Opinion
No. 33350
Submitted: October 10, 2007
Filed: November 21, 2007 Concurring Opinion Added December 20, 2007.
Appeal from the Circuit Court of Boone County, Honorable Jay M. Hoke, Judge Civil Action No. 98-C-192.
REVERSED AND REMANDED
D.C. Offutt, Jr., Stephen Burchett, Perry W. Oxley, David E. Rich, Offutt, Fisher Nord, Huntington, West Virginia, Attorneys for the Appellants.
Robert V. Berthold, Jr., Christina L. Smith, Berthold, Tiano O'Dell, Charleston, West Virginia, David B. Fawcett, Buchanan Ingersoll Rooney, Pittsburgh, Pennsylvania, Attorneys for Appellees, Harman Development Corporation, Harman Mining Corporation, and Sovereign Coal Sales, Inc.
CHIEF JUSTICE DAVIS delivered the Opinion of the Court.
JUSTICES STARCHER AND ALBRIGHT dissent and reserve the right to file dissenting opinions.
JUSTICE BENJAMIN concurs and reserves the right to file a concurring opinion.
The Appellants herein and defendants below, A.T. Massey Coal Company, Inc., and various of its subsidiaries, appeal from a March 15, 2005, order entered in the Circuit Court of Boone County, which denied their post-judgment motions for judgment as a matter of law, a new trial, or remittitur, in response to the entry of a judgment of more than $50 million in favor of the appellees herein, and plaintiffs below, Hugh M. Caperton, Harman Development Corporation, Harman Mining Corporation and Sovereign Coal Sales, Inc. In this appeal, A.T. Massey Coal Company and its subsidiaries allege numerous errors that purportedly occurred throughout the proceedings below. Based upon our thorough consideration of the parties' arguments, the relevant case law and the record on appeal, we conclude that this case may be resolved on two separate and mutually exclusive grounds. First, we find that the circuit court erred in denying a motion to dismiss filed by A.T. Massey Coal Company and its subsidiaries, based upon the existence of a forum-selection clause contained in a contract that directly related to the conflict giving rise to the instant lawsuit. Assuming, arguendo, that the circuit court's denial of the motion to dismiss was not in error, we further conclude that the judgment should be reversed based upon the doctrine of res judicata due to an earlier action that had been litigated in Buchanan County, Virginia. Accordingly, we reverse the judgment in this case and remand for the circuit court to enter an order dismissing this case against A.T. Massey Coal Company and its subsidiaries with prejudice.
I.FACTUAL AND PROCEDURAL HISTORY
Central to the dispute underlying this appeal is the Harman Mine, an underground coal mine located in Buchanan County, Virginia, that produced very high quality metallurgical coal. Prior to 1993, Harman Mine was owned by Inspiration Coal Corporation (hereinafter referred to as "Inspiration") through three subsidiaries: Harman Mining Corporation (hereinafter referred to as "Harman Mining"), Sovereign Coal Sales, Inc. (hereinafter referred to as "Sovereign"), and Southern Kentucky Energy Company (hereinafter referred to as "Southern"). For many years, all of the coal from the Harman Mine had been sold to Wellmore Coal Corporation (hereinafter referred to as "Wellmore"), a subsidiary of United Coal Corporation. In April 1992, Sovereign and Southern entered a coal supply agreement (hereinafter referred to as "1992 CSA") with Wellmore. Under the 1992 CSA, Wellmore was to purchase from Sovereign and Southern approximately 750,000 tons of coal per year for a period of ten years.
In 1993, Hugh M. Caperton (hereinafter referred to as "Mr. Caperton"), a plaintiff below and appellee herein, formed Harman Development Corporation (hereinafter referred to as "Harman Development"). In that same year, Harman Development purchased the three previously mentioned subsidiaries of Inspiration: Harman Mining, Sovereign and Southern, and thereby became the owner of the Harman Mine. Harman Development, Harman Mining and Sovereign are all plaintiffs to this action below, and are appellees herein (hereinafter collectively referred to as "the Harman Companies"). In 1997, in order to fund improvements to the Harman Mine, the Harman Companies sold all the Harman Mine reserves to Penn Virginia Corporation, and then leased back those reserves that could be mined in a cost-effective manner.
Harman Development Corporation is a Virginia corporation that has its principal place of business in Beckley, West Virginia.
Mr. Caperton had worked for Sovereign when it was a subsidiary of Inspiration. Mr. Caperton sold coal on behalf of Sovereign, including coal from the Harman Mine. Mr. Caperton left Sovereign to form his own coal brokerage company, Dominion Energy. Through Dominion Energy, Mr. Caperton continued to broker coal from the Harman Mine on behalf of Inspiration. In 1993, Dominion Energy became Harman Development Corporation.
Harman Mining is a Virginia corporation that transacts business in West Virginia and is a wholly-owned subsidiary of Harman Development.
Sovereign is a Delaware corporation that has its principal place of business in Beckley, West Virginia. Sovereign is a wholly-owned subsidiary of Harman Development.
The plan Harman Development established for the Harman Mine was to mine the reserves in a way that would allow convenient access to adjoining reserves owned by Pittston Coal Company. The appellees explain that it is commonplace in the mining industry for coal companies to sell or lease their properties to other operators when it makes economic sense to allow someone else to mine their coal. Due to the topography of the area, the Harman Mine provided better access to the Pittston reserves than Pittston itself had. Thus, Mr. Caperton hoped to one day lease the Pittston reserves. However, no lease agreement was ever executed between Pittston and any of the Harman Companies.
From the time the Harman Companies became owners of the Harman Mine until 1997, coal from the Harman Mine was purchased by Wellmore in accordance with the 1992 CSA. Prior to the expiration of the 1992 CSA, in March of 1997, a new CSA with a higher price per ton of coal (hereinafter referred to as "the 1997 CSA") was negotiated between Sovereign, Wellmore and Harman Mining. The 1997 CSA was to be in effect for a period of five years, commencing retroactively on January 1, 1997. However, the 1997 CSA included, among other things, a force majeure clause, and a forum-selection clause requiring that "[a] ll actions brought in connection with this Agreement shall be filed in and decided by the Circuit Court of Buchanan County, Virginia."
The 1997 CSA specified that Wellmore would purchase a minimum tonnage of coal, 573,000 tons per year, and also gave Wellmore the option to purchase all of the Harman Mine's production. Historically, Wellmore had purchased all of the coal that the Harman Mine produced.
The force majeure clause was nearly identical to one that had been included in the 1992 CSA, and stated, in relevant part,
The term "force majeure" as used herein shall mean any and all causes reasonably beyond the control of SELLER or BUYER, as applicable, which cause SELLER or BUYER to fail to perform hereunder, such as, but not limited to, acts of God, acts of the public enemy, epidemics, insurrections, riots, labor disputes and strikes, government closures, boycotts, labor and material shortages, fires, explosions, floods, breakdowns or outages of or damage to coal preparation plants, equipment or facilities, interruptions or reduction to power supplies or coal transportation (including, but not limited to, railroad car shortages) embargoes, and acts of military or civil authorities, which wholly or partly prevent the mining, processing, loading and/or delivering of the coal by SELLER, or which wholly or partly prevent the receiving, accepting, storing, processing or shipment of the coal by BUYER. . . . Pertaining to BUYER, the term "force majeure" as used herein shall further include occurrence(s) of a force majeure event at any of BUYER's customer's plants and facilities, except that the effects of any such force majeure event shall not justify BUYER in reducing its purchase of coal hereunder in greater proportion than the coal to be purchased hereunder bears to all BUYER's sources of supply, including BUYER's own mines, for BUYER's metallurgical coal sold to domestic coke producers. SELLER and BUYER shall promptly notify the other following commencement of a force majeure. If because of a force majeure SELLER or BUYER, respectively, is unable to carry out its obligations under this Agreement and if such Party shall promptly give to the other Party written notice of such force majeure, then the obligations of the Party giving such notice and the corresponding obligations of the other Party shall be suspended to the extent made necessary by such force majeure and during its continuance; provided however, (i) that such obligations shall be suspended only to the extent made necessary by such force majeure and only during its continuance, and (ii) that the Party giving such notice shall act promptly in [sic] reasonable manner to eliminate such force majeure. . . .
This forum-selection clause is identical to one that had been included in the 1992 CSA.
During the course of the 1992 CSA, and at the time the 1997 CSA was executed, one of Wellmore's primary customers was LTV Steel (hereinafter referred to as "LTV"). Wellmore sold and shipped nearly two-thirds of the coal it purchased from the Harman Companies to LTV's coke plant located in Pittsburgh, Pennsylvania. On July 19, 1997, LTV announced that it intended to close its Pittsburgh coke plant due to a change in emissions regulations promulgated by the Environmental Protection Agency.
LTV purchased from Wellmore a premium blend of coal from the Harman Mine mixed with other, lesser quality coals. The circuit court expressly found that "[c] oal from the Harman Mine is metallurgical coal with very favorable coking characteristics prized by steelmakers like LTV."
A.T. Massey Coal Company (hereinafter referred to as "Massey"), a defendant below and appellant herein, had tried unsuccessfully for several years to sell its West Virginia mined coal directly to LTV. Due to its lack of success in selling to LTV on its own, Massey determined to acquire LTV s supplier Wellmore and its parent corporation, United Coal Corporation (hereinafter referred to as "United"). Massey purchased Wellmore and United on July 31, 1997. Since there was no long-term agreement between LTV and Wellmore, Massey hoped to substitute its own coal for the Harman Mine coal that Wellmore had been supplying to LTV. An internal Massey memorandum admitted during trial revealed that Massey understood there were risks to its plan, most notably the possibility that the relationship between LTV and Wellmore might not continue under Massey ownership of Wellmore. The circuit court found that, in spite of this risk, and despite the knowledge that LTV was "extremely reluctant to change a long-established, successful coal blend" that included coal from the Harman Mine, Massey nevertheless "provided LTV with firm price quotes for coal mainly from Massey Mines, not Harman coal, and insisted that LTV make Massey its sole-source provider via a long-term coal contract." As a consequence of Massey's actions, LTV ceased buying coal from Wellmore. Thereafter, on August 5, 1997, Wellmore, at the direction of Massey, gave notice to the Harman Companies by letter stating that, if LTV did in fact close its Pittsburgh plant, then Wellmore anticipated a pro rata reduction in tonnage under the force majeure clause of the 1997 CSA.
This coal was inferior in quality to the coal obtained from the Harman Mine and sold to LTV through Wellmore.
The Harman Companies and Mr. Caperton presented evidence at trial to establish that Massey had for some time desired to sell coal to LTV, and opined that it was this desire that motivated Massey's acquisition of Wellmore, and further motivated Massey to eliminate the Harman Companies as its competitors via the destruction of those companies.
Massey made these demands notwithstanding its knowledge that LTV had historically demonstrated a preference for multiple suppliers and had not entered multi-year coal supply contracts. Additionally, the firm price for its coal that Massey quoted to LTV represented "a handsome improvement" over the prices at which Massey had been selling its coal.
Subsequent to Wellmore's August 5 letter, Massey entered negotiations with the Harman Companies for the purchase of the Harman Mine. During the course of these negotiations, confidential information regarding the Harman Mine's operations, including its desire to eventually mine adjoining Pittston reserves, as well as confidential information pertaining to the finances of the Harman Companies and of Mr. Caperton, personally, was shared with Massey. The Harman Companies also expressed to Massey their disagreement that the LTV closure of its Pittsburgh coke plant constituted a force majeure event.
See supra note 5.
Thereafter, on December 1, 1997, Wellmore, at Massey's direction, declared force majeure based on LTV's closure of its Pittsburgh coke plant, and advised the Harman Companies that it would purchase only 205,707 tons of the 573,000 minimum tons of coal required under the 1997 CSA. According to the express findings of the circuit court in this matter,
[o] nly after Massey's marketing efforts caused the loss of LTV's business did Massey direct Wellmore to declare "force majeure" against Harman, a declaration which Massey knew would put Harman out of business. Massey acknowledged Wellmore was readily able to purchase and sell the Harman coal, but instead chose to have Wellmore declare "force majeure" based upon a cost benefit analysis Massey performed which indicated that it would increase its profits by doing so. Furthermore, before Massey directed the declaration of "force majeure", Massey concealed the fact that the LTV business was lost and Massey delayed Wellmore's termination of Harman's contract until late in the year, knowing it would be virtually impossible for Harman to find alternate buyers for its coal at that point in time. Once Wellmore suddenly stopped purchasing Harman's output, Harman had no ability to stay in business. In the meantime, Massey sold Wellmore.
Massey continued in negotiations with the Harman Companies and Mr. Caperton for Massey's purchase of the Harman Mine, and the parties agreed to close the transaction on January 31, 1998. However, Massey delayed and, as the circuit court found, "ultimately collapsed the transaction in such a manner so as to increase [the Harman Companies'] financial distress." In addition, Massey utilized the confidential information it had obtained from the Harman Companies to take further actions, such as purchasing a narrow band of the Pittston coal reserves surrounding the Harman Mine in order to make the Harman Mine unattractive to others and thereby decrease its value. During the negotiations for the sale of the Harman Mine to Massey, Massey had also learned that Mr. Caperton had personally guaranteed a number of the Harman Companies' obligations. Subsequently, the Harman Companies, and Mr. Caperton, personally, filed for bankruptcy.
According to testimony presented at trial, during the negotiations of Massey's potential purchase of the Harman Mine, Massey represented that it would assume the Harman coal reserves lease from Penn Virginia "as-is." However, just prior to the scheduled closing of Massey's purchase of the Harman Mine, Massey demanded changes to numerous material terms of the Harman Companies lease agreement with Penn Virginia. Massey and Penn Virginia could not agree on terms and, therefore, Massey's purchase of the Harman Mine was never completed.
Mr. Caperton had personal obligations to Inspiration Coal (now known as Terra Industries), Senstar Financial, Grundy National Bank, and Vision Financial, among others.
The circuit court expressly found that many of the steps Massey took were directed at Mr. Caperton personally, and that Mr. Caperton had relied to his detriment on numerous false representations made by Massey. One example of such false representations made by Massey was that it lead Mr. Caperton to believe that it intended to close its purchase of the Harman Mine on January 31, 1998, when, in fact, Massey had already determined not to close the transaction.
Thereafter, in May 1998, Harman Mining and Sovereign sued Wellmore in the Circuit Court of Buchanan County, Virginia, alleging causes of action for breach of contract and for breach of the covenant of good faith and fair dealing arising from Wellmore's declaration of force majeure. However, Harman Mining and Sovereign voluntarily withdrew their tort claim prior to trial. Following trial on the contract claim, a jury found in favor of Harman Mining and Sovereign and awarded $6 million in damages.
Wellmore appealed the verdict to the Supreme Court of Virginia, however the appeal was refused on technical grounds. See Wellmore Coal Corp. v. Harman Mining Corp., 264 Va. 279, 568 S.E.2d 671 (2002).
Shortly after the Virginia action was filed, on October 29, 1998, Harman Development, Harman Mining, Sovereign and Mr. Caperton filed the instant action in the Circuit Court of Boone County, West Virginia, against A.T. Massey Coal Company, Inc., Elk Run Coal Company, Inc., Independence Coal Company, Inc., Mar Fork Coal Company, Inc., Performance Coal Company, and Massey Coal Sales Company, Inc. (hereinafter collectively referred to as "the Massey Defendants"). The first amended complaint in this action was filed on December 10, 1998, and asserted claims of tortious interference with existing contractual relations, tortious interference with prospective contractual relations, fraudulent misrepresentation, civil conspiracy, negligent misrepresentation, and punitive damages. Though numerous pre-trial motions were filed in the underlying action, two in particular are relevant to our resolution of this matter. First, in December 1998, the Massey Defendants filed a motion to dismiss. In their memorandum in support of the motion, the Massey Defendants argued, inter alia, that the forum-selection clause of the 1997 CSA required this action to be filed in Buchanan County, Virginia. The circuit court denied the Massey Defendants' motion to dismiss. Thereafter, in April 2002, the Massey Defendants filed a motion for summary judgment, arguing, in relevant part, that the instant action was barred under the legal principal of res judicata. The circuit court denied this motion as well.
Elk Run Coal Company, Inc., Independence Coal Company, Inc., Mar Fork Coal Company, Inc., Performance coal Company, and Massey Coal Sales Company, Inc., are all subsidiaries of A.T. Massey Coal Company, Inc.
Ultimately, only three of the theories of liability asserted in this action were presented to the jury for a verdict: tortious interference, fraudulent misrepresentation and fraudulent concealment. On August 1, 2002, the jury found in favor of all plaintiffs on all three grounds and returned a verdict, including punitive damages, of $50,038,406.00. On August 30, 2002, the Massey Defendants filed a motion seeking judgment as a matter of law, a new trial, or, in the alternative, remittitur. Following a lengthy delay, by order entered March 17, 2005, the circuit court denied the post-trial motions. This appeal followed.
The punitive damages claim was presented also.
There were additional delays in this case involving the trial transcript. The circuit court certified the transcript on August 25, 2006. This appeal was then filed on October 24, 2006.
II.STANDARD OF REVIEW
Our analysis of this case will consider two issues: first, whether the circuit court erred in denying the Massey Defendants' motion to dismiss on the issue of the forum-selection clause, and, in the alternative, whether the circuit court erred in denying the Massey Defendants' motion for summary judgment on the issue of res judicata.
We first review the correctness of the circuit court's denial of the Massey Defendants' motion to dismiss for improper venue in light of the forum-selection clause contained in the 1997 CSA. "This Court's review of a trial court's decision on a motion to dismiss for improper venue is for abuse of discretion." Syl. pt. 1, United Bank, Inc. v. Blosser, 218 W. Va. 378, 624 S.E.2d 815 (2005). However, we now hold that "[o] ur review of the applicability and enforceability of [a] forum[-] selection clause is de novo." Hugel v. Corporation of Lloyd's, 999 F.2d 206, 207 (7th Cir. 1993) (citing Northwestern Nat'l Ins. Co. v. Donovan, 916 F.2d 372, 375 (7th Cir. 1990); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 956 (10th Cir. 1992)). Cf Syllabus point 1, Chrystal R.M. v. Charlie A.L., 194 W. Va. 138, 459 S.E.2d 415 (1995) ("Where the issue on an appeal from the circuit court is clearly a question of law or involving an interpretation of a statute, we apply a de novo standard of review.").
"Courts generally consider a motion to dismiss, based upon a forum selection clause, as a motion to dismiss for improper venue." Franklin D. Cleckley, Robin J. Davis, Louis J. Palmer, Jr., Litigation Handbook on West Virginia Rules of Civil Procedure, § 12(b)(3)[5], at 376 (2d ed. 2006).
We next consider the circuit court's denial of the Massey Defendants' motion for summary judgment on the issue of res judicata. "A circuit court's entry of summary judgment is reviewed de novo." Syl. pt. 1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994). For purposes of our de novo review, we further note that
"`[a] motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law.' Syllabus Point 3, Aetna Casualty Surety Co. v. Federal Insurance Co. of New York, 148 W. Va. 160, 133 S.E.2d 770 (1963)." Syllabus Point 1, Andrick v. Town of Buckhannon, 187 W. Va. 706, 421 S.E.2d 247 (1992).
Syl. pt. 2, Painter. Finally, we note that "[t] he circuit court's function at the summary judgment stage is not to weigh the evidence and determine the truth of the matter, but is to determine whether there is a genuine issue for trial." Syl. pt. 3, Painter. With these considerations in mind, we proceed to address the dispositive issues raised in this appeal.
III.DISCUSSION
At the outset, we wish to make perfectly clear that the facts of this case demonstrate that Massey's conduct warranted the type of judgment rendered in this case. However, no matter how sympathetic the facts are, or how egregious the conduct, we simply cannot compromise the law in order to reach a result that clearly appears to be justified. As we will demonstrate below, the law simply did not permit this case to be filed in West Virginia.
Although numerous issues have been raised on appeal in this case, we find that the instant matter may be resolved on the issue of the forum-selection clause contained in the 1997 CSA between Sovereign Coal Sales, Inc., Wellmore Coal Corporation and Harman Mining Corporation. In the alternative, this case may be resolved based on the doctrine of res judicata. We address each of these issues in turn.
A. Forum-Selection Clause
The 1997 CSA between Sovereign, Wellmore and Harman Mining provided that the "[a] greement, in all respects, shall be governed, construed and enforced in accordance with the substantive laws of the Commonwealth of Virginia. All actions brought in connection with this Agreement shall be filed in and decided by the Circuit Court of Buchanan County, Virginia. . . ." In the proceeding below the Massey Defendants filed a motion to dismiss alleging, in relevant part, that the forum-selection clause in the 1997 CSA required that any action related to that agreement be brought in the Circuit Court of Buchanan County, Virginia. Accordingly, the Massey Defendants argued that the action was improperly before the Circuit Court of Boone County, West Virginia, and that the instant action should therefore be dismissed. The circuit court denied the motion to dismiss. This case presents the first opportunity for this Court to address substantive issues involving forum-selection clauses. By way of definition, it has been recognized that "[a] `forum selection' provision in a contract designates a particular state or court as the jurisdiction in which the parties wil litigate disputes arising out of the contract and their contractual relationship." 17A Am. Jur. 2d Contracts § 259, at 255 (2004) (footnote omitted). While forum-selection clauses historically were disfavored, such is no longer the case, so long as the clause is fair and reasonable:
"A motion to dismiss is the proper procedural mechanism for enforcing a forum-selection clause that a party to the agreement has violated in filing suit." Deep Water Slender Wells, Ltd. v. Shell Int'l Exploration Prod., Inc., 234 S.W.3d 679, 687 (Tex.App. 2007) (citations omitted).
The right of an injured party to legal redress is jealously guarded by the courts. Formerly, no agreement confining the right of a party to sue in a particular court or tribunal or in the courts or tribunals of a certain jurisdiction, or to determine the venue of a suit in such a way as to deprive the defendant of his statutory privileges as to place of trial was enforced, unless perhaps where the agreement was made after the cause of action had arisen and was part of a fair compromise. A minority of courts still follow this older rule.
During the past two decades, the rules governing the validity of various "forum selection" clauses have been relaxed considerably, the courts following a pattern similar to that which has already been discussed in connection with arbitration clauses. Thus, while it remains true today that a clause or provision unreasonably or improperly attempting to deprive a court of its jurisdiction will not be enforced, the modern trend is to respect the enforceability of contracts containing clauses limiting judicial jurisdiction, if there is nothing unfair or unreasonable about them. This trend is directly traceable to the landmark case of M/S Bremen v Zapata Off-Shore Co., [ 407 U.S. 1, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972)], in which the United States Supreme Court upheld the validity of a freely negotiated forum selection clause in a commercial contract between an American firm and a German concern, which specified that any dispute must be determined by the English courts. . . .
7 Samuel Williston Richard A. Lord, A Treatise on the Law of Contracts § 15:15, at 290-301 (4th ed. 1997) (footnotes omitted). See also 17A Am. Jur. 2d Contracts § 259, at 255-56 ("While there is contrary authority, generally modern courts will enforce forum-selection clauses entered into by parties to a contract provided that the clauses are not unfair, unreasonable, or unjust under [the] circumstances." (footnotes omitted)).
Although this Court has not had occasion to address substantive issues involving forum-selection clauses, we have previously indicated our general approval of forum-selection clauses by noting that they are not contrary to public policy:
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 § 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., 159 W. Va. 120, 221 S.E.2d 882 (1975). . . .
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).
General Elec. Co. v. Keyser, 166 W. Va. 456, 461-62 n. 2, 275 S.E.2d 289, 292-93 n. 2 (1981). See also Franklin D. Cleckley, Robin J. Davis, Louis J. Palmer, Jr., Litigation Handbook on West Virginia Rules of Civil Procedure § 12(b)(3)[5], at 376-77 (2d ed. 2006) (hereinafter referred to as "Litigation Handbook") ("The Supreme Court has indicated in passing that forum selection clauses are not contrary to public policy." (citing General Electric Co. v. Keyser)).
Having found no impediment to the enforcement of forum-selection clauses in general, we now must endeavor to specifically determine whether the forum-selection clause of the 1997 CSA should have been enforced in the instant case.
In Phillips v. Audio Active Limited, 494 F.3d 378 (2d Cir. 2007), the United States Court of Appeals for the Second Circuit articulated a four-part test for determining whether a claim should be dismissed based upon a forum-selection clause. We find this test supported by reason and logic, and by the manner in which such cases have been resolved in other courts; therefore, we now hold that
[d] etermining whether to dismiss a claim based on a forum[-] selection clause involves a four-part analysis. The first inquiry is whether the clause was reasonably communicated to the party resisting enforcement. . . . The second step requires [classification of] the clause as mandatory or permissive, i.e., . . . whether the parties are required to bring any dispute to the designated forum or [are] simply permitted to do so. [The third query] asks whether the claims and parties involved in the suit are subject to the forum selection clause. . . .
If the [forum-selection] clause was communicated to the resisting party, has mandatory force and covers the claims and parties involved in the dispute, it is presumptively enforceable. . . . The fourth, and final, step is to ascertain 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."
Phillips, 494 F.3d at 383-84 (internal citations omitted) (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S. Ct. 1907, 1916, 32 L. Ed. 2d 513 (1972)). See also Dexter Axle Co. v. Baan USA, Inc., 833 N.E.2d 43, 49 (Ind.Ct.App. 2005) ("Having found that the forum selection clause in the Consulting Agreement is valid, binding, and enforceable, we must next consider whether it applies to any or all of Dexter's claims against Baan."); Deep Water Slender Wells, Ltd. v. Shell Int'l Exploration Prod, Inc., 234 S.W.3d 679, 687 (Tex.App. 2007) ("In deciding whether to enforce a mandatory forum-selection clause, courts must determine whether the claims in the case at hand fall within the scope of the forum-selection clause and whether the court should enforce the clause. In addition to resolving issues of scope and enforceability, courts also may have to decide issues as to whether nonsignatories to the contract can enforce the forum-selection clause contained therein."). We now follow this analysis to ascertain whether the instant case should have been dismissed pursuant to the forum selection clause.
1. Reasonably Communicated. The first question we must answer is whether the forum-selection clause was reasonably communicated to Mr. Caperton and the Harman Companies. "Although a strong presumption of enforceability attaches to forum selection clauses, see M/S Bremen, 407 U.S. at 15, 92 S. Ct. 1907, `[t] he legal effect of a forum-selection clause depends in the first instance upon whether its existence was reasonably communicated to the plaintiff. . . .'" Electroplated Metal Solutions, Inc. v. American Servs., Inc., 500 F. Supp. 2d 974, 976 (N.D. Ill. 2007) (internal citation omitted) (quoting Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 9 (2d Cir. 1995)). See also 17A C.J.S. Contracts § 237, at 211 (1999) ("A forum selection clause is unenforceable as to a plaintiff who did not have sufficient notice of the forum selection clause prior to entering the contract.").
This prong of the analysis is easily resolved as Mr. Caperton and the Harman Companies have not argued that the forum-selection clause was not reasonably communicated to them. Furthermore, Sovereign and Harman Mining were parties to the agreement, and Mr. Caperton signed the contract in his capacity as president of Sovereign. Therefore, these parties cannot claim ignorance of the plainly worded forum-selection clause, which "clearly convey[ed] to any reader that any action regarding the [CSA] must be brought in a specific court, and the location of that court [was] readily ascertainable. . . ." Klotz v. Xerox Corp., No. 07 CIV 1734 (GEL),___F. Supp. 2d___,___, 2007 WL 3100220, at *2 (S.D.N.Y. Oct. 22, 2007). Moreover, though Harman Development, the parent company of Sovereign and Harman Mining, was not a party to the 1997 CSA, Mr. Caperton is the sole owner of Harman Development. Since Mr. Caperton had knowledge of the clause, Harman Development is deemed to have knowledge of the clause. See Clark v. Milam, 192 W. Va. 398, 402, 452 S.E.2d 714, 718 (1994) ("Generally, a corporation `knows,' or `discovers,' what its officers and directors know."). Thus, we find sufficient evidence in the record of this case to establish that the forum-selection clause was reasonably communicated to those who now resist its application.
2. Mandatory or Permissive. The second step in our analysis is to determine whether the forum-selection clause is mandatory or permissive. It has been widely recognized, and we now expressly hold that "[t] here are two types of forum[-] selection clauses: mandatory and permissive. A mandatory forum[-] selection clause contains clear language indicating that jurisdiction is appropriate only in a designated forum. A permissive forum[-] selection clause authorizes litigation in a designated forum, but does not prohibit litigation elsewhere." Litigation Handbook § 12(b)(3)[5], at 376 (footnote omitted) (citing K.V. Scientific Co., Inc. v. Bayerische Motoren Werke Aktiengesellschaft ("BMW"), 314 F.3d 494 (10th Cir. 2002)). See also Weisser v. PNC Bank, N.A., No. 3D07-487, ___ So. 2d ___, 2007 WL 2848118, at *2 (Fla.Dist.Ct.App. 2007) ("`Permissive [forum selection] clauses constitute nothing more than a consent to jurisdiction and venue in the named forum and do not exclude jurisdiction or venue in any other forum.' . . . In contrast, mandatory forum selection clauses provide `for a mandatory and exclusive place for future litigation.'" (citations omitted)); Great N. Ins. Co. v. Constab Polymer-Chemie GmbH Co., No. 5:01-CV-0882 (NAM) (GJD),___F. Supp. 2d___, 2007 WL 2891981, at *8 (N.D.N.Y. 2007) ("A mandatory forum selection clause grants exclusive jurisdiction to a selected forum and should control absent a strong showing that it should be set aside. . . . In contrast, `a permissive forum selection clause indicates the contracting parties' consent to resolve their dispute in a given forum, but does not require the dispute to be resolved in that forum. . . .'" (internal citations omitted)).
Resolution of the question of whether a forum-selection clause is mandatory or permissive requires scrutiny of the particular language used.
In determining whether a forum selection clause is mandatory or permissive, the language of the clause must be examined. For example, in Quinones, the Florida Supreme Court found that the forum selection clause was permissive, not mandatory, because it provided that the creditor "may" institute legal proceedings in specified courts, not that it "shall" do so. [ Quinones v. Swiss Bank Corp. (Overseas), S.A., 509 So. 2d 273, 275 (Fla. 1987)] (emphasis added). . . . "Conversely forum selection clauses which state or clearly indicate that any litigation must or shall be initiated in a specified forum are mandatory." Shoppes Ltd.[P'ship v. Conn, 829 So. 2d 356, 358 (Fla.Dist.Ct.App. 2002)] (emphasis added) (citing Mgmt. Computer Controls, Inc. v. Charles Perry Constr., Inc., 743 So. 2d 627 (Fla. 1st DCA 1999)).
Weisser, 2007 WL 2848118, at *2-3. The Weisser Court also cited Regal Kitchens, Inc. v. O'Connor Taylor Condominium Construction, Inc., 894 So. 2d 288, 290 (Fla.Dist.Ct.App. 2005), wherein the court examined a forum-selection clause which stated that "[a] ny litigation concerning this contract shall be governed by the law of the State of Florida, with proper venue in Palm Beach County." (emphasis added). The Regal Kitchens court observed that the clause was mandatory as to the law to be applied, but permissive as to the forum, commenting that,
[i] n the instant case, although the venue clause unequivocally states that Florida law shall apply to any litigation of the subcontract, it lacks mandatory language or words of exclusivity to show that venue is proper only in Palm Beach County. See Shoppes Ltd. P'ship v. Conn., 829 So. 2d at 357-58. That is to say, this clause does not unequivocally mandate that a controversy or dispute be litigated in Palm Beach County, nor does it waive any other territorial jurisdiction. The language merely allows a party to file suit in Palm Beach County.
894 So. 2d at 291-92.
Thus, to be enforced as mandatory, a forum-selection clause must do more than simply mention or list a jurisdiction; in addition, it must either specify venue in mandatory language, or contain other language demonstrating the parties' intent to make jurisdiction exclusive.
A forum selection clause is mandatory if jurisdiction and venue are specified with mandatory or exclusive language. John Boutari Sons, Wine Spirits, S.A. v. Attiki Imp. Distribs., Inc., 22 F.3d 51, 53 (2d Cir. 1994). In Boutari, the Second Circuit held that "[t] he general rule in cases containing forum selection clauses is that [w] hen only jurisdiction is specified the clause will generally not be enforced without some further language indicating the parties' intent to make jurisdiction exclusive." Boutari, 22 F.3d at 52. . . .
Great N. Ins. Co., 2007 WL 2891981, at *8 (additional citations omitted). See also K V Scientific Co., Inc. v. Bayerische Motoren Werke Aktiengesellschaft ("BMW"), 314 F.3d 494, 499 (10th Cir. 2002) ("`[W] here venue is specified [in a forum-selection clause] with mandatory or obligatory language, the clause will be enforced; where only jurisdiction is specified [in a forum-selection clause], the clause will generally not be enforced unless there is some further language indicating the parties' intent to make venue exclusive.'" (quoting Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th Cir. 1992)). See also Printing Servs. of Greensboro, Inc. v. American Capital Group, Inc., 637 S.E.2d 230, 232 (N.C.Ct.App. 2006) ("`[T] he general rule is when a jurisdiction is specified in a provision of contract, the provision generally will not be enforced as a mandatory selection clause without some further language that indicates the parties' intent to make jurisdiction exclusive. Indeed, mandatory forum selection clauses recognized by our appellate courts have contained words such as "exclusive" or "sole" or "only" which indicate that the contracting parties intended to make jurisdiction exclusive.'" (quoting Mark Group Int'l, Inc. v. Still, 566 S.E.2d 160, 161 (N.C.Ct.App. 2002)).
An example of a case illustrating a forum-selection clause that used mandatory language is Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762 (9th Cir. 1989). In that case, the plaintiff entered into a contract with the defendant to distribute equipment manufactured by the defendant. The contract contained a forum-selection clause that contained the following pertinent language: "Licensee hereby agrees and consents to the jurisdiction of the courts of the State of Virginia. Venue of any action brought hereunder shall be deemed to be in Gloucester County, Virginia." Docksider, 875 F.2d at 763. A dispute arose over the contract that resulted in the plaintiff filing an action against the defendant in a federal district court in California. The district court dismissed the action on the grounds that the forum-selection clause required the case be filed in a Virginia court. The plaintiff appealed on the grounds that the forum-selection clause was permissive, not mandatory. The Court of Appeals for the Ninth Circuit disagreed with the plaintiff, ruling as follows:
The critical language in [the clause] is the final sentence: "Venue of any action brought hereunder shall be deemed to be in Gloucester County, Virginia." The district judge concluded that this language represented the parties' intent to pursue any litigation that arose only in Virginia. [Plaintiff] contends that this interpretation is erroneous because the contractual language does not contain any express mandatory term such as "exclusively" that would indicate the parties' intent to vest Virginia with exclusive jurisdiction. [Plaintiff] has cited numerous cases as support for this position, relying principally on Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75 (9th Cir. 1987).
. . . .
Hunt Wesson is distinguishable because the forum selection clause underlying this action contains the additional sentence stating that "[v] enue of any action brought hereunder shall be deemed to be in . . . Virginia." This language requires enforcement of the clause because [plaintiff] not only consented to the jurisdiction of the state courts of Virginia, but further agreed by mandatory language that the venue for all actions arising out of the license agreement would be Gloucester County, Virginia. This mandatory language makes clear that venue, the place of suit, lies exclusively in the designated county. Thus, whether or not several states might otherwise have jurisdiction over actions stemming from the agreement, all actions must be filed and prosecuted in Virginia.
Docksider, 875 F.2d at 763-64.
In accordance with the foregoing authorities, we now hold that the determination of whether a forum-selection clause is mandatory or permissive requires an examination of the particular language contained therein. If jurisdiction is specified with mandatory terms such as "shall," or exclusive terms such as "sole," "only," or "exclusive," the clause will be enforced as a mandatory forum-selection clause. However, if jurisdiction is not modified by mandatory or exclusive language, the clause will be deemed permissive only.
This Court has often recognized that "`[i] t is well established that the word "shall," in the absence of language . . . showing a contrary intent . . ., should be afforded a mandatory connotation.'" Syl. pt. 1, in part, E.H. v. Matin, 201 W. Va. 463, 498 S.E.2d 35 (1997) (internal citation omitted). See also State v. Allen, 208 W. Va. 144, 153, 539 S.E.2d 87, 96 (1999) ("Generally, `shall' commands a mandatory connotation and denotes that the described behavior is directory, rather than discretionary." (citations omitted)).
Turning to the instant case, the forum-selection clause utilized mandatory language that identified the jurisdiction wherein disputes would be tried: "[a] ll actions brought in connection with this Agreement shall be filed in and decided by the Circuit Court of Buchanan County, Virginia." (Emphasis added). Accordingly, we are presented with a mandatory forum-selection clause. See Ex parte Bad Toys Holdings, Inc., 958 So. 2d 852, 856 (Ala. 2006) ("The forum-selection clause in the purchase agreement provides that `[v] enue for any legal action which may be brought hereunder shall be deemed to lie in Sullivan County, Tennessee' (emphasis added). The . . . use of the word `shall' in the forum-selection clause makes the clause mandatory, not permissive."); Town of Homer v. UnitedHealthcare of Louisiana, Inc., 948 So. 2d 1163, 1167 (La.Ct.App. 2007) ("We find the forum selection clause at issue to be clear and explicit. The clause expressly states that the proper venue for any legal actionshall be East Baton Rouge Parish. There is no ambiguity in this mandatory provision."); Polk County Recreational Ass'n v. Susquehanna Patriot Commercial Leasing Co., Inc., 734 N.W.2d 750, 758 (Neb. 2007) ("The forum selection clause in the Thornridge lease provides that any action concerning the lease `shall be' brought in Pennsylvania. We read this forum selection clause to be a mandatory clause. . . ."); General Elec. Co. v. G. Siempelkamp GmbH Co., 29 F.3d 1095, 1099 (6th Cir. 1994) ("Because the clause states that `all' disputes `shall' be at Siempelkamp's principal place of business, it selects German court jurisdiction exclusively and is mandatory."). Having determined that the forum-selection clause at issue in this case is a mandatory clause, we must now determine whether the claims and parties involved in the suit are governed by said clause.
3. Claims and Parties. The third part of our analysis is to determine whether the claims and parties involved in the suit are governed by the forum-selection clause. We address these questions separately. a. Are the claims asserted in the instant suit subject to the forum-selectionclause? Before the circuit court, Mr. Caperton and the Harman Companies argued that the claims asserted in this action are not governed by the forum-selection clause because they are tort, as opposed to contract, claims. We disagree.
For inexplicable reasons, Mr. Caperton and the Harman Companies did not brief this issue before this Court. However, because our review is of matters as they existed before the trial court at the time the Massey Defendants' filed their motion to dismiss, we will consider the arguments asserted by Mr. Caperton and the Harman Companies in opposition to the motion to dismiss.
It has been recognized that,
[w] hen a party seeks to enforce a mandatory forum-selection clause, a court must determine whether the claims in question fall within the scope of that clause. . . . The court bases this determination on the language of the clause and the nature of the claims that are allegedly subject to the clause.
Deep Water Slender Wells, Ltd. v. Shell Int'l Exploration Prod., Inc., 234 S.W.3d 679, 687-88 (Tex.App. 2007) (citing Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d 216, 221-22 (5th Cir. 1998)). See also Phillips v. Audio Active Ltd., 494 F.3d 378, 388 (2d Cir. 2007) ("[W] hen ascertaining the applicability of a contractual provision to particular claims, we examine the substance of those claims, shorn of their labels."). Accordingly, we expressly hold that, to determine whether certain claims fall within the scope of a mandatory forum-selection clause, the deciding court must base its determination on the language of the clause and the nature of the claims that are allegedly subject to the clause.
Turning to the case at hand, we must first examine the language of the mandatory forum-selection clause at issue. Because the 1997 CSA expressly states that it "shall be . . . construed . . . in accordance with the substantive laws of the Commonwealth of Virginia," we will scrutinize the language of the clause pursuant to Virginia law. Notably, under Virginia law, "[w] ritten contracts are construed as written, without adding terms that were not included by the parties. When the terms in a contract are plain and unambiguous, the contract is construed according to its plain meaning. The words that the parties used are normally given their usual, ordinary and popular meaning." Heron v. Transportation Cas. Ins. Co., 650 S.E.2d 699, 702 (Va. 2007).
The forum-selection clause of the 1997 CSA states in plain language that it applies to "[a] ll actions brought in connection with this Agreement." Due to the inclusion of the phrase "all actions," we perceive no intent by the parties to this agreement to limit in any way the type of actions to which it applies. Thus, for example, it would apply equally to contract claims, tort claims and statutory claims, so long as such claims are "brought in connection with" the 1997 CSA.
Considering next the "usual, ordinary and popular meaning" of the phrase "in connection with," we find the intended scope of the forum-selection clause to be quite broad. Heron, 650 S.E.2d at 702. The word "connection" in the context herein used, is generally understood to mean "[t] he condition of being related to something else by a bond of interdependence, causality, logical sequence, coherence, or the like; relation between things one of which is bound up with, or involved in another." II The Oxford English Dictionary 838-39 (1970 re-issue). See also Random House Webster's Unabridged Dictionary 431-32 (2d ed. 1998) (defining "connection" in part as "association; relationship . . ."); Webster's Third New International Dictionary 481 (1993) (defining "connection" in relevant part as "the state of being connected or linked . . . relationship or association in thought (as of cause and effect, logical sequence, mutual dependence or involvement)"). Thus, so long as the claims asserted in this action bear a logical relationship to the 1997 CSA, they fall within its scope, regardless of whether they sound in contract, tort, or some other area of the law.
Other courts considering forum-selection clauses that contained broad language such as that used in the instant clause have similarly determined that the clauses were not intended to apply merely to breach of contract claims, but rather were intended to apply to other claims as well. For example, the United States Court of Appeals for the Second Circuit was asked to determine the scope of a forum-selection clause that stated: "`any legal proceedings that may arise out of [the agreement] are to be brought in England.'" Phillips, 494 F.3d at 382. In determining the meaning of "arise out of," the court contrasted language such as "in connetion with" as being more expansive: "[w] e do not understand the words `arise out of as encompassing all claims that have some possible relationship with the contract, including claims that may only `relate to,' be `associated with,' or `arise in connection with' the contract." Id., 494 F.3d at 389 (emphasis added) (citations omitted).
In a different case, the Second Circuit also rejected an interpretation of a forum-selection clause that utilized the phrase "in connection with" as applying only to breach of contract claims:
There is ample precedent that the scope of clauses similar to those at issue here is not restricted to pure breaches of the contracts containing the clauses. The Managing and Members' Agent's Agreements speak, . . . with respect to the forum selection clauses, in terms of submission for "all purposes of and in connection with" the agreements (emphasis added). In Bense v. Interstate Battery System of America, 683 F.2d 718, 720 (2d Cir. 1982), we held that a forum selection clause that applied to "causes of action arising directly or indirectly from [the agreement]" covered federal antitrust actions. Similarly, the Supreme Court in Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S. Ct. 2449, 41 L. Ed. 2d 270, reh'g denied, 419 U.S. 885, 95 S. Ct. 157, 42 L. Ed. 2d 129 (1974), held that controversies and claims "arising out of" a contract for the sale of a business covered securities violations related to that sale. Id., 417 U.S. at 519-20, 94 S. Ct. at 2457. We find no substantive difference in the present context between the phrases "relating to," "in connection with" or "arising from." We therefore reject the [Appellants'] contention that only allegations of contractual violations fall within the scope of the clauses.
Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1361 (2d Cir. 1993).
Given the similarities between the phrases "in connection with" and "in relation to," we also note that the Third Circuit has reasoned,
In this case, we must interpret the provision in the forum selection clause that gives the English courts exclusive jurisdiction over "any dispute arising . . . in relation to" the 1990 Agreement. The ordinary meaning of the phrase "arising in relation to" is simple. To say that a dispute "arise[s] . . . in relation to" the 1990 Agreement is to say that the origin of the dispute is related to that agreement, i.e., that the origin of the dispute has some "logical or causal connection" to the 1990 Agreement. Webster's Third New International Dictionary, 1916 (1971).
John Wyeth Bro. Ltd. v. CIGNA Int'l Corp., 119 F.3d 1070, 1074 (3d Cir. 1997). See also Klotz v. Xerox Corp., No. 07 CIV 1734 (GEL),___F. Supp. 2d ___, ___ n. 4, 2007 WL 3100220, at *2 n. 4 (S.D.N.Y Oct. 22, 2007) (concluding that "[p] laintiff raises no challenge to the scope of the forum selection clause, nor could she, since the expansive language of the provision-covering `[a] ny action in connection with the Plan by an Employee'-plainly encompasses her claims"; and further commenting that "[p] laintiff s state law tort and contract claims are also part of an `action in connection with the Plan' and are covered by the clause" (footnote omitted)); Doe v. Seacamp Assoc, Inc., 276 F. Supp. 2d 222, 227 (D. Mass. 2003) ("A review of the case law leads me to conclude that the tort claims, too, are covered by the forum selection clause. The forum selection clause was worded to indicate that it governed any claim related to or arising from a contract, the subject of which were the terms and conditions of John Doe's enrollment at Seacamp."); Dexter Axle Co. v. Baan USA, Inc., 833 N.E.2d 43, 49 (Ind.Ct.App. 2005) (finding tort and statutory claims were subject to forum-selection clause).
Turning to the instant case, we note that the forum-selection clause issue was addressed below in the context of a motion to dismiss; therefore, we consider the claims as they were asserted in the amended complaint. Notably, though, only three of the claims asserted in the amended complaint were ultimately presented to the jury for a verdict, indicating that there was insufficient evidence to support the remaining claims. Accordingly, in deciding whether the claims asserted below were "brought in connection with" the 1997 CSA, we will limit our consideration to only those three claims that ultimately went to the jury. Those three claims, all sounding in tort, were: (1) tortious interference; (2) fraudulent misrepresentation; and (3) fraudulent concealment. Based upon our review of these tort claims, we conclude that they were indeed "brought in connection with" the 1997 CSA.
All of the injuries alleged in connection with the three aforementioned tort claims flow directly from Wellmore's declaration of force majeure, an event that is inextricably connected to the 1997 CSA. While the amended complaint methodically sets out numerous details of purported pre-force majeure wrongful conduct, no injury resulted from any of that alleged conduct without the declaration of force majeure under the 1997 CSA.
For example, "Count I" of the amended complaint alleges tortious interference with existing contractual relations, and specifically identifies existing contracts with Wellmore (the 1997 CSA), Penn Virginia (the lease of the Harman Coal reserves), and the UMWA (a labor contract). Certainly a claim of interference with the 1997 CSA itself is related to that contract. With respect to the Penn Virginia and UMWA contracts, it was Wellmore's declaration of force majeure that placed the Harman Companies and Mr. Caperton in the position of being unable to fulfill their contractual obligations. Without the force majeure, those contractual relations would have been unaffected by the actions of the Massey Defendants. Thus, this claim is "brought in connection with" the 1997 CSA.
Count II of the amended complaint alleged tortious interference with prospective contractual relations, again involving Wellmore, Penn Virginia and the UMWA. As with Count I, the key to these claims remains Wellmore's wrongful declaration of force majeure. In the 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. Therefore this claim is "brought in connection with" the 1997 CSA.
Finally, Count III alleges fraudulent misrepresentation, deceit and concealment either related to the declaration of force majeure itself or related to subsequent negotiations between the Harman Companies and the Massey Defendants "regarding their intentions to enter into a settlement agreement with Harman in connection with the 1997 CSA." Insofar as this claim either relates directly to the declaration of force majeure under the 1997 CSA, or to the parties' efforts to reach a settlement with respect to the 1997 CSA, it is "brought in connection with" the 1997 CSA.
Accordingly, because none of the relevant claims asserted in the amended complaint would have existed in the absence of Wellmore's declaration of force majeure under the 1997 CSA, these claims are all "brought in connection with" the 1997 CSA and, as a consequence, are within the scope of the forum-selection clause contained therein.b. Are the parties involved in the suit subject to the forum-selection clause? Before the circuit court, in their response to the Massey Defendants' motion to dismiss, the Harman Companies and Mr. Caperton argued that, as strangers to the 1997 CSA, the Massey Defendants are precluded from enforcing its terms as they are not third-party beneficiaries of the contract. The Harman Companies and Mr. Caperton further argued that two of the plaintiffs to this action, Harman Development and Mr. Caperton (in his individual capacity), are not signatories to the 1997 CSA and, therefore, may not be bound by its terms. We disagree. Other courts addressing the issue of whether non-signatories to a contract may enforce, or be subject to, a forum-selection clause have found the clauses to be enforceable under certain circumstances. One such case is Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509 (9th Cir. 1988). The Manetti-Farrow case involved a contract between a California corporation, Manetti-Farrow, and Gucci Parfums, an Italian corporation that was a subsidiary of another Italian corporation, Guccio Gucci, S.p.A. (hereinafter referred to as "Guccio Gucci"). The contract included a forum-selection clause that stated: "[f] or any controversy regarding interpretation or fulfillment of the present contract, the Court of Florence has sole jurisdiction." Manetti-Farrow, 858 F.2d at 511. Another company, Gucci America, signed a consent and ratification agreement, in which it consented to the contract between Manetti-Farrow and Gucci Parfums. Ultimately a dispute arose, and Manetti-Farrow filed suit in California alleging numerous causes of action, not only against Gucci Parfums and Gucci America, but also against the parent company, Guccio Gucci, as well as numerous officers of these companies. Manetti-Farrow, 858 F.2d at 511-12. Upholding the district court's dismissal based upon the forum-selection clause, the Ninth Circuit found that a forum-selection clause was applicable to "a range of transaction participants" who were "closely related to the contractual relationship":
Some courts have concluded that a forum-selection clause is applicable to tort claims only where the resolution of the claim requires interpretation of the contract. See Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 (9th Cir. 1988) ("Whether a forum selection clause applies to tort claims depends on whether resolution of the claims relates to interpretation of the contract." (citing Weidner Communications, Inc. v. Faisal, 671 F. Supp. 531, 537 (N.D. Ill. 1987); Berrett v. Life Ins. Co., 623 F. Supp. 946, 948-49 (D. Utah 1985); Clinton v. Janger, 583 F. Supp. 284, 288 (N.D. Ill. 1984)). While we might agree with this proposition were we presented with a more narrowly tailored forum-selection clause applying to claims "arising under" or "arising out of" the contract, we see no need for such a narrow rule in the context of a broadly worded forum-selection clause such as the one presently before us. Nevertheless, we do note that, insofar as the claims asserted in this action all flow from the allegedly wrongful declaration of force majeure, they would require interpretation of the contract to determine whether the declaration was indeed wrongful.
See supra note 24.
Manetti-Farrow argues the forum selection clause can only apply to Gucci Parfums, which was the only defendant to sign the contract. However, "a range of transaction participants, parties and non-parties, should benefit from and be subject to forum selection clauses." Clinton v. Janger, 583 F. Supp. 284, 290 (N.D. Ill. 1984) (citing Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202-03 (3d Cir.), cert. denied, 464 U.S. 938, 104 S. Ct. 349, 78 L. Ed. 2d 315 (1983)). We agree with the district court that the alleged conduct of the non-parties is so closely related to the contractual relationship that the forum selection clause applies to all defendants.
858 F.2d at 514 n. 5.
Similarly, in Hugel v. Corporation of Lloyd's, 999 F.2d 206 (7th Cir. 1993), it was argued that two corporate plaintiffs to a lawsuit, GCM and OMI, were not parties to the contract containing the forum-selection clause (which plaintiff Hugel had signed), and therefore, were not bound by the clause. In rejecting the argument, the court relied on the companies' close relationship to the agreement and the foreseeablity that they would be bound by the forum-selection clause:
The contract dispute in the Hugel case arose after plaintiff Dieter Hugel became a member of the Corporation of Lloyd's. Hugel v. Corporation of Lloyd's, 999 F.2d 206, 207 (7th Cir. 1993). Hugel signed a membership contract that included the forum-selection clause. Id. Thereafter, Lloyd's became suspicious that Hugel and GCM were involved in criminal misconduct and initiated an investigation. Id. Hugel cooperated with the investigation and provided confidential information pertaining to GCM and OMI. In the subsequent lawsuit, plaintiffs Hugel, GCM and OMI claimed that "they lost business as the result of Lloyd's breach of confidentiality relating to the investigation." Id.
In order to bind a non-party to a forum selection clause, the party must be "closely related" to the dispute such that it becomes "foreseeable" that it will be bound. . . . Hugel is President and Chairman of the Board of both GCM and OMI. In addition, Hugel owns 99% of the stock of GCM which, in turn, owns 100% of the stock of OMI. The alleged assurances of confidentiality were made to Hugel alone and Hugel alone decided that his corporations would participate in Lloyd's investigation.
Hugel and Lloyd's contracted to settle all of their disputes in England. Although GCM and OMI were not members of Lloyd's, in the course of a dispute between Hugel and Lloyd's, Hugel alone involved his two controlled corporations and supplied information allegedly belonging to those corporations. The district court found that the corporations owned and controlled by Hugel are so closely related to the dispute that they are equally bound by the forum selection clause and must sue in the same court in which Hugel agreed to sue. We hold these findings are not clearly erroneous.
999 F.2d at 209-10. Furthermore, the Hugel court made clear that a non-party to a contract need not be a third-party beneficiary in order for the forum-selection clause to be binding against such non-party:
Plaintiffs argue that the court must make a threshold finding that a non-party to a contract is a third-party beneficiary before binding him to a forum selection clause. While it may be true that third-party beneficiaries of a contract would, by definition, satisfy the "closely related" and "foreseeability" requirements, see e.g., Coastal Steel, 709 F.2d at 203 (refusing to absolve a third-party beneficiary from the strictures of a forum selection clause which was foreseeable); Clinton v. Janger, 583 F. Supp. 284, 290 (N.D. Ill. 1984), a third-party beneficiary status is not required.
Hugel, 999 F.2d at 209-10 n. 7 (emphasis added).
But see Pixel Enhancement Labs., Inc. v. McGee, 1998 WL 518187, at *2 (D. Mass. 1998) ("As McGee is not a third party beneficiary of the License Agreement, he has no standing to assert its forum selection clause. McCarthy v. Azure, 22 F.3d 351, 362 (1st Cir. 1994) ("[T] hird party beneficiary status constitutes an exception to the general rule that a contract does not grant enforceable rights to non-signatories).").
In another case, Great Northern Insurance Co. v. Constab Polymer-ChemieGmbH Co., No. 5:01-CV-0882 NAM GJD, ___ F. Supp. 2d ___, 2007 WL 2891981 (N.D.N.Y. Sept. 28, 2007), two German companies entered into a supply agreement whereby Constab Polymer-Chemie (hereinafter referred to as "Constab") would supply products used to produce photo paper to Feliz Schoeller GmbH Co., and its subsidiaries, one of which was Schoeller-USA. ___ F. Supp. 2d at ___, 2007 WL 2891981, at *1. The contract included a forum-selection clause specifying that jurisdiction of certain disputes would be in Warstein, Germany. Id., ___ F. Supp. 2d at ___, 2007 WL 2891981, at *7. Constab provided defective products to Schoeller USA, and Schoeller USA, through its insurer, filed suit in California. In rejecting the argument that, as non-parties to the contract Great Northern and Schoeller-USA could not enforce the forum-selection clause, the court reasoned,
Great Northern provided indemnity insurance to Schoeller-USA and, in accordance with the insurance policy, compensated Schoeller-USA for its losses resulting from the defective product and became subrogated to Schoeller-USA's rights.
[n] either Great Northern nor [its insured] Schoeller-USA are signatories to the Agreement. However, the enforcement of the forum selection clause is clearly "forseeable" given the relationships between the parties and the basis upon which plaintiff has commenced this suit. Therefore, the Court finds that the forum selection clause may be invoked against plaintiff. . . .
___ F. Supp. 2d at ___, 2007 WL 2891981, at *8. See also First Specialty Ins. Corp. v. Admiral Ins. Co., No. CV 07 408 MO, ___ F. Supp. 2d ___, ___, 2007 WL 1876516, at *3 (D. Or. June 22, 2007) ("[A] range of transaction participants, including non-parties, should be bound by forum selection clauses of an underlying agreement if their conduct is `closely related to the contractual relationship.' . . . The fact that either one or both parties was not a signatory to the underlying contract is not dispositive." (internal citations omitted)); Graham Tech. Solutions, Inc. v. Thinking Pictures, Inc., 949 F. Supp. 1427, 1434 (N.D. Cal. 1997) ("It is well established that `a range of transaction participants, parties and non-parties, should benefit from and be subject to forum selection clauses.' . . . [T] he conduct of GTSI and Mr. Fuller are closely related [to] the contractual relationship between Mr. Graham and TPI, and the forum selection clause applies to both GTSI and Mr. Fuller in spite of the fact that they are not signatories to the PSA." (internal citations omitted)); Deloitte Touche v. Gencor Indus., Inc., 929 So. 2d 678, 683 (Fla.Dist.Ct.App. 2006) ("The trial court found that this [forum-selection] clause could not be enforced against Gencor because Gencor was not a party to the contract. In other contexts, however, Florida courts have enforced contract terms, including forum selection clauses, against non-signatories. See, e.g., World Vacation Travel, S.A. v. Brooker, 799 So. 2d 410, 412 (Fla.Dist.Ct.App. 2001) (forum-selection clause against non-signatory proper where the claims are directly out of the agreement and the commercial relationship of the parties); Tuttle's Design-Build, Inc. v. Florida Fancy, Inc., 604 So. 2d 873, 873-74 (Fla. 2d DCA 1992) (recognizing that a reasonable forum-selection clause would be enforced against a non-signatory). This is particularly true where, as here, there exists a close relationship between the non-signatory and signatory and the interests of the non-signatory are derivative of the interests of the signatory. See, e.g., XR Co. v. Block Balestri, P.C., 44 F. Supp. 2d 1296, 1299 (S.D. Fla. 1999) (enforcing forum-selection clause against sole shareholder of contracting corporation where the shareholder's interests in the contract were derivative of the contracting party and the contract inured to the non-signatory's benefit)." (footnote omitted)); Dogmoch Int'l. Corp. v. Dresdner Bank AG, 304 A.D.2d 396, 397, (N.Y.App.Div. 2003) ("Although defendant was a nonsignatory to the account agreements, it was reasonably foreseeable that it would seek to enforce the forum selection clause given the close relationship between itself and its subsidiary. . . .").
Based upon the foregoing, we now hold that a plaintiff who is a non-signatory to a contract containing a forum-selection clause may be bound by that clause when it is shown that his or her claims are closely related to the contract. We further hold that a defendant who is a non-signatory to a contract containing a forum-selection clause may enforce that clause when it is shown that the claims against him or her are closely related to the contract.
Applying the foregoing holdings to the facts of the instant case, we first note that, as to the plaintiffs, Sovereign and Harman Mining were signatories to the 1997 CSA, and Harman Development and Mr. Caperton, in his individual capacity, were not. However, Sovereign and Harman are wholly-owned subsidiaries of Harman Development, and Mr. Caperton is the sole owner of Harman Development. Under these facts, any claim brought by Mr. Caperton and Harman Development in connection with the 1997 CSA are closely related to the contract and are, therefore, subject to the forum-selection clause contained therein. As we determined in the preceding section of this opinion, the three factually-supported claims asserted in the first amended complaint all flowed from the wrongful declaration of force majeure under the 1997 CSA, and were brought in connection with that contract. Accordingly, we find that Mr. Caperton and Harman Development are bound by the forum-selection clause of the 1997 CSA.
We note that Mr. Caperton did sign the 1997 CSA as president of Sovereign.
As we noted in the preceding section of this opinion, the forum-selection clause issue was addressed below in the context of a motion to dismiss; therefore, we consider the claims as they were asserted in the first amended complaint. Notably, though, only three of the claims asserted in the amended complaint were ultimately presented to the jury for a verdict, indicating that there was insufficient evidence to support the remaining claims. Therefore, we limit our consideration to only those three claims that ultimately went to the jury.
Turning to the Massey Defendants, we note that none of them were signatories to the 1997 CSA. However, Defendant Massey subsequently became the parent company to Wellmore, who is a signatory of the 1997 CSA, and Wellmore was Massey's subsidiary at the time it declared force majeure. All the other Massey Defendants are also subsidiaries of Massey. The complaint plainly alleges that Massey, along with all its subsidiaries who are defendants in this action, exercised "domination and control" over Wellmore and directed Wellmore to wrongfully declare force majeure. Because, as we previously determined, all of the claims in this action flow directly from the declaration of force majeure, and the complaint alleges that the Massey Defendants controlled Wellmore's declaration of force majeure, the complaint plainly demonstrates that the claims against the Massey Defendants are closely related to the contract. Therefore, we find that the Massey Defendants are entitled to enforce the forum-selection clause of the 1997 CSA.
The 1997 CSA was executed in March 1997, and was made retroactively effective to January 1, 1997. Massey acquired Wellmore on July 31, 1997, when it purchased United Coal Corporation and United's subsidiary Wellmore. Wellmore declared force majeure on December 1, 1997.
4. Rebuttal. Because the forum-selection clause was communicated to the resisting party, has mandatory force and covers the claims and parties involved in this dispute, it is presumptively enforceable. Thus, the final step to our analysis is to ascertain whether the Harman Companies and Mr. Caperton have rebutted the presumption of enforceability by making a sufficiently strong showing that enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching.
In this regard, it has been recognized that
[m] andatory choice of forum clauses will be enforced unless they are "unreasonable." Davis Media Group, 302 F. Supp. 2d at 466 (citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. at 10, 92 S. Ct. 1907). "Choice of forum and law provisions may be found unreasonable if (1) their formation was induced by fraud or overreaching; (2) the complaining party `will for all practical purposes be deprived of his day in court' because of the grave inconvenience or unfairness of the selected forum; (3) the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy; or (4) their enforcement would contravene a strong public policy of the forum state." Allen v. Lloyd's of London, 94 F.3d 923, 928 (4th Cir. 1996).
Belfiore v. Summit Fed. Credit Union, 452 F. Supp. 2d 629, 631-32 (D. Md. 2006) (footnotes omitted). Moreover,
[a] party trying to defeat a mandatory choice of forum clause bears a "heavy burden." See Davis Media Group v. Best Western Int'l, Inc., 302 F. Supp. 2d, 464, 469-70 (D. Md. 2004); see also, e.g., Sarmiento v. BMG Entm't, 326 F. Supp. 2d 1108, 1111 (C.D. Cal. 2003) ("[I] f the resisting party fails to come forward with anything beyond general and conclusory allegations of fraud and inconvenience, the court must uphold the agreement").
Id. at 631 n. 1. In this case, the Harman Companies and Mr. Caperton have not argued, either below or before this Court, that enforcement of the forum-selection clause of the 1997 CSA would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching. Accordingly, the forum-selection clause should have been enforced by the circuit court, and that court's failure to grant the Massey Defendants' motion to dismiss based upon the forum-selection clause was an abuse of discretion.
We would be remiss if we did not acknowledge that the motivating factor for the Harman Companies and Mr. Caperton to bring the tort claims in West Virginia may have been due to the fact that Virginia has a cap on punitive damages and West Virginia does not. See Va. Code § 8.01-38.1 (1987) ("In no event shall the total amount awarded for punitive damages exceed $350,000.00). Virginia also does not allow punitive damages for contract claims. See Kamlar Corp. v. Haley, 224 Va. 699, 705, 299 S.E.2d 514, 517 (Va. 1983).
B. Res Judicata
Although the forum-selection clause is dispositive of this case, we further conclude that, assuming arguendo the forum-selection clause did not apply here, this case is nevertheless barred by the doctrine of res judicata.
In addressing this issue, we are called upon to decide the res judicata effect of the Virginia judgment on the instant West Virginia proceeding. We have previously held that "[u] nder Article IV, Section 1, of the Constitution of the United States, a valid judgment of a court of another state is entitled to full faith and credit in the courts of this State." Syl. pt. 1, State ex rel. Lynn v. Eddy, 152 W. Va. 345, 163 S.E.2d 472 (1968). Further, "[b] y virtue of the full faith and credit clause of the Constitution of the United States, a judgment of a court of another state has the same force and effect in this State as it has in the state in which it was pronounced." Syl. pt. 3, Id. "In order to ensure that another state's judgment is given the same force and effect it would have in that state, the general rule appears to be that `[t] he validity and effect of a judgment must be determined by reference to the laws of the state where it was rendered.'" Jordache Enters., Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 204 W. Va. 465, 474, 513 S.E.2d 692, 701 (1998) (quoting 50 C.J.S. § 969, at 563). Further, "the full faith and credit clause generally requires the courts of this State to give [a foreign] judgment at least the res judicata effect which it would be accorded by [the foreign] courts." Jordache Enterprises, 204 W. Va. at 476, 513 S.E.2d at 703. See also Martin v. SAIF Corp., 167 P.3d 916, 918-19 (Mont. 2007) ("Full faith and credit generally requires every State to give to a judgment at least the res judicata effect which the judgment would be accorded in the State which rendered it." (internal quotations and citation omitted)).
Before discussing the specific elements that must be established in order for the preclusive effect of res judicata to apply under Virginia law, we must first address a preliminary issue. Under the laws of Virginia, "a judgment is not final for the purposes of res judicata . . . when it is being appealed or when the time limits fixed for perfecting the appeal have not expired." Faison v. Hudson, 243 Va. 413, 419, 417 S.E.2d 302, 305 (1992). In the instant proceeding it appears that a trial court judgment in the Virginia proceeding was entered on May 7, 2001. Subsequently, on April 1, 2002, Massey filed a motion for summary judgment with the West Virginia circuit court, arguing that principles of res judicata required dismissal of the West Virginia case as a result of the judgment in the Virginia case. On June 17, 2002, the circuit court denied the motion. The circuit court was correct in denying summary judgment on res judicata grounds because, at the time Massey filed its motion and the circuit court decided the matter, the Virginia judgment was being appealed by Wellmore. As we have pointed out, under Virginia law "a judgment is not final for res judicata purposes if it is being appealed." CDM Enters., Inc. v. Commonwealth/Manufactured Housing Bd., 32 Va. App. 702, 709, 530 S.E.2d 441, 445 (2000) (emphasis in original).
The Virginia judgment did not become final for purposes of res judicata until September 13, 2002, when the Supreme Court of Virginia dismissed Wellmore's appeal. See Wellmore Coal Corp. v. Harman Mining Corp., 264 Va. 279, 568 S.E.2d 671 (2002) (dismissing appeal). Consequently, the issue we now confront is whether or not this Court may recognize the finality of the Virginia judgment, for purposes of addressing the res judicata issue on appeal. A case squarely addressing this issue is Aronow v. Lacroix, 268 Cal. Rptr. 866, 219 Cal. App. 3d 1039 (1990).
The facts of Aronow involved two separate lawsuits filed by different plaintiffs against the same law firm for malicious prosecution. One lawsuit was filed by Dr. Ann Fitzsimmons, and the other was filed by Betty Aronow. In the case brought by Dr. Fitzsimmons, a judgment was rendered in favor of the law firm on January 27, 1981. However, as a result of an appeal, the case was not finally disposed of until June 24, 1987. The action brought by Ms. Aronow went to trial on October 5, 1982. Prior to trial the law firm raised the issue of res judicata, but the trial court found that res judicata did not apply because Dr. Fitzsimmons' case was pending an appeal and therefore had not become final. A jury ultimately returned a verdict in favor of Ms. Aronow and awarded her damages. The law firm appealed the judgment. While the case was pending on appeal, Dr. Fitzsimmons' case became final after an appellate court rendered a decision affirming the verdict in favor of the law firm. As a result of Dr. Fitzsimmons' case becoming final, the law firm raised the issue of res judicata in the appeal of Ms. Aronow's case. The appellate court in Aronow found that the issue could be raised on appeal:
Both plaintiffs had been sued by the law firm in a previous action.
First, we consider the question of a final judgment on the merits. At the time the court trial of [Ms. Aronow] began, [Dr. Fitzsimmons' case] was on appeal, so there was no final judgment . . . on which [the law firm] could rely to raise a res judicata defense in the trial court. . . . However, . . . our affirmance of the judgment in [the law firm's] favor [became] final, . . . on September 28, 1987, while the present appeal was pending.
Under these circumstances, [the law firm] now ha[s] a final judgment on which to base a claim of res judicata, and they can raise the issue on appeal. Although normally the res judicata effect of a prior judgment must be pleaded and proven at trial, when the judgment becomes final during the pendency of an appeal in another action, the first final judgment may be brought to the attention of the appellate court in which the appeal is pending and may there be relied on as res judicata.
Aronow, 268 Cal. Rptr. at 870, 219 Cal. App. 3d at 1046 (internal quotations and citations omitted) (footnote omitted). The appellate Court in Aronow went on to analyze the case under res judicata principles and found that the doctrine applied "to preclude [Ms.] Aronow from a judgment in her favor in her own case." Aronow, 268 Cal. Rptr. at 875, 219 Cal. App. 3d at 1053.
In accordance with Aronow, we now hold that a party may raise the defense of res judicata on appeal when the prior judgment relied upon becomes final during the pendency of his/her appeal. Although our holding on this issue permits us to exercise our inherent authority to consider Massey's res judicata argument, we believe the decisions of the Supreme Court of Virginia demonstrate that that court would also exercise its inherent authority to address the issue under the facts presented.
The decision by the Supreme Court of Virginia in Ward v. Charlton, 177 Va. 101, 12 S.E.2d 791 (Va. 1941), is instructive of how we believe that court would respond to the issue of res judicata raised in this case. The facts of Ward show that James R. Ward drove his car into the rear of a tractor being driven by Henry Harper. The tractor was owned by Sidney Charlton. Mr. Ward sued Mr. Charlton and, in a separate action, Mr. Harper sued Mr. Ward. Mr. Ward also brought a counter-claim against Mr. Harper.
In Mr. Ward's suit against Mr. Charlton, a jury returned a verdict in favor of Mr. Ward. However, the trial court set aside the verdict and granted judgment to Mr. Charlton. Mr. Ward appealed. While Mr. Ward's appeal was pending, a jury decided the case brought by Mr. Harper. In that case, the jury determined Mr. Harper was not entitled to recover from Mr. Ward, and Mr. Ward was not entitled to recover from Mr. Harper on the counter-claim.
As a result of the disposition of the Harper-Ward lawsuit, Mr. Charlton asked the Supreme Court of Virginia to dismiss Mr. Ward's appeal on res judicata grounds. Mr. Charlton took the position "that since it has been adjudicated by a court of competent jurisdiction that Ward . . . can not recover of Harper, the original tort feasor, a fortiori Ward can not recover of Harper's master, Charlton, whose liability, if any, depends entirely upon the liability of Harper, under the doctrine of respondeat superior." Ward, 177 Va. at 106, 12 S.E.2d at 792. In response, Mr. Ward argued, among other things, that Mr. Charlton could not raise the defense of res judicata for the first time on appeal. The Supreme Court of Virginia disagreed:
The present [appeal] presents the sole question as to whether Ward is entitled to a judgment against Charlton by reason of the alleged negligent acts of Charlton's servant, Harper. The petition for a writ of error prays that the verdict which Ward obtained against Charlton and which the trial court set aside, be restored, and that this court enter a final judgment on said verdict against Charlton. It conclusively appears from extrinsic evidence, which is not controverted, that subsequent to the closing of the record in the instant case a court of competent jurisdiction has determined that Ward is not entitled to recover the judgment which he here seeks.
It should be pointed out that, at the time of this case, the Supreme Court of Virginia had not adopted the rule that a judgment is not final for the purposes of res judicata when it is being appealed. This rule was first adopted in 1992, in Faison v. Hudson, 417 S.E.2d 302 (Va. 1992).
Must this court shut its eyes to these admitted facts and sagely proceed to consider an issue which has already been decided by a court of competent jurisdiction, and possibly enter a final judgment directly in conflict with that already rendered? We think not. In our opinion this court has the jurisdiction and it is its duty to examine this extrinsic evidence in determining whether it will proceed to hear the pending matter or dismiss it because the issue between the parties has been settled.
. . . .
It is true, as argued by the learned counsel for [Ward], that an appellate court in reviewing the record of the proceedings in the court below will not entertain the defense of res judicata if it was available and was not made below. This is so because the defense is an affirmative one and if not asserted below is deemed to have been waived. . . .
But this principle does not apply to the instant case where the defense was not available and could not have been asserted during the trial below.
. . . .
The doctrine of res judicata or estoppel by judgment is based on public policy. . . . It proceeds upon the principle that one person shall not the second time litigate, with the same person or with another so identified in interest with such person that he represents the same legal right, precisely the same question, particular controversy, or issue which has been necessarily tried and finally determined, upon the merits, by a court of competent jurisdiction, in a judgment in personam in a former suit. . . .
The doctrine is firmly established in our jurisprudence and should be maintained where applicable. . . .
Here it has been brought to our attention by undisputed evidence that since the trial below another court of competent jurisdiction has finally adjudicated that the plaintiff in error, Ward, is not entitled to a judgment against Charlton, the defendant in error. Hence, the plaintiff in error is estopped to ask this court to review the record before it and to enter in his favor a judgment. . . .
Ward, 177 Va. at 110-15, 12 S.E.2d at 793-96 (internal quotations and citations omitted) (footnote added).
Clearly under the decision in Ward, the Supreme Court of Virginia would address the issue of res judicata presented in this case, even though the doctrine did not become ripe until the case was presented on appeal. Consequently, we find that, although the circuit court was correct in denying summary judgment to Massey on res judicata grounds because the Virginia judgment was pending appeal, this Court may now address the issue anew because a final judgment was rendered in the Virginia case by the time this appeal was prosecuted.
The Supreme Court of Virginia has described the doctrine of res judicata, and its purpose, as follows:
the rationale for this judicially created doctrine [is that] it "rests upon public policy considerations which favor certainty in the establishment of legal relations, demand an end to litigation, and seek to prevent the harassment of parties. . . . The doctrine prevents `relitigation of the same cause of action, or any part thereof which could have been litigated, between the same parties and their privies.'"
City of Virginia Beach v. Harris, 259 Va. 220, 229, 523 S.E.2d 239, 243 (2000) (quoting Bill Greever Corp. v. Tazewell Nat'l Bank, 256 Va. 250, 254, 504 S.E.2d 854, 856 (1998) (additional citation omitted)). See also Smith v. Ware, 244 Va. 374, 376, 421 S.E.2d 444, 445 (1992) ("The bar of res judicata precludes relitigation of the same cause of action, or any part thereof, which could have been litigated between the same parties and their privies." (citing Bates v. Devers, 214 Va. 667, 670-71, 202 S.E.2d 917, 920-21 (1974); Flora, Flora Montague, Inc. v. Saunders, 235 Va. 306, 310, 367 S.E.2d 493, 495 (1988); Brown v. Haley, 233 Va. 210, 215, 355 S.E.2d 563, 567 (1987); and Worrie v. Boze, 198 Va. 533, 537-38, 95 S.E.2d 192, 196-97 (1956), aff'd on reh'g, 198 Va. 891, 96 S.E.2d 799 (1957))). With respect to the application of res judicata, the Virginia Court has been consistent in holding that
[f] our elements must be present before res judicata can be asserted to bar a subsequent proceeding: "(1) identity of the remedies sought; (2) identity of the cause of action; (3) identity of the parties; and (4) identity of the quality of the persons for or against whom the claim is made." Wright v. Castles, 232 Va. 218, 222, 349 S.E.2d 125, 128 (1986). See also Mowry v. City of Virginia Beach, 198 Va. 205, 211, 93 S.E.2d 323, 327 (1956).
Smith v. Ware, 244 Va. 374, 376, 421 S.E.2d 444, 445. See also State Water Control Bd. v. Smithfield Foods, Inc. 261 Va. 209, 214, 542 S.E.2d 766, 769 (2001) (same); Balbir Brar Assoc, Inc. v. Consolidated Trading and Servs. Corp., 252 Va. 341, 346, 477 S.E.2d 743, 746 (1996) (same). We will address each of these elements in turn.
1. Identity of the remedies sought. The Harman Companies argue that because the Virginia proceeding awarded damages for breach of contract, while the instant action awarded damages in tort, the remedies sought in these two actions are not the same. We disagree.
The Supreme Court of Virginia has not squarely defined what is meant by "identity of the remedies sought" for purposes of the res judicata test. Ware, 244 Va. at 376, 421 S.E.2d at 445. However, in the Ware case the court addressed the issue of whether there was identity of remedies, and concluded that because the earlier action sought relief in the court of law, while the latter action sought equitable relief in the court of chancery, there was no identity of remedy: "Mrs. Smith, in her motion for judgment for unlawful detainer, sought the remedy of possession and damages. . . . Mrs. Smith, in her bill of complaint, does not seek possession of the property. Rather, she seeks a commutation of her dower interest, which is a different remedy." Ware, 244 Va. at 376-77, 421 S.E.2d 445-46. Thus, it appears that the "remedy" element of res judicata refers, at least in significant part, to the distinction between legal and equitable remedies. The legal definition of the term "remedy" supports this view. See, e.g., Black's Law Dictionary 1296 (7th ed. 1999) (defining "remedy" as `[t] he means of enforcing a right or preventing or redressing a wrong; legal or equitable relief'").
Until January 2006, Virginia continued to separately recognize actions at law and actions in chancery. However, that distinction was abolished as of January 1, 2006. See Williams Connolly, L.L.P. v. People for Ethical Treatment of Animals, Inc., 273 Va. 498, 517 n. 6, 643 S.E.2d 136, 145 n. 6 (2007) ("As of January 1, 2006, Virginia abolished the procedural distinctions between actions at law and suits in chancery.").
Our conclusion is further supported by the opinion in Cherokee Corp. of Linden, Virginia, Inc. v. Richardson, 1996 WL 1065553, at *1 (Va. Cir. Ct. 1996), wherein the Circuit Court of Virginia explained the concept in this way:
At first brush [ Wright v. Castles, 232 Va. 218, 222, 349 S.E.2d 125, 128 (1986),] appears to a retrenchment in the scope of the doctrine of res judicata by its addition of the requirement of "identify of remedies," because if remedy were synonymous with "right of action," the implication is that the aggrieved party, confronted with a judgment for the defendant, may simply successively file actions based on different remedies or rights of action until he receives a favorable verdict. If this were true, the doctrine of Res Judicata would be substantially emasculated.
Black's Law Dictionary (5th ed. 1979) defines remedy as "the rights given to a party by law or by contract which that party may exercise upon a default by the other party, or upon the commission of a wrong (a tort) by another party," so remedy in this context is actually consonant with the broader concept of "cause of action." Moreover, the Supreme Court in Ware v. Smith, [ 244 Va. 374, 421 S.E.2d 444 (1992)], noted that the causes of action were different and relied upon Bates v. Devers, 214 Va. 667, 670-71, 202 S.E.2d 917, 920-21 (1974), which clearly held:
Res judicata-bar, is the particular preclusive effect commonly meant by the use of the term "res judicata." A valid, personal judgment on the merits in favor of a defendant bars relitigation of the same cause of action, or any part thereof which could have been litigated, between the same parties and their privies. See Restatement of Judgments 47, 62, 83 (1942).
Collateral estoppel is the preclusive effect impacting in a subsequent action based upon a collateral and different cause of action.
The ostensibly inconsistent rule of this case derives from the fact that Virginia still recognizes a distinction between law and equity, and this legal relic affects the court's res judicata decisions. In Ware v. Smith, supra; Brown v. Haley, 233 Va. 210, 219, 355 S.E.2d 563 (1987) (equitable claim for easement arose from different transaction and could not be asserted in earlier ejectment action at law between the same parties); and Wright v. Castles, 232 Va. 218, 349 S.E.2d 125 (prior chancery suit for injunction does not bar later suit for monetary damages, the court was confronted by later cases being filed on a different side of the court, because of the dichotomy between law and equity[)]. . . .
1996 WL 1065553, at *10 (emphasis added). With respect to the case presently before us, both the Virginia proceeding and the instant proceeding sought the legal remedy of monetary damages stemming from Wellmore's wrongful declaration of force majeure under the 1997 CSA. Accordingly, the identity of remedy element of Virginia's res judicata test has been met.
2. Identity of the cause of action. The Harman Companies contend that the breach of contract cause of action litigated in Virginia differs from the tort claims asserted in the instant action. We disagree.
As demonstrated by Rule 1:6 of the Rules of the Supreme Court of Virginia, Virginia applies the transactional approach to the element of res judicata requiring identity of the cause of action:
In 2003, the Supreme Court of Virginia handed down an opinion that significantly changed how that court defined the term "cause of action." See Davis v. Marshall Homes, Inc., 265 Va. 159, 166, 576 S.E.2d 504, 507 (2003) (concluding that fraud claim did not bar subsequent breach of contract claim involving same deed of trust notes, and commenting that "[t] he mere fact that some evidence relevant in plaintiff's action for fraud may be relevant to prove her distinct and separate contract claim for nonpayment of the deed of trust notes does not, for purposes of res judicata, mean that plaintiff only has one cause of action. Evidence of defendants' failure to satisfy the deed of trust notes does not prove that defendants made false representations of the values of the real properties intentionally and knowingly, with the intent to mislead plaintiff. Evidence of defendants' failure to satisfy the deed of trust notes does not establish plaintiff's reliance upon defendants' alleged misrepresentations."). However, in 2006 the Supreme Court of Virginia adopted Rule 1:6, which superseded the court's earlier decision in Davis. See Virginia Imports, Ltd. v. Kirin Brewery of America, LLC, 50 Va. App. 395, 410 n. 6, 650 S.E.2d 554, 561 n. 6 (2007) (observing that the transactional approach adopted by Rule 1:6 was promulgated to supersede the holding in Davis). With the adoption of Rule 1:6, Virginia has returned to the transactional approach previously applied in Virginia when addressing the element of res judicata requiring identity of the cause of action.
A party whose claim for relief arising from identified conduct, a transaction, or an occurrence, is decided on the merits by a final judgment, shall be forever barred from prosecuting any second or subsequent civil action against the same opposing party or parties on any claim or cause of action that arises from that same conduct, transaction or occurrence, whether or not the legal theory or rights asserted in the second or subsequent action were raised in the prior lawsuit, and regardless of the legal elements or the evidence upon which any claims in the prior proceeding depended, or the particular remedies sought. A claim for relief pursuant to this rule includes those set forth in a complaint, counterclaim, cross-claim or third-party pleading.
(Emphasis added). See also Virginia Imports, Ltd. v. Kirin Brewery of America, LLC, 50 Va. App. 395, 410 n. 6, 650 S.E.2d 554, 561 n. 6 (2007) (noting that Rule 1:6 represented the transactional approach). The transactional approach has been explained as follows:
As can be seen, Virginia follows the transaction rule set forth in the Restatement of Judgments 2d, 24 for purposes of defining "cause of action." The importance of understanding the broad concept of "cause of action" is essential to understanding the application of res judicata. One "cause of action" may give rise to myriad rights of action, e.g., breach of contract, breach of warranty, negligence, and statutory claims; however, if the rights of action arise from the same operative set of facts and could legally be asserted therein, they are all the same "cause of action" for purposes of the application of the doctrine of res judicata. "There can be no right of action until there is a cause of action." Stone v. Ethan Alan, 232 Va. 365, 368-369, 350 S.E.2d 629 (1986), citing Caudill v. Wise Rambler, 210 Va. 11, 13 168 S.E.2d 257, 259 (1969). However, as broad as the application of the doctrine of res judicata is, it applies only to rights of action which have accrued from the cause of action and could have been asserted in the proceeding upon which the plea is based. As the Supreme Court of Virginia noted in Southern. R. Co. v. Wash. C. R. Co., 102 Va. 483, 491, 46 S.E. 784 (1904):
[R] es judicata applies, except in special cases, not only to points upon which the court was actually required, by the parties, to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of the litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time. Diamond State Iron Co. v. Rarig Co., 93 Va. 603, 25 S.E. 894, and authorities cited. But it cannot be applied to a matter not adjudicated in a former action and which could not have been brought forward for adjudication upon the pleadings in the cause; nor to a matter arising after the former adjudication, even in a second suit between the parties to the former or their privies, if the causes of action are not the same. (cites omitted)
Cherokee Corp., 1996 WL 1065553, at *8. See also Allstar Towing, Inc. v. City of Alexandria, 231 Va. 421, 425, 344 S.E.2d 903, 905-06 (1986) (commenting that "[f] or the purposes of res judicata, a `cause of action' may be defined broadly `as an assertion of particular legal rights which have arisen out of a definable factual transaction,'" and concluding that second action was not barred by first because "the facts giving rise to the second cause of action were not even in existence when the first action was heard and decided on the merits" (internal citation omitted)).
Notably, the transactional approach of Rule 1:6 applies to "any claim or cause of action that arises from that same conduct, transaction or occurrence, whether or not the legal theory or rights asserted in the second or subsequent action were raised in the prior lawsuit." Rule 1:6 (emphasis added). Stated another way,
[u] nder settled principles, the "effect of a final decree is not only to conclude the parties as to every question actually raised and decided, but as to every claim which properly belonged to the subject of litigation and which the parties, by the exercise of reasonable diligence, might have raised at the time." Smith v. Holland, 124 Va. 663, 666, 98 S.E. 676, 676 (1919) (emphasis added). This could-have-litigated-should-have-litigated principle applies to . . . the broader transactional approach adopted by Rule 1:6. . . .
Virginia Imports, 50 Va. App. at 410 n. 6, 650 S.E.2d at 561 n. 6.
Turning to the case at bar, although the Virginia proceeding addressed contract claims, while the instant proceeding addressed tort claims, this distinction is of no moment. Both the tort claims asserted in the case sub judice and the earlier contract claims asserted in the Virginia proceeding arise from the same "conduct, transaction or occurrence," namely the wrongful declaration of force majeure by Wellmore, which was carried out under the direction and control of the Massey Defendants. Thus, the tort claims asserted in this action arise from the same transactional facts as the Virginia proceeding and should have been asserted in that proceeding.
3. Identity of the parties. Mr. Caperton and Harman Development were not parties to the Virginia action, and neither were any of the Massey Defendants named in the instant suit. The Harman Companies argue that there is no identity of the parties as there is no privity between the Massey Defendants and Wellmore. We disagree, finding there is identity of the parties between the Virginia proceeding and the instant proceeding under the doctrine of privity.
Pursuant to Virginia law,
[t] he doctrine of res judicata applies not only to the actual parties in a case but also to those in privity with them. See City of Virginia Beach v. Harris, 259 Va. 220, 229, 523 S.E.2d 239, 243 (2000). In other words, res judicata applies to anyone "`so identified in interest with [a party] that he represents the same legal right, precisely the same question, particular controversy, or issue.'" Johnson, 7 Va. App. at 618, 376 S.E.2d at 788 (citation omitted).
CDM Enters., Inc. v. Commonwealth/Manufactured Housing Bd., 32 Va. App. 702, 710, 530 S.E.2d 441, 445 (2000). One Virginia court has explained the requirement for the identity of parties in this way:
"One of the fundamental prerequisites to the application of the doctrine of res judicata is that there must be an identity of the parties between the present suit and prior litigation asserted as a bar. A party to the present suit, to be barred by the doctrine, must have been a party to the prior litigation, or represented by another so identified in interest that he represents the same legal right." Dotson, 232 Va. at 404-405, 350 S.E.2d at 644.
There is no fixed definition of privity that automatically can be applied in all cases involving res judicata issues. While privity generally involves a party so identified in interest with another that he represents the same legal right, a determination of . . . who are privies requires a careful examination of the circumstances of each case.Nero v. Ferris, 222 Va. 807, 813, 284 S.E.2d 828, 831 (1981).
In Patterson v. Saunders, the Supreme Court stated:
It is generally held that "`privity' means a mutual or successive relationship to the same rights of property, or such an identification in interest of one person with another as to represent the same legal rights, and the term `privy,' when applied to a judgment or decree refers to one whose interest has been legally represented at the trial."
194 Va. at 613, 74 S.E.2d at 208 (citation omitted).
Commonwealth ex rel. Gray v. Johnson, 7 Va. App. 614, 619, 376 S.E.2d 787, 789 (1989).
Turning to the instant case, we find that the parties to the Virginia proceeding "are so identified in interest" with the parties to the instant proceeding that they "represent the same legal right[s] ." CDM Enters., Inc., 32 Va. App. at 710, 530 S.E.2d at 445 (internal quotations and citations omitted). In the Virginia proceeding, Harman Mining and Sovereign sued Wellmore for breach of contract related to the wrongful declaration of force majeure under the 1997 CSA. It bears reiterating that all of the harm that has been claimed by Mr. Caperton and the Harman Companies in the instant action has stemmed directly from that wrongful declaration of force majeure under the 1997 CSA. Because the question of whether the declaration of force majeure was wrongful was the exact issue addressed in the Virginia proceeding, the interests of the various parties to the instant suit, which also depends upon the propriety of the declaration of force majeure, is directly aligned with the interests of the related corporate entities who participated in the Virginia action.
Moreover, it has been recognized that a parent company is in privity with its subsidiary. See Mullins v. Daily New Leader, 2001 WL 1772679, at *2 (Va. Cir.Ct. 2001) ("The Daily News Leader and Gannett Co., Inc., are in privity as Gannett is the parent company of the Daily News Leader."). Thus, Harman Development is plainly in privity with its susidiaries, Harman Mining and Sovereign, who were parties to the Virginia action. Mr. Caperton is also in privity with Harman Mining and Sovereign to the extent that he signed the 1997 CSA in his capacity as president of Sovereign, and insofar as Harman Mining and Sovereign are wholly-owned subsidiaries of Harman Development, and Mr. Caperton is the sole owner of Harman Development. Likewise, A.T. Massey Coal Company is in privity with its subsidiary Wellmore, as are the remaining Massey Defendants, who are also subsidiaries of Massey and sister corporations to Wellmore.
4. Identity of the quality of the persons for or against whom the claim is made. As previously indicated, for purposes of res judicata Virginia requires a determination be made of the identity of the quality of the persons for or against whom the claim was made. As explained by a Virginia trial court, "[t] he `identity of quality' element is a requirement that the parties in conflict appear in the identical capacities or on `the same side of the versus' in both proceedings." Winchester Homes, Inc. v. Hoover Universal, Inc., 1994 WL 1031408, at *2 (Va. Cir.Ct. 1994) (citing Greene v. Warrenton Prod. Credit Ass'n, 223 Va. 463, 291 S.E.2d 209 (1982)). The facts of the instant case clearly establish that this element has been met. The original plaintiffs in the Virginia suit are plaintiffs in the West Virginia proceeding, and they sued in the same capacity in both litigations. None of the Massey Defendants in the instant proceeding was a plaintiff in the Virginia proceeding. See Byrum v. Ames Webb, Inc., 196 Va. 597, 85 S.E.2d 364 (1955) (finding that prior litigation was not res judicata to subsequent litigation because plaintiff and defendant were both nonadversarial defendants in the prior litigation); Ezrin v. Stack, 281 F. Supp. 2d 67 (D.D.C. 2003) (applying Virginia law to find that res judicata applied where both parties were on opposite sides of the "v." in prior litigation).
5. Preclusive Effect of Res Judiciata. Because the four elements of res judicata have been met in this case, as demonstrated above, we conclude that the instant action is barred.
IV.CONCLUSION
For the reasons stated in the body of this opinion, we reverse the judgment in this case and remand for the circuit court to enter an order dismissing this case against A.T. Massey Coal Company and its subsidiaries with prejudice.
Reversed and remanded.
Roscoe Pound offered the following pertinent comments as to a judge's responsibility when dissenting:
The opinions of the judge of a highest court of a state are no place for intemperate denunciation of the judge's colleagues, violent invective, attributings of bad motives to the majority of the court, and insinuations of incompetence, negligence, prejudice, or obtuseness of fellow members of the court.
Roscoe Pound, Cacoethes Dissentiendi: The Heated Judicial Dissent, 39 A.B.A. J. 794, 795 (1953). There is an important difference between a thoughtful, well-reasoned separate opinion and one which is grounded in the political manipulation of legal doctrine; and in the case of ensuring a stable, predictable and fair judicial system, that difference matters. Judges who use their opinions simply as sensationalistic bombast by which to convey partisan agendas or who pander to emotion rather than legal reason do a disservice to the rule of law and to the institution they serve.
It is a testament to the strength of our justice system that judges may disagree and do so openly in separate opinions. A well-reasoned and legally sound separate opinion carries with it the opportunity for pointing out differences with the opinions of the other members of the court without undermining public confidence in the judiciary. Hon. Ruth Bader Ginsburg, Speaking in a Judicial Voice, 67 N.Y.U. L. Rev. 1185, 1196 (1992). By furthering positive progress in the development of law, a well-honed opinion serves as an invaluable instructional tool to judges, lawyers, legal scholars, law students and even to a judge's colleagues. "[T]he effective judge . . . strives to persuade, and not to pontificate. [He] speaks in `a moderate and restrained' voice, engaging in a dialogue with, not a diatribe against . . . [his] own colleagues." Id. at 1186 (internal quotations omitted). A separate opinion should never "generate more heat than light", but rather should "`stand on its own footing', . . . spell[ing] out differences without jeopardizing collegiality or public respect for and confidence in the judiciary." Id. at 1194, 1196 (internal quotations omitted).
It is difficult to respond to my colleague Justice Starcher's dissenting opinion with legal arguments since Justice Starcher identifies no legal support for his dissent. I would observe that emotion-laden verbiage which could easily be perceived as showing an apparent grudge or personal animosity should never serve as the basis for a separate opinion at the appellate level.
Because the majority decision possesses such a deep strength of legal authority, I do not believe that either of the dissenting opinions in any way weaken the authority of the Court's decision. I believe the dissenting opinions lack logical rigor and legal support. By baiting emotions, the dissents adopt a "political voice" rather than a "judicial voice." Resorts to emotions and sensationalism generally betray the lack of a cogent legal basis for one's criticism.
With due respect to my dissenting colleagues, this case does not present a close call on the basis of the rule of law. It simply does not. In this regard, I will focus on two particular aspects of this case. First, Virginia law supports applying res judicata in circumstances where both tort and contract claims are asserted. Second, the majority opinion correctly establishes that the appellate standard of review for "the applicability and enforceability of a forum-selection clause is de novo." Syl. pt. 2, maj. op.
1. Virginia law supports applying res judicata to cases involving both tort and contract causes of action. In his dissenting opinion, Justice Albright asserts that the instant action is not barred by res judicata because, under Virginia law, a plaintiff is not required to bring contract and tort causes of action in the same law suit. This reasoning is flawed. Virginia has traditionally applied the transactional approach to the identity of the "cause of action" element of the test for applying the doctrine of res judicata:
The Virginia Supreme Court applies the . . . transactional analysis in considering the scope of a transaction for the application of res judicata. . . . In Trout v. Commonwealth Transp. Commissioner, 241 Va. 69, 73, 400 S.E.2d 172 (1991), the Supreme discussed this broad transactional concept:
An "action" and a "cause of action" are quite different. "Action" is defined by Code § 8.01-2, as noted above. We define "cause of action" in Roller v. Basic Construction Co., 238 Va. 321, 327, 384 S.E.2d 323, 326 (1989), as "a set of operative facts which under the substantive law, may give rise to a right of action."
Pursuant to Va. Code Ann. § 8.01-2, "`Action' and `suit' may be used interchangeably and shall include all civil proceedings whether upon claims at law, in equity, or statutory in nature and whether in circuit courts or district courts."
Virginia follows the transaction rule set forth in the Restatement of Judgments 2d, § 24 for purposes of defining "cause of action." One "cause of action" may give rise to myriad rights of action, e.g., breach of contract, breach of warranty, negligence, and statutory claims; however, if the rights of action arise from the same operative set of facts and could legally be asserted therein, they are all the same "cause of action" for purposes of the application of the doctrine of res judicata. Lake Holiday Country Club, Inc. v. Teets, Nos. 00-44, 00-46 00-47, 00-70, 2001 WL 34037926, at *7 (Va. Cir.Ct. 2001).
In the 2003 case of Davis v. Marshall Homes, Inc., 265 Va. 159, 576 S.E.2d 504 (2003), the Supreme Court of Virginia departed from the transactional approach. In Davis, the court was asked to decide whether a contract claim was barred by the doctrine of res judicata due to an earlier tort action. The Davis court applied a "same evidence" test, stating that "`[t]he test to determine whether claims are part of a single cause of action is whether the same evidence is necessary to prove each claim.'" Davis, 265 Va. at 167, 576 S.E.2d at 507. Ultimately, the court concluded that because the contract claim required different proof than the earlier tort action, it was not barred by res judicata. Clearly, the Davis court had to reject the transactional approach, in favor of the "same evidence" test, in order to find the contract claim was not barred by res judicata. However, the significance of the Davis case lies not it its conclusions, but in the fact that its reasoning was subsequently rejected by the Supreme Court of Virginia when that court adopted Rule 1:6 of the Rules of the Supreme Court of Virginia and thereby returned to the transactional approach previously applied in Virginia. Thus, the Davis opinion has been viewed as a departure from the traditional res judicata law of Virginia and has been superceded by judicial rule. See Virginia Imps., Ltd. v. Kirin Brewery of Am., LLC, 50 Va. App. 395, 410 n. 6, 650 S.E.2d 554, 561 n. 6 (2007) (declaring that Rule 1:6 was promulgated to supersede the holding in Davis). As the majority opinion correctly notes, under the transactional approach that is applied pursuant to Virginia law, because the claims asserted in the instant action arise from the same operative set of facts, the Boone County action is barred by res judicata.
Indeed, Justice Albright's reasoning is undermined by the plain language of Rule 1:6, which bars a subsequent claim that arises from the same conduct that has been involved in an earlier litigation, regardless of whether the claim was actually asserted in the earlier suit:
A party whose claim for relief arising from identified conduct, a transaction, or an occurrence, is decided on the merits by a final judgment, shall be forever barred from prosecuting any second or subsequent civil action against the same opposing party or parties on any claim or cause of action that arises from that same conduct, transaction or occurrence, whether or not the legal theory or rights asserted in the second or subsequent action were raised in the prior lawsuit, and regardless of the legal elements or the evidence upon which any claims in the prior proceeding depended, or the particular remedies sought. . . .
2. The proper standard for appellate review of forum selection clauses is de novo . Justice Albright also finds fault with the de novo standard of review set out by the majority opinion. Again, he is simply wrong. To the extent that a determination of the applicability of a forum selection clause may require this Court to review factual determinations made by a circuit court, our review of those specific determinations would be for "plain error." See Syl. pt. 2, in part, Walker v. West Virginia Ethics Comm'n, 201 W. Va. 108, 492 S.E.2d 167 (1997) ("[W]e review the circuit court's underlying factual findings under a clearly erroneous standard."). Nevertheless, this Court often applies multi-faceted standards of review. Thus, while certain elements of an analysis, should they exist, might require deferential scrutiny, our overarching review of the general "applicability and enforceability" of a forum-selection clause is de novo." Syl. pt. 2, maj. op. See, also, Phillips v. Audio Active Ltd., 494 F.3d 378, 384 (2d Cir. 2007) ("Where the district court has relied on pleadings and affidavits to grant a Rule 12(b)(3) motion to dismiss on the basis of a forum selection clause, our review is de novo. In analyzing whether the plaintiff has made the requisite prima facie showing that venue is proper, we view all the facts in a light most favorable to plaintiff. Contract interpretation as a question of law is also reviewed de novo on appeal." (internal citations omitted)); Cowatch v. Sym-Tech Inc., No. 07-2582, 2007 WL 3257238, at *1 (3d Cir. 2007) ("Our review of the District Court's construction of the forum selection clause is plenary." (quoting Foster v. Chesapeake Ins. Co., 933 F.2d 1207, 1216 (3d Cir. 1991)); Kochert v. Adagen Med. Int'l, Inc., 491 F.3d 674, 677 (7th Cir. 2007) ("The district court's order granting Adagen's Rule 12(b)(3) motion for improper venue based on the contractual forum-selection clause is subject to de novo review." (citation omitted)); Calix-Chacon v. Global Int'l Marine, Inc., 493 F.3d 507, 510 (5th Cir. 2007) ("[T]he enforcement of a forum selection clause is an issue of law, and we review the district court's conclusions of law de novo." (quoting MacPhail v. Oceaneering Int'l, Inc., 302 F.3d 274, 278 (5th Cir. 2002)); Preferred Capital, Inc. v. Associates in Urology, 453 F.3d 718, 721 (6th Cir. 2006) ("We also note that `the enforceability of a forum selection clause is a question of law that we review de novo.'" (quoting Baker v. LeBoeuf, Lamb, Leiby Macrae, 105 F.3d 1102, 1104 (6th Cir. 1997)); American Soda, LLP v. U.S. Filter Wastewater Group, Inc., 428 F.3d 921, 925 (10th Cir. 2005) ("We review the enforceability of a forum selection clause de novo.) (citing K V Scientific Co. v. BMW, 314 F.3d 494, 497 (10th Cir. 2002)); Silva v. Encyclopedia Britannica, Inc., 239 F.3d 385, 387 (1st Cir. 2001) ("We review a district court's dismissal based on a forum-selection clause de novo."); Terra Int'l, Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 691-92 (8th Cir. 1997) ("In the case at hand, neither party challenges the validity of the forum selection clause; rather, they contest the specific meaning of the language used in the forum selection clause. . . . [W]e conclude that de novo review is the appropriate standard for reviewing a district court's interpretation of the specific terms contained in a forum selection clause. ."). In the instant case, the forum selection clause was reviewed in the context of a motion to dismiss. In this context, there simply were no factual determinations made by the circuit court that required deferential review.
For these reasons, I concur in the majority opinion.
The majority opinion in this case, written by Chief Justice Davis and agreed to by Justice Maynard and Justice Benjamin, is a result-driven effort to excuse without penalty an egregious exercise of raw economic power which a West Virginia jury has found seriously injurious to the plaintiffs in the case, deserving of substantial redress under the law.
The majority opinion, rejecting the judgment rendered below, rests on two conclusions, neither of which are valid in the circumstances:
First, the majority opinion concludes that the West Virginia civil action in this case is barred by the doctrine of res judicata under Virginia law because an action in contract brought and adjudicated in Virginia in 1998 precluded a subsequent tort action in West Virginia involving some aspects of that contract and other activities of the defendants.
Second, the opinion concludes that a "forum-selection clause" in a coal supply agreement to which some of the plaintiffs and all defendants were not parties required that the West Virginia tort action before us must be brought in Virginia.
The first reason, res judicata, is the easiest to address because the majority is just flat-out wrong. The common law of Virginia (and, historically, also of West Virginia) absolutely forbade filing contract and tort causes of action in the same lawsuit. Goodstein v. Weinberg, 245 S.E.2d 140, 143 (Va. 1978). That "judge-made" law was altered by the action of the Virginia Legislature in 1977, adopting § 8.01-272 of the Code of Virginia, to permit but not require contract and tort causes of action to be pursued in the same lawsuit. Thus, the option belonged to the plaintiffs, not the defendants, to decide whether to pursue one or two lawsuits to vindicate their allegedly infringed rights. The majority opinion engages in a convoluted discussion of claims, causes of action and remedies to hide the fact that it molds the law to attain the desired result, without recourse to the historical differences between contract and tort actions, without reference to the option of the plaintiffs to bring one or two actions under the law of Virginia at that time, and without an orderly discussion of those differences under both Virginia and West Virginia law. The long and the short of it is that the adjudication of the contract action in Virginia, resulting ultimately in a recovery of about $6 million, did not affect the rights of the plaintiffs in the action sub judice to recover damages in tort in a separate action, under either Virginia or West Virginia law.
It is to be noted that the "one recovery rule" was observed in West Virginia, in that the defendants here were accorded full credit against the West Virginia judgment for the contract claim recovery in Virginia. Moreover, the assertion in the majority opinion that a "good faith and fair dealing claim, originally raised in the Virginia action but voluntarily abandoned, was a tort claim does not survive scrutiny. Such a claim is for the breach of a covenant said to be implied in all contracts and sounds much more truly in contract than in tort.
The second reason asserted by the majority for vacating the verdict of the West Virginia jury which heard this case and vacating the resulting judgment entered on that verdict is the supposed application to the entire West Virginia action of a "forum-selection clause" in the 1997 coal supply agreement between the Harman companies and Wellmore Coal Corporation (not a party to the present litigation). This asserted reason presents a somewhat more difficult question.
In reviewing this second asserted reason, I start with the "consolation prize" language found in the majority opinion:
[W]e wish to make perfectly clear that the facts of this case demonstrate that Massey's conduct warranted the type of judgment rendered in this case. However, no matter how sympathetic the facts are, or how egregious the conduct, we simply cannot compromise the law in order to reach a result that clearly appears to be justified. As we will demonstrate below, the law simply did not permit this case to be filed in West Virginia.
Slip op. at p. 13. Simply put, the last two sentences of this "consolation prize" language constitute the desired result of the majority, not a result dictated by the law, as the majority would have one believe.
What follows the majority's confession of the essential justice of the plaintiffs' suit is a lengthy discussion about "forum-selection clauses" in contracts, resulting in seven new syllabus points, applied to the facts of this case so as to relieve the defendants of a verdict in excess of $50 million, plus interest and costs, which would have resulted in a judgment calculated to be in excess of $75 million.
Beyond that result, the unnecessarily broad and sweeping language of the opinion and the syllabus points could close the courthouse doors of this State to citizens with meritorious claims, unwittingly caught up in these "forum-selection clause" contracts, designed in most cases to give some litigants advantages over others and, under the majority's analysis, applicable in some cases to litigants not even party to the contracts containing the "forum-selection clauses." This is all accomplished by adopting by judicial fiat "new law" not previously found in West Virginia's jurisprudence and applying that "new law" at every turn in the manner most likely to yield the result of overturning the jury's verdict and the judgment of the lower court giving effect to that verdict.
First, I note that the majority's discussions leading to syllabus points five, six, seven, eight and nine, all dealing with how to review forum-selection clauses, appear to be, in the abstract, welcome additions to the law of this State. I recognize that it is the peculiar function of this Court in the ongoing development of our common law to speak to issues of law that have not been previously decided by this Court or decided by acts of the Legislature.
I depart from the views of the majority (1) because some of the language of the new syllabus points is unduly and dangerously broad, (2) because of the manner in which the majority then applies that "new law" to the facts of this case, and (3) because the sweeping language of the syllabus points fails to take into account that their application in certain circumstance may require findings of fact to which this Court ought to give deference, either because the court below is not "clearly wrong" in its consideration of the relevant facts, or because the court below is entitled to deference in its application of the law to the facts, absent an abuse of discretion. I will apply these concerns concretely to the case before us.
In syllabus point two, the majority asserts that "[o]ur review of the applicability and enforceability of a forum-selection clause is de novo." I respectfully suggest that our review is abuse of discretion, in large part because our review of those issues will most often be fact dependent and we should be attentive to the findings of the trial court with respect to those facts. See Chateau des Charmes Wines Ltd. v. Sabate USA Inc., 328 F.3d 528, 530 (9th Cir. 2003) (decision related to enforcement of a forum selection clause is reviewed for abuse of discretion, citing Kukje Hwajae Ins. Co., Ltd. v. M/V Hyundai Liberty, 294 F.3d 1171, 1174 (9th Cir. 2002)); TAAG Linhas Aereas de Angola v. TransAmerica Airlines, Inc., 915 F.2d 1351, 1353 (9th Cir. 1990) (enforcement of a forum selection clause reviewed for abuse of discretion) citing Peleport Investors v. Budco Quality Theatres, 741 F.2d 273, 280 n. 4 (9th Cir. 1984) (basing abuse of discretion standard on The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 7 (1972)).
In syllabus point six, which in the abstract I suggest is a well-stated point of law, the first inquiry is "whether the [forum-selection] clause was reasonably communicated to the party resisting enforcement." That is a fact-intensive inquiry further complicated by the majority's later assertion that such clauses may be made to apply to persons not party to the contract in which the clause is found. The majority blithely asserts that everyone in the instant case knew of the forum-selection clause; perhaps so, but is it the job of this Court to so declare?
The third query listed in syllabus point six asks "whether the claims and parties involved in the suit are subject to the forum-selection clause." The majority has no trouble finding that the parties to the contract readily understood and agreed that tortious interference, fraudulent misrepresentation and fraudulent concealment, the claims upon which the West Virginia jury returned its verdict, were to be brought in Virginia as matters "related to the contract," even though the evidence showed that substantial parts of the conduct involved had not one thing to do with the operation of the contract, and even though some of the parties to the tort action were not parties to the contract itself. For example, the purchase by the defendant Massey of a buffer between the Caperton properties and the Pittston property, to prevent the realization of a plan to mine the Pittston field, was in no way related to the coal supply agreement. Rather such was an instance of where the "facts of this case demonstrate that Massey's conduct warranted the type of judgment rendered in this case." Slip op. at 13. The point is that the majority went out of its way to make findings that fit its intended result rather than the justice of the cause. In short, the inquiry, as posed in the syllabus point, is an either/or inquiry. Some claims here were related to the contract; some were not. The majority chose, in effect, to say if any of the claims were "related" to the contract, all were. The better rule, to withstand the test of time and circumstances in the real world, is the converse: If any of the claims are not related to the contract then plaintiffs may bring suit where they so choose. The majority opted to design the law in a manner that would free Massey from its responsibility in this State.
The lengthy majority opinion cites numerous cases for its various propositions. Practically all of these cases contain an exception by which the harsh rules relied upon by the majority would not be applicable in certain circumstances, or state rules that might not apply unless certain factual scenarios appear in the record. Without fail, the majority has chosen to construe the facts and circumstances of this case so as to prevent a favorable outcome for the plaintiffs. A most clear example of this is the majority's application of syllabus points ten and eleven.
In syllabus points ten and eleven, the majority adopted sweeping language to compel plaintiffs and defendants alike who are not party to contracts containing forum-selection clauses to be bound by such clauses more often than not. This feat of legerdemain was accomplished by the majority first adopting a "closely related to the contract" test, and then adopting an analysis of the connection between plaintiffs' tort claims and the "forum-selection clause" contract that, in effect, puts the burden on the non-party to avoid the application of the "forum-selection clause." In particular, under the facts of this case, the majority constructed a close relationship almost out of whole cloth to bring about the result it desired. In the long run, the more devastating effect of this particular part of the opinion is that it invites future litigants to attack West Virginia litigants' ability to sue in the courts of this State based upon "forum-selection clauses" to which such West Virginia litigants were not parties and had received only cursory notice, perhaps by small print in limited warranty notices or financing agreements. The point is that the majority erred in favor of the powerful and against the unsuspecting. The point is our citizens have been put in jeopardy of losing remedies our law provides, in favor of more restrictive remedies provided elsewhere because such "forum-selection clauses" will only be invoked by those seeking to avoid responsibility — as in this case.
Congratulations to the majority. It has decided this case for the sake of Massey by protecting A.T. Massey Coal Company, Elk Run Coal Company, Inc., Independence Coal Company, Inc., Marfork Coal Company, Inc., Performance Coal Company and Massey Coal Sales Company, Inc. from the justified action of a West Virginia jury, rendering its verdict for, in the words of the majority opinion, "Massey's conduct [that] warranted the type of judgment rendered in this case." Slip op. at p. 13. The majority has done so by twisting logic, misapplying the law and introducing sweeping "new law" into our jurisprudence that may well come back to haunt us, or more likely, haunt the people we are duty-bound to protect under our law. The majority of three has saved Massey $50 million, plus interest and costs, which some reports calculate to total as much as $75 million today. For the sake of all West Virginians, young and old alike, I sincerely wish the result reached had been otherwise. Accordingly, I tender this heartfelt dissent.
I would have granted Massey's prayer for relief from interest accruing during the time the full record could not be reproduced due to problems with court reporting.
The majority's opinion is morally and legally wrong.
The majority opinion is morally wrong because it steals more than $60 million dollars from a man who was the victim of a deliberate, illegal scheme to destroy his business. The majority opinion is legally wrong because it uses erroneous legal reasoning to justify an immoral result.
Make no mistake — a West Virginia jury heard from all the witnesses for both sides, and decided that Mr. Don Blankenship directed an illegal scheme to break Mr. Hugh Caperton's business. No one says that the jury was wrongly instructed. No one says they didn't hear all the evidence. In fact, the majority opinion concedes, "the facts of this case demonstrate that Massey's conduct warranted the type of judgment rendered in this case." Yes, that's right, the majority of the members of this Court says that the Boone County jury's verdict was fully justified! Therefore, in this aspect of the case, our Court's opinion is unanimous.
Let's not forget why the jury's verdict was justified: the jurors looked Mr. Blankenship in the eye and concluded that he was lying, and that Mr. Caperton was telling the truth.
The majority opinion says: "That doesn't matter" — it all should have been handled in Virginia. To which argument, one must respond: "Horse puckey!"
The Virginia case was about a single narrow contract issue. There was nothing in the Virginia case about Mr. Blankenship's grand scheme to crush Mr. Caperton and his business. According to the jury's findings, that scheme was hatched in West Virginia and carried out in West Virginia. Mr. Caperton had every right to try his case in West Virginia — and he did, and he won.
Now three members of this Court have ruled that even though it is a fact that Don Blankenship illegally took over $60 million dollars from Hugh Caperton — he can get away with it scot-free. Talk about crime in the suites!
Finally, I would be remiss if I did not briefly speak to the multiple claims made by the Massey parties that I should remove myself from the consideration of the instant case because I have publicly decried the one-man smear tactics that Mr. Blankenship brought to our most recent Supreme Court election.
As a constitutional officer elected by the people, I have a right and duty to speak out about the administration of our justice system, including the conduct of judicial elections. I can have opinions, and still do my job fairly. I do decry murder and domestic violence and I speak out on it, and I also sit as a judge and hear cases involving people who are charged with those offenses.
I am one judge voting on this case who can say that I owe nothing to Mr. Blankenship one way or another — he did nothing to hurt or hinder my election. He did not fund my campaign, nor am I a social friend of his. It has been amusing for me to see Mr. Blankenship trying with all his might to create the circumstances where I would be forced to step aside and let him have in toto the kind of Court he wants — for example, he has said he will be "targeting" me in the next election if I run. Fortunately, the public can see through this kind of transparent foolishness, just as a West Virginia jury saw through his lies in court.
What is sad is that a majority of this Court is telling a West Virginia jury that their work to bring about justice was a complete waste.
Accordingly, I dissent.