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No. 33350 - Hugh M. Caperton, Harman Development Corporation, Harman Mining
Corporation, and Sovereign Coal Sales, Inc. v. A.T. Massey Coal Company,
Inc., Elk Run Coal Company, Inc., Independence Coal Company, Inc.,
Marfork Coal Company, Inc., Performance Coal Company, Inc., and Massey
Coal Sales Company, Inc.
Workman, Justice, dissenting.
Neither the sheer length of the majority's opinion, nor the large number of
cases cited (but erroneously applied), nor even its expansive conclusory statements, can
obfuscate its lack of sound legal reasoning and its result-driven approach.
In enunciating eight major new points of law and applying them retroactively
(with no opportunity for the parties to make a record under the new law), scrapping
mountains of prior precedent that give deference to the finders of fact below (and instead
making new factual determinations at this level), rewarding the defendant (whose conduct
is seemingly recognized by all as reprehensible) the spoils of its fraudulent acts, and then
characterizing the result as equitable, the majority has turned West Virginia jurisprudence
on its ear.
Specifically, the majority holds that Massey, despite engaging in wide-ranging
fraudulent conduct, both in connection with the 1997 Coal Supply Agreement (the CSA),
as well as separate and apart from it, is entitled to benefit from the forum-selection clause not
only with regard to matters relating to the CSA, but even with respect to actions completely
unconnected to that contract. The majority reaches this conclusion despite the fact that the
forum-selection clause is contained in a contract to which Massey was not a party, with
which Massey tortiously interfered, and under which Massey never acted in good faith. In
so doing, the majority not only deprives the plaintiffs of the substantial damages awarded to
them by the rightful finders of fact, a Boone County jury, but also leaves them with no legal
recourse by which to address Massey's extensive pattern of fraudulent conduct. It similarly
eliminates any recovery for the plaintiffs' numerous creditors in the three pending bankruptcy
cases, to whom most of the judgment would have gone. Not least among those creditors are
the Harman Companies' union miners who lost their jobs as a result of Massey's fraudulent
conduct, and the Harman Companies' hundreds of retirees, to whom the Harman Companies
previously paid pensions and medical benefits. (See footnote 1)
Because the majority unjustly strips Massey's victims of their rightful verdict
by creating extensive new law and manipulating the existing law to achieve the end result,
I dissent on the following grounds:
1 * Forum Selection Clause - Because much of Massey's fraudulent conduct bore no
connection to the CSA, the tort claims asserted by the plaintiffs should NOT be
governed by the forum-selection clause contained in that contract.
2 * Standard of Review - The new standard of review departs dramatically from
extensive prior precedent requiring deference to a circuit court's findings of fact, and
supplants this Court as a de novo finder of fact.
3 * Retroactivity - The new principles of law relating to the enforcement of forum-
selection clauses should NOT be applied retroactively by this Court. Such retroactive
application deprives the plaintiffs of any opportunity to present evidence to meet the
burden placed on them by the majority's new test and, thus, violates the plaintiffs' due
process rights. Moreover, in retroactively applying these new principles to the instant
case, the majority makes its own findings of fact, an act which should be reserved for
the circuit court. Finally, the majority's announcement of these new principles was
not clearly foreshadowed, and their enforcement produces a substantially
The plaintiffs in the underlying case, Harman Development Corporation,
Harman Mining Corporation, and Sovereign Coal Sales, Inc. (collectively the Harman
Companies), and Hugh M. Caperton (Mr. Caperton), sued A.T. Massey Coal Company,
Inc. and several of its subsidiaries (collectively Massey) in the Circuit Court of Boone
County, West Virginia. The Harman Companies alleged, among other things, that Massey
engaged in tortious interference with several of the Harman Companies' and Mr. Caperton's
existing contracts, (See footnote 2)
and further that Massey engaged in fraudulent concealment and made
fraudulent misrepresentations in its dealings with the plaintiffs. After a lengthy trial, during
which the plaintiffs produced overwhelming evidence of Massey's intentional fraudulent
acts, a jury in Boone County awarded the plaintiffs more than fifty million dollars in
damages. (See footnote 3)
Early in the course of that litigation, Massey filed a motion to dismiss based
on improper venue, arguing that a forum-selection clause contained in the CSA, a contract
between two of the Harman Companies and Wellmore Coal Corporation (Wellmore),
required that all actions brought in connection with the contract be litigated in Virginia. The
Circuit Court of Boone County denied that motion. (See footnote 4)
The majority now reverses, holding that
of Massey's alleged fraudulent acts_its fraudulent declaration of force majeure (See footnote 5)
was performed in connection with the CSA, all of the plaintiffs' claims, even those
completely unconnected to the CSA, should have been brought in Virginia. In reaching this
conclusion, the majority ignores Massey's significant fraudulent acts that were unrelated to
the CSA but that culminated in the financial destruction of the Harman Companies and Mr.
Caperton. Instead the majority declares that the fraudulent declaration of force majeure
was the act
from which all
of the plaintiffs' damages flowed. This is simply not true. As
determined by the fact-finders and fully demonstrated by the record below, Massey engaged
in a web of deceit replete with fraudulent acts, many of which were separate and apart
from the declaration of force majeure.
Specifically, the evidence introduced at trial showed that Massey engaged in
a wide-ranging scheme to expand the market for its own coal, obtain access to the Harman
Companies' valuable coal reserves and eliminate the Harman Companies and Mr. Caperton
as competitors from the metallurgical coal market. While aggressive competition and even
sharp practice in business dealings is certainly not actionable in and of itself, it becomes
actionable when a party engages in fraudulent misrepresentations and fraudulent concealment
to achieve those goals. (See footnote 6)
Here, Massey developed a scheme in which it simultaneously
disrupted the Harman Companies' existing coal supply contract with Wellmore, thus
eliminating the Harman Companies' primary source of revenue, while engaging in
fraudulent, bad-faith negotiations with Mr. Caperton for the sale of his interest in the Harman
Companies' assets. Through these fraudulent negotiations, Massey lured Mr. Caperton and
the Harman Companies into a false sense of security, thereby deterring them from seeking
other buyers for their coal. Moreover, Massey actively dissuaded other potential buyers and
took steps to ensure that the Harman Companies' reserves would be unattractive to anyone
else. Ultimately, after ensuring that Mr. Caperton would be unable to find any other willing
buyers, Massey collapsed the sale negotiations altogether, thereby forcing the Harman
Companies and Mr. Caperton into bankruptcy.
In furtherance of this fraudulent scheme, Massey engaged in actions that cannot
reasonably be considered to have any connection with the CSA. For example:
(1) After Massey expressed a desire to purchase Mr. Caperton's interest in the
Harman Companies, Mr. Caperton, at Massey's request, shared confidential
information with Massey relating to his business plans
beginning at a meeting in late November 1997, and continuing through January
1998, Mr. Caperton provided Massey with confidential business information
including mine maps, reserve studies, drill information, and, importantly, the
Harman Companies' plans to expand into adjoining reserves owned by Pittston
Coal Company (Pittston). Mr. Caperton also advised Massey of the Harman
Companies' debt obligations, including debts for which Mr. Caperton was
personally obligated, and advised Massey of the terms of the Harman
Companies' lease with Penn Virginia Coal Company (Penn Virginia), the
owner and lessor of the Harman Companies' coal reserves;
(2) As the negotiations for proposed sale of Mr. Caperton's interest in the Harman
Companies continued, Massey represented that it intended to take over the
Harman Companies' lease with Penn Virginia as is, and the parties agreed
to close the deal on January 31, 1998. At Massey's request, Mr. Caperton shut
down the Harman Companies' operations on January 19, 1998, in preparation
for that closing date.
An internal memo circulated between Massey officers,
however, indicated that, unbeknownst to Mr. Caperton, Massey had no
intention of closing on the agreed-upon date. Moreover, Massey knowingly
allowed the Harman Companies to continue to believe the January 31, 1998,
date would be met,
and allowed Mr. Caperton to shut down operations as
planned despite knowing, from the confidential information that it had
previously obtained, that such action would have serious financial
consequences for both the Harman Companies and for Mr. Caperton, due to
his personal guarantees of certain of the Harman Companies' loans;
(3) After refusing to close the deal by the original deadline, Massey continued to intentionally mislead the Harman Companies and Mr. Caperton into believing
that an agreement would be reached. Among other things, Massey executed
several letters of intent to Mr. Caperton and several creditors of the Harman
Companies. (See footnote 7)
For example, in a letter dated February 9, 1998, to Mr. Caperton,
Massey promised to, among other things, pursue good faith negotiations to
reach a deal permitting Massey to acquire Mr. Caperton's interest in the
(4) Two days after this letter, on February 11, 1998, Massey announced that it had
sold Wellmore to Black Diamond Company (Black Diamond). As part of
that sale, Massey directed Black Diamond not to pursue the acquisition of the
Harman Companies, a possibility in which Black Diamond had previously
expressed an interest;
(5) With the plaintiffs still unaware of Massey's true intentions, the parties agreed
to a new closing date of March 13, 1998. Hours before the transaction was set
to close, and despite Massey's previous assertions that it would accept the
Penn Virginia lease as is, Massey intentionally collapsed the deal by
demanding unreasonable changes to the proposed lease with Penn Virginia.
Those demands included changing the term of the lease, the royalty rate, the
mining provisions and the recoupment period. Although Penn Virginia agreed
to certain further concessions, Massey refused to negotiate at all, and the deal
(6) After collapsing the deal, Massey, using the confidential information it had
obtained through the sale negotiation process,
purchased a narrow band of
coal surrounding the Harman Companies' reserves from Pittston, in order to
create a barrier that would prevent any company other than Massey from being
able to expand the Harman Companies' operations.
Massey's own internal
documents acknowledged that this purchase ensured that the Harman
Companies' property would be unattractive to any potential buyer other than
Massey, thus ensuring that Massey would be able to acquire the Harman
property in the long run, obviously implying after bankruptcy.
None of these acts bore any connection to the CSA. Yet the majority sweeps
them under the CSA in a conclusory manner, with no attempt to offer any reasoning or
explanation for doing so. Indeed, rather than acknowledge the gravity of Massey's foregoing
conduct, the majority, using tunnel vision, focuses solely on the declaration of force majeure
As a result of this conduct, the Harman Companies defaulted on the terms of
their lease with Penn Virginia, violated the terms of their contractual obligations to their
miners and the UMWA, defaulted on loans to creditors, and ultimately declared bankruptcy.
Because Mr. Caperton had personally guaranteed certain loans on behalf of the Harman
Companies, he was forced into personal bankruptcy. As a further consequence of Massey's
scheme, Mr. Caperton defaulted on land reclamation liabilities under Federal and State
environmental laws and, as a result, was entered into the Office of Surface Mining's
Applicant Violator System, which effectively prevents him from obtaining any future coal
mining permits or otherwise working in a position of authority in that industry. (See footnote 8)
II. Enforceability of the Forum-Selection Clause
The majority announces that this case presents the first opportunity for this
Court to address substantive issues relating to the enforcement of forum-selection clauses.
In so stating, it broadly asserts that this Court has previously indicated our general approval
of forum-selection clauses, because this Court has noted, in dicta contained in a footnote,
that such clauses are not contrary to public policy. Specifically, in General Electric
Company v. Keyser, 166 W. Va. 456, 275 S.E.2d 289 (1981), this Court stated in footnote
We have had occasion, however, to discuss, indirectly,
forum selection clauses. Although our law on this point is
skeletal, it does indicate that contract clauses which affect
matters such as jurisdiction and the like should be carefully
Unquestionably, forum selection clauses are not contrary
to public policy in and of themselves for they are sanctioned in
commercial sales agreements under W. Va. Code s 46-1-105(2).
Although an early case in our jurisprudence held void a clause
in a stock certificate requiring that stockholders bring suit in
New York, Savage v. People's Building, Loan and Savings
Association, 45 W. Va. 275, 31 S.E. 991 (1898), later cases have
sanctioned, at least implicitly, forum selection clauses. Axelrod
v. Premier Photo Service, Inc., 154 W. Va. 137, 173 S.E.2d 383
(1970). Board of Education v. W. Harley Miller, Inc., W. Va.,
221 S.E.2d 882 (1975). Both Axelrod and Miller involved
contracts which contained arbitration clauses. In Axelrod, we
gave full faith and credit to a New York Court decision which
confirmed an arbitration award made pursuant to the contract
terms requiring arbitration. In Miller, we held valid a contract
provision which made arbitration a condition precedent to suit
in the West Virginia courts. The writer of the Miller opinion
noted that the common law rule preventing parties from ousting
the court of jurisdiction by their agreement was archaic. 221
S.E.2d at 885.
As the Federal court observed, West Virginia appears not
to subscribe to the rule that choice of forum clauses are void per
se. Rather the rule of most jurisdictions and the rule that this
Court believes that West Virginia should and would adopt is that
such clauses will be enforced only when found to be reasonable
and just. Leasewell, Ltd. v. Jake Shelton Ford Inc., 423 F.
Supp. 1011, 1015 (S.D.W. Va. 1976). See also, Kolendo v.
Jarell, Inc., 489 F. Supp. 983 (S.D.W. Va. 1980).
The factors to be weighed in determining the
effectiveness of a forum selection clause are materially different
from the factors a court will consider in determining the
effectiveness of a choice of laws clause and speak to very
different problems. Leasewell, supra at 1014. Choice of law
clauses, however, are not automatically void either, as they too
are sanctioned in commercial transactions by the West Virginia
Code. W. Va. Code 46-1-105(1). Thus it appears that we should
not per se invalidate a choice of law clause without analysis
anymore than we should invalidate a choice of forum clause
without careful scrutiny.
Id. at 461 n. 2, 275 S.E.2d at 292 n. 2. An objective reading of this footnote does not support
the majority's sweeping conclusion that this Court's prior law indicates general approval
of forum-selection clauses. Rather, the footnote indicates skepticism of such clauses by
requiring that they be carefully analyzed, and further implies that such clauses should only
be enforced where they are reasonable and just.
Nevertheless, the majority misstates that forum-selection clauses are viewed
with favor in West Virginia, and proceeds to adopt a test for determining the enforceability
of a forum-selection clause established in Phillips v. Audio Active Limited, 494 F.3d 378 (2d
Cir. 2007). Specifically, the majority sets forth the following four factors for consideration:
(1) whether the clause was reasonably communicated to the party resisting enforcement, (2)
whether the clause is mandatory or permissive, (3) whether the claims and parties involved
in the suit are subject to the forum-selection clause, and (4) whether the resisting party has
rebutted the presumption of enforceability by making a sufficiently strong showing that
enforcement would be unreasonable and unjust, or that the clause was invalid for such
reasons as fraud or overreaching. Although at least two of these four new factors obviously
require fact-driven determinations, the majority not only adopts these new principles of law
out of the blue, it then refuses to give the plaintiffs a chance to present evidence on them and,
incredibly, proceeds to make de novo findings of fact themselves!
A. Standard of Review for Forum-Selection Clauses
As an initial matter, I object to the majority's adoption of a completely new
standard of review specifically for forum-selection clauses. The majority now holds, without
providing any explanation, that [o]ur review of the applicability and enforceability of a
forum-selection clause is de novo. Given that this holding breaks from our existing
precedent without justification, I cannot support this decision.
While motions to dismiss based on a plaintiff's failure to state a claim are
generally reviewed de novo, Sturm v. Board of Educ. of Kanawha County, 223 W. Va. 277,
280, 672 S.E.2d 606, 609 (2008), this Court has held that motions to dismiss based on venue
are reviewed for abuse of discretion. Syl. Pt. 1, United Bank, Inc. v. Blosser, 218 W. Va.
378, 624 S.E.2d 815 (2005) (This Court's review of a trial court's decision on a motion to
dismiss for improper venue is for abuse of discretion.). As recognized by the majority,
motions to dismiss based on forum-selection clauses are motions to dismiss based on venue.
Accordingly, by assigning a de novo standard of review to motions to dismiss based on
forum-selection clauses specifically, the majority breaks with this Court's prior precedent.
More importantly, this Court has long held as a general proposition that
[i]n reviewing challenges to the findings and conclusions of the
circuit court, we apply a two-prong deferential standard of
review. We review the final order and the ultimate disposition
under an abuse of discretion standard, and we review the circuit
court's underlying factual findings under a clearly erroneous
standard. Questions of law are subject to a de novo review.
Syl. Pt. 2, Walker v. W. Va. Ethics Comm'n, 201 W. Va. 108, 492 S.E.2d 167 (1997). The
new test set forth by the majority for determining whether to dismiss a claim based on a
forum-selection clause necessarily requires that courts applying the test make findings of fact
as well as determinations of law. Specifically, the first inquiry under the majority's new test
is whether the clause was reasonably communicated to the party resisting enforcement.
This element does not require a legal interpretation of the clause itself; rather, it turns solely
on a question of fact specific to each individual case. Similarly, the fourth element of the
new test requires a court to consider whether the party resisting enforcement of the forum-
selection clause has made a sufficiently strong showing that such enforcement would be
unreasonable and unjust. Such showing likewise turns on the facts of the particular case, and
is not related to the legal interpretation of the contract at issue.
Faced with a similar question concerning what standard to use in reviewing the
enforcement of a forum-selection clause, the Supreme Court of Washington acknowledged
the nuances associated with reviewing such clauses, and concluded that:
[G]enerally the abuse of discretion standard applies. Under this
standard of review, a trial court abuses its discretion if its
decision is manifestly unreasonable or based on untenable
grounds. If the trial court's ruling is based on an erroneous view
of the law or involves application of an incorrect legal analysis
it necessarily abuses its discretion. Thus, the abuse of discretion
standard gives deference to a trial court's fact-specific
determination on enforceability of a forum selection clause,
while permitting reversal where an incorrect legal standard is
applied. If, however, a pure question of law is presented, such
as whether public policy precludes giving effect to a forum
selection clause in particular circumstances, a de novo standard
of review should be applied as to that question.
Dix v. ICT Group, Inc., 161 P.3d 1016, 1020 (Wash. 2007) (internal citations omitted). Thus,
while affirming the basic tenet that questions of law are reviewed de novo, the Supreme
Court of Washington recognized that, even in the context of forum-selection clauses, trial
courts should be afforded the typical measure of deference generally granted to their factual
findings. This approach is in keeping with this Court's prior precedent and there is no good
reason to alter longstanding law to require de novo review of a circuit court's findings of fact
merely because they relate to the applicability of a forum-selection clause. See Syl. Pt. 2,
Walker, 201 W. Va. 108, 492 S.E.2d 167. Thus, I cannot support the majority's new holding
on this issue, as its approach is too simplistic, not in conformity with our longstanding law,
and seems designed to achieve an outcome for one specific case.
B. Scope of the Plaintiff's Claims
The broad language of the forum-selection clause in this case provides that it
applies to all actions brought in connection with
the CSA. The facts in this case, however,
establish that it was Massey's actions relating to the sale of Mr. Caperton's interest in the
Harman Companies_actions that were not related in any way to the CSA_that directly caused
the Harman Companies' and Mr. Caperton's complete financial demise. (See footnote 9)
For example, had
Massey merely directed Wellmore to fraudulently declare force majeure
, but done nothing
further, it is likely that Mr. Caperton would have found a buyer for the Harman Companies,
which would have saved them from bankruptcy and saved Mr. Caperton from personal
financial ruin. Indeed, Black Diamond, the company that ultimately purchased Wellmore
from Massey, had previously expressed an interest in purchasing the Harman Companies.
Massey, however, prevented any such deal by engaging Black Diamond as a buyer for
Wellmore and then ordering Black Diamond not to communicate with representatives of
Harman regarding its possible acquisition. Massey's directive to Black Diamond is just one
example of an act by Massey that was wholly unrelated to the CSA and, in the absence of
which, the Harman Companies may well have avoided bankruptcy.
Similarly, had Mr. Caperton not shut down the Harman Companies' operations
in mid-January, in reliance on Massey's fraudulent representations that it intended to close
the deal by January 31, 1998, Mr. Caperton and the Harman Companies' financial distress
would not have been as urgent or immediate as it was. With a little more time, they could
have found another buyer for their extremely valuable coal. (See footnote 10)
As part of its scheme, however,
starting in November 1997, Massey consistently led Mr. Caperton to believe that the parties
would reach a deal for the sale of Mr. Caperton's interest in the Harman Companies' and,
thus, Massey effectively prevented Mr. Caperton and the Harman Companies from seeking
other buyers or pursuing other avenues for relief. Clearly, Massey's misrepresentations
regarding its intent to reach a sale agreement, as well as its failure to follow through on the
agreed-to closing date for this sale, bear no relation to the CSA. The actions did, however,
directly lead to the Harman Companies' and Mr. Caperton's declarations of bankruptcy.
Finally, Massey's use of confidential information, obtained during the sale
negotiations with Mr. Caperton, to purchase the narrow band of coal reserves surrounding
the Harman Companies' mine, provides another example of conduct unrelated to any aspect
of the CSA. As admitted by Massey in its own internal documents, this purchase ensured
that the Harman Companies' property would be unattractive to all potential buyers other than
Massey. Clearly, such action was yet another aspect of Massey's fraudulent scheme to
ensure the Harman Companies' total collapse, and to further Massey's goal of gaining access
to the Harman Companies' valuable coal reserves.
Accordingly, the majority is wrong when it concludes that, in absence of the
declaration of force majeure, the Harman Companies would not have been forced into
bankruptcy and their prospective contractual relationships would not have been impeded by
Massey. Rather, the facts indicate that Massey's fraudulent conduct neither began nor
ended with that wrongful declaration and that it was Massey's misrepresentations and
concealments made in connection with the proposed sale of Mr. Caperton's interest in the
Harman Companies that directly caused their demise. The majority, however, makes no
attempt to explain why all of Massey's conduct unrelated to the CSA can be characterized
as flowing from the fraudulent declaration of force majeure. Like many of its other
determinations, the majority simply makes conclusory statements without any support or
C. A Better Approach
Importantly, this case involves fraud
, rather than an act of negligence or
straightforward breach of contract. Courts in many other jurisdictions have refused to
enforce forum-selection clauses where the plaintiff has asserted claims of wide-ranging fraudulent
conduct. In such cases, the court considering the forum-selection clause
concluded that the gist of the asserted claims exceeded the scope of the contract containing
the forum-selection clause and, thus, the court refused to allow the defendant to benefit from
In Farmland Industries, Inc. v. Frazier-Parrott Commodities, Inc.
, 806 F.2d
848 (8th Cir. 1986) (abrogated on other grounds by Lauro Lines S.R.L. v. Chasser
, 490 U.S.
495 (1989)), the United States Court of Appeals for the Eighth Circuit affirmed a district
court decision that the enforcement of a forum-selection clause would be unreasonable given
that not all of the plaintiff's claims arose directly or indirectly from the agreement containing
the clause. In that case, plaintiff Farmland Industries, Inc. (Farmland), an agricultural
cooperative corporation, contracted with the defendants, commodity brokerage firms, to open
several commodity futures trading accounts. Id.
at 849. The contract, which was signed in
May 1985, contained a very broad forum-selection clause which bound Farmland to bring
any judicial action arising directly, indirectly, or otherwise in connection with, out of,
related to or from this Agreement or any transaction covered hereby or otherwise arising in
connection with the relationship between the parties . . . in Cook County, Illinois. Id.
In its complaint, Farmland alleged that prior to entering into the May 1985
contract, the defendants had engaged in various fraudulent activities, including a kick-back
scheme in which several of the defendants would receive money for every closed contract
on Farmland's commodities account. Farmland further alleged that the defendants had
created a sham corporation to receive the kickbacks, and that some of Farmland's favorable
commodities contracts had been transferred to an account set up for the sham corporation. Id.
After discovering the fraudulent conduct, Farmland filed suit in the District Court for
the Western District of Missouri, alleging fraud, breach of fiduciary duty, and violations of
several federal statutes, including the Racketeer Influenced and Corrupt Organizations Act
The defendants sought to dismiss the case based on improper venue pursuant
to the forum-selection clause. Id.
In reviewing the case, the Eighth Circuit concluded that the scope of the claims
raised in the suit was broader than the scope of the forum-selection clause
at 852. It
Plaintiff has alleged an elaborate scheme of fraud involving not
only Heinold [a party to the contract containing the clause] and
individuals associated with Heinold, but also involving other
individuals outside the securities brokerages, sham corporations,
and other matters not subject to the agreement between plaintiff
Id. Thus, the Eighth Circuit agreed with the district court that not all of Farmland's claims
arose directly or even indirectly from the contract, and Farmland could not have anticipated
having to litigate these claims in Illinois. Id. It further found that Farmland's multiple
claims were not intended to evade the forum selection clause, and that, although some of
the claims were directly related to the contract containing the clause, it made no sense to
transfer just those claims to the designated forum, thereby mandating the piecemeal
resolution of the case. Id. Consequently, it affirmed the district court's decision.
Similarly, in Armco Inc. v. North Atlantic Insurance Company Limited, 68 F.
Supp. 2d 330 (S.D.N.Y. 1999), the district court for the Southern District of New York
concluded that a forum-selection clause would not dictate venue in a case in which the
plaintiff had alleged a fraudulent course of conduct by the defendants which pre-dated the
signing of the clause-containing contract. In Armco, the plaintiff asserted common law fraud,
conversion, breach of fiduciary duty, and violations of RICO, stemming from an alleged
fraudulent scheme associated with the sale of several of its subsidiaries. Id. at 333. Prior to
the sale, which was designed to be a management buy-out, several of the plaintiffs'
employees entered into a secret agreement with the purchasers to eventually become joint-
owners of the subsidiaries. Id. at 333-34. The plaintiffs alleged that, instead of being the
product of an arms-length negotiation, the sale was part of a wide-ranging conspiracy to
defraud Armco and its affiliates out of millions of dollars. Id. at 334. They further asserted
that the fraudulent conduct commenced before the contract was entered into, and continued
after the sale had been completed. Id.
The sale contract in Armco included a forum-selection clause, stating that the
parties irrevocably submit themselves to the exclusive jurisdiction of the English Courts to
settle any dispute which may arise out of or in connection with this Agreement. Id. at 338.
After the plaintiff initiated suit in the Southern District of New York, the defendant moved
to dismiss asserting improper venue based on the clause. Id. at 333. The district court,
however, concluded that the action did not arise out of or in connection with the sale
contract. Id. at 338. It noted that the plaintiffs were not suing for breach of contract, alleging
any lack of performance, or otherwise disputing either party's rights or obligations under the
contract, but were instead alleging a series of fraudulent activities that included the
negotiation and execution of the subject Sale Contract. Id. Indeed, the action arose out
of the alleged wide ranging fraud, including numerous acts committed before the execution
of the Sale Contract. Id. Thus, it concluded, the 'gist' of plaintiffs' claims is not the
breach of a contractual relationship, but the series of acts by defendants resulting in the
fraud. Id. at 339 (emphasis added). Importantly, it noted that the signing of the sale
contract was merely one important aspect of the defendant's fraudulent scheme. Id. at 340.
I find the reasoning of the courts in Farmland and Armco compelling and the
better view for this Court to have adopted in the instant case. Similar to the defendants in
those cases, Massey engaged in a wide-ranging, fraudulent course of conduct for the
purposes of obtaining access to new sources of metallurgical coal and new purchasers for that
coal, while eliminating one of its competitors, the Harman Companies, in the process. To
that end, Massey engaged in a series of acts, of which the declaration of force majeure was
merely one important aspect. See Armco, 68 F. Supp. 2d at 340. Like the defendants in Armco, who initiated their fraudulent plan before the sale contract was signed, Massey
developed and initiated its fraudulent scheme prior to fraudulently declaring force majeure,
and its fraudulent conduct continued after that declaration until it had financially ruined the
Harman Companies and Mr. Caperton. Despite the clear evidence of the wide-ranging scope
of Massey's fraudulent conduct, the majority concludes that Massey's conduct that was
unrelated to the CSA did not, by itself, produce the ultimate injury, and thus it should be
disregarded. Under Farmland and Armco, however, the entire course of conduct should be
considered in determining the scope of the claims.
Underlying the holdings in these cases is the proposition that courts should not
reward wrong-doers by allowing them to benefit from contracts with which they have
fraudulently interfered. Indeed, it is an immense irony that Massey, in directing the
fraudulent declaration of force majeure, treated the CSA like it was not worth the paper it
was written on. Yet in its now successful effort to wreak corporate and personal financial
ruin on the Harman Companies and Mr. Caperton, Massey embraces the contract and its
forum-selection clause almost amorously. The majority encourages this behavior by
callously allowing Massey to benefit from the contract it sought to destroy.
III. Retroactive Application of the New Principles of Law
Even if the majority was correct that, under its new law relating to the
enforceability of forum-selection clauses, this suit should have been brought in Virginia, it
is clearly unjust to enforce the new principles of law in this case, particularly by doing so
without remanding the case for application of the new test by the circuit court. Indeed, I am
at a complete loss to understand how the majority can allow Massey to benefit_to the tune
of more than fifty million dollars plus interest_from a forum-selection clause contained in
a contract that Massey actively sought to destroy. That the majority considers the application
of the forum-selection clause in this case to be an equitable result is beyond
A. Due Process Violation
As previously discussed, the majority adopts a brand new legal test for
determining the validity and applicability of a forum-selection clause, a test which
necessarily requires findings of fact. The majority, however, refuses to remand the case for
application of the test by the circuit court. Instead, flying in the face of clear precedent, the
majority makes its own findings of fact in applying the test, without providing the plaintiffs
any opportunity to establish an appropriate evidentiary record. Accordingly, because the
plaintiffs did not have a crystal ball during the early stages of this case, they are precluded
from even attempting to comport with the new legal principles set forth by the majority.
It is well-settled that a State may not deprive a person of all existing remedies
for the enforcement of a right, which the State has no power to destroy, unless there is, or
was, afforded to him some real opportunity to protect it. Brinkerhoff-Faris Trust & Savings
v. Hill, 281 U.S. 673, 682 (1930). Nevertheless, that is exactly what the majority has done
here. Indeed, by enunciating new principles of law and applying them to the case at hand,
instead of remanding the case to the circuit court for further evidentiary analysis, the majority
violates the plaintiffs' due process rights.
As stated by former West Virginia Supreme Court Justice Joseph P. Albright,
Jr., in his dissenting opinion in this case following the majority's April 4, 2008, opinion:
[w]hen a new burden is placed on a party as part of that new law
and the party charged with carrying the burden is not permitted
an opportunity to go forward with evidence to meet that burden,
procedural due process guarantees are violated . . . There is
absolutely no way that the corporate appellees or Mr. Caperton
could have heretofore attempted to meet the burden the new
standard imposes in order to overcome the presumption of
validity. The majority affords no opportunity after announcing
the new standard for the affected parties to meet the newly
established burden. Obviously, Appellees' rights to due process
have been abridged.
Caperton v. A.T. Massey Coal Co., Inc., 223 W. Va. 624, 679 S.E.2d 223, 278-79 (2008)
(Albright, J., dissenting). I agree with Justice Albright's assessment that, by depriving the
plaintiffs of the opportunity to prove, under the majority's new test, that enforcement of the
forum-selection clause in this case is inappropriate, the majority deprives the plaintiffs of
their opportunity to protect their rights and, thus, violates due process principles.
B. New Retroactive Application Test
The majority now concludes that the existing test for determining when to
retroactively apply a newly established principle of law, set forth in Bradley v. Appalachian
, 163 W. Va. 332, 256 S.E.2d 879 (1979), is insufficient for the case at hand, (See footnote 11)
because the Bradley
test is narrowly confined to deciding whether to retroactively apply a
new principle of law that was created in a case that overruled prior precedent. Thus, the
majority, relying on the United States Supreme Court's decision in Chevron Oil Company
, 404 U.S. 97 (1971), overruled by Harper v. Virginia Department of Taxation
U.S. 86 (1993), now sets forth a new test designed for situations in which the new principle
of law addresses an issue of first impression, rather than overturning prior precedent:
First, we will determine whether the new principle of law was
an issue of first impression whose resolution was clearly
foreshadowed. Second, we must determine whether or not the
purpose and effect of the new rule will be enhanced or retarded
by applying the rule retroactively. Finally, we will determine
whether full retroactivity of the new rule would produce
substantial inequitable results.
In applying this test to the instant case, the majority finds that its new principles of law
relating to forum-selection clauses were clearly foreshadowed, that the purpose of the new
principles is furthered by applying them retroactively, and that retroactive application is not
The majority's application of its new retroactivity test to the instant case,
however, is arbitrary and unjust. Indeed, when applied to this case, even the new test clearly
retroactive application. Not only are the majority's new principles of law
relating to forum-selection clauses not clearly foreshadowed, enforcement of these new
principles plainly produces a substantially inequitable result.
1. Decision Not Clearly Foreshadowed
According to the majority, whether the resolution
of a new principle of law has
been clearly foreshadowed turns solely on whether a party should have known that the
Court might address
the issue of first impression. Thus, in the majority's view, the presence
or absence of clear foreshadowing applies only to whether the Court may decide to resolve
the issue at all and no foreshadowing is necessary of what the actual new law might be. (See footnote 12)
To this end, the majority, quoting an intermediate appellate court from
Michigan, holds that [a]ll that is required is some indication by a prior decision of this Court
or a national trend that would 'put persons on notice that [this Court] could resolve the issue
either way[.] Collins v. Dept. of Corr.
, 421 N.W.2d 657, 659 (Mich. App. 1988). It then
finds clear foreshadowing in this Court's prior pronouncement, made more than twenty-
eight years ago, in the footnote in Keyser
that indicated that contract clauses which affect
matters such as jurisdiction and the like should be carefully analyzed. 166 W. Va. at 461
n. 2, 275 S.E.2d at 291 n. 2.
It is absurd for this Court to find that dicta contained in a nearly thirty-year-old
footnote that merely advised courts considering contract clauses on jurisdiction and the like
to analyze them carefully, clearly foreshadows
the majority's complete overhaul of this
Court's law relating to forum-selection clauses. This is particularly absurd given the context
of this case, in which the party seeking to enforce the clause engaged in a wide-ranging
fraudulent scheme resulting, in part, in the fraudulent breach of the contract containing that
clause. (See footnote 13)
Moreover, this Court has specifically de-emphasized placing any importance on
language contained in footnotes, stating that language in a footnote generally should be
considered obiter dicta which, by definition, is language 'unnecessary to the decision in the
case and therefore not precedential.' Black's Law Dictionary 1100 (7th ed.1999). (See footnote 14) State
ex rel. Medical Assurance of West Virginia, Inc., v. Recht
, 213 W. Va. 457, 471, 583 S.E.2d
80, 94 (2003). Thus, the majority's finding that the Keyser
footnote provides the clear
foreshadowing necessary to retroactively apply the new legal principles announced in this
case is simply another example of how the majority blatantly manipulates the law to achieve
its desired outcome.
I additionally find no support for the majority's interpretation of foreshadowing
in the case on which it primarily relies, Professional Insurance Corp. v. Sutherland
, 700 So.
2d 347 (Ala. 1997). In Southerland
, the Alabama Supreme Court overruled prior precedent
holding that outbound (See footnote 15)
forum-selection clauses were per se
void. In retroactively
applying its new rule upholding such clauses to the case before it, the court stated that the
parties should have been forewarned that it would re-consider this prior precedent because
of an overwhelming national trend to enforce such clauses, initiated by the United States
Supreme Court decision in M/S Bremen v. Zapata Off-Shore Co.
, 407 U.S. 1 (1972). Id.
352. The Alabama Supreme Court concluded:
That nationwide trend foreshadowed our adoption today of the
rule that such clauses are not per se void, providing notice that
Alabama might follow suit and thereby reducing the reliance
these plaintiffs could reasonably have placed upon the continued
viability of the traditional rule in Alabama.
Contrary to the majority's assertion, the foreshadowing that the Alabama
Supreme Court relied on for applying the new rule retroactively did not merely alert the
parties to the fact that the court may overrule prior precedent on the issue, but clearly pointed
to the new rule that would be adopted. Indeed, as the Alabama Supreme Court noted, only
three other states still held the view that outbound forum selection clauses are per se invalid and unenforceable, and two of those so held because of their interpretation of state
statutes. Id. at 350. Thus, the national trend described in Sutherland not only foreshadowed
the court's inclination to re-address prior precedent, but also provided a clear indication of
what the new rule adopted by that court would be.
A second case cited by the majority, Founder v. Cabinet for Human Resources,
23 S.W.3d 221, 224 (Ky Ct. App. 1999), provides another good example of foreshadowing.
In Founder, the Court of Appeals of Kentucky retroactively applied a decision of the
Kentucky Supreme Court in Vawzkoroni v. Domino's Pizza, Inc., Ky., 914 S.W.2d 341
(1995), to Founder's case, even though Founder had filed his suit prior to the decision in Vaezkoroni. Id. at 224. The court of appeals concluded that Founder should have been on
notice that the law in this area would change, because the holding of Vaezkoroni had been
clearly foreshadowed by a prior opinion of that court. Id. That prior opinion had narrowed
the previously existing precedent, and pointed in the direction that the Vaezkoroni opinion
then confirmed. Id. Thus, the court of appeals held that retroactive application was
appropriate in that case. Once again, the foreshadowing that existed in Founder not only
indicated that the Court would address a particular area of law, but further pointed in the
direction the new law would go.
This Court has itself properly applied the foreshadowing test when previously
addressing retroactivity under Bradley, 163 W. Va. 332, 256 S.E.2d 879. For example, in Richmond v. Levin, 219 W. Va. 512, 518, 637 S.E.2d 610, 616 (2006), this Court applied the Bradley test and concluded that a particular holding had been clearly foreshadowed because:
The prior decisions of this Court clearly establish that we have
not permitted the legislature to enact statutes that are
inconsistent with and governed by rules promulgated under our
Rule-Making authority. Consequently, it should have been
reasonably foreshadowed that this Court would invalidate the
jury requirements of W. Va. Code § 55-7B-6d, because those
requirements conflicted with the Rules of Civil Procedure.
Thus, the new rule announced in Richmond was clearly foreshadowed because this Court's
prior holdings clearly indicated the direction in which the Court was moving with regard
to that particular area of law.
In the case at hand, however, no prior decisions of this Court provide any
foreshadowing whatsoever that this Court would be adopting any new legal principles
relating to forum-selection clauses, much less those that have been adopted in this case. To
say that the majority's new test was clearly foreshadowed requires great poetic license and
a true stretch of the imagination.
2. Application Creates Substantially Inequitable Results
I vehemently disagree with the majority's conclusion that no inequitable
result ensues from applying its new principles of law to the suit at issue. A jury, after
considering all the evidence relating to the merits of the case, found Massey guilty of
tortiously interfering with the plaintiffs' existing contracts, as well as making fraudulent
misrepresentations and engaging in fraudulent concealment. It awarded the plaintiffs more
than fifty million dollars in damages. As previously stated, much of that verdict would have
gone to repaying the Harman Companies' creditors, who were also victims of Massey's
conduct. To reverse such a verdict on the basis of a circuit court's decision on venue_an
issue wholly unrelated to the merits of the case_cannot be fair or equitable, particularly
without having given the plaintiffs an opportunity to prove, under the new principles of law,
that the forum-selection clause in this case should not have been enforced. This injustice is
further exacerbated by the fact that the applicable statutes of limitations prohibit the Harman
Companies and Mr. Caperton from bringing their claims in Virginia, where the majority now
holds they should have been brought. Thus, the plaintiffs are left without any recourse
against Massey's illegal behavior.
In support of its conclusion that retroactive application of the new legal
principles is equitable in this case, the majority merely states that there is no evidence in the
record to show that the forum-selection clause involved in this case was not freely bargained
for by the actual signatories to the agreement. This incredibly narrow and result-oriented
view of what makes the retroactive application of a new point of law inequitable is very
troubling. The majority once again refuses to consider the fact that Massey was being sued
because of its fraudulent course of conduct, one important element of which was its breach
of the very contract that contained the forum-selection clause. To allow a party that engages
in such fraudulent behavior to then benefit from the contract that it sought to destroy is the
very definition of inequitable. Accordingly, substantial inequitable results are produced
by the retroactive application of the majority's new legal principles and the new law should
not be retroactively enforced in this case.
In sum, because Massey engaged in a wide-ranging fraudulent scheme to
destroy the Harman Companies and Mr. Caperton for its own financial gain, and because
many of the acts engaged in by Massey to further that scheme bore absolutely no relation to
the CSA, legal claims based on those acts should not be controlled by the forum-selection
clause. Furthermore, under Farmland
, even claims that partially relate to the
fraudulent declaration of force majeure
should be exempt from the forum-selection clause,
because, given the wide-ranging scope of Massey's conduct in furtherance of that scheme,
the gist of the plaintiffs' suit exceeds the scope of the CSA. For these reasons, the forum-
selection clause should not be enforced in this case.
Furthermore, the majority's new standard of review is inappropriate, given that
its new test for determining the enforceability of forum-selection clauses requires findings
of fact. Where a circuit is asked to make factual determinations, this Court should afford
those determinations the deference traditionally given. Incredibly, the majority not only fails
to give deference, but chooses to make those findings of fact itself by applying its new
forum-selection clause test in this case and, in doing so, it deprives the plaintiffs of their due
process right to present evidence to establish that the forum-selection clause should not be
Thus, I oppose the majority's decision to retroactively apply the new principles
of law relating to forum-selection clauses, a decision that deprives the plaintiffs and other
victims of Massey's conduct of any possible redress. Indeed, even under the majority's
newly stated retroactivity test, retroactive application is inappropriate in the instant case
because the majority's new principles of law were not clearly foreshadowed, and applying
them to this case produces a substantial inequitable result. For these reasons, I respectfully
The Harman Companies' employees and retirees, the United Mine Workers of
America (UMWA), and the UMWA Health and Retirement Funds are among the largest
creditors in the Harman bankruptcy cases, with combined claims exceeding $15.8 million.
In its March 15, 2005, Final Order denying Massey's post-trial motions, the circuit
court found that
[t]he evidence was clearly sufficient for the Jury to conclude
that Defendants tortiously interfered with the Harman Plaintiffs'
advantageous relationships with, among others, the United Mine
Workers of America, with Penn Virginia Coal Company, with
Terra Industries, Inc., with Grundy National Bank, and with
Wellmore Coal Corporation. As for Plaintiff Caperton, the
evidence was clearly sufficient for the Jury to conclude that
Defendants tortiously interfered with, among others, his
personal guaranty relationships with Grundy National Bank, his
personal liability under the Terra reclamation bonds . . . and his
personal relationship with United Bank. Further, the evidence
was clearly sufficient for the Jury to conclude that Defendants
engaged in this intentional interference for the specific purpose
of financially destroying Plaintiffs, both corporately and
With interest, the award due to the plaintiffs would now exceed eighty-five million
Interestingly, no written order denying the motion to dismiss can be found in the
Court record, nor was any oral ruling documented in this case. Because throughout the
tortured history of this appeal, the parties have agreed that the motion was denied, we must
conclude that the lower court at least implicitly denied the motion.
The CSA included a force majeure
provision, which permitted either party to
suspend its obligations under the contract if one of several specific, uncontrollable events
prevented that party from being able to meet its contractual obligations. For example, if either
party was prevented from performing under the contract as a result of an act of God, act of
public enemy, epidemic, insurrection, etc., then that party could avoid defaulting on its
contractual obligations by declaring force majeure
The torts of fraudulent misrepresentation and fraudulent concealment each require
that the plaintiff prove:
(1) that the act claimed to be fraudulent was the act of the
defendant or induced by him; (2) that it was material and false;
that plaintiff relied on it and was justified under the
circumstances in relying upon it; and (3) that he was damaged
because he relied on it.
Syl. Pt. 5, in part, Kidd v. Mull
, 215 W. Va. 151, 595 S.E.2d 308 (2004) (quoting Horton v.
, 104 W. Va. 238, 242, 139 S. E. 737 (1927); Syl. Pt. 1, Lengyel v. Lint,
167 W. Va.
272, 280 S.E.2d 66 (1981)).
Mr. Caperton had personally guaranteed many of the Harman Companies' debts, and
Massey had promised to assume these debts as part of the deal.
The circuit court noted in its Final Order denying Massey's post-trial motions that
Mr. Caperton suffered additional mental anguish due to Massey's trespassing on his personal
property and photographing his personal residence.
By focusing on Massey's actions that were outside the scope of, or not done in
connection with, the CSA, I do not intend to diminish the importance of the fraudulent
declaration of force majeure
. There can be no doubt that Massey used that fraudulent
declaration to place the Harman Companies in a financially vulnerable position which forced
them to negotiate with Massey. That declaration, however, was not the proximate cause of
the damages that occurred in this case, and by focusing solely on it, the majority ignores the
importance of the other acts undertaken by Massey.
Massey documents acknowledged that the quality of the Harman Companies' coal
exceeded the quality of Massey's own most valuable reserves.
Remarkably, in every instance that existing law and longstanding precedent stood
in the way of the result reached by the majority, it simply altered the law accordingly.
Taken to its logical conclusion, under the majority's interpretation, every
area of law would be clearly foreshadowed because the public should expect that issues
of first impression will be, by there very nature, addressed by this Court when raised for the
first time. Clearly, such interpretation renders the first element of this test superfluous and
the concept of foreshadowing meaningless.
A more reasonable interpretation of Keyser
's footnote comes from a reading of its
complete text, in which the Court indirectly indicates that courts in West Virginia will only
enforce forum-selection clauses when such enforcement is found to be reasonable and just. Id.
at 461 n. 2, 275 S.E.2d at 292 n. 2. (quoting Leasewell, Ltd. v. Jake Shelton Ford Inc.
F. Supp. 1011, 1015 (S.D.W. Va.1976)).
As the Court further explained in Doe
[d]icta is defined by Black's Law Dictionary as:
Opinions of a judge which do not embody the resolution or
determination of the specific case before the court. Expressions
in court's opinions which go beyond the facts before court and
therefore are individual views of author of opinion and not
binding in subsequent cases. State ex rel. Foster v. Naftalin
Minn. 181, 74 N.W.2d 249.
Black's Law Dictionary 454 (6th ed.1990); see
20 Am.Jur.2d Courts
(defining dicta as expressions of opinion which are not necessary to support
the decision reached by the court). The phrase, obiter dicta,which translates
to a remark by the way, is often shortened to just dicta and similarly
references those comments or observations of a judge regarding a point that is
incidental or collateral to the direct issue before the court or upon an analogous
point introduced by way of illustration but not necessary to the determination
of the instant case. See
Black's Law Dictionary 1072 (6th ed.1990).
210 W. Va. at 494-95, 558 S.E.2d at 294-95 (footnote omitted).
The Alabama Supreme Court in Sutherland defined an outbound forum selection
as one providing for trial outside of Alabama, while an 'inbound' clause provides for trial
inside Alabama. Id. at 348 n. 1.