text:
    Gotwals v. Brook Lane Psychiatric Center

      C.P. of Fulton County,
    no. 30 of 1996 C

      John N. Keller, for plaintiff.

      Michael M. Badowski, for defendants.
    October 20, 1998
   WALKER, P.J.,

FACTUAL AND PROCEDURAL BACKGROUND

This case involves a suit for defamation. In her complaint filed on February 5,1996, plaintiff alleges that on November 7, 1995, defamatory statements were made about her at a meeting between Fulton County Medical Center (FCMC) staff and Mr. Lynn Rushing, a representative of Brook Lane Psychiatric Center. Plaintiff had been employed by Brook Lane from 1979 until October 1995. From 1992 until her resignation, she worked as a clinical social worker and had single-handedly staffed Brook Lane’s satellite office at FCMC in McCon-nellsburg, Fulton County. She left her employment to accept another position at Manito Inc., as a family therapist. The meeting at FCMC was held to determine what services Brook Lane would provide at FCMC after plaintiff’s departure.

In discussing whether plaintiff could be hired to perform part-time services at FCMC, Mr. Rushing, as Brook Lane’s representative, made the statement that plaintiff was “severely burned out” and that she was “doing the right thing to take care of herself a little bit.” He furthermore stated his opinion that plaintiff needed “time to take care of herself, she needs to heal and to regroup a little bit before she can provide.” Mr. Rushing also said that he did not anticipate that Brook Lane would hire plaintiff again, because “it is important for her to have a clean break at least for a considerable period of time.” Statements were furthermore made to imply that she could not handle her job while she was there, that she “generated a very large waiting list.” Plaintiff further alleges that the FCMC staff understood these statements to mean that she could not presently practice her profession.

A pre-trial conference in this matter was held on August 26, 1998. Trial is set for November 3, 1998. Both plaintiff and defendants filed a motion in limine raising three issues which are the subject of this opinion.

DISCUSSION

1. Plaintiff’s Motion in Limine

Plaintiff filed a motion in limine requesting this court to exclude a memorandum written by Kristie Palmer, plaintiff’s supervisor at Brook Lane. The memorandum was written to Lynn Rushing and includes a reference to a statement made by a “mother of two patients” that plaintiff had contacted her and told her that as long as the two patients received intensive family services in the house, they could not see Kristie Palmer at FCMC. Plaintiff wants to have this memorandum excluded because it constitutes hearsay and plaintiff contends that the writer, Kristie Palmer, will be available to testify at trial. Plaintiff furthermore seeks to exclude any testimony by Kristie Palmer regarding the statement made by the “mother of two patients” about plaintiff, because it constitutes hearsay.

At argument on the motions in limine held on September 21, 1998, counsel for defendants indicated that he did not intend to use the memo, nor have Kristie Palmer testify regarding the memo. It thus appears that this issue is moot. However, in case defense counsel changes his mind on this issue, it is this court’s ruling that he may not introduce the statement itself into evidence, nor present evidence of the statement made by the “mother of two patients” unless he calls that person as a witness.

2. Defendants’ Motion in Limine

Defendants have raised two issues in their motion in limine. First, they seek to exclude the excerpts made from the audiotape of the meeting in issue between FCMC and Brook Lane, because it is not the best evidence of the statements made at the meeting. Secondly, they seek to prevent plaintiff from presenting her claim for punitive damages to the jury, because they argue that the facts as established through discovery do not provide a basis for such claim.

a. Excerpts of Tape Made at the Meeting

Under the best evidence rule, the original of a recording must be introduced to prove the contents of that recording. Pa.R.E. 1002. However, the original is not required in four circumstances:

“(1) if the original is lost or destroyed;
“(2) if the original cannot be obtained by any available judicial process;
“(3) if the original is in possession of the opponent who was put on notice but did not produce the original; or
“(4) if the recording is merely collateral and not closely related to a controlling issue.” Pa.R.E. 1004.

It is clear that the contents of the statements made at the meeting are controlling to the determination of whether defamation exists. Thus, the tape recording is not merely collateral and under the best evidence rule the tape itself must be introduced into evidence, unless one of the other exceptions applies.

Sound recordings may be admitted into evidence even if they are of imperfect quality unless the inaudible portions are so substantial as to render the recording as a whole untrustworthy. Commonwealth v. Leveille, 289 Pa. Super. 248, 433 A.2d 50 (1981). In the underlying case, the parties submitted the audiotape from the meeting to this court for review. After listening to the tape, it appears to this court that many portions of the tape are inaudible, although there also are some clearly audible sections. However, this court finds that the inaudible portions are so substantial as to render the tape as a whole untrustworthy. Thus, the,original audiotape is not available to be introduced at trial.

This court could not find any case law, nor has counsel provided this court with any authority regarding the issue of what evidence may be admitted when the original of an audiotape exists but is largely inaudible. It appears to this court that the purpose of the best evidence rule is to require parties to prove the contents of a writing or recording by the best means possible, i.e. the original. Packel and Poulin, §1001 (1987). However, the exceptions that have been made to this rule were based on a finding that the original was shown to be unavailable through no fault of the proponent. Id. It is clear in this case that neither party is at fault regarding the inaudibility of the tape. This court finds the fact that much of the tape is inaudible to be equivalent to the tape having been destroyed or lost. Thus, this court finds that no original of the recording is available to prove the contents of the meeting, and therefore production of the tape is not required.

When production of the original is not required, the proffering party may present any evidence of the contents, including oral testimony. Comment to Pa.R.E. 1004. This court considered whether plaintiff would be permitted to introduce into evidence the excerpts made of the meeting by Charlene Brady, who attended the meeting. The parties submitted the excerpts to this court for review. They are not a verbatim transcription of the meeting, but rather contain the essence of the discussion, including some direct quotes and summaries of the discussion.

This court finds that the written excerpts themselves are not sufficiently reliable to be admitted into evidence. However, Ms. Brady was present at the meeting and she made the excerpts within a few days of the meeting. She will therefore be permitted to testify regarding her recollection of what was said at the meeting. Furthermore, plaintiff’s counsel may use the excerpts to refresh Ms. Brady’s recollection. This court believes that this constitutes competent evidence for plaintiff to introduce evidence regarding the contents of the meeting in the absence of the tape itself.

b. Punitive Damages

Defendants argue that plaintiff should be precluded from pursuing her claim for punitive damages. In order to impose punitive damages in a defamation case, plaintiff must satisfy the “actual malice” test. Hepps v. Philadelphia Newspapers Inc., 506 Pa. 304, 330, 485 A.2d 374, 388 (1984). Actual malice can be established either by proving the publication was made with knowledge of the falsity of its content or with reckless disregard of whether it was false or not. Hepps, 506 Pa. at 331, 485 A.2d at 389. Where the evidence does not support a finding that the publication was made with actual malice, the court may properly withdraw that issue from the jury’s consideration. Hepps at 332, 485 A.2d at 389. However, such withdrawal may take place only in a clear case. Hepps at 331, 485 A.2d at 388.

In the underlying case, this court finds that it is not absolutely clear at this time, based on the facts as established in discovery, whether actual malice exists. Therefore, this court will reserve ruling on this issue until the conclusion of trial. At that time, this court will determine whether plaintiff’s evidence provides a basis for the imposition of punitive damages, to be determined by the standard set forth above. If this court determines at that time that no such basis exists, it will withdraw that issue from the jury’s consideration.

ORDER

October 19, 1998, upon consideration of the motions in limine filed by both parties, this court enters the following order:

(1) Defendants will not be permitted to introduce into evidence the memo written by Kristie Palmer.

(2) Defendants will not be permitted to introduce into evidence testimony by Kristie Palmer regarding statements plaintiff made to the “mother of two patients” referred to in her written memo; defendants must call that person if they wish to introduce those statements into evidence.

(3) The audiotape made of the meeting at issue in this case is found to be unavailable because it is substantially inaudible; plaintiff is permitted to introduce into evidence testimony by Charlene Brady regarding her recollection of what had been said at that meeting. Plaintiffs may not introduce into evidence the excerpts of that meeting prepared by Ms. Brady, but plaintiff may use those excerpts to refresh Ms. Brady’s recollection.

(4) This court reserves ruling on the issue of whether the jury may consider the imposition of punitive damages in this case until the conclusion of trial.


source: Caselaw Access Project

author:
ELLIOTT, Member,
     DONOHUE, Member,
     NIX, Member,

license: Public Domain

text:
    In re Anonymous No. 6 D.B. 94

      Disciplinary Board Docket no. 6 D.B. 94.
    February 9, 1999
   ELLIOTT, Member,

Pursuant to Rule 218(c)(5) of the Pennsylvania Rules of Disciplinary Enforcement, the Disciplinary Board of the Supreme Court of Pennsylvania submits its findings and recommendations to your honorable court with respect to the above-captioned petition for reinstatement.

I. HISTORY OF PROCEEDINGS

Petitioner, [ ], filed a petition for reinstatement on October 22, 1997. Petitioner was suspended from the practice of law for one year and one day by order of the Supreme Court dated January 31, 1996. Petitioner was suspended as a result of his failure to reveal on his application for admission to the Pennsylvania Bar that he had been arrested in 1985.

Reinstatement hearings were held on April 3, 1998 and April 27,1998 before Hearing Committee [ ] comprised of Chair [ ], Esquire, and Members [ ], Esquire and [ ], Esquire. Petitioner was represented by [ ], Esquire. Office of Disciplinary Counsel was represented by [ ], Esquire.

The Hearing Committee filed a report on August 14, 1998 and recommended that the petition for reinstatement be granted. No briefs on exception were filed by the parties.

This matter was adjudicated by the Disciplinary Board at the meeting of October 5, 1998.

n. FINDINGS OF FACT

The board makes the following findings of fact:

(1) Petitioner was born on April 2, 1963 and was admitted to the bar in Pennsylvania on January 2, 1991. His current address is [ ].,

(2) On July 8, 1994, a hearing was held on a petition for discipline filed against petitioner arising from his failure to reveal in his application for admission to the Pennsylvania Bar that he had been arrested in 1985.

(3) By order of the Supreme Court of Pennsylvania dated November 16, 1995, petitioner was transferred to inactive status pursuant to Pa.R.D.E. 219, effective December 16, 1995. This transfer was due to petitioner’s failure to pay his attorney’s annual fee.

(4) Petitioner was notified by letter of November 17, 1995 of this transfer and his obligations thereunder.

(5) By order of the Supreme Court of Pennsylvania dated January 31, 1996, petitioner was suspended from the Pennsylvania Bar for a period of one year and one day. This suspension was based on his failure to reveal his arrest on the bar application.

(6) Petitioner was informed of the suspension and his obligations thereunder.

(7) Petitioner failed to provide the mandated notice to the [ ] Bar Association to remove his listing from its legal directory.

(8) In February 1996, petitioner filed a petition, and in March 1996, he filed a supplementary petition. These petitions requested that his suspension be made retroactive to November 16,1995, the date of petitioner’s transfer to inactive status. These petitions were denied by Supreme Court order dated April 8, 1996.

(9) In May 1997, under the caption [ ], Petitioner v. The Disciplinary Board of the Supreme Court of Pennsylvania and The Continuing Legal Education Board of the Supreme Court of Pennsylvania, petitioner filed in the Supreme Court of Pennsylvania an application for leave to file original process and declaratory judgment. This action sought to avoid the requirement that petitioner comply with the provisions of the Pennsylvania Rules of Continuing Legal Education as a condition of his reinstatement.

(10) By order dated August 1,1997, the Supreme Court granted the application to proceed in forma pauperis and denied the petition for declaratory judgment and motion to strike.

(11) On October 22, 1997 petitioner filed the instant petition for reinstatement.

(12) From petitioner’s 1991 admission to the bar to his inactive status in November 1995, his legal employment consisted of a variety of short-term positions. He worked as general counsel to a corporation in Florida for seven months in 1991, although he was not admitted to the bar. From 1993 to 1995, petitioner was employed as general counsel to a Pennsylvania company.

(13) After petitioner’s transfer to inactive status and his suspension, he held a variety of positions, both legal and non-legal, in which he has apparently been unable to sustain a successful employment relationship, and has been unemployed since September 1997. (N.T. 4/3/98 p. 27.)

(14) Petitioner completed 37 credit hours of CLE and reads the [ ] and legal treatises. To keep current on the law, petitioner also reads newspapers and watches television news shows pertaining to current legal events.

(15) Petitioner presented the testimony of two character witnesses. [A], Esquire, has known petitioner since law school. [A] testified that he has not talked to petitioner in approximately one year and does not socialize in the same circle as petitioner. (N.T. 4/3/98 pp. 103-104.) [A] testified that he had not discussed petitioner with anyone but the other character witness on the day of the hearing. (N.T. 4/3/98 pp. 103-104.)

(16) [B], Esquire, has known petitioner since law school. Although [B] and petitioner are socially friendly, the witness testified that he never discussed with acquaintances the fact of petitioner’s suspension, and, in fact, petitioner did not tell him of the suspension until sometime after January 1998. (N.T. 4/3/98 pp. 112-13.)

(17) In addition to the various petitions filed by petitioner regarding the disciplinary proceedings, petitioner filed a lawsuit on his own behalf against [C] Company and [D] Insurance. This suit was filed in the United States District Court for the [ ] District of Pennsylvania and involved an accident petitioner suffered in an elevator in Florida.

(18) Petitioner initiated and pursued this litigation even though he was aware that the two-year Pennsylvania statute of limitations barred his action. Apparently, he argued that the federal court should apply the four-year Florida statute of limitations. Confronted with Pennsylvania’s borrowing statute (42 Pa.C.S. §5524) he argued that statute was unconstitutional.

(19) Petitioner has a pending application for admission to the Florida Bar. This is the third application filed by petitioner seeking admission in Florida. The other two were denied.

(20) Disciplinary Counsel [ ] suggested to petitioner and his own counsel that petitioner might benefit from discussing a mentor relationship with [E], Esquire, executive director of the [F]. [E] did not and does not employ petitioner, but he testified that he met with petitioner, and while he did not know that their discussions used the term “mentorship,” he said he would be available to petitioner to “discuss problems with him, give him advice....” (N.T. 4/27/98 p. 7.)

III. CONCLUSIONS OF LAW

Petitioner has failed to meet his burden of proving by clear and convincing evidence that he has the moral qualifications, competence and learning in the law required to practice law in this Commonwealth.

Petitioner has failed to demonstrate that his resumption of the practice of law will neither be detrimental to the integrity and standing of the bar or the administration of justice nor subversive of the public interest.

IV. DISCUSSION

Pursuant to Pa.R.D.E. 218(a), an attorney who is suspended from the practice of law for a period exceeding one year may not resume practice until reinstated by order of the Supreme Court of Pennsylvania.

In order for petitioner to gain reinstatement after a suspension exceeding one year, it is petitioner’s burden to prove by clear and convincing evidence that he possesses the moral qualifications, competence and learning in the law necessary to practice law in Pennsylvania, and that the resumption of the practice of law by petitioner will be neither detrimental to the integrity and standing of the bar or the administration of justice nor subversive of the public interest. Pa.R.D.E. 218(c)(3)(i).

In determining whether petitioner clearly demonstrated his present fitness, the board must consider the nature of petitioner’s misconduct, his present competence and legal abilities, his character, his rehabilitation, and the degree of remorse expressed. Philadelphia Newspapers Inc. v. Disciplinary Board of the Supreme Court, 468 Pa. 382, 363 A.2d 779 (1976).

Petitioner was suspended for his failure to disclose a prior arrest on his Pennsylvania Bar application. Question 14(b) on the application asked: “Have you ever been arrested or prosecuted for any crime (other than a summary motor vehicle violation)?” Petitioner checked the “no” answer box in response. Petitioner was arrested in 1985 on a criminal charge of solicitation.

Petitioner was admitted to the Pennsylvania Bar in January of 1991.

In March of 1991, petitioner applied for the bar in Florida. Question 20a of the Florida Bar application directs applicants to:

“List all instances in your entire life (including while you were a juvenile) in which you have been arrested, detained or restrained, given a warning or taken into custody or accused, formally or informally, of the violation of a law, or ordinance, or accused, formally or informally, of committing a delinquent act.” (Exhibit P-5, p. 7.)

The application includes the following instruction:

“In answering questions 20-21, you are warned that no statute, court order of legal proceeding withholding adjudication, expunging the information required herein, or dismissing, vacating or setting aside any arrest, accusation or conviction, or purporting to authorize any person to deny the existence of such material shall excuse less than full disclosure, Irrespective Of Any Advice From Any Source That Such Information Need Not Be Disclosed.. ..” (Exhibit P-5, p. 7.)

Petitioner checked the “no” answer box in response. The Florida Board of Bar Examiners discovered this omission and denied petitioner’s application. Petitioner later revealed the omission to the Pennsylvania Board of Law Examiners in April of 1992. Disciplinary proceedings followed, resulting in petitioner’s suspension for one year and one day by order of the Supreme Court on January 31, 1996.

Petitioner testified on his own behalf as to the misconduct that led to his suspension. He testified that he failed to reveal the arrest because he was scared of the consequences of disclosing it:

“It’s my belief I was in denial, I was embarrassed and I think I repressed it to some extent. I take full responsibility for it. I am sorry for what I did. I have come a long way.” (N.T. 4/3/98 p. 32.)

Petitioner filed a petition for reinstatement on October 22, 1997 and reinstatement hearings were held on April 3 and April 27, 1998. A stipulation of the parties was offered into evidence. Petitioner testified and presented the testimony of two character witnesses. Office of Disciplinary Counsel’s case consisted of two witnesses and 61 exhibits.

Having outlined the misconduct, the board next considered petitioner’s present competence and legal abilities. The record establishes that petitioner has been unemployed since September 1997, and between his November 1995 transfer to inactive status and his April 1998 reinstatement hearings, petitioner had difficulty sustaining employment. (N.T. 4/3/98 p. 78.) He did, however, work in the summer of 1997 as a document reviewer for the [F]. Prior to petitioner’s transfer to inactive status and his suspension, he held a number of different positions, including telemarketer, road service counselor, legal assistant, document reviewer and researcher, and general counsel to a Pennsylvania company and a Florida corporation. Petitioner’s tenure at these positions was short.

During his suspension, petitioner filed two pro se lawsuits. One case was filed against [C] Inc. and [D] Insurance as a result of a Florida accident which injured petitioner. The other matter was filed against the Disciplinary Board of the Supreme Court and the Continuing Legal Education Board, challenging the requirement that he fulfill his CLE credits and pay the costs of his prosecution prior to the board’s consideration of his reinstatement petition. Office of Disciplinary Counsel presented evidence on these matters to demonstrate petitioner’s lack of competence.

Office of Disciplinary Counsel presented evidence that at the time he filed the personal injury suit, he knew it was time-barred by the two-year Pennsylvania statute of limitations. When questioned as to his motives, petitioner testified that he thought his case had merit since he argued the unconstitutionality of the Pennsylvania borrowing statute; if successful in that argument, the court would have applied the four-year Florida statute of limitations and not the two-year Pennsylvania statute. Interestingly, he testified he might not have filed the suit if he were acting as the attorney in the matter, and not the pro se plaintiff. (N.T. 4/3/98 pp. 44, 88-89.) He testified he was desperate and hoped he could obtain a settlement: “I had to somehow get money together to pay for my disciplinary bills.” He persisted in this desperation by appealing the dismissal of the federal action to the United States Court of Appeals for the Third Circuit and when that was unsuccessful, he filed a writ of certiorari to the United States Supreme Court. Office of Disciplinary Counsel offered the suit against the Disciplinary Board and the CLE Board as evidence of petitioner’s competence and learning in the law; it also reflects on his judgment and character.

Petitioner testified that in order to maintain his learning in the law and competence, he took 37 CLE course credits and has regularly read the [ ] and other legal treatises. (N.T. 4/3/98 pp. 49-50.) The evidence above is not sufficient to sustain petitioner’s burden under Rule 218(c)(3)(i).

Disciplinary Counsel [ ] suggested to petitioner that he might benefit from discussing a mentor relationship with [E], Esquire, executive director of the [F]. [E] testified that he met with petitioner approximately three times and talked with him various other times. (N.T. 4/27/98 p. 7.) Careful to contextualize the “mentorship” and explain there was no employment prospect for petitioner, [E] described the relationship as one in which petitioner could use Attorney [E] as a sounding board and seek guidance in furthering his career. The Hearing Committee recommended that petitioner’s petition for reinstatement be granted. The committee’s reinstatement recommendation appeared to turn in large part on Attorney [E’s] willingness to be a sounding board for petitioner. While this is certainly an advantageous relationship for petitioner, on its own it cannot be the basis for granting his petition for reinstatement.

The next issue for the board on a reinstatement petition is to determine whether by clear and convincing evidence the petitioner met the burden of proving moral fitness. Typically, this is done through the presentation of favorable character testimony, but the testimony of this petitioner’s two character witnesses is hardly compelling. In re Anonymous No. 90 D.B. 85, 17 D.&C.4th 548 (1992); In re Anonymous No. 45 D.B. 84, 15 D.&C.4th 321 (1992). Although Attorney [B] testified that petitioner’s reputation was as an honest and truthful individual and he never heard negative things about him, such reputation evidence carries little weight in light of the fact that the witness did not know of petitioner’s suspension and the reasons for it until shortly before the reinstatement hearing. Petitioner did not sustain his burden of proof by clear and convincing evidence that he is morally qualified to practice law in Pennsylvania.

Cross-examination revealed that one witness, [A], Esquire, had not seen petitioner in at least nine months, but for a brief conversation the day of the reinstatement hearing with the other character witness. He never had the opportunity to discuss petitioner’s reputation with members of the community. (N.T. 4/3/98 pp. 103-105.) The second character witness, [B], Esquire, testified on cross-examination that he did not know petitioner had been suspended until after he spoke with Office of Disciplinary Counsel in January 1998. He further testified that he never discussed the fact of the suspension with others. (N.T. 4/3/98 pp. 112-13.) Petitioner also testified regarding his moral fitness:

“Basically I uphold virtues of truth and justice and responsibility . . .I’ve learned from my mistake ... It was an aberration, but I have suffered. This has been hanging over my head for six years... I basically accept responsibility and [want to] be able to move forward professionally and financially so that I can become a productive citizen and the good lawyer that I am.”

While the board is impressed with petitioner’s testimony, it does not meet his burden of proof required by 218(c)(3)(i).

The board finds that petitioner did not meet his burden of proof by clear and convincing evidence that he is morally qualified, competent and learned in the law. The board recommends that petitioner’s petition for reinstatement be denied.

V. RECOMMENDATION

The Disciplinary Board of the Supreme Court of Pennsylvania recommends that petitioner, [ ], be denied reinstatement to the practice of law.

The board further recommends that, pursuant to Rule 218(e), Pa.R.D.E., petitioner be directed to pay the necessary expenses incurred in the investigation and processing of the petition for reinstatement.

Board Members Marroletti and Nix dissented.

Board Member Caroselli did not participate in the consideration and disposition of this matter.

Board Member Schultz did not participate in the October 5, 1998 adjudication.

CONCURRING OPINION

DONOHUE, Member,

February 9,1999 — I join in the opinion of the majority and the recommendation that the petitioner be denied reinstatement.

The petitioner’s evidence of moral fitness to practice law was neither clear nor convincing.

The petitioner presented two character witnesses in support of his moral fitness. [B], Esquire, his acquaintance since law school and a social friend, did not even know that the petitioner had been suspended from the practice of law until approximately January 1998. This was two years after the date of the suspension. It is hard to imagine that the petitioner and [B] had sufficient interaction to put this witness in a position to testify as to moral fitness when he did not have the most rudimentary knowledge about the petitioner’s professional status. Although it is understandable that the petitioner did not want to publicize the underlying reasons for his suspension, this character witness did not even know of the fact of the suspension.

The second character witness, [A], Esquire, hadn’t seen the petitioner in almost a year, does not socialize in the same circles and never discussed the petitioner’s character with anyone else in the community. [A’s] testimony can be given very little weight. In essence, the petitioner presented two character witnesses who, at best, had nothing negative to say about him.

On the issue of competence, in most cases, this member would be persuaded that taking 37 CLE course credits would be sufficient to carry the petitioner’s burden. However, this petitioner’s pro se legal activities during his suspension evidence either a complete misunderstanding of, or a total disregard for, the appropriate purpose for commencing a lawsuit, i.e., to redress an injury. The petitioner’s admission that he may not have filed the stale personal injury claims “on behalf of a client” points to the conclusion that he understood that his filings on his own behalf were questionable if not improper. Whether this activity indicates incompetence or lack of appropriate character to practice law is not relevant. Either way, it is evidence against his reinstatement at this time.

Board Member Cunningham joins in this concurring opinion.

DISSENTING OPINION

NIX, Member,

February 9, 1999—

I. DISCUSSION

The sole question to be decided by this board is whether the petitioner’s request for reinstatement to the bar of the Supreme Court of Pennsylvania should be granted. This determination is based on the petitioner’s providing proof, by clear and convincing evidence, that he has the moral qualifications, competency and learning in the law required for admission to practice law, and that the resumption of the practice of law will neither be detrimental to the integrity of the bar or administration of justice, nor subversive of the public interest. Pa.R.D.E. 218(c)(3)(i).

In determining whether the petitioner clearly demonstrated his present fitness, the board must consider the nature of petitioner’s misconduct, his present competence and legal abilities, his character, his rehabilitation, and the degree of remorse expressed. Philadelphia Newspapers Inc. v. Disciplinary Board of the Supreme Court, 468 Pa. 382, 363 A.2d 779 (1976).

In the instant case, the petitioner was suspended from the practice of law for a period of one year and one day for failing to disclose a prior arrest on his Pennsylvania Bar application. The majority does not provide any illumination on the facts of this case that might have motivated the petitioner to answer the question on the bar application untruthfully. The facts surrounding the petitioner’s misconduct involve his arrest for solicitation of a male police officer while an undergraduate. The ultimate resolution of the arrest was a dismissal of all charges. Given the nature of the arrest, it is not unreasonable to believe the petitioner’s testimony that he believed that an arrest of this type on his record might very well be a bar to future employment. Further, given these facts, the petitioner’s statement that “I was embarrassed and I think I repressed it to some extent” can only be deemed to support this point of view. Of course, this does not lessen the misconduct, but it is an indicator of the petitioner’s state of mind and why he might have chosen a particular course of conduct.

Clearly, the Hearing Committee took these factors under consideration and in recommending reinstatement, opined: “that despite personal and professional problems, which the petitioner has experienced in the past, we are hopeful he has grown and developed both personally and professionally as a result of his misconduct and what has turned out to be a lengthy suspension. We believe he now possesses the moral character and learning in the law necessary to obtain readmittance to the bar.”

The majority ignores the findings of the Hearing Committee. This is difficult to understand, given the learned members comprising this committee who had the advantage of evaluating the petitioner’s credibility. The deference that this board usually gives to a hearing committee is ignored in this instance.

The majority bases its decision to recommend the denial of reinstatement by determining without any real factual basis that the petitioner did not meet its burden of proving his competence and learning in the law. The record supports that the petitioner has met this burden based on his having taken 37 CLE course credits and by regularly reading the [ ] and other legal treatises. (N.T. 4/3/98 pp. 49-50.) In other cases, such a record would certainly be acceptable. It appears that the majority’s reluctance to find the petitioner learned in the law is based in part on the petitioner’s difficulty in sustaining employment. The majority goes on to point out that during the period of the petitioner’s suspension, he held a number of different positions. It seems to me that anyone whose profession is taken from them for whatever period of time would face some period of adjustment. Any forced or mandatory career change is very likely to result in some missteps in the finding of new employment. If we are not willing to accept this premise, we will encourage suspended attorneys to find employment within the profession, and such an approach is clearly fraught with danger. This board is currently facing the problem of how to protect the public from suspended or disbarred attorneys who under the guise of acting in the capacity of a paralegal, in effect, continue their practices during their suspensions. By punishing a suspended attorney for not maintaining consistent employment, we are forcing the same attorney to remain in the profession in a lesser capacity that we know is a cause of greater difficulties. This result cannot be supported and should not be used as a factor in denying this petitioner’s reinstatement.

In In re Anonymous No. 82 D.B. 87, no. 725 Disciplinary Docket no. 2 (Pa., Jan. 22, 1997), a petitioner’s seven-year absence from the bar was spent working for her church in an unpaid position. She was unable, even after exhaustive effort, to obtain employment. This factor was not considered to be a fact that should be held against her. Although this petitioner spent a far greater period of time away from the bar and her misconduct was far more severe than the petitioner’s in the present case, she was still determined to be fit to resume the practice of law. Clearly, this case supports my position that the majority erred in finding that this petitioner’s employment history during his suspension be a factor in denying his petition for reinstatement.

The majority also questions the petitioner’s pursuit of two pro se lawsuits during this suspension. In its review of the petitioner’s thought process and strategy in these two actions, the majority makes the determination that the petitioner’s actions on their face evidence some lack of competency. Although the petitioner’s lawsuits appear to be poorly reasoned, it would be a tremendous leap by this board to start looking into a practitioner’s professional techniques in determining his competence. Such determinations are outside this board’s jurisdiction and I would be most leery of accepting this gauntlet.

The majority also appears to be concerned with the number of character witnesses presented by the petitioner. It has always been my opinion that one witness, if compelling, should suffice in these circumstances. This point of view is well-founded. In In re Anonymous No. 82 D.B. 87, no. 725 Disciplinary Docket no. 2 (Pa., Jan. 22, 1997), the petitioner, after a seven-year absence from the bar, presented only a single witness at her hearing and was reinstated. Clearly, the number of witnesses presented at a hearing for reinstatement is not determinative of an attorney’s fitness to practice law.

The majority also gives great weight to the fact that neither character witness had knowledge of the facts of the petitioner’s suspension prior to .the time of the reinstatement hearing. Such a fact should only be seen as strengthening the petitioner’s case. He has testified that he was embarrassed by the factors surrounding his misconduct and perhaps repressed them. Given his state of mind, it is certainly plausible that he would not freely share with others the details surrounding his suspension, absent some overwhelming necessity to do so. Clearly, given the facts set forth in the present matter, no negative connotations should be raised by this petitioner’s failure to disclose the content of his misconduct to anyone, prior to his hearing.

The majority also gives very little weight to the petitioner’s willingness, at the suggestion of Disciplinary Counsel, to develop a mentor relationship with [E], executive director of the [F]. The majority, while finding the mentoring program to be a positive step by the petitioner, determined that the Hearing Committee’s apparent reliance on this relationship was inadequate to support their recommendation for reinstatement. This logic on its face is circular and patently unfair. It appears that the majority will accept only those interpretations that taken alone and perhaps out of context shed a dark light on the petitioner, while ignoring or diminishing any conclusions that would bolster or support the petitioner’s case. Since I know this is not the majority’s intention, I must conclude that they have not had the opportunity to fully digest the practical effect of their determination.

Finally, the petitioner to his credit makes a most difficult admission. He does so in the following statement:

“Basically, I uphold virtues of truth and justice and responsibility ... I’ve learned from my mistake... It was an aberration, but I have suffered. This has been hanging over my head for six years ... I basically accept responsibility and [want to] be able to move forward professionally and financially so that I can become a productive citizen and the good lawyer that I am.” (N.T. 4/3/98 p. 113.)

It is because of the petitioner’s willingness to accept the results of his misconduct, together with his showing by clear and convincing proof that he possesses the moral qualifications, competence and learning in the law necessary to practice law in Pennsylvania, and that his resumption of the practice of law will be neither detrimental to the integrity and standing of the bar or the administration of justice nor subversive of the public interest, that leads me to dissent from the majority opinion. I agree with the Hearing Committee that the petitioner be given the opportunity to put this sad chapter of his life behind him. I believe he has taken every action necessary to be reinstated and would recommend that the petitioner’s petition for reinstatement be granted.

Board Member Marroletti joins in this dissent.

ORDER

And now, April 13, 1999, the petition for review and for oral argument and briefing schedule is denied and, upon consideration of the report and recommendations of the Disciplinary Board dated February 9, 1999, the petition for reinstatement is denied. Pursuant to Rule 218(e), Pa.R.D.E., petitioner is directed to pay the expenses incurred by the board in the investigation and processing of the petition for reinstatement.

      . This testimony is especially positive in light of the initial Hearing Committee report and recommendation which reported his testimony was “he had no recollection of having been arrested when he filled out his application for the Pennsylvania Bar and that he was in a very rushed state because he was in the middle of exams.” The Hearing Committee concluded petitioner was “not candid” before this panel “and believed his testimony to be ludicrous and not truthful.” Report of Hearing Committee no. 1.02 filed 1/26/95, p. 6.


author: GAVIN, P.J.,

text:
    TDG Partnership v. Regis Insurance Co.

      C.P. of Chester County,
    no. 92-01496.

      Walter P. Eells, for plaintiffs.

      William J. Schmidt, for defendant.
    September 10, 1999
   GAVIN, P.J.,

This is another case alleging bad faith conduct on the part of an insurer. Such cases seem to be flowing from the word processors of judges at both the trial and appellate court level with increasing frequency and oftentimes dissimilar results. The seeming dissimilarity in the opinions is perhaps best explained by the fact that there are varying theories of bad faith against insurers. For an excellent article noting the differences, the reader is referred to Counterpoint, Bad Faith: The Pennsylvania Problem (January 1999).

BACKGROUND

The plaintiff partnership is a business enterprise involving members of the Kelsch family. As with many other entrepreneurs, they believed they had the skills necessary to run a restaurant and catering business and pooled their resources in order to purchase the premises located at 523 West Lancaster Avenue, Wayne, Pennsylvania. In the trivia category, and demonstrating how small a world it is, this writer is intimately familiar with the premises, having frequented same while an undergraduate and law student at Villanova University when it was known as the Connus Ale House. The property in question consisted of a two-story building with an attached railroad car that was used for dining.

Having settled on the location of their business, the Kelsch brothers prudently obtained insurance coverage from the defendant, Regis Insurance Company. Their policy included coverage for damage to the premises, to the contents, and business interruption coverage.

While insurance is one of those necessary evils like death and taxes, most businesses go through their life cycle without ever having to call on the insurer to pay a claim. In fact, the insurance industry functions on the premise that claims paid will be less than premiums received. This is a concept that both the insurer and the insured well know, and while it may be aggravating to the insured to make premium payments, it is less aggravating than the claims process when the need arises. This is a classic case of the aggravation that every insured anticipates will occur when they have to call on their carrier to honor a claim. In fact, this case went beyond the level of aggravation one reasonably anticipates and degenerated into an adversarial process that in this writer’s view was nothing less than an effort on the defendant’s part “to stiff its insured.”

FINDINGS OF FACT

(1) Plaintiff is TDG Partnership, a general partnership engaged in the real estate business located at 77 Lionville Road, Exton, Pennsylvania.

(2) Plaintiff Carkrisme Inc. is a Pennsylvania corporation also with offices at 77 Lionville Road, Exton, Pennsylvania.

(3) The sole shareholders of the above-named corporation were three brothers: Jack Kelsch, James Kelsch and Tom Kelsch.

(4) Plaintiffs, TDG partnership and Carkrisme Inc., owned and operated a restaurant and catering business known and trading as “Conestoga Crossing” and “Catering by Judy,” located at 523 West Lancaster Avenue, Wayne, Pennsylvania.

(5) The Kelsch brothers stood as the three general partners in TDG Partnership, which owned the land on which “Conestoga Crossing” was operated.

(6) The defendant is Regis Insurance Company, a Pennsylvania corporation engaged in the business of issuing insurance policies and is located at 1031 Old Cassatt Road, Berwyn, Pennsylvania.

(7) Regis issued a special multi-peril insurance policy, no. RM106147, to TDG Partnership and Carkrisme Inc. t/a Conestoga Crossing, Catering by Judy, Jack, James and Tom Kelsch. (Exhibit P-1.) The insurance policy was effective from November 25,1990 to November 25,1991 and provided coverage for the restaurant building in the amount of $824,000, personal property in the amount of $150,000 and loss of earnings/extra expense in the amount of $175,000.

(8) On February 26, 1991, a fire damaged plaintiffs’ restaurant located at 523 West Lancaster Avenue, Wayne, Pennsylvania. Due to the fire, the restaurant and catering business ceased to operate.

(9) As a result of the fire, plaintiffs submitted a claim for building damage, personal property damage and loss of earnings/extra expense with the defendant Regis.

(10) Regis neither denied liability over the loss nor claimed any wrongdoing by plaintiffs. Yet, the claim became extremely problematic to resolve and eventually, on April 13, 1995, plaintiffs filed this civil suit against Regis, setting forth five separate counts: Count I — breach of contract — combined business interruption extra expense endorsement of the policy; Count II— breach of contract — building coverage claim; Count III— breach of contract — contents claim; Count IV — bad faith; Count V — negligent misrepresentation.

Count I — Loss of Earnings/Business Interruption

(11) An endorsement of the insurance policy issued by Regis to plaintiffs (P-1; MP 15 05) entitled “Combined business interruption and extra expense endorsement,” provides coverage at the insured location of $175,000 subject to a monthly limitation of 16-2/3' percent of the $175,000.

(12) The defendant, Regis, knew the terms of its own policy endorsement and that its purpose was to pay for loss of earnings and necessary extra expense “in order to continue as nearly as practicable the normal operation and normal gross earnings of the insured’s business following damage to or destruction of real or personal property.” (P-1; MP 15 05 ¶1(5).)

(13) Ongoing operation of a restaurant requires payment of full-time staff, as well as other fixed and continuing expenses such as rent, taxes and utilities.

(14) Plaintiff John Kelsch testified that it was essential that the insured, during the period the restaurant was closed for restoration, receive immediate cash flow under this coverage provision of the policy. Thus, in an effort to receive this coverage, plaintiffs timely submitted to Regis a list of cost estimates for the first and second months of business interruption by letter dated March 21, 1991 addressed to George Morrison who Regis had assigned to adjust the loss. (P-00109.)

(15) Plaintiffs also provided the supporting data to Regis (P-00110/P-00119) and based on this data requested the first month’s reasonable payment by March 29, 1991.

(16) The evidence at trial revealed that by the end of April 1991, Regis’ adjuster, George Morrison, as well as Regis’ accountant, Harris Margolis, had projections of monthly interruption expense through the month ending July 25, 1991. (P-00175.) In fact, by letter dated April 22, 1991, Regis’ accountant, Harris Margolis, set forth his compilations of the insureds’ business interruption for George Morrison. These figures never changed.

(17) John Kelsch testified that he never saw Margolis’ projections which explains his constant expressions of concern to Regis that his claim be resolved as well as his inquiries as to whether Regis required additional information to resolve this portion of the claim. (P-00139.) On May 8,1991, John Kelsch wrote to George Morrison, pleading that the claim be resolved. (P-00219.)

(18) Despite numerous requests for payment, the defendant, without reasonable explanation, took more than seven months to pay plaintiffs anything under this coverage.

(19) The objective and verifiable information in the defendant’s possession mandated the conclusion that the plaintiffs were entitled to the limits of this particular coverage.

(20) Despite the objective evidence, on September 18, 1991, the defendant demanded an appraisal under the policy provisions. (P-00322.)

(21) Both parties appointed an appraiser, but neither side could agree on an umpire. (P-00365.)

(22) After months of trying to determine an acceptable umpire and 22 months after the fire, the insureds’ counsel advised Regis that under any interpretation of the policy, the balance of the limits was due and that it was unconscionable not to pay on the claim. (P-00398-00405.)

(23) On January 19, 1993, the Honorable Lawrence E. Wood appointed Robert Supplee, Esquire, as the umpire.

(24) On February 24, 1994, Robert Supplee submitted his award to the court. (P-514B-514D.) The award stated that the policy provides coverage for up to six months to reopen, yet Regis chose to offer only five months of coverage. Mr. Supplee noted that TDG asserted that at least six months was required to reopen and that Regis made no attempt to justify the five-month limitation. Thus, Robert Supplee used a six-month calculation for his award entered in favor of the insureds. Plaintiffs wrote to Regis and requested payment in accordance with the award by May 3, 1994, pursuant to the policy clause providing that Regis shall make payment within 30 days after presentation and acceptance of proof of loss.

(25) Upon the court’s receipt of the reappraisal award, Judge Wood corresponded with both parties’ counsel and suggested that each submit an order for his signature. The defendant, however, did not respond to either the umpire, plaintiffs or the court.

(26) Plaintiffs then notified Regis that it would act upon the court’s request and sent a letter to Judge Wood, along with a suggested order, requesting confirmation of the appraisal award. Judge Wood waited 12 days during which Regis still did not respond. Thereafter, on May 16,1994, Judge Wood confirmed the award and entered judgment against Regis for $91,000 which amount constituted the $175,000 policy limits awarded by Mr. Supplee, less $84,000 previously paid to plaintiff by Regis. In response to this order, Regis filed a petition to open or strike the judgment, which was dismissed by Judge Wood on September 19,1995. Regis then appealed this decision to the Superior Court of Pennsylvania, which appeal was denied on May 30, 1996.

(27) After the appeal was denied, payment of the balance finally was made by Regis on August 9, 1996, 66 months after the fire. The insurance policy provided that Regis should ordinarily pay submitted claims within 30 days.

Count II — Building Loss Coverage Claim

(28) Under form MP 00 13 (P-1), the insureds had coverage for damage to buildings or structures as the result of fire.

(29) The parties retained contractors to prepare estimates of repair based on the damage to the building.

(30) On April 25, 1991, Regis advanced $20,000 towards building damage loss. By June 13, 1991, after plaintiffs signed a proof of loss (P-00249), Regis determined that the total loss for damage as of that date was $93,500 and prepared a second advance of $53,800.

(31) The proof of loss contained a “hold back” in the amount of $18,700. At the trial, Regis representatives only indicated that they required a “hold back” because that’s the way they did things. There was no indication how the hold back figure was calculated under the terms of the policy and for how long it would be enforced by Regis.

(32) The insureds’ contractor determined that there was additional damage which amounted to $18,378, which was submitted to Regis for payment after repairs were substantially completed, in November 1991.

(33) Two pieces of evidence, one, a copy of a handwritten note authored by George Morrison which is almost illegible, demonstrates that Regis intended to refuse to pay plaintiffs any additional monies for loss submitted by the insured. (P-358; P-359.)

(34) On December 19, 1991, the insureds demanded that Regis pay the “hold back” in the amount of $18,700 on the first proof of loss and also demanded payment of the additional $18,378 on the subsequent proof of loss. (P-421.)

(35) Regis finally paid the “hold back” of $18,700 in February 1993, two years after the loss.

(36) Despite repeated requests, Regis has refused, without explanation, to adjust the second claim for coverage on building damage submitted in the amount of $18,378.

Count III — Contents Claim

(37) Another one of the coverages of the multi-peril insurance policy which Regis issued to plaintiffs provided for the “business personal property of the insured,” as set forth in MP 00 14. (P-1.)

(38) The insureds also purchased, by endorsement, replacement cost coverage, as designated in form MP 04 20 (P-1) for the contents of the building at the insured location.

(39) Under this contract, the clause “actual cash value” was thereby replaced by the term “replacement cost (without deduction for depreciation).” (emphasis added)

(40) Following the fire, an inventory of the damaged personal property was compiled by both parties on or about February 27, 1991, and was substantially completed about March 5, 1991.

(41) Separate inventories for liquor (P-0079) and for food and related products (P-0084) were submitted three weeks later by the insureds to Regis.

(42) The parties developed different totals, and then engaged in a series of attempts to resolve their differences.

(43) The insureds were concerned that additional items of contents damage might later be discovered which they would want covered.

(44) George Morrison believed that $39,985 represented a fair value to settle the contents claim. (P-00267.) In an effort to settle the claim, Regis presented plaintiffs with a “sworn statement of proof of loss” (P-00269) which it told the insureds to sign if they wanted payment. In fact, the sworn proof of loss stated that “[t]he whole loss and damage [for the contents] was $39,985.” (P-00269.)

(45) Plaintiffs were unwilling to sign the sworn proof of loss related to their contents claim and once again, under the provisions of the policy, the parties resorted to the appraisal process.

(46) On October 11, 1991, almost eight months after the fire, Regis tendered a partial payment to plaintiffs for the contents claim in the amount of $25,000. (P-00335.)

(47) On October 31, 1991, the appraisers submitted their determination which stated “[w]e further agreed that our appraisal of the personal property claims was agreed at $43,500 as the replacement cost loss and that depreciation of $6,525 resulted in an actual cash value loss of $36,975.” (P-00345.) From this determination, Regis determined that it only had to pay plaintiffs the actual cash value, notwithstanding the replacement cost coverage plaintiffs had purchased.

(48) Following the appraisers’ determination, Regis tendered payment in the amount of $11,975 to plaintiffs. (P-00366.) Regis also submitted to the plaintiffs, along with this payment, a subrogation receipt (P-00367) which purported to relieve itself from any further liability as a “full settlement of all claims and demands...” By memo dated December 19, 1991, plaintiffs flatly rejected the $11,975 payment as the final figure to cover the personal property claim. (P-00374.) This memo was followed by a response from Regis’ president, Richard DiLoreto, which advised his employee, George Morrison, to “do nothing with the December 19, 1991 letter.” (P-00376.)

(49) Meanwhile, plaintiffs submitted claims for additional contents losses which were determined following the original inventories, generally for cleaning and repair of sundry personal property.

(50) Despite numerous demands for action on this claim, from 1991 through present, Regis has failed to approve, deny or in any way adjust these additional contents losses, consistent with the written detective of Richard DiLoreto. (P-00390 and 00394.)

(51) Throughout 1992, the insureds’ counsel made further requests for payment of at least the $11,975, as being a further undisputed sum. These demands were to no avail.

(52) On February 25,1993, the insureds’ counsel again demanded payment of at least the sum of $11,975, and prepared a proper subrogation receipt for that additional advance that would not foreclose the insureds’ ability to make or collect on additional claims under the policy. (P-00424.)

(53) Twenty-four months after the fire, Regis paid a second advance on the contents/personal property claim. Regis, however, has refused to respond to the supplemental claims and has failed to tender to date the depreciation figure deducted in 1991.

DISCUSSION

At issue before the court is whether Regis’ actions with regard to its handling of this claim following the fire constitute bad faith under 42 Pa.C.S. §8371.

Plaintiffs contend that they have clearly and convincingly made out a case for bad faith under 42 Pa.C.S. §8371 as the defendant, Regis, had no reasonable basis for delaying the insureds’ claims and knew or recklessly disregarded any lack of a reasonable basis.

“The Pennsylvania Supreme Court has long held that an insurer must act with the ‘utmost good faith’ toward its insured.” Romano v. Nationwide Mutual Fire Insurance Co., 435 Pa. Super. 545, 550, 646 A.2d 1228, 1231 (1994), citing Fedas v. Insurance Co. of Pennsylvania, 300 Pa. 555, 558, 151 A. 285, 286 (1930). (remaining citations omitted) In D’Ambrosio v. Pennsylvania National Mutual Casualty Insurance Co., 494 Pa. 501, 431 A.2d 966 (1981), the Supreme Court of Pennsylvania declined to create a common-law remedy for an insurer’s bad faith conduct. On February 7, 1990, the Pennsylvania Legislature promulgated 42 Pa.C.S. §8371 which created a statutory remedy for the bad faith conduct of insurers. There is no legislative history that specifically concerns the passage of the statute which was enacted as part of a comprehensive insurance bill. See Younis Brothers & Co. v. Cigna Worldwide Insurance Co., 882 F. Supp. 1468, 1471 (E.D. Pa. 1994). The bad faith statute provides:

“In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:
“(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3 percent;
“(2) Award punitive damages against the insurer;
“(3) Assess court costs and attorney’s fees against the insurer.” 42 Pa.C.S. §8371.

Bad faith is not defined in section 8371. However, in 1994, the Superior Court of Pennsylvania clarified the meaning of bad faith in Terletsky v. Prudential Property and Casualty Insurance Co., as follows:

“ ‘Bad faith’ on part of insurer is any frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith.” Terletsky, 437 Pa. Super. 108, 125, 649 A.2d 680, 688 (1994), appeal denied, 540 Pa. 641, 659 A.2d 560 (1995), citing Black’s Law Dictionary 139 (6th ed. 1990).

Recently, the Pennsylvania Superior Court defined bad faith as “any frivolous or unfounded refusal to pay proceeds of a policy.” Tenos v. State Farm Insurance Co., 716 A.2d 626, 631 (Pa. Super. 1998), quoting Romano v. Nationwide Mutual Fire Insurance Co., supra at 553, 646 A.2d at 1232.

Bad faith on the part of an insurer must be proven by the insured by clear and convincing evidence that “the insurer did not have a reasonable basis for denying benefits under the policy and that the insurer knew of or recklessly disregarded its lack of a reasonable basis in denying the claim.” MGA Insurance Co. v. Bakos, 699 A.2d 751, 754 (Pa. Super. 1997); Polselli v. Nationwide Mutual Fire Insurance Co., 23 F.3d 747 (3d Cir. 1994), citing Cowden v. Aetna Casualty and Surety Co., 389 Pa. 459, 471, 134 A.2d 223, 229 (1957); Hall v. Brown, 363 Pa. Super. 415, 419, 526 A.2d 413, 416 (1987). “[T]he crux of a bad faith claim under section 8371 is the denial of coverage by an insurer when it has no good reason to do so.” Jung v. Nationwide Mutual Fire Insurance Co., 949 F. Supp. 353, 360 (E.D. Pa. 1997). (citations omitted) Additionally, “to recover under a claim of bad faith, the plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim.” Terletsky, supra at 125, 649 A.2d at 688. (citations omitted) Recklessness is required to support a finding of bad faith; mere negligence or an incorrect analysis of the law is insufficient to sustain liability. Polselli, supra, 23 F.3d 747.

Finally, the parameters of section 8371 may also be discerned by reference to analogous Pennsylvania insurance law, specifically the Unfair Insurance Practices Act. In Romano v. Nationwide Mutual Fire Insurance Co., supra, the Superior Court found “that the rules of statutory construction permit a trial court to consider, either sua sponte or upon the request of a party, the alleged conduct constituting violations of the [Unfair Insurance Practices Act] or the regulations in determining whether an insurer . . . acted in ‘bad faith.’ ” Romano, 435 Pa. Super, at 554, 646 A.2d at 1233, citing MacFarland v. United States Fid. & Guar. Co., 818 F. Supp. 108 (E.D. Pa. 1993) (holding that the alleged conduct constituting violations of the UIPA and the regulations can be considered in determining whether the insurer acted in bad faith under 42 Pa.C.S. §8371); Rottmund v. Continental Assurance Co., 813 F. Supp. 1104 (E.D. Pa. 1992) (holding that courts may look to other statutes upon the same or similar subjects to define bad faith under 42 Pa.C.S. §8371); Coyne v. Allstate Insurance Co., 771 F. Supp. 673 (E.D. Pa. 1991) (holding that provisions of the UIPA can be utilized to describe conduct constituting bad faith). The UIPA defines unfair methods of competition and unfair or deceptive acts or practices in the business of insurance, specifically, section 1171.5 prohibits insurers from:

“Refusing to pay claims without conducting a reasonable investigation based upon all available information.
“Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed and communicated to the company or its representative.
“Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which the company’s liability under the policy has become reasonably clear.
“Compelling persons to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts due and ultimately recovered in actions brought by such persons.” 40 Pa.C.S. §1171.5(a)(10)(iv)(v)(vi)(vii) (respectively).

These prohibitions contained in the UIPA may also be illustrative of Regis’ bad faith conduct in handling plaintiffs’ claim.

With regard to plaintiffs’ claim for loss of earnings/ extra expense, Regis knew the terms of its own policy endorsement which plaintiffs purchased and knew that the purpose of this endorsement was to pay plaintiffs for loss of earnings and necessary extra expense “in order to continue as nearly as practicable the normal operation and normal gross earnings of the insureds’ business damage to or destruction of real or personal property.” (P-1; MP 15 05.) In addition, Regis never challenged liability. In order to receive this coverage under their policy, plaintiffs timely submitted to Regis a list of cost estimates for the first and second months of business interruption by letter dated March 21, 1991. The evidence at trial demonstrated that Regis’ adjuster had projections of monthly business interruption expense through the month ending July 25, 1991. Even though Regis knew of its duty under the policy and possessed the projections of business interruption expense, Regis, without any reasonable explanation, took more than seven months to pay plaintiffs anything under this coverage provision. This alone supports the conclusion that Regis breached its duty of good faith and fair dealing with plaintiffs and was acting instead through some motive of self-interest or ill will toward its insured. However, there is more!

Regis further delayed payment to the insureds under the policy when it failed to respond to the court after the court-appointed umpire, Robert Supplee, Esquire, submitted his award. Indeed, the evidence demonstrates that Regis completely ignored Mr. Supplee’s award, ignored Judge Wood’s directive to submit an order for his signature after the award was reached and then failed to pay plaintiffs the amount awarded. Instead, Regis appealed the matter to the Pennsylvania Superior Court, lost the appeal, and finally, after all of its avenues where closed down and after five years had elapsed since the fire, Regis made payment to plaintiffs for this claim. After hearing the testimony of Jack Kelsch and George Morrison on this issue, it became abundantly clear to this court that Regis had no reasonable basis for taking the actions which it did (note that Regis never even formally denied the claim) and that Regis’ conduct was a gross deviation from its duty as an insurer.

We find Polselli v. Nationwide Mutual Fire Insurance, 1995 WL 430571 (E.D. Pa.) instructive on this first issue. In Polselli, fire occurred at the Polselli residence on January 1, 1991, causing extensive damage. Plaintiff’s husband was the sole title owner of the premises and sole named insured on the homeowners policy entered into with Nationwide. Under the policy, Nationwide had the responsibility to reimburse the insured for damage to the building, contents and for “additional living expenses.” Plaintiff, Regina Polselli, went forward and filed a claim with Nationwide since she was the sole occupant of the dwelling at the time of the fire. On January 28, 1991, plaintiff filed a proof of loss with Nationwide for the building claim, contents and ALE. Nationwide responded that it would not make payment under the policy until it determined the identity of the insured and investigated the loss. Sixty-one days after the fire, plaintiff filed suit against Nationwide, alleging bad faith in handling the claim. Nationwide made its first advance on plaintiff’s ALE claim on July 17,1991, seven months after the fire.

With regard to the ALE payments, the court analyzed whether Nationwide’s failure to.make advance ALE payments, when it was not required to do so under the policy, was evidence of bad faith. The court stated that “[t]he question is not whether Nationwide was required under the agreement to make an advance payment, but whether its failure to do so in this case was ‘frivolous or unfounded’ and a breach of its duty of good faith and fair dealing toward its clients.” Polselli, 1995 WL 430571 p. 5. In analyzing this issue, the court explained that as a result of the fire, Mrs. Polselli had become destitute, relying on the kindness of friends for shelter and food, and that Nationwide not only knew of her desperate condition, but used this as leverage to extract a favorable settlement on her ALE claim. The court reasoned that although Nationwide was justified in refusing an advance before it was able to establish coverage and the accidental origin of the fire, these questions were resolved in March 1991 and payment was not made until July 1991. The court stated that Nationwide’s “duty of good faith and fair dealing toward its insureds meant it had an obligation to extend that policy to Mrs. Polselli, once it determined coverage and the accidental origin of the fire.” Polselli, 1995 WL 430571 p. 6. Here, Regis never challenged liability and had projections for business interruption in April 1991. Yet, Regis continued to thwart plaintiffs’ efforts to receive payment for this claim and dragged the process through five years of litigation until it finally made payment. These actions were not indicative of good faith on Regis’ part toward its insureds as Regis had a duty, as did Nationwide to Mrs. Polselli, under the policy to provide coverage to its insureds once coverage was determined.

Furthermore, the prohibitions contained in the UIPA are illustrative of Regis’ bad faith conduct toward plaintiffs in handling the business interruption/loss of earnings portion of the claim. Specifically, Regis never challenged liability and, in April 1991, had projections of the loss of earnings/business interruption, projections which never changed, yet failed to pay the entire proceeds of plaintiffs’ claim for five years. This conduct on Regis’ part demonstrates that it was “[n]ot attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which the company’s liability under the policy has become reasonably clear.” 40 RS. §1171.5(a)(10)(vi).

The evidence at trial demonstrated that Regis’ conduct in handling the plaintiffs’ claims for building and contents loss also rose to the level of bad faith on Regis’ part. First, with regard to plaintiffs’ contents claim, the policy contained a “replacement cost coverage endorsement” (P-1; MP 04 20) which specifically stated that “[t]he provisions of section I of this policy applicable to the property described as covered on a replacement cost basis are amended to substitute the term ‘replacement cost {without deduction for depreciation) ....’” (emphasis added) Clearly, under the insurance policy, the insureds had purchased and paid for replacement cost coverage, and under the policy, depreciation was not to be deducted from whatever the amount of the loss was calculated to be. Regis had no reasonable basis to withhold depreciation and we find that Regis’ decision to withhold depreciation was frivolous and constituted an unfounded refusal on its part to pay proceeds of a policy. See Tenos v. State Farm, supra.

Similarly, with regard to plaintiffs’ building claim, Regis, without explanation, withheld for two years a “hold back” payment in the amount of $18,700. Once again, Regis refused to pay the insureds the hold back amount, but finally did so two years after the loss. We find that Regis’ conduct regarding this issue was a violation of its duty of good faith and fair dealing and find that it is further evidence of this company’s bad faith conduct toward its insureds.

Additionally, in adjusting the building loss claim, Regis indicated that plaintiffs would not receive additional funds until they signed a subrogation form. That subrogation form related to the payment of legitimate contents coverage. (P-00367.) We find that this type of practice on Regis’ part violates the UIPA § 1171.5(a)(10)(xiii) which prohibits insurance companies from failing to promptly settle claims where liability has become reasonably clear under one portion of a policy, in order to influence settlements under other portions of policy coverage.

At trial, it became increasingly clear that the cumulative effect of Regis’ handling of plaintiffs’ claims under the policy was impregnated with Regis’ frivolous and unfounded refusals to pay proceeds to the plaintiffs under the policy. The fact that plaintiffs had to wait for five years to receive full payment for lost eamings/business interruption clearly convinced this court that Regis had acted in bad faith in accordance with 42 Pa.C.S. §8371. This conduct, along with Regis’ insistence on deducting depreciation, even though the policy precluded such a deduction, as well as Regis’ hold back of funds without explanation for two years after the loss, further compelled this court to conclude that Regis breached its duty of good faith and fair dealing through a motive of self-interest or ill will.

In an action arising under an insurance policy, a court may award to the insured punitive damages, attorneys’ fees and costs if the court finds that the insurer acted in bad faith in refusing to pay the insured’s claim. 42 Pa.C.S. §8371. Even though Regis never contested liability, it subjected its insureds to constant and unreasonable delays. The insureds were entwined in protracted litigation in order to receive the payments due under the policy, and the evidence at trial indicates that additional sums are still due and owing to the insureds. Based upon all of the foregoing, we find that Regis’ actions toward its insured constituted bad faith and warrant an award of punitive damages, attorneys’ fees and costs under the statute.

CONCLUSIONS OF LAW

(1) There was binding insurance coverage for the named insureds as of the date of loss, February 16,1991.

(2) Plaintiffs proved by clear and convincing evidence that defendant Regis acted in bad faith pursuant to 42 Pa.C.S. §8371 as set forth in Count IV of their complaint.

(3) Due to Regis’ bad faith conduct, plaintiffs have suffered damages which have been calculated in accordance with 42 Pa.C.S. §8371(1) in the total amount of $182,981.22 as reflected in appendix l.

(4) Due to Regis’ bad faith conduct, plaintiffs are entitled to punitive damages in accordance with 42 Pa.C.S. §8371(2) in the amount of $548,943.66.

(5) Due to Regis’ bad faith conduct, plaintiffs are entitled to attorney fees and court costs in accordance with 42 Pa.C.S. §8372(3), and plaintiffs are directed to proceed on this issue in accordance with the court’s verdict which follows.

VERDICT

And now, September 10, 1999, after consideration of the evidence in the above matter, we enter a verdict in favor of the plaintiffs and against the defendant in the amount of $182,981.22 pursuant to 42 Pa.C.S. §8371(1) and punitive damages in the amount of $548,943.66 pursuant to 42 Pa.C.S. §8371(2).

We direct plaintiffs to submit to this court within 10 days from the date of this order a compilation of its attorneys’ fees and court costs incurred. Defendant shall then have 10 days from the date appearing on the certificate of service of plaintiffs’ damage compilation to respond.

      . It should be noted that on February 12, 1992, plaintiffs had to file a writ so as not to be precluded from seeking relief from Regis by the statute of limitations. It also should be noted at this juncture that before this trial, Count V was withdrawn by plaintiffs and Count I was the subject of a release between the parties.

      .1 specifically find that defendant’s conduct was the antitheses of the insurer-insured relationship. When defendant was called upon to perform, it blithely ignored more than adequate data supplied by plaintiffs. Indeed, it ignored its own work product and offered sums less than it knew to be due. As I said earlier, it attempted “to stiff” its client. Such conduct is outrageous and warrants the imposition of punitive damages.

      .1 read 42 Pa.C.S. §8371(1) to mean that for each year the claim was unpaid, the prime rate for that year was to be used. Otherwise, use of the prime rate for the year that the claim originated could be artificially high/low over the life period the claim remained unpaid. I then applied 3 percent to that total.

      . Pennsylvania law does not require that punitive damages bear a reasonable relationship to compensatory damages. See e.g., Kirkbride v. Lisbon, 521 Pa. 97, 555 A.2d 800 (1989). However, I am aware of the criticism surrounding some punitive damage awards and efforts to limit same. The appropriate response to such criticism is to demonstrate that reason, not emotion, drove the punitive damage award.
      The previously found “bad faith” of defendants caused, in this writer’s opinion, plaintiffs’ business to fail because it lacked the very funds it had sought to have available by insuring itself with defendant. Every reasonable request by plaintiffs was met with stonewalling by defendant. When a dispute arose over inventory, plaintiffs chose a neutral party as arbitrator. Defendant insisted that its agent, whose work product was being questioned, serve as its arbitrator. Additionally, there are the instances of stonewalling referenced in the body of my opinion.
      The evidence was overwhelming that defendant would not honor its obligation to plaintiffs. Insurers, because of their superior bargaining position vis-a-vis insureds, must not use that advantage to their gain. This is especially so where liability and damages are clear. If they do so, there must be no gain. Indeed, there should be significant negative consequences for such conduct.
      An award of punitive damages three times compensatory damages is the appropriate negative consequence for this conduct.


author: HECKLER, J.,

text:
    Land O’Lakes Inc. v. Zelenkofske, Axelrod & Co. Ltd.

      C.P. of Bucks County,
    no. 96-06390-24-1.

      Manny D. Pokotilow, James J. Kozuch and Michael J. Berkowitz, for plaintiff.

      Walter H. Flamm Jr. and Brian W. Waerig, for defendant.
    October 29, 1999
   HECKLER, J.,

A jury trial which commenced on February 16,1999, was conducted in this matter. On February 19, 1999, the jury rendered a verdict in favor of plaintiff Land O’Lakes in the amount of $404,000. Thereafter, plaintiff Land O’Lakes filed a motion for post-trial relief that the verdict be molded to include prejudgment interest. On June 28,1999, this court issued an order denying plaintiff’s motion to mold the verdict to include prejudgment interest. Plaintiff appeals from that order. In accordance with Pennsylvania Rule of Appellate Procedure 1925(a), we file this opinion.

BACKGROUND

In the summer of 1994, Land O’Lakes Inc., known as Atlantic Dairy Cooperative prior to a merger, assessed the effectiveness of their existing computer system, the IBM AS 400. A.D.C., as the plaintiff was known at the time of the events which give rise to this matter, was the employer of several hundred people. The primary function of the Atlantic Dairy Cooperative was to market and distribute the milk of its member farmers. This required A.D.C. to test milk to ensure compliance with government regulations and to operate in a fashion which met the pickup and delivery needs of its members and customers. A.D.C.’s IBM computer system was used for sharing information within the company and for processing billing statements. A.D.C. concluded that, because the lease on the existing computer was coming to an end and because their present outdated system was not adequate to their needs, the capacity of their information system should be expanded.

Unable to have its own management information systems division implement a new system, A.D.C. decided to seek outside assistance. Plaintiff invited Zelenkofske, Axelrod and Co. Ltd. to survey its existing system. Z.A. is an accounting firm. In addition to providing accounting services to their clients, Z.A. also offers management consulting services.

After completing the survey, defendant Z.A. presented plaintiff with a proposal that offered two alternative solutions, characterized respectively as short-term or long-term in nature. The short-term solution was to make improvements to the existing system and the long-term solution was to restructure and redesign A.D.C.’s entire computer system.

A.D.C. decided that the long-term proposal would best fit their company’s needs. After approval from the company’s finance committee, A.D.C. informed Z.A. that they would be brought in to implement the long-term solution. Z.A. estimated the time for completion to be 18 to 22 months. Based upon Z.A.’s proposal, the total cost for the project was to be $880,000. The cost breakdown was $700,000 to Z.A. for consulting services and $180,000 for hardware and software.

The system to be implemented was described as a client/server system. Such a system involves a network of inter-connected personal computers. This system was termed a turnkey computer system, meaning that the system would be designed from beginning to end, enabling A.D.C. simply to begin to use the system once it had been assembled and installed by Z.A.

A.D.C. was to assist with the implementation of the new system by providing Z.A. with information concerning the dairy industry to enable Z.A. to develop the project in accordance with A.D.C.’s needs. In addition to designing and implementing the system, Z.A. was to recommend which hardware and commercially available software A.D.C. would purchase for use in creating the new platform. In a presentation made while seeking this account, Z.A. represented to A.D.C. that a substantive benefit would be derived from the project every month or two throughout the life of the project.

Z.A. began work on the project in August of 1994. Evan Fineman, the chief financial officer of A.D.C., was assigned to oversee this project. Paul Miller was the original project manager for Z.A. In May of 1995, Z.A. replaced Paul Miller with one Steven Schifter. In the late summer of 1995, James Fraher replaced Mr. Fineman. Mr. Fraher was the chief operations officer of A.D.C.

Mr. Fraher assumed the responsibility of overseeing the Z.A. project in August of 1995. After familiarizing himself with the project, he ascertained that no written agreement existed between A.D.C. and Z.A. for the implementation of the computer system. On September 12,1995, Mr. Fraher met with members of the Z.A. staff and spoke with Mr. Schifter. At that time he advised Schifter that A.D.C. would not be making any further payments on the project until a written agreement concerning the performance of the project was formulated and executed. Up to this point, Z.A. had billed and A.D.C. had paid approximately $440,000 for work on the project.

Mr. Schifter drafted a written agreement and presented it to Mr. Fraher on September 26, 1995. The agreement proposed that A.D.C. pay Z.A. an amount in excess of the original budgeted amount for the completion of the project. The draft pushed the total price up to $950,000 and extended the project three months beyond the original 18 month deadline. In addition, the written agreement provided that the rights to market and sell the completed program were to be retained by Z.A. The proposed written agreement was not accepted by Mr. Fraher.

On October 19, 1995, a formal meeting was held. Present at the meeting were: Andrew Zelenkofske, managing partner of Z.A.; Mr. Schifter; Robert Dever, chief executive officer of A.D.C.; and Mr. Fraher. At that meeting, Mr. Fraher and Mr. Dever informed Z.A. that a third party was going to be brought in to conduct a “fresh look” at the project. The purpose of this was to determine what had been done and what remained to be done on the project. Further, the A.D.C. representatives informed Z.A. that subsequent to the “fresh look,” the balance of the project would be put out for bid. Z.A.’s cooperation in the “fresh look” was requested and it was explained to Z.A. that they would have the opportunity to bid on the balance of the project at the end of the “fresh look.” Mr. Zelenkofske agreed that Z.A. would cooperate in the “fresh look.” The company hired to do this “fresh look”— also referred to as a scope study — was C.B. Technologies in Malvern, PA. Their assignment was to examine the documentation of the project, to understand what the scope of the project was and based upon existing documentation to determine how much of the project had actually been completed.

Z.A. requested that A.D.C. either pay or assure payment of invoices then outstanding as a precondition to Z.A.’s participation in the “fresh look.” Mr. Fraher explained to Mr. Schifter that the outstanding invoices would not be paid until the “fresh look” was completed. At that point Mr. Fraher again asked for Z.A.’s cooperation in the “fresh look.” Z.A.’s representative found this request to be unacceptable. Shortly thereafter, Z.A. left the project and A.D.C. entirely, taking with them a box of documents. At that time A.D.C.’s outstanding invoices with Z.A. amounted to $216,950.64.

Z.A. filed suit against A.D.C. on August 12, 1996 for breach of contract, quantum meruit and unjust enrichment. Thereafter, A.D.C. filed suit against Z.A. on August 27, 1996. A.D.C. asserted claims for breach of contract, unjust enrichment and breach of express and implied warranties. After the completion of discovery and rulings on various motions, these consolidated matters went to trial on February 16,1999. After a four-day trial, the jury rendered a verdict in favor of A.D.C. in the amount of $404,000.

Pursuant to Pennsylvania Rule of Civil Procedure 227.1 governing post-trial relief, A.D.C. filed a motion to mold the verdict to include prejudgment interest. On June 28,1999, this court entered an order denying plaintiff A.D.C.’s motion to mold the verdict to include prejudgment interest. Plaintiff appeals from said order.

ISSUES ON APPEAL

In their statement of matters complained of on appeal, plaintiff asserts that this court erred in denying plaintiff’s motion to mold the verdict to include prejudgment interest. For the reasons stated below, this court denied plaintiff’s motion to mold the verdict to include prejudgment interest.

DISCUSSION

Generally, there is a legal right to prejudgment interest on money owing upon a contract. See Verner v. Shaffer, 347 Pa. Super. 206, 500 A.2d 479 (1985); Burkholder v. Cherry, 414 Pa. Super. 432, 607 A.2d 745 (1992). The justification for an award of interest is that “because the defendant knew or at least could have learned the amount of his debt, he should have tendered that amount to the plaintiff. Since he did not, and by failing to do so caused the delay of litigation, he has deprived the plaintiff of the use of that amount from the date of the breach to the date of the satisfaction of the judgment.” Burkholder v. Cherry, 414 Pa. Super. 432, 436, 607 A.2d 745, 747 (1992) (citing Frank B. Bozzo Inc. v. Electric Weld Division, 345 Pa. Super. 423, 430, 498 A.2d 895, 898 (1985)).

Traditionally, when determining a party’s right to interest, the Pennsylvania courts have followed the Restatement (Second) of Contracts §354. See e.g., Burkholder v. Cherry, supra; Verner v. Shaffer, supra; Somerset Community Hospital v. Allen B. Mitchell and Associates Inc., 454 Pa. Super. 188, 685 A.2d 141 (1996). Section 354 of the Restatement (Second) of Contracts is as follows:

“Section 354. Interest as damages
“(1) If the breach consists of a failure to pay a definite sum in money or to render a performance with fixed or ascertainable monetary value, interest is recoverable from the time of performance on the amount due less all the deductions to which the party in breach is entitled.
“(2) In any other case, such interest may be allowed as justice requires on the amount that would have been just compensation had it been paid when performance was due.” Restatement (Second) of Contracts §354(1)(2).

Comment (c) explains the rule as follows:

“(c) Where the amount due is sufficiently definite.
“Under the rule stated in subsection (1), a party is not chargeable with interest on a sum unless its amount is fixed by contract or he could have determined its amount with reasonable certainty so that he could have made a proper tender. Unless otherwise agreed, interest is always recoverable for the nonpayment of money once payment has become due and there has been a breach. . . . The sum due is sufficiently definite if it is ascertainable from the terms of the contract, as where the contract fixes a price per unit of performance even though the number of units performed must be proved and is subject to dispute. The same is true, even if the contract does not of itself create a money debt if it fixes a money equivalent of the performance. It is also true, even if the contract does not fix a money equivalent of the performance if such equivalent can be determined from established market prices. The fact that the extent of the performance rendered and the existence of the market price must be proved by evidence extrinsic to the contract does not prevent the application of these rules.” Restatement (Second) of Contracts §354, comment (c).

In the instant case, plaintiff contends that the damages awarded were readily ascertainable and therefore plaintiff is entitled to mold the verdict to include prejudgment interest. This court disagrees.

The present matter was a contractual dispute where both parties claim that the opposing party breached the contract. The terms of the contract underlying this dispute are unclear. There was no written agreement. The only terms established beyond dispute at trial were that Z.A. was to have completed a turnkey computer system within 18 months at a total cost to A.D.C. of $880,000. The contract did not establish separately valued and defined stages of completion whereby defendant Z.A. would complete a certain percentage of the project which the parties agreed would have a certain value. There was no ascertainable monetary value for Z.A.’s failure to render performance on the project because the terms of the contract and the circumstances surrounding it lacked clarity. The undisputed evidence established that Z.A. had done at least some work of value for A.D.C. Defendant Z.A. contended that they had performed satisfactorily and would have completed the project but for A.D.C.’s refusal to pay. Accordingly, Z.A. contended that they were not the breaching party.

The damage claims of both parties reinforce the nature of the dispute. A.D.C. claimed the right to recover all or most of the $440,000 which it had paid to Z.A. Z.A. claimed more than $216,000 in unpaid invoices which A.D.C. had refused to pay.

The scope study performed by C.B. Technologies does not provide a definite monetary equivalent for the work done by Z.A. or the work left by Z.A. to be done. The study assigned a total value of $16,000 to the work Z.A. had commenced but not completed. The study, however, did not examine the work that Z.A. had completed; nor did it include such work in a calculation of value.

Further, the jury’s determination that A.D.C. was entitled to a damages award in the amount of $404,000 is irrelevant for the purposes of prejudgment interest. The jury’s methodology for calculating A.D.C.’s damage award does not establish an ascertainable monetary sum in the nature of a debt of which the defendant had notice.

In an action for breach of contract involving the failure to pay a definite sum of money, the amount due is likely to be sufficiently definite so as to establish plaintiff’s legal right to prejudgment interest on the money owed. However, where, as in the instant case, the breach involves the failure of a contracting party to render performance and there exists no mechanism in the contract by which, apart from a jury’s verdict, to assign a definite value to the defendant’s failure to render satisfactory performance, there would seem to be no ascertainable monetary value of which the defendant could be said to have had notice until trial was completed. Without such ascertainable monetary value, plaintiff does not have a legal right to prejudgment interest.

For the foregoing reasons, plaintiff’s motion to mold the verdict to include prejudgment interest was denied.

      . Defendant Z. A. ’s suit was originally filed in Montgomery County. The suit was transferred to Bucks County so that these matters could be heard together.