Virginia Supreme Court revives epic suit against Massey Coal
If Hugh Caperton’s litigation against Massey Coal were a cat, it would now be entering its sixth or seventh life, thanks to a ruling Thursday by the Supreme Court of Virginia.
Long ago, in 1998 to be exact, the West Virginia coal mining executive launched his case against Massey, which Caperton accused of driving his mining business into ruin. According to Caperton and his lawyers at Reed Smith, when Massey acquired a company Caperton supplied with coal, it aborted Caperton’s supply agreement with the acquired company, put Caperton’s business on the brink of collapse, then reneged on tentative offers to buy Caperton’s operations. Caperton sued Massey’s subsidiary in Virginia state court for breaching the original supply contract and won a $6 million jury verdict. But he also brought tort claims against Massey in West Virginia, since that’s where he lived and where his fateful meetings with Massey’s then chief, Don Blankenship, took place. Caperton believed that Blankenship meant to destroy him, and a state-court jury in West Virginia apparently agreed. In 2002, it awarded Caperton more than $50 million in punitive and compensatory damages.
The West Virginia Supreme Court of Appeals, however, was more kindly disposed toward Blankenship and Massey. A lot more kindly disposed. As it would later emerge, one judge on the state high court had vacationed with Blankenship on the French Riviera. Another had received $3 million in contributions from Blankenship in his campaign for a seat on the Supreme Court – more than the combined contributions of all the rest of the judge’s supporters. Despite recusal efforts by Caperton and Reed Smith, the West Virginia high court struck down the verdict in 2007 on the grounds that a forum selection clause in Caperton’s original supply contract required him to bring any claims in Virginia – and because Caperton had already obtained a judgment in Virginia, his tort claims were barred under the doctrine of res judicata.
On reconsideration motions, two high court judges recused themselves, but not the judge elected with the help of Blankenship’s money. In its second ruling on Caperton’s jury verdict, the West Virginia Supreme Court once again struck the jury verdict. Reed Smith continued to argue that Caperton’s due process rights had been violated, both at the state high court and in a petition for certiorari at the U.S. Supreme Court. The Supreme Court eventually accepted the case and ruled in 2009 that Caperton was right. It reversed the state Supreme Court and sent the case back down for reconsideration.
Astonishingly, on the case’s third round at the West Virginia high court, Caperton’s verdict was once again bounced. The judges concluded for the third time that the forum selection clause in Caperton’s original supply contract with the company Massey had acquired required that all of his claims be litigated in Virginia, even though his tort suit against Massey didn’t involve that contract or conduct by anyone connected with it on Massey’s side.
Reed Smith refiled the tort suit in Virginia state court in November 2010. Can you guess what happened next? Yep, it was dismissed by the trial court under res judicata because Caperton could have litigated those claims when he brought his breach of contract suit in Virginia 12 years earlier. Both sets of allegations arose from the same transaction, the judge said, so even if they weren’t based on the same evidence the tort suit was precluded.
That was the issue the Virginia Supreme Court considered in Thursday’s ruling. It concluded that Caperton’s tort case didn’t involve the same claims or the same evidence as the contract case and is thus not barred under res judicata. The high court sent the case back down to the trial court where, according to Caperton counsel Bruce Stanley of Reed Smith, it should be ready for trial in a matter of months.
Stanley told me that the 10-year-long res judicata diversion was unjustified from the start. When that defense reared its head in the case’s first trip to the West Virginia Supreme Court, “frankly, we were shocked,” he said. He continues to believe the West Virginia court was wrong to enforce the forum selection clause, which he considers irrelevant to Caperton’s tort claims. But he’s eager to retry the case. “We’d like to finally get a decision on the merits,” he said. (Stanley told me that he’s not concerned about statute of limitations defenses because Virginia law tolls the statute when a case is filed in an improper jurisdiction.)
For Caperton, it’s been a long time coming. Stanley said he was effectively blacklisted from holding a top job at a mining company after his run-in with Massey. Today he’s a salaried employee at an underground mine safety equipment firm. “This has been tough on him and his family,” said Stanley, who’s been handling the litigation since 2000. “Both of us have watched our children grow up with this hanging over his head.”
I left a message for Massey counsel Kevin Huff of Kellogg, Huber, Hansen, Todd, Evans & Figel but didn’t hear back.
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