SER National Union Fire Insurance Company of Pittsburg, PA. v. David W. Hummel, Jr. and Axiall Corporation and Westlake Chemical Corporation

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2020 Term
FILED
_______________
October 19, 2020
released at 3:00 p.m.
No. 19-0978 EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALS
_______________ OF WEST VIRGINIA
STATE OF WEST VIRGINIA, ex rel.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.;
ALLIANZ GLOBAL RISKS US INSURANCE COMPANY;
ACE AMERICAN INSURANCE COMPANY;
ZURICH AMERICAN INSURANCE COMPANY;
GREAT LAKES INSURANCE SE;
XL INSURANCE AMERICA, INC.;
GENERAL SECURITY INDEMNITY COMPANY OF ARIZONA;
ASPEN INSURANCE UK LIMITED;
NAVIGATORS MANAGEMENT COMPANY, INC.;
IRONSHORE SPECIALTY INSURANCE COMPANY;
VALIDUS SPECIALTY UNDERWRITING SERVICES, INC.; and
HDI-GERLING AMERICA INSURANCE COMPANY,
Petitioners
v.
THE HONORABLE DAVID W. HUMMEL, JR., JUDGE OF THE SECOND
JUDICIAL CIRCUIT, and
AXIALL CORPORATION, and
WESTLAKE CHEMICAL CORPORATION
Respondents
____________________________________________________________
Appeal from the Circuit Court of Marshall County
The Honorable David W. Hummel, Jr., Judge
Civil Action No. 19-C-59
WRIT GRANTED AS MOULDED
____________________________________________________________
Submitted: September 23, 2020
Filed: October 19, 2020
Debra Tedeschi Varner, Esq. Jeffrey V. Kessler, Esq.
James A. Varner, Sr., Esq. Berry, Kessler, Crutchfield, Taylor &
Varner & Van Volkenburg PLLC Gordon
Clarksburg, West Virginia Moundsville, West Virginia
Myles A. Parker, pro hac vice Travis L. Brannon, Esq.
Alexandra F. Markov, pro hac vice Thomas C. Ryan, Esq.
Carroll, Warren & Parker John M. Sylvester, pro hac vice
Jackson, Mississippi Paul C. Fuener, pro hac vice
David R. Osipovich, pro hac vice
Counsel for Petitioners Sarah M. Czypinski, pro hac vice
K&L Gates LLP
Pittsburgh, Pennsylvania
Counsel for Respondents
CHIEF JUSTICE ARMSTEAD delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “In determining whether to entertain and issue the writ of prohibition for
cases not involving an absence of jurisdiction but only where it is claimed that the lower
tribunal exceeded its legitimate powers, this Court will examine five factors: (1) whether
the party seeking the writ has no other adequate means, such as direct appeal, to obtain the
desired relief; (2) whether the petitioner will be damaged or prejudiced in a way that is not
correctable on appeal; (3) whether the lower tribunal’s order is clearly erroneous as a matter
of law; (4) whether the lower tribunal’s order is an oft repeated error or manifests persistent
disregard for either procedural or substantive law; and (5) whether the lower tribunal’s
order raises new and important problems or issues of law of first impression. These factors
are general guidelines that serve as a useful starting point for determining whether a
discretionary writ of prohibition should issue. Although all five factors need not be
satisfied, it is clear that the third factor, the existence of clear error as a matter of law,
should be given substantial weight.” Syllabus Point 4, State ex rel. Hoover v. Berger, 199
W. Va. 12, 483 S.E.2d 12 (1996).
2. “Ordinarily, in the absence of a written motion for summary judgment by
one of the parties, the court is not authorized sua sponte to grant a summary judgment.”
Syllabus Point 2, Gavitt v. Swiger, 162 W. Va. 238, 248 S.E.2d 849 (1978).
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3. “As a general rule, a trial court may not grant summary judgment sua
sponte on grounds not requested by the moving party. An exception to this general rule
exists when a trial court provides the adverse party reasonable notice and an opportunity
to address the grounds for which the court is sua sponte considering granting summary
judgment.” Syllabus Point 4, Loudin v. National Liability & Fire Insurance Company, 228
W. Va. 34, 716 S.E.2d 696 (2011).
4. “A writ of prohibition will not issue to prevent a simple abuse of discretion
by a trial court. It will only issue where the trial court has no jurisdiction or having such
jurisdiction exceeds its legitimate powers. W. Va. Code 53-1-1.” Syllabus Point 2, State ex
rel. Peacher v. Sencindiver, 160 W. Va. 314, 233 S.E.2d 425 (1977).
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Armstead, Chief Justice:
In this petition for writ of prohibition, both parties agree that this Court
should grant the requested relief to the extent that it prohibits the circuit court from
enforcing its sua sponte order dismissing Count III of Axiall Corporation (“Axiall”) and
Westlake Chemical Corporation’s (“Westlake”) (collectively, “Respondents”) complaint
and finding that West Virginia law applied to all of Respondents’ bad faith claims.
Petitioners argue, and Respondents disagree, that this Court should extend the writ to order
that Georgia law – and only Georgia law – applies to all claims raised in the underlying
complaint.
For the reasons set forth below, we agree that the circuit court exceeded its
legitimate authority by sua sponte dismissing Count III of the complaint and finding that
West Virginia law applied to all bad faith claims, as that issue had not been briefed, argued,
or developed by the parties. However, we decline to extend the writ to find that Georgia
law applies to the entire dispute, as a writ of prohibition is not the proper avenue for such
relief.
I. FACTUAL AND PROCEDURAL BACKGROUND
On August 27, 2016, a chlorine tank train car ruptured at the Natrium Plant
located in Proctor, West Virginia. This rupture caused damage to the Natrium Plant, which
is owned and operated by Westlake. Axiall is a wholly-owned indirect subsidiary of
Westlake.
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Axiall sought coverage under its insurance policies for damages caused by
the leak. Among them, Petitioners issued thirteen separate policies in which each Petitioner
subscribed to certain “quota-shares” of the insurance for the Natrium Plant. These policies,
subject to their conditions, endorsements, and exclusions, provided coverage for all risks
of direct physical loss or damage to the insured property.
On April 9, 2019, over two-and-a-half years after the claim was first made,
Petitioners denied coverage pointing to exclusions in the policies for faulty workmanship,
corrosion, and contamination. That same day, Petitioners filed a declaratory judgment
action in the State of Delaware to determine their rights and responsibilities under the
policies. 1 The next day, April 10, 2019, Respondents filed the underlying complaint
asserting five separate counts: (1) declaratory judgment; (2) breach of contract; (3) bad
faith under Georgia law; (4) bad faith under West Virginia law; and (5) statutory bad faith
under the West Virginia Unfair Trade Practices Act.
Petitioners subsequently filed a motion titled “Defendants’ Motion to
Dismiss or Stay In Favor of First-Filed Foreign Action.” In that motion, Petitioners sought
to either dismiss or stay the West Virginia proceeding because (1) the Delaware action was
filed earlier; (2) West Virginia was not a convenient forum; and (3) West Virginia was not
the proper venue for this action. The circuit court held a hearing on the motion to dismiss
1
The Delaware action has been stayed.
2
on September 5, 2019, and denied the motion. However, the circuit court, sua sponte,
without anyone moving, briefing, or seeking such relief, dismissed 2 Count III – Bad Faith
– Violation of Georgia Code § 33-4-6, finding:
It is further ORDERED that Count III of Plaintiffs’
Complaint, titled “Bad Faith – Violation of Georgia Code § 33-
4-6,” is hereby DISMISSED. The Court FINDS that while
Georgia law governs the coverage issues pled in Count II,
Plaintiffs’ bad-faith claims against Defendants are governed by
West Virginia law, and therefore Count III of Plaintiff’s
Complaint pled under Georgia law cannot be maintained
simultaneously with Counts IV and V pled under West
Virginia law. The Court acknowledges that this issue has not
been briefed or argued before the Court.
On October 25, 2018, Petitioners filed the instant petition, and by order of
this Court entered on January 30, 2020, a rule to show cause issued.
II. STANDARD OF REVIEW
In Syllabus Point Four of State ex rel. Hoover v. Berger, 199 W. Va. 12, 483
S.E.2d 12 (1996), this Court explained:
In determining whether to entertain and issue
the writ of prohibition for cases not involving an absence of
jurisdiction but only where it is claimed that the lower tribunal
exceeded its legitimate powers, this Court will examine five
factors: (1) whether the party seeking the writ has no other
adequate means, such as direct appeal, to obtain the desired
relief; (2) whether the petitioner will be damaged or prejudiced
2
After the circuit court made its ruling, this matter was referred to the
business court division.
3
in a way that is not correctable on appeal; (3) whether the lower
tribunal’s order is clearly erroneous as a matter of law; (4)
whether the lower tribunal’s order is an oft repeated error or
manifests persistent disregard for either procedural or
substantive law; and (5) whether the lower tribunal’s order
raises new and important problems or issues of law of first
impression. These factors are general guidelines that serve as a
useful starting point for determining whether a
discretionary writ of prohibition should issue. Although all
five factors need not be satisfied, it is clear that the third factor,
the existence of clear error as a matter of law, should be given
substantial weight.
With this standard in mind, we turn to the issues raised in this writ.
III. ANALYSIS
The parties agree that the circuit court exceeded its lawful authority when it
sua sponte dismissed Count III of the complaint and held that West Virginia law applies to
Respondents’ bad faith claims. A second issue – on which the parties strenuously disagree
– is whether the choice-of-law provision contained in the parties’ insurance contract applies
to the entire dispute below. We will examine each issue in turn.
1. Sua Sponte Dismissal of Count III and Ruling On West Virginia Law
We believe that the circuit court committed clear error as a matter of law by
sua sponte dismissing Count III. The parties appeared for argument on Petitioners’ motion
to dismiss or stay on September 5, 2019. The parties briefed and argued the issues raised
in that motion. No party asked the circuit court to dismiss Count III of the complaint. No
party asked the circuit court to find that West Virginia law applied to the bad faith claims
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pled in the complaint. No party briefed these issues and no party argued for or against such
relief.
Although this issue arises from the sua sponte grant of a motion to dismiss,
we believe that this Court’s prior rulings on sua sponte granting of summary judgment are
persuasive. In that context, we have held that “[o]rdinarily, in the absence of a written
motion for summary judgment by one of the parties, the court is not authorized sua sponte
to grant a summary judgment.” Syllabus Point 2, Gavitt v. Swiger, 162 W. Va. 238, 248
S.E.2d 849 (1978). In this same context we have held that:
As a general rule, a trial court may not grant summary
judgment sua sponte on grounds not requested by the moving
party. An exception to this general rule exists when a trial court
provides the adverse party reasonable notice and an
opportunity to address the grounds for which the court is sua
sponte considering granting summary judgment.
Syllabus Point 4, Loudin v. Nat’l Liab. & Fire Ins. Co., 228 W. Va. 34, 716 S.E.2d 696
(2011). Likewise, in the context of a sua sponte to dismissal we have reasoned:
As we stated in Litten v. Peer, 156 W. Va. 791, 797, 197
S.E.2d 322, 328 (1973), “[i]t has always been the policy of this
Court to protect each litigant’s day in court.” It is equally true,
of course, that “the fundamental requirement of due process is
an opportunity to be heard upon such notice and proceedings
as are adequate to safeguard the right for which the
constitutional protection is invoked.” Anderson Nat. Bank v.
Luckett, 321 U.S. 233, 246, 64 S. Ct. 599, 88 L. Ed. 692 (1944).
In re Charleston Gazette FOIA Request, 222 W. Va. 771, 777, 671 S.E.2d 776, 782 (2008).
Accordingly, we agree that a writ should be granted prohibiting enforcement of the circuit
court’s sua sponte order dismissing Count III of Respondents’ complaint and finding that
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West Virginia law applied to the bad faith claims. At the bare minimum, the circuit court
should have given the parties notice and the opportunity to respond to the grounds for
dismissal the circuit court was considering.
2. Choice-of-Law
Moving to the second issue, we reiterate that procedurally this matter is
before us on a writ of prohibition. Petitioners argue that this Court should now decide
whether this action is governed by the Georgia choice-of-law provision in the contract.
Both parties acknowledge that the insurance contract in question contains a choice of law
provision which provides, “[a]ny dispute concerning or related to this insurance will be
determined in accordance with the laws of the State of Georgia.” Petitioners essentially
argue that no other law, except the law of the State of Georgia, applies to the underlying
complaint. On this issue, they quote Hoover for the proposition that they “ha[ve] no other
adequate means, such as direct appeal, to obtain the desired relief.” Syllabus Point 4, in
part, Hoover. Petitioners fail, however, to meet the additional factors set forth in Hoover
to entitle them to the prohibitory relief. Petitioners argue that this Court should – on the
grounds of judicial economy – proceed to rule on this issue. They further assert that Axiall
was a sophisticated entity and the Georgia choice-of-law provision should be strictly
construed against Axiall.
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In their brief, responding to this argument, Respondents state:
While providing that any dispute “concerning or relating to this
insurance will be determined in accordance with the laws of
the State of Georgia,” this provision does not specifically
exclude the application of the laws of other states to, for
example, bad-faith claims-handling issues involving coverage
under the Policies. Indeed, application of Georgia’s conflict-
of-law rules may result in the application of West Virginia bad-
faith law to Westlake’s bad-faith claims. Aware of the
sparseness of this provision and the potential for ambiguity in
its wording, the Insurers assert – without any evidentiary
support whatsoever – that it was Axiall who drafted this
wording. The Insurers’ reliance on this and other similar
assertions in their Petition, coupled with the fact that there has
not been any discovery in this case, is yet another reason why
the Insurers’ Petition is not the proper vehicle for determining
choice-of-law issues.
Moreover, during oral argument, Respondents argued that there is ongoing discovery
between the parties regarding the very issues arising from the drafting of the choice-of-law
provision. Accordingly, it is clear to this Court that the choice-of-law issue is not nearly
as clear-cut as Petitioners would make it out to be.
We are mindful that a writ of prohibition is an extraordinary remedy and not
available in routine circumstances:
[T]his Court will use prohibition in this discretionary way to
correct only substantial, clear-cut, legal errors plainly in
contravention of a clear statutory, constitutional, or common
law mandate which may be resolved independently of any
disputed facts and only in cases where there is a high
probability that the trial will be completely reversed if the error
is not corrected in advance.
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State ex rel. Vanderra Resources, LLC v. Hummel, 242 W. Va. 35, 40, 829 S.E.2d 35, 40
(2019) (citing with approval Syllabus Point 1, Hinkle v. Black, 164 W. Va. 112, 262 S.E.2d
744 (1979), superseded by statute on other grounds as stated in State ex rel. Thornhill
Grp., Inc. v. King, 233 W. Va. 564, 759 S.E.2d 795 (2014)).
Application of the Hoover factors through the lens of Vanderra demonstrates
that Petitioners have not established that this Court should decide the choice-of-law
question in the context of an extraordinary writ. Petitioners have an adequate means to
obtain relief by filing an appropriate motion, at an appropriate time, before the business
court. Petitioners are neither damaged nor prejudiced by making their arguments before
the business court, as they will still maintain the ability, should the business court deny
such relief, to appeal any adverse ruling to this Court. Petitioners cannot demonstrate that
there was a clear legal error because this issue has yet to be decided below with adequate
findings for our review. The lack of a circuit court ruling with sufficient findings on this
issue makes it impossible for this Court to “correct . . . substantial, clear-cut, legal errors
plainly in contravention of a clear statutory, constitutional, or common law mandate. . . .”
Id.
We are mindful that “[a] writ of prohibition will not issue to prevent a simple
abuse of discretion by a trial court. It will only issue where the trial court has no jurisdiction
or having such jurisdiction exceeds its legitimate powers. W. Va. Code 53-1-1.” Syllabus
Point 2, State ex rel. Peacher v. Sencindiver, 160 W. Va. 314, 233 S.E.2d 425 (1977). We
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cannot say that the circuit court has abused its discretion or lacks jurisdiction when it has
made no determination on the question with sufficient findings and conclusions to permit
us to undertake a thorough review. Accordingly, the parties may raise this issue upon
remand to the business court upon an appropriate and timely motion.
IV. CONCLUSION
For the reasons set forth herein, we vacate the circuit court’s October 22,
2019, order dismissing Count III of the complaint and finding West Virginia law applies
to the bad faith claims contained in the complaint and remand the case to the business court
for further proceedings consistent with this opinion. However, we decline Petitioners’
invitation to extend our ruling to find that the Georgia choice-of-law provisions govern this
action and leave such determination to the business court upon remand.
Writ granted as moulded.
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