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Case Bulletin – West Virginia Supreme Court of Appeal Narrows Definition of Civil Conspiracy

In May of 2018, the West Virginia Supreme Court of Appeals authored an opinion that narrowed the definition of civil conspiracy in West Virginia case law. In Ellis v. Herndon, the West Virginia Supreme Court of Appeals held that a plaintiff cannot hold a defendant liable for civil conspiracy if the plaintiff willingly took part in the actions of the alleged conspiracy. No.: 17-0409, 2018 WL 2175547 (W. Va. May 11, 2018).

In Ellis, Scott Ellis and Kimberly Ellis operated Tri-State Mine Service, Inc. As part of its operation, Tri-State Mine Services, Inc. submitted business bids to Arch Coal Mountain Laurel’s warehouse manager Stephen Herndon. The Plaintiffs alleged that Mr. Herndon, while working as the warehouse manager, operated a “kickback scheme” under which vendors were expected to return to him 10% of the total payments for the work performed. Tri-State Mine Services Inc. was one of the vendors who participated in this scheme. Eventually, the public found out about Mr. Herndon’s scheme at Arch Coal Mountain Laurel and the vendors who participated in the scheme. The Plaintiffs lost business as a result and Tri-State Mine Services Inc. became devalued. Following, the Plaintiffs filed a lawsuit against the Herndons that included a claim for civil conspiracy.

Following the exchange of discovery, the Defendants filed a motion for summary judgment seeking a dismissal of the civil conspiracy claim. The circuit court granted the motion for summary judgment and concluded that the Plaintiffs were “estopped” from asserting a claim for damages because their damages grew from an illegal kickback scheme in which they were willing participants. In support of its decision, the circuit court referenced federal court proceeding in which Mr. Ellis testified about his involvement in the kickback scheme. In that federal court proceeding, Mr. Ellis and Mr. Herndon plead guilty to a single count information of “structuring.” In that guilty plea, Mr. Ellis stipulated that he participated in a bid-rigging scheme that involved paying an Arch employee to guarantee wins on certain jobs. However, in the civil proceeding in the state court, Mr. Ellis argued that he had disavowed his stipulation and claimed that parts of it were untrue. The Plaintiff alleged that this created an issue of fact so that the claim could survive summary judgment.

On appeal to the West Virginia Supreme of Appeals, the court again revisited the definition of a civil conspiracy. It reasoned, that for a civil conspiracy to be actionable it must be proved that the defendants have committed some wrongful act or have committed a lawful act in an unlawful manner to the injury of the plaintiff. The court found that the Plaintiffs had not met this burden. It reasoned that the Plaintiff’s stipulation in his federal court proceedings, showed that he was a willing participant in the kickback scheme. As a result, the court held that he was a “willing participant” in the action that caused the devaluation of his business. Therefore, the court held that Plaintiffs could not recover on their claim of civil conspiracy, and the court granted the Defendant’s motion for summary judgment.