Ain’t No Stoppin’ (The Arb’ Panel) Now (PA)

On January 22, 2016, the United States Court of Appeals for the Third Circuit held that legal error alone is not a sufficient basis to vacate the results of an arbitration in Whitehead v. Pullman Group LLC, 15-1627, 2016 WL 279015 (3d Cir. Jan. 22, 2016).

Singer-songwriters Gene McFadden and John Whitehead, were an influential Philadelphia R&B band in the 1970s, best known for their signature tune “Ain’t No Stoppin’ Us Now.”  In 2002, appellant David Pullman approached Whitehead and McFadden about purchasing their song catalogue.  The parties signed a contract, but never finalized the sale.  Whitehead and McFadden died in 2004 and 2006, respectively, and Pullman became embroiled in a series of disputes with their respective estates over ownership of the song catalogue.  The parties ultimately agreed to arbitrate.

A panel of three arbitrators issues its final award in September of 2014.  While the panel agreed with Pullman that the May 2002 agreement with Whitehead and McFadden was a valid contract, it also concluded that Pullman had failed to introduce evidence sufficient to prove that he had ever notified Whitehead and McFadden that he had completed his due diligence.  Consequently, the panel ruled that Pullman’s option to purchase the song catalogue had lapsed and the May 2002 agreement was no longer enforceable.

Pullman then moved to vacate the arbitral award contending, among other things, that the arbitrators’ actions amounted to a “manifest disregard of the law.”  The District Court denied the motions, giving way to an appeal.

The Federal Arbitration Act specifies four circumstances under which a district court can vacate an arbitral award.  The available federal statutory grounds for vacatur include:  award procured by corruption, evident partiality of the arbitrator, refusal to postpone the hearing for good cause, refusal to consider material evidence, and arbitrators exceeding their powers.  Most jurisdictions also permit vacatur if the arbitrator’s award exhibits “manifest disregard of the law,” and some recognize other judicially created grounds: “contrary to public policy,” “irrational,” and “arbitrary and capricious.”

The Third Circuit held that legal error along is not a sufficient basis to vacate the results of an arbitration.  The court opined that for an error to justify vacating an arbitration award, it must be “not simply an error of law, but [one] which so affects the rights of a party that it may be said that he was deprived of a fair hearing.”  Ultimately, the court discerned no unfairness justifying vacating an arbitration award, concluding that the arbitral panel reasonably chose not to consider potentially self-servicing evidence about communications with persons who are no longer able to present their side of the story.

Generally speaking, the odds are stacked heavily against a successful vacatur action.  When the American Bar Association reviewed 182 vacatur applications, they found that 120 were brought in state courts and only 62 were brought in the federal courts.  Of the state court cases, 31, or about 25.8 percent, resulted in vacatur.  By contrast, in the federal cases, only six awards were vacated, or about 9.7 percent.  As to the most potential grounds for vacatur, the ABA found that the most frequently asserted and most frequently successful of all of the statutory and other grounds advanced by parties seeking vacatur was the allegation that the arbitrators had “exceeded their powers, or so imperfectly executed them that a . . . final and definitive award upon the subject matter submitted was not made.”  The next most active category was that the arbitrators allegedly “manifestly disregarded the law,” but motions on this ground succeeded in only two cases, or about 4 percent of the time.  The third most frequently advanced ground was that the arbitrators had committed “misbehavior by which the rights of a party were prejudiced,” a catch-all category encompassing various judge-made grounds for vacatur other than “manifest disregard.”  This ground includes allegations that the award was “irrational,” “violated public policy,” or was “arbitrary and capricious.”

In sum, it is extremely difficult for parties to obtain vacatur of an arbitration award, and the decision to apply for vacatur should not be made lightly.  Thanks to Hillary Ladov for her contribution the this post.  Please email Brian Gibbons with any questions.

Beware the Slippery Slope: Carbon County, PA awards highest ever verdict in wrongful death suit involving a ski resort

On November 9, 2015, a jury in Carbon County, Pennsylvania awarded 1.2 million dollars to Patricia Bortz, the widow of Victor Bortz, an excavation truck driver who died while performing work on a ski slope expansion project.  The verdict, in Bortz v. Tuthill, is the highest ever reported in Carbon County.

Plaintiff Victor Bortz was driving an articular hauler up the ski slope at Blue Mountain Ski Resort, owned by the Tuthill Corporation.  Bortz was working as part of an excavation crew and was instructed to ascend up a twenty-five foot ski hill in a hauler.  After Bortz dropped of the soil, he backed off the hill down into a thirty foot embankment and was thrown from the vehicle.  Bortz, his co-worker and his boss had all expressed concern about the steepness of the hill prior to attempting the drive.  In fact, Bortz described his anxieties over the radio while he was driving the hauler right before his death.

The plaintiff argued that the grade of the slope exceeded the reasonable standards for the industry.  However the key issue in the case was whether Tuthill exercised sufficient control over Bortz’s work to be held liable as proper owner.  In this case, the jury felt that directing the type of truck and how much dirt to move was sufficient to establish control.  This case will be useful in the cannon of Pennsylvania cases determining extent of ownership and control.  Thanks to Remy Cahn for her contribution to this post.  Please email Brian Gibbons with any questions.

 

Blind Spot: Jury Awards $5 Million Based on Defective SEPTA Bus Mirror (PA)

SEPTA is no stranger to accidents and their resulting lawsuits.  Last December, a Philadelphia jury awarded a $5 million verdict against SEPTA and the manufacturer of its buses, New Flyer of America Inc., in Chin v. SEPTA.

The case arose out of a September 5, 2012 incident in which the plaintiff, Stephen Chin, was crossing the street at Sixth and Arch in Philadelphia when he was struck by a SEPTA bus turning left onto Sixth Street.  Chin fell and the bus rolled over his right foot, causing a degloving injury and multiple fractures to his ankle and foot.  Chin was a college athlete who ran cross-country.  After the accident, he continued to suffer significant pain which greatly impacted his way of life.

Chin sued SEPTA on a theory of negligence and New Flyer on claims of negligence and strict liability, alleging that they had defectively designed the bus when it mounted the driver’s side rear-view mirror.  Chin asserted that due to this defect the driver was unable to see him as he crossed the street.  Chin settled with SEPTA for its statutory cap amount of $250,000 while the case against New Flyer proceeded to trial.

At trial, testimony showed that it was solely New Flyer’s responsibility to determine the best position for the bus’s rear-view mirror even though SEPTA advised them to position the mirror to minimize blind spots.  Chin’s team used an expert who stated that the bus design was defective due to New Flyer’s negligent methodology.  Specifically, he stated that New Flyer’s failure to listen to SEPTA’s specifications, their lack of computer-aided analysis of sightlines, and their failure to meet industry standards of lower placed mirrors all fed in to their negligence and defective design.  The expert even provided a 3D model which demonstrated that had the mirror been four inches lower, the driver would have been able to see Chin.

New Flyer’s defense team produced an expert of their own who stated that the bus was not defective but instead it was the driver’s fault for failing to use the “rock and roll” technique.  This technique requires a bus driver to bend forward, backward, and side-to-side to see over any objects obstructing their view, such as rear-view mirrors.  To support this, he produced his own 3D model as well which showed that had the driver used the rock and roll technique they would have been able to see Chin.

The jury found New Flyer to be negligent but not strictly liable.  Chin was determined to receive $5 million; of which they determined that New Flyer was 25% liable and SEPTA 75%, thus putting New Flyer on the hook for $1.25 million.

This verdict reminds of importance of experts where the jury’s factual determination depends on one fact witness’s interpretation of events and their legitimacy.  Here, New Flyer may have saved $3.75 million, thanks to their expert’s testimony.  The jury may have been thinking along the lines of Mick Jagger – “I know, it’s only ‘rock n’ roll,’ but I like it.”  Thanks to Peter Cardwell for his contribution to this post.  Please email Brian Gibbons with any questions.

Court Prevents Deposition of Counsel in Coverage Dispute (PA)

In JCT Leasing LLC. V. Travelers Casualty Insurance Company, Plaintiffs sued their  insurer, seeking damages for breach of contract and bad faith arising out of a fire claim. Plaintiffs sought to depose defendant’s coverage counsel, and the court needed to evaluate whether attorney-client privilege barred his deposition.

After plaintiffs submitted a claim to Travelers for fire at their property, Travelers retained Ernest Koshineg, Esq. to advise them on whether plaintiffs’ claim was covered. Upon advice from counsel, Travelers notified plaintiffs that it was rescinding their policy, as the policy was issued based on the representation that a sprinkler system was in the warehouse, when in fact there was not. Plaintiffs notified defendant that they intended to depose Koshineg and required him to bring materials he prepared while assisting in the claims investigation and policy rescission process. Defendant moved for a protective order, which was ultimately granted.

Plaintiffs argued that Koshineg worked as part of the defendant’s claims adjusting team and should be considered to be an investigator for the insurer because he became involved so early on in the matter. But the Court found that Mr. Koshineg played a traditional lawyer’s role of providing legal advice to a client, and did not serve as a member of defendant’s claims investigation team and thus the attorney–client privilege applied.

Plaintiffs further argued that even if privilege existed, it had been waived because the Vice President, who advised the plaintiffs of their policy rescission testified that in drafting the rescission letter, he relied on the advice of counsel. But the Court found that defendant had not waived the privilege because the defendants did not assert “reliance on course” as an affirmative defense to the lawsuit.

Thanks to Chelsea Rendelman for her contribution to this post and please write to Mike Bono for more information.

New Year’s Resolution: Read The Contract Before Signing (PA)

As people are cramming into gyms around the country trying to keep their New Year’s resolutions, it is a good time to remember the importance of carefully reading all the contracts we are presented with in our daily lives. In Hinkal v. Pardoe & Gold’s Gym, Inc. et al., the Pennsylvania Superior Court dealt with whether the agreement signed by the plaintiff when she became a member of Gold’s Gym released the defendants from liability.

Melinda Hinkal decided she wanted to join a gym to lose weight. After a six day the trial period, Hinkal decided to join the gym and signed a membership agreement. The agreement contained a section on the back of the form entitled “Waiver of Liability; Assumption of the Risk.” The section stated that the member recognized that working out at a gym involves “inherent risk of personal injury… and Member voluntarily assume all risk of personal injury to Member and waives any and all claims or actions” against the gym and its employees. Hinkal claimed that she was handed a “sheaf of papers” and was told to sign it. She claimed she never read it.

A few weeks later, she ruptured a disc in her in her neck while using an assisted pull-up machine under the supervision of defendant, Pardoe, her personal trainer.  Hinkal sued Pardoe for negligent instruction and supervision and the gym, under a theory of respondeat superior. The trial court granted the defendant’s motion for summary judgment, and dismissed the complaint. Hinkal then appealed and asked the superior court to set aside the membership agreement’s waiver clause, arguing that it was unreasonable for her to read this clause as it was inconspicuously placed on the back of the waiver.

The Superior Court addressed the standards for upholding liability waivers: whether the waiver infringes on public policy, and whether the agreement is a “contract of adhesion,” meaning that each party must have free bargaining abilities.

Hinkal argued that the membership agreement was comparable to liability release provisions that were printed on the back of ski tickets, which the Court previously struck down. The Court differentiated the signed membership agreement from the unsigned clause attached to the back of an amusement ticket, noting that there was no proof on the ticket that there was ever a meeting of the minds agreeing to the release. The membership agreement, on the other hand, was signed right under an unambiguous directive not to sign the agreement until reading both sides. The Court found that the membership agreement clearly expressed a straightforward statement that there was a meeting of the minds between the contracting parties.

As the Court aptly quoted, “The law of Pennsylvania is clear. One who is about to sign a contract has a duty to read that contract first.”

Thanks to Jim Stinsman for his contribution to this post and please write to Mike Bono for more information.

Updates in Tort Law Don’t Rid Ford of $6 Million Verdict on Appeal (PA)

The Superior Court of Pennsylvania denied a motion for a new trial and/or judgment notwithstanding the verdict filed by Ford Motor Company after a jury award of $5,940,706.86  in Cancelleri v. Ford Motor Co.

In August 2010, John Cancelleri was driving south on Pennsylvania Route 307 in his 2005 Mercury Sable. Suddenly, a 2007 Ford Mustang travelling in the opposite direction turned left into his path and crashed into the front left side of his vehicle. During the collision, Cancelleri was wearing his seatbelt, but his airbag failed to deploy, which allowed his head to hit the windshield. Following the accident, Cancelleri was confined to a wheelchair due to a disc herniation and spinal cord compression.

The Cancelleris sued, among others, Ford, the company that manufactured the Mercury Sable, on the theories of negligence, strict liability, breach of implied warranty of fitness and/ merchantability, punitive damages and loss of consortium. The jury unanimously found in favor of the Cancilleris on their claims of crashworthiness design defect and loss of consortium.

The primary argument that Ford raised on appeal, was that the Pennsylvania Supreme Court’s 2014 decision in Tincher v. Omega Flex, Inc. allowed a more accommodating standard of proof in a determination of whether a product is in defective condition in strict product liability cases. Tincher held that “when a plaintiff proceeds on a theory that implicates a risk-utility calculus, proof of risks and utilities are part of the burden to prove that the harm suffered was due to the defective condition of the product. The credibility of witnesses and testimony offered, the weight of evidence relevant to the risk-utility calculus, and whether a party has met the burden to prove the elements of the strict liability cause of action are issues for the finder of fact.” Tincher v. Omega Flex, Inc., 104 A.3d 328, 407 (Pa. 2014)

Ford argued that under Tincher, the trial court should have submitted the question of whether the vehicle was unreasonably dangerous and that the jury should have been asked to consider risk-utility factors in making its determination.

The appeals court rejected these arguments because Tincher did not specifically involve a crashworthiness case and was “not intended as a rigid formula to be offered to the jury in all situations.” The Court noted that “in crashworthiness cases, the jury is required to determine whether the vehicle was defective in design as well as whether an alternative safer, and practicable design existed at the time of design that could have been used instead… the jury’s considerations in crashworthiness cases, including the instant matter, already involve[d] proof of risks and utilities regarding whether the harm suffered was due to the defective condition of the product.”

Thanks to Sathima Jones for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

 

Life after Death: Superior Court Rules Waivers Do Not Apply to Wrongful Death Actions (PA)

A recent decision from the Pennsylvania Superior Court revived a wrongful death action previously dismissed on the basis of a waiver of liability, holding instead that such waivers do not apply to surviving spouses under the applicable statutory regime.

In Valentino v. Philadelphia Triathlon, the decedent participated in a June 2010 triathlon hosted by defendant Philadelphia Triathlon and conducted, in part, along the Schuylkill River.  As part of his participation in the triathlon, the decedent was required to preregister for the event and execute a waiver and release form absolving Philadelphia Triathlon from any liability arising out of death or bodily injury.  Unfortunately, during the course of the swimming portion of the triathlon, the decedent drowned in the Schuylkill River where his body was ultimately recovered the next day.

In or about April 2012, the decedent’s widow filed a wrongful death and survival action naming, among others, Philadelphia Triathlon as a defendant.  While preliminary objections removed all defendants but Philadelphia Triathlon from the case, the trial court eventually granted summary judgment in its favor on the basis that the waiver and release form barred the widow’s action in its entirety.

On appeal, the widow argued that the trial court improperly sustained preliminary objections and wrongfully granted summary judgment.  In respect of the latter alleged error, the widow argued in part that summary judgment was inappropriate on the basis of the waiver and release form because Pennsylvania law does not apply the limitations therein to third-parties suing under the Commonwealth’s wrongful death statute.  In ultimately adopting this reasoning, the Superior Court explained that because Pennsylvania’s cause of action for wrongful death is statutory, it belongs exclusively to the beneficiary and is not derivative of the decedent’s own claims.  Moreover, inasmuch as the wrongful death claims are not “passed on” by the decedent, the Superior Court went on to state that any waivers or limitations executed by the decedent in respect of his own claims during life did not inure to the detriment of widows or other beneficiaries attempting to enforce their own causes of action.  Consequently, the Superior Court overturned the trial court’s summary judgment order and remanded for further proceedings.

The Superior Court’s decision in Valentino reaffirms and highlights subtle distinctions between Pennsylvania’s wrongful death and survival statutes insofar as the former allows beneficiaries to recover their own damages because of the loss of a loved one and the latter merely preserves the decedent’s own right to recovery.   Thanks to Adam Gomez for his contribution to this post.  Please email Brian Gibbons with any questions.

Superior Court Finds $2.3 Million Judgment To Be Concrete (PA)

In DeFranco v. Albino, No. 1868 EDA 2014 (Pa. Super. Ct. Jan. 6, 2016)., the Superior Court of Pennsylvania affirmed a $2.3 million judgment in favor of a construction worker who was injured when a concrete-pumping hose hit him in the head and knocked him off a wall.

On March 22, 2010, DeFranca was building foundations and footings at new homes, and was standing atop a 9′ wall  to pour cement.  The hose from the concrete pump trunk clogged, and the concrete pump truck operator increased the pressure on the pump to unclog it.  However, he did not signal to DeFranca to put the hose down and get out of the way.  Due to the additional pressure, the hose was thrown from side to side and hit DeFranca in the head, causing him to fall off the wall and drop into a basement.

DeFranca identified the concrete pump truck owned by 5 Star Concrete Pumping, LLC as the pump truck involved in his accident.  5 Star was a concrete pumping service formed in 2007 by Mr. Franks and Mrs. Franks.  Prior to forming 5 Star to provide concrete pump truck services, Mr. Franks owned and operated concrete pump trucks through his ready-mix concrete delivery business, Trans-Fleet.  Trans-Fleet and 5 Star shared a business address, employees, and operated out of the same office space.  When customers called Trans-Fleet, they could order concrete and a concrete pump truck all at once. The concrete was provided by Trans-Fleet.  Trans-Fleet employees would provide a concrete pump truck exclusively by 5 Star.  Both businesses had separate invoicing systems, bank accounts, and tax returns. Mr. Franks personally trained all 5 Star concrete pump truck operators.

On appeal, Trans-Fleet raised four issues.  First, Trans-Fleet argued the issue of an agency relationship between it and 5 Star should not have been submitted to the jury because it was not properly pleaded.  The Court opined that the allegations in the complaint were sufficient to put Trans-Fleet on notice that it had to defend against an agency theory.  The complaint included several paragraphs asserting Trans-Fleet was liable based on the negligence of its agents.

Trans-Fleet’s second argument was that DeFranca did not introduce evidence that a 5 Star truck was at the construction site on the day of the accident.  However, the Court found that the trial court noted ample evidence, including testimony from DeFranca identifying a truck pictured in an exhibit as matching the one at the site.

Trans-Fleet’s third argument was that the trial court improperly excluded GPS evidence that allegedly indicated a 5 Star vehicle was not in the vicinity of the accident.  On this point, the Court determined that Trans-Fleet failed to present a proper witness to testify as to the authenticity of the GPS records.  Furthermore, Trans-Fleet’s counsel also agreed prior to trial that the records were not admissible without testimony from a representative of the third-party company that created the GPS records.

In its final issue on appeal, Trans-Fleet argued the issue of negligent training was improperly submitted to the jury.  Trans-Fleet maintained that the company did not have to train 5 Star employees because the companies were separate entities.  Again, the Court found the trial court’s opinion well supported by the evidence.Although a non-precedential decision, the Court’s analysis of crucial concepts such as agency and the exclusion of evidence is instructive.

Thanks to Hillary Ladov for her contribution to this post.  Please email Brian Gibbons with any questions.

 

PA Court Orders Arbitration in Death Act Case

In MacPherson v. Magee Memorial Hospital for Convalescence et al., the Pennsylvania Superior court addressed the applicability of arbitration agreements in a wrongful death action.  In September 2009, Richard MacPherson was admitted to Manor Care nursing home facility.  A short time later, Richard and Manor Care executed a written arbitration agreement, which provided that any disputes between the parties would be submitted to binding arbitration, and both parties waived the right to trial by judge or jury.

After his death, Richard’s brother Patrick, as executor of Richard’s estate, brought a lawsuit against various nursing home facilities where Richard had stayed.  Manor Care filed preliminary objections seeking to have the case transferred to arbitration, which were denied by the trial court. Manor Care appealed to the superior court to determine whether the arbitration agreement was binding on the executor of the estate.

Under Pennsylvania law, courts apply a two-part test to decide if a trial court should compel arbitration. First, the court must determine whether there is a valid agreement to arbitrate.  Second, the court must determine if the underlying dispute falls within the scope of the agreement.

In reviewing the first prong of the test, the Superior Court noted that both Pennsylvania law and the Federal Arbitration Act embrace a liberal policy favoring arbitration. Applying state-law contract interpretation principles, and recognizing the policies favoring arbitration, the court determined that both Richard MacPherson and Manor Care freely entered into the agreement to submit to binding arbitration.

Under the second prong of the test, the court ultimately determined that the underlying dispute fell within the scope of the arbitration agreement, distinguishing the case from Pisano v. Extedicare Homes.  In Pisano, the same court previously found that an arbitration agreement entered into by the decedent in a wrongful death action was not binding on the decedent’s relative, the plaintiff in the case, because the relative was not a party to the agreement.

The Superior Court stated that MacPherson’s case was different because it was brought under a different subsection of Pennsylvania’s Death Act. The first type of action, allows for specifically delineated beneficiaries–parents, children, and spouses–to recover against those liable for the wrong death of their relative. Pisano fell into this category.

The second type of action allows for the personal representative of the decedent, or executor, to recover on behalf of estate of the decedent. Because the executor was the decedent’s sibling, which is not one of the recognized beneficiaries under the Death Act, his claim was brought solely as the representative of his brother’s estate. Because the estate is the entity capable of recovering, and not another beneficiary, the Court found that the arbitration agreement is binding on the dispute. As such, the applicability of the arbitration agreement in wrongful death actions is going to be determined by what relatives the decedent is survived by.

Thanks to Jim Stinsman for his contribution to this post and please write to Mike Bono for more information.

Policy Rescission: Timing Is Everything

An insurer may waive its right to rescind based on an insured’s misrepresentations, if the insurer is aware of the misrepresentations contained in the insurance application but fails to timely assert such a claim – says one Western District of Pennsylvania jury.

In H.J. Heinz Co. v. Starr Surplus Lines Insurance Co., an insured sued its insurer after it failed to provide coverage for losses incurred after its product was accidentally contaminated.  The insurer filed a counterclaim claiming that the policy should be rescinded since the insured failed to disclose several key events leading up to the loss at issue.  The insurer contended there were four prior incidents of contamination that resulted in the product being recalled, which the insured failed to disclose.  Additionally, the insured failed to disclose that one of its plants had been closed by the U.S. government after it was contaminated by listeria.

The insurer moved for summary judgment on its claim for rescission, but the motion was denied since the insured claimed the insurer had been notified of the information it claimed was withheld, and that any omission by the insured was a result of the insurer’s failure to ask about any alleged prior contamination.  At trial, the jury determined that the insurer failed to promptly assert a claim of rescission after it had gained sufficient knowledge to do so.

This case illustrates that although an insured’s misrepresentations on its insurance application may be a valid basis to rescind a policy, if an insurer does not take prompt action and attempt to rescind the policy once it learns of the misrepresentations, it may act as a bar to prevailing on such a claim.

Thanks to Colleen Hayes for her contribution to this post.