author: GARDNER, P.J.,

text:
    Volz v. Concept Sciences Inc.

      C.P. of Lehigh County,
    nos. 1999-C-1736, 1999-C-2390, 2000-C-0183, 2000-C-2280, 2000-C-1797.

      Richard M. Jordan, for defendants Concept Sciences and Ward.

      Edward A. Greenberg, for additional defendant Alfa Laval.
    June 13, 2001
   GARDNER, P.J.,

This matter is before the court on four sets of preliminary objections filed by defendant and additional defendant Alfa Laval Flow GmbH (GmbH) in these five consolidated cases. In its preliminary objections, Alfa Laval Flow GmbH, a German corporation, contends that this court does not have personal jurisdiction over it.

In their responses to the preliminary objections, plaintiff Diane C. Bowers and defendants Concept Sciences Inc. and M Ward Ph.D. contend that Alfa Laval Flow GmbH has sufficient contacts with this jurisdiction to satisfy both the Pennsylvania long-arm statute and federal due process requirements to confer personal jurisdiction over additional defendant.

The parties developed a factual record by taking depositions and filing affidavits and deposition transcripts. Memoranda of law and supplemental memoranda were filed by the parties. Oral argument was held before the undersigned on January 30, 2001. For the reasons expressed below, we conclude that this court has personal jurisdiction over defendant and additional defendant Alfa Laval Flow GmbH. Accordingly, we overrule the preliminary objections and direct Alfa Laval Flow GmbH to answer defendants’ joinder complaints.

Preliminary objections raising objections to personal jurisdiction were filed by GmbH in four of the within five consolidated cases. On June 26, 2000 in case no. 1999-C-1736, and on September 13, 2000 in case no. 2000-C-0183, additional defendant GmbH filed preliminary objections to the joinder complaint of defendant Concept Sciences Inc. On June 26, 2000 in case no. 1999-C-2390, additional defendant GmbH filed preliminary objections to the joinder complaint of defendant Irl Ward Ph.D. On December 5, 2000 in case no. 2000-C-2280, defendant GmbH filed preliminary objections to the amended complaint of plaintiff Diane C. Bowers, as executrix of the estate of Terry Bowers, and in her own right. Alfa Laval Flow GmbH is not a party to the remaining consolidated case no. 2000-C-1797.

Two of the cases, case nos. 1999-C-1736 and 1999-C-2390, were commenced by plaintiffs Sharon M. Volz and William D. Volz. By letter dated May 2, 2001, counsel for Mr. and Mrs. Volz, Francis T. Colleran, Esquire, advised the undersigned that the two Volz cases had settled. Accordingly, we will dismiss the preliminary objections of additional defendant GmbH in those two cases as moot.

Accordingly, two sets of GmbH preliminary objections remain for decision on the merits. One set is the preliminary objections of additional defendant GmbH to the joinder complaint of defendant Concept Sciences Inc. in case no. 2000-C-0183 where plaintiffs are Adhesive Specialists Inc.; Schnenermann Excavating Inc.; and Data Link Associates Corp. The second set is the preliminary objections of defendant GmbH to the amended complaint of plaintiff Diane C. Bowers in case no. 2000-C-2280. On June 12,2001 we entered an order in the Bowers case, filed June 13, 2001, approving a stipulation of counsel that the decision of this court in the Volz cases (nos. 1999-C-1736 and 1999-C-2390) as to the GmbH preliminary objections will be dispositive of the preliminary objections filed by defendant GmbH in the Bowers case (no. 2000-C-2280).

Because of the settlement of the Volz cases, we do not reach the merits of the GmbH preliminary objections in those cases. However, the facts and issues and applicable law are the same concerning the GmbH preliminary objections in all four cases. Therefore, in the spirit of the stipulation, we will consider our decision on the GmbH preliminary objections in the Adhesive Specialists Inc. case (case no. 2000-C-0183) as dispositive of the GmbH preliminary objections filed in the Bowers case.

On September 5, 2000, an initial oral argument was conducted before the undersigned on the preliminary objections of GmbH and other additional defendants. By order of the undersigned dated September 5, 2000, we disposed of the preliminary objections of all additional defendants to the joinder complaints of defendants M Ward and Concept Sciences Inc. in the nature of a motion to strike. In that order we directed defendants to file a more specific joinder complaint.

Additional defendant, Alfa Laval Flow GmbH’s preliminary objections to the complaint of Concept Sciences Inc. in the Adhesive Specialists Inc. case (no. 2000-C-0183) were filed September 13, 2000. Concept Sciences Inc. filed its response on October 5, 2000. On November 7,2000, Concept Sciences Inc. filed the deposition transcripts of Vincent Manganiello and Robert T. MacGregor taken October 18, 2000 and the deposition transcript of Robert Shuck taken October 20, 2000.

On November 20, 2000, Concept Sciences Inc. filed its supplemental memorandum of law on the issue of personal jurisdiction. On December 5,2000, GmbH filed its supplemental memorandum of law. On January 25, 2001, Concept Sciences Inc. filed a reply memorandum of law in opposition to the memorandum of law submitted by GmbH. On January 30, 2001, oral argument was conducted before the undersigned on the issue of personal jurisdiction.

These consolidated cases arise out of an explosion which occurred on February 19,1999 at defendant Concept Sciences Inc.’s facility located at 749 Roble Road, Allentown, Lehigh County, Pennsylvania. Defendant Concept Sciences filed joinder complaints against numerous additional defendants whom they allege are responsible for the damages suffered by them and by the numerous plaintiffs who have brought suit as a result of this explosion. The joinder complaints contain counts for strict liability, negligence, breach of contract and breach of warranty.

Based upon the pleadings, record papers, depositions, affidavits, stipulations and agreements of counsel at oral argument, the pertinent facts are as follows.

Concept Sciences was in the business of manufacturing a solution known as hydroxylamine which is used to clean computer chips. At the time of the explosion at its plant, Concept Sciences was attempting to purify and manufacture hydroxylamine in a 50 percent aqueous solution. Concept Sciences purchased some of the equipment for its manufacturing facility through additional defendant ALEDco Inc. One of the many pieces of equipment purchased from ALEDco by Concept Sciences was an IP800 Peristaltic Pump. Concept Sciences contends that the explosion on February 19, 1999 was caused by the malfunction of the pump.

ALEDco ordered the pump from Alfa Laval Pumps Inc., in Kenosha, Wisconsin. Alfa Laval Pumps Inc. in turn ordered the pump from Alfa Laval Flow GmbH. Alfa Laval Flow GmbH shipped the pump to Alfa Laval Pumps Inc. in Kenosha, Wisconsin. Alfa Laval Pumps Inc. shipped the pump to ALEDco in Allentown, Pennsylvania, which then sold the pump to Concept Sciences Inc.

Alfa Laval Flow GmbH contends that it is a German corporation, with its principal place of business in Dusseldorf, Germany. It contends that it does not conduct business in the Commonwealth of Pennsylvania nor maintain an office or a registered agent in Pennsylvania nor have either continuous or systematic contacts in Pennsylvania.

At oral argument, counsel for GmbH admitted that the structure of the corporations involved in this litigation is as follows: Alfa Laval Flow GmbH is a wholly owned subsidiary of Alfa Laval Holding GmbH. Ninety-nine percent of GmbH is owned by Alfa Laval Holding BV, a Dutch company; and 1 percent is owned by Alfa Laval Holding AB, a Swedish company.

Alfa Laval Inc. is a New Jersey corporation with its principal place of business in Kenosha, Wisconsin. It is the successor company to Alfa Laval Pumps Inc. Alfa Laval Inc. is a wholly owned subsidiary of Alfa Laval U.S. Holdings Inc., which is a wholly owned subsidiary of Alfa Laval Holding BY. Moreover, Alfa Laval Inc. transacts business with many other companies owned by Alfa Laval Holding BV.

Defendant Concept Sciences Inc. contends that Alfa Laval Flow GmbH is part of a “family of corporations” including additional defendants Alfa Laval Pumps Inc.; Alfa Laval Flow Inc.; Alfa Laval Pumps, a division of Alfa Laval Flow Inc.; Alfa Laval Inc.; and other entities. Defendant further contends that the common internet website used by all these entities and others are evidence of this “family” of corporations.

In addition, defendant contends that Alfa Laval Flow GmbH is an important party to this litigation. It is the only manufacturer of the peristaltic pump which is at the heart of this case. Defendant further contends that the pump found its way into the United States and the Commonwealth of Pennsylvania, specifically, not by accident or inadvertence, but rather as part of the systematic sales efforts of the manufacturer’s parent corporation and its agents.

Initially, we note that when preliminary objections, if sustained, would result in the dismissal of an action, the objections should be sustained only in cases which are free and clear from doubt. GMAC v. Keller, 737 A.2d 279, 280-81 (Pa. Super. 1999). Moreover, the burden of proof rests upon the party challenging the court’s exercise of jurisdiction; and the court must consider the evidence in the light most favorable to the non-moving party. Grimes v. Wetzler, 749 A.2d 535, 539 (Pa. Super. 2000).

When the moving party has supported its jurisdictional objection, the burden shifts to the party asserting jurisdiction to prove that there is statutory and constitutional support for the court’s exercise of personal jurisdiction. McCall v. Formu-3 International Inc., 437 Pa. Super. 575, 578, 650 A.2d 903, 904 (1994).

In Hall-Woolford Tank Company Inc. v. R.F. Kilns Inc., 698 A.2d 80 (Pa. Super. 1997), the Superior Court of Pennsylvania stated the following:

“Pursuant to the Judiciary Act, 42 Pa.C.S. §5301 et seq., our courts may exercise two types of in personam jurisdiction over a non-resident defendant. General jurisdiction is founded upon a defendant’s general activities within the forum which evidence continuous and systematic contacts with the state.... Specific jurisdiction has a more narrow scope and is focused upon the particular acts of the defendant which gave rise to the underlying cause of action.” 698 A.2d. at 82. (citations omitted)

When a state exercises personal jurisdiction over a nonresident defendant in a suit arising out of or related to the defendant’s contacts with the forum, the state is exercising specific jurisdiction. Kubik v. Letteri, 532 Pa. 10, 614 A.2d 1110 (1992). Even if specific jurisdiction does not exist, the court may exercise jurisdiction if the defendant has carried on business in a continuous and systematic part of its general business within the Commonwealth. McCall, supra.

There are two initial considerations which the court must look at in order to exercise personal jurisdiction over a non-resident defendant: “(1) jurisdiction must be conferred by the state long-arm statute, and (2) the exercise of jurisdiction under the statute must meet constitutional standards of due process.” Hewitt v. Eichelman’s Subaru Inc., 341 Pa. Super. 589, 592, 492 A.2d 23, 24 (1985). In Pennsylvania, personal jurisdiction may be asserted over non-residents “to the fullest extent allowed under the Constitution of the United States.” See 42 Pa.C.S. §5322(b).

In this case, because jurisdiction is conferred by the long-arm statute, we must look to see whether GmbH has established minimum contacts with this forum. The seminal case in determining personal jurisdiction over a non-resident defendant is the decision of the United States Supreme Court in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). That case held that the due process clause is satisfied when a non-resident defendant has such minimum contacts with the forum state that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.

“The ‘minimum contacts’ test does not allow for mechanical application. In applying the test, the facts must be weighed to see whether the requisite ‘affiliating circumstances’ are present. New answers ‘will be written in black and white. The greys are dominant and even among them the shades are innumerable.’

Important factors in determining whether this test has been met are the quality of the contacts between the defendant and the forum state, whether the cause of action flows from the contact or contacts, and whether the defendant has purposefully availed himself of the privilege of conducting activities in the forum. The test for the foreseeability of a tort is whether ‘defendant’s conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there.’ ” Felty v. Conaway Processing Equipment Co., 738 F. Supp. 917, 918 (E.D. Pa. 1990). (internal citations omitted)

In this case, Alfa Laval Flow GmbH contends that these concepts have been further refined by the United States Supreme Court decision in Asahi Metal Industry Co. Ltd. v. Superior Court of California, Solano County, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987). Moreover, Alfa Laval Flow GmbH contends that we should follow the test set forth in the plurality opinion authored by Justice Sandra Day O’Connor because it has been adopted by the appellate courts of this Commonwealth. The pertinent portion of that opinion states:

“The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum state. Additional conduct of the defendant may indicate intent or purpose to serve the market in the forum state, for example, designing the product for the market in the forum state, advertising in the forum state, establishing channels for providing regular advice to customers in the forum state, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum state. But a defendant’s awareness that the stream of commerce may or will sweep the product into the forum state does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum state.” 480 U.S. at 113, 107 S.Ct. at 1032, 94 L.Ed.2d at 104.

To the contrary, Concept Sciences Inc., contends that Asahi is a plurality opinion, without precedential value, and in fact has not been adopted as the test to be utilized in Pennsylvania. Rather, Concept Sciences contends that the Supreme Court of Pennsylvania has adopted the more liberal standard articulated in Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed. 2d 528 (1985). We agree.

In McCall, supra, a case relied on by both parties, the Superior Court of Pennsylvania stated:

“Recently, in Kubik v Letteri, 532 Pa. 10, 614 A.2d 1110 (1992), Pennsylvania’s Supreme Court adopted the flexible approach articulated in Burger King Corporation v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) regarding the determination of whether due process has been satisfied. ‘The standard which must be met by a state in asserting specific personal jurisdiction over a non-resident defendant... is clear: (1) the non-resident defendant must have sufficient minimum contacts with the forum state and (2) the assertion of in personam jurisdiction must comport with fair play and substantial justice. The determination of whether this standard has been met is not susceptible to any talismanic jurisdictional formula: The facts of each case must always be weighed in determining whether jurisdiction is proper.’ ” McCall, 437 Pa. Super, at 579, 650 A.2d at 905. (citation omitted)

For the following reasons, we find that Alfa Laval Flow GmbH has sufficient minimum contacts with the Commonwealth of Pennsylvania and that the assertion by this court of in personam jurisdiction will comport with the “traditional notions of fair play and substantial justice” as set forth in International Shoe and its progeny.

Initially, a review of the pleadings, record papers, exhibits, affidavits, depositions and admissions of counsel indicate that Alfa Laval Flow GmbH is a German corporation that is part of a larger, worldwide conglomerate of corporations that are engaged in business in the United States and throughout the world. A simple review of the generic website utilized by the many incarnations of the “Alfa Laval” name indicates that these are a “family” of corporations that while independent entities, do work in conjunction with one another and for a common parent corporation.

There is no dispute that GmbH is the manufacturer of the IP800 peristaltic type pump that is at the center of this litigation. Concept Sciences contends that the explosion that occurred on February 19, 1999 is the direct result of the malfunction of the pump manufactured by Alfa Laval Flow GmbH. Although GmbH disputes that its pump was the cause of the explosion, it does not dispute that the pump it manufactured is the pump in question.

Concept Sciences relies on the depositions of Robert Schuck, assistant treasurer and assistant secretary of Alfa Laval Inc.; Robert T. MacGregor, regional sales manager of Alfa Laval Inc.; and Vincent Manganiello, a salesman for ALEDco Inc. In addition, Concept Sciences relies on the printed pages from the Alfa Laval website which are attached as exhibits to its supplementary memorandum of law and as exhibits to the deposition of Robert Schuck.

As the Superior Court of Pennsylvania noted in McCall, supra, the required minimum contacts should have some connection to the enterprise involved in causing the claimed injuries. As we noted above, the pump was manufactured by Alfa Laval Flow GmbH. Moreover, the deposition testimony of Robert Schuck reveals that the pump was manufactured elsewhere, but distributed by Alfa Laval Inc. throughout the United States, including the Commonwealth of Pennsylvania. However, Mr. Schuck did not know what volume of Alfa Laval products were distributed in Pennsylvania.

In addition, Mr. Schuck testified that no payment is made to GmbH for the merchandise that Alfa Laval Inc. orders from it. Rather, the companies use a “netting system” to add and subtract from the orders placed and received by each of the entities that make up the Alfa Laval “family” of companies.

The deposition testimony of Robert MacGregor reveals that in selling Alfa Laval products, Mr. MacGregor made no distinction between the products of Alfa Laval Inc.; Alfa Laval Flow Inc.; Alfa Laval Pumps; or Alfa Laval Flow GmbH. Mr. MacGregor was aware that the pumps he sold were manufactured in England and Germany. Moreover, he was responsible to support sales of all pumps, including the peristaltic pumps to distributors in Pennsylvania.

Vincent Manganiello testified in his deposition that he is a salesman for ALEDco Inc. He is the salesman responsible for selling the peristaltic pump to Concept Sciences. He also testified that his company routinely obtained Alfa Laval pumps that were made overseas and that he sold another type of pump to Concept Sciences that was manufactured in Europe. Moreover, he received training from Mr. MacGregor of Alfa Laval Inc. to assist him in selling the pumps manufactured in Europe.

Finally, the Alfa Laval website depicts Alfa Laval as a worldwide conglomerate of corporations related to one another; or at the very least, servants to one master.

We conclude that although GmbH has no office in Pennsylvania, is not qualified to do business here, owns no property here, nor maintains a bank account here, it could and should expect that it could be “haled into court” here because of the apparently well-set-up network for distribution of its products through this intricate web of corporations which all use some variation of the “Alfa Laval” name.

We note that Mr. Schuck did not bring many documents requested by Concept Sciences to his deposition. Additional defendant GmbH should not be rewarded for thwarting the court-ordered discovery process by not producing the documentation requested by Concept Sciences. Because of the actions of GmbH in this regard, Concept Sciences was unable to explore the full extent of the contacts that GmbH has with the United States Alfa Laval entities. Nevertheless, Concept Sciences has established that GmbH has sufficient contacts with Pennsylvania to subject GmbH to personal jurisdiction here.

The second part of the test is a determination of whether the exercise of personal jurisdiction will comport with the concepts of fair play and substantial justice.

“In making the determination of whether it is reasonable and fair to require a defendant to conduct his defense in that forum, factors a court should consider include ‘(1) the burden on the defendant, (2) the forum state’s interest in adjudicating the dispute, (3) the plaintiff’s interest in obtaining convenient and effective relief, (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies and (5) the shared interest of the several states in furthering fundamental substantive social policies.’ ” McCall, 437 Pa. Super, at 580, 650 A.2d at 905. (citations omitted)

In this case we find that there is no burden on Alfa Laval Flow GmbH, as other entities of this “family” of companies are already subject to this court’s jurisdiction. Their experienced legal counsel should have no problem continuing to competently represent all the Alfa Laval defendants. Moreover, because of the devastation created both in terms of loss of life and property damage caused by the explosion at the Concept Sciences site, this Commonwealth has a great interest in adjudicating this dispute.

The plaintiffs in these cases, as well as Concept Sciences, have a definite interest in obtaining convenient and effective relief from their losses in these cases. As noted above, Concept Sciences contends that the pump manufactured by Alfa Laval Flow GmbH is the cause of the explosion because of a manufacturing defect in the pump. Accordingly, we agree with Concept Sciences that GmbH is an indispensable party to this litigation. If Concept Sciences can establish its claim against GmbH, this manufacturer may very well be liable, in whole or in part, for this tragedy. Therefore, it should be included as a party in these cases.

We conclude that factors (4) and (5) of the McCall test are not relevant to the present inquiry, but find that it is reasonable and fair to assert personal jurisdiction over Alfa Laval Flow GmbH.

For the reasons expressed above, we find that it is proper to assert specific in personam jurisdiction over Alfa Laval Flow GmbH in these consolidated cases. Accordingly, we overrule the preliminary objections of GmbH.

ORDER

Now, June 13,2001, upon consideration of additional defendant Alfa Laval Flow GmbH’s preliminary objections to the complaints of Irl Ward and Concept Sciences Inc., filed on June 26, 2000 in case nos. 1999-C-1736 and 1999-C-2390; upon consideration of additional defendant, Alfa Laval Flow GmbH’s preliminary objections to the complaint of Concept Sciences Inc., filed September 13,2000 in case no. 2000-C-0183; upon consideration of defendant, Alfa Laval Flow GmbH’s preliminary objections to the amended complaint filed December 5, 2000 in case no. 2000-C-2280; upon consideration of the answers to all three preliminary objections; upon consideration of the briefs of the parties; after oral argument held January 30, 2001; and for the reasons expressed in the accompanying opinion, it is ordered the preliminary objections of additional defendant Alfa Laval Flow GmbH in the nature of a motion to dismiss for lack of personal jurisdiction in case nos. 1999-C-1736 and 1999-C-2390 are dismissed as moot.

It is further ordered the preliminary objection of additional defendant Alfa Laval Flow GmbH in the nature of a motion to dismiss for lack of personal jurisdiction in case no. 2000-C-0183 is overruled.

It is further ordered that the preliminary objection of defendant Alfa Laval Flow GmbH in the nature of a motion to dismiss for lack of personal jurisdiction in case no. 2000-C-2280 is overruled.

It is further ordered that Alfa Laval Flow GmbH shall have until 20 days after the expiration of the stay in these cases by the Commonwealth Court of Pennsylvania to file an answer to the joinder complaint of defendant Concept Sciences Inc. in case no. 2000-C-0183.

It is further ordered that the Lehigh County Court operations supervisor shall schedule the remaining preliminary objections of all defendants to the third amended complaint filed by plaintiff Diane C. Bowers in case no. 2000-C-2280 at the next available list after the stay in these cases is lifted by the Commonwealth Court of Pennsylvania.

      . By order dated May 29, 2001 the Honorable Joseph T. Doyle, judge of the Commonwealth Court of Pennsylvania, entered an order in the matter of Koken v. Reliance Insurance Company, 269 M.D. 2001 (Pa. Commw. 2001). That order directed that Reliance Insurance Company be placed into rehabilitation in accordance with the provisions of article V of the Insurance Department Act of 1921, Act of May 17, 1921, P.L. 789, art. V, §§501-563, as amended, 40 PS. §§221.1-221.63. Paragraph 22 of the order stayed for 60 days all actions currently pending in which Reliance was obligated to defend a party. Defendants have advised the court that they are each insured by Reliance.
      Therefore, we intend to file an order staying the within matters shortly after filing the within order and opinion. Because we already had this matter under advisement prior to the Commonwealth Court stay, and mindful of the directive of the Supreme Court of Pennsylvania in Pa.R J.A. no. 703 that all matters be promptly decided, we issue this order and opinion cognizant that the parties will not be allowed to proceed in these consolidated cases until the stay expires or is lifted by the Commonwealth Court of Pennsylvania.
      Accordingly, additional defendant shall have 20 days after the lifting of the stay to file an answer to defendants’ joinder complaints.

      . By order of the undersigned dated September 5, 2000, we directed the parties to establish a record of facts necessary to resolve the within preliminary objections through stipulations, affidavits, depositions and other discovery. Because GmbH did not endorse its preliminary objections with a notice to plead, defendant Concept Sciences Inc., was not required under the Pennsylvania Rules of Civil Procedure to file an answer to the preliminary objections. However, a preliminary objection in the nature of an attack on in personam jurisdiction cannot be determined from facts of record alone. See note to Pa.R.C.P. 1028(c). Accordingly, we directed the parties to create a record so that we could dispose of the within preliminary objections.

      . In our September 5, 2000 order, we gave defendants six months to file an amended joinder complaint for several reasons. These included the extensive discovery materials (approximately 25,000 documents) and the lack of access to the explosion site because of ongoing investigations by the Pennsylvania State Police Fire Marshal. Because the statute of limitations had not run, we gave defendants the opportunity to conduct pre-complaint discovery to provide a complaint with enough specificity to comply with the pleading requirements of Connor v. Allegheny General Hospital, 501 Pa. 306, 461 A.2d 600 (1983).
      Accordingly, we gave defendants six months in which to conduct the discovery necessary to file an appropriate amended joinder complaint.

      . Notes of Testimony of the oral argument held before the undersigned January 30, 2001, at pp. 6-8.

      . The court may exercise jurisdiction over a corporation or person who acts directly or by an agent by shipping merchandise either directly or indirectly into or through the Commonwealth. See 42 Pa.C.S. §5322(a) (1) (iii).

      . Notes of Testimony (N.T. Schuck) of the deposition of Robert Schuck conducted October 20, 2000, at p. 16.

      . N.T. Schuck, pp. 42-44.

      . Notes of Testimony (N.T. MacGregor) of the deposition of Robert T. MacGregor conducted October 18, 2000, at pp. 13-14.

      . N.T. MacGregor, p. 23.

      . N.T. MacGregor, pp. 65-66.

      . Notes of Testimony of the deposition of Vincent Manganiello conducted October 18, 2000, at pp. 19-24.

      . N.T. Schuck, p. 8.

      . Although all the facts have not yet been developed on the record, four deaths and other personal injuries resulted from the explosion on February 19, 1999. In addition, the entire 42,000 square foot facility housing Concept Sciences Inc. in Lehigh Valley Industrial Park III was destroyed. Moreover, there was extensive property damage to other nearby buildings in the industrial park.
      There have been 23 cases filed in Lehigh County, and several cases filed in Northampton County, seeking damages for death, personal injuries, property damage, and site clean-up costs, arising from this explosion.

      . As noted in the attached opinion, these two cases have settled. Accordingly we dismiss the preliminary objections of additional defendant Alfa Laval Flow GmbH as moot.

      . As noted in our attached opinion, the parties stipulated that they would be bound in case no. 2000-C-2280 by our decision in case nos. 1999-C-1736 and 1999-C-2390. Because those cases have settled, and the preliminary objections are moot, in the spirit of the stipulation between the parties we consider our decision on the preliminary objections in case no. 2000-C-0183 as dispositive of the preliminary objections filed in case 2000-C-2280.

      . See footnote 1 of our attached opinion.

      . Four of the defendants in case no. 2000-C-2280 filed preliminary objections to the third amended complaint of Diane C. Bowers which are' not disposed of by the within order and opinion. Accordingly, they will be scheduled for oral argument after the expiration of the stay in these cases by the Commonwealth Court of Pennsylvania.
      On April 12, 2001 defendant Lehigh Realty Associates filed preliminary objections in the nature of a demurrer, a motion to strike for lack of specificity, and a motion to dismiss the punitive damages claim.
      On April 19, 2001 defendants Alfa Laval Flow GmbH; ALEDco Inc.; and Alfa Laval Inc. filed separate preliminary objections each in the nature of a motion to strike for lack of specificity. In addition ALEDco’s preliminary objections included a motion to dismiss the punitive damages claim and a motion to dismiss the loss of consortium claim. Both Alfa Laval Flow GmbH’s and Alfa Laval Inc.’s preliminary objections included a motion to strike for failure to conform to a rule of law and a demurrer.
      Alfa Laval Inc. is not a party to this lawsuit. Nevertheless, it has filed preliminary objections on behalf of defendants Alfa Laval Pumps Inc., Alfa Laval Flow Inc. and Alfa Laval Pumps, a division of Alfa Laval Flow Inc., as successor in interest to those entities.


source: Caselaw Access Project

author: WOLF, J.,

license: Public Domain

text:
    CSC Enterprises Inc. v. Pennsylvania State Police, Bureau of Liquor Control Enforcement

      Edward A. Taraskus, for plaintiff.

      Edward B. McHugh, for defendant.
    March 2, 2001
   WOLF, J.,

This case arises from the appeal of three citations issued by the Bureau of Liquor Control Enforcement of the Pennsylvania State Police against CSC Enterprises Inc. t/a Who’s on Third in 1998 and 1999 and affirmed by an administrative law judge on February 22,2000. This finding was appealed by CSC to the Liquor Control Board which affirmed the ALJ by decision dated April 19, 2000. On November 6, 2000, this court, after a review of the record and briefs and upon consideration of oral argument, reversed the decision of the board, finding that the decision of the ALJ and the board imposed a duty upon CSC that was not required by 47 P.S. §4-495. For the following reasons this court’s decision should not be disturbed.

FACTS AND PROCEDURAL HISTORY

The first of the three citations issued against CSC, no. 98-1943, contained three counts:

“(1) In July 1998, CSC, through its agents, servants or employees used or permitted to be used on the inside of its premises, a loudspeaker or similar device that could be heard on the outside in violation of 40 Pa. Code §5.32(a);
“(2) From August through September 1998, CSC through its agents, servants or employees sold, furnished or permitted such sale or furnishing of alcoholic beverages to 12 minors in violation of 47 P.S. §4-493(1); and
“(3) From August through September 1998, CSC through its agents, servants or employees permitted 12 minors to frequent its premises in violation of 47 P.S. §4-493(1).”

The second citation, no. 99-1009, contained one count which alleged that CSC, by or through its agents, servants or employees, sold or furnished alcoholic beverages to five individuals under 21 years of age on April 17, 1999, in violation of 47 P.S. §4-493(1).

The third citation, no. 99-1171, contained one count which charged that CSC, by its servants, agents or employees, issued checks or drafts in payment for purchases of malt or brewed beverages when CSC had insufficient funds in or credit with the institution upon which the funds were drawn, in violation of 47 P.S. §4-493(26).

These citations were consolidated for hearing before Administrative Law Judge Felix Thau on November 23, 1999. With regards to the citations for serving alcohol to underage individuals, CSC presented uncontroverted evidence at the hearing that each of the individuals was carded at the door before gaining entrance to the licensed establishment and that each of these individuals presented identification that was later admitted to be altered, forged or otherwise fraudulent. CSC also presented testimony of its doorman, who had 20 years of experience in carding patrons. The doorman testified that CSC has a strict policy of carding all patrons at the door and that additional identification was required in questionable cases. At the close of the evidence the ALJ sustained the citations and imposed a $1,600 fine and a three-day suspension of the liquor license for citation no. 98-1943, and imposed a $1,400 fine and five-day suspension of the liquor license for citation no. 99-1009. In so holding, the ALJ found that CSC did not act in “good faith” in carding the minors and thus were not relieved of liability for violation of the burden imposed by section 495 of the Liquor Code. 47 P.S. §4-495. The ALJ based this conclusion on the following factors: the alleged poor quality of the identification cards proffered, the short length of time the identification was viewed, CSC’s failure to question the individuals regarding the accuracy of the information contained in the identification cards, the number of “youthful” looking patrons entering as a group, the absolute number of minors found, and the percentage of minors found to the total number of patrons. See ALJ adjudication at p. 11.

This finding was appealed to the board which, by opinion dated April 19, 2000, affirmed the decision of the ALJ. In doing so, the board relied heavily on the holding in Skoritowski v. Pennsylvania State Police, 742 A.2d 704 (Pa. Commw. 1999). In Skoritowski, the Commonwealth Court found that whether a party acts in good faith is a state of mind to be determined from the testimony of witnesses. However, once “autoptic evidence is introduced in a trial then the fact-finder decides what weight shall be accorded to the same.” Id. at 707. Thus, the board reasoned, given the list of factors considered by the ALJ when he found that CSC was merely paying lip-service to its responsibility to keep minors out of its establishment, the ALJ’s decision was supported by substantial evidence. Board opinion at p. 7. This appeal followed.

DISCUSSION

In deciding whether to uphold the findings of the board, this court, following a de novo review, may sustain, alter, change or modify the board’s action, whether or not it makes findings of fact that are materially different from those of the board. Altshuler v. Pennsylvania Liquor Control Board, 729 A.2d 1272 (Pa. Commw. 1999). This court is required to accept into evidence the record below, Pennsylvania State Police v. Kelly’s Bar Inc., 536 Pa. 310, 639 A.2d 440 (1994), but remains free to make its own findings of fact and conclusions of law and impose sanctions as it deems appropriate. Here the court finds, based on the records presented to the ALJ, the board, and this court, that the imposition of fines and the suspension of CSC’s license was not warranted.

Section 495 of the Liquor Code sets forth the types of identification that a licensee may accept as proof of legal age. Specifically, 47 P.S. §4-495(a) provides that a photo driver’s license or a photo non-driver’s identification card is acceptable as proof of legal age. More specifically, this section of the code provides that:

“A photograph or photocopy or other visual or video presentation of the identification card set forth in subsection (a) in the possession of a licensee or an employee of a state liquor store may be offered as a defense in all civil and criminal prosecutions for serving a minor, and no penalty shall be imposed if the administrative law judge or the courts are satisfied that the licensee or state liquor store employee acted in good faith.” 47 P.S. §4-495(f).

Here, CSC met the obligations imposed by this provision of the code; the identification of each and every minor was checked. The ALJ held that this was insufficient, finding that Skoritowski required more. As relevant to this case, however, the court in Skoritowski found that when a “495 defense” was proffered, the ALJ had to look at the identification as it existed at the time of the sale in order to find a lack of good faith. Where it was not available for review, testimony was sufficient to support a finding of good faith. Id. at 706. What the court in Skoritowski did not do was to require the licensee to determine the quality of the identification card, that is, to detect a forgery. There is no question that CSC had a duty to check the identification cards. However, that duty is not limitless but is defined by what a reasonable licensee would do. Here, in concluding that the review of the identification cards was insufficient, the ALJ and the board were essentially imposing upon CSC not only a duty to conduct an investigation but also an obligation to detect that those cards had been forged. The ALJ essentially said as much when he stated that where the initial identification was suspect, CSC should use a declaration of age card system and make a photostatic copy of each identification presented. N.T. 2/23/99 at p. 114. However, the statute does not require that such a system be maintained. Moreover, maintaining such a system would not have prevented the individuals from gaining access to CSC’s establishment as, having already gone to the extreme of producing forged documentation, there is little doubt that these minors would have fraudulently filled out the declaration cards as well.

The ALJ erred in imposing burdens upon CSC that are not required by the code. Specifically, in holding that the identification cards proffered were not of good quality, the ALJ is requiring CSC to play detective and make an independent and correct determination of the validity of the cards. Under Skoritowski what is required is a good faith effort to make the determination. Moreover, the ALJ found that the amount of time that CSC’s doorman reviewed the identification cards was insufficient. Thus, the ALJ is imposing his opinion as to what is a sufficient time measure on how long the card must be reviewed, which also is not required by the code. The ALJ also found that CSC’s failure to question the minors about the contents of the identification cards was further evidence of its lack of good faith. However, the code does not require any licensee to question its patrons and potential patrons or conduct an inquiry in a specific manner.

The conduct of CSC in this matter was at least as conscientious as that of the licensee in Skoritowski. In Skoritowski, a minor purchased alcohol at a food mart after presenting proof of age to the clerk. Although the transaction in Skoritowski was captured on tape, the actual card was not shown. Here, the cards were preserved and presented to this court which could properly find that sufficient effort had been made to assess the validity of the proffered identification. Therefore, the imposition of fines and suspension of CSC’s license was in error.

CONCLUSION

For the foregoing reasons, the decision of this court should not be disturbed.

      . In fact, a number of the minors who were served testified that they had been asked for identification by CSC’s doorman and that they produced identification for the doorman who reviewed it before allowing them into the premises.

      . Prior to the addition of subsection (f) to section 495 of the code in 1996, licensees were required to have the customer fill out and execute a “declaration of age card” after the customer’s photo identification was checked. Only then could a licensee defend a citation for serving alcoholic beverages to minors. Finding that this was too unwieldy a process, the legislature amended this section of the code to permit the licensee to omit the declaration card part of the proceeding, and defend based on a review of the photographic identification alone.


author: GRINE, J.,

text:
    Martin v. National Grange Mutual Insurance Company

      C.P. of Centre County,
    no. 2000-0527.

      James K. Thomas II and Brooks R. Farland, for plaintiff.

      John W. Heslop Jr., for defendant.
    November 15, 2000
   GRINE, J.,

A hearing was held in the above-captioned matter on August 14, 2000. As a default judgment was previously entered, the sole purpose of the August 14, 2000 hearing was for the assessment of damages as to defendant National Grange Insurance Company. Based on the testimony presented during the hearing and upon review of the briefs, proposed findings of fact and suggested conclusions of law, this court enters the following opinion and order.

FINDINGS OF FACT

(1) NGM received notice of plaintiff Ralph Martin, t/d/b/a Colyer Dry Kiln’s (Colyer) claim against NGM’s insured, Ebac Systems Inc., on June 12, 1995.

(2) An NGM adjuster, supervisor and claim manager collectively executed a home office management report, dated June 14, 1995, which acknowledged that NGM needed an opinion from counsel as to whether the insurance policy issued to Ebac provided coverage for the Colyer claim.

(3) NGM retained William Black, Esq., to provide a coverage opinion.

(4) On July 11,1995, Attorney Black provided an oral opinion to NGM that it would be difficult to deny coverage for the claims against Ebac.

(5) Colyer filed a writ of summons against Ebac in August 1995.

(6) NGM neither hired counsel to defend Ebac, nor ruled Colyer to file a complaint.

(7) On or about October 24,1995, NGM District Claim Manager Steve Bracewell had a telephone conversation with Attorney Black wherein Attorney Black restated his opinion that there appeared to be merit to the Colyer claim.

(8) On November 28, 1995, Mr. Bracewell had another telephone conversation with Attorney Black wherein Attorney Black opined that (1) NGM was probably “on the hook” for damages that occurred during the policy period, and (2) NGM should defend Ebac under a reservation of rights.

(9) NGM received a copy of the Colyer complaint on or about October 29, 1996.

(10) NGM requested two extensions of time from Colyer’s counsel in order to respond to the complaint.

(11) On December 5, 1996, NGM Adjuster Tracey Robinson, during a telephone conversation with Attorney Black’s law firm, advised his firm to wait for further instruction before preparing and/or sending a coverage opinion.

(12) On December 11, 1996, contrary to advice and opinions received by Attorney Black, Adjuster Robinson told counsel for Ebac she did not see a trigger for coverage under the NGM policy, and that she would obtain an independent coverage opinion and get back to counsel for Ebac with a formal response.

(13) On January 10, 1997, District Claim Manager Justin Davis instructed Adjuster Robinson to get a coverage opinion from an attorney other than Attorney Black.

(14) As Attorney Black did not hear from Adjuster Robinson since the December 5, 1996 telephone conversation, Attorney Black wrote to Adjuster Robinson inquiring whether NGM still needed a coverage opinion.

(15) On April 2, 1997, Adjuster Robinson discussed the case with an attorney from a different law firm, possibly located in Hollidaysburg, Pennsylvania. Adjuster Robinson noted in her file that said attorney “will review for coverage issues.”

(16) In a letter dated December 22, 1997, Attorney Black again wrote a letter to inquire whether he should provide a coverage opinion or if his firm should close its file.

(17) Adjuster Robinson, in a letter dated December 30,1997, instructed Attorney Black that a coverage opinion was not necessary and that Attorney Black should close his file.

(18) On March 25, 1998, Attorney Black wrote to NGM confirming NGM’s instruction to not prepare a coverage opinion and that Attorney Black was closing his file without billing regardless of the fact Attorney Black had performed research and prepared a partial coverage opinion.

(19) NGM never received a written coverage opinion from any attorney.

(20) NGM violated its own internal guidelines by never explaining its coverage position to Ebac.

(21) NGM never hired counsel to defend Ebac under a reservation of rights.

(22) NGM never instituted any formal legal proceedings to determine its obligations and responsibilities under the policy to Ebac.

(23) NGM admits the complaint triggered a duty to defend Ebac under a reservation of rights.

(24) Ebac was forced to hire its own counsel and defend itself.

(25) Following jury selection and with potential compensatory damages in excess of $235,000 plus punitive damages, Ebac settled the case with Colyer for $130,000.

(26) The parties stipulated the amount of settlement, $130,000, is fair and reasonable.

(27) Ebac paid counsel fees in the underlying lawsuit in the amount of $62,245. Said amount is fair and reasonable.

(28) District Claim Manager Justin Davis left NGM’s Richmond office in January 1999.

(29) Duane Regan assumed the Richmond office position of district claim manager in August 1999.

(30) There was no district claim manager in the Richmond office from January 1999 through August 1999.

(31) Despite their knowledge that a complaint had been filed against an insured, Ebac, and despite awareness of and/or involvement in the pending coverage issues, no one in a management or supervisory position at NGM performed any kind of substantive review of the file for almost three years.

(32) Although NGM Supervisor Starbuck participated in the decision regarding obtaining a coverage opinion, Supervisor Starbuck made an entry in the file running notes on October 15, 1999, almost one year after the underlying case was settled, inquiring whether Adjuster Robinson should close the file. The note stated that “This file has not had any activity in 2-1/2 years....”

(33) Despite the fact that issues regarding Ebac’s settlement with Colyer and the numerous coverage issues were clearly indicated by a review of the file’s running notes, on December 9, 1999, District Claim Manager Regan reviewed the running notes and advised Adjuster Robinson the file should be closed.

(34) District Claim Manager Regan did not retrieve and review the paper file prior to instructing Adjuster Robinson to close the file.

(35) On December 17,1999, Adjuster Robinson closed the file.

(36) As of the date the file was closed, NGM had not expended a single dollar on expenses.

(37) Adjuster Robinson was interviewed for the litigation specialist job in April 1996.

(38) Jerry Cox, senior claims consultant at NGM’s home office, noted in his interview evaluation that “[Robinson] understands the litigation process and the need for financial control.”

(39) Robinson assumed the job of litigation specialist in the Richmond office on June 1, 1996.

(40) On or about May 19, 1997, District Claim Manager Davis performed Robinson’s first job performance appraisal. Robinson was praised for securing flat-fee arrangements with local counsel, which “[Resulted in [a] significant decrease in our legal expenses. Goal exceeded. Expense control — 100 percent satisfaction.”

(41) Immediately thereafter, Robinson received a 7.12 percent salary increase.

(42) Robinson’s performance was again evaluated on June 4,1998. Robinson was honored with NGM’s Circle of Excellence Award as “her control of the legal expenses had a significant impact on this office’s reduction in ALAE (principally legal expenses) in 1997.”

(43) The 1998 performance appraisal also noted:

“Done an excellent job in controlling legal expenses.
“100 percent compliance on extension usage, suit referral and expense control....
“Key areas of litigation management and expense control resulted in this office’s turnaround in 1997.”

(44) Robinson received a $1,800 salary increase immediately thereafter.

(45) Robinson’s 1999 performance appraisal noted that Robinson “needs to renew emphasis on expense control as it is as much part of her job as investigating and settling claims.”

(46) Robinson did not receive any award, bonus or salary increase following the 1999 review.

(47) The instant bad faith action was filed against NGM in March 2000.

(48) A default judgment was entered against NGM on May 1, 2000.

(49) District (presently Regional) Claim Manager Regan stated during the August 14, 2000 hearing that this was the worst file handling he had ever seen.

(50) NGM’s total assets, as of December 31,1999, are $525,874,000.

(51) Approximately $320,000,000 of NGM’s total assets are liquid assets or those easily convertible to cash.

(52) NGM earned $17,032,000 in investment income.

(53) NGM’s policyholder surplus or net worth has grown approximately 50 percent over the last five years.

(54) As of December 31, 1999, NGM’s policyholder surplus or net worth was $265,708,000.

(55) An award of punitive damages against NGM in the area of 2.65 million dollars, one percent of NGM’s net worth, only changes NGM’s key ratios approximately one percent. Such an award would not make NGM financially incapable of responding to and handling claims of its policyholders or adversely affect NGM’s ability to operate as a business enterprise.

(56) NGM breached its duty of good faith and fair dealing to its insured, Ebac.

(57) NGM elevated its own financial interests above its duties to the insured.

(58) NGM’s management consciously disregarded the advice NGM received from counsel it hired to render a coverage opinion.

(59) NGM’s coverage counsel, who opined NGM had a duty to defend Ebac under a reservation of rights agreement, was terminated by NGM.

(60) NGM failed to disclose to its insured the advice it received from NGM’s coverage counsel.

(61) NGM lied to its insured about whether NGM had a duty to provide a defense.

(62) NGM failed in its promise to the insured to obtain an independent coverage opinion and advise its insured accordingly.

(63) NGM, by placing emphasis on, and rewards for, reducing counsel fees, provided incentives for bad faith behavior from NGM’s claim handlers.

(64) NGM’s management failed to fulfill one of its principal functions of supervising claim handlers to make certain policyholders’ rights were protected.

(65) NGM’s behavior was outrageous and recklessly indifferent toward its insured.

CONCLUSIONS OF LAW

(1) Because a default judgment has been entered against NGM in this case, NGM is deemed to have admitted well pleaded facts and that NGM breached its contract with, and acted in bad faith toward, its insured, Ebac. Fox v. Gabler, 534 Pa. 185, 626 A.2d 1141 (1993); Lawrence v. General Medicine Ass’n Ltd., 412 Pa. Super. 163, 602 A.2d 1360 (1992).

(2) Because of its admitted breach of contract, NGM is obligated to reimburse Ebac for the settlement that Ebac funded, $130,000, plus fees Ebac paid to Ebac’s defense counsel, $62,245. Said amounts total $192,245.

(3) Pennsylvania’s bad faith statute, effective July 1, 1990, is codified at 42 Pa.C.S. §8371, and 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 fees against the insurer.” 42 Pa.C.S. §8371.

(4) Because of its admitted bad faith conduct toward Ebac, NGM is also liable for interest on the amount of the claim, court costs and punitive damages. 42 Pa.C.S. §8371.

(5) Pursuant to section 8371, interest is awarded from June 12, 1995, when Ebac first requested that NGM respond to the claim asserted against Ebac by Colyer. Using that date, interest compounded annually at the prime rate plus 3 percent totals $142,763.

(6) Pennsylvania has adopted section 908 of the Restatement (Second) of Torts, which provides:

“(1) Punitive damages are damages, other than compensatory or nominal damages, awarded against a person to punish him for his outrageous conduct and to deter him and others like him from similar conduct in the future.
“(2) Punitive damages may be awarded for conduct that is outrageous, because of the defendant’s evil motive or his reckless indifference to the rights of others. In assessing punitive damages, the trier of fact can properly consider the character of the defendant’s act, the nature and extent of the harm to the plaintiff that the defendant caused or intended to cause and the wealth of the defendant.” Restatement (Second) of Torts §908; see also, Feld v. Merriam, 506 Pa. 383, 485 A.2d 742 (1984) (adopting section 908).

(7) An insurer acts in bad faith with respect to a claim if it (1) did not have a reasonable basis for denying benefits under the policy and (2) if it knew or recklessly disregarded its lack of a reasonable basis in denying the claim. Terletsky v. Prudential Property and Casualty Insurance Co., 437 Pa. Super. 108, 649 A.2d 680 (1994), alloc. denied, 540 Pa. 641, 659 A.2d 560 (1995).

(8) In assessing punitive damages, the courts have typically considered three things: the character of the act, the nature and extent of the harm caused, and the wealth of the defendant. Kirkbride v. Lisbon Contractors Inc., 521 Pa. 97, 100, 555 A.2d 800, 802 (1989).

(9) Punitive damages in Pennsylvania are not intended as compensation to the injured plaintiff, but are a penalty, imposed to punish the defendant and to deter him and others from similar outrageous conduct. Voltz v. General Motors Acceptance Corp., 332 Pa. 141, 2 A.2d 697 (1938); Esmond v. Liscio, 209 Pa. Super. 200, 224 A.2d 793 (1966), alloc. denied.

(10) The only limitation on the amount of punitive damages that can be awarded in Pennsylvania is that the award cannot be excessive. BMW v. Gore, 517 U.S. 559, 134 L.Ed.2d 809 (1996) (discussing the ratio of punitive damages to the actual harm inflicted on the plaintiff and noting that, “in most cases, the ration will be well within a constitutionally acceptable range.... when the ratio is a breathtaking 500 to one, however, the award must surely ‘raise a judicial eyebrow.’ ”); TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443, 125 L.Ed.2d 366 (1993) (no federal judicial eyebrow raised at a 10 to one ratio).

(11) Unlike federal law, Pennsylvania does not require a proportionality between the amount of the compensatory damages and the amount of punitive damages. In fact, a mathematical proportionality (under Pennsylvania law) would actually defeat the purpose of punitive damages — to punish tort-feasors for outrageous conduct and deter them from similar conduct. Kirkbride, supra; Sprague v. Walter, 441 Pa. Super. 1, 656 A.2d 890 (1995), alloc. denied, 543 Pa. 695, 670 A.2d 142 (1996), 543 Pa. 730, 673 A.2d 336 (1996).

(12) Courts have upheld and endorsed punitive damages awards of $150,000 where the underlying underinsured motorist claim was only $15,000 — a 10 to one ratio and the ratio of around one percent of the defendant’s net worth for a punitive damages award. Wood v. Allstate, 1997 U.S. District LEXIS 14663 (E.D. Pa. 1997); Dunn v. HOVIC, 1 F.3d 1371, 1383 (3d Cir. 1993), cert. denied, 510 U.S. 1031 (1993).

(13) NGM, at all times, had an obligation to place the interests of Ebac in the same light as its own interests. Cowden v. Aetna Casualty and Surety Co., 389 Pa. 459, 134 A.2d 223 (1957).

(14) This court finds, by clear and convincing evidence that NGM’s behavior (1) constituted a breach of contract insurance with Ebac, (2) constitutes “bad faith” as contemplated in section 8371, and (3) was outrageous because NGM acted with reckless indifference toward Ebac, its insured.

(15) Plaintiff is entitled to punitive damages in an amount approximately 10 times the amount of compensatory damages.

(16) Accordingly, plaintiff is entitled to an award of damages, including an award of punitive damages as follows:

(1) Reimbursement for the underlying settlement $130,000
(2) Reimbursement for the counsel fees incurred $62,245
(3) Interest pursuant to section 8371 $142,763
(4) Punitive damages $3.350.000
TOTAL: $3,685,008

(17) Pursuant to 42 Pa.C.S. §8371, plaintiff is entitled to reimbursement for the counsel fees and costs incurred in the instant matter, subject to approval by this court.

ORDER

And now, November 15,2000, after a hearing on damages and upon review of the proposed findings of fact and suggested conclusions of law, it is ordered and decreed that judgment is entered in favor of plaintiff Ralph Martin, t/d/b/a Colyer Dry Kiln, as assignee/subrogee for Ebac Systems Inc., Ebac Inc., and Ebac Ltd., and against defendant National Grange Mutual Insurance Company in the amount of $3,685,008.

It is further ordered that plaintiff Ralph Martin, t/d/b/a Colyer Dry Kiln, as assignee/subrogee for Ebac Systems Inc., Ebac Inc., and Ebac Ltd., is entitled to reimbursement for attorneys’ fees and costs incurred in the instant matter, subject to approval by this court.


author: TERESHKO, J.,

text:
    Sokoloski v. American Home Products

      Lee B. Belefsky, for plaintiffs.

      J. Clayton Undercofler, for defendant Les Servier.

      Michael T. Scott, Barbara R. Binis, and Reetu Dandora, for defendants AHP and Wyeth Ayerst.
    January 9, 2003
   TERESHKO, J.,

Plaintiffs, Judith and Joseph Sokoloski, now appeal this court’s order dated November 14, 2001 granting the motion for summary judgment in favor of defendants, Les Laboratoires Servier and Servier Amerique (referred to collectively as Les Servier). Plaintiffs are one of 22 other plaintiffs against whom this order was entered. Pursuant to the order of the Superior Court (attached as exhibit A [not published herein]), these appeals are consolidated.

These actions were part of the diet drug Phentermine-Fenfluramine (Phen-Fen) mass tort litigation in Philadelphia, Pennsylvania. At the time of this litigation, this writer was the supervising judge of the Complex Litigation Center and, in that capacity, supervised the mass tort program.

The mass tort program included all the Phen-Fen cases against defendant American Home Products Corporation (AHP). At the time of the entry of the instant order, all the then-open cases against AHP were settled, leaving Les Servier as the only open defendant. In due course, these actions against Les Servier were on track to proceed to trial when, on May 21,2001, Les Servier filed its global motion for summary judgment.

FACTUAL HISTORY AND LEGAL ANALYSIS

In what follows, the factual history and legal analysis of this litigation are considered together.

In the early 1990s, a new diet drug was launched upon the American consumer. It consisted of using the drug fenfluramine in conjunction with the drug phentermine to create the now well-known “Phen-Fen” therapy. The use of phentermine is not at issue here. Rather, the fenfluramine component of Phen-Fen is our principal focus, as well as dexflenfluramine, its chemical “cousin,” which subsequently was used as an alternative to phentermine.

For commercial purposes, fenfluramine had become the brand name “Pondimin” and dexfenfluramine had become the brand name “Redux.”

Les Servier, a corporate citizen of France, with its principal place of business in France, manufactured the bulk powdered ingredient in both Pondimin and Redux and licensed the use of the active ingredient to various entities which ultimately joined the AHP corporate family.

Les Servier never established a corporate presence in the United States.

The powdered product that was licensed and sold to the AHP entities in the United States was converted by AHP into the final product of Phen-Fen. The U.S. Food and Drug Administration (FDA) approved the final product for sale by AHP. The right to do this was sought by and granted to AHP as an exclusive right in the United States. There was no evidence to show that Les Servier ever sought or received from the FDA the right to sell the final product.

Since AHP entities were the sole licensees of Les Servier and had exclusive approval from the FDA, Les Servier argues that AHP was the sole manufacturer, distributor, marketer and promoter of Pondimin and Redux.

Against this background, a review that includes the federal diet drug litigation is now appropriate.

After the medical complications attendant on the use of Pondimin and Redux became known, the Pondimin and Redux products were withdrawn from the U.S. market in a joint announcement made by AHP and the FDA on September 15, 1997.

An avalanche of litigation soon followed in state and federal courts. All the federal litigation was consolidated for pretrial purposes in the Eastern District of Pennsylvania, under the Multi District Litigation Rules (MDL). Because of the overlap of the state and federal cases, as well as of state and federal litigators, pretrial discovery and settlement negotiations were conducted as an ongoing joint exercise.

During the discovery and settlement processes, on October 12, 1999, a class action complaint was filed as Brown v. American Home Products Corporation. It is instructive to read Judge Bechtle’s language in understanding the significance of this class action complaint.

“The Brown complaint was filed as a vehicle for combining the claims of class members asserted in pending federal and state diet drug litigation throughout the country into a single complaint to facilitate class action treatment of those claims for settlement purposes. (T.R. 5-2-00.) The settlement agreement was reached with respect to a class consisting of all persons in the United States who ingested Pondimin and Redux and their associated consortium claimants. (Exhibit P-3 at 19 of 48.)” In re Diet Drugs, Brown v. AHP at *19.

The foregoing takes on significance because of what was required to establish and certify this class.

In In re Diet Drugs, Brown v. AHP, Judge Bechtle had before him the joint motion of the class representatives and the sole defendant, American Home Products, for an order certifying and approving the nationwide settlement class embodied in the settlement agreement entered into between the parties on November 19, 1999. Id.

In order to arrive at the point where approval of such motion would be proper, certain underlying requirements had first to be met.

Class requirements are stated generally under Rule 23 of the Federal Rules of Civil Procedure. Fed.R.C.P. 23 et seq. Specifically, Fed.R.C.P. 23 establishes the “commonality” requirement in 23(a)(2) while identifying four prerequisites to a class action:

“One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.”

In class counsel’s proposed findings of fact and conclusion of law (appendix, tab. 2, exhibit “H”) it was represented that, “Diet drugs themselves were essentially a single product, marketed by a single major manufacturer. ...” Id. (Referring to AHP.)

In In re Diet Drugs, Brown v. AHP, under the commonality requirements, Judge Bechtle adopted the following facts proposed by plaintiffs.

“Here, there exist several common issues to the class to support a finding of predominance and cohesiveness. With regard to common questions of fact, the diet drugs at issue here are essentially a single product — in that Pondimin and Redux are chemically related — marketed by a single major manufacturer — AHP.” Id. at *41.

“In addition, plaintiff’s claims in this litigation all stem from allegations involving a common course of conduct followed by AHP. (internal citations omitted) Plaintiff’s negligence and failure to warn claims will revolve around AHP’s conduct and knowledge in developing and marketing Pondimin and Redux. Although there are some individual differences among class members, the common class-wide focus on AHP’s knowledge and conduct predominate such that judicial efficiency will be improved through the class mechanism ....” Id. at *42.

“The instant class is more cohesive than the classes sought to be certified in the asbestos and tobacco litigation arenas.” Id.

“[T]he instant class was exposed to only two diet drugs, which are chemically related,...Id.

“Where Anchem involved 20 asbestos defendants, the instant class involves a single manufacturer defendant— AHP.” Id.

Here, it is thus clear that plaintiffs, for the purpose of obtaining class action certification and national settlement approval, advanced the position in the national diet drug litigation that AHP was the only manufacturer, distributor and promoter of the diet drugs in question. Further, it is likewise clear that the trial court in that litigation, vested with authority as the coordinating court under the Federal Rules for Multi District Litigation, entered as a conclusion of law the position advanced by plaintiff regarding AHP’s status as the sole manufacturer, distributor and promoter.

Basing its determinations in the instant matter upon the doctrine of judicial estoppel, this court holds that plaintiff’s actions in the class action litigation mentioned above necessarily prevent plaintiffs from here proceeding against a different and additional defendant, namely against Les Servier.

In Sunbeam Corporation v. Liberty Mutual Insurance Company, infra, our Supreme Court has explained the doctrine of judicial estoppel.

“Judicial estoppel is an equitable, judicially-created doctrine designed to protect the integrity of the courts by preventing litigants from ‘playing fast and loose’ with the judicial system by adopting whatever position suits the moment. Gross v. City of Pittsburgh, 686 A.2d 864, 867 (Pa. Commw. 1966). Unlike collateral estoppel or res judicata, it does not depend on relationships between parties, but rather on the relationship of one party to one or more tribunals. In essence, the doctrine prohibits parties from switching legal positions to suit their own ends.” Sunbeam Corp. v. Liberty Mutual Insurance Co., 566 Pa. 494, 500, 781 A.2d 1189, 1192 (2001),

The Pennsylvania Supreme Court has ruled that “[w]e have a summary judgment rule in this Commonwealth in order to dispense with a trial of a case (or, in some matters, issues in a case), where a party lacks the beginnings of evidence to establish or contest a material issue.” Ertel v. Patriot-News Co., 544 Pa. 93, 100, 674 A.2d 1038, 1042 (1996). In Pennsylvania, “[i]t is by now axiomatic that a motion for summary judgment may only be granted where there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law.” Burnside v. Abbott Laboratories, 351 Pa. Super. 264, 273-74, 505 A.2d 973, 978 (1985). Thus, Pennsylvania courts have ruled that “the function of a summary judgment motion is to avoid a useless trial.” Dillon by Dillon v. National Railroad Corp. (Amtrak), 345 Pa. Super. 126, 137, 497 A.2d 1336, 1341 (1985). (citations omitted) In Pennsylvania, the principles governing summary judgment are well-settled: “First, the pleadings, depositions, answers to interrogatories, admissions on file, together with the affidavits, if any, must demonstrate that there exists no genuine triable issue of fact. . . Second, the record must show that the moving party is entitled to judgment as a matter of law.” Stidham v. Millvale Sportsmen’s Club, 421 Pa. Super. 548, 558, 618 A.2d 945, 950 (1992). (citations omitted) “It is not part of the court’s function to decide issues of fact but solely to determine whether there is an issue of fact to be tried.” Washington Federal Savings & Loan Association v. Stein, 357 Pa. Super. 286, 288, 515 A.2d 980, 981 (1986). “[A]ll doubts as to the existence of a genuine issue of material fact must be resolved against the party moving for summary judgment.” Breslin by Breslin v. Ridarelli, 308 Pa. Super. 179, 183, 454 A.2d 80, 82 (1982). (citations omitted) “Summary judgment may be granted only where the right is clear and free from doubt.” First Wisconsin Trust Co. v. Strausser, 439 Pa. Super. 192, 198, 653 A.2d 688, 691 (1995) (citing Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466 (1979)). “The moving party has the burden of proving that there is no genuine issue of material fact.” Id., 439 Pa. Super, at 198, 653 A.2d at 691. In determining whether the moving party has met this burden, the court must examine the record in the light most favorable to the non-moving party, giving that party the benefit of all reasonable inferences. See Elder v. Nationwide Insurance Co., 410 Pa. Super. 290, 294, 599 A.2d 996, 998 (1991). Once a motion for summary judgment is made and properly supported, “a non-moving party may not avoid summary judgment by resting] upon the mere allegations or denials of his pleading ....” Ertel, 544 Pa. at 100, 674 A.2d at 1042. Rather, the non-moving party must set forth specific facts showing that there is a genuine issue for trial. See Curran v. Children’s Service Center of Wyoming County Inc., 396 Pa. Super. 29, 33, 578 A.2d 8, 9 (1990). Thus, rearticulating the Pennsylvania Supreme Court’s own well-settled ruling, the Ertel court ruled that in Pennsylvania “the mission of the summary judgment procedure is to pierce the pleadings and assess the proof in order to see whether there is a genuine need for a trial.” Ertel, 544 Pa at 100, 674 A.2d at 1042. (citations omitted)

Considering the instant factual predicate, this court finds that the doctrine of judicial estoppel is applicable and that the granting of summary judgment is required and proper.

In their general master long-form complaint and jury demand, filed on May 17,1999, under the mass tort protocols, plaintiffs alleged, inter alia, that Les Servier formulated, developed, manufactured, promoted, marketed, licensed, distributed and/or sold pharmaceutical products most relevantly in Pennsylvania.

The complaint goes on to allege that such activity made Les Servier liable to plaintiffs under theories of negligence, strict liability, breach of implied warranty, breach of express warranty, fraud and loss of consortium, and it seeks compensatory and punitive damages.

Prior orders of court, issued pursuant to Les Servier’s preliminary objections, struck plaintiffs’ Counts II and III, alleging strict liability in tort and strict liability failure to warn, respectively, and Count IV, alleging breach of implied warranty. The remaining counts were resolved by the instant order granting defendant’s motion for summary judgment.

Although this court’s conclusion that the doctrine of judicial estoppel by itself warrants a grant of summary judgment on all counts, there are additional bases upon which summary judgment would be appropriate, which bases this court briefly analyzes in what follows.

In Count I (¶¶63-69) of their complaint, plaintiffs allege negligence against defendant Les Servier.

Plaintiffs’ negligence count does not restrict its focus to the specific activity by Les Servier which is complained of. Indeed, the complaint goes on at length to list every possible activity which may be assumed to be inherent in any drug’s coming to market. Because of this dissembling, the court will utilize a construct in analyzing plaintiff’s allegations of negligence.

The Pennsylvania Supreme Court has articulated the elements a plaintiff must plead in advancing a count of negligence: “(1) the existence of a duty or obligation recognized by law, requiring the actor to conform to a certain standard of conduct; (2) a failure on the part of the defendant to conform to that duty, or a breach thereof; (3) a causal connection between the defendant’s breach and the resulting injury; and (4) actual loss or damage suffered by the complainant.” Atcovitz v. Gulph Mills Tennis Club Inc., 2002 WL 31867709, *2 (Pa.)

Assuming that, in the instant matter, the complained of activity comprises the designing, manufacturing, selling, distributing, promoting, testing, etc., of the finished diet drug product, the record contains no evidence to corroborate the claim that Les Servier was involved in any of those activities. As Les Servier amply points out in its merits motion (global motion for summary judgment, merits motion, at 19-21), the AHP defendants have admitted that they exclusively performed all the complained of activities. Further, as identified above, plaintiffs themselves have alleged in another forum that parties other than Les Servier defendants had been exclusively responsible for the complained of activities. The same plaintiffs have also benefited from this position by virtue of the above referred to class action certification and settlement.

Under the comprehensive Food and Drug Administration regulatory scheme (FDA Act), a manufacturer must obtain approval from the FDA agency to distribute its product, Food, Drug and Cosmetic Act, 21 U.S.C. §301 et seq. Said approval is secured by formal application, which must include “full reports of investigation which have been made to show whether or not such drug is safe for use and whether such drug is effective in use.” 21 U.S.C. §355(b)(l)(A). Additionally, subsequent to FDA approval, a manufacturer is required to provide updated data or information to the FDA secretary, to enable the secretary to determine whether grounds exist for revocation of the drug, 21 U.S.C. §355 (k)(l). Moreover, the manufacturer, distributor or seller of the drug has the duty to label the prescription drug it has manufactured. See 21 U.S.C. §352(b), 21 C.F.R. §201.100.

It is clear that a determination of manufacturers, distributors or sellers status is critical under the FDA regulatory scheme, not just for the initial approval of the drug, but also for the continuing monitoring of the safety and efficaciousness of the drug. Once AHP has been determined to be the exclusive manufacturer, distributor, and seller of the drug here at issue, it follows a priori that Les Servier cannot be identified as a manufacturer, distributor, or seller of the drug here at issue, and that it must be precluded from the class of companies to be held liable for said manufacturing, distribution or sale of the drug.

“Proof of causation is a necessary element in a products liability action as well as in a negligence action. ‘A plaintiff must establish that a particular product of a defendant manufacturer caused her injuries.’ City of Philadelphia v. Lead Industries Asso., 994 F.2d 112, 123 (3d Cir. 1993), citing Lilley v. Johns-Manville, 408 Pa. Super. 83, 92, 596 A.2d 203, 207 (1991), alloc. denied, 530 Pa. 644, 607 A.2d 254 (1992); Eckenrod v. GAF Corp., 375 Pa. Super. 187, 190-91,544 A.2d 50, 52 (1988), alloc. denied, 520 Pa. 605, 553 A.2d 968 (1988). In general, a defendant must be identified as the manufacturer, distributor, or seller of the offending product before the injuries suffered by the plaintiff may be found to be proximately caused by some negligent act or omission of the defendant. ‘Absent such identification, there can be no allegations of duty, breach of duty, or legal causation, and hence there can be no liability.’ Id., 344 Pa. Super, at 18, 495 A.2d at 967-68. ” Mellon v. Barre-National Drug Co., 431 Pa. Super. 175, 184, 636 A.2d 187, 191-92 (1993).

Since plaintiffs have failed to establish that the Les Servier defendants engaged in the complained of conduct, it follows that Les Servier had no duty. Without such duty being established, liability deriving from a theory of negligence cannot be attached.

Assuming again that plaintiffs’ theory against Les Servier under the negligence count is based upon a failure to warn, plaintiffs must establish that Les Servier had some duty to them as a consumer of the final product.

It has been here established peradventure that Les Servier did none of the activities of a manufacturer, distributor or seller of the final product, although it did manufacture an ingredient in bulk, which AHP then used in its final manufacture of the product.

In White v. Weiner, our Superior Court had before it a case which is a factual replica of the instant case. See White v. Weiner, 386 Pa. Super. 111, 562 A.2d 378 (1989). The White case involved the sale in bulk quantity of the drug protamine sulfate. This protamine sulfate, “in bulk packages not in tablet, capsule or dosage form” id. at 115, 562 A.2d at 380 (emphasis added), was sold to the pharmaceutical company Upjohn for conversion to a final product, which would then be distributed to medical care providers for prescription to the individual parties.

The court, in White, reviewed the FDA Act and the Pennsylvania Controlled Substance, Drug, Device and Cosmetic Act, 35 P.S. §780-101 to §780-144, (Commonwealth Act), and found that, for the purpose of applying a labeling requirement, 21 U.S.C. §§301-392 (1982), the “Federal Act,” did not preempt the “Commonwealth Act.” “It is axiomatic that the existence of a federal statute, such as that governing the manufacture, distribution, and sale of prescription drugs . . . does not necessarily preempt state action in that field.” White, 386 Pa. Super, at 117, 562 A.2d at 381-82. (citations omitted) (footnote omitted) “[0]ur Supreme Court specifically concluded that the Federal Act did not preempt this Commonwealth’s Dangerous Drug Act of 1955, a predecessor statute to the current Commonwealth Act.” Id. at 117-18, 562 A.2d at 382. (footnote omitted)

“An examination of the federal statute reveals neither an express or [sic] implicit exposition of any congressional intent to preclude state action in the field of regulation of the sale and dispensing of drugs; there is, within the statute, ‘no scheme of regulation’ so ‘pervasive’ as to lead to the inference that the federal government by the passage of this legislation intended to pre-empt the field. The mere fact that Congress has taken action in this field does not justify the assumption that the federal system was thus intended to dominate that field. . . . Hence, because the field of drug regulation is not exclusively within the federal domain, this Commonwealth may enter that field so long as its laws and regulations do not conflict with the federal provisions.” Id. at 118, 562 A.2d at 382. (citations omitted)

Nevertheless, the White court held that “[o]ur legislature unequivocally has expressed a policy of deference to the federal scheme in the area of drug labeling,... Id. at 120, 562 A.2d at 383. Specifically, under the Federal Act, the labeling must include the following information: “description, clinical pharmacology, indications and usage, contraindications, warnings, precautions, adverse reactions, drug abuse and dependence, overdosage, dosage and administration, how supplied.” Id. at 122, 562 A.2d at 384 (quoting 21 C.F.R. §201.56). In White, the court was clear in placing responsibility and, a fortiori, liability for the labeling requirements “squarely upon the shoulders” of the manufacturer, distributor or packer of the prescribed drug. See id. at 121, 562 A.2d at 384. The analysis of the White court then continued on to review the additional requirements imposed upon the manufacturer, distributor, etc. (See the above analysis under the general negligence discussion, p. 7 ff.)

With this analysis in hand, the White court held:

“In this case, we decline to impose on a bulk supplier of pharmaceutical chemicals the additional duties to warn suggested by appellant. The rigorous testing and reporting required of final manufacturers by federal law, see e.g., 21 U.S.C. §355(b)(l)(A), (k)(l), renders superfluous detailed warning by bulk suppliers to those same manufacturers.” Id. at 124, 562 A.2d at 385.

By way of partial explanation of its rationale for limiting the liability of a “bulk supplier,” the White court wrote further,

“This general reluctance to expand tort liability within the distribution chain is consistent with our position that
“[i]t is illusory to believe the public does not pay for tort recoveries, or that resources for such are limitless. As it is with everything, a balance must be struck — certain limits drawn ... A sound and viable tort system— generally what we now have — is a valuable incident of our free society, but we must protect it from excess lest it becomes unworkable [citing] Steiner v. Bell Telephone Co., 358 Pa. Super. 505, 522, 517 A.2d 1348, 1357 (1986) (en banc), aff’d without opinion, 518 Pa. 57, 540 A.2d 266 (1988).” Id. at 123-24, 562 A.2d at 385.

As a matter of law, Les Servier had not the duty to warn plaintiff consumers of Phen-Fen. Absent that duty, no liability for any failure to warn can exist.

As a discrete sub-issue of the general negligence count, plaintiff claims that defendant negligently designed the drugs in question. It remains clear that Les Servier did not manufacture the finished product, but only supplied a bulk ingredient which other companies converted into the final product of Phen-Fen; and, on that fact alone, the necessary nexus to the final product is absent.

An analysis of the Incollingo, Baldino, and Hahn line of cases is irrelevant here as those cases analyzed the duties of a manufacturer of the finished prescription drug. But cf. Incollingo v. Ewing, 444 Pa. 299, 282 A.2d 206 (1971); and cf. Baldino v. Castagna, 505 Pa. 239, 478 A.2d 807 (1984); and cf. Hahn v. Richter, 427 Pa. Super. 130, 628 A.2d 860 (1993). The duties of the Les Servier defendant fall rather within the White v. Weiner analysis herein presented.

In Count V of their complaint, plaintiffs allege a breach of express warranty against defendants, claiming that defendants expressly warranted that their products were both efficacious and safe for their intended use.

To defeat summary judgment on a claim of breach of express warranty, plaintiffs must first establish that an express warranty existed. Yet, in this action, plaintiffs fail to establish the existence of an express warranty. According to Pennsylvania law, an express warranty is created as follows:

“(a) General rule. — Express warranties by the seller are created as follows:
“(1) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
“(2) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
“(3) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
“(b) Formal words or specific intent unnecessary. — It is not necessary to the creation of an express warranty that the seller use formal words, such as ‘warrant’ or ‘guarantee’ or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the opinion of the seller or commendation of the goods does not create a warranty.” 13 Pa.C.S. §2313.

To substantiate their claim of breach of warranty, plaintiffs offer several communications between defendants Servier and Wyeth concerning the collaboration between the companies with respect to fenfluramine and dexfenfluramine. One example is a letter dated July 15, 1996, from Marie-Anne Attal of Les Servier to Matthew S. Dean of Wyeth that states that “[w]e are very proud of the U.S. introduction of Redux and of our collaboration.” (Pi’s exhibit V.) This “collaboration” represents nothing more nefarious than the commonplace relationship between bulk supplier and vendor. Another communication upon which the plaintiffs rely is a 1992 letter from Dr. Derome-Trombley to Dr. Boni of Intemeuron that states that “[t]hese two drugs [dexfenfluramine and fenfluramine] are marketed worldwide by Servier.” (Pi’s exhibit O.)

While Les Servier may have marketed these component ingredients of Redux and Pondimin, there is no evidence that they made an affirmative promise regarding the safety of these drugs. As suppliers of ingredients in bulk form, it was not Les Servier’s role or obligation to warrant their product to those who would eventually use Phen-Fen. Plaintiffs fail to offer any evidence of any actual, specific promise made by Les Servier to the parties injured by ingesting Phen-Fen. In accordance with prior decisions made in Pennsylvania, privity does not exist between bulk suppliers of a component ingredient in a compound and a party injured from ingesting the compound. See White v. Weiner, 386 Pa. Super. 111, 562 A.2d 378 (1989). Likewise, this causal leap cannot be made when transposing responsibility for express warranties from Wyeth, who may have made these warranties, to Les Servier, who merely supplied the component bulk ingredients.

Because plaintiff’s brief is totally devoid of any evidence of an express warranty made by Les Servier, summary judgment is appropriate with regard to this count.

In Count VI of their complaint, plaintiffs allege that Les Servier made fraudulent misrepresentations in advertising and in promoting their drugs.

The record before this court contains no evidence to support the allegation of fraud, since there is no evidence in the record that defendants made any representations at all to the injured patients about the safety of “Phen-Fen.” Consequently, the allegation of fraud could never withstand the rigorous scrutiny required of an allegation of fraud.

The Pennsylvania Supreme Court has ruled that “fraud or intent to defraud is never presumed, and must be proved by ‘evidence that is clear, precise and convincing.’ ” Snell v. Commonwealth of Pennsylvania, State Examining Board, 490 Pa. 277, 281, 416 A.2d 468, 470 (1980). (citations omitted) Specifically, the Pennsylvania Superior Court has determined that “[fjraud consists of anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct ... innuendo, by speech or silence, word of mouth, or look or gesture.” Delahanty v. First Pennsylvania Bank N.A., 318 Pa. Super. 90, 107, 464 A.2d 1243, 1251 (1983) (citing Frowen v. Blank, 493 Pa. 137, 425 A.2d 412 (1981)). The Delahanty court articulated the long-settled elements a party must prove to succeed on a cause of action for fraud. “The elements of fraud are as follows: ‘there must be (1) a misrepresentation, (2) a fraudulent utterance thereof, (3) an intention by the maker that the recipient will thereby be induced to act, (4) justifiable reliance by the recipient upon the misrepresentation, and (5) damage to the recipient as the proximate result.’ ” Id. at 108, 464 A.2d at 1252. (citations omitted)

In this matter, this court has ruled that plaintiffs’ claims that Les Servier was anything more than a bulk supplier of the powdered ingredient in Pondimin and in Redux lack all factual support. As manufacturers of a mere ingredient but not the final product, defendants in this present action lacked a duty to the plaintiffs. Furthermore, plaintiffs could not have acted in justifiable reliance on statements of misrepresentation allegedly made by defendants, and plaintiffs did not so act, because defendants never made such statements. Therefore, plaintiffs have failed to prove all the elements necessary to sustain their claim of fraud.

For the above reasons, this court properly granted defendant’s motion for summary judgment and committed no error of law thereby.

      . Since these facts are not contested in any material way, citation to the record is omitted.

      . See In re Diet Drugs, Brown v. American Home Products Corp, 2000 WL 1222042 (E.D. Pa.) (providing the source of these background facts).