author: HODGSON, J.,

text:
    Veit v. North Wales Borough

      C.P. of Montgomery County,
    no. 01-00356.

      Carol Sweeney, for plaintiff.

      David Truelove, for defendant.
    September 14, 2001
   HODGSON, J.,

Kenneth Veit appeals from the decision of the North Wales Civil Service Commission upholding his termination from the position of chief of police for North Wales Borough.

The parties agreed, in lieu of a hearing, to rest on the notes of testimony generated at the Civil Service Commission hearing. We ordered the parties to file briefs in support of their positions and, subsequently, entertained argument on the issues.

FINDINGS OF FACT

(1) Veit became employed by the Borough of North Wales in the capacity of chief of police on April 2,1973. (N.T. p. 573.)

(2) On or about January 25,1999, Veit took sick leave from his position as a result of knee replacement surgery.

(3) Pursuant to the borough-council form of government, the mayor is the chief executive in charge of the police department. 53 Pa.C.S. §45101 et seq.; 53 Pa.C.S. §46029.

(4) By letter dated May 17,1999, North Wales Mayor Douglas Ross placed Veit on administrative leave effective immediately. (N.T. p. 540, exhibit V-20.)

(5) On March 10, 1999, Veit was ordered to supply medical records or submit to a physical examination.

(6) By letter dated May 26,1999, from Mayor Ross to Veit, Veit was suspended without pay. (N.T. p. 542-43, exhibit B-25.)

(7) The May 26, 1999 letter listed the reason for suspension as follows: “I take this action at this time due to your repeated and unjustified refusal to comply with my order that you submit to a physical examination and cooperate fully with the physician who administered the examination. Your refusal to sign the medical release form is contrary to my order to cooperate fully, and therefore, you are suspended for a violation of my direct order.” (N.T. p. 543, exhibit B-25.)

(8) The May 26, 1999 letter included the following relevant language regarding Veit’s suspension: “You are hereby suspended, without pay, effective immediately, for disobedience of a direct order. Your suspension will remain in effect until the next regularly scheduled meeting of borough council on Tuesday, June 8,1999. At that time or thereafter, council may suspend you, discharge you, or reduce you in rank, or reinstate you.” (N.T. p. 543, exhibit B-25.)

(9) Veit received a second suspension letter from Mayor Ross dated May 27, 1999. (N.T. p. 70, exhibit B-5.)

(10) The May 27,1999 letter once more advises Kenneth Veit that he has been suspended, without pay, from his position as a North Wales Police Chief.

(11) The May 27,1999 letter cites that the suspension was a result of “repeated disobedience of orders and neglect of duty in accordance with sections 1190(2) and (4) of the Borough Code of the Commonwealth of Pennsylvania.” (Exhibit B-5.)

(12) The May 27, 1999 letter cites the following reasons for Veit’s suspension:

“On four separate instances, you were given direct orders from me or my designee that you refused to follow and/or comply with or neglected to comply with.
“On December 11, 1998, you were given verbal and written orders to schedule the DARE program, prepare a detailed monthly incident report, and prepare a community policing plan. You were given specific instructions and timetables for each of these orders and you failed to follow any of the instructions, meet the timetables, or comply with any of these three direct orders. Prior to going out on sick leave, you failed to schedule DARE, provide monthly incident reports or a community policing plan.
“On January 19, 1999, you were informed that the clause 11(b) of the North Wales Police Contract entitled the borough to have you examined by a physician of the borough’s choosing to determine if your extended sick leave was justified. On March 10, 1999, while still out on sick leave, you were ordered to either submit your medical records or submit to a physical examination in accordance with clause 11(b). In your letter of March 19, 1999, you indicated you would not comply with my order. On March 26, 1999, you were again ordered to submit your medical records or submit to a physical examination. You were ordered to comply by April 2,1999, and you failed to do so.
“On May 17, 1999, you were ordered to submit to a physical examination and fully cooperate with the physician designated by the borough. Although you did appear for and take the physical, you have not signed the medical release necessary for me, as your employer, to receive the results and allow you to return to active duty if you are physically capable of doing so. Your repeated and unjustified refusal to sign the medical release form is contrary to my order to cooperate fully and therefore, is a violation of my direct order.”

(13) The May 27, 1999 suspension letter refers to a violation of sections 1190(2) and (4) of the Borough Code of the Commonwealth of Pennsylvania.

(14) Veit was never given a date, time and place to respond to the allegations.

(15) The next regularly scheduled meeting of the North Wales Borough Council was held on June 8, 1999.

(16) The public session of the meeting was preceded by an executive session.

(17) Veit and his attorney were present for a portion of the meeting.

(18) Veit was never addressed at the meeting.

(19) Veit was never given the opportunity to speak or to respond to the allegations contained in the May 26 and May 27, 1999 letters.

(20) At the June 8,1999 meeting, a motion was made to terminate Veit based upon the charges set forth in Mayor Ross’s May 27, 1999 letter.

(21) At the June 8,1999 meeting, the borough council voted in favor of terminating Veit from his position as chief of police of the North Wales Borough.

(22) Veit was not informed of his right to be heard prior to termination. (N.T. pp. 342-43.)

(23) Veit was not informed of his right to be represented by counsel prior to his termination. (N.T. p. 339.)

(24) The June 9, 1999 letter terminated Veit from his position as chief of police for North Wales Borough.

DISCUSSION

The court reviewing the matter on appeal must affirm the local agency unless it is determined that constitutional rights were violated, that an error of law was committed, that procedure for the agency was contrary to statute or that a necessary finding of fact was unsupported by substantial evidence. Appeal of Suspension of McClellan, 82 Pa. Commw. 75, 475 A.2d 867 (1984). Because we conclude that appellant was denied his constitutional right to a pre-termination hearing, see Cleveland Board of Education v. Loudermill, 470 U.S. 532, 105 S.Ct. 1487 (1985), we do not reach the remaining questions of whether the commission committed an error of law, whether procedure contravened a statute or whether a necessary finding of fact was unsupported by substantial evidence.

In Cleveland Board of Education v. Loudermill, the Supreme Court of the United States held that the due process clause of the United States Constitution entitles a public employee to a pre-termination hearing. Commonly referred to as a “Loudermill hearing,” the hearing “need only include oral or written notice of the charges, an explanation of the employer’s evidence, and an opportunity for the employee to tell his [or her] side of the story.” Gilbert v. Homar, 520 U.S. 924, 117 S.Ct. 1807 (1997). The purpose of a pre-termination hearing is to assure that there are reasonable grounds to support the suspension without pay. Loudermill at 545-46,105 S.Ct. at 1495. This hearing is to be followed by a more comprehensive post-termination hearing. Gilbert at 929, 117 S.Ct. at 1807; Loudermill, 470 U.S. at 532, 105 S.Ct. at 1495.

Under certain circumstances, however, not relevant herein, due process does not require the state to provide a hearing prior to the initial deprivation of property. See Gilbert v. Homar, 520 U.S. 924, 117 S.Ct. 1807 (1997).

Our conclusion that Veit was entitled to a pre-termination hearing stems from our necessary determination that he had a property right in continued employment. Such a right affords Veit constitutional protections such that this right could not be deprived without due process.

Property interests are a product not of the constitution but of state law. Loudermill at 538, 105 S.Ct. at 1491. Veit was entitled to retain his position and not be discharged absent “just cause.” 71 Pa.C.S. §§741.3(d), 741.807 (2000). “State law restricting discharge of a public employee except ‘for cause’ supports such an entitlement to continued employment and thereby creates a protectable property interest.” Ballas v. City of Reading, 2001 WL 73737 (E.D. Pa. January 25,2001) (referring to Gilbert at 928-29, 117 S.Ct. at 1807). Veit clearly had a property right in continued employment and neither party disputes this conclusion.

Due process requires some form of hearing prior to the discharge of an employee who has a property interest in his or her employment. Loudermill at 542, 105 S.Ct. at 1493. “The essential requirements of due process are notice and an opportunity to respond. The opportunity to present reasons either in person or in writing why the proposed action should not be taken is a fundamental due process requirement.” Loudermill at 546, 105 S.Ct. at 1495.

The need for this hearing “is evident from a balancing of the competing interests at stake. These are the private interests in retaining employment, the governmental interest in the expeditious removal of unsatisfactory employees and the avoidance of administrative burdens, and the risk of an erroneous termination.” Loudermill at 542-43, 105 S.Ct. at 1493.

The governmental interest in this case does not outweigh Veit’s private interest in retaining his employment as police chief. Nor does it justify the risk of an erroneous termination. The underlying charges against Veit stem from his alleged failure to submit to a physical examination and alleged disobedience relative to various other orders handed down from Mayor Ross. This factual scenario is clearly distinguishable from those in Gilbert, where the employee, a university police officer, had been arrested on felony drug charges.

As in Loudermill, under Pennsylvania law, Veit is entitled to a full administrative hearing before the Civil Service Commission as well as judicial review. However, where the constitution requires a pre-termination hearing, the most fair and thorough post-termination hearing cannot undo the failure to provide such constitutionally mandated proceedings. Alvin v. Suzuki, 277 F.3d 107 (3d Pa. 2000).

The hearing should serve as an initial check against erroneous decisions — “a determination of whether there are reasonable grounds to believe that the charges against the employee are true and support the proposed action.” Loudermill at 545-46, 105 S.Ct. at 1495.

CONCLUSION

The private interest of Veit in retaining employment and the risk of an erroneous termination outweighed the governmental interest in expeditious removal of an unsatisfactory employee and the avoidance of administrative burden.

Since Veit was not afforded a pre-termination hearing we find that Veit’s rights under Amendments V and XIV of the United States Constitution were violated.

ORDER

And now, September 13, 2001, after review of notes of testimony, argument and consideration of legal memoranda, Veit’s petition for appeal and review is granted in that this matter is sent back to the Borough of North Wales for the purpose of affording Veit a pre-termination hearing.

Veit shall be restored to his status as of May 26,1999; that is, he remains suspended from the borough police force pending the borough’s compliance with this order.

      . The Gilbert court recognized that there are situations where a state may need to act quickly or where it would be impractical to provide predeprivation process; post deprivation process satisfies the requirements of the due process clause. Id. at 930, 117 S.Ct. at 1812. This recognition was made in the context of the court dismissing the lower court’s interpretation of Loudermill that the due process clause required in all instances a pre-suspension hearing. These situations do not exist in the present case.
      The court continued, “[i]n determining what process is due, account must be taken of the length and finality of the deprivation,” distinguishing the situation before it, where the employee faced a temporary suspension, from the situation in Loudermill, where the employee faced termination. Id.


source: Caselaw Access Project

author: SHEPPARD JR., J„

license: Public Domain

text:
    Academy Industries Inc. v. PNC Bank N.A.

      Gilbert B. Abramson, for plaintiffs.

      William A. Slaughter and Joel E. Tasca, for defendants.
    January 30, 2001
   SHEPPARD JR., J„

Petitioners, PNC Bank N.A., Herbert McDonald and The Fulcrum Group, filed this motion to strike the demand for a jury trial made by respondents, Academy Industries Inc., Stuart Polsky and Richard Kaufman.

For the reasons set forth, this court will enter a contemporaneous order granting the motion to strike the jury trial demand.

BACKGROUND

These consolidated actions arise out of loans extended by PNC to Academy pursuant to a loan and security agreement dated December 9, 1996. In connection with the loan agreement, Academy also entered into a “revolving loan note,” a “term note” and a “mortgage note.” In addition, Academy guaranteed the loans under a guaranty and suretyship agreement, while three of Academy’s principals, including Polsky and Kaufman, guaranteed up to $500,000 of the loans under a limited guaranty and suretyship agreement. Each of the loan documents includes language waiving the right to a jury trial in actions related to the loan documents.

When several disputes as to alleged defaults occurred, PNC entered into two forbearance agreements with Academy, the second of which ran until April 30,1999. Each of these forbearance agreements also included a waiver of the right to a jury trial. PNC asserts that in September 1999, Academy remained in default and filed for bankraptcy. This petition in bankruptcy was later dismissed due to Academy’s inability to establish a plan of reorganization.

After the dismissal of Academy’s bankruptcy petition, PNC hired Fulcrum and McDonald to work with Academy to maximize a return on its assets and, if warranted, to sell Academy or its assets. In May 2000, most of Academy’s personal property was sold at a public auction, with the proceeds being applied to the loans. According to PNC, Academy’s real property remains titled in Academy’s name, and a balance of $1.18 million remains outstanding on the loans.

On May 16, 2000, the respondents (Academy Industries Inc. et al.) filed the first of the above-captioned actions against the petitioners (PNC Bank N.A. et al.) for breach of contract, intentional interference with contractual relations, breach of fiduciary duty and declaratory relief. Each of these claims relates to PNC’s actions taken in connection with the declaration of default and the sale of Academy’s assets. PNC confessed judgment against Academy on July 7, 2000 under the revolving loan note and the mortgage note. Academy subsequently filed a petition to open the judgment, a move PNC has opposed. The two actions were consolidated on October 19,2000.

On November 30, 2000, the petitioners filed this motion.

DISCUSSION

The waivers are valid, and these actions fall within their scope. Accordingly, the motion to strike the demand for a jury trial will be granted.

Under Pennsylvania law, the right to trial by jury may be waived by express agreement. Ottavio v. Fibreboard Corp., 421 Pa. Super. 284, 289, 617 A.2d 1296, 1299 (1992); Stock v. Amott, 415 Pa. Super. 113, 122, 608 A.2d 552, 556 (1992). Here, under the waivers’ plain language, the respondents have waived the right to demand a jury trial for any action related to the loans. The respondents, however, argue that the waivers are invalid because they were not made knowingly and voluntarily.

Federal cases interpreting the right to a trial by jury have applied a strict test to determine whether a waiver is valid:

“The Seventh Amendment right to a jury trial can only be surrendered through a knowing and voluntary waiver. In deciding whether a waiver is knowing and intelligent, a court may consider: (1) whether there exists gross disparity in bargaining power between the parties; (2) the business or professional experience of the party opposing the waiver; (3) whether the opposing party had the opportunity to negotiate contract terms; and (4) whether the clause containing the waiver was conspicuous. A voluntary waiver may be inferred from the circumstances surrounding the agreement, and the party seeking to enforce the waiver bears the burden of proof.” Phoenix Four Grantor Trust #1 v. 642 N. Broad St. Assocs., no. civ. a. 00-597, 2000 WL 1717261 at *2 (EX). Pa. Nov. 15,2000).

Application of this four-prong test here dictates that the respondents’ arguments must fail. Each of the waivers was set forth entirely in capital letters in a separate paragraph. Indeed, in several of the loan documents, the waiver was in large, boldface type and was placed immediately above the signature line. The allegedly overwhelming size of the documents is equally unconvincing, in that each of the notes is no more than two pages long. In sum, this court submits that the waivers are conspicuous.

This court also believes that the respondents had the business experience necessary to be aware of the waivers. The summary prepared by Academy in anticipation of the loans details the extensive education and experience of its principals, including Kaufman and Polsky. In addition, the respondents appear to have had the benefit of counsel. Robert S. Dubin, a third Academy principal, has a law degree, a master of laws and nearly three decades of “extensive” business experience. This is sufficient to convince this court that the respondents had more than adequate business and professional experience.

Similarly, a disparity in bargaining power and lack of opportunity for negotiation cannot be found here. The circumstances described by respondents amount to nothing more than the conditions under which many commercial transactions typically are consummated. The immediate necessity of completing the loan transaction was imposed by a third party under terms consented to by Academy, and thus does not constitute grounds for claiming disparate bargaining power with PNC.

Moreover, the fact that PNC used its right to confess judgment to coax the execution of the forbearance agreements does not establish a disparity in bargaining power. To hold otherwise would be to invalidate countless business transactions and effectively preclude PNC from ever negotiating with a borrower while it held confession of judgment power. Accordingly, any disparity in bargaining power or lack of opportunity for negotiation in this situation is nothing outside the ordinary and, to the extent that it was present, can be attributed to Academy and its zeal to conclude the transaction for which the loans were promised.

Based on the above, this court submits that the waivers were knowing and voluntary. The waivers are valid. The motion should be granted and the respondents’ jury trial demand stricken. Accordingly, a contemporaneous order will be entered striking the jury trial demand.

ORDER

And now, January 30,2001, upon consideration of the motion to strike the demand for a jury trial filed by petitioners (PNC Bank N.A., Herbert McDonald and The Fulcrum Group) and respondent’s opposition to it, and in accord with the memorandum opinion being filed contemporaneously with this order, it is hereby ordered that the petitioner’s motion to strike respondents’ demand for a jury trial is granted.

      . The agreement, the notes and the guaranty agreements are referred to collectively as the “loan documents.”

      . While the precise language differs from document to document, all the waiver clauses are broad in their scope.

      . PNC argues that there were defaults and these occurrences resulted in the forbearance agreements. Academy, on the other hand, maintains that there was no default and that it entered into the forbearance agreements as a result of pressure by PNC.

      . Each of the waivers is broad and applies to any action having any relation to the loans. As each of the parties’ claims bears a significant connection to the loans, there can be no doubt that the provision applies. See Today’s Man Inc. v. Nationsbank N.A., no. civ. a. 99-479, 2000 WL 822500 (E.D. Pa. June 22, 2000) (finding that plaintiff’s claims fell within the “sweeping” language of the waiver of the right to trial by jury); Curtis Ctr. Ltd. Partnership v. Sumitomo Trust & Banking Co., civ. a. no. 95-1465, 1995 WL 365411 (E.D. Pa. June 15,1995) (same).

      . In general, “the Seventh Amendment is applicable only to federal court proceedings.” Wertz v. Chapman Twp., 559 Pa. 630, 636 n.3, 741 A.2d 1272, 1275 n.3 (1999). See also, City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 719 (1999) (United States Constitution Seventh Amendment does not apply to suits in state courts). However, Pennsylvania courts have found interpretations of the Seventh Amendment persuasive when addressing the right to a jury trial under Article 6, Section 1 of the Pennsylvania Constitution. See Nealy v. State Farm Mutual Automobile Insurance Co., 695 A.2d 790, 793 (Pa. Super. 1997) (relying on several federal court cases addressing Seventh Amendment right to jury trial).

      . As to this last item, it is important to note that there is no consensus as to which party bears the burden of proof in arguing the validity of a jury trial waiver. Compare Leasing Service Corp. v. Crane, 804 F.2d 828, 833 (4th Cir. 1986) (burden is on party seeking to uphold the waiver of the right to a jury trial) with K.M.C. Co. v. Irving Trust Co., 757 F.2d 752, 758 (6th Cir. 1985) (burden is on party seeking to invalidate contractual agreement waiving right to jury trial). See Luis Acosta Inc. v. Citibank N.A., 920 F. Supp. 15, 18 (D.P.R. 1996) (noting federal circuit courts’ split as to burden of proof).
      In this case, however, the burden of proof was not controlling in this court’s decision.

      . To the extent that the respondents’ argument can be distilled into the simple assertion that they did not read the agreement, it is singularly unimpressive: “in the absence of fraud, the failure to read a contract before signing it is ‘an unavailing excuse or defense and cannot justify an avoidance, modification or nullification of the contract;’ it is considered ‘supine negligence.’ ” Germantown Savings Bank v. Talacki, 441 Pa. Super. 513, 521, 657 A.2d 1285, 1289 (1995) (finding that confession of judgment provision in the same size type as the rest of the nine-page document was adequate). Moreover, there is no support for the respondents’ creative argument that the waivers should have specified that the right to a jury trial is constitutional in nature and should have stated that the respondents had right to a jury trial for breach of contract claims.


author: FORD, J.,

text:
    Raspaldo v. Sacred Heart Hospital
    C.P. of Lehigh County,
    no. 1999-C-2221 V.

      Marc G. Brecher, for plaintiffs.

      Katherine B. Kravitz, for defendants.
    November 17, 2000
   FORD, J.,

This is a medical malpractice action whereby the plaintiffs sue as co-administrators of the estate of Alexa Marie Raspaldo, and in their own right.

In their complaint of September 8,1999, the plaintiffs aver medical negligence in the obstetrical care rendered to plaintiff, Amy L. Raspaldo. Plaintiffs claim that the negligence resulted in the death of the decedent, Alexa Marie Raspaldo, minutes after her birth on May 2,1999.

On October 6, 1999, the defendants filed preliminary objections to the complaint. We have considered the arguments of counsel of April 11,1999 and the briefs submitted by counsel. We hereafter discuss each preliminary objection.

DEMURRER — CORPORATE NEGLIGENCE

Plaintiffs’ complaint purports to set forth a cause of action, based upon corporate negligence, against Sacred Heart Ob/Gyn Associates. The demurrer seeks to have this claim dismissed as not setting forth a viable cause of action. The demurrer also addresses what the defendants believe are corporate negligence claims against the individual physicians. However, plaintiffs acknowledge in their response to the preliminary objections that corporate negligence claims are not brought against the individual physicians. Plaintiffs will be held to that assertion. Thus, there are no corporate negligence claims stated against the individual physicians.

Does the law of the Commonwealth recognize a cause of action for corporate negligence against a physician group practice like Ob/Gyn?

When reviewing preliminary objections, the court must accept as true all well-pleaded, material and relevant facts as well as all reasonable inferences drawn therefrom. Mellon Bank N.A. v. Fabinyi, 437 Pa. Super. 559, 650 A.2d 895 (1994). When the preliminary objection is a demurrer, the court will resolve the issues solely on the basis of the pleadings and the court will not consider any testimony or other evidence. Id. For the court to sustain the preliminary objection, the face of the complaint must reveal that the claim cannot be sustained and that the law will not permit recovery. Id. If any doubt exists, the court must overrule the objection. Id.

We note the accurate statement of the law pressed by the plaintiffs, namely, that the question presented by a demurrer is whether, on the facts averred, the law says with certainty that no recovery is possible. Scarpitti v. Weborg, 530 Pa. 366, 369, 609 A.2d 147, 148-49 (1992).

The appellate courts have not addressed whether corporate negligence should be extended to physician group practices. Currently, corporate negligence claims may be asserted against only hospitals and health maintenance organizations.

The theory of health care corporate negligence was first adopted in Pennsylvania in the case of Thompson v. Nason Hospital, 527 Pa. 330, 591 A.2d 703 (1991). Under the doctrine of corporate negligence, a hospital owes a direct duty to patients to ensure their safety and well

being. Id. at 339, 591 A.2d at 707. The duties owed by a hospital to a patient are divided into four categories:

“(1) a duty to use reasonable care in the maintenance of safe and adequate facilities and equipment,...
“(2) a duty to select and retain only competent physicians, ...
“(3) a duty to oversee all persons who practice medicine within its walls as to patient care,... and
“(4) a duty to formulate, adopt and enforce adequate rules and policies to insure quality care for the patients, ....” Id. (citations omitted)

In 1998, our Superior Court extended corporate negligence to health maintenance organizations (HMOs). The court recognized the role HMOs play in providing total health care to their patients. Shannon v. McNulty, 718 A.2d 828, 835 (Pa. Super. 1998). Although the court found that HMOs do not specifically practice medicine, HMOs are involved in the daily decision making which affects patient care, such as limiting the length of hospital stays, restricting access to specialists, restricting access to therapy, or preventing emergency room care. Id. HMOs affect the care received by subscribers. For these actions, HMOs must be held liable when they do not pass the test of medical reasonableness. Id. The court stated, “[w]e see no reason why the duties applicable to hospitals should not be equally applicable to an HMO when that HMO is performing the same or similar functions of a hospital.” Id. at 836.

Counsel have done a fine job in bringing to the attention of the court decisions of other courts of common pleas which have addressed whether corporate negligence should be extended to private physician practice groups. One case cited was Anderson v. Orthopaedic Consultants Ltd., 77 Lancaster L. Rev. 87 (2000) (Stengel, J.), which sustained preliminary objections and dismissed a claim based on corporate liability against an orthopedic practice. Another was Oven v. Pascucci, Lackawanna County no. 99-CV-5279 (June 9, 2000) (Nealon, J.), which overruled preliminary objections and permitted a claim for corporate negligence to proceed against a corporation employing an optometrist and medical doctor at which Lasik® eye surgery was performed. Both cases contain excellent, thorough histories of corporate negligence in the Pennsylvania courts.

This court also previously addressed attempts by plaintiffs to bring corporate negligence claims against physician group practices. See Tuffiash v. Lehigh Valley Hospital, 46 Lehigh L.J. 181 (1994) andAttinello v. St. Luke’s Hospital, Lehigh County no. 1998-C-477V (Ford, J.).

Our reading of Thompson v. Nason Hospital, supra, and Shannon v. McNulty, supra, leads us to the conclusion that our appellate courts did not intend to extend corporate negligence responsibility to physician group practices.

However, the allegations of paragraph 14 of the complaint lead to the conclusion that Ob/Gyn is more than the typical obstetrics practice. Whether that is supported by actual evidence remains to be seen. Accordingly, because the allegations of the complaint describe Ob/Gyn as more akin to a hospital than a physician group practice, the claim for corporate negligence against Ob/Gyn survives the demurrer.

Let us see if discovery demonstrates that Ob/Gyn is a typical physician group practice limiting itself to medical care and treatment related to obstetrics and gynecology. On the other hand, if discovery demonstrates that Ob/Gyn played a “gatekeeping role” in the health care of plaintiff, Amy Raspaldo, that it required Amy Raspaldo to commit to a single corporate health care provider as a matter of medical necessity, or that other factors distinguish Ob/Gyn from other physician group practices, perhaps this claim for corporate negligence can proceed.

Our denial of the demurrer should not be interpreted as this court’s concluding that theories of corporate negligence can properly be stated against physician group practices. We hold to the contrary. We deny the demurrer so that the plaintiffs have their opportunity to demonstrate that there is something unusual about defendant, Ob/Gyn, which has characteristics closer to a hospital or HMO than a private physician group practice.

DEMURRER — NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS

Plaintiff Amy L. Raspaldo attempts to set forth a claim for negligent infliction of emotional distress in the third cause of action. Plaintiff Jose F. Raspaldo attempts to set forth a claim for negligent infliction of emotional distress in the fourth cause of action. The defendants demur to these claims and argue that the complaint fails in not properly setting forth two of the three elements for a negligent infliction of emotional distress claim.

According to the complaint, Mr. Raspaldo was present in the delivery room for a portion of Mrs. Raspaldo’s labor and then for the entire delivery. The complaint alleges that a traditional delivery was inappropriate and a Cesarean section should have been performed. It alleges that the plaintiffs witnessed the use of a forceps and vacuum extractor and that these were “improperly placed” in Mrs. Raspaldo’s body. The complaint alleges that Mr. and Mrs. Raspaldo were advised during the delivery that the deceased child was in “fetal distress.” It also alleges that the plaintiffs witnessed the death of the child 17 minutes after the delivery.

The injuries that Mrs. Raspaldo claims, in her own right, are “severe emotional distress, pain, suffering, causing shock to her nervous system and illness.” (Complaint, paragraph 37.) Plaintiff, Mr. Raspaldo, claims injuries of “emotional distress causing shock to his nervous system and illness.” (Complaint, paragraph 43.)

The defendants’ brief sets forth a rather lengthy, well constructed and, we believe, accurate recitation of when damages may be recovered for negligent infliction of emotional distress. The plaintiffs do not dispute the defendants’ exposition.

First, of course, a plaintiff may recover for emotional or mental suffering as an element of damages.

Second, recovery of damages for emotional distress may be obtained where the plaintiff was in the “zone of danger.” In these cases, a plaintiff is in personal danger of physical impact because of a negligent force directed at him, and the plaintiff actually fears that a physical impact may occur. Neiderman v. Brodsky, 436 Pa. 401, 413, 261 A.2d 84, 90 (1970). No one argues that this is a “zone of danger” case.

Third, recovery is allowed for a person who is “outside the zone of danger” where the plaintiff was a close family member located near the scene of an accident and shock resulted from direct emotional impact from observing a traumatic encounter with a tort-feasor. Sinn v. Burd, 486 Pa. 146, 404 A.2d 672 (1979). This is often called the “bystander rule.”

The plaintiffs, in the third and fourth causes of action, attempt to state claims under this third theory in order to recover for emotional distress that they allegedly experienced as a result of the claimed acts of negligence upon their deceased daughter. Through their demurrer, the defendants challenge the plaintiffs’ attempted use of the bystander rule to seek recovery herein.

A first requirement for a claim under the bystander rule is that the plaintiff must be a “close relative” of the person who suffers the precipitating negligent injury. Love v. Cramer, 414 Pa. Super. 231, 234, 606 A.2d 1175, 1177 (1992). Plaintiffs satisfy this requirement through their pleading in that they allege that the deceased child was their daughter.

The second requirement is that the plaintiff claiming damages must experience a “sensory and contemporaneous observance” of the precipitating injury to the close relative. Id., 414 Pa. Super, at 234, 606 A.2d at 1177. Plaintiffs satisfy this requirement in their pleading. They personally witnessed the result of the alleged negligence, namely, the death of their child. But they witnessed the events that are alleged to have caused the death. They were told the child was in fetal distress as they watched the delivery. They saw an alleged improper use of forceps and vacuum. They witnessed an attempt at natural delivery when, according to their complaint, Cesarean section was required. The plaintiffs adequately plead the observation of traumatic events that is necessary under the bystander rule.

Finally, recovery under the bystander rule requires that a plaintiff suffer physical injuries as a result of a defendant’s negligence. Armstrong v. Paoli Memorial Hospital, 430 Pa. Super. 36, 45, 633 A.2d 605, 609 (1993). As the Superior Court stated in Armstrong, “[temporary fright, nervous shock, nausea, grief, rage and humiliation if transitory are not compensable harm; but, long continued nausea or headaches, repeated hysterical attacks or mental aberration are compensable injuries. This court applied the Restatement standards to a case in which the plaintiff averred ‘headaches, shaking, hyperventilation, nightmares, shortness of breath, lack of control over the bowels, and tightening of the muscles in the neck, back and chest’ and found that she had stated a cause of action for negligent infliction for emotional distress when her employer wrongfully coerced her to enter an abusive substance abuse program. Crivellaro v. Pennsylvania Power & Light, 341 Pa. Super. 173, 491 A.2d 207 (1985). Relying on comment c to section 436A, a panel of this court held that ‘symptoms of severe depression, nightmares, stress and anxiety, requiring psychological treatment, and . . . ongoing mental, physical and emotional harm’ sufficiently stated physical manifestations of emotional suffering to sustain a cause of action. Love v. Cramer, [supra.] Cases which the Crivellaro court collected from other jurisdictions cite depression, nightmares, nervousness, insomnia and hysteria as physical symptoms warranting recovery. Crivellaro, 341 Pa. Super, at 180, 491 A.2d at 210.” Armstrong, 430 Pa. Super, at 44-45, 633 A.2d at 609.

The allegations of the complaint in paragraphs 37 and 43, set forth above, list the physical injuries plaintiffs claim they suffered as a result of experiencing the traumatic events occasioned upon their daughter. These allegations are vague. Did the plaintiffs in this case suffer passing physical ailments or were they of a more lasting nature? We cannot tell. However, if legitimate physical injuries were suffered, in the fashion that we have addressed, the plaintiffs are granted the opportunity to amend their complaint to specify them. Accordingly, the demurrer is denied but the plaintiffs will have to amend their complaint within 30 days to set forth what facts exist to sustain causes of action for negligent infliction of emotional distress.

MOTIONS TO STRIKE OR FOR MORE SPECIFIC PLEADING-AGENCY AND GENERAL AVERMENTS OF NEGLIGENCE

At the argument, counsel for plaintiffs indicated that she had come into possession of additional information so that more specific allegations can be made pertaining to the agents who were allegedly involved on behalf of the named defendants. Accordingly, we strike paragraphs 8,9,13(a), 14(a), 15(a), 16(a), and both paragraphs 17(a), with leave to amend within 30 days.

The defendants challenge paragraphs 14(a-d), 15(a-d), 16(a-d), and both paragraphs numbered 17(a-d), because the paragraphs do not set forth, with requisite specificity, the material facts giving rise to the general averments of negligence that are made in these paragraphs. We agree. Accordingly, we strike these paragraphs and provide plaintiffs with the opportunity to amend their pleading within 30 days of our order.

These challenged paragraphs of the complaint make general allegations as to procedures or tasks not performed by the given defendant. In the amended complaint, the plaintiffs should address in what fashion the pertinent defendant failed to or was negligent in not performing the given obligation.


author: CARPENTER m, J.,

text:
    A+ Printing Inc. v. City of Altoona

      C.P. of Blair County,
    no. 2000 GN 1688.

      Stephen D. Wicks, for petitioner.

      Michael L. Eggert, for respondent.
    September 11, 2000
   CARPENTER m, J.,

This matter comes before the court for determination of petitioner’s (A+ Printing Inc.) entitlement to an exemption from the business privilege tax imposed by the respondent, the City of Altoona, on the grounds that it is a manufacturer under 53 PS. 6902(4). A hearing was held before the court on June 23, 2000, at which this court admitted the certified record from the Act 50 hearing. The court also heard testimony from Michael A. Colledge, president and sole owner of A+ Printing, intended to supplement the existing record. An opportunity has been afforded for briefs to be filed the last of which was received on August 16, 2000. The matter is presently ready for our disposition.

This case began when the petitioner was assessed for a failure to file returns and pay business privilege taxes for the years 1997, 1998 and 1999. On December 16, 1999, the petitioner filed a petition for appeal of assessment of business privilege tax against the City of Altoona and the Altoona Area School District, contesting its liability for payment of the tax. On January 18, 2000, a hearing was held on the petitioner’s appeal before Hearing Officer Ira Weiss, Esquire. The record of that proceeding is court exhibit no. 1. At that hearing, the petitioner presented witness testimony and documentary evidence concerning the nature of the petitioner’s business operations.

On February 25, 2000, the hearing officer denied the petitioner’s appeal. On or about March 24, 2000, the petitioner filed a petition for review of the hearing officer’s decision with this court. A further hearing was held before this court on June 23, 2000, at which the petitioner presented additional testimony from Mr. Colledge (as indicated previously) and also introduced four documentary exhibits consisting of examples of products produced by the petitioner. All of these facts are essentially undisputed presently. The nature of the business engaged in by petitioner is also subject to agreement. The petitioner has been engaged in the business of commercial printing since 1992. It primarily produces cards, letterheads, envelopes, programs, carbon paper forms, brochures, catalogs and company annual reports. Only about five to 10 percent of petitioner’s business revenues stem from production of cards, letterheads and business envelopes. Forty to 45 percent of its revenues come from printing catalogs. The remaining 45 to 50 percent of its revenue is derived from the printing of brochures, reports, carbon forms and programs.

The printing process utilized by the petitioner involves design layout of the product, typesetting through a computer generator process, projection of film negatives from which an aluminum plate is produced, and application of ink to paper with the aluminum plate. The raw materials used by the petitioner are paper and envelopes, to which ink is applied through the above described process to produce a final product. The envelopes, which the petitioner purchases, are not altered in physical form through the petitioner’s printing process. In some cases, the paper received by the petitioner is cut or folded, as well as having ink applied to it. As the reader can see, the central question before the court is whether petitioner’s various treatments of paper constitute manufacturing.

The term “manufacturing” for purposes of the Local Tax Enabling Act was defined by the Supreme Court of Pennsylvania in the following terms: “[manufacturing] ... consists in the application of labor or skill to material whereby the original article is changed into a new, different and useful article____Whether or not an article is a manufactured product depends upon whether or not it has gone through a substantial transformation in form, qualities and adaptability in use from the original material, so that a new article or creation has emerged.... If there is merely a superficial change in the original materials, without any substantial and well signalized transformation in form, qualities and adaptability in use, it is not a new article or new production . . . .” Philadelphia School District v. Parent Metal Products Inc., 402 Pa. 361, 364, 167 A.2d 257, 259 (1961); see also, Bindex Corporation v. City of Pittsburgh, 504 Pa. 584, 587, 475 A.2d 1320, 1322 (1984).

The question of whether a particular activity constitutes manufacturing under this definition is to be resolved on the specific facts of the particular case. The court must view the term “manufacturing” narrowly for purposes of determining whether the petitioner is entitled to an exemption from local taxation as a manufacturer. Township of Muhlenberg v. Clover Farms Dairy Co., 665 A.2d 544, 546 (Pa. Commw. 1995).

The City of Altoona argues the decision of the hearing officer was correct because the original articles received by the petitioner — paper and envelopes — are not transformed in form, qualities and adaptability in use, and do not become new articles and new products. In effect, paper and envelopes come into the petitioner’s business, and what leaves the business is still, essentially, paper and envelopes. Any differences are argued to be namely, superficial — ink has been applied to the product, and in some cases, the size of the paper has been changed. We disagree with this analysis and find for the petitioner.

At the outset, we concede the distinction which we are being asked to make is a difficult one. We find no particular authority which conclusively binds us. We base our decision on a fair reading of the case law combined with the reasonable inferences which appeal to our common sense and judgment. Petitioner cites to us the case of Ohiopyle Prints v. Uniontown Area School District, 662 A.2d 672 (Pa. Commw. 1995) as particularly instructive. The Ohiopyle decision discussed the transformation of paper, the specific commodity with which we are dealing in the present case as follows:

“When a newspaper is printed, paper and ink are radically transformed into a device for the communication and storage of information, opinions, and advertising. The consumer who purchases a newspaper is not merely buying paper and ink, but is purchasing a product that will provide him or her with access to information. Taxpayer’s printing process on the other hand, simply converts an undecorated garment into a decorated garment, without any change in use at all.” See Ohiopyle at 674.

We find the logic of the Ohiopyle decision well grounded both in law and in logic. Paper is a commodity capable of numerous uses. Indeed, those uses are so many as to be almost incapable of enumeration. What our petitioner’s process accomplishes, as in Ohiopyle is to render all of those possible applications of paper moot except for one purpose — namely, use in a particular customer’s business operations. We believe this necessarily constitutes manufacturing under the stated definition. Even construing the term “manufacturing” narrowly as we are required to do, we believe petitioner’s business so closely resembles the newspaper printer it is entitled to the same exemption.

Like the newspaper publisher, the petitioner, through the application of labor, changes the original article (paper) into a new, different and useful article. The paper goes through a literal transformation in form, quality and adaptability from an original blank page so a new article (be it business card, catalog, poster, envelope) has emerged. This change is not superficial. It is a substantial and well signalized transformation in form, quality and adaptability in use. What was a commodity useful to all is now uniquely useful only to the immediate purchaser. That distinction differentiates our situation and likens it to the production of a newspaper (unique) as opposed to respondent’s attempt to liken it to circumstances found not to constitute manufacturing (i.e., use of cardboard sheets to make boxes, printing of tee shirts, etc.). In those cases, which respondent cites as controlling, we see superficial change to a product that was already in essentially final form and ready for use. A shirt, for example, can be worn by the intended user no matter what logo is printed onto it or, indeed, if no logo is printed on it at all. In that very real sense, the change which a company makes in supplying a design for that shirt transforms the underlying product not at all. That is not the case, however, with an operation such as petitioner’s which takes an unfinished product and adapts it (final form) to a particular customer. Whether petitioner is changing a general paper envelope which could not pass through the Postal Service to one which does for that customer, reducing a card to an advertisement for a business/individual as a business card, or changing blank paper to a business brochure or catalog he has inevitably taken a general commodity and altered its usefulness and adaptability permanently. That constitutes manufacturing as we read the definition. Accordingly, and consistent with the above, petitioner’s appeal of his 1997,1998 and 1999 business privilege taxes is granted, the decision of the hearing officer is reversed, and this appeal sustained.