State v. Evans

Decision Date07 April 2016
Docket NumberNo. 15-1100,15-1100
PartiesSTATE OF WEST VIRGINIA EX REL. SCOTT H. KAMINSKI, Petitioners, v. THE HONORABLE THOMAS C. EVANS, III, JUDGE OF THE CIRCUIT COURT OF JACKSON COUNTY, WEST VIRGINIA; A.I.O. HOLDINGS, LLC; AND, THOMAS T. MARTIN AND DEBRA MARTIN, Respondents.
CourtSupreme Court of West Virginia

STATE OF WEST VIRGINIA EX REL. SCOTT H. KAMINSKI, Petitioners,
v.
THE HONORABLE THOMAS C. EVANS, III, JUDGE OF THE CIRCUIT COURT OF JACKSON COUNTY, WEST VIRGINIA; A.I.O. HOLDINGS, LLC; AND, THOMAS T. MARTIN AND DEBRA MARTIN, Respondents.

No. 15-1100

STATE OF WEST VIRGINIA SUPREME COURT OF APPEALS

April 7, 2016


(Jackson County No. 09-C-31)

MEMORANDUM DECISION

The petitioner herein, Scott H. Kaminski ("Mr. Kaminski"),1 prior counsel to the respondent herein and defendant below, A.I.O. Holdings, LLC ("AIO"),2 seeks a writ of prohibition to prohibit enforcement of an order entered October 29, 2015, by the Circuit Court of Jackson County. By that order, the circuit court denied Mr. Kaminski's motion to quash a subpoena issued by the respondents herein and plaintiffs below, Thomas T. and Debra Martin ("the Martins").3 The order further directed Mr. Kaminski to produce documents as to which Mr. Kaminski sought to invoke privilege due to attorney-client confidentiality.

Upon our review of the parties' arguments, the appendix record, the sealed Affidavit of Mr. Kaminski, and the pertinent authorities, we conclude that the circuit court's order is not clearly erroneous as a matter of law, and, therefore, the requested writ of prohibition should be denied. Because this Court finds no substantial question of law in connection with the petition, a memorandum opinion refusing the requested writ of prohibition is the

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appropriate disposition pursuant to Rule 21 of the West Virginia Rules of Appellate Procedure.

In January 2004, the Martins leased the right to drill for and produce natural gas on approximately sixty-one acres (the "Martin Lease") to Martin Twist Energy Co., LLC ("MTEC"). Pursuant to the lease, MTEC drilled three wells upon the Martins' property. Subsequently, AIO lent $2 million to MTEC. The loan was collateralized by various oil and gas leases and wells, including the Martin Lease and the wells that had been drilled. MTEC defaulted on its loan with AIO. Thereafter, AIO instituted foreclosure proceedings against MTEC in Kentucky. The proceedings resulted in the entry of an Agreed Judgment whereby the entire right and interest in the Martin Lease and the drilled wells was transferred to AIO in October 2008.

In March 2009, the Martins filed suit against AIO. The complaint set forth multiple grounds, including failure to pay appropriate royalties under the Martin Lease. Counsel for AIO, Scott Kaminski, first appeared in April 2009. Subsequently, AIO filed an answer and a counterclaim against Mr. Martin alleging that he interfered with AIO's production from the wells by chasing AIO employees off the property with a gun and prohibiting them from working. A court-ordered mediation held in July 2010 was unsuccessful. A settlement offer presented by the Martins was rejected by Todd Pilcher ("Mr. Pilcher"), who was said to be acting on behalf of AIO.

In November 2010, AIO filed discovery responses signed by Mr. Kaminski and verified by Mr. Pilcher. Among other things, AIO stated that it complied with all obligations under the lease agreement, including the right to operate the wells and the duty to pay royalties/shut-in fees. The wells were represented to be "shut-in" because they were not producing.4 AIO stated that there were no other persons or entities who had rights to the Martin Lease. AIO also stated that it had numerous communications with the Martins and that AIO employees or contractors had been threatened by the Martins on several occasions. Additionally, AIO filed responses to requests for admissions in May 2011. The responses were signed by Mr. Kaminski but were not verified. AIO admitted that it acquired the Martin Lease through foreclosure proceedings and that it maintained documentation of gas production, revenues and costs incurred with the Martin wells. It also admitted that Martin Twist ("Mr. Twist") and MTEC did not, directly or indirectly, own any interest in AIO.

We note that the record establishes that Mr. Twist, who died during the pendency of the Martin litigation while incarcerated in a federal facility, was a Kentucky-based business

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man involved in the oil and gas industry. Mr. Twist incorporated, owned, operated or managed various Kentucky companies, including MTEC. Mr. Kaminski previously represented Mr. Twist and/or his companies in other matters unrelated to the Martin litigation. Mr. Twist retained Mr. Kaminski to represent AIO in the Martin litigation. Mr. Twist is not an incorporator, owner, manager, operator or agent of AIO.

Discovery disputes resulted in the Martins filing a motion to compel. The Martins sought contact information for Mr. Pilcher and Jonathan Rager ("Mr. Rager"), who had been identified by AIO as a well tender. AIO refused to provide contact information on the grounds that Mr. Pilcher and Mr. Rager were employees who could be contacted only through Mr. Kaminski. A request by the Martins to depose Mr. Twist was rejected by AIO. Mr. Kaminski represented that Mr. Twist knew nothing about the matters at issue with AIO. Mr. Kaminski further stated that the only individual with knowledge regarding AIO and the Martin wells was Mr. Pilcher. The efforts of the Martins to take the deposition of Mr. Pilcher also were frustrated. At a July 2011 hearing, Mr. Kaminski represented to the trial court that the only person he had contact with relative to the case was Mr. Pilcher, who was not, and had never been, a direct employee of AIO. Instead, Mr. Pilcher was an independent contractor who could not be controlled by AIO. Mr. Kaminski further advised the trial court that he did not know the whereabouts of Mr. Pilcher and that recent attempts to contact him had been unsuccessful.

On September 14, 2011, Gregory P. Anastas ("Mr. Anastas") was deposed as the designated representative of AIO. Mr. Anastas testified that the sole member of AIO was Advantage Investments and that he was the only member of Advantage Investments. According to the testimony, AIO had no employees and no day-to-day operations. Mr. Anastas was explicit that he did not learn of the lawsuit until well into 2011, did not know who was managing the lawsuit on behalf of AIO, was unaware of previous court dates, and did not know who retained Mr. Kasminski. Mr. Anastas testified that he did not know who answered the interrogatories on behalf of AIO, did not know of the mediation, did not authorize anyone to go to the mediation on behalf of AIO, and did not know Mr. Pilcher or Mr. Rager. Mr. Anastas stated that he did not know that AIO had an interest in the Martin Lease or the wells. He testified that AIO had no records in its possession related to the Martin Lease wells, never made a royalty payment to the Martins, never received one cent from production from the Martin Lease wells, had no knowledge as to the amount of gas produced from the Martin Lease wells, could not counter the claims that the Martins had not been compensated properly by AIO, and had no knowledge to support the counterclaim against Mr. Martin. Indeed, according to Mr. Anastas, the primary business of AIO was funding Mr. Twist. Mr. Anastas indicated that he had spent several years "chasing after" his money from Mr. Twist and felt like AIO was in a similar position to the Martins.

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On October 7, 2011, the Martins filed a Motion Requesting Sanctions directed toward Mr. Kaminski. The Martins asserted that the testimony of Mr. Anastas demonstrated that AIO's counsel engaged in egregious conduct in representing AIO for more than two years without the knowledge or authority of AIO. The Martins pointed to false and misleading pleadings and misrepresentations during the discovery process as well as participation in a mediation without the knowledge or authority of AIO. It was suggested that the actions of counsel were taken at the direction of an undisclosed third-party, who retained Mr. Kaminski, paid the fees, and steered the litigation. The request for sanctions also included recent photographic documentation that the wells were not shut-in, but, rather, were producing gas.

Also on October 7, 2011, Mr. Kaminski reviewed an Operating Agreement for the first time. He had no prior knowledge of the Operating Agreement. The Operating Agreement provided that 530 West Main St. Properties, LLC ("530 West Main"), one of Mr. Twist's companies, had the right to operate the Martin Lease wells. The Operating Agreement contained mutual indemnification language requiring 530 West Main and AIO to hold harmless and indemnify one another "from and for any and all actions, causes of action, claims, demands, damages, costs, loss of services, expenses and compensation on account of, or in any way growing out of, this Operating Agreement or 530 West Main's management of the assets. . . . " Mr. Kaminski served as counsel to 530 West Main's owner, Mr. Twist, as to other unrelated matters. He had never served as counsel for 530 West Main. Based on the motion for sanctions and the Operating Agreement, and after consultation with the West Virginia Office of Disciplinary Counsel, Mr. Kaminski moved to withdraw as counsel and disavowed all previously made discovery responses. The trial court granted the motion to withdraw as counsel by order entered on November 18, 2011.

Thereafter, AIO waived its attorney-client privilege in regard to any communications between Mr. Kaminski and AIO, people acting on behalf of AIO, and people purporting to act on behalf of AIO. AIO then provided all the communications it had with Mr. Kaminski to the Martins. This consisted of one document that was an email chain between Mr. Anastas and Mr. Kaminski discussing the scheduling of the deposition of Mr. Anastas.

On January 22, 2013, the Martins issued a subpoena seeking various documents from Mr. Kaminski, which can be separated into four groups. The first group includes AIO documents representing all communications between Mr. Kaminski and AIO. The second group of documents are...

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