State ex rel. Antero Res. Corp. v. McCarthy, 22-0400

CourtSupreme Court of West Virginia
Writing for the CourtHUTCHISON CHIEF JUSTICE
PartiesSTATE OF WEST VIRGINIA EX REL. ANTERO RESOURCES CORPORATION, Petitioner, v. THE HONORABLE CHRISTOPHER MCCARTHY, JUDGE OF THE CIRCUIT COURT OF HARRISON COUNTY, SCOTT A. WINDOM, TRUSTEE OF THE CAROLYN E. FARR TRUST AND ITS BENEFICIARIES, AND EMPIRE OIL & GAS, INC., A WEST VIRGINIA CORPORATION, Respondents.
Docket Number22-0400
Decision Date17 November 2022

STATE OF WEST VIRGINIA EX REL. ANTERO RESOURCES CORPORATION, Petitioner,
v.

THE HONORABLE CHRISTOPHER MCCARTHY, JUDGE OF THE CIRCUIT COURT OF HARRISON COUNTY, SCOTT A. WINDOM, TRUSTEE OF THE CAROLYN E. FARR TRUST AND ITS BENEFICIARIES, AND EMPIRE OIL & GAS, INC., A WEST VIRGINIA CORPORATION, Respondents.

No. 22-0400

Supreme Court of Appeals of West Virginia

November 17, 2022


Submitted: November 1, 2022

PETITION FOR A WRIT OF PROHIBITION WRIT GRANTED

Timothy M. Miller, Esq. Mychal S. Schultz, Esq. Katrina N. Bowers, Esq. Babst, Calland, Clements & Zomnir, P.C. Charleston, West Virginia and Joseph V. Schaeffer, Esq. Babst, Calland, Clements & Zomnir, P.C. Pittsburgh, Pennsylvania Attorneys for Petitioner

David J. Romano, Esq. Romano Law Office, LC Clarksburg, West Virginia Counsel for Respondents, Scott A. Windom, Trustee and Empire Oil & Gas, Inc.

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JUSTICES WOOTON and BUNN, deeming themselves disqualified, did not participate in the decision in this case.

JUDGES HAMMER and SIMS, sitting by temporary assignment.

HUTCHISON CHIEF JUSTICE

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SYLLABUS BY THE COURT

1. "A writ of prohibition is available to correct a clear legal error resulting from a trial court's substantial abuse of its discretion in regard to discovery orders." Syl. Pt. 1, State Farm Mut. Auto. Ins. Co. v. Stephens, 188 W.Va. 622, 425 S.E.2d 577 (1992).

2. "When a discovery order involves the probable invasion of confidential materials that are exempted from discovery under Rule 26(b)(1) and (3) of the West Virginia Rules of Civil Procedure, the exercise of this Court's original jurisdiction is appropriate." Syl. Pt. 3, State ex rel. U.S. Fidelity & Guar. Co. v. Canady, 194 W.Va. 431, 460 S.E.2d 677 (1995).

3. "'In order to assert an attorney-client privilege, three main elements must be present: (1) both parties must contemplate that the attorney-client relationship does or will exist; (2) the advice must be sought by the client from that attorney in his capacity as a legal adviser; (3) the communication between the attorney and client must be identified to be confidential.' Syllabus Point 2, State v. Burton, 163 W.Va. 40, 254 S.E.2d 129 (1979)." Syl. Pt. 7, State ex rel. U.S. Fidelity & Guar. Co. v. Canady, 194 W.Va. 431, 460 S.E.2d 677 (1995).

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4. "The burden of establishing the attorney-client privilege . . . always rests upon the person asserting it." Syl. Pt. 4, in part, State ex rel. U.S. Fidelity & Guar. Co. v. Canady, 194 W.Va. 431, 460 S.E.2d 677 (1995).

5. "To establish the application of the crime-fraud exception, a party must demonstrate an adequate factual basis exists to support a reasonable person's good faith belief that an in camera review of the privileged materials would produce evidence to render the exception applicable. In making this prima facie showing, the party must rely on nonprivileged evidence, unless the court has not previously made a preliminary determination on the matter of privilege, in which case the allegedly privileged materials may also be considered. Discretion as to whether to conduct an in camera review of the privileged materials rests with the court. If, however, the prima facie evidence is sufficient to establish the existence of a crime or fraud so as to render the exception operable, the court need not conduct an in camera review of the otherwise privileged materials before finding the exception to apply and requiring disclosure of the previously protected materials. The crime-fraud exception operates to compel disclosure of otherwise privileged materials only when the evidence establishes that the client intended to perpetrate a crime or fraud and that the confidential communications between the attorney and client were made in furtherance of such crime or fraud." Syl. Pt. 7, State ex rel. Allstate Ins. Co. v. Madden, 215 W.Va. 705, 601 S.E.2d 25 (2004).

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6. "In order to admit in evidence confidential communications between attorney and client under the exception to the general rule that, if such communications were made in order to perpetrate a fraud on justice, they are not privileged, it must clearly appear that such communications were made by the client with that intent and purpose." Syl. Pt. 2, Thomas v. Jones, 105 W.Va. 46, 141 S.E. 434 (1928).

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HUTCHISON, Chief Justice:

Petitioner, Antero Resources Corporation, seeks a writ of prohibition to prevent the respondent, the Honorable Christopher McCarthy, Judge of the Circuit Court of Harrison County, from enforcing an April 7, 2022, order granting a motion to compel filed by the plaintiffs below and respondents herein, Scott A. Windom, Trustee of the Carolyn E. Farr Trust and its Beneficiaries, and Empire Oil & Gas, Inc., (hereinafter "plaintiffs"). The order requires Kevin Ellis, an attorney employed by Antero, to appear at a deposition and respond to questions that Antero claims are subject to the attorney-client privilege and/or work product doctrine. Antero argues that the circuit court abused its discretion by making factual findings in its order that are contrary to the evidentiary record and erroneously applied the crime-fraud exception to the attorney-client privilege. Having considered the parties' briefs and oral arguments, the submitted appendices, and the pertinent authorities, we grant the writ for the reasons set forth below.

I. Facts and Procedural Background

The Carolyn E. Farr Trust was created by its namesake on May 24, 1991, to provide funds for the general care, maintenance, and support of herself, and upon her death,[1] the same for her four children. The assets of the Trust include several natural gas

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mineral properties located primarily in Ritchie and Doddridge counties.[2] Ms. Farr designated Clarence E. Sigley, Sr., as the Trustee, and he served in that capacity until his death on September 22, 2019.

After Mr. Sigley's death, the underlying civil action commenced when the plaintiffs filed suit on June 22, 2020, against Mr. Sigley's estate, which was being administered by his wife, Barbara Wright Sigley. The complaint also named as defendants Ms. Sigley, individually; Amy R. Zannino, the Sigleys' daughter; and Antero. The complaint alleged that Mr. Sigley converted, misappropriated, and fraudulently diverted Trust assets thereby breaching his fiduciary duties and obligations as Trustee. Relevant to the issue before this Court, the complaint specifically alleged that Mr. Sigley improperly leased certain mineral properties belonging to the Trust to himself and then simultaneously assigned those leases to Antero, which allowed him to collect bonuses and royalty payments that he kept for himself and his family to the detriment of the Trust. The complaint further alleged that Antero facilitated or participated in the fraudulent transfers of the property and that Antero knew or should have known that Mr. Sigley's actions were a violation of his fiduciary duties.

The petition for a writ of prohibition currently before this Court stems from a discovery dispute that arose when the plaintiffs took the deposition of Kevin Ellis on

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October 15, 2021. As noted above, Mr. Ellis is an attorney employed by Antero, and he held the title of "Manager, Administrative and Legal-WV" during the time period relevant to the plaintiffs' complaint.[3] The record indicates that Mr. Ellis secured the leases to the Farr Trust properties for Antero. During the deposition, counsel for Antero objected to many questions asked by counsel for the plaintiffs, instructing Mr. Ellis not to answer based upon the attorney-client privilege and/or work product doctrine. After Antero's counsel asserted multiple objections, the plaintiffs' attorney adjourned the deposition and then filed a motion to compel with the circuit court seeking a ruling requiring Mr. Ellis to answer the questions. The circuit court referred the matter to a discovery commissioner who held a hearing and ultimately recommended that the motion to compel be granted based upon a finding that the crime-fraud exception applies and precludes Antero from claiming the protections afforded by the attorney-client privilege and work product doctrine.

The circuit court adopted the findings of the discovery commissioner in its April 7, 2022, order and granted the plaintiffs' motion to compel. Antero then filed its petition for a writ of prohibition with this Court. By order entered on August 17, 2022, we issued a rule to show cause why the writ should not be granted and scheduled the matter for oral argument.

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II. Standard for Issuance of Writ

In the context of discovery orders, this Court has held that clear legal error warrants the exercise of this Court's original jurisdiction through the issuance of a writ of prohibition. As syllabus point one of State Farm Mut. Auto. Ins. Co. v. Stephens, 188 W.Va. 622, 425 S.E.2d 577 (1992), provides: "A writ of prohibition is available to correct a clear legal error resulting from a trial court's substantial abuse...

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