Not-so-positive reinforcement

By The West Virginia Record | Feb 2, 2007

"The Birthplace of Runaway Punitive Damages" wouldn't quite fit on a license plate or a boasting roadside signpost. But it's an honor to which West Virginia can credibly lay claim.

The birth year was 1993. The venue was Welch in McDowell County. The case was TXO Production Corp. v. Alliance Resources. And the landmark verdict was $19,000 in compensatory damages and $10,000,000 in punitives -- a multiple (526) that trumped the previous U.S. record (4) by a Mountain State mile. And then some.

The dollar amounts might sound like peanuts when compared with our courts' latest smack-down, a Roane County jury's $270 million punitive damage award against Oklahoma-based oil and gas giant Chesapeake Energy. But plaintiff's lawyers from Spencer to San Diego know it was the former that bore the latter, making all those zeroes finally possible.

The repercussions have been great for law schools, not-so for businesses. For those companies living in the wrong jurisdictions -- or foolish enough to dip their toes in them -- the net has been target practice.

This isn't to maintain that the corporate defendants in these cases were right or that justice wasn't served. But it's to acknowledge that massive-dollar punitive damages -- intended to "punish" -- have an impact that reaches far beyond the defendants in their cross hairs.

Juries issue these big dollar awards as deterrents. Defendants feeling the brunt are supposed to play the public example: Misbehave in West Virginia, and this is the fate you'll suffer. So don't let it happen again.

But verdicts like TXO and Chesapeake deter much more than poor corporate behavior.

Undeniably, they deter home-grown entrepreneurs from expanding here. They deter new plants and factories, new regional offices and new jobs. They deter investment in West Virginia.

Alas, it wasn't always this way. But 13 years after that Welch jury set a record, the fiercest local judicial climates carry reputations that precede themselves. That includes ours.

"We had heard coming into West Virginia that the court system was not fair, not favorable to the business climate, and unfortunately this just reinforces that," Chesapeake Vice President Henry Hood told talk show host Hoppy Kercheval in the aftermath of their verdict.

Unfortunately, indeed.

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