WASHINGTON (Legal Newsline) - For the second time in three years, West Virginia has been singled out as the nation's most unfair legal environment by the American Tort Reform Foundation.
The ATRF's annual Judicial Hellholes report, released Tuesday, cites West Virginia Attorney General Darrell McGraw's relationship with trial lawyers and pro-plaintiff decisions by the state Supreme Court as main reasons the state is named a hellhole for the seventh straight year.
West Virginia is again the only entire state listed. Counties in Alabama, California, Florida, Illinois, Nevada and New Jersey join the Mountain State.
"West Virginia has reclaimed its former spot as the #1 Judicial Hellhole this year thanks to its near-perfect storm of anti-business rulings, massive lawsuits and cozy relationships between the personal injury bar, Attorney General Darrell McGraw and some in the judiciary," ATRF president Tiger Joyce said
"The state's highest court has a history of plaintiff-friendly decisions, paying damages to those who are not injured, allowing mass trials, permitting lawsuits outside the workers' compensation system, rejecting long-established legal principles, and welcoming plaintiffs' lawyers from other states to take advantage of its generous rulings.
"To make matters worse, West Virginia is one of only two states that do not guarantee a right to appeal a civil verdict."
Like other organizations, the ATRF says West Virginia's legal climate has an adverse effect on its business reputation.
In April, a survey of corporate attorneys conducted by Harris Interactive and commissioned by the U.S. Chamber of Commerce, the owner of Legal Newsline, showed that West Virginia had the least favorable legal climate for businesses.
Forbes magazine has placed West Virginia last in its ranking of states' business environments the past two years, and a U.S. Census Bureau study showed that young professionals between ages 21-45 are leaving the state.
A few 2008 developments helped put West Virginia back on top of the ATRF's list.
The state Supreme Court refused to hear two appeals of large verdicts that contained sizeable punitive damages awards. One was a $405 million verdict against Chesapeake Energy and NiSource that included $270 in punitive damages, and the other was a $220 million verdict against Massey Energy that included $100 million in punitive damages.
Chesapeake Energy abandoned plans to build a $35 million regional headquarters in Charleston because of the state's business climate. Supreme Court Justice Larry Starcher, in accepting the appeal of DuPont in a $381 million case, wrote that the Court should have accepted the other two large appeals.
Also, McGraw was narrowly re-elected to a fifth term in November. The Democrat has drawn criticism for awarding no-bid state contracts to private lawyers who have contributed to his campaign.
The most controversial of McGraw's arrangements was the $10 million 2004 settlement OxyContin-manufacturer Purdue Pharma. Four firms hired to represent the State made more than $3 million, and McGraw's office handed out the rest, much to the dismay of some lawmakers.
In 2008, McGraw pushed for outside counsel he hired to sue Visa and MasterCard to be paid $3.9 million. The settlement provided for a sales tax holiday on appliances with the Energy Star label. Two of the four firms are contributors of McGraw's, and a judge has not ruled on attorneys fees yet.
McGraw and Chief Deputy Attorney General Fran Hughes, who could not be reached for comment, have long defended their practice of hiring outside counsel to pursue cases against businesses.
"Think of the terms," Hughes has said. "We don't know how long we want you to work, or how much it will cost you, or how much you'll be paid. The attorneys selected are highly skilled, and have the capital and the infrastructure to try large cases.
"Any judicial officer receives contributions from the bar, but Attorney General McGraw does not appoint special assistant attorneys general based on campaign contributions. Not many attorneys have the expertise to engage in antitrust litigation."
The ATRF is not buying their argument. Fees from settlements, it says, should go to the state Legislature for appropriation.
"McGraw's is a long-standing practice, dating back to the 1990s when he hired outside counsel to obtain nearly $1.8 billion from the tobacco industry, a substantial amount of which went not
to the state but to those private sector attorneys," the report says.
"Often enough, these attorneys are not paid on an hourly basis but instead receive a portion of the award that ought to go to the State and its citizens. State Senator Vic Sprouse has called McGraw's use of private firms the largest concern facing the West Virginia Legislature."
Other problems facing West Virginia's legal climate, according to the report, are:
-Medical monitoring lawsuits like the DuPont case, which includes $130 million for the medical monitoring of approximately 7,000 Harrison County residents who live near a plant where DuPont allegedly dumped cadmium, arsenic and lead;
-Mass trials, like asbestos cases grouped together, that put pressure on defendants to settle;
-Allowing out-of-staters to file lawsuits in West Virginia;
-The state Supreme Court's unwillingness to adopt the Learned Intermediary Doctrine, which would shield drug manufacturers from liability in cases where doctors did not warn patients of potential side effects;
-Courts allowing juries to determine punitive damages before deciding on liability; and
-The lack of an intermediate appellate court, which means an appeals aren't guaranteed to be heard.
The report also mentions a 2007 lawsuit against McDonald's in which the plaintiff sought $10 million because the restaurant put cheese on his hamburger. The plaintiff was allergic to cheese.
"Lawsuit abuse continues to have a negative impact on the nation's economy, and certainly on West Virginia's economy," Joyce said.
"Every dollar spent defending against a speculative lawsuit is a dollar that won't be spent on research and development, capital investment, worker training or job creation. Unfortunately for those living in Hellhole jurisdictions during this economic downturn, it can be that much harder to find or keep a job as employers are driven away by the threat of costly litigation."
In 2002, West Virginia received a dishonorable mention in the Hellhole report. In 2003, it was sixth on the list, fourth in 2004, third in 2005, first in 2006 and fourth last year.
To make way for West Virginia, South Florida was moved down a spot from last year to No. 2.
The report lists damage done by medical malpractice cases that resulted in some of the nation's highest insurance premiums.
"Many medical malpractice cases stem from true tragedies, particularly when childbirth is involved," the report says. "But extraordinarily high awards, like the $35 million to a family in Broward County this year, limit access to healthcare for everyone."
Broward County is also singled out for having three alleged instances of judicial misconduct alst year.
Also noted is a $24.2 million verdict against Honeywell International in Miami-Dade County. It may be the largest award for a single defendant in Florida asbestos litigation history, the report says.
"The jury reached its determination after just three hours of deliberations, though Honeywell itself
did not manufacture products containing asbestos," the report says.
"Its involvement in the case resulted from a series of corporate mergers dating back over 25 years. From 1981-2007, Honeywell prevailed in all but 10 of the 135 asbestos cases against it that went to trial. But it seems to have learned the hard way that going to trial in South Florida risks an outlier verdict."
At No. 3, Cook County in Illinois made the report for a fourth straight year because it has experienced "a substantial surge in asbestos claims, embraced improper class actions, rendered evidentiary decisions that favored plaintiffs, hosted excessive awards and otherwise shown an unwillingness to dismiss claims with little or no connection to the jurisdiction.
At No. 4, Atlantic County in New Jersey has become a destination for pharmaceutical litigation, the report says.
At No. 5, Montgomery and Macon counties in Alabama stepped up from the watch list because of a history of excessive verdicts, including a $215 million verdict against AstraZeneca Pharmaceuticals earned by outside counsel on behalf of the State, the report says.
At No. 6, Los Angeles County maintained its streak of being mentioned in the report every year it has been conducted, and Clark County in Nevada rounds out the list at No. 7.
Jurisdictions to watch were Rio Grande Valley and the Gulf Coast of Texas, Madison County in Illinois, Baltimore, St. Louis, St. Louis County and Jackson County in Missouri.
Other areas considered less serious were: Orange County, California; St. Clair County, Illinois; Madison, Wisconsin; Seattle; New Orleans; Santa Fe, New Mexico; and the states of Minnesota and Oklahoma.
The U.S. Chamber's Institute for Legal Reform applauded the ATRF report.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.