WEST VIRGINIA RECORD

BLUEFIELD – Nationwide Insurance plans to seek a stay of a lawsuit filed against it earlier this year by former state Attorney General Darrell McGraw.

The stay would occur while the U.S. Supreme Court decides whether certain actions filed by state AGs can be classified as mass actions and removed to federal court under the Class Action Fairness Act of 2005.

On May 28, the court granted review of Mississippi Attorney General Jim Hood’s appeal of a U.S. Court of Appeals for the Fifth Circuit’s decision that held his case against AU Optronics can be removed to federal court under CAFA.

Oral arguments will be scheduled before the Supreme Court in the fall.

“The Supreme Court’s resolution of Hood will directly bear on the resolution of Plaintiff’s pending Motion to Remand in this case,” Nationwide’s notice of decision to U.S. District Judge David Faber, of the Southern District of West Virginia, says.

“Nationwide therefore files this Notice of Decision to bring this development to the Court’s attention and to inform the Court that Defendants intend to file a motion to stay resolution of Plaintiff’s Motion to Remand pending the Supreme Court’s decision…”

In February, Mississippi Attorney General Jim Hood submitted a petition for a writ of certiorari with the court, arguing that a November ruling by the U.S. Court of Appeals for the Fifth Circuit “warrants plenary review.”

The Fifth Circuit, in its Nov. 21 opinion, ruled that the removal of a lawsuit involving liquid crystal display panels to a federal district court was proper.

In Hood’s lawsuit, several companies from Japan, Korea and Taiwan were accused of fixing prices for thin film transistor LCD panels from 1999 to 2006.

The Fifth Circuit found that the suit qualified as a “mass action” under the Class Action Fairness Act.

The federal statute, passed in 2005, gives federal courts jurisdiction to certain class actions in which the amount in controversy exceeds $5 million, and in which any of the members of a class of plaintiffs is a citizen of a state different from any defendant, unless at least two-thirds or more of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the state in which the action was originally filed.

Business groups and tort reform supporters had lobbied for the legislation, arguing that it was needed to prevent class-action lawsuit abuse.

“After analyzing the complaint, the relevant statutes and the parens patriae authority of the State, we hold that the real parties in interest in this suit include both the State and individual consumers of LCD products. Because it is undisputed that there are more than 100 consumers, we find that there are more than 100 claims at issue in this case. The suit therefore meets the CAFA definition of a ‘mass action,’” Judge E. Grady Jolly wrote for the Fifth Circuit.

Hood, who sued several major suppliers of the LCD panels in Hinds County Chancery Court in March 2011, argues that the suit should remain in a state court. The attorney general says he filed the suit under his parens patriae powers — to protect the physical and economic well-being of the residents of his state.

Several companies sued by McGraw made the argument the cases should be heard in federal court. The Fourth Circuit decided the issue when it rejected the appeal of CVS Pharmacy.

The Nationwide lawsuit, now being handled by new Attorney General Patrick Morrisey, concerns the company’s discounts on automobile, homeowners and agribusiness insurances to members of the West Virginia Farm Bureau.

It said the rates as applied to policyholders are discriminatory because the discount offered does not correspond to expected losses and average expenses, and there are no expected average cost differences reflected.

Nationwide has noted that the West Virginia Insurance Commission is charged by statute with reviewing proposed insurance rates and did approve Nationwide’s discounts.

“(T)he insurance code does not authorize Attorney General suits, and the Attorney General is not empowered to pursue actions in civil court unless specifically authorized to do so by statute,” a motion to dismiss filed by Nationwide says.

Nationwide also says the West Virginia Consumer Credit and Protection Act excludes its application to the sale of insurance.

A response filed March 7 by Morrisey’s chief counsel Dan Greear and the Charleston law firm Tiano O’Dell, which was hired to represent the State, says Nationwide is applying a discount below the seven percent on file with the insurance commissioner. It adds that the motion to dismiss misrepresents the factual and legal basis for the lawsuit.

“Such inaccurate premature misjudgment of claims, at the earliest phase of litigation prior to discovery, is precisely why our law disfavors motions to dismiss.”

From the West Virginia Record: Reach John O’Brien at jobrienwv@gmail.com.