.
product for sale cannot be sold during certain time or reduced hours), it is likely that the commission-based employee is not entitled to unemployment compensation. Given that employees are
generally aware of the vagaries of commission-based sales jobs, it is only fair that they not benefit
from a system that is designed to provide a safety net to employees who lose income through no
fault of their own.
SER Tallman v. Tucker,
No. 14-0948 (February 12, 2015)
The defendant sought a Writ of Prohibition against the Circuit Court’s ruling striking his
disclosure of expert witness opinions as untimely.
The Court granted the Writ, finding the defense disclosure was timely filed. The plaintiff
failed to provide appropriate disclosures and was compelled to do so and the defendant filed opinions in a reasonable time after plaintiffs’ filings.
Facts:
Plaintiff filed a vague expert disclosure. After the defendant moved to strike, the Circuit
Court allowed the plaintiff to supplement the disclosure by including the pre-trial certificate of
merit. The defendant filed expert disclosures and then deposed plaintiff’s experts. After the experts stated new opinions, the defendant supplemented the prior disclosures. Plaintiff’s motion to
strike the supplement was granted and defendant sought a Writ of Prohibition.
Holding:
“We begin by noting that the circuit court’s order finds fault with Dr. Tallman for supplementing his expert witness disclosure fifteen days after the discovery cut-off date. However, the
order implicitly pardons Ms. Powell for not filing her initial expert witness disclosure until thirtythree days after the deadline for making such disclosure. The bedrock of our judicial system is
fairness to all parties. In our view of the record, fairness was not shown to Dr. Tallman.”
“In addition to Ms. Powell disclosing her experts thirty-three days after the circuit court’s
initial scheduling order required her to make such disclosure, Dr. Tallman found Ms. Powell’s expert disclosure was deficient. As a result of the inadequacy of Ms. Powell’s expert disclosure, Dr.
Tallman was forced to file a motion to compel disclosure in a manner that was required by Rule
26(b)(4). We find the late and inadequate disclosure by Ms. Powell was the cause of Dr. Tallman’s
inability to fully disclose the opinions of his experts within the initial and subsequent discovery
cut-off dates.”
“Rather, the critical issue for Dr. Tallman was that he now knew exactly who Ms. Powell’s
expert was and what opinions he would rely upon. While it is true that Dr. Tallman could have deposed Dr. Milewski as soon as he was listed as an expert, a party is not required to depose an expert
in the dark. The very basis of expert disclosure under Rule 26(b)(4) is so that a party does not have
to go on a fishing expedition in trying to determine what opinions the expert will rely upon at trial.”
Concurring Opinion:
Justice Workman, joined by Loughry, concurs, stating “I wholeheartedly agree that seasonable supplementation of discovery is required by our Rules and fundamental fairness. However,
adherence to these requirements does not necessitate that an expert disclosure constitute a veritable
script from which the expert may not stray in testifying and elucidating his opinions.”
HEALTHCARE
Impact on Business:
HEALTHCARE
This is a positive decision that enforces the rules and circuit court enforcement of scheduling orders in requiring adequate disclosures of expert opinion by plaintiff. The same logic, of
course, applies to the defendants’ disclosures. This opinion supports the prohibition on “trial by
ambush” by requiring adequate expert disclosures.
Stephens v. Rakes,
No. 13-1079 (June 16, 2015)
The Court affirmed the jury’s verdict for compensatory and punitive damages. The Court
found “there was testimony, as discussed in detail above, creating a genuine issue of material fact
that she deviated from the standard of care in several respects, proximately causing the decedent’s
death. The criticisms offered by Mr. Rakes’ experts do not seek to hold Dr. Stephens liable as
‘captain of the ship’ for the actions of other doctors or nurses. Rather, these are criticisms of Dr.
Stephens’ own deviations from the standard of care expected of an attending hospitalist treating a
patient in the decedent’s situation.” The Court also affirmed the circuit court’s refusal to instruct
the jury that the physician was bound to follow the patient’s “do not use” order, stating,“[i]t was
Mr. Rakes’ theory that Dr. Stephens’ deviations from the acceptable standard of care and recklessness caused the decedent’s health to decline to the point where he went into respiratory arrest. The
DNR order was not a break in causation alleviating any of the negligent or reckless actors from
liability for proximately causing the decedent’s death. Accordingly, we affirm the circuit court’s
ruling on this issue.” Similarly, the Court found the case was properly submitted to the jury to
consider punitive damages, and affirmed the amount, finding sufficient evidence of willful, wanton
and reckless conduct. In particular, the Court focused on the testimony of the plaintiff’s expert that
“this was as bad a care as I’ve ever seen in my 30 years in a three-day hospitalization..,” and that
the care was “reckless.” For the same reasons, the Court affirmed the denial of the pre-trial motion
for summary judgment on punitive damages.
Facts:
The defendant physician was sued for causing the patient’s death by negligently giving
Seroquel and failing to provide proper in hospital care.
Holding:
The Court affirmed the jury verdict for compensatory and punitive damages.
Impact on Business:
The Court’s affirmance of the circuit court’s decision not to instruct the jury about the “do
not use” order and the defendant’s obligation to follow it places health care providers in a difficult
situation as to applying life saving measures to their patients. The Court’s willingness to find willful, wanton and reckless behavior and affirm a punitive damage award in a case involving medical
care is of concern, particularly when the Court relied, in part, on the characterization of the care
made by plaintiffs’ hired expert. Stephens, written by Justice Benjamin, also follows prior cases
where inflammatory statements by plaintiffs’ counsel are deemed insufficient to cause reversal of
a verdict. These results encourage circuit courts to allow punitive damage cases to be decided by
juries and to find that inflammatory statements are harmless, even if inappropriate.
HEALTHCARE
The defendant physician sought reversal of a Mercer County jury verdict of $500,000.00
in non-economic damages, and $500,000.00 in punitive damages, resulting in a judgment of
$810,000.00 which including an off-set for pre-verdict settlements from the jury’s non-economic
damage award. The defendant also appealed the pretrial denial of her motion for summary judgment.
Tug Valley Pharmacy v. All Plaintiffs in Mingo County,
No. 14-0144 (May 13, 2015)
The Court was asked to decide two certified questions:
HEALTHCARE
1. May a person maintain an action if, in order to establish the cause of action, the person
must rely, in whole or in part, on an illegal or immoral act or transaction to which the
person is a party?
2. May the doctrine of in pari delicto be employed as a bar to tort claims under West Virginia law?
Answering the first question, the Court held that criminal behavior is not a bar to recovery
but merely evidence to be considered by the jury in comparing fault. “[A] plaintiff’s immoral or
wrongful conduct does not serve as a common law bar to his or her recovery for injuries or damages
incurred as a result of the tortious conduct of another. Unless otherwise provided at law, a plaintiff’s conduct must be assessed in accordance with our principles of comparative fault.” The Court
declined to answer the second question as unnecessary.
Facts:
Plaintiffs were drug users who obtained prescriptions and purchased narcotic pain medicines from the defendant pharmacies. They then sued the pharmacies for negligently selling them
the narcotics, seeking damages.
All of the respondents admitted to engaging in most, if not all, of the following illegal
activities associated with the prescription and dispensation of controlled substances while being
provided services by the petitioners: criminal possession of pain medications; criminal distribution, purchase, and receipt of pain medications (“off the street”); criminally acquiring and obtaining
narcotics through misrepresentation, fraud, forgery, deception, and subterfuge (not advising doctors
of, using multiple doctors concurrently, commonly known as “doctor shopping”); and abusing and/
or misusing pain medication by ingesting greater amounts than prescribed and snorting or injecting
the medications to enhance their effects. Notably, during depositions conducted in the underlying
cases, virtually all of the respondents asserted their Fifth Amendment privilege against self-incrimination, refusing to answer questions about other sources from whom they obtained controlled
substances who were not licensed physicians.
The defendants moved for summary judgment, relying on the “wrongful conduct” rule under which recovery is barred to a plaintiff who commits criminal acts.
Holding:
“Where a plaintiff has engaged in allegedly immoral or criminal acts, the jury must consider
the nature of those actions, the cause of those actions, and the extent to which such acts contributed
to their injuries, for purposes of assessment of comparative fault.”
“A plaintiff’s immoral or wrongful conduct does not serve as a common law bar to his or
her recovery for injuries or damages incurred as a result of the tortious conduct of another. Unless
otherwise provided at law, a plaintiff’s conduct must be assessed in accordance with our principles
of comparative fault.”
Dissenting Opinions:
Impact on Business:
Tug Valley Pharmacy is consistent with cases where the Court has abolished or refused to
accept doctrines that provide an absolute bar to recovery by plaintiffs, opting instead for consideration of plaintiff’s conduct within the comparative fault scheme. Under Bradley v. Appalachian
Power, 256 S.E.2d 879 (1979) ([a] party is not barred from recovering damages in a tort action
so long as his negligence or fault does not equal or exceed the combined negligence or fault of
the other parties involved in the accident.) Assumption of the risk was merged into comparative
fault in King v. Kayak Manufacturing, 182 W. Va. 276, 387 S.E.2d 511 (1989) (“We recognized
the harshness of the common law rule of contributory negligence in Bradley, as well as the fact
that it had been abrogated in a majority of other jurisdictions. The same situation exists with the
doctrine of assumption of risk.”). See also Ratlief v. Yokum, 167 W.Va. 779, 280 S.E.2d 584 (1981)
(abolishing last clear chance); Moran v. Atha Trucking, Inc., 208 W.Va. 379, 540 S.E.2d 903 (1997)
(abolishing sudden emergency). Just last term, the Court abolished another bar to recovery, tanking the “open and obvious” rule, again leaving the issue to the jury under the comparative fault
scheme. Hersh v. E-T Enterprises, 752 S.E.2d 336 (2013)(“[W]e abolish the ‘open and obvious’
doctrine.”).
If a hazard is open and obvious on premises, it does not preclude a cause of action by a
plaintiff for injuries caused by that hazard. Instead, a jury may consider the obviousness of the
hazard in determining the comparative negligence of the plaintiff against that of the owner or
possessor of the premises.”). Tug Valley therefore follows stare decisis and is consistent with this
trend; however, unlike other cases where the Court declined to bar recovery, the plaintiffs here
were, as recognized by the Court, engaged in pretty reprehensible conduct. In rejecting the wrongful conduct rule, the Court also noted that a new statute enacted in 2015 was not at issue, stating:
We are cognizant of and expressly note that in its most recent session, our Legislature enacted a similar statute which would bar recovery for a plaintiff whose
damages ‘arise out of the plaintiff’s commission, attempt to commit or fleeing from
the commission of a felony criminal act insofar as the plaintiff is convicted of the
felony.’ H. B. 2002, 2015 Leg. 82nd Sess. (W. Va. 2015) (effective May 25, 2015).
However, the instant certified question, which asks this Court to adopt a common
law version of the wrongful conduct rule, is unaffected by this enactment which is
not yet effective as of the date this case was submitted to the Court or this opinion.
Cf. Dugger v. Arredondo, 408 S.W.3d 825 (Tex. 2013) (analyzing potential availability of common law “unlawful acts doctrine” irrespective of availability of statutory affirmative defense to similar effect). The effect of this statute is simply not
before the Court.
HEALTHCARE
Justices Ketchum and Loughry dissented. Both would have adopted the “wrongful conduct” rule as a bar to recovery. Justice Ketchum stated, “I dissent because criminals should not be
allowed to use our judicial system to profit from their criminal activity.” Justice Loughry echoed
similar sentiments, noting that “by summarily dismissing the wrongful conduct rule as unworkable, the majority’s decision requires hardworking West Virginians to immerse themselves in the
sordid details of the parties’ enterprise in an attempt to determine who is the least culpable—a drug
addict or his dealer.”
Ayers v. Erie Insurance Company, et al.,
No. 14-0843 (June 12, 2015) (memorandum decision)
What the Court was Asked to Decide:
INSURANCE & INDEMNIFICATION
Whether the circuit court erred in ruling that a criminal plea to battery invoked the insurer’s
intentional act exclusion, excluding coverage, without further considering the aggressor’s subjective intent.
The Court affirmed the circuit court’s grant of summary judgment in favor of the insurer.
The Court held that the circuit court had not erred in finding Erie had properly denied coverage
under the policy’s intentional act exclusion.
Facts:
On June 21, 2010, Barbara Dean confronted her adult daughter, Michelle Dean-Meadows,
regarding Meadows’ alcohol and drug use. This resulted in a physical altercation between Dean
and Meadows that spread onto a neighbor’s, Rose Marie Ayers, property. Dean told Ayers to call
911, and Ayers did so. However, Meadows followed Ayers into her home and struck her in the face,
causing injuries.
Thereafter, Meadows was arrested and charged with burglary, disorderly conduct, obstruction, destruction of property, and battery. Ayers alleged negligence against Dean and Meadows
and sought declaratory judgment against Erie Insurance Company (“Erie”) to seek coverage under
Dean’s homeowner’s insurance policy. Erie denied coverage and defended petitioner’s suit on two
grounds: (1) that petitioner’s claim fell within the intentional act exclusion in the policy, and (2)
that Meadows was not a resident of the Dean household.
The circuit court held that, because Meadows pled guilty to battery, she committed an intentional act that injured petitioner. Meadows’ intentional act invoked the intentional act exclusion
in the policy, which resulted in a lack of coverage for Ayers’ claims.
Holding:
The Court affirmed the circuit court’s order granting summary judgment in favor of Dean
and Erie. The Court reiterated from its precedent that when there is an intentional wrongful act,
intent to do harm can be inferred. Further, where a policyholder is criminally convicted of an intentional act, she is estopped in a collateral civil action from claiming that the act was anything but
intentional. Meadows’ conviction in the present case estopped the argument that her actions were
unintentional. Thus, the Court held that the circuit court did not err in finding that Erie had properly
denied coverage under the intentional act exclusion.
Impact on Business:
This decision affirms that insurers can confidently deny coverage under their intentional act
exclusion when a policyholder has been criminally convicted of an intentional act.
Barrett v. Retton,
2014 WL 6676540, --S.E.2d-- (Nov. 21, 2014)
Barrett v. Retton has created a situation where the introduction of evidence to establish
expert witness bias is now a loophole for introducing evidence that a party is insured.
The Court held that the trial court appropriately considered the evidence.
Facts:
In Barrett, the respondent’s car was involved in an automobile accident caused by Ms. Barrett. Plaintiffs attempted to negotiate with petitioner’s motor vehicle insurer, State Farm Insurance
Company (“State Farm”), but were unable to reach a settlement, either by themselves or with the
assistance of counsel. Id. at 2. Thereafter, respondents filed a civil complaint against petitioners in
August of 2012. Id. A jury verdict was returned in respondents’ favor in the amount $1,013,156,
including $320,500 for future medical expenses.
In their appeal, petitioners asserted five assignments of error. The most important assignment of error for purposes of the business community is petitioners’ assertion that the circuit court
erred by allowing respondents to introduce evidence of payments made by State Farm to petitioners’ expert witnesses. Id.
The circuit court allowed the introduction of evidence that Dr. Sandra Metzler, an expert in
the field of biomechanics, had received more than $6,000,000 from State Farm during a five year
period. Id. In the instance of Dr. Metzler, the issue was compounded because she works for an expert witness firm, SEA Ltd., which employs and provides the services of a large number of experts
with ten separate offices in eight different states. The court permitted the jury to hear evidence
regarding the total amount of payments during the five year period from State Farm to SEA, as a
whole, not just to Dr. Metzler, or even to her office. The circuit court also allowed introduction of
evidence that Dr. P. Kent Thrush, an orthopedist, had received more than $1,000,000 from State
Farm for expert consultation in numerous cases over an approximate five year period.
Holding:
The Supreme Court of Appeals of West Virginia disagreed with the petitioners’ assertion
that the trial court erred in admitting evidence of payments made by State Farm to petitioners’
expert witnesses. Instead, it found that the “circuit court appropriately considered the evidence
under the directive of Syllabus Point 2, Reed v. Wimmer, 195 W.Va. 199, 201, 465 S.E.2d. 199, 201
(1995).” Id.
The Court reasoned that any information about the relationships between each expert witness and State Farm or its affiliates was offered for the purpose of showing witness bias, a purpose
allowed by West Virginia Rule of Evidence 411. Id. at 3. In addition, the appropriate four point
In Barrett, the trial court allowed cross-examination of an expert witness, ostensibly to
show bias, by allowing questions as to the amount of money paid to that expert by the defendants’
insurance company in cases over a five year period. Barrett at 3. The impact, as seen below, will
be a positive impact for the plaintiff, and a negative impact for the defendant in most cases.
balancing test was administrated to the facts at hand. Id. Finally, the Court believed that the circuit
court gave proper limiting instructions that any mention of insurance was for the sole purpose of
informing the jury of information needed to evaluate the witnesses’ credibility and believability. Id.
Impact on Business:
In practice, cumulative values of compensation paid to experts will be significantly higher
for insurance companies when compared to cumulative values for plaintiffs because insurance
companies are in the business of defending their insureds in cases brought against them while an
individual plaintiff is rarely involved in more than one litigated case in his or her life. As a result,
insurance companies, by the nature of their business, regularly pay for the retention of expert witnesses who are hired by defense attorneys. Attorneys and insurance companies often hire experts
who are known to have appropriate education and expertise and, candidly, who have been previously vetted. Plaintiffs’ attorneys, likewise, tend to hire experts repeatedly, but because they have
many fewer cases than multi-state insurance companies, the cumulative values presented to a jury
are inherently disparate and may speak indirectly to the jury about the insurance company’s ability
to pay.
The broader impact of Barrett permits an unfair comparison between compensation paid
to testifying experts that is inherently prejudicial. Admittedly, the Court relied on a balancing test
from Reed that prevents introduction of evidence of insurance at trial if the presiding trial court
believes the prejudicial nature of the evidence outweighs its probative value. The Court found that
references to insurance were sufficiently limited to evaluating witness bias.
In Barrett, the sums of money paid by State Farm to the expert witnesses at issue were large
because of their cumulative value. At what point will a court limit references to cumulative payments made to experts employed by insurance companies? Additionally, with no definitive line
drawn, a question is presented as to the ability for insured defendants to use expert testimony for
fear of having evidence of insurance expert payments for other insureds in other cases presented at
trial and permitted by the presiding court. Plaintiff’s counsel may work multiple times with a single
expert, but usually not multiple times for a single client. Similarly, even if plaintiff’s counsel has
a prolific practice, the number of cases in which he or she may be involved and hiring experts will
be a fraction of the number of times a regional or national insurance company has defended cases
and hired experts.
One way to avoid, potentially, the same result in future cases would be to have the defense
attorneys pay their experts directly rather than having their retaining insurance carriers pay the
invoices. This small change in practice could make the difference between the evidence being admissible or not.
BPI, Inc. v. Nationwide Mutual Insurance Company,
No. 14-0799 (May 20, 2015)
Whether the decision in Cherrington, regarding defective workmanship causing bodily
injury or property damage constituting an “occurrence” under CGL policies, applied retroactively.
Cherrington’s holding applies retroactively to any case that was not final at the time the
Cherrington decision was rendered.
Facts:
In February of 2008, American Towers LLC (“American Towers”) hired BPI, Inc. (“BPI”),
a West Virginia contractor, to construct a cell tower, a cell tower compound, and an access road to
the tower. BPI was to use plans engineered and provided by American Towers. The access road
collapsed within one year after the project’s completion, allegedly due to the faulty workmanship
of BPI or its subcontractors.
American Towers filed a civil action against BPI, which filed a cross-claim against Nationwide Mutual Insurance Company (“Nationwide”). BPI asserted that any potential liability was
covered under its commercial general liability (“CGL”) policy purchased from Nationwide. Nationwide sought a declaration that it was not obligated to insure BPI for this incident.
The district court determined that the case depended on the application of West Virginia
law regarding BPI’s insurance policy covering property damage caused by an “occurrence.” The
Court in Cherrington v. Erie Insurance Property & Casualty Co. concluded that defective workmanship causing bodily injury or property damage was an “occurrence” under a CGL policy. 745
S.E.2d 508 (W. Va. 2013). Thus, resulting damages could be covered under a policy such as BPI’s
policy in this case. Prior to Cherrington, damages from faulty workmanship were not considered
to be caused by an “occurrence.”
The 2013 Cherrington decision was issued after American Towers filed its civil action
against BPI. To determine applicable law, the United States District Court for the Eastern District
of Kentucky posed a certified question to the Court regarding Cherrington’s retroactivity.
Holding:
The Court in Cherrington did not address retroactivity, with no reference to past or future
insurance policies. Retroactive cases apply to parties in the case before the court, as well as those
parties in pending cases. The Court used six factors in its analysis to determine retroactivity, as
laid out by its precedent. First, the nature of the substantive issue overruled must be determined. If
the issue involved a traditionally settled area of law, and the new rule was not foreshadowed, then
retroactivity is less justified. Second, procedural issues rather than substantive issues lend themselves to retroactivity. Third, overruled common law decisions may result in retroactivity because
the substantive issue usually has a narrower impact. Fourth, retroactivity is disfavored when substantial public issues are involved, which arise from statutory or constitutional interpretations that
depart from prior precedent. Fifth, the more radical a new decision is, the less likely it should be
applied retroactively. Finally, the Court will look at other courts’ precedents that have determined
the question of retroactivity in similar areas of law.
For the first factor, the Court leaned toward retroactivity because the definition of “occurrence”
was not a settled area of the law. The second factor was resolved because the case was a substantive matter, rather than a procedural one, which is more likely to be applied retroactively. Third, the
Court determined that retroactive application of Cherrington would only affect a narrow portion of
the law. The fourth factor was irrelevant because Cherrington did not represent a change in statutory or constitutional law. The Court further determined that the holding did not represent a radical
departure from prior law because it concerned faulty workmanship performed by a subcontractor.
The Court also considered Nationwide’s reliance interests and found that they did not mandate a finding of prospectivity. The Court acknowledged that retroactivity presented a degree of
unfairness to insurers who had presumably set their rates based upon a definition of “occurrence”
which differs from that in Cherrington. However, the Court stated that that was a common problem
when the law changes due to a judicial decision.
After examining all of the factors, the Court held that the determination regarding defective
workmanship causing bodily injury or property damage in Cherrington applied retroactively to any
pending claim. Thus, any case that was not final at the time the Cherrington decision was rendered
will have the benefit of the Court’s holding in Cherrington.
Impact on Business:
This decision applies the holding in Cherrington retroactively to claims pending at the time
the Cherrington decision was rendered. An “occurrence” under a CGL policy includes defective
workmanship that causes bodily injury or property damage.
Collins v. Nationwide Mutual Insurance Company,
No. 14-0357 (February 27, 2015) (memorandum decision)
The Court was asked to decide whether the circuit court had erred in granting summary
judgment in favor of the insurer by disregarding petitioner’s contradictory deposition.
The Court affirmed the circuit court’s holding granting summary judgment in favor of the
insurer. The circuit court was correct to find that the petitioner’s second deposition was insufficient
to create an issue of fact to defeat summary judgment.
Facts:
On November 8, 2008, Timothy Collins was driving a Ford truck when he was struck by a
vehicle driven by John Viars, who had run a red light. The Ford truck was owned by Delmos Collins, Timothy’s father. Timothy Collins submitted claims for his injuries under Mr. Viars’ insurance
policy and reached a settlement for the liability limits of $20,000. Timothy also submitted a claim
under his father’s policy with Farmers Insurance Group and reached a settlement for the policy
limit of $50,000.
The underlying dispute resulted from two claims Timothy made under two Nationwide
policies purchased by his father: (1) an underinsured motorists’ claim under a Nationwide automobile insurance policy, and (2) a claim under a Nationwide umbrella liability insurance policy.
Nationwide denied Timothy’s claim under his father’s policy because the policy did not list
the Ford truck as an insured vehicle. Additionally, Nationwide denied his claim under the umbrella
policy because the umbrella policy’s declaration page did not list Timothy’s Farmers Insurance
Group policy. Further, although the Nationwide automobile insurance policy was listed on the declaration page, it did not provide coverage because the Ford truck was not covered by that policy.
Petitioners asked the circuit court to declare that coverage existed under either Nationwide
policy. However, the circuit court found that coverage was excluded under both policies. Nationwide moved for summary judgment, to which petitioners responded by citing the father’s second
deposition, which asserted he had originally told the agent about the Ford truck and the agent had
told him the truck was covered. In the father’s initial deposition, he testified that he did not believe
he had to tell Nationwide’s agent about the truck because he thought it would be automatically
covered.
The circuit court rejected petitioners’ conflicting testimony as creating an issue of fact and
granted summary judgment in favor of Nationwide.
Holding:
The Court determined the circuit court to be correct in finding the deposition insufficient
to defeat summary judgment. Additionally, petitioners never explained the father’s change in testimony between the first and second depositions. The Court determined that the second deposition
was the father’s attempt to “improperly revitalize a lost case with contradictory and self-serving
testimony.” The Court, therefore, agreed with the circuit court that the denial of insurance cover-
age for Timothy’s accident was proper, and that Nationwide and the insurance agent were entitled
to summary judgment on all of petitioners’ claims.
Impact on Business:
This decision holds for the insurer in ensuring they are safeguarded from insureds changing their testimony without explanation.
Elk Run Coal Co. v. Canopius U.S. Insurance, Inc.,
No. 14–0723 (June 9, 2015)
The Court was asked to decide whether an indemnitor can agree to indemnify an indemnitee in an indemnification agreement for the indemnitor’s sole negligence.
An indemnitor can agree to indemnify an indemnitee for the indemnitee’s sole negligence.
Facts:
In Elk Run Coal Co. v. Canopius U.S. Ins., Inc., Medford Trucking, LLC (“Medford”)
entered into a “Hauling and Delivery Agreement” (“Agreement”) with Elk River Coal Co. (“Elk
River”) whereby Medford was to haul Elk River’s coal to various locations. The Agreement required Medford to “indemnify, defend and save harmless” Elk Run from and against any losses,
“whether on account of damage or injury (including death) to persons or property, violation of
law or regulation, or otherwise, relating to, resulting from, arising out of, caused by or sustained
in connection with, directly or indirectly, Contractor’s performance of the Work.” The Agreement
also required Medford to purchase insurance that would cover its liabilities under the Agreement,
and Elk Run was to be named as an additional insured. Medford obtained four $1,000,000.00 policies, including a general liability policy with Canopius US Insurance (“Canopius”), and an excess
policy with RSUI Indemnity Company (“RSUI”).
During the course of operations at an Elk Run facility, a Medford driver was sitting in his
truck as coal was loaded by an Elk Run employee. The Elk Run employee allegedly lost consciousness, causing his front-end loader to flip the Medford truck, injuring the driver. The driver
sued Elk Run, and Elk Run demanded indemnification from Medford without an assertion, by any
party, that Medford caused or contributed to the accident in any way. Both Canopius and National
ultimately denied indemnity, defense, and coverage. Canopius did so because it determined that the
injury resulted from Elk Run’s sole negligence. Elk Run settled with the driver but continued to
pursue a third-party declaratory action against the insurance companies. The circuit court granted
summary judgment in favor of the insurers.
Holding:
On June 9, 2015, the Supreme Court of Appeals of West Virginia held that a broad indemnity agreement can allow a party to be indemnified from its own sole negligence. In other words, a
party 0% at fault can bind itself to indemnify a party 100% at fault. On appeal, the court addressed
and accepted Elk Run’s four arguments for coverage under the Canopius commercial general liability policy. First, the court concluded that the Agreement was an “insured contract” that entitled
Elk Run to “stand[] in the shoes of Medford for coverage purposes.” Canopius argued that even
if the Agreement was an insured contract, it could not indemnify Elk Run for its sole negligence
because the insurance policy expressly provided coverage regarding Medford’s “acts or omissions;
or the acts or omissions of those acting on [Medford’s] behalf.” However, the court found that Elk
Run had been acting on Medford’s behalf by assisting Medford to accomplish the work required
by the Agreement, namely, loading a Medford truck with an Elk Run-owned front-loader.
Next, the court concluded that the Agreement was not void as against public policy simply
because it provided for indemnification of Elk Run’s own conduct. West Virginia Code § 55-8-4
requires the court to void a broad indemnity agreement when the indemnitee is solely negligent
only if “it cannot be inferred from the contract that there was a proper agreement to purchase insurance for the benefit of all concerned.” Even though the court did not believe the provision applied
to the contract at issue, it observed that the Agreement clearly provided that insurance was for the
benefit of all parties.
The Court also found that the language of the agreement was clear enough to indicate that
Medford agreed to indemnify Elk Run’s sole negligence. In so finding, the court distinguished
several other cases that had construed contracts against indemnity of a party’s sole negligence.
Unlike prior cases, the Agreement broadly and clearly provided for indemnification of “losses relating to or in connection with Medford’s work, either directly or indirectly.” The court concluded
that this language provided that Medford indemnify Elk Run as long as the “negligence bore some
relation . . . to Medford’s work.”
Because of the foregoing conclusions, the court reversed the summary judgment in regard
to Canopius and accordingly reversed the summary judgment for RSUI, which had provided excess general liability coverage.
Impact on Business:
The court’s decision in this case lends important guidance to how broad indemnity agreements will be construed when injury results from the sole negligence of the indemnified party. A
company contracting to indemnify another should define its obligation with precision, particularly
to avoid indemnification when it is not at fault. And businesses should make sure they have adequate and sufficient insurance coverage to cover all indemnification obligations.
Schoolhouse Limited Liability Company v. Creekside Owners Association,
No. 13–0812 (May 8, 2014) (memorandum decision)
Whether a good faith settlement extinguishes the non-settling parties’ cross-claims for implied indemnification.
Implied indemnification claims of a non-settling defendant against a settling defendant are
not automatically extinguished by a good faith settlement if (1) the plaintiff’s release of settling
parties is in good faith, and (2) the plaintiff releases and dismisses all possible claims against the
settling parties, including claims that are based on the vicarious liability of non-settling parties.
Facts:
Plaintiff sued a number of contractors and subcontractors for work performed. The defendant contractors and subcontractors asserted cross-claims for implied indemnification and contribution. Plaintiff settled with some of the defendants and submitted a stipulation explicitly dismissing claims of vicarious liability for work performed by the settling defendants. There was
no dispute that the settlement was a good faith settlement and that contribution cross-claims were
extinguished by the settlement. However, the non-settling defendant argued that the settlement did
not operate to extinguish its cross-claim for implied indemnification.
Holding:
Implied indemnification claims of a non-settling defendant against a settling defendant are
extinguished if (1) the plaintiff’s release of settling parties is in good faith, and (2) the plaintiff releases and dismisses all possible claims against the settling parties, including claims that are based
on the vicarious liability of non-settling parties.
Impact on Business:
If a business is named as a defendant in a case with multiple defendants, any separate,
non-global settlement negotiations with plaintiff should contemplate a release and dismissal of any
claims that could be asserted against a non-settling defendant for the vicarious or derivative liability of the settling defendant.
State Auto Property & Casualty Insurance Company v. Kober,
No. 14-0556 (June 10, 2015) (memorandum decision)
Whether the circuit court applied an improper notice requirement when dismissing State
Auto Property & Casualty Insurance Company’s (“State Auto”) subrogation claim for implied
indemnity.
The circuit court’s order was reversed and remanded. The Court held the circuit court had
erred in applying a notice requirement for State Auto’s claim for implied indemnity. Rather, the
notice requirement was only applicable in contribution claims.
Facts:
On August 8, 2011, Eric Connell, an employee of Randy’s Contracting, was involved in a
car accident in Hampshire County, West Virginia. At the time, Connell was driving a truck towing
a trailer that had been manufactured by defendant Kaufman Trailer. Both the truck and trailer were
owned by Randy’s Contracting. The accident occurred when an axle, manufactured by defendant
Al-Ko Kober, failed, which caused the trailer to lose a wheel. The trailer fishtailed into oncoming
traffic and was struck by a truck driven by James Coleman.
Randy’s Contracting is insured by State Auto under a policy that provides liability insurance for vehicles owned and operated by Randy’s Contracting. Prior to the initiation of lawsuits,
State Auto paid Coleman for personal injuries and property damage incurred from the accident.
State Auto also paid its insured, Randy’s Contracting, for its property damage arising from the accident. Al-Ko Kober and Kaufman Trailer were not party to these settlements.
State Auto contended it had a contractual right of subrogation arising from its policy issued
to Randy’s Contracting, allowing it to recover from defendants the money paid to Randy’s Contracting and Coleman. Responding to State Auto’s complaint, defendants filed motions to dismiss.
The defendants argued that State Auto was making claims for contribution, and that State Auto’s
suit was barred because State Auto did not apprise the defendants of the settlements.
State Auto argued that it was seeking indemnification, rather than contribution. The circuit
court ruled for the defendants, stating that, “the Plaintiff’s independent cause of action for indemnification was extinguished when the Plaintiff failed to give notice to the Defendants or to make
them a party to any settlement or litigation.”
Holding:
Although tortfeasors are required to provide notice to other tortfeasors of settlement negotiations with an injured party to recover contribution from the other tortfeasors, this notice requirement is inapplicable for claims of implied indemnity. Therefore, State Auto was not required to
provide notice to the defendants of the settlement negotiation and consummation to maintain its
claim for indemnity. The Court held that the circuit court had erred in dismissing the subrogation
claims for both Randy’s Contracting and Coleman by relying on an improper notice requirement.
Concurrence:
Impact on Business:
This decision explains that insurers attempting to file claims for implied indemnity do not
need to notify other tortfeasors of settlement negotiations to recover.
Justice Loughry, joined by Justice Ketchum, concurred that no notice requirement was
required to advance an implied indemnification claim. However, Justice Loughry argued that the
Court should revisit its holding in Charleston Area Medical Center, Inc. v. Parke-Davis, which
held that a tortfeasor who settles with an injured person before a lawsuit could not bring a contribution claim against a joint tortfeasor who was not a participant in the settlement. 614 S.E.2d 15 (W.
Va. 2005). Justice Loughry believed Parke-Davis was wrongly decided, and that it discouraged
parties from promptly resolving claims.
Tuttle v. State Farm Mutual Automobile Insurance Company,
No. 14-0427 (April 10, 2015) (memorandum decision)
Whether the circuit court erred in finding there was no meeting of the minds to enforce a
settlement when the insurer’s agent had mistakenly omitted words from correspondence regarding
settlement demands.
The Court affirmed the circuit court’s order, finding that the court did not err in determining there was no meeting of the minds because the insurer’s agent had not clearly accepted the
final settlement offer.
Facts:
On March 8, 2012, a car driven by Samantha Baire struck Connie Tuttle’s oncoming car,
causing Ms. Tuttle to sustain injuries and require medical treatment. The car driven by Ms. Baire
was registered in the name of her father and was insured by State Farm Mutual Automobile Insurance Company (“State Farm”).
Ms. Tuttle’s counsel, Travis A. Griffith, sent State Farm’s claim representative, Terry Cole,
a settlement demand of $44,980.92. Thereafter, Mr. Cole countered with a settlement offer of
$17,000. Mr. Griffith then sent a second demand of $43,000, and provided documentation of petitioner’s medical records from the accident, which totaled $12,024.99. Mr. Cole then countered
with an offer of $19,524.97.
Mr. Griffith made a final demand of $40,500, stating that if the demand was not met, Ms.
Tuttle would file suit. Mr. Cole responded a day later by facsimile, stating, “Please be advised[,]
based on the current info, I am meet your $40[,]500 counter demand. Please contact me at 304368-3830 to discuss.” The same day, Mr. Griffith, by return mail, confirmed what he believed to
be Ms. Tuttle’s acceptance of State Farm’s counteroffer. In the acceptance letter, Mr. Griffith noted
his law firm’s tax identification number and described how the settlement would be drafted.
The next day, Mr. Cole informed Mr. Griffith that his facsimile failed to include the words
“unable to.” The correspondence should have read: “Please be advised based on the current info,
I am unable to meet your $40[,]500 counter demand. Please contact me . . . to discuss.” Thereafter, Mr. Griffith spoke to Mr. Cole by phone, where Mr. Cole confirmed that State Farm had not
increased its settlement offer to $40,500.
On January 27, 2014, Ms. Tuttle filed a petition to enforce the settlement, claiming that the
facsimile contained a valid settlement offer that she had accepted. The circuit court held a hearing
on the petition and determined that there was no contract, and, therefore, no settlement to enforce.
The court found there was a typographical mistake with no meeting of the minds, no consideration
was given, and the parties agreed to disagree. The circuit court then dismissed the matter.
Ms. Tuttle appealed, arguing that the circuit court erred because Mr. Cole made a unilateral
mistake and, therefore, should bear the burden.
Holding:
The Court held that, despite the fact that a unilateral mistake of a party to a contract will
not remove the effects of an agreement, Mr. Cole did not show a clear acceptance of Ms. Tuttle’s
final settlement offer. Mr. Cole’s typographical error did not automatically turn his response into an
acceptance. The Court concluded that the circuit court did not err in finding there was no meeting
of the minds between the parties.
This decision follows the authority that there must be a meeting of the minds for a valid,
enforceable settlement, and does not use the insurer’s typographical error to its detriment.
Impact on Business:
West Virginia Mutual Insurance Company v. Betty J. Adkins,
No. 13-0692 (October 15, 2014)
Whether the circuit court erred in finding there to be $6 million in coverage available
for respondents’ claims asserted against a vicariously liable employer for an employee’s medical
malpractice. Specifically, whether the circuit court erred in using two separate policy periods to
calculate the employer’s insurance limits.
The Court reversed the circuit court’s ruling that coverage existed under multiple policy
periods, finding instead that the employer had $3 million in separate policy limits. Additionally,
the medical corporation did not share in the surgeon’s separate limits under his tail coverage where
both the corporation and the surgeon had separate limits of insurance under the policy terms. The
Court refused to reform the insurer’s policy to reflect the insurer’s intention to have shared limits.
Facts:
West Virginia Mutual Insurance Company (“WVMIC”) is a professional medical liability
insurer. United Health Professionals, Inc. (“UHP”) is a West Virginia corporation that provides
professional medical services, and was insured by WVMIC under a claims-made medical malpractice insurance policy for 2010.
Respondents initiated medical malpractice claims arising out of surgeries performed in
2006 and 2007 by Dr. Mitchell E. Nutt, while he was an employee of UHP. The respondents
brought claims against Dr. Nutt in 2008, 2009, and 2010, and asserted vicarious liability claims
against UHP in 2010.
The parties reached a settlement agreement to which WVMIC paid Dr. Nutt’s $3 million in
aggregate limits under his extended reporting endorsement (“tail coverage”). Dr. Nutt’s tail coverage was acquired upon his departure from employment with UHP on March 14, 2008. The tail
coverage provides Dr. Nutt with separate limits of coverage of $1 million per covered medical incident with a $3 million annual aggregate. The parties agreed to resolve by judifical determination
whether additional coverage was available under the 2010 Policy for the claims asserted against
UHP.
The circuit court granted summary judgment in favor of the respondents, finding there was
an additional $6 million in policy limits available for their claims asserted against UHP under the
2010 Policy. The court interpreted a change in the policy’s wording to allow coverage for multiple
policy periods. Thus, in reaching the total of $6 million, the circuit court had aggregated the policy
limits from 2006 and 2007—the years when the surgeries occurred.
WVMIC argued that there were no separate insurance limits available to UHP under the
2010 Policy, and even if separate insurance limits were available, then there was a mutual mistake
warranting a reformation of the 2010 Policy. WVMIC argued that the payment under Dr. Nutt’s
tail coverage were to apply to the claims against UHP as well. WVMIC asked the Court to reverse
the circuit court’s ruling that coverage existed under multiple policy periods.
Holding:
The Court disagreed with WVMIC’s argument that UHP shared in Dr. Nutt’s policy limits
and further coverage was not available. WVMIC argued that UHP only intended to have separate
policy limits for medical incidents occurring after January 1, 2008, and shared limits for those occurring between January 1, 2008, and January 1, 2002. The Court was persuaded in its decision to
reject WVMIC’s argument by the fact that Dr. Nutt was a sole insured under his tail coverage and
that there was no sharing designation for UHP in the 2010 policy.
Finally, the Court rejected WVMIC’s argument to reform its 2010 policy to conform with
UHP’s intention for shared limits occurring prior to January of 2008. WVMIC wanted the Court to
declare the policy’s effective date of 2008 as its retroactive date. On its face, the policy’s retroactive date was 2002. The Court declined to do this.
Justice Davis’s Dissent:
Justice Davis criticized the Court for disregarding the traumatic nature of the respondents’
injuries and allowing recovery for only one-half of the coverage periods. The change from the
policy’s prior language indicated an intention to change the limits of coverage in the 2008 insurance policy, as well as the coverage for all subsequent years. While the prior version of the policy
language required medical incidents to have been reported during the policy period to be covered
thereunder, the 2010 version provided coverage for “all covered medical incident(s) during the
policy period.”
Impact on Business:
This decision interprets the employer’s insurance policy strictly and, although it reduces
the circuit court’s policy limit declaration, it does not come to the insurer’s aid regarding reformation of the policy.
First, the Court disagreed with the circuit court’s conclusion that the policy’s language
required application of the aggregate limits of insurance for the policy period when the incidents
occurred, which would give UHP a total of $6 million in policy limits for the respondents’ claims.
The term “policy period” did not refer to the prior 2006 and 2007 claims-made policies. Rather,
“policy period” simply referred to the 2010 policy period. Looking at UHP’s policy limits as set
forth in the 2010 policy declarations, the Court determined that UHP had separate limits of insurance with a $3 million annual aggregate.
West Virginia ex rel. John D. Perdue v. Nationwide Life Insurance Company,
No. 14-0100 (June 16, 2015)
Whether the circuit court erred in dismissing petitioner’s complaints that insurers had unlawfully retained unclaimed life insurance proceeds that should have been delivered to the West
Virginia State Treasurer.
The circuit court erred in dismissing petitioner’s complaints because the statute’s plain
language showed the insurers had an affirmative duty to pay proceeds to the Treasurer, regardless
of whether beneficiaries brought a claim. Thus, the Court reversed the circuit court’s judgment.
Facts:
West Virginia State Treasurer, John D. Perdue, appealed an order dismissing 63 complaints
that he had filed against insurance companies doing business in West Virginia. The complaints
alleged that the insurers had unlawfully retained life insurance proceeds unclaimed by state residents, in contravention of the West Virginia Uniform Unclaimed Property Act of 1997 (the “Act”).
Under the Act, the Treasurer is to deposit any proceeds into an unclaimed property fund.
Perdue sought to enforce the insurers’ obligations under the Act to file reports and transfer
abandoned life insurance proceeds. He claimed that because the insurers failed to use the Department of Commerce’s Death Master File (“DMF”) to learn of their insureds’ deaths, they had failed
to truthfully report abandoned property under the Act and shortchanged the unclaimed property
fund.
The circuit court believed the Act to be ambiguous and, therefore, looked to a different
statute to determine legislative intent. The circuit court dismissed Perdue’s claims, stating that
until proof of an insured’s death had been submitted to the insurer, the insurer had no obligation to
pay the policy proceeds under the Act. Thus, the insurer should be allowed to retain the proceeds
until someone having a contractually derived interest made a formal claim per the policy.
Holding:
The Court held that the circuit court had failed to give effect to the Act’s plain meaning
and, therefore, had frustrated legislative intent. The Court determined that with respect to the presumptively abandoned proceeds of a life insurance policy, the legislature intended to affirmatively
separate the insurer’s obligation to pay those proceeds to the Treasurer from the filing of any claim
for benefits required by the policy terms. The insurer’s duty to account for and pay proceeds is tied
to the insured’s death, and matures three years after.
However, the West Virginia Uniform Unclaimed Property Act imposes no specific duty
on insurers to search the DMF or other similar source. The Act only requires insurers generally,
as holders of abandoned property, to account for and turn over the property to the Treasurer. The
Court stated that insurers, based upon their resources and volume of business, can each determine
the most effective way to discover whether their insureds are still living. Insurers may choose to
contact insureds directly, delegate the task to agents, or review the DMF.
Concurrence:
Justice Ketchum concurred with the Court, but would have required insurers to regularly
search for deceased insureds by using the DMF. Justice Ketchum argued that insurers use the DMF
when it is to their benefit and ignore it when it causes them to pay. He warned against neglecting
the DMF because it was to the detriment of beneficiaries and allowed them to keep money that
should have been paid to the unclaimed property fund.
This decision gives insurers an affirmative duty to discover whether their insureds have
died and, thereafter, remit any unclaimed life insurance policy proceeds to the Treasurer. However,
the insurers have some discretion in choosing their method of determining whether policyholders
are deceased. They are not obligated to use the DMF.
Impact on Business:
RMLL Enterprises, Inc. d/b/a Jill’s Lounge v. Mark W. Matkovich, State Tax Commissioner,
No. 13-1275 (October 17, 2014) (memorandum decision)
TAXATION
Whether the Circuit Court had correctly granted the Tax Commissioner’s motion to dismiss
the taxpayer’s appeal of an adverse administrative decision due to the taxpayer’s failure to file a
mandatory appeal bond?
The Court affirmed the Circuit Court on the basis that, despite the general provision of
the Administrative Procedures Act, addressing judicial review of administrative decisions and expressly providing that no appeal bond was required, the more recently enacted statute, specifically
governing judicial review of administrative decisions issued by the West Virginia Office of Tax
Appeals (WVOTA), and making the filing of an appeal bond jurisdictional, controlled.
Facts:
When the taxpayer received, from the Tax Commissioner, notices of assessment of additional sales and use tax due from the conduct of its business, it challenged such assessments before
the WVOTA, which, after a hearing, issued an administrative decision upholding the assessments
in the aggregate amount of $234,878.44. The taxpayer then filed an appeal of the administrative
decision in the Circuit Court.
Then, before any proceedings on the merits of the appeal were had, the Tax Commissioner
moved to dismiss the taxpayer’s appeal based on its failure to timely file an appeal bond equal in
an amount equal to the assessment (i.e. “pay to play”). In granting the motion, the Circuit Court
cited West Virginia Code §11-10A-19(e) which makes the timely filing of such a bond a jurisdictional prerequisite to the Court’s consideration of the appeal. The taxpayer had relied, instead, on
the general provisions for judicial review of administrative agency rulings in the Administrative
Procedures Act, under which an appeal bond was expressly made not a requirement. See, West
Virginia Code §29A-5-4(b). The taxpayer then sought review of the Circuit Court’s ruling before
the West Virginia Supreme Court.
Holding:
Upon review, the Court, in a unanimous Memorandum Decision, affirmed the Circuit
Court’s ruling. In doing so, the Court relied on the principle of statutory construction whereby,
when related provisions of law cannot be reconciled otherwise, those specifically addressing a subject shall override other, particularly earlier, provisions which are only generally applicable to the
same subject. Thus, the Court held that, because the statute providing for appeals of administrative
decisions of the WVOTA and requiring the appeal bond was both more specific and more recently
enacted than the provision of the Administrative Procedures Act expressly prohibiting such a bond
requirement, the former controlled.
In its Memorandum Decision, the Court cited its earlier holding in Frantz v Palmer, 211
W.Va. 188, 564 S.E.2d 398 (2001), which construed and applied the predecessor statute to West
Virginia Code § 11-10A-19(e), as an example of the rule that posting an appeal bond in such cases
is jurisdictional. However, despite that reference, the Court in the present case did not acknowledge the actual holding of Frantz v Palmer expressly recognizing an exception to the filing of a
bond in the same kind of appeal.
Impact on Business:
This ruling, by resolving the inconsistency between the two statutes in favor of the one
making mandatory the timely filing of an bond for an appeal of a WVOTA administrative decision
and, thus, confirming the “pay to play” rule in tax appeals, keeps West Virginia out of the mainstream on that important business tax policy issue. However, by doing it in the form of a Memorandum Decision, and by not overtly overruling Frantz v. Palmer, the Court preserved an important
exception to “pay to play,” at least for financially-challenged small business taxpayers.
TAXATION
Specifically, the holding in Frantz v. Palmer was that, because the predecessor tax appeal
statute authorized the Tax Commissioner to waive the appeal bond requirement upon a finding that
the taxpayer’s assets were sufficient to satisfy the liability of a legally final assessment, when, due
to the taxpayer’s impecunious circumstances, the Commissioner could so find, the state Constitution’s open courts provision remitted the question of an appeal bond to the Court’s discretion.
Presumably, because the taxpayer’s capacity to post the required bond was not raised in this case,
the Court did not raise it on its own. Thus, at the least, it must be concluded that the holding in
Frantz v. Palmer regarding constitutional access to the courts remains good law. That conclusion
is all the more compelling in light of the fact that the current statute, under which the present case
was decided, was enacted after Frantz v. Palmer and added an express provision authorizing the
appellate court in circumstances where the Tax Commissioner “refuses” to do so, to consider and
certify the taxpayer’s financial capacity to satisfy the tax liability at issue if made legally final.
United Hospital Center, Inc. v. Cheryl Romano, Assessor of Harrison County, et al,
233 W.Va. 313, 758 S.E. 2d 240, No. 13-0120 (March 26, 2014)
TAXATION
Whether, for ad valorem property tax purposes, the real property owned by a charitable
hospital corporation, was exempt from taxation for tax year 2011 when its newly constructed hospital on that property was not, due to construction delays, licensed and open for patient treatment
until October 3, 2010?
Notwithstanding the hospital’s unopened and unlicensed status as of the statutory assessment date of July 1, 2010, in light of the circumstances of its near-completion and the preliminary
information technology, security and other housekeeping activities conducted thereon by that date,
a rational construction of the spirit, purpose and intent of the constitutional, statutory and regulatory provisions of law governing the question, yielded the conclusion that the property was exempt
for tax year 2011.
Facts:
University Hospital Center, Inc. (the hospital) is a non-profit, charitable organization recognized as exempt from federal income tax under Internal Revenue Code Section 501(c)(3), and
has as its primary purpose the operation of a charitable hospital in Harrison County. In furtherance of that purpose, the hospital constructed, on land it owned, a larger, more modern hospital
to replace its prior facility located in another part of the County. Due to unexpected construction
delays caused by a water line break, the planned 2010 opening of the hospital for the treatment of
patients (originally scheduled to occur on or before July 1) was postponed until October 3, 2010.
However, certain information technology, housekeeping, security and environmental functions of
the hospital were in place and operating at the new facility by July 1.
Holding:
Upon review, the sCourt, in a 4 to 1 decision, overruled and reversed the Circuit Court’s
holding, which had, in turn, sustained the earlier rulings of the Assessor and the State Tax Commissioner, that the property was taxable in 2011. Justice Davis dissented and would have affirmed
the Circuit Court.
The general rule of law governing the issue is that to be exempt for the ensuing calendar
year, the property of a charitable organization must, as of the July 1 assessment date, be used
“primarily and immediately” for charitable purposes and may not be used or leased out for profit.
In its decision, the Supreme Court, after an exhaustive review of the constitutional, statutory and
regulatory provisions both generally and specifically governing the tax treatment of a charitable
hospital’s property, and of its own decisional history applying such laws, held that, given the circumstances, it was clearly intended by such laws that the property would be exempt and, in effect,
that any language in the legislative rules to the contrary had to give way to a “rational” reading of
all the applicable authority taken as a whole.
In so holding, the Court recognized the specific terms of the legislative rule governing
charitable hospitals which provided that incomplete construction, as of July 1, of what was to
become a charitable hospital, did not satisfy the requirement that, to be exempt, “the actual use
as to make the primary and immediate use of the property charitable” was required. 110 C.S.R.
§3.24.17.3. However, the Court, relying, in part, on the actual pre-opening operations taking place
at the hospital on July 1, and, in part, on its view of a necessarily rational reading of the intent of
all the applicable authorities, held that the hospital was being used for charitable purposes as of the
July 1 date.
Dissenting Opinion:
In essence, Justice Davis concluded that because the words of the legislative rule specifically addressing incomplete construction of a charitable hospital were written to make such a hospital taxable, the Legislature, in approving that rule, must have intended such an outcome. While
she accuses the majority of essentially disregarding that rule in reaching such a narrow conclusion,
she failed to address the overall design and purpose of all the authority governing the matter on
which the majority clearly relied. Of course, at the time of this decision, none of us had the benefit
of the latest expansive statutory construction jurisprudence flowing from the United States Supreme Court in King, et al. v. Burwell, Secretary of Health and Human Services, et al., No. 14-114
(June 25, 2015).
Impact on Business:
This ruling, given the scope of its application to the major components of the ever-growing
healthcare industry which operate in an income-tax-exempt environment, should be viewed favorably due to its rational approach in using the constitutional policy of providing property tax
exemptions for enterprises which relieve the burdens of government. That approach will remain
important until the day arrives when revenue-starved local governments no longer have to challenge any and all claims of either exemption, or of lower taxable commercial property values, no
matter how reasonable such claims are under the facts and the intent of governing law.
TAXATION
Justice Davis’ dissent emphasized the rule of statutory construction whereby when related
provisions of law cannot be otherwise reconciled, those specifically addressing a subject shall
override other provisions which are only generally applicable to the same subject. Indeed, she
declared herself “speechless” that the majority could have ruled as it did when, due to the absence
of an active license to operate a hospital by treating patients at the subject property as of July 1, the
hospital could not have legally done so. Her dissent then noted, but failed to fully address, the fact
that, while not licensed to treat patients there as of July 1, the hospital was, by that date, actively
conducting other functions there, all of which were essential to the primary and immediate purpose
of treating patients.
State ex rel. J.C. ex rel. Michelle C. v. Mazzone,
772 S.E.2d 336 (2015)
VENUE
Whether the Mass Litigation Panel properly dismissed personal injury claims made by
non-resident families on the basis of forum non conveniens.
Utilizing the eight factors found in West Virginia Code §56-1-1a, the West Virginia Supreme Court held that the Mass Litigation Panel did not error when dismissing twenty non-resident
plaintiffs on the basis of forum non conveniens because “West Virginia has no real interest in trying
non-resident plaintiffs’ claims against non-resident defendants involving causes of action that accrued in states other than West Virginia.” Id. at 349.
Facts:
This litigation commenced on July 11, 2012, when a product liability and negligence claim
was filed in Wayne County (West Virginia) Circuit Court by nineteen unrelated mothers (“petitioners”). The petitioners alleged that taking the drug Zoloft during their pregnancies caused birth
defects in their children. These nineteen petitioners were from multiple states with only one petitioner being from West Virginia.
The original complaint was followed by a series of interesting procedures that included
multiple motions, remands, and reviews by federal courts, referrals to and rulings by the Mass
Litigation Panel, and consolidation with another case that had similar facts. Ultimately, on January 14, 2014, then-Chief Justice Davis (on behalf of the West Virginia Supreme Court) issued an
administrative order to transfer the two civil actions to the Mass Litigation Panel.
On July 9, 2014, the respondents filed a motion with the Mass Litigation Panel seeking to
dismiss the twenty-two non-resident petitioners. On October 21, 2014, the Panel unanimously
granted the respondents motion dismissing twenty of the twenty-two petitioners’ cases. The petitioners responded to the order by seeking a writ of prohibition from the West Virginia Supreme
Court to prevent the order’s enforcement.
Holding:
In its holding, the Court emphasized that it must consider the eight factors enumerated in
West Virginia Code §56-1-1(a) as a way of determining whether, in the interest of justice and for
the convenience of the parties, a claim or action should be dismissed on the basis of forum non
conveniens. The Court thoroughly analyzed each of the eight factors, highlighting factors that
weighed against the plaintiffs. Specifically, the Court found that the Panel was correct in finding
that a non-resident petitioners’ choice of forum is entitled to less deference; the difficulty and
costs associated with obtaining the attendance of witnesses and production of documents would
not be insubstantial; the lack of subpoena power would make it difficult to compel attendance by
witnesses; there would be administrative difficulties flowing from court congestion, including unnecessary conflict of law problems, difficulty in applying foreign law, and the burdening of West
Virginia citizens with jury duty; and that all discovery that had been previously conducted is easily
transferrable to any re-filed proceeding in any of the petitioners’ home states.
Based on these reasons, the Court found no error in the Panel’s decision to dismiss the
non-resident petitioners’ cases on the basis of forum non conveniens. In a 3-2 decision, with Justices Davis and Workman dissenting on the basis of the motion to dismiss not being filed timely,
the Court held that the cases could be tried substantially more inexpensively and expeditiously in
states where the sources of proof would be more easily accessible.
Impact on Business:
VENUE
This ruling by the Court appears to be logical and based on common sense – why would
West Virginia be interested in adjudicating claims involving out-of-state parties that arose in a state
other than West Virginia? This decision is noteworthy because of the great lengths the Court has
traveled in previous opinions to welcome such cases with little or no nexus to West Virginia. This
decision appears to be good for business because it tends to establish some stability in ascertaining
appropriate forums for suits.
Hammons v. West Virginia Office of Insurance Commissioner,
2015 WL 3386875, --SE.2d-- (May 20, 2015)
WORKER’S COMPENSATION
The issue in the case related to the timeliness of a request for a permanent partial disability
(“PPD”) evaluation. However, the more intriguing issue is the dialogue of the Court in its majority
and dissenting opinions regarding its treatment of memorandum decisions and the implicit need
for an intermediate appellate court.
The Court overturned a series of memorandum decisions in order to achieve the end result
of remanding the case to the Board of Review to allow the Petitioners’ requests for a PPD evaluation.
Facts:
Hammons involved two consolidated appeals from the workers’ compensation Board of
Review where the claimants were denied a PPD evaluation. Id. at 8. The Court discussed the
remedial purposes of workers’ compensation as well as the law governing judicial interpretation
and application of a statute (in this case, a workers’ compensation file re-opening request filed
pursuant to W. Va. Code §23-4-16(a)(2)). Id. at 11-14. At the heart of the case was whether the
claimants, Hammons and Stinnett, had filed timely their claims for permanent partial disability
(PPD) benefits above and beyond their original claims. West Virginia Code § 23-4-16(a)(2) states
that a request for PPD benefits must be made within five years of the initial workers’ compensation
award.
In the case of Mr. Hammons, he was awarded a 4% permanent partial disability award for
a lower leg injury on June 6, 2005. He subsequently developed back pain and filed an additional
claim based on the original injury, appealing all the way to the West Virginia Supreme Court,
which ruled in his favor on January 4, 2010. He filed his an additional PPD claim on August 9,
2010, which was beyond the five-year time limitation from his initial award.
In the case of Ms. Stinnett, she was awarded a 22% PPD award on January 21, 2000 for a
wrist injury that resulted from a fall. She began experiencing back pain that was ruled compensable on January 14, 2005, a week before her time-window expired. No request for additional
compensation was filed and litigation commenced on August 30, 2005 regarding authorization
for back surgery after her claim was denied because her back pain was the result of a pre-existing
condition. This litigation was decided in her favor on July 20, 2009 but she did not file a claim for
additional PPD benefits until July 5, 2011, more than eleven years after her initial award.
The Court ruled that both Mr. Hammons and Ms. Stinnett had made their PPD requests
within the required timeframe. In both cases the Court stated that pending litigation held up the
claimants’ ability to file claims for additional benefits, despite the fact that the Hammons litigation was concluded approximately 5 months before the deadline and the Stinnett litigation was not
initiated until nearly 7 months after the deadline.
Holding:
The Court overturned a series of memorandum decisions in order to achieve the end result
of remanding the case to the Board of Review to allow the Petitioners’ request for a PPD evaluation. The Court declared that “[g]iven the abbreviated factual and legal discussion set forth in this
Court’s memorandum decisions, we cannot say that such prior decisions have fully considered and
analyzed the applicable statutory and jurisprudential law as thoroughly and thoughtfully as does
our extensive discussion of the issue herein.” Id. at 38 (emphasis added).
Dissenting Opinion:
sent:
Justice Loughry pounced on the majority’s treatment of memorandum decisions in his dis-
I am dumbfounded by the message that this statement sends to all of the litigants
that come before this Court. For the majority to indicate that this Court does not
give full consideration and attention to cases that are decided through memorandum decisions is absolutely appalling and inaccurate. As explained in the comment
to Rule 21 of the Rules of Appellate Procedure, this Court began issuing memorandum decisions in December 2010 to “reinforce the fact that every appeal will receive a decision on the merits that sets forth the considered judgment of the Court.”
W.Va. R.App.P. 21 cmt. “[T]here is no question that memorandum decisions are
pronouncements on the merits that fully comply with the constitutional requirements to address every point fairly arising upon the record and to state the reasons
for a decision concisely in writing.” State v. McKinley, 234 W.Va. 143,-, 764 S.E.2d
303, 311 (2014). For the majority to suggest otherwise in order to justify a radical
departure from the doctrine of stare decisis will only reinforce the belief held by
some that we do not “thoroughly and thoughtfully” decide every case that comes
before us.
Id. at 23 (emphasis added).
Impact on Business:
The Court has maintained that it considers the merits of every case before it, regardless of
the form of opinion the Court issues. See Wesbanco Bank, Inc. v. Mantz, No. 11-0435, 2011 WL
8197529, at *1 (W. Va. Oct. 11, 2011) (“Upon careful consideration, the Court concludes that the
circuit court’s order should be reversed in a memorandum decision pursuant to Rule 21(d) of the
Revised Rules.”); Butler v. Plumley, No. 12-1263, 2013 WL 5508395, at *4 (W. Va. Oct. 4, 2013)
(“The circuit court noted that in petitioner’s direct appeal, this Court upheld petitioner’s sentences
in a memorandum decision and that the memorandum decision constituted a decision on the merits pursuant to Rule 21 of the West Virginia Rules of Appellate Procedure.”).
The dialogue between Justice Davis and Justice Loughry suggests that memorandum decisions do not receive such careful consideration. The broader impact of this decision is that it
reinforces the clarion call for an intermediate appellate court. If the Court is not “thoroughly and
thoughtfully” deciding each case presented to it, it stands to reason that another layer of judicial
review is needed to ensure thorough consideration of the merits of each case. The West Virginia
Legislature has certainly discussed the need for an intermediate appellate court in the last few
sessions. The interesting thing about Hammons is that the Supreme Court of Appeals of West
Virginia is now implicitly discussing the need as well.
workers’ compensation
Recognizing that its decision in the cases sub judice is a departure from this Court’s
previous ruling in Lewis, as well as several other factually similar cases, the majority explains its abrupt 180 degree shift in opinion with the following incredible
statement: “Given the abbreviated factual and legal discussion set forth in this
Court’s memorandum decisions, we cannot say that such prior decisions have fully
considered and analyzed the applicable statutory and jurisprudential law as thoroughly and thoughtfully as does our extensive discussion of the issue herein.”
In re: Shana H. for Russell H. v. Amfire, LLC, Slip Op.
(February 10, 2015)
WORKERS’ COMPENSATION
1. Whether the six-month statute of limitations for filing a claim for dependents’ benefits may
be tolled.
2. Who is the proper party to file a dependents’ claim on behalf of a minor child?
1.
Where a dependents’ claim for death benefits is delayed because the claimant was unaware
and could not have learned through reasonable diligence that the decedent’s cause of death
was work-related, the six months statute of limitations for filing a claim is tolled until the
claimant, through reasonable diligence, learns of evidence linking the work-related injury
or disease to the decedent’s death.
2. A dependent’s claim may be filed on behalf of a minor child by his or her attorney or by a
member of his or her family.
Facts:
On March 24, 2009, the claimant suffered a work-related injury when he was hit in the
head which rendered him unconscious for one minute and resulted in a “no lost time” injury.
On December 7, 2010, the claimant died in his sleep and an autopsy performed by the
chief medical examiner the next day, determined that his death was the result of a traumatic seizure brought on by the 2009 no lost time injury. The autopsy report was not communicated to his
family until August 24, 2011. The deceased claimant left behind a minor child in the care of his
mother who then filed an application for dependent’s benefits on behalf of the minor child more
than six months after the date of death. The claim was rejected by the claims administrator on the
grounds that the claim was not timely filed and because the child’s grandmother was not the proper
person to file the application for dependent benefits since she was not the child’s legal guardian.
The claims administrator also ruled that there was insufficient evidence to establish a connection
between the March, 2009 injury and his death in December 2010. The Office of Judges and the
Workers’ Compensation Board of Review affirmed the denial of benefits. The West Virginia Supreme Court of Appeals reversed the denial.
Holding:
In interpreting West Virginia Code §23-4-15(a), the Court concluded that notwithstanding
the specific language of the statute, the six-month time period may be tolled when the dependent
delays in filing a claim because he or she could not have known, through reasonable diligence,
that the cause of death was work-related and such delay was not the result of the dependent’s own
conduct.
The Court also concluded that the specific language of Code §23-4-15(a) provides that
when the employee or the dependent of the employee is mentally or physically incapable of filing
the application, it may be filed by his or her attorney or by a member of his or her family.
Impact on Business:
The Court’s definition specifically expands the time period within which a claim for dependent’s benefits may be filed beyond the six months provided in the statute, notwithstanding specific language that the time limitation is a condition of right and thus jurisdictional. Additionally,
notwithstanding the specific language of Code §23-4-15(a), a dependent of the deceased employee
may have a claim for dependent’s benefits filed by an attorney or a member of the dependent’s
family.
WORKERS’ COMPENSATION
NOTES
1624 Kanawha Blvd. East • Charleston, WV 25311
Phone: 304.342.1115 • Fax: 304.342.1130
wvchamber.com

2015 Courtwatch - West Virginia Chamber of Commerce

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