Neely

Former Supreme Court of Appeals Justice Richard Neely expects a Kanawha County jury to award West Virginia doctors at least $45 million in punitive damages in a class action trial set to begin Jan. 6." />

Former justice-turned-plaintiff's attorney expects huge jury award

Neely

Former Supreme Court of Appeals Justice Richard Neely expects a Kanawha County jury to award West Virginia doctors at least $45 million in punitive damages in a class action trial set to begin Jan. 6.

Neely, lead attorney for about 1,270 doctors, accuses St. Paul Fire and Marine Insurance of converting about $5 million in medical malpractice premiums to other purposes.

He predicted the punitive award in a Nov. 21 statement of the case for District Judge Paul Zakaib, who will conduct the trial.

According to Neely, St. Paul carried out its conversion scheme by withdrawing from the medical malpractice market in West Virginia in 2001.

He has argued that St. Paul's withdrawal triggered a malpractice insurance crisis that caused death and illness.

St. Paul has answered that a crisis caused it to leave, rather than the other way around. Zakaib conditionally certified the case as a national class action two years ago, but this year he narrowed it to a West Virginia class action.

Neely's plaintiffs, Eric Mantz, Willis Trammell and Todd Witsberger, purchased St. Paul malpractice insurance for their surgical practice through 2001.

The surgeons paid a surcharge of two percent for an automatic extension of coverage after death, disability or retirement. This policy "tail" would cover lawsuits about anything that happened before death, disability or retirement.

When St. Paul notified West Virginia doctors that it would no longer cover medical malpractice, Mantz, Trammell and Witsberger closed their practice and joined the faculty of West Virginia University.

A fourth surgeon from the practice, Dan Foster, retired. He applied for tail coverage, and St. Paul approved it. St. Paul charged nothing, because he had already paid for it.

Mantz, Trammell and Wirsberger also applied for tail coverage. St. Paul approved it and sent them a bill for the premium. Mantz thought that like Foster, he should not have to pay for the tail. He asked the office of the Attorney General to investigate. Nothing came of the request.

In March 2002, Neely filed suit for Mantz, Trammell and Witsberger. He wrote that they left private practice "largely as a result of medical malpractice insurance problems." Neely claimed damages under state insurance law, the doctrine of promissory estoppel, breach of good faith and fair dealing, and punitive liability.

He called on the court to return to the surgeons $254,358.40 in excess premiums, and to grant them tail coverage as if they retired. He asked for a punitive fee, and for $84,786.12 in attorney fees.

Neely named the local insurance agent of the surgeons, Commercial Insurance Service, as co-defendant. Four months later he added counts of fraud and negligence, claiming that St. Paul moved more than a billion dollars from reserves to profits from 1993 to 1997.

At a hearing before Zakaib, he compared St. Paul to Enron.

Defense attorney Michael Farrell of Charleston told Zakaib that Foster got free coverage.

"The three of them chose not to do what the contract said," he said.

At another hearing Neely said, "This company has done terrible injury to the state of West Virginia."

Hundreds would die because Charleston Area Medical Center closed its trauma unit, he said.

Farrell said, "This case is not brought in the name of the state of West Virginia."

He also said the complaint did not allege hundreds of deaths.

In a deposition, Mantz said he would always hold St. Paul responsible for causing his wife to work too hard and get sick.

All three surgeons said in depositions that they made more money as professors than in private practice because the university paid their malpractice premiums.

Back and forth

Co-defendant Commercial Insurance Service, after ten months in the background, moved for summary judgment. Attorney Charles Love of Charleston argued at a hearing that the plaintiffs made no case against his client. Zakaib denied the motion.

St. Paul removed the case to U.S. District Court, arguing that plaintiffs fraudulently joined Commercial Insurance Service to keep jurisdiction in Kanawha County.

U.S. District Judge Joseph Goodwin remanded the case to Zakaib.
Neely prepared to expand his case to a national class action. He rewrote the complaint and added three plaintiffs from Minnesota.

Neely wrote that St. Paul left West Virginia due to "foolhardly gambles." He claimed damages for breach of contract, breach of good faith and fair dealing, unjust enrichment, conversion and gross negligence.

Again St. Paul removed to federal court on grounds of fraudulent joinder. Again Goodwin sent the case back, scolding St. Paul for trying to prolong the litigation.

St. Paul based its defense on the approval it received from state regulators to leave the medical malpractice market.

In a deposition, state insurance commissioner Jane Cline stated that St. Paul did all that the law required, gave more information than the law required, and properly exercised its business judgment.

At a hearing, defense attorney Neil Dilloff of Baltimore said, "If St. Paul was so bad - we wrote a terrible contract, we lied, we pillaged, we stole, we converted - then where is the West Virginia insurance commissioner? Why aren't we in some kind of administrative proceeding being hit around the head?"

Bait and switch?

Neely then pulled a surprise. In July 2003, he moved to certify a class action for West Virginia doctors only. If their claim succeeded at trial, he told Zakaib, he would ask for certification of a national class for a second trial.

He estimated that the West Virginia class would include 1,270 doctors.

At a hearing, Dilloff told Zakaib that the plaintiffs had talked about a national class and at the eleventh hour they had switched to a state class.

Neely said that, "...the rules on class certification in West Virginia are about the most liberal rules anywhere in America."
Dilloff said St. Paul would proceed in a West Virginia class action but Zakaib should dismiss the national class action.

Zakaib told Neely, "You can't get on a horse and ride it in two different directions. That's what you are trying to get me to do."
Neely followed with a memorandum asking Zakaib to apply Minnesota law at trial.

Neely's legal team included the Jones Day firm of Washington, D.C. At a hearing on class certification, Robert Klonoff of Jones Day sprang another surprise.

Klonoff said the Minnesota plaintiffs would withdraw and the West Virginia plaintiffs would pursue a national class action.
Dilloff said, "The cart is before the horse again."

"We have always asked for a national class," Klonoff said.

Dilloff said, "We have been totally snookered as to what is going to take place today." Farrell said, "It's like WVU going to Virginia Tech to find out the game was at Boston College."

Zakaib conditionally certified a national class action in December 2003. He declined to apply Minnesota law. He denied a class action against Commercial Insurance Service.

The masters at work

The case slowed to a crawl. Zakaib appointed special masters to manage discovery disputes and class definitions, but objections wiped out four special masters.

Former --- Judge James McHugh finally took charge as special master.
In December 2004, Neely dropped all claims except conversion. In March 2005, he published a national notice of a class action on that claim.

In a memorandum in May, Neely estimated compensatory damages at $70 million. He predicted an award of at least $600 million in punitive damages.

Special master McHugh then narrowed the scope of the case. He recommended against a national class action.

McHugh relied in part on the Class Action Fairness Act that Congress passed and President Bush signed in February. In the act, Congress declared its intent to prevent state courts from resolving problems of residents of other states.

Zakaib entered an order Oct. 11, certifying a West Virginia class.
Neely published a national notice to all who had seen his first notice, telling them that only West Virginia doctors qualified for the class.

As the trial approached, St. Paul moved for summary judgment and for all sorts of limits on testimony and evidence.

Neely's responses to these motions advanced an argument for a national scheme. Defense attorney Cheryl Lardieri of Baltimore wrote to McHugh that plaintiffs tried to resurrect their national class action.

She wrote, "Plaintiffs have gone back on their word and are trying to introduce at trial everything but the kitchen sink." St. Paul asked on Nov. 18 for a six week trial. The insurer identified 593 exhibits it planned to offer.

Neely, in a Nov. 21 pretrial memorandum, estimated that West Virginia doctors paid $5.3 million for tail coverage that St. Paul did not provide.

He wrote that Mantz, Trammell and Witsberger expect a jury to award at least $45 million in punitive damages.

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