By DAVID A. RIDENOUR
WASHINGTON, D.C. -- West Virginia isn't "almost Heaven," but "almost Hell" where its judicial climate is concerned.
But finally, there's some good news on the horizon. After years of being battered by the state's bizarre system of jackpot justice, sucker-punched businesses are beginning to strike back.
In late May, the West Virginia Supreme Court, historically a good friend of the plaintiffs' bar, voted 5-0 to deny a request by two major natural gas providers -- Chesapeake Energy Corp. and NiSource -- to hear an appeal of a dubious $405-million jury verdict that found the companies underpaid landowners.
At issue was the firms' practice of deducting production and marketing costs out of the royalties they paid. The Roane County trial court inexplicably found that leases specifying that the royalties are "an amount 1/8 of the price, net all costs beyond the wellhead" and "less taxes, assessments, and adjustments" are ambiguous.
Ambiguous or not, the court interpreted the language in favor of the owner.
A week later, Chesapeake Energy countered with an eye-opening announcement: it was cancelling a $35-million commitment to build a futuristic regional headquarters on the outskirts of Charleston's airport.
Chesapeake spokesman Scott Rotruck tied the decision directly to the high court's denial of an appeal request that would have been granted pro forma in most states.
Left standing was a verdict by a Roane County jury that requires Chesapeake and NiSource to pay $134.3 million in allegedly unpaid gas royalties to landowners plus a staggering $270 million in punitive damages.
Chesapeake actually inherited its role as a defendant in the case when it purchased Columbia Natural Resources, another natural gas company for $2.2 billion in 2005.
Rotruck called the no-appeal ruling "stunning," noting it wipes out any possibility for Chesapeake to challenge the verdict since West Virginia doesn't have a court of appeals like most other states.
The Supreme Court's rejection, he said "sends a profoundly negative message about the business climate in the state."
Chesapeake started with 10 employees in 1989 and today has 6,000 workers and 300,000 shareholders as the nation's third largest producer of natural gas. Its CEO, Aubrey K. McClendon, has been quick to stand up against demagogic politicians with little economic literacy who use oil and gas companies as ceremonial whipping boys.
Last September, for example, he challenged Connecticut Gov. Jodi Rell, a Republican; and House Energy and Commerce Committee chairman John Dingell (D-Mich.) to retract "incorrect and reckless statements that demonstrate a lack of understanding of the natural gas market" and Chesapeake's role in it.
West Virginia has long held a place on the American Tort Reform Association's annual listings of "judicial hellholes," currently ranked number 4 and the only entire state to make the list.
Its "judicial climate" continues to be ranked the worst in America by the U.S. Chamber of Commerce's Institute for Legal Reform. And three of the seven largest verdicts in the U.S. last year were handed out in the Mountain State's remarkably generous courts, according to a list published by the National Law Journal.
The pronounced judicial tilt toward plaintiffs' lawyers is hurting the quality of the state's healthcare as well as its economy.
In February, Charleston Area Medical Center (CAMC) was ordered to pay $25 million -- most of it in punitive damages -- to a local physician who filed suit when the center failed to give his proposal to purchase self-insurance against medical malpractice charges "express lane" approval. A judge recently reduced the damage award to $10 million.
A few years before, CAMC was forced to temporarily close its bustling, highly-rated trauma unit because of doctor shortages spurred by soaring hikes in medical malpractice premiums. The inflated premiums were propelled skyward by exorbitant jury awards.
Hopefully, Chesapeake's bold reaction will encourage more companies to throw down the gauntlet when states begin treating them as prey for parasitical trial lawyers rather than welcome sources of jobs and tax revenues.
It's long past time for the West Virginia Legislature to get serious about enacting sensible tort reforms. If not, the state may be forced to change its slogan from "almost Heaven" to the hellish gloom described in Dante's Inferno: ³All hope abandon, ye who enter here."
Ridenour is Vice President of The National Center for Public Policy Research (www.nationalcenter.org), a nonpartisan conservative think-tank on Capitol Hill. Readers may write him at NCPPR, 501 Capitol Court NE, Washington, DC 20002.