Supreme Court Agrees to Reconsider Sackett v. Nationwide
At the urging of the Insurance Department, the Pennsylvania Supreme Court has agreed to reconsider Sackett v. Nationwide. As discussed in prior eNotes, Sackett v. Nationwide, decided on April 17, 2007, has had major repercussions in the Pennsylvania motor vehicle insurance industry, on the issue of stacking. Read the Client Advisory
Pa.R.C.P. No. 4003.8
New Rule of Civil Procedure Governing Pre-Complaint Discovery
Takes Effect November 1, 2007
Background: Though not commonly invoked, the Pennsylvania Rules of Civil Procedure have permitted a plaintiff to engage in discovery by way of interrogatories or depositions where same is to be used for the preparation of a complaint. See Pa.R.C.P. No. 4001(c) (“[A]ny party may take the testimony of any person . . . by deposition upon oral examination or written interrogatories . . . for preparation of pleadings . . . .”). Until recently, however, the rules of civil procedure did not provide any standards by which to evaluate a request for pre-complaint discovery. The absence of such guidance in the rules forced the Courts to create their own standards for resolving disputes over whether a particular request for pre-complaint discovery was appropriate. This matter eventually came before the Pennsylvania Supreme Court in McNeil v. Jordan, 894 A.2d 1260 (2006).
In McNeil, the Court opined that “to obtain pre-complaint discovery a litigant should be required to demonstrate his good faith as well as probable cause that the information sought is both material and necessary to the filing of a complaint in a pending action.” Id. at 1278. The Court further stated that the litigant must show that “but for the discovery request, he will be unable to formulate a legally sufficient pleading.” The Court’s Opinion, however, was hardly an unequivocal pronouncement, with one justice concurring in only a few parts of the Court’s Opinion, two justices dissenting and two justices not participating in the Court’s decision. In an effort to clarify this area of the law, the McNeil Court, in a footnote, referred this matter to the Civil Procedural Rules Committee to consider the adequacy of the rules governing pre-complaint discovery and to recommend any amendments that might clarify what the Court called a “vexing area of civil procedure.” Id. at 1279 n.27.
Recent Action:
Following the referral of the McNeil Court, on September 20, 2007, the Civil Procedural Rules Committee issued an Order promulgating a new rule of civil procedure governing pre-complaint discovery. The new rule establishes two requirements that a plaintiff must meet before he or she may discover information from a potential defendant before filing a complaint: (1) the information sought must be “material and necessary to the filing of the complaint” and (2) the discovery sought by the plaintiff must “not cause unreasonable annoyance, embarrassment, oppression, burden or expense to any person or party.” Pa.R.C.P. No. 4003.8(a).
In addition to the above, the new rule sets forth the Court procedure for resolving disputes concerning the appropriateness of pre-complaint discovery. Under the rule, a defendant to whom a request for pre-complaint discovery is directed may object to the request or file a motion for protective order. The Court may then require the plaintiff to “state with particularity how the discovery will materially advance the preparation of the complaint.” The motion or objection is to be decided by “weigh[ing] the importance of the discovery request against the burdens imposed on any person or party from whom the discovery is sought.” Pa.R.C.P. No. 4003.8(b).
Rule 4003.8, takes effect November 1, 2007
Comment:
Rule 4003.8 provides some much needed direction regarding under what circumstances pre-complaint discovery is appropriate and provides a procedure for litigating disputes about this discovery which raises the bar for plaintiff to obtain pre-complaint discovery.
The first requirement, under subdivision (a) of the rule, is that information sought must be “material and necessary to the filing of the complaint . . . .” This language should have the effect of restricting pre-complaint discovery to only those matters essential to a plaintiff in preparing a complaint. Taken in conjunction with the McNeil opinion, which was relied upon by the Civil Procedural Rules Committee in promulgating Rule 4003.8, it would seem that pre-complaint discovery will not be allowed unless a plaintiff is unable, without the discovery, to formulate a complaint which states a claim upon which relief can be granted. Finally, it should be pointed out that the rule appears to limit pre-complaint discovery to interrogatories and depositions.
Wang v. Whitetail Mountain Resort
2007 Pa.Super. 283
(September 11, 2007)
Defendant entitled to Judgment on the Pleadings based on language of Release Executed by Plaintiff.
Plaintiff Jen Wang brought suit against Defendant Whitetail Mountain Resort following a snow tubing accident where she was struck by another snow tuber. Plaintiff’s Complaint averred, among other matters, that Defendant’s employee had negligently instructed her to exit the snow tube spillway into the path of an oncoming snow tuber, and that as a result of the collision, she sustained personal injuries. Prior to taking part in the snow tubing activity at issue, Plaintiff admittedly signed a document that contained an “Assumption of the Risk” clause, as well as a “Release from Liability” clause. The “Release from Liability” clause contained language stating that Plaintiff was releasing Whitetail Mountain Resort and its employees from “. . . any and all liability related to injury . . . related to [Plaintiff’s] use of the tubing facility.” The Release was raised in Defendant’s New Matter as an affirmative defense to Plaintiff’s cause of action, and thereafter, Defendant moved for judgment on the pleadings, which was granted by the Trial Court. On appeal, the Superior Court was asked to decide whether Plaintiff’s cause of action against Whitetail Mountain Resort was barred because the Release did not contain specific language releasing Defendant for the alleged negligent instruction given by its employee. Plaintiff argued that the negligent conduct she complained of was not within the contemplation of the parties at the time the document was signed.
In holding that the Release did bar Plaintiff’s cause of action against Whitetail Mountain Resort, the Court noted that releases are generally enforceable if the following factors are met: 1) the release does not undermine public policy; 2) the release is a contract amongst the individuals relating to their private affairs; 3) each party to the release was a free bargaining agent when the contract was made; and 4) the release spells out the intent of the parties with particularity. For purposes of Plaintiff’s cause of action, the 4th element was under scrutiny, namely whether Plaintiff had awareness and understanding of the terms of the release before signing it. In determining whether a releasing party has the requisite awareness and understanding, the following elements will be considered: 1) the release’s placement in the document; 2) the size of the release’s print; and 3) whether the release is highlighted. The Court noted that the Release signed by Plaintiff was in a separately titled paragraph in the middle of a single page document, it had font larger than the font used for other portions of the document, and its language was highlighted by using bolded capital letters. Further, the Court held that the broad language of the Release was enforceable against Plaintiff because it expressed Plaintiff’s intention to “assume the risk of activities related to snow tubing at Whitetail Mountain”, and Plaintiff released Whitetail Mountain Resort from “all liability” related to her use of the snow tubing facility.
If you have any questions, or wish to discuss this case, please call Jody A. Mooney at (610) 332-7013 or email her at jmooney@tthlaw.com.
Gianni v. Phillips
2007 Pa.Super. 284
Decided: September 12, 2007
Superior Court upholds litigants’ right to a trial by a jury of 12 (when timely demanded).
Background: Mr. Gianni was injured as a result of a fall on a construction site. He subsequently instituted suit, initially marking the matter for non-jury presentation, but subsequently perfecting a timely demand for trial by a jury of 12. At the pre-trial conference, the trial judge asked the parties to proceed with a jury of only 8. The Defendant agreed to the reduction, the Giannis did not. The matter was subsequently tried to a jury of 8 over the Giannis’ objection. The jury entered a verdict for the Defendant, and the Giannis appealed claiming, among other things, that their Constitutional right to trial by a jury of 12 was violated.
Holding: The Superior Court reversed, holding that Article I, Section 6 of the Pennsylvania Constitution entitles a civil litigant to a jury of 12 persons when a proper demand is made. The Opinion relies heavily upon a 1993 decision of the Pennsylvania Supreme Court which dictates that when a demand for a trial by jury is made, the phrase “trial by jury” means 12 persons. The right can be waived or modified by agreement, but a party that has properly demanded a jury trial cannot be compelled to try its case with less than 12 jurors.
Any questions regarding this case can be directed to Kevin McNamara at 717-237-7132 or kmcnamara@tthlaw.com.
Ocean Spray Cranberries, Inc. v. Refrigerated Food Distributors, Inc., 2007 PA Super 311 (Pa. Super. 2007)
Decided: October 15, 2007
The Pennsylvania Superior Court overturns Court of Common Pleas decision and holds that Perry/Ruzzi rule applies to both personal injury and property damage claims.
Background: A general contractor contracted with a refrigeration company to install certain freezer equipment for a warehouse project. The freezer equipment manufacturer had an agreement with the refrigeration company, which included a clause that provided that, "[the refrigeration company] assumes and agrees to indemnify, defend and hold [the equipment manufacturer] harmless from and against any and all liability and obligation (including reasonable attorney's fees and other costs and expenses of litigation) with respect to claim for bodily injury, or death, or property damage...which are based in whole or in part upon any act or omission on the part of [the equipment manufacturer]...." After the equipment was installed, a fan broke free from the freezer equipment, fell, and severed an ammonia pipe line. Over 10,000 pounds of liquid ammonia escaped and spoiled food products in the warehouse. The equipment manufacturer sought indemnification from the refrigeration company for the equipment manufacturer's negligence. The trial court, holding that the Perry/Ruzzi rule, which prohibits indemnification for an indemnitee's negligence, unless such intent is expressed in unequivocal terms in the contract, did not apply to property damage claims and held that the equipment manufacturer was entitled to indemnification for its own negligence from the refrigeration company.
Holding: The Superior Court reversed. The Superior Court held that it found no support for the proposition that the Perry/Ruzzi rule applied only in personal injury cases. After examining the language of the indemnity clause, the court explained that the agreement between the manufacturer and the refrigeration company that installed the equipment did not 'clearly express' an intent by [the refrigeration company] to indemnify [the equipment manufacturer] for its own negligence under the circumstances...."
If you have any questions, or wish to discuss this case, please call Scott D. McCarroll at (717) 237-7131 or email him at smccarroll@tthlaw.com.
Hillgartner v. Port Authority of Allegheny County
2007 Pa. Commw. LEXIS 516 (Pa. Commw. 2007)
Decided September 12, 2007
Background: Plaintiff employees filed suit against the employer, a port authority, and various individuals in their individual capacity, alleging gender discrimination in violation of both the U.S. and Pennsylvania Constitutions. However, Plaintiffs had already filed an action based on the same events in federal court. The issue before the Court was whether the doctrine of lis pendens applied to preclude the state court action.
Holding: The doctrine of lis pendens is designed to protect a defendant from having to defend several suits on the same cause of action at the same time. The Commonwealth Court recalled the test for applying the doctrine of lis pendens: (1) the case (i.e. same facts and causes of action) must be the same, (2) the parties must be the same, and (3) the rights asserted and the relief requested must be the same.
The Court held that the case was the same, and though Plaintiffs asserted otherwise, they were not precluded from recovering for alleged acts of discrimination that occurred subsequent to the filing of the federal action. Both actions involved the same Plaintiffs, even though the state action included two Defendants not named in the federal complaint, because these Defendants were in privity with the remaining Defendants. The relief requested was the same, as both complaints sought compensatory and punitive damages. Although the federal complaint sought injunctive relief as well, this did not prevent application of lis pendens, according to the Court, because the federal action included and adequately protected all of Plaintiffs’ state claims. The Court also recognized that the doctrine of res judicata would ultimately preclude any recovery on the state complaint, as that doctrine precludes parties involved in a prior litigation (i.e. the federal case) from subsequently asserting claims in a later action (i.e. the state case) that were raised or could have been raised in the previous litigation.
Any questions regarding this case can be directed to Corey J. Adamson at 717-255-7639 or cadamson@tthlaw.com.
Schwartz v. Rockey
35 WAP 2006; 36 WAP 2006
Decided: October 17, 2007
The Pennsylvania Supreme Court holds, in a concealment of water intrusion suit by buyers of a residence, that delay prevents the ability to seek rescission, and that to award treble damages under the Unfair Trade Practices and Consumer Protection Law (UTPCPL) does not require a higher standard of willful and malicious conduct governing punitive damages.
Background: The buyers sued the sellers for common-law fraud and violations of the UTPCPL. Later, the buyers were allowed to amend to seek rescission. The trial court awarded compensatory damages, representing diminution in value, but not rescission, restitution, treble damages or attorneys’ fees. The trial court held that the buyers could either affirm the contract and collect damages at law, or repudiate the contract and rescind. Once the remedy is selected, the party is bound by that selection. Rescission must also be done promptly, and here the buyers lived in the house for six years. Although the sellers conduct was fraudulent, the trial court determined it did not rise to the level of outrageous conduct for treble damages under the UTPCPL. On appeal, the Superior Court found that the buyers properly had been allowed to amend their complaint to assert rescission and ruled that treble damages were appropriate.
Holding: The Pennsylvania Supreme Court held that a complaint for contract-based damages does not foreclose a subsequent amendment for an inconsistent equitable remedy (rescission), at least where it is alleged that the plaintiffs lacked knowledge of material facts, and there is no demonstrable detrimental reliance by the opposing party. However, the Court declined to reverse the trial court holding that rescission was unavailable due to the plaintiffs not acting promptly in seeking rescission. The court also held that the standard of awarding treble damages under the UTPCPL are not governed by the common-law requirements for awarding punitive damages, which require conduct which is malicious, wanton, willful and oppressive.
Any questions regarding this case can be directed to Paul Walker at 717-441-7061 (pwalker@tthlaw.com).
ASH v. Continental Insurance Company
2007 Pa. LEXIS 2139 (Pa. 2007)
Decided October 11, 2007
The Pennsylvania Supreme Court affirms that the applicable statute of limitations for a bad faith insurance action, pursuant to Section 8371, is two years.
Background: The Plaintiff insured file a breach of contract action against the Defendant insurer. The Plaintiff later sought to amend the complaint to add a claim of bad faith pursuant to the bad faith insurance statute (42 Pa.C.S. § 8371). The trial court denied the motion as time barred, and the Superior Court had affirmed.
Holding: The Supreme Court affirmed, holding that the applicable statute of limitations for a bad faith action, under Section 8371, is two years. According to the Court, an action for the breach of the statutory duty of good faith is derived primarily from the law of torts, and thus subject to the two year statute of limitations applicable to torts actions in Pennsylvania. The Opinion noted, with limited discussion or analysis, that actions for breach of an implied contractual duty (i.e. the contractual duty of good faith) are governed by the four year statute of limitations applicable to contract actions, and claims for violation of the UTPCPL are governed by the six year “catch all” statute of limitations.
Any questions regarding this case can be directed to Corey J. Adamson at 717-255-7639 or cadamson@tthlaw.com.
FLETCHER-HARLEE CORPORATION v. SZYMANSKI
2007 PA Super 310 (Pa. Super. 2007)
Decided October 15, 2007
The corporate veil should be pierced, and the shareholder of a corporation held liable for the corporation’s debts, where corporate formalities have not been observed, corporate and personal assets commingled, the corporation is inadequately capitalized, and a new company performing the same services as the debtor company has been incorporated solely to avoid prior company’s debts.
Background: Plaintiff general contractor obtained an arbitration award against a concrete company. After converting the award into a judgment, the judgment debtor concrete company ceased doing business and filed for bankruptcy. However, Defendant shareholder began performing concrete work through another corporation. Plaintiff sought to pierce the corporate veil. The trial court found in favor of Defendant, and also denied Plaintiff’s motion for judgment notwithstanding the verdict.
Holding: The Superior Court reversed, vacating the judgment and directing that judgment be entered in favor of the Plaintiff. The Court found that the evidence of record clearly supported allowing the corporate veil to be pierced. The factors to be considered in determining whether the corporate entity should be disregarded include: 1) whether corporate formalities have been observed, 2) whether corporate records have been kept, 3) whether officers and directors, other than the dominant shareholder, actually perform a function, and 4) whether the dominant shareholder has used the assets of the company as if they were his own.
The Court stated that the factors supporting a piercing were numerous: the debtor company was not sufficiently and appropriately capitalized, because when it was faced with the prospect of arbitration of Plaintiff’s claims, it stopped doing business and filed for bankruptcy. Corporate formalities were not adhered to, and the Defendant shareholder intermingled his personal affairs and funds with that of the debtor company.
There is a strong presumption in Pennsylvania against piercing the corporate veil, and the general rule is that a corporation is regarded as an independent entity. The equitable doctrine of piercing the corporate veil will only be successfully invoked in rare circumstances where it is obvious that the corporate entity is a sham and the shareholder uses control of the corporation or the corporation’s assets to further his personal interests. In this case, there was only one shareholder, which made for a simpler analysis of whether the corporate veil should be pierced.
Any questions regarding this case can be directed to Corey J. Adamson at 717-255-7639 or cadamson@tthlaw.com.
Flood v. Klecknersville Rangers Volunteer Fire Company, et al
Commonwealth Court of Pennsylvania, No. 573 C.D. 2007
Decided October 2, 2007
The law firm of Thomas, Thomas & Hafer, LLP, successfully obtained summary judgment for the defendant volunteer fire company, and its employees, on the basis that the volunteer fire company is a local agency pursuant to the Political Subdivision Tort Claims Act (PSTCA), and therefore, entitled to immunity. The Commonwealth Court affirmed on appeal.
Facts/Background: Appellants dialed 911 when Mrs. Flood, who was 37 weeks pregnant, had vaginal bleeding. Appellee first responders from Klecknersville Rangers Volunteer Fire Company (Klecknersville) responded and transported Mrs. Flood to the hospital where an emergency caesarian section was performed and the baby was born. It was determined that Mrs. Flood had a placental abruption which caused extensive brain damage to the baby. The Appellants filed suit against Klecknersville and its first responders, which included an EMT and a certified pre-hospital registered nurse, claiming they failed to properly diagnose and treat Mrs. Flood which increased the risk of harm to the baby. Appellees were successful in obtaining summary judgment based on Klecknersville, a volunteer fire company, being a “local agency”, and thus, it and its employees, were entitled to immunity pursuant to the PSTCA, 42 Pa. C.S. §§ 8541-8546. The Floods appealed to the Commonwealth Court. After briefing and oral argument, the Commonwealth Court affirmed.
Reasoning/Holding: On appeal, the Commonwealth Court rejected Appellants’ argument that the Pennsylvania Supreme Court cases Sphere Drake v. Philadelphia Gas Works, 782 A.2d 510 (Pa. 2001) and Christy v. Cranberry Volunteer Ambulance Corps., 856 A.2d 43 (Pa. 2004), stand for the proposition that a volunteer fire company is no longer entitled to immunity even if it is created pursuant to relevant law and recognized as the official fire company for a political subdivision. See Guinn v. Alburtis Fire Co., 614 A.2d 218 (Pa. 1992). The Commonwealth Court explained that the cases of Sphere Drake and Christy dealt only with the issue of whether an entity that had not traditionally provided a government function could be considered a “local agency” for purposes of immunity pursuant to the PSTCA. The Supreme Court in Sphere Drake and Christy found only that a nontraditional entity could be considered a “local agency” if certain criteria are present. However, as explained by the Commonwealth Court, these cases did not abrogate the test set forth in Guinn for determining whether a volunteer fire company is a “local agency” entitled to immunity pursuant to the PSTCA.
If you have any questions or would like more information on this case, please contact bfoland@tthlaw.com or shersperger@tthlaw.com.