West Virginia Record

Friday, January 24, 2020

AG's office was asked to file asphalt suit three times, DOH attorney says

By Chris Dickerson | Feb 8, 2017


CHARLESTON — West Virginia Attorney General Patrick Morrisey’s office was asked three times to file a suit on behalf of the state Department of Highways regarding the price of asphalt, according to a DOH attorney.

“The West Virginia Attorney General’s office rejected the opportunity and ignored the need to file such a necessary suit on approximately three separate occasions over a nearly 1.5 year period,” Mike Folio, director of the legal division of the DOH, wrote in a Feb. 7 letter to Marty Gearheart, who is the co-chairman of the Joint Legislative Oversight Commission on Department of Transportation Accountability.

“Bailey & Glasser advised me that the firm had previously provided a draft antitrust asphalt complaint to Mr. Morrisey and member of his office and had encouraged the Attorney General to file an antitrust suit on approximately three occasions over a nearly 1.5 year period.”

Morrisey’s press secretary said the AG’s office wanted to take time to assess the asphalt case.

“We fully investigate matters,” Curtis Johnson said in a statement. “As such we don’t simply take complaints prepared by outside counsel. We have a competitive bidding process that everyone must comply with. We could be asked 1,000 times by a private firm to blindly take a case and not comply with the competitive bidding law, but we will never do that.

“This is further demonstrated, in this case, by the fact that the initial complaint filed by the private firm was withdrawn and a new case filed. Our complaint also fixed defects from the original filing to improve the state’s chance of prevailing.”

On Jan. 11, Morrisey’s office filed a lawsuit in Kanawha Circuit Court alleging 11 asphalt and paving companies violated the state’s Antitrust Act. The lawsuit claims CRH and its numerous subsidiaries, Kelly Paving Inc. and American Asphalt & Aggregate Inc. drove out competitors and pushed asphalt prices higher across a substantial portion of West Virginia via acquisition or non-compete agreements.

The AG's office seeks the maximum fines and a judgment for three times the state’s damages, along with an order restoring competition within the state-approved asphalt manufacturing and sale market.

“Any corporate conspiracy aimed at driving out competition must be stopped,” Morrisey said in a statement at the time. “Such predatory schemes inflate prices and come at a tremendous cost.”

The lawsuit contends the price of state-approved asphalt increased at a higher rate in areas controlled by CRH and other defendants as compared to other parts of the state where there is more competition.

Morrisey says those high prices strain the state highways budget. That, according to the lawsuit. forces the state to delay construction projects, some indefinitely, causing economic damage and public safety risks.

Morrisey's office will lead the lawsuit with the state’s Department of Transportation as another plaintiff.

“Let’s be clear: when the highways department needs counsel for the filing of an antitrust matter, they must seek approval through the Attorney General’s office,” Morrisey said in a statement. “When the governor seeks outside counsel for the filing of any matter in court, it must obtain the approval of the Attorney General’s office.

“Hiring private counsel without approval of my office is not only against the law – it represents the very essence of the friends and family plan that I ran against and that voters rejected."

Morrisey said outside counsel will be retained to help on the case.

“Importantly, I want to save money on this bid – which is why we are hopeful to pay outside counsel between 17 and 25 percent of any fees earned on this matter – the purported contract between the private firm and highways would have cost taxpayers far more money,” Morrisey said. “We will always do the right thing and will not rush a defective filing forward simply because someone in the media or local government wants to generate headlines.”

The civil complaint, alleges trade restraint, monopolization and attempts to monopolize – all violations of the state’s Antitrust Act – along with a count of unjust enrichment.

Other defendants listed in the complaint are Oldcastle Inc., Oldcastle Materials Inc., West Virginia Paving Inc., Southern West Virginia Paving Inc., Southern West Virginia Asphalt Inc., Camden Materials LLC, American Asphalt of West Virginia LLC and Blacktop Industries & Equipment Company.

In December, lawmakers questioned Folio why the AG’s office wasn’t more involved with the lawsuit, particularly when the DOT joined the suits previously filed on behalf of the cities of Charleston, Parkersburg, Beckley, Bluefield and Huntington as well as the Kanawha County Commission. Folio said then the DOH was talking to the AG’s office, but couldn’t say much else at the time.

In his Feb. 7 letter, he offered more information because the original suit filed by Bailey & Glasser had been dismissed and replaced by the one filed by the AG’s office. He said he learned about the AG’s Jan. 11 press conference to announce the filing of its lawsuit just minutes before it began.

“At that time, I learned for the first time that DOH’s counsel would publicly disparage his client and not work cooperatively with his client to announce the filing of the suit,” Folio wrote, adding that “Bailey & Glasser told me that the Attorney General’s office rebuffed the firm’s invitation to file this historic and necessary suit.”

Seven lawsuits were filed against West Virginia Paving in various circuit courts across the state. A motion to consolidate them in Kanawha County was filed in late October. The lawsuits list West Virginia Paving Inc.; Southern West Virginia Paving Inc.; Southern West Virginia Asphalt Inc.; Kelly Paving Inc.; Camden Materials LLC; American Asphalt of West Virginia LLC; American Asphalt & Aggregate Inc.; and Blacktop Industries and Equipment as defendants. Kelly Paving recently was dismissed from some of those suits.

Those suits allege that the defendants have been inflating prices of asphalt and creating a de facto monopoly. The suits allege that the paving companies charged the cities and the DOH 40 percent, and sometimes more, for asphalt and paving supplies than it should have been charging.

West Virginia Paving released a statement, calling the allegations in the lawsuits blatantly false and that the bulk of the price changes were directly related to the cost of the transportation and raw materials.

Last year, the state Legislature passed a law requiring state agencies to go to the Attorney General’s office for representation in lawsuits, even if outside counsel later is required. In December, the paving companies filed a motion to dismiss the lawsuits because Morrisey’s office hadn’t been involved in the case on behalf of the DOT.

In the AG's case, the state is being represented by General Counsel Edward M. Wenger as well as Assistant AGs Steven A. Travis and Douglas L. Davis.

In his letter, Folio noted that answers to the AG’s complaint are due soon.

“I recommend that the Attorney General’s office immediately engage Bailey & Glasser because Bailey & Glasser’s bid is the most cost-effective for the state and Bailey & Glasser is the most qualified bidder to handle this complex litigation. To date, the Attorney General has not engaged counsel even though answers to the complaint are due on or about February 17, 2017.”

Kanawha Circuit Court case number: 17-C-41

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Organizations in this Story

West Virginia Department of Transportation, Division of HighwaysWest Virginia Division of HighwaysBailey & Glasser LLPVirginia Attorney General's Office