CHARLESTON – The West Virginia Supreme Court of Appeals ruled that a new trial is needed in a lawsuit involving the West Virginia Department of Transportation-Division of Highways and a $24 million verdict.
Justice Menis Ketchum authored the majority opinion. Justice Allen Loughry dissented and filed a separate opinion.
"It is a well-established rule in the law of eminent domain that a jury may not award just compensation for the lost profits of a business on land taken by condemnation," the June 17 opinion states. "However, in this appeal of a jury's $24 million verdict in a condemnation case, a litigant testified and valued his interest in a tract of condemned land using only the future lost profits of his business."
Despite this evidence, Tucker Circuit Court refused to instruct the jury to disregard lost business profits when calculating just compensation, according to the opinion.
The state Supreme Court reversed the circuit court's judgment on the jury's verdict and remanded the case for a new trial.
On June 21, 2011, Western Pocahontas Properties LP leased 187 acres of its land to Beacon Resources Inc. and the lease allowed Beacon to extract coal in exchange for royalty payments to Western.
On Aug. 15, 2011, Beacon signed a contract to sell coal to a neighboring mine and the contract expired on March 31, 2012. Beacon claimed it did not renew the contract because it learned some of the land would be taken through condemnation to build a highway and did not believe it would be able to fulfill the contract.
In April 2012, DOH filed a condemnation action against Western and Beacon and sought to take approximately 30 of the 187 acres owned by Western and leased to Beacon to construct a portion of the Corridor H Highway and on July 25, 2012, the circuit court granted DOH's right to take possession of the 30 acres of land.
DOH deposited $750,000 with the circuit clerk as its estimate of just compensation for the surface of the land taken and Western later accepted that valuation of the surface.
However, DOH also despoited $5,863,100 as its estimate of just compensation for the coal underlying the 30 acres of land taken and Beacon objected to the DOH's valuation of the coal.
A three-day jury trial was held in July 2013 to establish the just compensation value for Beacon's leasehold interest in the coal and the trial centered on two issues: the amount of land affected and the fair market valuation of the lease.
At the close of the trial, the DOH proposed a jury instruction telling the jury that it "may not consider any lost profit" to Beacon's business when it calculated the damages to award as just compensation. The circuit court refused to give the DOH's proposed instruction to the jury.
The jury returned a verdict awarding Western and Beacon $24 million and the DOH subsequently made a motion for a new trial, arguing that the circuit court erred when it refused to instruct the jury not to consider the lost business profits earned by Beacon.
The circuit court denied the motion for a new trial and DOH appealed the circuit court's order.
"In its order denying a new trial, the circuit court expressed surprise at the quality of the advocacy of the DOH's trial counsel," the opinion states. "For instance, given the 'unusual posture of the take in this case,' the circuit court said it was 'quite frankly surprised that the [counsel for the DOH] did not submit special interrogatories,' leaving the court and parties with no understanding of the deliberations, decision or rationale of the jury in its damage award."
The Supreme Court said they were sufficiently troubled by the quality of the trial record that they have considered – but declined – exercising their discretion to review what can only be considered "plain errors" not raised by the DOH in its appeal.
"We anticipate that, on remand, inadequacies such as these will be remedied by trial counsel for the parties," the opinion states.
The circuit court erred when it failed to give the DOH's proposed instruction informing the jury to disregard Beacon’s profits when assessing just compensation, according to the opinion.
"We therefore reverse the circuit court’s February 4, 2014, orders entering judgment and denying a new trial, and remand the case for a new trial," the opinion states.
In his dissenting opinion, Loughry said the majority has decided to treat the state like a child, "scolding it for not adequately preparing for trial and then allowing it to have a 'do over.'"
"Despite the fact that the new points of law set forth in the majority opinion do not support a finding that the trial judge erred by refusing to give the state's proposed jury instruction, the majority nonetheless reaches that conclusion and remands this case for a new trial," his dissenting opinion states.
In doing so, the majority provides unprecedented, detailed guidance for the retrial of this matter in an undisguised effort to ensure that the state is not slapped with another $24 million verdict.
"Because it is clear that the trial court did not commit reversible error by refusing to give an obviously erroneous instruction and because this court should not be dispensing legal advice to parties, I dissent from the majority’s decision in this case," he stated in his dissenting opinion.
Loughry stated that like the majority, he was unimpressed with the manner in which the state presented its case at trial.
"However, I simply do not believe that the assigned errors warranted giving the state a second bite at the apple," he stated. "In fact, I would not be surprised if, upon retrial, a new jury, properly instructed on the role of lost profit, awards Beacon just compensation in an amount substantially greater than the verdict that is the subject of this appeal."
The petitioner was represented by Leah R. Chappell of Adams, Fisher & Chappell PLLC.
Beacon was represented by Lori A. Dawkins and Lauren K. Turner of Steptoe & Johnson PLLC; Western and WPP were represented by David H. Wilmoth and Jeffrey S. Zurbuch of Busch, Zurbuch & Thompson PLLC.
W.Va. Supreme Court of Appeals case number: 14-0381