WASHINGTON (Legal Newsline) - Even with a couple "well-reasoned" decisions by its state Supreme Court this year, West Virginia remains third on an annual list of Judicial Hellholes, according to a new report released Thursday.

The report, released by the American Tort Reform Association each year, documents abuses of the civil justice system and points out those states that are the most unfair and out-of-balance.

"Despite some good news out of West Virginia this year, the state ranks third on our latest list," ATRA president Sherman "Tiger" Joyce said in a statement.

Philadelphia and California rank No. 1 and 2, respectively. Behind West Virginia are South Florida; Madison and St. Clair counties in Illinois; New York City and Albany, N.Y.; Clark County in Nevada; and McLean County in Illinois.

This is the second year in a row West Virginia has ranked No. 3. The state has appeared on the Judicial Hellholes list every year since its inception in 2002.

"West Virginia's high court reached well-reasoned decisions this year when interpreting the state's consumer protection law and upholding the limit on subjective pain and suffering damages in lawsuits against health care providers," Joyce said, acknowledging that it's not all bad news for the state.

But such rulings, while helpful, do not address the core problems in the state's civil justice system, Joyce said.

That includes its lack of full appellate review and its liability rules that are "out of the mainstream," he said.

The Judicial Hellholes report also points out the state's excessive awards, noting two "astronomically high" verdicts in cases against a mortgage lender and a nursing home.

"In addition to raising costs for those who seek mortgages or nursing home care in the future, such extraordinary verdicts also encourage more litigation as personal injury lawyers and their clients may reject reasonable settlement offers and instead gamble on hitting a West Virginia jackpot at trial," Joyce said.

West Virginia also continues to be a haven for weak lawsuits by plaintiffs from other states, according to the report.

On top of that, Attorney General Darrell McGraw remains under fire for running his office as if it were a "private personal injury law firm and distributing litigation settlements to programs and organizations of his choosing, rather than to the state and its taxpayers," Joyce said.

Earlier this year, a federal appeals court unanimously rejected a scheme by McGraw's office to withhold lawsuit settlement monies from state agencies and the federal government.

Now, because of the attorney general's actions, the state's Medicaid budget is facing a nearly $3 million hole.

But there are some positives, according to the Judicial Hellholes report.

West Virginia has made some fair and balanced judicial decisions, which are included in the report's Points of Light section.

In particular, the report commends the state's Supreme Court for its decision to uphold reasonable limits on noneconomic damages in cases brought against health care providers and facilities.

It also heralded the U.S. Court of Appeals for the Fourth Circuit's reinstatement of CSX's asbestos fraud complaint against a Pittsburgh-based law firm. The railroad alleged that attorneys engaged in a scheme to file in West Virginia courts fabricated asbestos claims with no factual basis.

"We're definitely experiencing a pattern of good news/bad news," Richie Heath, executive director of West Virginia's Citizens Against Lawsuit Abuse, said of the annual report.

"The Judicial Hellholes report continues to acknowledge that West Virginia is taking positive steps. However, we have failed to fix the core problems that continue to plague our state's legal system, and with many other states passing significant legal reforms over the last year, West Virginia may fall even further behind."

Heath said it is more critical now than ever that the state put its best foot forward, given the increased interest in its Marcellus Shale supply.

"We must fix the core problems that currently plague our legal system if we expect to attract many of these new jobs to the Mountain State," he said.

And while the state Supreme Court has done well to improve its previously battered reputation, Heath said state lawmakers need to start doing more.

"Reining the ethical missteps of our 'rogue' attorney general would be a good first step," he said.

Meanwhile, the West Virginia Association for Justice called Thursday's report a "farce" and a "baseless attack" on the state.

"I haven't quite figured out how you make the Hellhole list or who votes on it. I envision a bunch of mice voting for the owl as the most vile of birds. Cows campaigning for people to eat more chicken. Rush Limbaugh publishing a list of his least favorite Democrats," WVAJ President Paul T. Farrell Jr. said in a statement. "Most good lawyers recognize the list as a farce."

Farrell said ATRA should disclose the West Virginia lawyers who voted on the list.

"I doubt there are any," he said. "If there are some lawyers in West Virginia that cannot find a fair judge, perhaps they are in the wrong line of work."

He said residents need to recognize the annual report for what it really is: a corporate public relations campaign packaged as a bad pun.

"It is nothing more than an editorial cartoon by those with a political agenda," Farrell said.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.