McGraw v. American Tobacco Co.

• Decision Date: 22 June 2009
• Docket Number: No. 33873.,33873.
• Citation: 681 S.E.2d 96
• Court: West Virginia Supreme Court
• Parties: Darrell V. McGRAW, Jr., Attorney General, The State of West Virginia; The West Virginia Public Employees Insurance Agency; and The West Virginia Department of Health and Human Resources, Plaintiffs Below, Appellants, v. The AMERICAN TOBACCO COMPANY, et al., Defendants Below, Appellees.

681 S.E.2d 96

Darrell V. McGRAW, Jr., Attorney General, The State of West Virginia; The West Virginia Public Employees Insurance Agency; and The West Virginia Department of Health and Human Resources, Plaintiffs Below, Appellants, v. The AMERICAN TOBACCO COMPANY, et al., Defendants Below, Appellees.

No. 33873.

Supreme Court of Appeals of West Virginia.

Submitted February 24, 2009.

Decided June 22, 2009.

Syllabus by the Court

1. A circuit court order compelling arbitration is not subject to direct appellate review prior to the dismissal of the circuit court action unless the order compelling arbitration otherwise complies with the requirements of West Virginia Code § 58-5-1 (1998) and Rule 54(b) of the West Virginia Rules of Civil Procedure. A party seeking this Court's review of a circuit court order compelling arbitration prior to entry of a final order which complies with the requirements of West Virginia Code § 58-5-1 (1998) and Rule 54(b) of the West Virginia Rules of Civil Procedure must do so in an original jurisdiction proceeding seeking a writ of prohibition.

2. "In determining whether to grant a rule to show cause in prohibition when a court is not acting in excess of its jurisdiction this Court will look to the adequacy of other available remedies such as appeal and to the over-all economy of effort and money among litigants, lawyers and courts; however, this Court will use prohibition in this discretionary way to correct only substantial, clear-cut, legal errors plainly in contravention of a clear statutory, constitutional, or common law mandate which may be resolved independently of any disputed facts and only in cases where there is a high probability that the trial will be completely reversed if the error is not corrected in advance." Syllabus point 1, Hinkle v. Black, 164 W.Va. 112, 262 S.E.2d 744 (1979).

3. "In determining whether to entertain and issue the writ of prohibition for cases not involving an absence of jurisdiction but only where it is claimed that the lower tribunal exceeded its legitimate powers, this Court will examine five factors: (1) whether the party seeking the writ has no other adequate means, such as direct appeal, to obtain the desired relief; (2) whether the petitioner will be damaged or prejudiced in a way that is not correctable on appeal; (3) whether the lower tribunal's order is clearly erroneous as a matter of law; (4) whether the lower tribunal's order is an oft repeated error or manifests persistent disregard for either procedural or substantive law; and (5) whether the lower tribunal's order raises new and important problems or issues of law of first impression. These factors are general guidelines that serve as a useful starting point for determining whether a discretionary writ of prohibition should issue. Although all five factors need not be satisfied, it is clear that the third factor, the existence of clear error as a matter of law, should be given substantial weight." Syllabus point 4, State ex rel. Hoover v. Berger, 199 W.Va. 12, 483 S.E.2d 12 (1996).

4. This Court will preclude enforcement of a circuit court's order compelling arbitration only after a de novo review of the circuit court's legal determinations leads to the inescapable conclusion that the circuit court clearly erred, as a matter of law, in directing that a matter be arbitrated or that the circuit court's order constitutes a clear-cut, legal error plainly in contravention of a clear statutory, constitutional, or common law mandate.

5. "A valid written instrument which expresses the intent of the parties in plain and unambiguous language is not subject to judicial construction or interpretation but will be applied and enforced according to such intent." Syllabus point 1, Cotiga Development Co. v. United Fuel Gas Co., 147 W.Va. 484, 128 S.E.2d 626 (1962).

6. The mere fact that parties do not agree to the construction of a contract does not render it ambiguous. The question as to whether a contract is ambiguous is a question of law to be determined by the court. Syllabus point 1, Berkeley County Public Service District v. Vitro Corp. of America, 152 W.Va. 252, 162 S.E.2d 189 (1968).

Ronald R. Brown, Assistant Attorney General, Charleston, WV, for Appellants.

Mark W. Kelley, Ray, Winton & Kelley, PLLC, Charleston, WV,

Robert J. Brookhiser, Elizabeth B. McCallum, Howrey, LLP, Washington, D.C., Pro Hoc Vice,

John F. Billings, Lexington, KY, for Appellee Subsequent Participating Manufacturers, Commonwealth Brands, Inc., et al.

David B. Thomas, Pamela L. Campbell, Teresa K. Thompson, Allen Guthrie McHugh & Thomas, PLLC, Charleston, WV,

James D. Mathias, C. Dylan Sanders, DLA Piper U.S. LLP, Baltimore, MD, Pro Hoc Vice, for Appellee Original Participating Manufacturer Philip Morris, Inc.

W. Henry Jernigan, Jr., Brace R. Mullet, Dinsmore & Shohl, LLP, Charleston WV

Stephen R. Patton, Kirkland & Ellis, LLP, Chicago, IL, Pro Hoc Vice, for Appellees Original Participating Manufacturers, R.J. Reynolds Tobacco Company and Lorillard Tobacco Company.

BENJAMIN, Chief Justice.

Appellants, Darrell V. McGraw, Jr., Attorney General, the State of West Virginia, the West Virginia Public Employees Insurance Agency, and the West Virginia Department of Health and Human Resources (hereinafter collectively "the State") bring the instant matter before this Court upon appeal of a March 20, 2007, order entered by the Circuit Court of Kanawha County. In its March 20, 2007, order, the circuit court held that questions regarding the State's diligent enforcement of its qualifying statute¹ during the year 2003 were subject to nationwide arbitration before three former federal judges pursuant to the terms of the Master Settlement Agreement ("MSA") previously entered into in this litigation. For the reasons set forth herein, we affirm.

I. FACTUAL AND PROCEDURAL HISTORY

In 1994, the State filed suit in the Circuit Court of Kanawha County, West Virginia, against this nation's major tobacco companies seeking damages, including increased health care costs relating to smoking-related illnesses, incurred as a result of the marketing and sale of tobacco products in West Virginia. Similar actions where brought in states throughout the United States and, in 1998, the State, along with forty-five other states,² the District of Columbia, the Commonwealth of Puerto Rico and four United States territories, entered into a comprehensive MSA with the original participating manufacturers (hereinafter "OPMs").³ Pursuant to the terms of the MSA, participating manufacturers (hereinafter "PMs") agreed to extensive restrictions on their marketing, advertising and lobbying, in addition to annual payments which would be divided among the settling states in exchange for the settling states' release of past and future claims against PMs. On December 11, 1998, the Circuit Court of Kanawha County entered a consent decree approving the MSA and incorporating its terms and provisions. The circuit court retained jurisdiction over the dispute for purposes of implementing, interpreting and enforcing the consent decree and MSA.

Under the terms of the MSA, the PMs make an annual payments into a national escrow account in amounts determined by an independent auditor.⁴ Not only does the independent auditor determine the amount of the PMs' individual annual payments, but the independent auditor also performs certain calculations as set forth by the terms of the MSA and allocates those payments among the settling states. Among the calculations performed by the independent auditor is the Non-Participating Manufacturer Adjustment (hereinafter "NPM Adjustment") which, if applied, reduces the PMs' annual payments to account for market share losses caused by MSA's marketing and advertising restrictions. The NPM Adjustment is triggered when the PMs demonstrate that they have collectively lost a market share of more than two percent to the NPMs compared to their combined market share prior to participation in the MSA and an economic consulting firm finds that participation in the MSA was a significant factor contributing to that market share loss. Diligent enforcement of its qualifying statute⁵ allows a settling state to avoid the NPM Adjustment under the terms of the MSA and shifts that state's share of the NPM Adjustment to settling states which do not qualify for the exemption in pro rata proportion to their respective allocable shares. If all settling states demonstrate diligent enforcement then the NPM Adjustment is not applicable for that year's calculation.

The instant dispute arises from the independent auditor's decision, in 2006, to presume all settling states diligently enforced their qualifying statutes when calculating payments due for the year 2003.⁶ The PMs disputed this determination and requested that the matter be arbitrated in accordance with the terms of the MSA. The State, like many other settling states, responded by seeking a declaration in state court that it had diligently enforced its qualifying statute for the year 2003 and was, therefore, exempt from application of the NPM Adjustment. In a motion joined by the SPMs, the OPMs asked the Circuit Court of Kanawha County to compel arbitration of this dispute under the terms of the MSA. Specifically, the OPMs argued that Section XI(c) of the MSA required any dispute "arising out of or relating to" the independent auditor's calculations and determinations to be submitted to binding arbitration before a nationwide panel of three former federal judges. Section XI(c) of the MSA provides:

Resolution of Disputes. Any dispute, controversy or claim arising out of or relating to calculations performed by, or any determinations made by, the Independent Auditor (including, without limitation, any dispute concerning the operation or application of any of the adjustments, reductions, offsets, carry-forwards and allocations described in subsection IX(j) or subsection XI(I)) shall be...