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Still bad reviews for legal climate

Oct. 12, 2012 @ 11:40 PM

HUNTINGTON -- West Virginia's reputation of having a menacing legal climate for businesses is no secret nationally, and fixing it is a work in progress.

Just last month, the U.S. Chamber of Commerce's Institute for Legal Reform released its annual lawsuit climate report and again found West Virginia to have the worst legal climate in the country. The American Tort Reform Association ranks West Virginia third on its list of "Judicial Hellholes" in the United States, behind the city of Philadelphia and California.

National experts on legal reform say that West Virginia's new business court, opened just this week, is a positive development, but it remains to be seen whether the state can improve its reputation without the establishment of an intermediate court of appeals.

West Virginia is one of only two states in the nation without an intermediate court of appeals, the other being New Hampshire. But unlike New Hampshire, West Virginia has neither an intermediate court of appeals nor mandatory review, said Justin Hakes, spokesman for the U.S. Chamber's Institute for Legal Reform.

Court officials in the state argue that an intermediate court is an unnecessary cost given some new changes. Rather than establish an intermediate court of appeals, West Virginia opened this week a business court to handle disputes between two or more businesses. It has assigned judges who will handle the complex issues faced by businesses, such as transactions, contracts, intellectual property cases, tax matters and many other topics.

State officials -- including House Speaker Rick Thompson, D-Wayne, who has been a proponent of the business court -- hope that it not only expedites the process for businesses, but gives circuit judges more time to handle civil and criminal cases.

The seven-region business court system is modeled after a successful, 200-year-old system in Delaware that about 18 other states have borrowed, and it comes at no extra cost to taxpayers. Judge Christopher Wilkes of Berkeley County will head the business court, and a handful of judges, including James Young of Wayne County, will be assigned to handle its cases.

Along with this change, West Virginia has established a new rule in the appellate procedure that each request for an appeal to the West Virginia Supreme Court should get a written explanation of whether or not it merits review by the justices.

The changes do give businesses more stability and predictability, which is positive, said Hakes of the U.S. Chamber.

"West Virginia has been in the bottom for quite some time now," Rakes said. "The extent to which these changes will affect that ranking when you still have the lack of an intermediate court of appeals remains to be seen, but the changes from our view are a positive step in the right direction."

The U.S. Chamber submitted comments on the proposed rule changes in May, and some of its recommendations were adopted, one involving the subject matters that the court address and another involving predictability of which cases will reach the business court, he said.

According to the U.S. Chamber, the state has a lot of damage control to do, with high stakes.

"As our economic downturn has continued, a growing percentage of business leaders have identified a state's lawsuit climate as a significant factor in determining their growth and expansion plans, and the jobs that come along with them," Lisa A. Rickard, president of the Institute for Legal Reform, said in a release. "That makes the consequences of this survey even more significant to the economic growth of West Virginia."

The state "continues to suffer from outrageous verdicts, lack of meaningful appellate review, an overzealous attorney general's office, antiquated laws and frivolous lawsuits," Rickard said in the release.

West Virginia could save up to $320 million in tort costs if it were to improve its legal environment, according to a 2011 study titled "Creating Conditions for Economic Growth: The Role of the Legal Environment." It was completed by the institute's consultant, NERA Economic Consulting,

Darren McKinney, spokesman for the American Tort Reform Association, said that he thinks the finite resources of the state might have been better spent on an appellate system.

"I think they could have gotten more bang for their buck had they, in fact as many have sought, set up an intermediate appeals court," McKinney said. "There's no down side to a business court, but one could argue that the significant and frightening problems that West Virginia has ... are keeping businesses out of state and convincing some to leave.

"It's not inconceivable that if West Virginia continues to ignore some of its other glaring problems, it won't be too long before that business court has a very small docket. Businesses aren't going to stay in West Virginia, and if no businesses set up shop there, there won't be any businesses to sue."

He described West Virginia's "glaring problems" by saying, "As our 'Judicial Hellhole' report documents annually, you continue to have an attorney general's office that continues to think that corporations are his piggy bank, and he spins his down-home media and jury stories and convicts (businesses) in the media before they even get to a court."

The "Judicial Hellhole" website lists decisions it does not support, as well as some examples of good decisions in the state.

There remains much progress to be made, but the new business court and newly required written explanation regarding appeals are good news, said Steve Roberts, president of the West Virginia Chamber of Commerce.

The state Chamber was active in lobbying the Legislature for an intermediate court of appeals, which in 2011 passed the Senate but not the House. It would have created a three-judge intermediate appellate court that would hear appeals of any civil or criminal case that the Supreme Court would not consider. It died in the last few days of the legislative session.

Opponents said the costs involved were an unknown and that recently adopted new rules by the state Supreme Court already addressed many of the issues raised by the bill's proponents.

Delegate Jim Morgan, D-Cabell, remembers being told the list of cons for an intermediate court of appeals being things like the cost, which could be about $10 million yearly, as well as several other factors such as criminals being out of jail.

While the changes now in place could be helpful to the business community, no one knows right now whether or not it will change the state's national reputation.

"We don't need to be last if we can buy our way out of it for $10 million," Morgan said, referring to an estimate of the cost of an intermediate court. "That's a lot of money, (but it might be worth it). Employment and taxes (from businesses coming to the state) might make up for that."

Meanwhile, the Chamber is supportive of the creation of the business court, Roberts said.

"Clearly, we need additional legal reforms, but the business court will be viewed nationally as a step in the right direction," he said.

Having a court well-honed in handling business matters is especially important in the 21st Century, with substantial and complicated issues involving employers, Roberts said.

"We all would like to attract high tech, new economy jobs, but with those jobs come complicated issues related to patents, copyrights, issues with international trade, and complex tax issues," he said. "We live in a world where everything is getting more specialized, and the same can be said of courts. Some courts are good at family matters or criminal matters, so we think having a court specifically competent and trained to take on highly complex, tax, regulatory, patent kinds of issues makes a lot of sense.

"It's really in the interest of everybody. It's not just a business issue. At least most able-bodied and able-minded people want a place to work and need to have a fair (business climate), and that's what a business court will provide."

He's also pleased with the court issuing written opinions about appeals placed before the court. It will help provide a complete body of law that businesses can turn to for guidance.

"Some have found that our laws are interpreted differently in different parts of the state," he said. "Having a written body of decided opinions from the West Virginia Supreme Court of Appeals will help people know what the law is so they can carefully follow it.

"We support the creation of an intermediate appellate court. We think it's a good way to manage the appellate docket. But we think the court is to be complimented for going as far as it has and offering to issue written opinions. We are now seeing that the volume of written opinions is good. We are now evaluating the quality of the written opinions. We are cautiously optimistic."