author: HERRON, J.,

text:
    Jewelcor Management Inc. v. Thistle Group Holdings Co.

      Thomas J. Elliott, for plaintiff.

      Mark A. Klugheit, for defendant.
    March 22, 2002
   HERRON, J.,

ORDER

And now, March 22, 2002, upon considering the respective positions of the parties, review of the verified complaint and plaintiff’s petition for injunctive relief and accompanying memorandum of law, it is hereby ordered that:

(1) The annual meeting of the stockholders for Thistle Group Holdings Co., scheduled for April 3, 2002, is hereby enjoined;

(2) The annual meeting of the stockholders of Thistle Group Holdings Co., shall not be noticed for any date earlier than April 17, 2002.

It is further ordered that this order is conditioned upon plaintiff posting a bond in the amount of $500 as security for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.

Opinion to follow.

Plaintiff Jewelcor Management Inc. has filed a petition for a preliminary injunction that would force defendant Thistle Group Holdings Co. to move its annual shareholders’ meeting from April 3, 2002, to April 17, 2002. For the reasons set forth in the following findings of fact, discussion and conclusions of law, the petition is granted, and the court has issued the injunction as requested.

FINDINGS OF FACT

(1) Thistle Group Holdings Co. is a publicly traded Pennsylvania corporation that operates primarily through Roxborough Manyunk Bank.

(2) Jewelcor Management Inc. is a record owner of 500 shares of Thistle common stock. Pet. exhibit A.

(3) The Thistle bylaws state that its annual shareholders’ meeting is to be held “on such date and time as may be determined by the board of directors and stated in the notice of such meeting.” Def. mem. exhibit B, exhibit A §2.2. The bylaws also state that notice of the annual meeting must be given at least 10 days before the meeting. Id. §2.4.

(4) On January 20, 2002, the Thistle board of directors determined that the 2002 annual shareholders’ meeting would be held on April 17, 2002, with a voting period date of March 4, 2002. Def. mem. exhibit B ¶3.

(5) On January 23,2002, Thistle informed ADP Proxy Services that the meeting would be held on April 17, 2002. PI. reply exhibit D ¶2. ADP passed on this informal notice to certain banks and brokers who hold more than 71 percent of Thistle common stock on behalf of beneficial owners. PI. reply exhibit C ¶6; pi. reply exhibit D ¶3.

(6) On February 13, 2002, JMI provided Thistle with notice that it was nominating three individuals (nominees) for election to the board at the meeting. Pet. exhibit A.

(7) On February 15, 2002, Jeffrey Unger, an attorney and financial analyst with JMI, contacted D.F. King & Co., JMI’s proxy service, to determine if the meeting date had been set. Compl. exhibit A ¶4. A representative of King informed Mr. Unger that ADP had stated that the meeting would be held on April 17, 2002, with a record date of March 4, 2002. PI. reply exhibit B ¶4.

(8) Relying on the information obtained from ADP, King and JMI prepared a proxy solicitation schedule based on an April 17, 2002 meeting date. PI. reply exhibit B ¶4; pi. reply exhibit C ¶4.

(9) Thistle filed a preliminary schedule 14A with the SEC on February 15,2002. Def. mem. exhibit A ¶7. This filing did not indicate a date or location for the meeting. Def. mem. exhibit A, exhibit 3.

(10) On February 20,2002, the board met and authorized moving the meeting to April 3, 2002. Def. mem. exhibit B ¶5. Thistle asserts that this move was orchestrated to avoid a lengthy proxy fight that would distract Thistle from focusing on core banking issues. Id.

(11) On February 25, 2002, five days after the board moved the meeting date, Thistle received notice that the Office of Thrift Supervision of the United States Department of Treasury (OTS), the bank’s primary regulator, had scheduled its yearly safety and soundness examination to last from April 1, 2002, until May 10,2002. Def. mem. exhibit B ¶7. OTS requested access to a range of Thistle and bank documents and representatives. Id. ¶8.

(12) Thistle filed its definitive schedule 14A with the Securities and Exchange Commission on March 12,2002. Def. mem. exhibit A ¶8. This definitive filing announced a meeting date of April 3,2002. Id. Thistle contemporaneously mailed its proxy materials to its shareholders. Def. mem. exhibit B ¶9.

(13) On March 13,2002, Long reviewed Thistle’s definitive schedule 14A and became aware of the April 3, 2002 meeting date. Compl. exhibit A ¶6.

(14) Responses to JMI’s proxy solicitation will not be received until April 4, 2002, at the earliest. Tr. of March 22, 2002 oral arg. 28.

(15) JMI has requested that the court issue an injunction enjoining the defendants from holding the meeting before April 17, 2002. Pet. 15.

DISCUSSION

JMI has presented sufficient reasons for issuing the injunction. In short, the board’s attempt to move the meeting date is a blatant attempt to manipulate the upcoming board election and to interfere with JMI’s right to contest the election of Thistle’s directors. Accordingly, the court has issued the injunction, which reschedules the meeting for no earlier than April 17, 2002.

To be entitled to a preliminary injunction, as governed by Pa.R.C.P. 1531, a petitioner must satisfy a four-part test:

(1) The petitioner has a clear right to relief;

(2) The preliminary injunction is necessary to prevent immediate and irreparable harm that cannot be compensated by monetary damages;

(3) A greater injury will result by refusing to issue the injunction; and

(4) The injunction will restore the parties to the status quo as it existed prior to the wrongful conduct.

See Valley Forge Historical Society v. Washington Memorial Chapel, 493 Pa. 491, 500, 426 A.2d 1123, 1128 (1981); Greco v. Hazleton City Authority, 721 A.2d 399, 401 (Pa. Commw. 1998).

I. JMI Has a Clear Right To Relief

In determining a petitioner’s right to a preliminary injunction, it is essential that “the activity sought to be restrained is actionable, and that the injunction issued is reasonably suited to abate such activity. And unless the plaintiff’s right is clear and the wrong is manifest, a preliminary injunction will generally not be awarded.” All-Pak Inc. v. Johnston, 694 A.2d 347, 350 (Pa. Super. 1997) (citing Singzon v. Department of Public Welfare, 496 Pa. 8, 11, 436 A.2d 125, 127 (1981)). However, to demonstrate a “clear right to relief,” a petitioner must show only that substantial legal questions must be resolved to determine the rights of the respective parties and need not prove the merits of the underlying claim. Chmura v. Deegan, 398 Pa. Super. 532, 535, 581 A.2d 592, 593 (1990). Specifically, “unlike a party seeking a permanent injunction, a party seeking a preliminary injunction is not required to establish his or her claim absolutely.” Boyle by Boyle v. Pennsylvania Interscholastic Athletic Association Inc., 676 A.2d 695, 699 (Pa. Commw. 1996). (citation omitted)

A. Thistle’s Conduct Was Not Illegal

Because Thistle is a Pennsylvania corporation, its internal affairs are governed by Pennsylvania corporation law. 15 Pa.C.S. § 1102(a). Each Pennsylvania corporation is to have an annual shareholders’ meeting “at such time as shall be provided in or fixed pursuant to authority granted by the bylaws.” 15 Pa.C.S. §1755(a). Notice for an annual meeting at which no “fundamental change” will be considered must be given at least five days in advance of the meeting. 15 Pa.C.S. § 1704(b)(2).

Here, the bylaws vest the board with the authority to set the date of Thistle’s annual meeting and require that at least 10 days’ notice be provided to shareholders. This permits the board to set a meeting date as it sees fit. Additionally, by giving shareholders notice of the meeting prior to April 7,2002,10 days before the scheduled meeting date, Thistle complied with both the bylaws and Pennsylvania law.

JMI appears to argue that the board’s action is illegal because it contravenes the earlier “notice” of the April 17,2002 meeting date. This argument is doubly flawed. First, there is no indication the “notice” of the April 17, 2002 meeting date qualifies as “notice” as the term is defined. With regard to the April 17,2002 meeting date, it appears that Thistle did nothing more than notify ADP, who passed word of the meeting date on to a substantial majority, but not all, of Thistle’s shareholders. This does not jibe with the requirement in both the bylaws and 15 Pa.C.S. § 1704(b)(2) that notice be sent to “each” shareholder. While the court is wary of allowing a defendant corporation to use its noncompliance with Pennsylvania business law as a shield to thwart the rights of its shareholders, JMI has failed to provide a single case where a court found that informal notice to a proxy service company constituted “notice.” Thus, the court cannot consider the notification of the April 17, 2002 meeting date, to be considered the full and complete notice of the meeting contemplated by Pennsylvania statute and the bylaws. Cf. Sparkes v. Wright, 377 Pa. Super. 374, 382, 547 A.2d 415, 419 (1988) (“[BJecause of the misleading nature of the notice and the confusion generated by the distribution of the invalid mail ballots ... the meeting of December 4, 1987, was properly declared a nullity.”).

Even if the Thistle’s January 23, 2002 contact with ADP could be considered “notice,” there is no indication that moving the date of an annual meeting is illegal per se. Again, the court is unaware of any case law that categorically prohibits a board of directors from moving an annual meeting date once notice of that date has already been provided. In the absence of such supporting authority, the court must conclude that Thistle and the board did not engage in conduct that can be considered illegal.

B. Thistle’s Conduct Was Improper and Inequitable

Notwithstanding the court’s conclusion that the board’s actions were not illegal, the examination of JMI’s complaints is not complete. A corporation’s board of directors acts improperly when it manipulates a corporate election to perpetuate its own control of the corporation. Because the board’s moving the meeting date amounts to little more than an effort to maintain domination over Thistle’s operations, JMI has a clear right to relief.

There is little doubt that the right to vote for a corporation’s directors is one of the paramount privileges afforded shareholders:

“The right to vote is among the most fundamental rights of ownership of voting shares. . . . The right of voting stock is inseparable from the right of ownership. The one follows as a sequence from the other, and the right to vote cannot be separated from the ownership without the consent of the legal owner....
“The right to vote helps ensure corporate democracy, the principle that the owners of a corporation should control the direction that their corporation takes. In the face of disagreements with management, shareholders’ most basic alternatives are either to sell their shares or to vote in new directors.... In the context of corporations whose shares do not have a ready market, shareholders have suffered in their inability to cash out of investments they believe to be mismanaged. Thus, the principle that shareholders should be afforded the right to vote out directors who do not share their vision is all the more important.” Warehime v. Warehime, 777 A.2d 469, 477-78 (Pa. Super. 2001) (citing, inter alia, Blasius Indus. Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988)). (quotation marks omitted) See also, Reifsnyder v. Pittsburgh Outdoor Advertising Co., 405 Pa. 142, 149 n.8, 173 A.2d 319, 322 n.8 (1961) (“The right to vote is often considered a shareholder’s most fundamental right.”); William Meade Fletcher, 5 Fletcher Cyc. of the Law of Private Corps. §2025 (1996) (“[T]he right to vote is a right that is inherent in and incidental to the ownership of corporate stock, and as such is a property right.”).

There appears to be strong support, albeit mostly from outside the Commonwealth, for granting injunctive relief where a corporation or its directors interfere with the fair election of directors. JMI cites a number of cases, primarily from Delaware, that discuss the importance of corporate democracy and shareholder elections in general terms. See e.g., Giuricich v. Emtrol Corp., 449 A.2d 232, 239 (Del. 1982) (“The courts of this state will not allow the wrongful subversion of corporate democracy by manipulation of the corporate machinery or by machinations under the cloak of Delaware law.”). It appears from these cases that tinkering with corporate elections to interfere with shareholders’ electoral rights violates a director’s fiduciary duty to shareholders and is enjoinable. In Blasius Industries Inc., for example, the Delaware Chancery Court considered the plaintiffs’ challenge to how an election of two directors had been conducted:

“One of the principal thrusts of plaintiffs’ argument is that, in acting to appoint two additional persons of their own selection, including an officer of the company, to the board, defendants were motivated not by any view that Atlas’ interest (or those of its shareholders) required that action, but rather they were motivated improperly, by selfish concern to maintain their collective control over the company. That is, plaintiffs say that the evidence shows there was no policy dispute or issue that really motivated this action, but that asserted policy differences were pretexts for entrenchment for selfish reasons. If this were found to be factually true, one would not need to inquire further. The action taken would constitute a breach of duty.” 564 A.2d at 658.

This theme also runs through the Chancery Court’s decision in Aprahamian v. HBO & Co., 531 A.2d 1204, 1206-1207 (Del. Ch. 1987):

“The corporate election process, if it is to have any validity, must be conducted with scrupulous fairness and without any advantage being conferred or denied to any candidate or slate of candidates. In the interests of corporate democracy, those in charge of the election machinery of a corporation must be held to the highest standards in providing for and conducting corporate elections.” 531 A.2d at 1206-1207.

There is little case law in Pennsylvania on this subject. The only two Pennsylvania cases JMI cites are Steinberg v. American Bantam Car Co., 76 F. Supp. 426 (W.D. Pa. 1948), and Warehime. In Steinberg, the corporation’s bylaws set the annual shareholder meeting for the third Monday in September, but the directors repeatedly postponed the meeting. After the directors set the meeting for February of the next year and forwarded notice on January 24, they prevented the plaintiff from obtaining a list of shareholders. In granting the plaintiff preliminary injunctive relief, the court noted that the facts presented by the plaintiff, including the repeated moving of the meeting date, amounted to constructive fraud. While Steinberg helps JMI to the extent that it shows that moving a shareholder meeting date can constitute improper conduct, the allegations here are distinguishable in that there was no repeated moving of the meeting date, and there is no evidence that the bylaws of Thistle required the meeting to be held on a specific date.

Warehime is marginally more similar to this case and revolved around a director-presented stock plan that would essentially have precluded removing the corporation’s directors under all but the most unlikely circumstances. The incumbent directors themselves conceded that the proposed plan was designed to deter a change in control, with the court ultimately finding that they had “purposefully entrenched themselves.” 777 A.2d at 480. Because of this, and in spite of the fact that the directors had not violated their fiduciary duties, the court held that the directors’ conduct was improper and enjoined the plan from taking effect:

“While the business judgment rule does afford directors significant leeway in decisions that they make in good faith and with due care, and while directors may consider constituencies other than the shareholders, neither provision can validate corporate actions designed to undermine shareholder’s voting rights.
“The directors’ actions were improper, not because of a breach in duty to the corporation, but because of the principle of corporate democracy, the core issue in the present remand, which bars actions otherwise properly taken that are designed to undermine voting rights.
“We hold that John Warehime and the other directors impermissibly exercised their power to retain their own positions by purposely depriving the majority shareholders of any real opportunity to affect the outcome of any vote. Such abuse of position, even if exercised in the belief that the company was thereby well served, violates the principles of corporate democracy that enable shareholders to control their own company. Therefore, we set aside the vote taken in favor of the stock plan.” 777 A.2d at 480-81 & 480 n.13. (citations and footnotes omitted)

While Warehime generally supports JMI’s position that interfering with a shareholder’s voting rights is enjoin-able, even where such conduct is not illegal or a breach of fiduciary duty, it is distinguishable from the case at hand. Warehime centered on the substance of the plan under consideration, not the process by which the meeting was scheduled and noticed. In contrast, the instant dispute involves why the board moved the meeting and how the board notified JMI of the changed meeting date.

More on point than either Pennsylvania case is Schnell v. Chris-Craft Industries, 285 A.2d 437 (Del. 1971). There, the board of directors amended the company’s bylaws to allow the board to set the time and place for stockholders’ meetings, and the trial court concluded that the board’s motivation in setting a date for the meeting was to impede a dissident group of shareholders’ ability to wage a proxy fight over the election of directors. The Delaware Supreme Court accepted these findings of fact, but held that the trial court’s refusal to grant relief to the shareholders was in error:

“In our view, those conclusions amount to a finding that management has attempted to utilize the corporate machinery and the Delaware law for the purpose of perpetuating itself in office; and, to that end, for the purpose of obstructing the legitimate efforts of dissident stockholders in the exercise of their rights to undertake a proxy contest against management. These are inequitable purposes, contrary to established principles of corporate democracy. The advancement by directors of the bylaw date of a stockholders’ meeting, for such purposes, may not be permitted to stand.
“When the bylaws of a corporation designate the date of the annual meeting of stockholders, it is to be expected that those who intend to contest the re-election of incumbent management will gear their campaign to the bylaw date. It is not to be expected that management will attempt to advance the date in order to obtain an inequitable advantage in the contest.” 285 A.2d at 439. (citation omitted)

Of particular significance in Schnell is the fact that, like Warehime, the defendants’ actions were merely inequitable, not illegal, but nevertheless provided grounds for an injunction:

“Management contends that it has complied strictly with the provisions of the new Delaware Corporation Law in changing the bylaw date. The answer to that contention, of course, is that inequitable action does not become permissible simply because it is legally possible.
“Management relies upon American Hardware Corp. v. Savage Arms Corp., 37 Del. Ch. 10, 135 A.2d 725, aff’d, 37 Del. Ch. 59, 136 A.2d 690 (1957). The case is inapposite for two reasons: It involved an effort by stockholders, engaged in a proxy contest, to have the stockholders’ meeting adjourned and the period for the proxy contest enlarged; and there was no finding there of inequitable action on the part of management. We agree with the rale of American Hardware that, in the absence of fraud or inequitable conduct, the date for a stockholders’ meeting and notice thereof, duly established under the bylaws, will not be enlarged by judicial interference at the request of dissident stockholders solely because of the circumstance of a proxy contest. That, of course, is not the case before us.” 285 A.2d at 439. (emphasis added) (citations omitted) See also, Lerman v. Diagnostic Data Inc., 421 A.2d 906, 913 (Del. Ch. 1980) (“Unequitable conduct by management cannot become permissible simply because it is legally possible ....”).

Later cases have narrowed the holding of Schnell. See e.g., Alabama By-Prods. Corp. v. Neal, 588 A.2d 255, 258 n.1 (Del. 1991) (The principle espoused in Schnell “should be reserved for those instances that threaten the fabric of the law, or which by an improper manipulation of the law, would deprive a person of a clear right.”); Martin Marietta Corp. v. The Bendix Corp., no. civ. a. 6942, 1982 WL 525140 at *7 (Del. Ch. September 19, 1982) (“Schnell . . . turned on the proposition that the action taken by incumbent management, although legally permissible, was inequitable and unfair under the circumstances . . . .”). However, the basic tenets of shareholder democracy and fairness that Schnell propounded remain sound law.

In this case, the court has no doubt that the board’s moving of the meeting date from April 17 to April 3 is an intentional and improper infringement on JMI’s rights as a shareholder to contest a board election. The OTS visit and examination could not have influenced the board’s decision, as Thistle was not aware of the examination until five days after it moved the meeting. Moreover, the board’s assertion that it sought nothing more than avoiding a drawn-out proxy fight is difficult to believe. Rather, it appears that the board’s action was a thinly veiled attempt to provide its slate of nominees with an advantage and to undermine JMI’s election and proxy efforts. In addition, although Thistle’s informal notice through ADP does not satisfy the statutory and bylaws requirements, it is significant that JMI relied on the board’s initial meeting date determination to plan its election campaign and that the board was most likely aware of this reliance. Thus, the board’s actions are inequitable and impermissible under Pennsylvania law.

The cases cited by the defendants are not to the. contrary. In In re Allegheny International Inc., no. 88-448, 1988 WL 212509 (W.D. Pa. May 31, 1988), for example, the court found that “under Pennsylvania law, courts of equity have jurisdiction to restrain the holding of a corporate election only where there has been a showing that a fair and honest election cannot be held because of unlawful conduct, fraud, violence, or similar abuses.” 1988 WL 212509 at *4 (requiring a “compelling showing of need” to issue an injunction). Here, it is clear that a fair and honest election cannot be held on April 3, 2002, because of the board’s abuses, and Allegheny International therefore supports the conclusion that an injunction is appropriate here.

In Blasius, the Delaware Chancery Court found that, once it is established that directors have acted with the primary purpose of impeding a stockholder’s exercise of her voting powers, “the board bears the heavy burden of demonstrating a compelling justification for such action.” 564 A.2d at 661. Here, the board has failed utterly to demonstrate such a justification. Thus, JMI has shown that it has a clear right to have the original meeting date of April 17, 2002, restored.

II. JMI Will Suffer Immediate and Irreparable Harm

To establish immediate and irreparable harm, a petitioner has the burden of showing that the harm cannot be remedied by damages, Schaeffer v. Frey, 403 Pa. Super. 560, 565, 589 A.2d 752, 755 (1991); Churchill Corp. v. Third Century Inc., 396 Pa. Super. 314, 328, 578 A.2d 532, 539 (1990), and that damages “can be estimated only by conjecture and not by an accurate pecuniary standard.” West Penn Specialty MSO Inc. v. Nolan, 737 A.2d 295, 299 (Pa. Super. 1999). In determining whether the harm in question can be remedied by damages, courts are to look not at past damage, but rather to “the unbridled threat of the continuation of the violation.” Id. In addition, the harm in question must be “great” in nature. Kimmel v. Lower Paxton Twp., 159 Pa. Commw. 475, 481, 633 A.2d 1271, 1274 (1993). Interference with a shareholder’s election rights has been held to constitute immediate and irreparable harm by courts both inside and outside the Commonwealth. See e.g., International Banknote Co. v. Muller, 713 F. Supp. 612, 623 (S.D.N.Y. 1989) (“[Cjourts have consistently found that corporate management subjects shareholders to irreparable harm by denying them the right to vote their shares or unnecessarily frustrating them in their attempt to obtain representation on the board of directors.”); Treco Inc. v. Land of Lincoln Sav. & Loan, 572 F. Supp. 1447, 1450 (N.D. Ill. 1983) (“Due to the impending time constraints imposed by the October 26, 1983 annual meeting, plaintiffs will suffer irreparable harm should the court refuse to grant immediate injunctive relief.”); Warehime, 777 A.2d 469.

JMI alleges that allowing the meeting to proceed on April 3, 2002, will make it impossible for it to continue its proxy battle in favor of the nominees. Specifically, the advanced meeting date does not allow JMI sufficient time to send, to receive and to process its proxy materials. The court has little difficulty finding that JMI’s inability to involve itself in the corporate election process and to solicit the proxy votes of other Thistle shareholders constitutes immediate and irreparable harm.

III. The Injunction Will Restore the Status Quo

In granting a preliminary injunction, a court is required to “preserve the status quo, as it exists or previously existed before the acts complained of.” Smotkin v. Manhattan-Ward Inc., 363 Pa. Super. 597, 600, 526 A.2d 1223, 1225 (1987). The status quo to be preserved is “the last actual, peaceable and lawful noncontested status which preceded the pending controversy.” Valley Forge, 493 Pa. at 501, 426 A.2d at 1129. Forcing the meeting to be held on April 17, 2002, or thereafter, would restore the status quo as it existed prior to the board’s improper action in moving the meeting to April 3, 2002.

IV. Greater Injury Will Result From Refusing To Grant the Injunction Than From Denying the Injunction

The fourth requirement for a court to grant a preliminary injunction is that there would be greater injury resulting from failing to grant the injunction than from granting the injunction. DiLucente Corp. v. Pennsylvania Roofing Co., 440 Pa. Super. 450, 456, 655 A.2d 1035, 1037 (1995). In considering any injuries, “[tjhere should be no balancing of convenience, but it should be clear that greater injury would be done by refusing it than in granting it.” Pennsylvania Railroad Co. v. Driscoll, 330 Pa. 97, 101, 198 A. 130, 133 (1938).

The defendants contend that moving the meeting will harm them by allowing JMI to advance positions that are harmful to Thistle and the bank and by interfering with the examination. However, there is no indication that OTS’s visit will be less disruptive on April 3 than on April 17. Moreover, the supposed harm caused by JMI’s underlying proposals that the bank be sold or merged does not justify denying an injunction; a corporation’s directors may not muzzle a shareholder simply because they deem the shareholder’s views to be bad. Instead, the directors must engage in a dialogue and debate with the shareholder that allows them to exercise their rights as shareholders. Accordingly, there is greater harm in denying the injunction than in granting it.

CONCLUSIONS OF LAW

(1) JMI has a clear right to have the meeting moved to a date no earlier than April 17, 2002.

(2) JMI will suffer immediate and irreparable harm if the injunction is not granted.

(3) The harm JMI will suffer if the court refuses to issue the injunction is greater than the harm the defendants will suffer if the court issues the injunction.

(4) The injunction will restore the status quo as it existed prior to the defendant’s wrongful conduct.

(5) These conclusions require that the court grant the petition and issue the injunction.

      . The action also names several of Thistle’s directors as defendants in this matter.

      . JMI ultimately reduced the number of nominees to two to comply with federal banking regulations.

      . A “schedule 14A” is a securities filing that incorporates proxy solicitation materials.

      . “Fundamental changes” include mergers, amendments to the articles of incorporation and dissolutions. 15 Pa.C.S. §§1901-1992.

      . In First Union National Bank v. Quality Carriers Inc., 48 D.&C.4th 1 (2000), for example, the court held that a defendant corporation’s own errors in carrying out a merger did not render the merger void ab initio, a result that would have been inequitable to the shareholders whose rights had been trampled in the merger process.

      . It is possible to draw a distinction between a shareholder’s right to vote in a board election, on the one hand, and the shareholder’s right to field candidates and to solicit proxy votes in that election. The court finds this distinction meaningless in this case and will treat JMI’s right to solicit proxies and to field the nominees as concomitant with its voting rights.

      . Indeed, the opposite may be inferred, as it is likely that bank officials will be far more occupied with OTS on April 3, 2002, the third day of the examination, than on April 17,2002, midway through the examination.

      . Before an injunction may be issued and effective, a petitioner is required to post a bond in an amount to be determined by the court. Pa.R.C.P. 1531(b); Berger by and through Berger v. West Jefferson School District, 669 A.2d 1084, 1085-86 (Pa. Commw. 1995). In determining the amount of the bond, the trial court is to balance the equities involved and “require a bond which would cover damages that are reasonably foreseeable.” Greene County Citizens United by Cumpston v. Green County Solid Waste Authority, 161 Pa. Commw. 330, 337, 636 A.2d 1278, 1281 (1994). The $500 bond to be posted by JMI is sufficient to sustain the injunction.


source: Caselaw Access Project

license: Public Domain

text:
    Mattiola Construction Corp. v. Commercial Union Insurance Co.

      Travis L. Kreiser, for plaintiff.

      Joseph P Connor III, for defendant.
    March 8, 2002
   HERRON, J.,

Plaintiff Mattiola Construction Corp. has filed a motion for summary judgment on a portion of its claim for breach of contract. The motion presents the novel issue of whether a subcontractor’s insurer must remit compensation for liquidated damages deducted from payments to the subcontractor and arising from damage caused by the subcontractor’s tortious conduct. For the reasons set forth in this opinion, the court is granting the motion.

BACKGROUND

Mattiola is a construction company whose operations center on saw-cutting concrete and asphalt materials in road and bridge construction. In 1999, Mattiola entered into a written subcontract with IA Construction Corporation whereby Mattiola agreed to perform certain concrete saw-cutting work on a bridge owned and operated by the Pennsylvania Turnpike Commission. Motion ¶6. On April 17,2000, while performing this work, Mattiola employees accidentally cut certain structural steel members on the bridge, resulting in the stoppage of all work on the project. Id. f 11.

IA Construction demanded that Mattiola arrange for the repair of the damage resulting from the accident, and Mattiola did so. Motion ¶14-15. However, because of the accident, the project ultimately ran beyond the August 4, 2000 deadline agreed to by IA Construction and the commission, and the commission withheld construction engineering liquidated damages of $75,900 from its payments to IA Construction. Motion exhibit B ¶¶7,13; motion exhibit C ¶5-6. IA Construction, in turn, withheld an equal amount from its payments to Mattiola. Motion ¶33.

At the time of the accident, Mattiola was insured by a commercial general liability insurance policy provided by defendant Commercial Union Insurance Co. (CGU). Motion ¶12. When CGU refused to compensate Mattiola for the liquidated damages, Mattiola brought suit against CGU for breach of the policy, breach of the contractual duty of good faith and bad faith. In the motion, Mattiola seeks summary judgment on its claim for breach of the policy arising from CGU’s failure to reimburse it for the liquidated damages.

DISCUSSION

Pennsylvania Rule of Civil Procedure 1035.2 allows a court to enter summary judgment “whenever there is no genuine issue of any material fact as to a necessary element of the cause of action.” A court must grant a motion for summary judgment when a non-moving party fails to “adduce sufficient evidence on an issue essential to his case and on which he bears the burden of proof such that a jury could return a verdict in his favor.” Ertel v. Patriot-News Co., 544 Pa. 93, 101-102, 674 A.2d 1038, 1042 (1996).

CGU does not meaningfully contest the amount of the liquidated damages and has conceded that the liquidated damages “arose out of the damage done by plaintiff and the subsequent repairs.” Motion exhibit C ¶5. See also, motion exhibit D ¶4 (acknowledging that “[a]s a result of the delay, plaintiff incurred $79,500 in liquidated damages occasioned solely by the delay”). Instead, CGU focuses on the particular language of the policy to argue that the liquidated damages are categorically excluded from coverage thereunder. Each of CGU’s arguments is in essence based on the contention that the liquidated damages arise in contract, not in tort.

Under the policy, CGU must pay Mattiola “those sums that [Mattiola] becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’” to which the policy applies. Motion exhibit F 1.A.1.a. However, there are a number of coverage exclusions, including limitations on the term “property damage” itself, on contract-related damages, and on damages arising from Mattiola’s failure to fulfill its contractual obligations. These restrictions will be addressed seriatim.

In reviewing the policy’s coverage and exclusions, there are several axioms of insurance policy interpretation to keep in mind. Interpretation of an insurance policy is a matter of law to be decided by the court. Curbee Ltd. v. Rhubart, 406 Pa. Super. 505, 509, 594 A.2d 733, 735 (1991). Where a court finds an insurance policy provision ambiguous, “the provision is to be construed in favor of the insured and against the insurer.” Redevelopment Authority of Cambria County v. International Insurance Co., 454 Pa. Super. 374, 388, 685 A.2d 581, 588 (1996). See also, Bubis v. Prudential Property & Casualty Insurance Co., 718 A.2d 1270, 1273 (Pa. Super. 1998) (“[A]n ambiguity in an insurance contract should be read in favor of the insured.”). This can be attributed to the general principle that a contract must be construed against the drafter, as well as the fact that insurance contracts generally are contracts of adhesion. Rudolph v. Pennsylvania Blue Shield, 553 Pa. 9, 17, 717 A.2d 508, 511 (1998). (citation omitted) In addition, this approach conforms to Pennsylvania’s policy of interpreting insurance coverage clauses “broadly so as to afford the greatest possible protection to the insured.” Eichelberger v. Warner, 290 Pa. Super. 269, 275, 434 A.2d 747, 750 (1981) (citing Mohn v. American Casualty Co. of Reading, 458 Pa. 576, 326 A.2d 346 (1974), and Penn-Air Inc. v. Indemnity Insurance Co. of North America, 439 Pa. 511, 269 A.2d 19 (1970)). See also, Butterfield v. Giuntoli, 448 Pa. Super. 1, 14 n.8, 670 A.2d 646, 652 n.8 (1995) (“[I]f a policy is reasonably susceptible of two interpretations, it must be construed in the insured’s favor so as not to defeat, unless clearly necessary, the claim to indemnity which the insured intended to obtain.”).

I. The Term “Property Damage ” Includes the Liquidated Damages

CGU’s first contention is related to the definition of “property damage.” Under the policy, the term “property damage” is defined as follows:

“(a) physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
“(b) loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.” Motion exhibit F V.15.

According to CGU, the liquidated damages are not property damage and therefore are not covered by the policy. This argument fails to take into account the language of the policy, which extends coverage beyond property damage itself to damages incurred because o/property damage. Clearly, the physical injury to the bridge resulting from the accident caused a substantial delay in the completion of the project. This delay can be considered a loss of use, and any resultant damages, including the liquidated damages, are attributable to the accident.

This interpretation of the policy finds support from commentators and courts alike. The Illinois Court of Appeals in Gibraltar Casualty Co. v. Sergeant & Lundy, 574 N.E.2d 664, 671 (Ill. App. Ct. 1991), considered whether an underlying lawsuit alleged property damage as defined by the insurance policy where the claims arose out of the insured’s supposed shortcomings in the insured’s design for an atomic power plant and its efforts to cover up these deficiencies. The Gibraltar Casualty Co. court held that alleged increased costs resulting from construction delays attributable to the design errors were sufficient to allege loss of use within the policy definition of property damage and that the insurer had a duty to defend the insured:

“Loss of use as distinguished from loss of profits is the loss of the right to use property which is an incident of ownership. Loss of use claims are not the same as claims for anticipated profits or loss of investment, and a party’s description of loss of use damages as merely economic does not take them outside the coverage of an insurance policy that defines property damage as including loss of use.” 574 N.E.2d at 671. (emphasis added)

Even in a liquidated damages context, courts have stuck to this broad interpretation of loss of use caused by property damage. In Insurance Company of North America v. Aberdeen Insurance Services Inc., 253 F.3d 878 (5th Cir. 2001), for example, the court considered a commercial general liability insurance policy where the insured’s negligence had resulted in the breach of an oil pipeline, delaying the insured’s completion of its contract-based construction obligations. The court distinguished between CGL insurance cases where the insured was responsible for the physical injury and liquidated damages were covered, and those where the insured was not responsible and liquidated damages were not covered. 253 F.3d at 889. The court concluded that, because the insured was responsible for the pipeline break and the accompanying damage that caused the delay in the project’s completion, the liquidated damages awarded against it were a direct consequence of its tortious conduct and were covered by the insurance policy. Commentators agree with the position espoused by the Fifth Circuit and the Illinois Appellate Court:

“The standard post-1973 CGL policy, which covers ‘damages because of... property damage,’ defines ‘property damage’ as: (1) the physical injury to or destruction of tangible property which occurs during the policy period including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period. ‘[T]he most sensible reading of the ... phrase, ‘damages because of. . . property damage,’ requires the insurer to pay all damages which are causally related to an item of ‘property damage’ which satisfies either of the policy’s definitions.’ Federated Mutual Insurance Co. v. Concrete Units Inc., 363 N.W.2d 751, 757 (Minn. 1985).
“Thus, courts must initially determine whether consequential damages follow either a direct physical injury to tangible property, or a loss of use of tangible property ....
“[I]f either of the two prongs of the ‘property damage’ definition have been satisfied, consequential damages may constitute property damage. See e.g., Westchester Fire Insurance Co. v. Bell Lumber & Pole Co., no. 86 C 8948 (N.D. Ill. October 23, 1991) (consequential damages were causally related to the railroad company’s loss of use of its rail cars); Central Armature Works Inc, v. American Motorists Ins., 520 F. Supp. 283, 289 (D.D.C. 1980) (lost profits stemming from loss of use of a shredder resulting from property damage inflicted by acts of the insured were covered by CGL policy); Minnesota Mining & Mfg. Co. v. Travelers Indem. Co., 457 N.W.2d 175, 182 (Minn. 1990) (‘Damages which are causally related to covered “property damage” should also be covered under the language of the policy.’); Federated Mut. Ins. Co. v. Concrete Units, supra, 363 N.W.2d at 56-57 (the loss of use of a grain elevator resulted in consequential damages); Marley Orchard Corp. v. Travelers Indem. Co., 50 Wash. App. 801, 750 P.2d 1294, 1297, review denied, 110 Wash. 2d 1037 (1988) (stress to trees constituted property damage and the resulting consequential damages were covered by the insured’s CGL policy).
“A loss arising from ‘property damage’ is recoverable, whether or not the loss itself is tangible. See e.g., Aetna Casualty & Surety Co. v. General Time Corp., 704 F.2d 80, 83 (2d Cir. 1983) (lost profits resulting from defective motors incorporated into zone valves); Central Armature Works Inc. v. American Motorists Insurance Co., 520 F. Supp. at 289 (lost profits resulting from negligently repaired scrap metal shredder); DiMambro-Northend Assocs. v. United Construction Inc., 154 Mich. App. 306, 310, 313-16, 397 N.W.2d 547, 548, 550-51 (1986), appeal denied, 428 Mich. 893 (1987) (lost profits, additional overhead and labor costs following fire in a tunnel under construction); General Insurance Co. of Am. v. Gauger, 13 Wash. App. 928, 538 P.2d 563, 566 (1975) (lost profits resulting from defective crop seed); Safeco Insurance Co. v. Munroe, 165 Mont. 185, 527 P.2d 64, 68-69 (1974) (lost profits following injury to a wheat crop).” Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes §7.03 (9th ed. 1998). See also, Jeffrey W. Stempel, Law of Insurance Contract Disputes 14-10 (“[Wjhere economic damage occurs as a fairly traceable consequence of tangible physical injury, property damage coverage is available.”).

In short, Mattiola caused the accident and the resulting property damage. Accordingly, the liquidated damages arose because of property damage addressed by the policy and are covered by the policy, subject to any possible exclusions.

II. The Liquidated Damages Are Not Contractual Damages Excluded From the Policy

The policy excludes property damage “for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement,” although it includes damages “[t]hat the insured would have in the absence of the contract or agreement” as an exception to the exclusion. Motion exhibit F I.A.2.b(l). CGU contends that two contractual provisions govern the deduction of the liquidated damages from amounts owed Mattiola and allow the invocation of this contract exclusion.

CGU first points out that the subcontract imposed liability on Mattiola for damages arising from a delay “by any fault or neglect or act or failure to act” of Mattiola, including liquidated damages. Subcontract ¶9. This, CGU contends, creates a contractual obligation, and Mattiola’s responsibility for the liquidated damages thus arises in contract and is excluded from coverage. However, there does not appear to be any question that Mattiola would have been responsible and liable in some capacity for the accident even in the absence of the subcontract’s provision, and the exception to the exclusion applies.

CGU’s second objection goes to the form of the damages, i.e., liquidated damages set in advance by a contract between IA Construction and the commission, and posits that the liquidated damages are a liability arising from a contract. This attempt to draw a line between the contractually determined liquidated damages and damages arising in tort from the accident is unpersuasive. CGU relies on a number of cases in which Pennsylvania courts held that a CGL policy did not cover damages for breach of contract. However, each of these cases is readily distinguishable from the instant case. In Redevelopment Authority of Cambria County v. International Insurance Co., 454 Pa. Super. 374, 685 A.2d 581 (1996), for example, the Superior Court applied the “gist of the action” test to determine that the claims against the insured were essentially contract claims not covered by the policy. Similarly, in Toombs, NJ Inc. v. Aetna Casualty and Surety Co., 404 Pa. Super. 471, 591 A.2d 304 (1991), the Superior Court held that an insurer was not required to defend the insured against claims arising from the insured’s alleged breach of an agreement to build and to operate two restaurants. See also Snyder Heating Co. Inc. v. Pennsylvania Manufacturers’ Association Insurance Co., 715 A.2d 483 (Pa. Super. 1998) (applying gist of the action test to find that claim for alleged breach of agreement to maintain burners and boilers sounded in contract and that insured was not entitled to coverage). Essentially, each of these cases held that the underlying claim was contract-based and that a CGL policy, which generally covers only tort claims, was not implicated.

In none of the cases cited by CGU was there any property damage underlying the economic damages claimed. In contrast, Mattiola’s duty to remit damages, whether in the predetermined form of the liquidated damages or otherwise, stems more from its actions, the accident and the damages caused thereby as from either its breach of the obligation to avoid negligent conduct, as discussed supra, or the liquidated damages provision. Under these circumstances, a gist of the action analysis makes it clear that any action brought against Mattiola based on the accident would sound in tort, not contract; simply because the amount of the liquidated damages is contractually determined does not mean that Mattiola’s underlying liability and obligation to pay IA Construction the liquidated damages is contractual in nature. Accordingly, the cases cited by CGU are inapposite, and the liquidated damages are not excluded from the policy because of any contractual foundation they may have. Cf. Imperial Cas. Indem. Co. v. High Concrete Structures Inc., 858 F.2d 128, 136 (3d Cir. 1988) (interpreting CGL policy to find that “if there is property damage, then there is coverage for any loss of use the damage caused.”).

IIL Exclusion M Does Not Bar Mattiola from Recovering

Finally, CGU asserts that provision I.A.2.m. of the policy (exclusion M) excludes coverage of the type of damages Mattiola incurred. Exclusion M excludes coverage for property damage to “impaired property” arising out of “[a] delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.” “Impaired property,” in turn, is defined as follows:

“(7) ‘Impaired property’ means tangible property, other than ‘your product’ or ‘your work’, that cannot be used because:...
“(b) You have failed to fulfill the terms of a contract or agreement; if such property can be restored to use by:
“(1) The repair, replacement or removal of ‘your product’ or ‘your work’; or
“(2) Your fulfilling the terms of the contract or agreement.” Motion exhibit F V.7.

CGU asserts that, because the accident came about because of Mattiola’s negligence, which constitutes a breach of the subcontract, exclusion M precludes recovery of the liquidated damages.

In attempting to invoke exclusion M, CGU presents nothing more than old wine in new bottles. As stated supra, Mattiola’s liability in relation to the accident sounds in tort, not contract, and any duties that Mattiola may have violated are less contractual in nature and more tort-related. Cf. Standard Fire Insurance Co. v. Chester-O’Donley Associates Inc., 972 S.W.2d 1, 12 (Tenn. Ct. App. 1998) (holding that impaired property provision could be invoked and liquidated damages barred “when there has been no physical injury to tangible property other than the insured’s work”). Accordingly, exclusion M does not apply, and the policy covers the liquidated damages.

CONCLUSION

Because Mattiola is entitled to coverage of the liquidated damages under the policy, it is also entitled to summary judgment on its claim for breach of the policy arising from CGU’s failure to pay the liquidated damages.

ORDER

And now, March 8,2002, upon consideration of plaintiff Mattiola Construction Corp.’s motion for summary judgment and defendant Commercial Union Insurance Co. ’s response thereto, and in accordance with the memorandum opinion being filed contemporaneously with this order, it is hereby ordered and decreed that the motion is granted. Summary judgment in the amount of $75,000 together with prejudgment and post-judgment interest at the rate of 6 percent per annum, said interest to run from April 10, 2001 to the date said sum is paid to the plaintiff, is hereby entered in favor of the plaintiff on the component of Count I — breach of insurance contract stemming from the defendant’s failure to compensate the plaintiff for the liquidated damages.

      . IA Construction was responsible for the overall repair and reconstruction of the bridge, which is referred to as the “project.”

      . This event is referred to as the “accident.”

      . The liquidated damages were calculated at a rate of $1,100 per day of delay over the 69-day delay period.

      . Mattiola’s claim for breach of the policy has two components. The first is CGU’s failure to compensate Mattiola for the liquidated damages and is addressed in this opinion. The second relates to CGU’s increase of Mattiola’s renewal premiums. Mattiola has not requested summary judgment on this second component.

      . Mattiola is also seeking prejudgment interest of six percent accruing from the date on which this action was initiated. Under Pennsylvania law, “in a contract action, the award of prejudgment interest is not a matter of discretion, but is a legal right.” Verner v. Shaffer, 347 Pa. Super. 206, 211, 500 A.2d 479, 482 (1985) (citing Gold & Co. v. Northeast Theatre Corp., 281 Pa. Super. 69, 421 A.2d 1151 (1980)). Such interest is proper because “the breaching party has deprived the injured party of using interest accrued on money which was rightfully due and owing to the injured party.” Somerset Community Hospital v. Allan B. Mitchell & Assocs. Inc., 454 Pa. Super. 188, 201, 685 A.2d 141, 148 (1996) (citing Thomas H. Ross Inc. v. Seigfreid, 405 Pa. Super. 558, 592 A.2d 1353 (1991)). Accordingly, a victory on its claim for breach of the policy entitles Mattiola to the prejudgment interest it seeks.

      . CGU makes a brief conclusory jab at the amount of the liquidated damages by stating that the liquidated damages amount to a penalty, but does not explain the foundation for this belief. In any event, to the extent that CGU relies on this argument, it is in error. To be permissible, a liquidated damages provision must both (1) address damages that are difficult or impossible to measure and (2) be a reasonable estimate of those damages. See e.g., Holt’s Cigar Co. v. 222 Liberty Assocs., 404 Pa. Super. 578, 588, 591 A.2d 743, 748 (1991); Harris v. Dawson, 239 Pa. Super. 316, 360 A.2d 706 (1976); Kraft v. Michael, 166 Pa. Super. 57, 70 A.2d 424 (1950). Lost profits, such as those that would logically result from the project delay, “are difficult to establish with mathematical certainty,” Scobell Inc. v. Schade, 455 Pa. Super. 414, 421, 688 A.2d 715, 719 (1997), and Pennsylvania courts have repeatedly upheld liquidated damages awards arising from a project’s delay in a construction contract context. See e.g., Downingtown Area School District v. International Fidelity Insurance Co., 769 A.2d 560 (Pa. Commw. 2001). In addition, the fact that the amount varied with the length of the delay, combined with CGU’s failure to produce any evidence of unreasonableness, allows the court to infer that the liquidated damages were a reasonable estimate of the damages caused by the delay in completing the project. Cf. Keck v. Bieber, 148 Pa. 645, 646, 24 A. 170 (1892) (“[Wjhere a lump sum is named by them, the court will always look into the question whether this is really liquidated damages or only a penalty, the presumption being that it is the latter.”). Cf. ZA Consulting L.L.C. v. Wittman, April term, 2001, no. 3941, slip op. at 7 n.4 (C.P. Phila. January 9, 2002) (Herron, J.) (concluding that plaintiff was not entitled to presumption that non-lump sum liquidated damages provision was reasonable estimate of damages where the provision clearly bore no relation to damages incurred) (available at http://courts.phila.gov/cptcvcomp.htm).

      . The policy generally applies to property damage “that is caused by an ‘occurrence’....” Policy I.A.l.b(l). Both parties agree that the accident constituted an “occurrence.” Motion ¶13.

      . A specific provision in an insurance policy “is [deemed] ‘ambiguous’ if reasonably intelligent people could differ as to its meaning.” Williams v. Nationwide Mutual Insurance Co., 750 A.2d 881, 885 (Pa. Super. 2000).

      . Pennsylvania has adopted the “gist of the action” doctrine, under which a plaintiff pursuing a tort action must show that “the wrong ascribed to the defendant must be the gist of the action with the contract being collateral.” Phico Insurance Co. v. Presbyterian Medical Services Corp., 444 Pa. Super. 221, 229, 663 A.2d 753, 756 (1995) (citing Bash v. Bell Telephone Co., 411 Pa. Super. 347, 601 A.2d 825 (1992), and noting further that “the important difference between contract and tort actions is that the latter lie from the breach of duties imposed as a matter of social policy while the former lie for the breach of duties imposed by mutual consensus.”).


author: MAZER MOSS, J.,

text:
    Weinrich v. Abington Memorial Hospital

      Rosalind Kaplan, for plaintiffs.

      John Shay and Donald Brooks Jr., for defendants.
    July 23, 2001
   MAZER MOSS, J.,

FACTS AND PROCEDURAL HISTORY

The instant action was filed against defendants, including appellant Dr. Steven Wiener, for negligence which allegedly caused, facilitated, promoted and/or exacerbated plaintiff’s dependence on controlled substances. Further, plaintiffs assert defendant Dr. Wiener caused plaintiff Charlene Weinrich emotional distress due to his improper and unprofessional dual relationship. Specifically, plaintiffs alleged Dr. Wiener engaged in improper and harmful, personal, physical and sexual contact.

Dr. Wiener appeared in the fall of 2000 before the Bureau of Occupational and Professional Affairs to determine whether his medical license should be revoked due to his sexual relationship with plaintiff, his patient. At said hearing, records were produced to show Dr. Wiener’s treatment compliance for various disorders, including sexual disfunction disorder. Two letters from Dr. Ginnasio to Charles Artz, Esq., Dr. Wiener’s attorney at the revocation hearing, were produced. Same summarized Dr. Ginnasio’s treatment notes.

On March 22, 2001, we conducted a hearing in discovery court in which plaintiffs sought to compel certain documents. Following said hearing, a privilege log and the documents in question were presented for in camera review. Upon review of same, we determined defendant was required to produce the requested documents. Specifically, we ordered defendant to provide a copy of Dr. Charles Ginnasio’s handwritten treatment notes having determined said documents were not protected by psychiatrist/patient privilege. This appeal follows.

DISCUSSION

Confidential communications to psychiatrists or licensed psychologists are privileged under 42 Pa.C.S. §5944. However, said privileged may be waived. See Commonwealth v. Santiago, 541 Pa. 188, 197-98, 662 A.2d 610, 615 (1995) (defendant voluntarily waived privilege when he pursued insanity defense at first trial and could not reclaim it during new trial); see also, Sprague v. Walter, 441 Pa. Super. 1, 43-44, 656 A.2d 890, 911 (1995) (prior release of records and deposition testimony regarding the content of said records is equivalent to waiver). Dr. Wiener waived his right to assert the privilege due to his prior testimony before the Bureau of Occupational and Professional Affairs.

At said hearing, Dr. Wiener testified extensively to his voluntary outpatient treatment. See plaintiffs’ memorandum of law in response to defendant Steven Wiener, DO’s objections to production, exhibit B, pp. 134-37. Further, Dr. Ginnasio testified as to defendant’s condition, treatment and fitness to practice medicine. Id. at exhibit C. Dr. Ginnasio’s letters summarizing defendant’s treatment to Mr. Artz were admitted into evidence. Id. at exhibits H and I.

Additionally, defendant Dr. Wiener has placed his psychiatric/psychological condition at issue in said action. His condition and treatment serves as an explanation or a defense for his conduct with and toward plaintiff Charlene Weinrich. As defendant has placed his condition at issue, he cannot now claim treatment records are privileged. To allow such would be contrary to the intent of the General Assembly when creating said privilege. 42 Pa.C.S. §5944; Kraus v. Taylor, 710 A.2d 1142, 1145 (Pa. Super. 1998). As such, we properly required defendant to provide plaintiffs with said treatment records and other requested documents.


author: QUIÑONES ALEJANDRO, J.,

text:
    Hartman v. Corporate Jet Inc.

      Arthur A. Wolk, for plaintiffs.

      Ann T. Field, for defendant.
    February 27, 2001
   QUIÑONES ALEJANDRO, J.,

INTRODUCTION

David and Sharon Hartman, plaintiffs, filed this instant appeal contending that this motion judge erred in granting the petition to transfer venue based on the doctrine of forum non conveniens, filed by Corporate Jet Inc., defendant. This motion judge disagrees.

RELEVANT FACTUAL AND PROCEDURAL HISTORIES

Plaintiffs are husband and wife and reside in Ann Arbor, Michigan. Plaintiff David Hartman is a flight surgeon specializing in emergency medicine.

Defendant Corporate Jet Inc. is a Pennsylvania corporation that operates medevac flights throughout the northeast and has its principal offices in Pittsburgh, Allegheny County, Pennsylvania.

On February 12, 1999, plaintiff David Hartman was seriously injured when the medevac Aerospatiale Model 355 helicopter flight that he was assigned to, which originated from St. Vincent Hospital in Toledo, Ohio, crashed in Ohio. Plaintiffs essentially allege that the unskilled and uncertified (in instrument flight conditions) pilot carelessly, recklessly, and negligently entered into instrument meteorological conditions QMC) weather and without visual contact with the ground, descended the helicopter, and struck a house. The helicopter was operated by an employee/agent of defendant.

On July 14, 2000, plaintiffs filed, in Philadelphia County, the instant civil action against defendant to recover damages for personal injuries plaintiff David Hartman sustained in the helicopter crash. On August 25, 2000, defendant filed its answer to plaintiffs’ complaint.

On September 26, 2000, defendant filed a petition to transfer venue from Philadelphia County to Allegheny County based on the doctrine of forum non conveniens, pursuant to the provisions of Pennsylvania Rules of Civil Procedure 1006(d)(1). On October 26,2000, plaintiffs filed a response to defendant’s petition to transfer venue and on November 3, 2000, defendant filed a reply to plaintiffs’ response. Subsequently, these pleadings were assigned to the undersigned motion judge. By order dated November 3, 2000, this motion judge granted defendant’s petition and transferred the case to Allegheny County.

Dissatisfied with this order, on December 1, 2000, plaintiffs filed this timely appeal.

ISSUE

In response to an order issued in accordance with Pennsylvania Rule of Appellate Procedure 1925(b), plaintiffs, on December 22, 2000, filed of record a statement of matters complained of on appeal and essentially argued that this motion judge erred in transferring the action from Philadelphia County to Allegheny County where the moving party failed to sustain its burden of showing that the chosen forum was vexatious or oppressive.

LAW AND DISCUSSION

Undisputedly, a trial/motion judge has great discretion in reviewing a petition to change venue based upon the doctrine of forum non conveniens. Hoose v. Jefferson Home Health Care Inc., 754 A.2d 1, 3 (Pa. Super. 2000); Johnson v. Henkels & McCoy Inc., 707 A.2d 237, 239 (Pa. Super. 1997). Absent a showing of an abuse of discretion, a court’s decision to transfer venue will not be reversed. McCrory v. Abraham, 441 Pa. Super. 258, 657 A.2d 499 (1995). To show an abuse of discretion, an appellant must show that in reaching a conclusion, the law was overridden or misapplied, or that the judgement exercised is manifestly unreasonable, or the result of bias, prejudice, or ill will. Johnson, supra. Also, an abuse of discretion occurs, “if the trial court has not held the defendant to the proper burden[.]” Id. at 239 (quoting Petty v. Suburban General Hospital, 363 Pa. Super. 277, 282, 525 A.2d 1230, 1232-33 (1987)).

This motion judge recognizes that a plaintiff’s choice of forum is entitled to weighty consideration and deference, however, the right of a plaintiff to choose a forum is not absolute. See Okkerse v. Howe, 521 Pa. 509, 517-18, 556 A.2d 827, 832 (1989). This is evident by Pa.R.C.P. 1006(d)(1) which permits a defendant to file a petition for a change of venue for the convenience of the parties and witnesses although the original venue chosen by the plaintiff is proper. Specifically, the rule provides: “[f]or the convenience of parties and witnesses the court upon petition of any party may transfer an action to the appropriate court of any other county where the action could originally have been brought.” Pa.R.C.P. 1006(d)(1). See also, Johnson, 707 A.2d at 238.

It is also well established that a plaintiff’s choice of forum is accorded less deference when the plaintiff does not live in the forum district and none of the operative events occurred there. Watt v. Consolidated Rail Corp., no. civ. a., 1997 WL 288607, *2 (E.D. Pa. May 21, 1997). The doctrine of forum non conveniens is employed as “a necessary counterbalance to insure fairness and practicality.” Okkerse, 521 Pa. at 518, 556 A.2d at 832.

In Cheeseman v. Lethal Exterminator Inc., 549 Pa. 200, 213, 701 A.2d 156, 162 (1997), the Pennsylvania Supreme Court clarified the appropriate standard when considering a petition to transfer venue pursuant to Pa.R.C.P. 1006(d)(1): “a petition to transfer venue should not be granted unless [a] defendant meets [the] burden of demonstrating, with detailed information on the record, that the plaintiff’s chosen forum is oppressive or vexatious to the defendant.” Cheeseman, 549 Pa. at 213, 701 A.2d at 162.

This burden may be met by showing, with facts on the record that: “the plaintiff’s choice of forum was designed to harass the defendant even at some inconvenience to the plaintiff himself.... Alternatively, [a] defendant may . . . [establish] on the record that trial in the chosen foram is oppressive ...; for instance, that trial in another county would provide easier access to witnesses or other sources of proof, or to the ability to conduct a view of premises involved in the dispute. [However,] the defendant must show more than that the chosen forum is merely inconvenient to [the defendant].” Cheeseman, 549 Pa. at 213, 701 A.2d at 162. (citation omitted)

Instantly, when deciding defendant’s petition to transfer venue, this motion judge carefully reviewed the complaint, answer and new matter, the petition to transfer venue with its attached exhibits, the response to the petition, and the reply to the response. In this motion judge’s opinion, the evidence of record supports a finding that a trial in plaintiffs’ chosen forum, Philadelphia County, would be oppressive and/or vexatious to the defendant, and that a trial in Allegheny County would be more convenient to all parties and the majority of the witnesses. The uncontested evidence considered by this motion judge, most of which has been stated, is the following:

“Plaintiffs are residents of Ann Arbor, Michigan.
“Defendant is a Pennsylvania corporation with its principal place of business in Pittsburgh, Allegheny County, Pennsylvania. Defendant provides medevac helicopter services throughout the northeast.
“According to the complaint, on February 12, 1999, plaintiff David Hartman, an emergency room physician, was on board defendant’s medevac helicopter flight originating in Toledo, Ohio, when it crashed in Ohio. Plaintiff suffered a broken hip and pelvis which required six months of rehabilitation.
“All essential eyewitnesses to the helicopter crash, the helicopter staff, airport personnel, and physicians, nurses, and other medical personnel who provided emergency and medical treatment to plaintiff on February 12,1999, and subsequently, either work and/or reside in Ohio, or Allegheny County, Pennsylvania, or Michigan.
“The affidavit of John B. Heffernan, director of safety for defendant, avers that the relevant records and evidence concerning said helicopter crash are in Pittsburgh, Allegheny County, Pennsylvania and/or Ohio.
“Plaintiff David Hartman’s treating physicians and medical records are in Michigan.
“Venue in Philadelphia County was established by the fact that defendant admits that it has conducted business (unrelated to the instant action) in Philadelphia County.
“Lastly, this motion court took judicial notice of the considerable travel time and distance that a trial in Philadelphia County would require of the parties and witnesses. It is approximately 304 miles each way between Pittsburgh and Philadelphia, and thus, daily driving to Philadelphia would be difficult and air travel would be expensive. Plaintiffs reside in Ann Arbor, Michigan, which is more than 600 miles from Philadelphia County. Other individuals and witnesses having knowledge of the helicopter crash in question reside in Ohio which is more than 530 miles from Philadelphia. If a trial was held in Philadelphia County, all parties and witnesses would expend significant amounts of money either for travel and/or lodging and meals.”

Based on these facts and the holdings in Dulaney v. Consolidated Rail Corporation, 715 A.2d 1217 (Pa. Super. 1998) and Cheeseman, supra, this motion judge opined that a trial in Philadelphia County would be oppressive and vexatious to the parties, and therefore, transferred this case to Allegheny County. While venue is proper in Philadelphia County, when confronted with this petition to transfer venue, however, and based on the evidence of record, venue based solely on the fact that defendant has conducted unrelated business transactions in Philadelphia County, without more, does not amount to a convenient forum for the parties. It is undisputed that the helicopter crash occurred in Ohio and that all potential witnesses involved in the helicopter crash reside and/or are employed and/or located outside Philadelphia County. It is noted, however, that plaintiffs’ expert is from Philadelphia County. However, no medical care or assistance was provided to plaintiff, a resident of Michigan, in Philadelphia County. Further, if a view of the crash site and/or helicopter was needed, travel to either Ohio or Pittsburgh, Pennsylvania (Allegheny County), would have to occur. Thus, this motion judge opines that venue in Philadelphia County, while proper, constitutes a harassment to defendant and its witnesses, and is also onerous and an unnecessary hardship to the parties, particularly the defendant, and to the witnesses. In light of the evidence and testimony needed, trial in Allegheny County is more convenient than it would be in Philadelphia County. Clearly, the evidence of record supports this motion judge’s findings, more so, when there is absolutely no nexus between the alleged accident/claim and Philadelphia County.

In summary, the above-cited factors strongly outweigh plaintiffs’ choice of forum. Therefore, this motion judge believes no error occurred when the petition to transfer venue was granted.

CONCLUSION

Based on these reasons, this motion judge opines that no errors were committed in granting defendant’s petition to transfer venue. Consequently, this motion judge respectfully recommends that plaintiffs’ appeal be dismissed and that the order, which transferred venue to Allegheny County, be affirmed.

      . While this motion judge is aware that plaintiffs’ residency is irrelevant in determining whether the chosen form is vexatious or oppressive to a defendant, their residency is only noted as a fact of record.

      . It is assumed that the wreckage of the helicopter is not located in Philadelphia County.


author: HALPERN, Member,

text:
    In re Anonymous No. 90 D.B. 99

      Disciplinary Board Docket No. 90 D.B. 99.
    May 4, 2000
   To the Honorable Chief Justice and Justices of the Supreme Court of Pennsylvania:

HALPERN, Member,

Pursuant to Rule 208(d)(2)(iii) of the Pennsylvania Rules of Disciplinary Enforcement, the Disciplinary Board of the Supreme Court of Pennsylvania herewith submits its findings and recommendations to your honorable court with respect to the above-captioned petition for discipline.

I. HISTORY OF PROCEEDINGS

On July 20, 1999, a petition for discipline was filed by petitioner, Office of Disciplinary Counsel, against respondent, [ ]. The petition charged respondent with violations of Rule 203(b)(2) of the Pennsylvania Rules of Disciplinary Enforcement and Rules 8.4(d), 5.5(a), 1.3,1.4(a), and 1.16(d) of the Rules of Professional Conduct arising out of his failure to appear before Chief Disciplinary Counsel for an informal admonition.

A disciplinary hearing was held on October 22, 1999 before Hearing Committee [ ] comprised of Chair [ ], Esquire, and Members [ ], Esquire, and [ ], Esquire. Petitioner was represented by [ ]. Respondent did not appear for the hearing nor did he have counsel to represent him.

The committee filed a report on December 29, 1999 and found that petitioner violated the rules charged in the petition for discipline. The committee recommended a suspension for a period of one year and one day.

This matter was adjudicated by the Disciplinary Board at the meeting of February 2, 2000.

II. FINDINGS OF FACT

The board makes the following findings of fact:

(1) Petitioner, whose principal office is located at Suite 3710, One Oxford Centre, Pittsburgh, Pennsylvania, is invested, pursuant to Rule 207 of the Pennsylvania Rules of Disciplinary Enforcement, with the power and the duty to investigate all matters involving alleged misconduct of an attorney admitted to practice law in the Commonwealth of Pennsylvania and to prosecute all disciplinary proceedings brought in accordance with the various provisions of the aforesaid rules.

(2) Respondent was bom in 1960 and was admitted to practice law in Pennsylvania in 1989. His home address is [ ]. Respondent is subject to the disciplinary jurisdiction of the Disciplinary Board of the Supreme Court of Pennsylvania.

(3) In accordance with Rules 208(a)(2) and (3), Pa.R.D.E., it was determined that respondent should receive an informal admonition as a result of misconduct involving his client [A] and in aiding in the unauthorized practice of law of [B], a formerly admitted attorney, and [C], a paralegal.

(4) By letter dated April 19,1999, respondent was directed to appear before Chief Disciplinary Counsel on Monday, May 17,1999, to receive an informal admonition.

(5) Chief Disciplinary Counsel’s notice to respondent also informed respondent that, pursuant to Rules 208(a)(6), Pa.R.D.E., respondent had 20 days to demand as of right that a formal proceeding be instituted against him before a hearing committee in the appropriate disciplinary district and that in the event of such a demand, respondent need not appear for the administration of the informal admonition.

(6) Respondent did not demand that a formal proceeding be instituted against him in regard to the allegations giving rise to the imposition of the informal admonition.

(7) As a result of respondent’s failure to demand the institution of formal proceedings against him, respondent is conclusively deemed to have violated the Rules of Professional Conduct set forth in Chief Disciplinary Counsel’s letter of April 19, 1999.

(8) Chief Disciplinary Counsel’s notice, which was sent by certified mail, return receipt requested, to respondent’s attorney registration address, was received April 20,1999. The domestic return receipt PS form 3811 (green card) reflected a signature of “[D].”

(9) Respondent failed to appear on May 17, 1999.

(10) By letter dated May 17, 1999, respondent was directed by Chief Disciplinary Counsel to provide good cause for his failure to appear for the informal admonition.

(11) The letter of May 17, 1999 was sent by certified mail. The green card reflected a delivery date of May 18, 1999 and a signature of an individual with the surname of “[E].”

(12) Respondent was to reply to the letter of May 17, 1999 on or before May 27, 1999.

(13) Respondent did not reply to the letter of May 17, 1999, affording respondent an opportunity to establish good cause for not appearing for the informal admonition.

(14) Notice of the disciplinary hearing scheduled for Friday, October 22, 1999, was served upon respondent by District [ ] investigator [F]. (N.T. 10, 11, 18, 19)

(15) Respondent did not appear for the hearing before Hearing Committee [ ].

(16) Respondent did not contact Office of Disciplinary Counsel for a continuance.

(17) By order of the Supreme Court dated July 16, 1998, respondent was transferred to inactive status for failure to comply with the continuing legal education requirements.

(18) By order of the Supreme Court dated January 22, 1999, respondent was placed on temporary suspension after he was convicted of the crimes of possession of a controlled substance and possession of drug paraphernalia. The court referred this matter to the Disciplinary Board, at case nos. 5 D.B. 99 and 24 D.B. 99.

III. CONCLUSIONS OF LAW

By his failure to appear for the informal admonition, respondent violated the following Rules of Professional Conduct and Rules of Disciplinary Enforcement:

(1) Pa.R.D.E. 203(b)(2) — Willful failure to appear before the Chief Disciplinary Counsel for imposition of an informal admonition is grounds for discipline;

(2) R.P.C. 8.4(d) — It is professional misconduct for a lawyer to engage in conduct that is prejudicial to the administration of justice;

Respondent is conclusively deemed to have violated the following Rules of Professional Conduct as a result of his failure to demand the institution of formal proceedings after his notification that an informal admonition had been determined:

(1) R.P.C. 1.3 — A lawyer shall act with reasonable diligence and promptness in representing a client;

(2) R.P.C. 1.4(a) — A lawyer shall keep a client informed about the status of a matter and promptly comply with reasonable requests for information;

(3) R.P.C. 1.16(d) — Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advanced payment of fee that has not been earned; and

(4) R.P.C. 5.5(a) — A lawyer shall not aid a non-lawyer in the unauthorized practice of law.

IV. DISCUSSION

This matter is before the Disciplinary Board upon a petition for discipline charging respondent with violations of the rules arising out of his failure to appear before Chief Disciplinary Counsel for the imposition of an informal admonition. The informal admonition stemmed from the findings that respondent aided a nonlawyer in the unauthorized practice of law; failed to act with reasonable diligence in representing a client; failed to keep a client informed about the status of a matter and promptly comply with reasonable requests for information; and failed to protect a client’s interests upon termination of the representation.

The record is clear that respondent received notice from the Office of Chief Disciplinary Counsel that he was to receive an informal admonition on May 17,1999. In that notice respondent was advised of his right to demand formal proceedings in the event he did not agree with the findings resulting in the informal admonition. Respondent did not avail himself of the opportunity to request formal proceedings.

The record is also clear that subsequent to his failure to appear for the informal admonition he received, by certified mail, a letter from Chief Disciplinary Counsel directing respondent to provide good cause for his failure to appear on May 17, 1999. Respondent did not reply to the letter.

As a result of the failure to appear, petitioner initiated formal proceedings before the Disciplinary Board. A disciplinary hearing was scheduled for October 22, 1999. Respondent was personally served with the petition for discipline and the notice of disciplinary hearing by District [ ] investigator [F]. Respondent failed to appear for the disciplinary hearing.

Respondent’s failure to appear for the informal admonition constitutes a basis for disciplinary sanction. In addition, this failure to appear is aggravated by several facts of record. Respondent failed to appear for the disciplinary hearing. This non-appearance deprived the Hearing Committee and petitioner of the opportunity to question respondent regarding his current fitness to practice law, which was brought into issue by his seeming lack of regard for the disciplinary system.

Respondent is currently on inactive status due to his failure to fulfill his CLE requirements. There is also a disciplinary matter that arose from respondent’s conviction on August 18, 1998 of the crimes of possession of drug paraphernalia and possession of a controlled substance. He was placed on temporary suspension by the Supreme Court on January 22, 1999. At the time this case was adjudicated, that matter was pending before the Supreme Court.

Failure to appear for private discipline has generally resulted in the imposition of a public form of discipline. The attorney in In re Anonymous No. 43 D.B. 93, 23 D.&.C.4th 468 (1994), was suspended by the Supreme Court for a period of 13 months subsequent to his failure to appear for an informal admonition, his neglect of client cases, and his misrepresentation of the status of a case to a client. The board found that the attorney’s failure to participate in the disciplinary process evidenced a lack of responsibility for his professional duties.

In the matter of In re Anonymous No. 127 D.B. 89, 12 D.&C.4th 106 (1991), the attorney was suspended by the Supreme Court for a period of 13 months for failing to appear for an informal admonition, and general neglect of client matters.

An attorney was suspended for a period of one year and one day after he failed to appear for two informal admonitions. In re Anonymous No. 8 D.B. 91, 21 D.&C.4th 333 (1993).

After due consideration of the facts of this matter and the relevant case law, as well as the aggravating circumstances brought to light by respondent’s failure to appear at the hearing, the board is persuaded that the appropriate discipline is a suspension of respondent’s license to practice law for a period of one year and one day. Such a length of suspension would require respondent to petition for reinstatement pursuant to Rule 218 (a), Pa.R.D.E., and prove that he is fit to practice law in Pennsylvania. The board recommends that this suspension be made concurrent to the suspension imposed in the matter at nos. 5 D.B. 99 and 24 D.B. 99 on March 16,2000.

V. RECOMMENDATION

The Disciplinary Board of the Supreme Court of Pennsylvania recommends that the respondent, [ ], be suspended from the practice of law in the Commonwealth of Pennsylvania for a period of one year and one day to run concurrent to the suspension imposed by the Supreme Court on March 16, 2000 at nos. 5 D.B. 99 and 24 D.B. 99.

It is farther recommended that the expenses incurred in the investigation and prosecution of this matter are to be paid by the respondent.

Board Member Scaricamazza did not participate in the February 2, 2000 adjudication.

ORDER

And now, June 26, 2000, upon consideration of the report and recommendations of the Disciplinary Board dated May 4, 2000, it is hereby ordered that [respondent] be and he is suspended from the bar of this Commonwealth for a period of one year and one day to run consecutive to the suspension previously imposed by this court on March 16,2000, at no. 475 Disciplinary Docket no. 3, and he shall comply with all the provisions of Rule 217, Pa.R.D.E. It is further ordered that respondent shall pay costs to the Disciplinary Board pursuant to Rule 208(g), Pa.R.D.E.

      . On March 16, 2000, the Supreme Court ordered that respondent be suspended from the practice of law for a period of one year and one day for the matter at nos. 5 D.B. 99 and 24 D.B. 99.


author: MORAN, J.,

text:
    Kot v. Milano

      C.P. of Northampton County,
    no. 1999-C-05870.

      George K. Keenan, for plaintiff.

      Anthony V. Clarke, for defendant.
    November 14, 2002
   MORAN, J.,

STATEMENT OF REASONS

Presently before the court are related motions filed by defendant Carl J. Milano D.M.D. on the complaint filed by plaintiff Gail H. Kot. Kot’s complaint contains counts for negligence, breach of contract, and negligent representation. The first motion is a motion for summary judgment contending that Kot’s claims, if true, would require the enforcement of an illegal contract. The second motion is a motion in limine seeking to prohibit Kot from presenting any evidence at trial regarding the allegedly illegal contract.

Standard of Law

Pennsylvania Rule of Civil Procedure 1035.2 states that where there is no genuine issue of material fact and the moving party is entitled to relief as a matter of law, summary judgment may be entered. However, a nonmoving party may not rest on averments contained in pleadings or answers to survive a motion for summary judgment if the burden of proof rests on the nonmoving party. Manzetti v. Mercy Hospital of Pittsburgh, 565 Pa. 471, 776 A.2d 938 (2001). In determining whether summary judgment should be entered, the record must be viewed in a light most favorable to the nonmoving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Manzetti.

Pennsylvania Rule of Civil Procedure 1035.1 defines what the relevant record is for deciding these motions. The following statement of facts is taken from the pleadings and depositions submitted by the parties viewed in the required light.

Factual Summary

Kot was referred to Milano by her dentist, Dr. Michael Healy, for possible oral surgery. On July 8, 1997, Kot was seen by Milano with complaints of soreness and pain in her lower right jaw. Milano took panoramic X-rays of Kot’s mouth and made a diagnosis of two complete bony impacted mandibular third molars, one on the right side and one on the left.

After the examination, Kot alleges that she informed Milano that she only wanted the right molar removed, since the left molar was asymptomatic. She also requested that the procedure be done in a hospital, as her insurance would cover 100 percent of the costs for a hospital procedure, versus only 60 percent for an office procedure. Kot alleges that Milano stated that he would admit her to the hospital under the pretense that he was planning on extracting both molars. However, she further alleges, Milano stated that once she was admitted, he would declare the left molar too risky to operate on, and would only extract the right molar.

On July 14,1997, Kot returned to Milano’s office and signed, among others, a consent for operation or special treatment. This typewritten form states at the top “I hereby authorize Dr. Carl J. Milano and/or such physicians as may be selected by him to perform the following procedure(s): Surgical removal of two complete bony impacted third molars with general anesthesia.” (Italicized language was handwritten on blank lines on the form.) Kot admits that this language was on the form when she signed it. The second bulleted item on the form states “Dr. Carl J. Milano has discussed with me the topics that are briefly summarized below: . . . c. The possible [sic] of likely results of the proposed procedure. *Risks* — possible labial & lingual parasthesia.” (Italicized language is typewritten in a different font from the font of the form.) Kot does dispute that the apparently added language regarding the risks was on the form when she signed it.

On August 1, 1997, Kot was admitted to the Warren Hospital in New Jersey. Milano placed her under general anesthesia and removed both lower molars. Kot alleges that after the surgery, her mouth became infected and she experienced numbness and pain in the lower jaw, predominately on the left side with decreased sensation in the lower aspect of the jaw, predominately at the gums, which was associated with pain in the area where the wisdom teeth were removed. She has also experienced and continues to experience numbness in her chin bilaterally as well as the lower lip, slurred speech, drooling and disfigurement.

The Alleged Oral Contract

Milano argues that Kot’s breach of contract and negligent representation claims would constitute actions to enforce an illegal contract. “A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.” Restatement (Second) Contracts §178, cited in support in Central Dauphin School District v. American Casualty Company, 493 Pa. 254, 426 A.2d 94 (1981). Plaintiff cites federal precedent and argues that the “clean hands” doctrine is applicable only where the party seeking relief is guilty of conduct involving fraud, deceit, unconscionability or bad faith which directly injures the opposing party and affects the balance of equities between the parties. Castle v. Cohen, 676 F. Supp. 620 (1987), aff’d and remanded, 840 F.2d 173 (1988).

However, we note that a federal court’s interpretation of Pennsylvania law is not binding on this court, except to the extent it is persuasive. Hoy v. Angelone, 554 Pa. 134, 720 A.2d 745 (1998). In contrast, two decisions of the Pennsylvania Supreme Court define the state of Pennsylvania law in this area. In Central Dauphin, supra, a school district instituted a taxation scheme that was eventually declared unconstitutional and the school district was required to refund the taxes that were collected. The school district filed a claim with its insurer claiming that the refund was a loss covered by the insurance contract. The insurer refused to pay, and the school district instituted an action seeking indemnification for the refund.

The Pennsylvania Supreme Court declared that enforcing such an insurance policy would offend the public policy of the Commonwealth of Pennsylvania. Central Dauphin. The court noted that the taxing authority would be unjustly enriched if the insurance contract were enforced under the circumstances. “A district would be able to subject its citizens to an unlawful tax measure like the one imposed here, and yet in effect retain the proceeds of the unlawful tax simply by recovering on the claimed insurance coverage.” Id., 493 Pa. at 259. In effect, the court noted that enforcing the contract under such circumstances would reward the authority for implementing an illegal tax measure. Id. Therefore, the court did not enforce the insurance contract.

In contrast, the Pennsylvania Supreme Court in a later case limited the extent of its holding in Central Dauphin. BlaST Intermediate Unit 17 v. CNA Insurance Companies, 544 Pa. 66, 674 A.2d 687 (1996). In BlaST, the plaintiff had been successfully sued under the Equal Pay Act and section 1983. It filed a claim with its insurance company, who refused to pay based on the decision in Central Dauphin. The Pennsylvania Supreme Court held that enforcing the insurance policy under these circumstances did not violate public policy. Id. The court noted that the plaintiff would not be unjustly enriched if the contract were enforced. Id. The court distinguished Central Dauphin on the grounds that the plaintiff in BlaST would not receive a windfall if the contract were enforced.

These two cases establish that a contract will not be enforced if the plaintiff will be awarded a windfall for engaging in illegal conduct. In the present case, Kot’s deposition testimony, if accepted as true, establishes that she knew that Milano was misrepresenting his plans for admitting her to the hospital. Whether Kot intended this misrepresentation for purposes of insurance fraud or not, she signed a form that she admits she knew misrepresented the actual terms of their contract. Furthermore, she admits that she knew that as a consequence of this misrepresentation, she would receive 100 percent coverage for the procedure. While Kot’s actions may or may not constitute a crime, such misrepresentation is clearly offensive to the public policy of this Commonwealth. Allowing Kot to recover damages for the breach of a contract which she actively misrepresented to her insurer would be awarding a windfall for an action offensive to the public policy of this Commonwealth. We therefore grant Milano’s motion for summary judgment with regard to Count II of Kot’s complaint.

Milano argues that this principle acts to bar Counts I and III of Kot’s complaint. Initially, we note that granting relief to plaintiff under these two counts would not constitute enforcement of an illegal contract. Kot has presented an expert report opining that Milano did not meet the standard of care in his treatment of Kot. Furthermore, Kot, in her deposition testimony, alleges that the language regarding the possible risks involved in the procedure was not present on the form when she signed it. Under such circumstances we cannot hold that, as a matter of law, Kot is not entitled to relief under Counts I and III. Therefore, Milano’s motion for summary judgment with regard to Counts I and III of Kot’s complaint is denied.

Motion in Limine

Milano, in a separate motion, argues that Kot should be precluded from presenting any evidence at trial regarding the alleged oral contract between Kot and Milano. We note that based upon our ruling above, it appears that such evidence would be irrelevant to the counts that remain at issue. However, the issue of relevancy under these conditions has not been briefed or argued to this court. The issue is preserved for a decision by the trial judge for a decision on the relevancy of any evidence proffered at trial.

ORDER

And now, November 14, 2002, defendant’s motion for summary judgment is granted with respect to plaintiff’s claim for breach of contract, and denied with respect to plaintiff’s negligence and negligent misrepresentation claims. Defendant’s motion in limine is denied, but preserved for a decision by the trial judge.