State of West Virginia ex rel. v. Jennifer Bailey ( 2020 )

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
State of West Virginia ex rel. West
Virginia Mutual Insurance Company,
Petitioner, FILED
November 10, 2020
vs) No. 20-0257 (Kanawha County 16-C-497) released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
The Honorable Jennifer Bailey, Judge of the SUPREME COURT OF APPEALS
OF WEST VIRGINIA
Circuit Court of Kanawha County; A. H. F. and
A. F., individually and on behalf of
all others similarly situated; Steven R. Matulis,
M. D.; Charleston Gastroenterology Associates,
PLLC; and Charleston Area Medical Center, Inc.,
Respondents.
MEMORANDUM DECISION
Petitioner West Virginia Mutual Insurance Company (“WV Mutual”) 1 seeks to
invoke this Court’s extraordinary jurisdiction to prohibit the Circuit Court of Kanawha County
from enforcing an order consolidating the declaratory judgment action it filed against respondents
Steven R. Matulis, M. D. (“Dr. Matulis”) and Charleston Gastroenterology Associates, PLLC
(“CGA”) seeking an insurance coverage determination, with the consolidated tort suits which form
the basis of that claim for insurance coverage. The circuit court concluded that “efficiency” bore
in favor of consolidation and that both the declaratory judgment and tort actions “stem from and
turn on the application of the same set of facts.” As a result, the circuit court consolidated the
declaratory judgment action with the underlying consolidated tort suits already pending before it.
Respondents A. H. F. and A. F. 2 (“respondents”) filed a response in opposition to the petition for
writ of prohibition and in support of the circuit court’s consolidation. The remaining respondents 3
filed summary responses expressly taking no position in this matter.
1
WV Mutual is represented by Marc E. Williams, Esq., Robert L. Massie, Esq., Jennifer
W. Winkler, Esq., Nelson Mullins Riley & Scarborough, LLP, Huntington, West Virginia, and
Ronald P. Schiller, Esq. and Michael R. Carlson, Esq., Hangley Aronchick Segal Pudlin &
Schiller, Philadelphia, Pennsylvania, admitted pro hac vice.
2
Consistent with our practice in cases involving sensitive facts, we identify certain parties
by initials only. See In re Jeffrey R.L., 190 W. Va. 24, 26 n.1, 435 S.E.2d 162, 164 n.1 (1993). A.
H. F. and A. F. are represented by Marvin W. Masters, Esq. and Richard A. Monahan, Esq., The
Masters Law Firm lc, Charleston, West Virginia.
3
Respondent Steven R. Matulis, M. D. is represented by Isaac R. Forman, Esq. and
Andrew C. Robey, Esq., Hissam Forman Donovan Ritchie PLLC, Charleston, West Virginia.
1
This Court has considered the parties’ briefs, oral arguments, and the appendix
record. Upon consideration of the standard of review and the applicable law, the Court finds no
substantial question of law and no prejudicial error. For these reasons, a memorandum decision
denying the requested writ of prohibition is appropriate under Rule 21 of the West Virginia Rules
of Appellate Procedure.
I. Factual and Procedural History
The underlying tort actions involve the sexual misconduct allegations pending
against Dr. Matulis, a local gastroenterologist. 4 The first sexual misconduct case was filed by T.
W. on April 5, 2016, in the Circuit Court of Kanawha County and was assigned to Judge Jennifer
F. Bailey. Several other suits ensued, totaling fifteen separate suits against some combination of
Dr. Matulis, CGA, Charleston Area Medical Center, and others. On September 26, 2018, Judge
Bailey consolidated all of the tort actions with the initial suit pending before her (the “tort
actions”).
Approximately one year after the first tort action was filed, on May 30, 2017, WV
Mutual filed a declaratory judgment action against Dr. Matulis and CGA in the Circuit Court of
Kanawha County, seeking a declaration that the tort actions triggered neither a duty to defend nor
indemnify under its policy spanning from July 1, 2015, to July 1, 2016 (hereinafter the “declaratory
judgment action”). 5 This action was assigned to Judge Charles E. King, Jr. Dr. Matulis and CGA
counterclaimed, alleging breach of the duty of good faith and fair dealing, bad faith and violations
of the Unfair Claims Settlement Practices provisions of the West Virginia Unfair Trade Practices
Act, West Virginia Code § 33-11-4(9) (2002). WV Mutual subsequently amended its complaint
to add all of the plaintiffs in the underlying tort actions as party defendants to the declaratory
judgment action.
On May 10, 2019, respondents, as plaintiffs in one of the tort actions, moved to
consolidate the declaratory judgment action with the tort actions pursuant to West Virginia Rule
Respondent Charleston Gastroenterology Associates, PLLC is represented by John A. Kessler,
Esq. and David R. Pogue, Esq., Carey, Scott, Douglas & Kessler, PLLC, Charleston, West
Virginia. Respondent Charleston Area Medical Center, Inc. is represented by Lee Murray Hall,
Esq. and Sarah A. Walling, Esq., Jenkins Fenstermaker, PLLC, Huntington, West Virginia.
4
Plaintiffs in these actions allege generally that Dr. Matulis engaged in, among other
things, inappropriate observing and/or fondling of their breasts and/or digital vaginal penetration
while they were under anesthesia for gastrointestinal procedures.
5
The basis of WV Mutual’s position that there is no coverage under its policy is that the
sexual misconduct alleged does not constitute a “medical incident” or “professional services”
sufficient to trigger coverage, as required by the policy. Further, it claims that the acts are
expressly excluded from coverage as either 1) sexual acts “whether under the guise of professional
services or not”; 2) intentional torts or dishonest, reckless, or malicious acts; or 3) acts which
constitute violation of a statute imposing criminal penalties.
2
of Civil Procedure 42(a), alleging that both “aris[e] out of the same facts.” Shortly thereafter, one
of the plaintiffs in another of the tort actions likewise moved to “transfer” the declaratory judgment
action. 6 WV Mutual opposed these motions on the basis that they were attempts to delay coverage
from being determined, that the actions did not arise from the same facts, and that consolidation
would prejudice WV Mutual. On July 8, 2019, WV Mutual moved for judgment on the pleadings
in the declaratory judgment action and sought an expedited ruling.
On November 22, 2019, a hearing was conducted before Judge Bailey on the
consolidation/transfer motions. Judge Bailey indicated she was going to consolidate the cases
“strictly looking at the efficiency,” “so that we can keep everybody in one area moving forward,
scheduling and so forth.” On March 3, 2020, Judge Bailey entered an order consolidating the
actions, finding that the tort actions and declaratory judgment action “stem from and turn on the
application of the same set of facts.” Noting Dr. Matulis’ defense that his actions were for
legitimate medical reasons rather than sexual gratification, the order states that “what actions Dr.
Matulis’ [sic] committed and what those actions legally constitute are questions of fact and law
that are germane to all causes of action.” The order found that, accordingly, Dr. Matulis may be
found merely negligent for “fail[ing] to obtain proper consent” rather than having committed
intentional sexual torts. 7 As a result, the circuit court found that “[d]iscovery of the facts of the
underlying cases is paramount to the determination of coverage under The Policy” and concluded
that consolidation was appropriate.
The court further found that both actions proceeding “on one schedule before one
court” eliminated the “potential for inconsistent or differing rulings” with “some decisions subject
to interlocutory appeal” and others not. Given that “there would likely have to be multiple trials
regardless,” the fact that the declaratory judgment action must be bifurcated from the tort actions
for trial was of no consequence.
WV Mutual filed the instant petition for writ of prohibition and a rule to show cause
issued.
II. Standard of Review
As to the issuance of a writ of prohibition:
In determining whether to entertain and issue the writ of
prohibition for cases not involving an absence of jurisdiction but
6
WV Mutual makes much of the fact that the “motion to transfer” apparently was filed
pursuant to Rule 42(b)—which is mandatory for actions in different “courts”—and that the circuit
court did not state in orally ordering the consolidation whether it was pursuant to Rule 42(a) or
(b). Respondents appear to concede, however, that this consolidation is governed by the
discretionary provisions of Rule 42(a).
7
This statement appears to be based on the wording of the various plaintiffs’ complaints
which reference their “lack of consent” to the alleged inappropriate touching.
3
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.
Syl. Pt. 4, State ex rel. Hoover v. Berger, 199 W. Va. 12, 483 S.E.2d 12 (1996). Moreover,
[a] trial court, pursuant to provisions of [West Virginia Rules
of Civil Procedure] Rule 42, has a wide discretionary power to
consolidate civil actions for joint hearing or trial and the action of a
trial court in consolidating civil actions for a joint hearing or trial
will not be reversed in the absence of a clear showing of abuse of
such discretion and in the absence of a clear showing of prejudice to
any one or more of the parties to the civil actions which have been
so consolidated.
Syl. Pt. 1, Holland v. Joyce, 155 W. Va. 535, 185 S.E.2d 505 (1971); see also State ex rel.
Appalachian Power Co. v. MacQueen, 198 W. Va. 1, 4, 479 S.E.2d 300, 303 (1996) (“A decision
by a trial court to consolidate civil actions on any or all matters in issue under Rule 42(a) of the
West Virginia Rules of Civil Procedure will be deferentially reviewed under an abuse of discretion
standard.”). With these standards in mind, we proceed to the parties’ arguments.
III. Discussion
WV Mutual argues that the circuit court committed a clear error of law warranting
a writ of prohibition by consolidating the declaratory judgment action and tort actions on the basis
that they contain a “common question of law or fact.” WV Mutual contends that declaratory
judgment actions are determined based upon the allegations in the complaint and the language of
the insurance policy, whereas the underlying tort actions are concerned with determining the truth
or falsity of those allegations, which are irrelevant to coverage. Respondents counter that there is
no clear error of law because the two actions obviously contain common issues of fact as they
pertain to precisely the same wrongdoing. Respondents echo the circuit court’s conclusion that
whether there is a duty to indemnify is necessarily determined by whether Dr. Matulis’ acts were
intentional or merely negligent—a common fact in contention in the tort actions.
4
West Virginia Rule of Civil Procedure 42(a) provides, in pertinent part:
Consolidation of Actions in Same Court. When actions involving a
common question of law or fact are pending before the court, it may
order a joint hearing or trial of any or all the matters in issue in the
actions; it may order all the actions consolidated; and it may make
such orders concerning proceedings therein as may tend to avoid
unnecessary costs or delay. . . .
(emphasis added). In that regard, WV Mutual contends this Court has definitively established that
declaratory judgment actions and their underlying torts do not have common questions of law or
fact in State ex rel. Energy Corp. of America v. Marks, 235 W. Va. 465, 774 S.E.2d 546 (2015).
In Marks, the Court issued a writ of prohibition, finding that a bad faith action
against an insurer was improperly joined with litigation for personal injuries sustained in the car
accident which gave rise to the bad faith allegations. WV Mutual concedes that Marks involves
permissive joinder under West Virginia Rule of Civil Procedure 20, rather than consolidation
under Rule 42(a), but contends that the underlying principles are the same. Id. at 469, 774 S.E.2d
at 550. In that regard, WV Mutual directs the Court to Marks’ rationale which focuses on similar
language in both Rules requiring a “common” issue or question of “law or fact” and finding that
there was no such commonality between the two actions. 235 W. Va. at 470, 774 S.E.2d at 551.
In issuing the writ, the Marks Court reasoned:
ECA’s negligence in causing the wreck has no bearing on whether
the plaintiffs’ insurer is obligated to pay the claim for medical
payments coverage. Likewise, the plaintiffs’ bad faith claim against
their insurer does not affect ECA’s potential liability for its
employee’s negligence in causing the wreck. Furthermore, we note
that joining these two unrelated claims would not further Rule
20(a)’s objective of promoting judicial efficiency while preventing
duplication of effort. Because these claims do not present a single
factual or legal question in common, the claim against ECA can be
resolved with just as much efficiency without being joined to the
plaintiffs’ claim against their insurer.
235 W. Va. at 470, 774 S.E.2d at 551 (emphasis added). 8
8
Justice Davis dissented, finding that joinder was proper because “[i]n this case, the
plaintiffs’ claims against all of the defendants arose from the same occurrence, i.e., the underlying
motor vehicle accident, and a fact common to all defendants also is present herein, i.e., the amount
of damages sustained by the plaintiffs as a result of the subject accident.” 235 W. Va. at 473, 774
S.E.2d at 554 (Davis, J., dissenting). She noted that any concern of prejudice through joinder of
the actions is more properly resolved with bifurcation of the trials. Id. (“Rule 20(b) contemplates
bifurcation of claims brought against different defendants to avoid such prejudice.”).
5
We find that WV Mutual overstates the applicability of Marks to the instant facts.
First, Marks did not involve a declaratory judgment action as in the instant case—only a bad faith
claim. Id. at 468, 774 S.E.2d at 549. And while the bad faith claim arose out of a failure to make
medical payments under the insurance policy, the issue presented was not whether the policy
covered such medical payments, but whether the insurer violated the Unfair Trade Practices Act
by failing to accept or reject the claim for medical payments within a reasonable time. Id. at 468
and n.4, 774 S.E.2d at 549 and n.4. Accordingly, Marks stands—at most—for the proposition that
a bad faith claim based on claims handling and an underlying tort may have no commonality. 9
Second, as to Marks’ use of a writ of prohibition to correct this issue, we note that the misjoinder
was but only one of the errors asserted. Importantly, the Marks Court found that the misjoinder
had created an improper venue-giving defendant and that once the bad faith claim was properly
severed, venue would no longer lie in the circuit court. Id. at 472, 744 S.E.2d 553. Finding that
the lack of venue “was not correctable on appeal,” the Court issued the writ of prohibition. Id.
In the instant case, WV Mutual’s declaratory judgment action seeks a determination
as to both its duty to defend and its duty to indemnify. These are critically distinct issues which
WV Mutual has commingled in its analysis. While WV Mutual is correct that the determination
of the duty to defend is established by looking to the allegations in the complaint and the
contractual language, 10 the duty to indemnify is more nuanced. Certainly the allegations and
claims presented drive the inquiry, but “an insurer must look beyond the bare allegations contained
in the third party’s pleadings and conduct a reasonable inquiry into the facts in order to ascertain
whether the claims asserted may come within the scope of the coverage that the insurer is obligated
to provide.” Syl., Farmers & Mechanics Mut. Fire Ins. Co. of W. Va. v. Hutzler, 191 W. Va. 559,
447 S.E.2d 22 (1994). In Hutzler, the Court criticized the insurer for limiting its coverage
determination to the four corners of the complaint and failing to “assess[] the avenues for recovery”
in view of the factual allegations, which avenues may give rise to coverage. Id. at 562, 447 S.E.2d
at 25. As in Hutzler, respondents and their similarly situated fellow plaintiffs allege a variety of
“avenues for recovery.”
WV Mutual’s position in this matter would have this Court declare that indemnity
obligations never entail factual determinations relative to the claims alleged and therefore defy
consolidation. However, as WV Mutual itself admits in its brief, “the outcome of the underlying
lawsuits may have a bearing on whether there is a duty to indemnify[.]” Indeed, in Christian v.
Sizemore, 181 W. Va. 628, 633, 383 S.E.2d 810, 814-15 (1989), the Court expressly recognized
9
We recognize that Dr. Matulis and CGAS counter-claimed against WV Mutual asserting
a bad faith claim. However, WV Mutual’s focus is not the lack of commonality between the tort
actions and the bad faith claim, but rather the principal declaratory judgment action.
10
See State Auto. Ins. v. Alpha Eng’g Serv., 208 W. Va. 713, 716, 542 S.E.2d 876, 879
(2000) (“[A]n insurer has a duty to defend an action against its insured only if the claim stated in
the underlying complaint could, without amendment, impose liability for risks the policy covers.
If the causes of action alleged in the plaintiff's complaint are entirely foreign to the risks covered
by the insurance policy, then the insurance company is relieved of its duties under the policy.”
(citations omitted)).
6
scenarios “[w]here [] the facts involving the coverage question are intimately tied to the personal
injury litigation,” suggesting that this entanglement may affect the manner and timing of resolution
of the indemnity question. See also Syl. Pt. 1, Tennant v. Smallwood, 211 W. Va. 703, 568 S.E.2d
10 (2002) (“Determination of the proper coverage of an insurance contract when the facts are not
in dispute is a question of law.” (emphasis added)). We therefore find no error in the circuit court’s
conclusion that both the tort actions and declaratory judgment action, at least as pertains to
indemnity, share common questions of fact and law.
The issue of commonality notwithstanding, this Court has provided further
guidance on the considerations involved in consolidation under Rule 42(a), as follows:
The trial court, when exercising its discretion in deciding
consolidation issues under W. Va. R. Civ. P. 42(a), should consider
the following factors: (1) whether the risks of prejudice and possible
confusion outweigh the considerations of judicial dispatch and
economy; (2) what the burden would be on the parties, witnesses,
and available judicial resources posed by multiple lawsuits; (3) the
length of time required to conclude multiple lawsuits as compared
to the time required to conclude a single lawsuit; and (4) the relative
expense to all concerned of the single-trial, multiple-trial
alternatives. When the trial court concludes in the exercise of its
discretion whether to grant or deny consolidation, it should set forth
in its order granting or denying consolidation sufficient grounds to
establish for review why consolidation would or would not promote
judicial economy and convenience of the parties, and avoid
prejudice and confusion.
Syl. Pt. 2, State ex rel. Appalachian Power Co. v. Ranson, 190 W. Va. 429, 430, 438 S.E.2d 609,
610 (1993). To that end, WV Mutual argues that 1) it will be forced to participate in protracted
factual discovery of the tort actions, in which it otherwise has no interest; 2) plaintiffs in the tort
action may get access to otherwise undiscoverable materials (i.e., claim files); 3) no alleviation of
burden results, because the discovery needed in each differs; and 4) the actions must ultimately be
bifurcated for trial under any circumstance and therefore consolidation serves no purpose.
Primarily, however, WV Mutual insists that it will be prejudiced by an inevitable delay in resolving
the coverage issue, because of the circuit court’s suggestion that coverage turns on discovery of
the facts in the underlying tort actions.
In response, respondents counter that 1) WV Mutual can decline to attend any
depositions or proceedings it deems not relevant to its declaratory judgment action; 2) irrespective
of consolidation, plaintiffs may obtain claim files in discovery of the declaratory judgment action;
and 3) bifurcation of the declaratory judgment action from the tort actions cures any perceived
prejudice. As to WV Mutual’s claim of delay, respondents contend that any delay is purely
7
speculative and, in fact, unlikely, as the circuit court readily offered up an early date for a hearing
on the declaratory judgment action. 11 We agree on all counts.
WV Mutual’s concern of delay appears to be based solely on inferences it gives to
the consolidation order’s reference to “[d]iscovery of the facts of the underlying cases [being]
paramount to the determination of coverage[.]” However, this concern is belied by the expediency
the circuit court sought to give the coverage matter during the hearing on the motion. The circuit
court has, in actuality, demonstrated no undue delay or intention to tolerate delay in hearing the
coverage matter. The declaratory judgment action languished in a separate court for approximately
two years before WV Mutual even sought judgment on its pleadings and did so only after the
consolidation motion was made. Judge Bailey, in both her hearing comments and by setting a date
certain for the declaratory judgment motion to be heard, fully demonstrated an understanding of
the practicalities attendant to addressing the coverage issues.
We agree with WV Mutual’s position that the declaratory judgment issues should
be heard and resolved as expeditiously as the circumstances and issues allow. 12 However, whether
and to what extent factual development is necessary before the circuit court may decide the
indemnity issues is a determination the circuit court simply has not yet made. 13 As of the filing of
the petition, the briefing had not yet been completed, much less presented to the circuit court. Nor
had the circuit court made any ruling about what additional discovery may be needed before the
coverage issues could be determined. In fact, at the hearing, Judge Bailey remarked, “[I]f
[plaintiffs] believe they need to do some discovery, obviously, I’m going to have to make a
decision about that.”
11
As represented during oral argument, the original date selected for such hearing was
postponed due to COVID-19 closures.
12
We note with approval the circuit court’s concern that awaiting a determination
regarding the declaratory judgment issues from a separate court may have served to delay the tort
actions. In expressing this concern, the court plainly recognized that the coverage issue should be
addressed as expeditiously as possible to avoid any such delay. As this Court has observed,
[d]eclaratory judgment [] provides a prompt means of resolving
policy coverage disputes so that the parties may know in advance of
the personal injury trial whether coverage exists. This facilitates the
possibility of settlements and avoids potential future litigation as to
whether the insurer was acting improperly in denying coverage.
Christian, 181 W. Va. at 632, 383 S.E.2d at 814. As a result, we have directed that “[w]here the
coverage question is separable from the issues in the underlying tort action, it should ordinarily be
decided first, as it often may be dispositive of the personal injury litigation.” Id. at 632-33, 383
S.E.2d at 814.
13
Accordingly, the Court does not in this decision intend to suggest what considerations
may or may not be proper or relevant to the circuit court’s determination of the coverage issue.
8
Perhaps most compellingly, it is well-established that “[a] declaratory judgment
claim with regard to the defendant’s insurance coverage may be brought in the original personal
injury suit rather than by way of a separate action.” Syl. Pt. 4, Christian, 181 W. Va. 628, 383
S.E.2d 810. Therefore, the suggestion that consolidation of a declaratory judgment action and the
underlying tort—which this Court has expressly sanctioned—would result in irremediable
prejudice is untenable. In fact, permitting consolidation of the two matters is “not materially
different from what would result if plaintiffs had [included the declaratory judgment allegations in
their complaint,] . . . utiliz[ing] procedures that have long been permitted under West Virginia
law.” Woodrum v. Johnson, 210 W. Va. 762, 769, 559 S.E.2d 908, 915 (2001). Speculative
concerns over delay or other potential mishandling of the declaratory judgment action is
insufficient to establish prejudice.
Finally, and in addition to the foregoing, we conclude that the relief sought by WV
Mutual satisfies none of the Hoover factors. As discussed above, should the circuit court err in its
handling of the declaratory judgment matter, a direct appeal is available to WV Mutual and any
prejudice stemming from any such error is clearly correctable upon that appeal. Further, the
circuit court’s consolidation merely brings to fruition a long-standing procedural mechanism
permitting joinder of tort and coverage claims and therefore by no means “manifests persistent
disregard for either procedural or substantive law.” Finally, and perhaps most importantly, given
our well-established law that consolidation is a matter in which the circuit court enjoys wide
discretion, this matter presents neither a new and important problem, nor issue of first impression.
In a case denying a writ of prohibition to preclude discretionary consolidation, this Court reminded
that “‘[t]he piecemeal challenge of discretionary rulings through writs of prohibition does not
facilitate the orderly administration of justice.’” River Riders, Inc. v. Steptoe, 223 W. Va. 240, 248,
672 S.E.2d 376, 384 (2008) (quoting Woodall v. Laurita, 156 W. Va. 707, 713, 195 S.E.2d 717,
720-21 (1973)).
Accordingly, we find that WV Mutual has failed to establish its entitlement to
extraordinary relief. For the foregoing reasons, the requested writ of prohibition is denied.
Writ denied.
ISSUED: November 10, 2020
CONCURRED IN BY:
Chief Justice Tim Armstead
Justice Margaret L. Workman
Justice Elizabeth D. Walker
Justice Evan H. Jenkins
Justice John A. Hutchison
9