State of West Virginia ex rel. Antero Resources Corporation v. The Honorable Christopher McCarthy, Judge of the Circuit Court of Harrison County, Scott A. Windom, Trustee of the Carolyn E. Farr Trust ( 2022 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2022 Term FILED
_____________________ November 17, 2022
released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
No. 22-0400 SUPREME COURT OF APPEALS
OF WEST VIRGINIA
_____________________
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.
___________________________________________________________
PETITION FOR A WRIT OF PROHIBITION
WRIT GRANTED
_________________________________________________________
Submitted: November 1, 2022
Filed: November 17, 2022
Timothy M. Miller, Esq. David J. Romano, Esq.
Mychal S. Schultz, Esq. Romano Law Office, LC
Katrina N. Bowers, Esq. Clarksburg, West Virginia
Babst, Calland, Clements & Counsel for Respondents,
Zomnir, P.C. Scott A. Windom, Trustee and
Charleston, West Virginia Empire Oil & Gas, Inc.
and
Joseph V. Schaeffer, Esq.
Babst, Calland, Clements &
Zomnir, P.C.
Pittsburgh, Pennsylvania
Attorneys for Petitioner
CHIEF JUSTICE HUTCHISON delivered the Opinion of the Court.
JUSTICES WOOTON and BUNN, deeming themselves disqualified, did not participate in
the decision in this case.
JUDGES HAMMER and SIMS, sitting by temporary assignment.
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).
i
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).
ii
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).
iii
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
1
Ms. Farr died in 1993.
1
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
2
Empire Oil & Gas, Inc., is a West Virginia company that is also an asset of the
Farr Trust.
2
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.
3
According to Antero, Mr. Ellis’s current title is “Regional Vice President-
Appalachia.”
3
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 of its discretion in regard to
discovery orders.” This Court has further held that “[w]hen 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). 4 The reason for this holding is obvious.
4
Rule 26 of the West Virginia Rules of Civil Procedure provides, in pertinent part:
(b) Discovery Scope and Limits. Unless otherwise
limited by order of the court in accordance with these rules, the
scope of discovery is as follows:
(1) In General. Parties may obtain discovery regarding
any matter, not privileged, which is relevant to the subject
matter involved in the pending action, whether it relates to the
claim or defense of the party seeking discovery or to the claim
or defense of any other party, including the existence,
description, nature, custody, condition and location of any
books, documents or other tangible things and the identity and
location of persons having knowledge of any discoverable
matter. It is not ground for objection that the information
sought will be inadmissible at the trial if the information sought
appears reasonably calculated to lead to the discovery of
admissible evidence.
4
“[T]he attorney-client privilege and the work product exception would be lost forever if
the offended party is forced to ‘run the gauntlet’ before having the opportunity to seek
redress before this Court.” Canady, 194 W. Va. at 437, 460 S.E.2d at 683. Accordingly,
with this standard in mind, we consider the parties’ arguments.
III. Discussion
Antero argues that the findings the circuit court made in its April 7, 2022,
order granting the plaintiffs’ motion to compel are inadequate, contrary to the evidentiary
record, and do not support the application of the crime-fraud exception to the attorney-
client privilege. Specifically, Antero contends that the circuit court committed clear legal
****
(3) Trial Preparation: Materials. Subject to the provisions of
subdivision (b)(4) of this rule, a party may obtain discovery of
documents and tangible things otherwise discoverable under
subdivision (b)(1) of this rule and prepared in anticipation of
litigation or for trial by or for another party or by or for that
other party's representative (including the party's attorney,
consultant, surety, indemnitor, insurer, or agent) only upon a
showing that the party seeking discovery has substantial need
of the materials in the preparation of the party's case and that
the party is unable without undue hardship to obtain the
substantial equivalent of the materials by other means. In
ordering discovery of such materials when the required
showing has been made, the court shall protect against
disclosure of the mental impressions, conclusions, opinions, or
legal theories of an attorney or other representative of a party
concerning the litigation.
(Emphasis added).
5
error by concluding that “Antero’s participation in the fraudulent scheme can be inferred
by its inspection of property records and its continued payment to [Mr. Sigley] as an
individual without taking action to verify the propriety of the actions of [Mr. Sigley].”
Antero asserts that this is clear error because an inference does not equate to the factual
basis required for application of the crime fraud exception, and because the circuit court
ignored the fact that the Trust Agreement expressly provided that Mr. Sigley as Trustee
could sign documents and take title of Trust property in his own name. Antero also points
out that the circuit court disregarded West Virginia Code § 44-5A-3(b) (2011) which
provides that “the party dealing with the fiduciary 5 is not under a duty to follow the
proceeds or other consideration received by a fiduciary from the sale or exchange [of any
property].” (Footnote added). Finally, Antero contends that the plaintiffs presented no
evidence that it communicated with Mr. Ellis with the “intent and purpose” to commit a
fraud which is a necessary part of the prima facie showing required for invocation of the
crime-fraud exception to the attorney-client privilege. Antero maintains that it was also
clear legal error for the circuit court to apply the crime-fraud exception in the absence of
such evidence.
Conversely, the plaintiffs argue that none of the information they are seeking
is protected by the attorney-client privilege. They contend that Mr. Ellis was not acting in
5
West Virginia Code § 44-5A-1 (1993) defines “fiduciary” to include “one or more
trustees of a testamentary or inter vivos trust estate, whichever in a particular case is
appropriate.”
6
his capacity as attorney, but rather was fulfilling his duty as Antero’s “landman” when he
secured the leases for the Farr Trust mineral properties. As such, the plaintiffs maintain
that counsel for Antero had no basis to assert the attorney-client privilege and instruct Mr.
Ellis not to respond to the questions posed to him during his deposition. The plaintiffs
further argue that if the attorney-client privilege was properly invoked by Antero, then the
circuit court’s order contains the findings necessary for application of the crime-fraud
exception.
“The attorney-client privilege is a common law privilege that protects
communications between a client and an attorney during consultations.” State ex rel. Doe
v. Troisi, 194 W. Va. 28, 35-36, 459 S.E.2d 139, 146-47 (1995). It
“is intended to ensure that a client remains free from apprehension that consultations with
a legal advisor will be disclosed.” Canady, 194 W.Va. at 438, 460 S.E.2d at 684. We
have held that
“[i]n 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).
Id. at 433-34, 460 S.E.2d at 679-80, syl. pt. 7. We have also held that “[t]he burden of
establishing the attorney-client privilege . . . always rests upon the person asserting it.” Id.
at 434, 460 S.E.2d at 679, syl. pt. 4, in part.
7
The attorney-client privilege is not absolute; it is subject certain exceptions
such as the crime-fraud exception, which the plaintiffs have asserted here.6 As this Court
observed in State ex rel. Allstate Ins. Co. v. Madden, 215 W. Va. 705, 717, 601 S.E.2d 25,
37 (2004), “[t]he crime-fraud exception has long been recognized as a means to overcome
the privilege ordinarily afforded to communications between a client and his or her counsel
when such communications have been made in furtherance of the commission of a crime
or fraud.” In other words, ““[i]t is the purpose of the crime-fraud exception to the attorney-
client privilege to assure that the “seal of secrecy” . . . between lawyer and client does not
extend to communications “made for the purpose of getting advice for the commission of
a fraud” or crime.’” Id., quoting United States v. Zolin, 491 U.S. 554, 563, 109 S.Ct. 2619,
2626, 105 L.Ed.2d 469, 485 (1989) (citations omitted). This Court has held that
[t]o 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
6
The attorney-client privilege may also be waived. Canady, 194 W.Va. at 442, 460
S.E2d at 688. However, there has been no assertion of waiver in this matter.
8
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.
Madden, 215 W. Va. at 709, 601 S.E.2d at 29, syl. pt. 7.
Having carefully reviewed the April 7, 2022, discovery ruling, we find that
the circuit court abused its discretion and committed clear legal error by declaring the
crime-fraud exception applicable without first determining whether the attorney-client
privilege could be invoked in response the questions posed to Mr. Ellis by the plaintiffs’
counsel. The circuit court’s order indicates that the court simply “assumed that some of
the . . . questions posed at the deposition could, at least arguably, be protected from
disclosure by the attorney-client privilege.” The order further indicates, however, that it
was undisputed that Mr. Ellis had duties as “Manager, Administrative and Legal-WV” that
were both legal and non-legal in nature and that “neither party identified any clear
delineation.” In addition, the plaintiffs have argued from the outset that the information
they seek relates solely to Mr. Ellis’s non-legal duties, and therefore, the attorney-client
privilege does not apply.
This Court has made clear that “even when proved, [the attorney-client
privilege] is to be applied strictly.” Canady, 194 W. Va. at 444, 460 S.E.2d at 690. As we
have explained, because “[t]he attorney-client privilege and the work product exception
may result in the exclusion of evidence which is otherwise relevant and material and are
9
antagonistic to the notion of the fullest disclosure of the facts, courts are obligated to strictly
limit the privilege and exception to the purpose for which they exist.” Id. at 438, 460
S.E.2d at 684. Therefore, “the claimant must show certain threshold requirements in order
to avail himself or herself of the privilege or exception including a showing that the
communication originated in confidence, that it would not be disclosed, that it was made
by an attorney acting in his or her legal capacity for the purpose of advising a client, and
that it remained confidential.” Id., (emphasis added).
The fact that Mr. Ellis holds a law license and was in-house counsel for
Antero does not mean that the attorney-client privilege extends to all of his
communications. Indeed, in Canady, this Court expressly “refuse[d] to adopt a per se rule
making ordinary investigative employees who hold licenses to practice law, attorneys for
purposes of the attorney-client privilege[,]” explaining that
to do so could pose an absolute bar to discovery of
relevant and material evidentiary facts. In the insurance
industry context, it would shield from discovery documents
that otherwise would not be entitled to any protection if written
by an employee who holds no law license but who performs
the same investigation and duties. To enlarge the scope of
protection to those not performing traditional attorney duties
would be fundamentally incompatible with this State’s broad
discovery policies designed for the ultimate ascertainment of
truth. More than ever, we find these broad discovery policies
essential to the fair disposition of both civil and criminal
lawsuits.
Id. at 444, 460 S.E.2d at 690. Because Mr. Ellis was performing a variety of duties for
Antero at the time the leases for the Farr Trust properties were obtained, we find that the
10
circuit court’s failure to conduct an analysis of the questions posed during his deposition
to determine the scope and applicability of the attorney-client privilege was clear error that
warrants the granting of the writ of prohibition. Given these particular facts and
circumstances, determining the applicability of the attorney-client privilege to the
information sought by the plaintiffs during Mr. Ellis’s deposition was a necessary first step
in the analysis of whether to grant the plaintiffs’ motion to compel. The circuit court’s
failure to make that determination cannot be overlooked and requires us to grant Antero
the requested relief.
If the parties seek to revisit this matter below, the circuit court must conduct
a new hearing and first determine whether the attorney-client privilege applies to the
communications Antero seeks to shield from discovery. In Madden, we outlined the
general procedure to be followed when attorneys who are being deposed assert the
attorney-client privilege, instructing that
if the party seeking testimony for which a privilege is
claimed files a motion to compel, or the responding party files
a motion for a protective order, the trial court must hold an in
camera proceeding and make an independent determination of
the status of each communication the responding party seeks
to shield from discovery.
Id. at 710, 601 S.E.2d at 30, syl. pt. 11, in part. Should the circuit court find any of the
communications between Mr. Ellis and Antero protected by the attorney-client privilege,
then the circuit court can proceed to determine whether the plaintiffs have demonstrated an
adequate factual basis to render the crime-fraud exception operable. Critically, “the
11
dispositive question is whether the attorney-client communications are part of the client’s
effort to commit a crime or perpetuate a fraud.” Id. at 717, 601 S.E.2d at 37 (additional
quotations and citation omitted). In other words,
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). In the absence of such
evidence, there would not be an adequate factual basis to render the crime-fraud exception
operable. See syl. pt. 7, Madden, supra.IV. Conclusion
For the foregoing reasons, we grant the requested writ of prohibition.
Writ granted.
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