Court Opinion

ID: 8484751
Source: CourtListenerOpinion
Date Created: 2022-11-17 21:15:19.071449+00
Date Added: 2024-06-11T16:49:56.702519
License: Public Domain

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.

                                            12