text:
    Haynes v. French

      C.P. of Lehigh County,
    no. 2000-C-627.

      Glennis L. Clark, for plaintiff.

      Edwin M. Matzkin, for defendants.
    June 21, 2002
   BLACK, J.,

This matter is before the court on the defendants’ motion for post-trial relief following a jury verdict in favor of the plaintiff. The plaintiff alleged that her former employer, the corporate defendant, Clemens Industries Inc., failed to pay monies due her under her employment contract. She also alleged that Clemens’ president, the individual defendant, Richard French, is personally hable for her unpaid salary under the Pennsylvania Wage Payment and Collection Law, 43 Pa.C.S. §260.1 etseq.

In a special verdict, the jury found that Clemens had materially breached the employment contract; that the plaintiff had not materially breached that contract; that the plaintiff’s financial loss from Clemens’ breach amounted to $225,000; that French had an active role in making decisions for the corporation; and that the plaintiff did not have an active decision-making role. The jury’s findings were molded into verdicts in favor of the plaintiff against the defendant Clemens on Count 1 in the amount of $225,000 and against the defendant French on Count 4 in a like amount.

The defendants have assigned four grounds for a new trial in their post-trial motion. They contend that the trial court erred (1) “in excluding relevant testimony... concerning the proceeds of sale of the corporate assets ... ;” (2) in excluding plaintiff’s exhibit 34 from the jury room; (3) in excluding and failing to give collateral estoppel effect to a finding in a prior unemployment compensation proceeding that the plaintiff had been terminated for willful misconduct; and (4) “in excluding relevant evidence and cross-examination on behalf of defendants.” The second of these grounds has not been briefed and is therefore waived. Jara v. Rexworks Inc., 718 A.2d 788, 794 (Pa. Super. 1998). The fourth ground is so general and ambiguous as to defy analysis and is therefore waived. Weir by Gasper v. Estate of Ciao, 521 Pa. 491, 504, 556 A.2d 819, 825 (1989). We will address, therefore, in this opinion only the first and third grounds asserted. For the reasons stated below, neither of these grounds is meritorious. Therefore, the defendants’ motion is denied.

FACTUAL BACKGROUND

In May 1989 the plaintiff Tanna Haynes, the defendant Richard French, and a third person, Irvin Zimmerman, agreed to acquire the capital stock of two businesses known as Dale Clemens Custom Tackle Inc. and Rodcrafter Press Inc. These three individuals formed a new corporation to make the purchase, and they became the sole stockholders of the new entity. The new corporation was named Clemens Industries Inc., and did business under the trade names Dale Clemens Custom Tackle and Rodcrafter Press.

The purchase price for the stock of Custom Tackle and Rodcrafter Press was $900,000. Most of the funds for the purchase came from a $600,000 loan to the new corporation by Meridian Bank, guaranteed by the plaintiff and French in proportion to their shares of stock in the new corporation. These guarantees of the plaintiff and French were secured by their personal assets. Zimmerman contributed the remaining $300,000 needed for the purchase.

French, Zimmerman, and the plaintiff entered into a shareholders agreement in which they allocated the corporate stock as follows: 390 shares to French, 270 shares to the plaintiff, and 340 shares to Zimmerman. The shareholders elected themselves as the three directors of the firm; and as directors, they then elected French as president and the plaintiff as vice-president and secretary/ treasurer. The plaintiff signed a proxy at this time authorizing French to vote her shares of stock as he saw fit.

The plaintiff was hired as the new firm’s full-time bookkeeper. On May 4,1989, the plaintiff and Clemens entered into a written employment agreement for her services. The agreement was renewable automatically on a year-to-year basis, unless terminated by the plaintiff on 30 days notice or by Clemens for cause or when the plaintiff ceased to be a shareholder of the corporation.

The employment agreement provided in paragraph three that the plaintiff was to receive a salary of “$27,500/ $75,000* per annum” for her services. The asterisked reference in the agreement stated:

“The difference ($47,500) shall be payable for a period of five years and is due (1) immediately after completion of the sale of the business after the payoff of the note between Clemens Industries and Meridian Bank and/ or (2) upon payoff of the note between Clemens Industries and Meridian Bank. The balance shall be paid to the employee over the next five years in installments as agreed upon by the president and secretary/treasurer of the corporation and then approved by the board of directors.”

Clemens repaid the Meridian Bank loan in August 1999, shortly after it sold all the assets of its wholly owned subsidiary, Custom Tackle. However, the plaintiff never received the deferred salary provided in the employment agreement of $47,500 per year, though she had received some small increases in her basic salary during her tenure with the company.

On September 28, 1999, French terminated the plaintiff’s employment with Clemens. Shortly before her employment termination, French and Zimmerman, two of the three shareholder/directors, held a telephone meeting in which they voted to remove the plaintiff as an officer of the corporation. The plaintiff was not invited to participate in this meeting.

The defendants contended at trial that the reason for the plaintiff’s termination was her misappropriation of corporate funds and her unauthorized use of a corporate credit card for personal purchases. The plaintiff argued at trial that these complaints were merely a pretext for the defendants’ real motivation, which was to avoid their obligations to her under the employment and shareholders agreements.

Following her dismissal, the plaintiff applied for unemployment compensation benefits. The Lehigh County Job Center denied her application, making an administrative determination that she had been discharged for willful misconduct and hence was ineligible for benefits under 43 P.S. §802(e). The plaintiff appealed this decision to the Unemployment Compensation Board of Review. Referee S. Harold Geld held several hearings at the conclusion of which he affirmed the job center’s ruling, agreeing that the plaintiff was ineligible for unemployment benefits because she had been discharged for willful misconduct. The Unemployment Compensation Board of Review affirmed Referee Geld’s decision. The board’s decision was affirmed by the Commonwealth Court.

DISCUSSION

1. The Exclusion of Testimony Concerning the Proceeds of Sale

Although it is not clear from their post-trial motion, the defendants’ brief explains that their first assignment of error relates to a single question in the testimony of Robert Eckstein, Clemens’ accountant, who acted as temporary bookkeeper after the plaintiff had been dismissed. At trial the defendants called Eckstein as a fact witness regarding, inter alia, the sale of Custom Tackle’s assets. He was not qualified or offered as an expert witness in any field.

The defendants attempted to elicit testimony from Eckstein as to the disposition of funds allegedly received by Clemens from the sale of these assets. The plaintiff objected when defense counsel asked Eckstein, “Did you have occasion to trace the $191,000 from the purchaser through the bookkeeping system?” The basis for the plaintiff’s objection was that the defendants were attempting to place before the jury an expert opinion without having qualified the witness as an expert. This objection was sustained, and properly so.

Although the defendants argue that Eckstein was called to testify only as a fact witness, the type of financial analysis required to answer the question posed is beyond the capacity of the average layperson. Tracing the disposition of funds through a bookkeeping system requires a certain degree of expertise in the field of accounting or bookkeeping. Defense counsel had an opportunity to qualify Eckstein as an expert, but deliberately chose not to do so. The reason may have been that Eckstein had not been listed as an expert witness in the defendant’s pretrial statement and had not supplied an expert witness report in advance of trial in accordance with the court’s pretrial order.

It is within a trial judge’s discretion to exclude testimony by lay witnesses who lack the qualifications or knowledge necessary to express an expert opinion. See Vattimo v. Eaborn Truck Service Inc., 777 A.2d 1163, 1166 (Pa. Super. 2001); see also, Carpenter v. Pleasant, 759 A.2d 411, 415-16 (Pa. Commw. 2000). Because Eckstein was not proposed or qualified as an expert at trial, the plaintiff’s objection was properly sustained. If the defendants had desired to present Eckstein as an expert witness to trace the flow of cash from the sale of assets through the corporate accounts, they should have qualified him as an expert and submitted an expert report prior to trial. In the absence of this procedure, Eckstein could not properly testify as an expert witness.

Moreover, even assuming arguendo that the objection should have been overruled, post-trial relief is still not warranted because no prejudice inured to the defendants as a result of the ruling. “To constitute reversible error, an evidentiary ruling must not only be erroneous, but also harmful or prejudicial to the complaining party.” Turney Media Fuel Inc. v. Toll Bros. Inc., 725 A.2d 836, 839 (Pa. Super. 1999). In the case at issue defense counsel made no offer of proof after the trial court’s ruling. Therefore, it is impossible to ascertain what Eckstein’s testimony would have been in response to the prohibited question. As a result, it is impossible to ascertain how the exclusion of his answer could have affected the outcome of this case.

2. The Unemployment Compensation Proceeding

After the testimony was concluded at trial, the defendants’ attorney asked the court to take judicial notice of the Commonwealth Court’s decision on the plaintiff’s unemployment compensation claim.1 declined to do so because I concluded that the decision was not entitled to collateral estoppel effect in this case.

This ruling was consistent with the decision of the Pennsylvania Supreme Court in Rue v. K-Mart Corp., 552 Pa. 13, 713 A.2d 82 (1998). In Rue, also a civil suit, the court refused to give collateral estoppel effect to a finding adverse to the employer in an earlier unemployment compensation case. In the present case, even though the unemployment compensation decision was adverse to the employee, the same result should be obtained.

Ordinarily, collateral estoppel applies when the following conditions are met:

“(1) An issue decided in a prior action is identical to one presented in a later action;
“(2) The prior action resulted in a final judgment on the merits;
“(3) The party against whom collateral estoppel is asserted was a party to the prior action, or is in privity with a party to the prior action; and
“(4) The party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior action.” Id. at 17, 713 A.2d at 84.

Some of these conditions are met in this case. The decision of the Commonwealth Court, affirming the decision of the Unemployment Compensation Board of Review, is a final judgment on the merits. The plaintiff here was a party to the prior unemployment compensation proceeding. However, two other conditions are not met. First, there is lacking an identity of issues. Second, because of the nature of an unemployment compensation proceeding, the plaintiff was not afforded a full and fair opportunity to litigate the issues relevant to her breach of contract claim in that prior proceeding.

The issue in the unemployment compensation case was whether the plaintiff had been terminated for willful misconduct. A finding of “willful misconduct” by an unemployment referee acts as a bar to unemployment benefits under the Unemployment Compensation Law. 43 P.S. §802(e). “Willful misconduct” has been defined by the Commonwealth Court as:

“(1) the wanton and willful disregard of the employer’s interests;]
“(2) the deliberate violation of rules[;]
“(3) the disregard of standards of behavior which an employer can rightfully expect from its employe[e;] or
“(4) negligence which manifests culpability, wrongful intent, evil design, or intentional and substantial disregard for the employer’s interests or the employee’s duties and obligations.” Kentucky Fried Chicken of Altoona Inc. v. Unemployment Compensation Board of Review, 10 Pa. Commw. 90, 97, 309 A.2d 165, 168-69 (1973).

The Commonwealth Court has held that an employee’s unauthorized use of the employer’s credit card rises to the level of willful misconduct. Harmon v. Unemployment Compensation Board of Review, 66 Pa. Commw. 320, 444 A.2d 806 (1982). Since the plaintiff acknowledged that she had used Clemens’ credit card for some personal purchases without authority, the Commonwealth Court affirmed the board’s finding that the plaintiff had been guilty of willful misconduct, for purposes of her unemployment compensation claim.

In the instant case, the plaintiff also acknowledged that she had used Clemens’ credit card for some personal purchases without specific authority to do so. She claimed at trial, as she had in her unemployment case, that she reimbursed Clemens by using her own cash for corporate expenses. The issue for the jury to decide was whether the plaintiff’s unauthorized use was a material breach of her employment contract. The jury was instructed that an employee has a duty of loyalty and a duty of honesty to her employer in the handling of funds, and that “(a) material breach is a breach that is significant, that is, one that is not trivial.” This is a different standard than the standard applicable to the unemployment case. The plaintiff’s unauthorized credit card use could have been “willful misconduct” under the standard used in the unemployment case, but not a “material. breach” of her duties to her employer under the employment agreement.

In Morrison v. Department of Corrections, 659 A.2d 620 (Pa. Commw. 1995), the Commonwealth Court applied similar reasoning. The court held that the finding of an unemployment compensation referee that the petitioner’s actions were not willful misconduct did not estop the State Civil Service Commission from determining that the Commonwealth had just cause to remove the petitioner from his position as a corrections officer. In so doing, the court noted that the State Civil Service Commission used a different standard to determine the propriety of the petitioner’s termination than did the unemployment referee who had found the petitioner not guilty of willful misconduct. Id. at 625.

A second unmet condition for collateral estoppel lies in the significant procedural differences between an unemployment compensation proceeding and a trial in a court of law. Unemployment compensation procedures are designed to give a speedy, informal method for determining claims. There is no pre-hearing discovery. The rales of evidence do not apply. 43 P.S. §825. There is no right to a jury trial, which is guaranteed to citizens of this Commonwealth in civil actions at law by both the Federal Constitution and the Pennsylvania Constitution. U.S. Const, amend. 7; Pa. Const. Art. I, §6. As a practical matter, since the claimant is out-of-work, the claimant is forced to proceed almost immediately, whether or not there has been sufficient time for investigation and research. As a result, because of the need for a speedy, informal process, a party’s opportunity to fully and fairly litigate claims or defenses in an unemployment compensation case is considerably limited.

The Pennsylvania Supreme Court has recognized the significant procedural differences between unemployment compensation proceedings and court trials, and has cited these differences as a valid reason to deny collateral estoppel effect to unemployment compensation adjudications. In Rue v. K-Mart, supra, the court stated that “proceedings before a referee clearly do not allow parties to litigate issues in the manner available in a court of record,” noting that in referee’s hearings the rales of evidence do not apply and there is no procedure for pre-hearing discovery. Id. at 19, 713 A.2d at 85-86. The court found that the defendant, K-Mart, had not been given a full and fair opportunity to litigate the basis for the employee’s termination because of the “fast and informal nature of the proceedings before the referee, as well as the negligible economic consequences thereof....” Id. at 21, 713 A.2d at 86. The court concluded:

“The substantial procedural and economic disparities between unemployment compensation proceedings and later civil proceedings negate the preclusive effect of a referee’s factual findings.” Id. at 20-21, 713 A.2d at 86.

The defendant cites Hodge v. Unemployment Compensation Board of Review, 735 A.2d 758 (Pa. Commw. 1999) in support of his contention that collateral estoppel should apply in the present case. In Hodge, the Commonwealth Court affirmed application of collateral estoppel by the Unemployment Compensation Board of Review to a prior finding made by a court of common pleas that the claimant was engaged in the unauthorized practice of law on the employer’s premises and on the employer’s time. However, Hodge is easily distinguishable because the prior finding in that case was made by a court of law, not an administrative judge or a referee. Therefore, none of the concerns about procedural inequities that exist in this case are implicated.

The defendants also argue that the holding in Rue should not apply here because the decision in that case was adverse to the employer, K-Mart. The defendants point out that K-Mart had little incentive to litigate the award of unemployment compensation, because the outcome of such a proceeding had only negligible economic consequences to K-Mart. On the other hand, an employee does have a compelling incentive to litigate an unemployment claim because a loss of benefits in that proceeding could have a substantial economic effect on the employee.

However, the distinction proposed by the defendants does not withstand analysis for two reasons. First, the Supreme Court based its decision in Rue not only on the limited economic consequences to the employer from an adverse referee’s decision, but also on the “procedural . . . disparities” between unemployment compensation proceedings and court trials. Rue, supra at 20, 713 A.2d at 86. These procedural disparities exist for the employee as well as the employer. Thus, the distinction posited by the defendants is not valid.

Second, if we were to adopt the defendants’ position, an unjust and unbalanced situation in favor of the employer would surely result. Under the defendants’ theory, if the employer prevails in the compensation proceeding, the decision is binding on the employee. However, pursuant to Rue, supra, if the employer loses the compensation case, the decision is not binding on the employer. This is an inequitable “heads I win, tails you lose” result for the employer. If the employer has a potential contract dispute with an employee, the employer can vigorously defend the unemployment compensation claim. If the employer loses, he still has another bite at the apple in the subsequent civil suit. If the employer wins, the employee would be deprived of the chance to present his contract claim before a jury in a civil trial proceeding. Such a lack of mutuality is inherently unfair. The only proper solution is to deny the application of collateral estoppel against either party.

This conclusion does not conflict with the recent cases granting preclusive effect in court trials to prior findings in workers’ compensation cases. See e.g., Frederick v. Action Tire Company, 744 A.2d 762 (Pa. Super. 1999). In Rue v. K-Mart, supra, the Pennsylvania Supreme Court expressly distinguished workers’ compensation cases and limited its holding to the unemployment compensation context. See Rue, supra at 21 n.4, 713 A.2d at 87 n.4. The court stated that collateral estoppel was appropriate for findings in workers’ compensation cases because of the distinct statutes and procedures involved issue in those cases. Id. Thus, the Rue decision leaves undisturbed the line of Pennsylvania appellate cases, of which Frederick v. Action Tire Company, supra, is a recent example, holding that prior findings in workers’ compensation cases are a bar to religitation of identical issues in collateral civil actions. By the same token, Rue makes it abundantly clear that a different rule applies to unemployment compensation cases.

While it may be desirable from the standpoint of judicial economy to allow the application of collateral estoppel in civil suits to findings in unemployment compensation cases, this would deprive litigants of a full and fair opportunity to litigate their claims and defenses. Moreover, in the instant case there is lacking a complete identity of issues. Therefore, our refusal to grant collateral estoppel effect to the prior unemployment compensation decision was not an abuse of discretion or an error of law.

      . The plaintiff’s complaint asserted claims against five defendants in five separate counts. However, only the first and fourth counts were presented to the jury. Count 5 of the complaint was not pursued at trial. During the trial the plaintiff was granted a voluntary nonsuit as to Counts 2 and 3. After the plaintiff rested her case, a compulsory nonsuit was granted on the plaintiff’s claims against all defendants other than Clemens and French. All references to the defendants in this opinion are to the remaining defendants, Clemens and French, only. The caption of the case has been amended accordingly.

      . Plaintiff’s motion for post-trial relief, ¶1, p. 1.

      . Id., ¶4, p. 2.

      . Plaintiff’s exhibit 8, ¶3, p. 2.

        . Id.

      . Notes of testimony of trial, 6/12/01, at 168.

      . Id. at 168-70.

      . In their brief the defendants also allege that the court erred in allowing Eckstein to testify on cross-examination, in response to a question posed by the plaintiff’s counsel, whether “off-the-book” payments would be entered in the cash disbursements journal of the corporation. Id. at 173-74. However, the defendants never raised this issue in their post-trial motion, and the issue is therefore waived. Beckner v. Copeland Corp., 785 A.2d 1003, 1006 (Pa. Super. 2001). In any event, this question did not seek expert testimony because, unlike the question from defense counsel discussed above, the question by plaintiff’s counsel required no analysis of accounting records but merely a statement of the company’s bookkeeping policy, with which Eckstein as the company’s temporary bookkeeper was presumably familiar. Furthermore, the question posed was an appropriate follow-up to testimony by Eckstein on direct examination that there was no record in Clemens’ books of payments from the plaintiff to Custom Tackle. N.T., 6/12/01 at 166. It was legitimate for the plaintiff to ask whether “off-the-book” disbursements would be entered in the cash disbursements journal. Therefore, there was no abuse of discretion or error of law in permitting this testimony.

      . Id. at 243.

      . N.T., 6/12/01, at 216, 218.

      . N.T., 6/13/01, at 75. The defendants did not object to any portion of the jury charge.

      . The plaintiff also cites City of Philadelphia v. Stradford Arms Inc., 1 Pa. Commw. 190, 195, 274 A.2d 277, 280 (1971), where the Commonwealth Court ruled that collateral estoppel did not apply in an equity trial to a prior decision of a city zoning board of adjustment. Id. at 196, 274 A.2d at 280. The Commonwealth Court reasoned in Stradford Arms that the zoning board of adjustment did not have equity jurisdiction, and therefore could not grant injunctions or impose penalties, powers that were within the subject matter jurisdiction of a court of common pleas. Id. The court held that collateral estoppel applied only where the prior tribunal had the same subject matter jurisdiction as the current forum. Id. at 196, 274 A.2d at 280. However, in view of the decisions of the Commonwealth Court in Frederick, supra, and other cases, the continued vitality of Stradford Arms is subject to question. See e.g., J.S., a minor and through his parents and natural guardians H.S. and I.S. v. Bethlehem Area School District, Thomas Doluisio and A. Thomas Kartsotis, 794 A.2d 936 (Pa. Commw. 2002), where the Commonwealth Court in a 2-1 panel decision held that findings of a school board in a school expulsion proceeding precluded subsequent litigation of the same issue in a civil lawsuit. Thus, Stradford Arms should not be read broadly, and I do not base my decision in the instant case on the reasoning in Stradford Arms.


source: Caselaw Access Project

author: COHEN, J.,

license: Public Domain

text:
    Zwiercan v. General Motors Corporation

      C.P. of Philadelphia County,
    June Term 1999,
    no. 3235.

      John M. Mason, for plaintiff.

      Joseph E. O’Neil, John J. O’Donnell, J. Andrew Langan, Douglas M. Poland and Brian Kavanaugh, for defendants.
    September 11, 2002
   COHEN, J.,

Defendant General Motors Corporation has filed a motion for summary judgment as to plaintiff’s claim for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. For the reasons set forth below, the motion for summary judgment is granted in part and denied in part.

BACKGROUND

This action focuses on vehicles manufactured by GM between 1990 and 1999 (the class vehicles). The plaintiff is the owner of a 1997 Chevy Blazer, which is considered a class vehicle. Plaintiff alleges that the front seats of all class vehicles are designed in such a way that the front seats are prone to collapse rearward during moderate speed rear-end collisions. Although the plaintiff’s vehicle has not been involved in a rear-end collision, she has brought claims, as a class representative, on behalf of herself and similarly situated owners of class vehicles, for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, and breach of implied warranty of merchantability. On May 22,2002, this court granted defendant’s motion for summary judgment as to the breach of warranty claim and denied summary judgment as to the UTPCPL claim.

Now, before this court is defendant’s motion for summary judgment against the plaintiff’s remaining UTPCPL claim, plaintiff’s opposition to defendant’s motion for summary judgment, and plaintiff’s reply memorandum in support of motion for summary judgment. In its motion, defendant asserts that plaintiff’s UTPCPL claim should be dismissed because plaintiff’s admissions establish that she cannot prove the elements of reliance and causation to support her UTPCPL claim. Additionally, defendant argues that plaintiff’s UTPCPL claim should be dismissed because it is barred under the economic loss doctrine and, to the extent the plaintiff’s claim is based on defendant’s statements to the National Highway Traffic Safety Administration (NHTSA), such claim is pre-empted under the Supremacy Clause of the United States Constitution.

Upon review of the pleadings and after hearing oral argument, defendant’s motion for summary judgment is granted in part and denied in part.

DISCUSSION

In accordance with Pa.R.C.P. 1035.2, this court may grant summary judgment where the evidentiary record shows either that the material facts are undisputed, or the facts are insufficient to make out a prima facie cause of action or defense. McCarthy v. Dan Lepore & Sons Co. Inc., 724 A.2d 938, 940 (Pa. Super. 1998). To succeed, a defendant moving for summary judgment must make a showing that the plaintiff is unable to satisfy an element in his cause of action. Basile v. H & R Block, 777 A.2d 95, 100 (Pa. Super. 2001). Here, the defendant alleges that based on plaintiff’s admissions, plaintiff has failed to establish the essential elements of “reliance, materiality, and causation” with respect to defendant’s acts or omissions. To avoid summary judgment, the plaintiff, as the non-moving party, must adduce sufficient evidence on the issues essential to its case and on which it bears the burden of proof such that a reasonable jury could find in favor of the plaintiff. McCarthy, 724 A.2d at 940. In addressing the issue, this court is bound to review the facts in a light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Manzetti v. Mercy Hospital of Pittsburgh, 565 Pa. 471, 482, 776 A.2d 938, 945 (2001). The plaintiff must be given the benefit of all reasonable inferences. Samarin v. GAF Corp., 391 Pa. Super. 340, 350, 571 A.2d 398, 403 (1989). Therefore, this court must first determine whether the plaintiff has pled each of the required elements for her claim under the UTPCPL.

I. Plaintiff’s UTPCPL Claim Survives Summary Judgment

Plaintiff claims that the defendant’s acts and omissions violated the UTPCPL. Based on the complaint, it appears that plaintiff is alleging a violation of UTPCPL §201-2(4)(xxi). Section 201-2(4)(xxi) defines unfair methods of competition or unfair or deceptive acts or practices as “[ejngaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” (the catchall provision). To establish a claim under the catchall provision, a party must either prove the elements of common-law fraud, or that defendant’s deceptive conduct caused harm to the plaintiff. See e.g., Weiler v. SmithKline Beecham Corporation, 53 D.&C.4th 449 (C.P. Phila. 2001) (Herron, J.); Foultz v. Erie Insurance Exchange, 2002 WL 452115 (C.P. Phila. Mar. 13, 2002) (Herron, J.); Abrams v. Toyota Motor Credit Corporation, 2001 WL 1807357 (C.P. Phila. Dec. 5, 2000) (Herron, J.). Although this court’s holdings establish that “reliance” is not a required element for a plaintiff to proceed under a “deceptive” practice claim, as discussed below, plaintiff’s “reliance” has been established in the instant case.

The first substantive question presented by the parties is whether the plaintiff has alleged facts sufficient to establish that she relied on the acts or omissions of the defendant. Although defendant correctly states that its general advertising slogans, are not actionable because they are “mere puffery,” the crux of the issue lies not in the statements made by the defendant, but rather, its silence when it had a duty to speak. Defendant argues that it was under no duty to disclose the alleged existence of defective seats in its cars. Defendant further argues that it cannot be liable because it made no statements to plaintiff concerning the safety of its seats. The defendant is mistaken; silence can be actionable.

Pennsylvania law holds that the deliberate non-disclosure of a material fact is just as actionable as an intentional false statement. Neuman v. Corn Exchange National Bank & Trust Co., 356 Pa. 442, 451, 51 A.2d 759, 764 (1947). In defining “fraud,” the Pennsylvania Supreme Court held that fraud exists when “deception of another ... is brought about by a misrepresentation of fact... or by silence.” McClellan Estate, 365 Pa. 401, 407-408, 75 A.2d 595, 598 (1950). (emphasis added) However, in order for silence to be actionable there must be a duty to speak. Smith v. Renaut, 387 Pa. Super. 299, 306, 564 A.2d 188, 192 (1989); see generally, 37 C.J.S. Fraud §15.

The duty to speak most often arises when there is a fiduciary or confidential relationship between parties. In the context of business transactions, when there has been no active misrepresentation, and no fiduciary or confidential relationship exists, there is an apparent absence of Pennsylvania case law discussing the existence of a duty to speak.

Here, the court must determine whether a duty exists between a manufacturer and an ordinary consumer. In this regard, although this court is not bound by such decisions, federal courts interpreting Pennsylvania law have held that there is generally no duty to speak where the parties are “sophisticated business entities, entrusted with equal knowledge of the facts.” Duquesne Light Co. v. Westinghouse Electric Corporation, 66 F.3d 604, 612 (3d Cir. 1995); City of Rome v. Glanton, 958 F. Supp.1026 (E.D. Pa. 1997) (discussing the application of the Restatement (Second) of Torts §551). In Duquesne, the Third Circuit addressed, in a breach of contract case, whether a nuclear steam equipment supplier’s alleged nondisclosures concerning equipment sold to an electric utility company constituted actionable fraud. The court recognized that Pennsylvania cases were unclear regarding when a duty to speak arises outside of the fiduciary or confidential relationship context. Duquesne, 66 F.3d at 612. Following the guidance in analogous Pennsylvania cases, the court held that there is no duty to speak between two sophisticated business entities with equal knowledge of the facts and legal representation, because neither party is reliant on the other for information. Id. at 612.

In the instant case, however, the parties do not have the same level of sophistication or knowledge. The plaintiff as an ordinary purchaser of an automobile, does not have access to the same information as the defendant manufacturer. Plaintiff also alleges that defendant’s internal memoranda and studies, as well as its defense in prior litigation involving the alleged defective seats, establish that defendant knew of the alleged material defect in its seats years before plaintiff purchased her vehicle. Therefore, unlike the facts under Duquesne, here, the unsophisticated plaintiff is at the mercy of the defendant to inform her of a known safety defect. Following the persuasive reasoning of Duquesne, this court finds that a manufacturer has a duty to disclose a known latent defect to a purchaser when the purchaser is unsophisticated and does not have access to the same information as the manufacturer. Under the facts of this case, a reasonable jury could find that the defendant had a duty to inform the plaintiff of the alleged safety defect in its class vehicles.

Moreover, the Pennsylvania Supreme Court mandated that the UTPCPL is to be liberally construed to prevent unfair or deceptive practices and place the seller and consumer on more equal footing. Commonwealth v. Monumental Properties Inc., 459 Pa. 450, 458-60, 329 A.2d 812, 816-17 (1974). Recognizing a duty to speak in the present case is consistent with general fraud concepts and is in line with the purpose of the UTPCPL. Such an interpretation further defines the scope of the UTPCPL, by giving meaning to the “duty to speak” requirement, and by placing consumers on more equal footing with manufacturers. Moreover, this court finds support for this conclusion in the holdings of other jurisdictions.

In cases involving defective parts in automobiles, other courts have held that a defendant manufacturer has a duty to disclose knowledge of material defects in its products if the consumer could not be expected to otherwise learn of the defect. In re Ford Motor Company Ignition Switch Products Liability Litigation, 2001 WL 1266317 (D.N.J. 1997). In In re Ford Motor Company, the Third Circuit addressed the issue of fraudulent concealment in a case involving defective ignition switches installed in Ford vehicles. Although the Third Circuit dismissed some of the plaintiffs’ claims with leave to amend their complaint to plead with more specificity, the court found that the third party manufacturer of the defective part had a duty to disclose the defect. Id. at *20-*21. The court stated “that the applicable standard in most states across the country could be generally expressed as follows: a defendant manufacturer has a duty to disclose its knowledge, if any, of material defects in the items manufactured, so long as the consumer could not be expected to otherwise obtain the information.” Id. at *21.

Similarly, in a case involving General Motors, a New York State court denied General Motors’ motion to dismiss, holding that the Attorney General of New York properly stated a cause of action alleging fraudulent suppression and concealment of a material fact, where General Motors allegedly knew that a part would prematurely fail and did not disclose that fact to consumers. State of New York v. General Motors Corp., 120 Misc.2d 371, 446 N.Y.S.2d 124 (Sup. Ct. 1983). The court based its analysis on New York’s general common-law fraud provisions, which have been interpreted to find a duty to speak when a party has superior knowledge or has means of knowledge not available to both parties. Id. at 374; see also, Kuelling v. Roderick Lean Mfg. Co., 75 N.E. 1098, 1102 (1905). Additionally, the Second Circuit, applying New York law, concluded that the duty to speak, in the context of a business transaction, has been found in three circumstances: (1) where the party has made a partial or ambiguous statement; (2) where the parties are in a fiduciary or confidential relationship; and (3) where one party possesses superior knowledge, not readily available to the other party. Brass v. American Film Technologies Inc., 987 F.2d 142, 150 (2d Cir. 1993). (citations omitted)

Additional support for finding a duty to speak in consumer protection cases can be found in the decisions of the Illinois Supreme Court. In interpreting Illinois’ consumer protection statute, the court held that omissions or concealment of a material fact in the conduct of trade or commerce constitutes fraud. Connick v. Suzuki Motor Company Ltd., 174 Ill.2d 482, 504, 675 N.E.2d 584, 595 (1996), rehearing denied, (1997). In Connick, the court found that Suzuki’s failure to warn plaintiffs of the vehicle’s known tendency to rollover was a violation of the consumer fraud statute. Id. at 504-505. The court also found that such a defect would be material to a buyer of the car and that it is unnecessary to plead a common-law duty to disclose in order to state a valid claim of consumer fraud based on an omission or concealment. Id. at 505, citing Celex Group Inc. v. Executive Gallery Inc., 877 F. Supp. 1114, 1129 (N.D. Ill. 1995).

Therefore, based on analogous Pennsylvania law, as well as federal decisions and precedent from other state courts, this court finds that a duty to speak exists, in the context of a business transaction with an ordinary non-business consumer, when the seller has superior knowledge of a material fact that is unavailable to the consumer. Plaintiff has alleged facts that, if true, establish that defendant knew of the alleged defect and that knowledge of such a defect would have been material to the plaintiff’s decision to purchase her vehicle. It is disingenuous for the defendant to argue that knowledge of a defective front seat that could seriously injure or kill its occupant would not be material to a consumer.

Next this court must determine whether the plaintiff has established that she relied on the acts or omissions of the defendant. Defendant argues that plaintiff’s deposition testimony establishes that the plaintiff did not rely on defendant’s acts and could not have relied on defendant’s alleged non-statements. This court finds that the defendant both incorrectly summarizes plaintiff’s deposition testimony, and misstates the issue.

First, the plaintiff’s deposition testimony sufficiently establishes that she “relied” on the defendant’s silence and purchased her class vehicle believing that the front seats in her car were safe and free from defect. The plaintiff states, in reference to the front seats of her car that, “she assumed they were safe [and that] they stayed where they are... I just assumed from being a General Motors product that I had for a long time that they were safe.” Pl.’s resp. mem. of law at 36. This statement supports plaintiff’s claim that defendant’s silence lead her to assume the front seats were safe.

Defendant argues that the plaintiff cannot establish actual reliance because plaintiff “relied” on a statement that was never uttered. When actual reliance cannot be established, courts have looked to the nature of the parties’ relationship and materiality of the statement to establish a presumption of reliance. Relying on general principles of contract law, the Pennsylvania Supreme Court has held that “reliance” can be presumed when a party makes material misrepresentations. See e.g., New York Life Insurance Co. v. Brandwene et ux., 316 Pa. 218, 172 A.2d 669 (1934); McClellan Estate, 365 Pa. 401, 408, 75 A.2d 595, 598 (1950) (citing Restatement of Contracts §476(1)); see also, Vasquez v. Superior Court of San Joaquin County, 4 Cal.3d 800, 484 P.2d 964, (1971) (holding that the rule in California and elsewhere is that reliance upon alleged false representations can be inferred from the circumstances).

More recently, in Peerless Wall and Window Coverings Inc. v. Synchronics Inc., 85 F. Supp.2d 519 (W.D. Pa. 2000) a federal court cited the Pennsylvania Supreme Court in addressing the question of a “presumption of reliance.” In Peerless, a case involving a software manufacturer’s failure to disclose that its software was not Y2K compliant, the court stated that “when one would not have entered the transaction in the presence of a full disclosure of a material fact . . . that person has obviously relied.” Id. at 534 (relying on New York Life Insurance Co. v. Brandwene, 316 Pa. 218, 172 A.2d 669 (1934)). Although the court dismissed the plaintiff’s fraud claim, it did so because the plaintiff could not present evidence that plaintiff would not have purchased the software if the defect had been disclosed. Therefore, the Peerless opinion holds open the possibility that where, as here, a plaintiff can demonstrate that they would not have purchased a product had they been aware of the defect, reliance on the defendant’s omission can be presumed.

Moreover, this court held, in certifying a class UTPCPL claim, that when a duty to speak exists, reliance by the class plaintiffs is implicit and is established by operation of law. Katlin v. Tremoglie, 43 D.&C.4th 373, 391 (1999). In Katlin, a therapist failed to reveal to his patients the fact that he was not licensed to practice medicine. Id. The court found that the “doctor” had a duty to disclose the material fact that he was not licensed to practice medicine. In reaching this holding, the court relied on Basile v. H & R Block Inc., 729 A.2d 574, 584 (Pa. Super. 1999) to extend the presumption of yond the fiduciary relationship and apply it to a special or confidential relationship. Id. Recognizing that the presumption is not based on the form but rather the substance of the relationship, the court found no compelling reason not to extend the duty to speak to a case involving allegations of a breach of a confidential relationship. Id.

Here, the plaintiff has established that the defendant’s silence regarding the alleged defect in the class vehicles was material to the plaintiff’s decision to purchase the car. The plaintiff testified that she assumed in the face of defendant’s silence that the front seats of the car were safe, and that had defendant disclosed that there was a safety defect in the front seats, she would not have bought the car. PL’s resp. mem. of law at 37. Following the court’s rationale in Peerless, and Katlin, plaintiff’s reliance on defendant’s active concealment can be presumed because the concealment of the alleged defect would be material to the plaintiff’s decision to purchase her car. In addition, the plaintiff’s own testimony supports finding that she relied on defendant’s material omission. Therefore, this court finds that it is appropriate under these facts to expand the presumption of reliance.

II. The Plaintiff Is Barred From Using the UTPCPL To Recover for Alleged Fraudulent Statements Made to the NHTSA

In its motion, defendant asserts that to the extent that plaintiff’s UTPCPL claim is based on alleged misrepresentations to the NHTSA, such “statements” cannot form the basis of a state action to enforce NHTSA regulations. Defendant is correct in stating that insofar as plaintiff’s UTPCPL claim seeks redress for misstatements to the NHTSA, it is a “fraud on the agency” claim, which is properly pre-empted by federal law. See Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001) (holding that a patient’s state law fraud claims against a manufacturer were a “fraud on the agency” claim, because the state claim was based on manufacturer’s statements to the Food and Drug Administration, which the FDA has authority to police itself). Therefore, because the plaintiff cannot use the UTPCPL to enforce an alleged fraud on a federal agency, defendant’s motion for summary judgment on this issue is granted.

III. The Economic Loss Doctrine Does Not Bar Plaintiff’s UTPCPL Claim

Defendant argues that plaintiff’s UTPCPL claim is barred by the economic loss doctrine because plaintiff has suffered no personal injury. Defendant suggests that because plaintiff’s only harm is the cost to repair the allegedly defective seats, her appropriate remedy, if any, is based in contract law. Plaintiff responds that the economic loss doctrine does not apply under these facts because the doctrine does not apply to the alleged intentional acts by defendant.

In Pennsylvania, the purpose of the economic loss doctrine is to maintain the separate sphere of the law of contract and tort. New York State Electric & Gas Corporation v. Westinghouse Electric Corporation, 387 Pa. Super. 537, 550, 564 A.2d 919, 925 (1989). Originally, the economic loss doctrine was applied to products liability claims, with the expectation that parties could recover purely economic damages under contract theory. East River S.S. Corporation v. Transamerica Delaval Inc., 476 U.S. 858, 871 (1986). The reach of the doctrine has been justified on the basis that parties can protect themselves by negotiating the terms of a manufacturer’s liability. Id. at 872-73. Pennsylvania courts addressing the economic loss doctrine have accepted the Supreme Court’s rationale and focused on the ability of the purchaser to recover economic harm under a breach of warranty claim. REM Coal Co. Inc. v. Clark Equipment Co., 386 Pa. Super. 401, 563 A.2d 128 (1989). In an attempt to guide future courts on the application of the doctrine, the Superior Court stated that “the proper focus is not on the type of risk, but the actual harm for which plaintiff seeks recovery.” Id. at 411, 563 A.2d at 133. Unfortunately, there is much confusion in the Pennsylvania cases as to the scope and breadth of the economic loss doctrine. For the reasons discussed below, this court finds that the economic loss doctrine does not bar plaintiff’s UTPCPL claim.

Recently, the Third Circuit in Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002) held that a plaintiff’s UTPCPL claim was barred by the economic loss doctrine. Although not bound by the Third Circuit’s opinion, this court will address the decision in an effort to clarify the law. In Werwinski, the Third Circuit’s ruling focused on the parties’ appropriate redress under contract law. The case involved a class of consumers that had incurred substantial costs to repair failed transmissions in their vehicles. The parties alleged that the manufacturer knowingly installed defective parts in the transmissions which caused the transmissions to fail. Here, the alleged defects in the front seats of the class vehicles have not yet manifested themselves, because the cars have, fortunately, not been involved in rear-end collisions. Despite the fact that the front seats have not yet injured anyone, and the plaintiff cannot bring a breach of contract claim, the plaintiff’s UTPCPL claim for intentional concealment and deceptive practices is ripe. The plaintiff need not wait until she is physically injured to bring a claim for deceptive practices when the manufacturer had a duty to inform her of a known defect.

Although the Werwinski court applied the economic loss doctrine to UTPCPL claims, it did so on the belief that exempting statutory claims from the doctrine would nullify the doctrine. While this court agrees that in certain cases the doctrine should apply to bar statutory claims, a blanket application of the economic loss doctrine to the UTPCPL fails to address the purpose of enacting the statute. The Pennsylvania Supreme Court clearly stated that the purpose of the UTPCPL is to be liberally construed to prevent unfair or deceptive practices. Commonwealth v. Monumental Properties Inc., 459 Pa. 450, 458-60, 329 A.2d 812, 816-17 (1974). To apply the economic loss doctrine to all claims under the UTPCPL has the potential to eviscerate the UTPCPL itself. The instant case is an example of the danger of applying the economic loss doctrine too broadly.

Here, the plaintiff has raised a legitimate question as to whether the defendant’s actions were deceptive under the UTPCPL, but does not have a viable breach of contract claim. To apply the economic loss doctrine to bar the plaintiff’s statutory claim here would frustrate the intent of the UTPCPL, in this context, and would be inconsistent with the purpose of the economic loss doctrine. This is not a case where the plaintiff is attempting to bring a tort action in lieu of a breach of contract claim. If the doctrine were to bar the plaintiff’s action, the plaintiff would be estopped from litigating a claim which the legislature specifically provided for when it amended the UTPCPL to protect against deceptive practices. Therefore, this court finds that, under the facts of this case, the plaintiff’s UTPCPL claim should not be barred by the economic loss doctrine.

CONCLUSION

For the reasons stated above, this court holds that the plaintiff has alleged sufficient facts which if accepted by a finder of fact, would be sufficient to establish a valid UTPCPL claim against defendant and such claim is not barred by the economic loss doctrine. Insofar as plaintiff seeks recovery under the UTPCPL for statements made by the defendant to the NHTSA, such claim is barred by federal pre-emption. Accordingly, this court is granting in part and denying in part defendant’s motion for summary judgment.

ORDER

And now, September 11, 2002, upon consideration of the motion for summary judgment of defendant, General Motors Corporation, plaintiff Shirley Zwiercan’s response thereto, and oral argument from the parties, and in accordance with the memorandum opinion being filed contemporaneously with this order, it is hereby ordered and decreed that the motion is granted insofar as plaintiff is barred by federal pre-emption from claiming a violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Act for statements made by defendant to the National Highway Transportation Safety Administration, and denied as to the remaining claims.

      . See Shirley Zwiercan v. General Motors Corp., 2002 WL1472335 (C.P. Phila. May 22, 2002) (Herron, J.)

      . The issue of damages was previously addressed in the defendant’s first motion for summary judgment in this case. This court denied defendant’s first motion to dismiss the plaintiff’s UTPCPL claim, holding that plaintiff’s cost to repair the alleged defective seats is sufficient to sustain a claim of damages in a UTPCPL action. Zwiercan v. General Motors, 2002 WL 1472335 (C.P. Phila. May 22, 2001) (Herron, J.); See also, Grant v. Bridgestone Firestone Inc., 2002 WL 372941 (C.P. Phila. Jan. 10, 2002) (ruling that cost to repair a defect is sufficient to bring a claim under the UTPCPL); Solarz v. Daimler Chrysler Corp., 2002 WL 452218 (C.P. Phila. Mar. 13, 2002) (Herron, J.) (holding that failure to allege actual loss or out-of-pocket cost is not fatal to a UTPCPL claim).

      . Because this section of the UTPCPL appears to cover all other acts of fraud or deceptive conduct that are not specifically enumerated in the other articles of UTPCPL §201-2(4), Pennsylvania courts have dubbed §201-2(4)(xxi) the “catchall provision.”

      . Defendant urges this court to reconsider its opinions holding that “reliance” is not a required element to establish a “deceptive” act under the catchall provision. As this court finds that reliance has been sufficiently pled in the present case, the court finds it unnecessary to address our previous decisions. Defendant further argues that Weinberg v. Sun Company Inc., 565 Pa. 612, 777 A.2d 442 (2001) requires this court to dismiss plaintiff’s claim for failure to demonstrate reliance. The instant case is distinguishable. In Weinberg, the Pennsylvania Supreme Court, reviewing a false advertising claim, considered whether a party could bring a UTPCPL claim when the party did not hear the alleged misleading advertisement. In the instant case, this court is addressing whether a manufacturer who fails to warn the public of a known safety defect can be held liable for engaging in a deceptive or fraudulent practice. The underlying issue, therefore, is whether the manufacturer breached its duty to speak, not whether the manufacturer falsely advertised its product.

      . Defendant does not brief the issue of whether a duty to speak exists between a manufacturer and its customers, but instead focuses the argument on whether non-feasance is actionable under the UTPCPL, citing Gordon v. Pennsylvania Blue Shield, 378 Pa. Super. 256, 548 A.2d 600 (1988) (holding that an insurer’s failure to pay an insured’s claim amounts to non-feasance and is not actionable under the UTPCPL). Defendant’s argument misses the point. In the present case, the critical issue is whether the defendant’s intentional failure to warn against a known defect is actionable under the UTPCPL. Such behavior, if true, would be an act of misfeasance not non-feasance as the defendant suggests.

      . It is undisputed that the plaintiff and defendant were not in a fiduciary or confidential relationship.

      . The court acknowledged that Pennsylvania courts have often cited to the Restatement (Second) of Torts §551, in adopting the duty to speak requirement. However the court found that Pennsylvania case law does not provide much guidance as to what extent the courts are bound by the Restatement’s discrete criteria.

      . Neuman v. Corn Exchange National Bank & Trust Co., 356 Pa. 442, 451, 51 A.2d 759, 764 (1947) (finding that a bank’s misrepresentations to a purchaser of stock was actionable because the purchaser was justified in relying on bank’s statements since the bank, as the holder and seller of the stock is the proper source of information); Scaife Co. v. Rockwell-Standard Corporation, 446 Pa. 280, 285 A.2d 451 (1971) (holding that the continuous business relationship between a selling corporation and a purchaser gave rise to a duty to speak based on reliance between the parties). Quashnock v. Frost, 299 Pa. Super. 9, 445 A.2d 121 (1982) (addressing termite infestation of a home, the court stated that disclosure is required “since caveat emptor is no longer rigidly applied to the complete exclusion of any moral or legal obligation to disclose material facts.”); Smith v. Renaut, 387 Pa. Super. 299, 564 A.2d 188 (1989) (relying on Quashnock, to hold that a seller has an affirmative duty to disclose a known termite infestation.)

      . Although the Basile decision was appealed, reversed and remanded, the proposition for which Katlin court relied on was affirmed on appeal in Basile v. H & R Block Inc., 777 A.2d 95 (Pa. Super. 2001). On appeal, the Superior Court held that the trial court abused its discretion in granting summary judgment. The court reversed the trial court decision, holding that a tax consultant’s failure to inform clients about interest rates charged on the company’s accelerated tax refund service constituted a breach of a fiduciary duty. Furthermore, the court found, that the facts, if true, established that a fiduciary duty not only existed between the clients and the individual tax consultant, but also between the clients and H & R Block as the orchestrating entity. Id. at 107. The court stated that “the evidence suggests that the plaintiffs trusted not the individuals who staffed any given Block office, but Block as an organization.” Id. The court was persuaded by the pervasive media presence of H & R Block and the fact that the company, through the advertising of its “rapid refund” service, attempted to “achieve a false intimacy” with the customer. Id. Therefore, based on the confidential relationship, the court found a level of trust and reliance on the part of the customers.

      . This court, in partially granting defendant’s first summary judgment motion, held that plaintiff has no claim for breach of contract until her front seats actually manifest a failure. Zwiercan v. General Motors, 2002 WL 1472335 (C.P. Phila. May 22, 2002) (Herron, J.)

      . In declining to extend the application of the economic loss doctrine to intentional fraud claims, this court noted, there is an absence of Pennsylvania case law on the subject, but found support for the proposition that the doctrine should not bar claims where the representation is intentionally false. First Republic Bank v. Brand, 50 D.&C.4th 329 (C.P. Phila. 2000) (Herron, J.); see also, Teledyne Tech Inc. v. Freedom Forge Corporation, no. 3398, slip. op. 20 n.17 (C.P. Phila., April 19, 2002) (Sheppard, J.); Amico v. Radius Communications, 2001 WL 1807924 (C.P. Phila.) (Herron, J.). The defendant asks this court to reconsider its previous holdings in light of the Third Circuit’s holding in Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002). However this court finds the instant case distinguishable from both our previous cases and Werwinski.


author: KUNSELMAN, J.,

text:
    National First Mortgage Corporation of Pennsylvania v. Economy Savings Bank PaSA

      C.P. of Beaver County,
    no. 11181 of 1995.

      Robert M. Barnes, for plaintiffs.

      Donald M. Lund, for defendant.
    June 18, 2002
   KUNSELMAN, J.,

The matter is before the court on the defendant’s motion to compel production of documents in the custody of the plaintiff’s accountant, S. R. Snodgrass A.C. The plaintiff objects to the production of certain documents on the basis of the accountant-client privilege set forth in 63 P.S. §9.11 (a).

A short factual and procedural history is necessary to understand the issue. National First Mortgage Corporation of Pennsylvania was in the business of entering into mortgage loans and selling them to other financial institutions. In that connection, National First entered into a contract with Economy Savings Bank PaSA in which, it alleges, Economy agreed to purchase such loans from it. This suit was filed by National First against Economy seeking damages arising out of an alleged breach of the agreement by Economy. The complaint sets out four causes of action in four counts and seeks damages for, among other things, the lost value of National First as an ongoing business, the lost value of loans and the lost value of loan servicing.

The relationship between National First and Economy began in 1990. However, National First’s parent company, First Federal Savings and Loan Association of Pittsburgh, was placed into receivership in 1991 and Resolution Trust Corporation took over the assets including National First. Resolution Trust Corporation prohibited National First from selling loans to investors, including Economy.

In December 1993, Resolution Trust Corporation sold National First to the Chestnut Corporation. In preparation for that sale, National First retained S. R. Snodgrass A.C. for purposes of auditing its books and to calculate the purchase price for the sale pursuant to a formula which was set forth in the agreement of sale. After the sale, Resolution Trust Corporation authorized the sale of loans and National First began to sell loans to investors again, including Economy.

Eventually, Economy refused to purchase loans and this suit was filed. Extensive discovery has occurred between the parties including depositions, answers to interrogatories and the exchange of documents. The discovery has included the release of voluminous documents to Economy by Snodgrass with National First’s consent. The documents released relate to Snodgrass’ audits and computation of the purchase price paid by Chestnut Corporation for National First. (Since National First has been sold, we wonder who is the real party in interest. No issue has been raised in that regard and we, of course, express no opinion with respect thereto.)

Notwithstanding the voluntary release of documents by Snodgrass, National First has withheld its consent to the release of certain documents by Snodgrass. This refusal has precipitated the pending motion to compel. The documents with respect to which National First has claimed the accountant-client privilege include the following: (1) a letter from Joe McGrath, said to be National First’s president, to Snodgrass dated February 11, 1994; (2) a letter from Tony Cordera, chief financial officer of National First, to R. Gross regarding the Snodgrass audit (R. Gross is an attorney in Washington D.C. who is outside counsel to National First); (3) notes by Snodgrass of telephone conversations with National First between April 12, 1994, and April 29, 1994; (4) a letter from Snodgrass to Joseph McGrath dated July 8, 1994; (5) notes of a telephone conversation with Tony Cordera dated June 28, 1994; (6) a letter from R. Gross to Snodgrass dated April 28,1994; and (7) a letter from R. Gross to Snodgrass dated April 13, 1994.

The accountant-client privilege claimed by National First has been codified in the C.RA. Law. It provides, in relevant part, as follows:

“Except by permission of the client engaging him or the heirs, successors or personal representatives of a client, a licensee or a person employed by a licensee shall not be required to, and shall not voluntarily, disclose or divulge information of which he may have become possessed unless the sharing of confidential information is within the peer review process. This provision on confidentiality shall prevent the board from receiving reports relative to and in connection with any professional services as a certified public accountant, public accountant or firm. The information derived from or as the result of such professional services shall be deemed confidential and privileged. Nothing in this section shall be taken or construed as prohibiting the disclosure of information required to be disclosed by the standards of the profession in reporting on the examination of financial statements, or in making disclosures in a court of law or in disciplinary investigations or proceedings when the professional services of the certified public accountant, public accountant or firm are at issue in an action, investigation or proceeding in which the certified public accountant or firm is a party.” 63 P.S. §9.11 (a).

While there are federal cases interpreting this section, there is a dearth of Pennsylvania appellate case law and few trial court opinions which have been published. Therefore, we will decide the issue as one of first impression since we are not bound by either federal decisions or decisions of our sister trial courts.

We first note that evidentiary privileges are not favored since they are in derogation of the search for truth. Commonwealth v. Stewart, 547 Pa. 277, 282, 690 A.2d 195, 197 (1997). Therefore, courts should accept testimonial privileges only to the very limited extent that permitting a refusal to testify or excluding relevant evidence has a public good transcending the normally predominant principal of utilizing all rational means for ascertaining the truth. Id. Thus, our Superior Court has said that “we must construe narrowly the provisions of any privilege that operates to hamper a party’s access to information bearing on matters in litigation before a court of law.” PennDOT v. Taylor, 746 A.2d 626, 629 (Pa. Super. 2000). Further, “the statute makes only a limited change in the common law, and it does not extend the common law attorney-client privilege to the accountant-client relationships.” Agra Enterprises Inc. v. Brunozzi, 302 Pa. Super. 166, 171, 448 A.2d 579, 582 (1982).

The attorney-client privilege, if applicable, is absolute. Cf. Gould v. City of Aliquippa, 750 A.2d 934 (Pa. Commw. 2000). However, we must conclude that the accountant-client privilege is not absolute. We reach this conclusion for several reasons. First, the statute excepts from the privilege the disclosure within the peer review process. Second, the statute excepts from the privilege the disclosure of information required to be disclosed by the standards of the profession in reporting on the examination of financial statements. Finally, the statute excepts from the privilege the disclosure of information in court or other proceedings when the professional services of the accountant are at issue and the accountant is a party.

Having concluded that the privilege is not absolute, we must look to see if the acceptance of the privilege has a public good which transcends the normally predominant principal of utilizing all rational means to ascertain the truth. In that regard, we note that National First, for all other purposes, no longer exists. Its sole purpose now appears to be a recovery of damages against Economy. In addition, National First has already consented to the disclosure of voluminous documents by Snodgrass to Economy. Thus, to honor the privilege under these circumstances would give National First a superior position in the search for the truth.

Moreover, it appears that there was not a long-term, ongoing accountant-client relationship between Snodgrass and National First since Snodgrass was retained for the limited purpose of auditing National First’s financial statements and computing the purchase price. Like the attorney-client privilege, the purpose of the accountant-client privilege is to insure an atmosphere where the client will transmit all relevant information to the account without fear of future disclosure in subsequent litigation. Orix USA Corp. v. DVI Inc., 37 D.&C.4th 491 (Allegheny Cty. 1997). However, unlike the attorney-client privilege, the intended beneficiary of which is the systematic administration of justice and not the individual client, the intended beneficiary of the accountant-client privilege is the client and the accountant. Id. Therefore, to honor the privilege under these circumstances would compromise the search for the truth on the very issue Snodgrass was retained to determine— the value of National First and with the very same information National First claims a privilege from disclosure.

Finally, we observe from our in-camera review of the documents at issue, that for the most part, they discuss the transaction which was under the control of Resolution Trust Corporation. Since Resolution Trust Corporation’s purpose is to act as a receiver or conservator of a failed financial institution under the Financial Institutions Reform, Recovery and Enforcement Act, we think the transaction itself is a matter of public concern and importance. For that reason as well, we think the search for the truth outweighs the need to protect the communications from disclosure. We observed, however, that large portions of Snodgrass’ notes of telephone conversations between April 12,1994, and April 29,1994 were redacted. The redaction appears to have been done by Snodgrass prior to releasing the documents to counsel for National First. We, of course, do not know whether the redacted material relates to National First or another client of Snodgrass. We will order disclosure of the redacted material as well unless Snodgrass files an affidavit that the redacted material is not related to National First.

An appropriate order is attached.

ORDER

The motion to compel production of S. R. Snodgrass A.C. documents is granted. National First Mortgage Corporation of Pennsylvania is directed to instruct S. R. Snodgrass A.C. to produce all documents responsive to the subpoena issued by Economy Savings Bank, including all documents identified in paragraph 12 of the motion and including the redacted portions of item 3 in paragraph 12 unless S. R. Snodgrass A.C. submits an affidavit that the redacted portions are not related to National First Mortgage Corporation of Pennsylvania.

Compliance with this order shall occur on or before 4:30 p.m. on the seventh business day following the filing of this order. Counsel for the parties shall submit a consent order for entry which preserves the confidentiality of the documents for all purposes except the within litigation.


author: WALLITSCH, J,

text:
    Davitt v. Wood Co.

      C.P. of Lehigh County,
    no. 2000-C-0686.

      H. Thomas Hunt III, for plaintiff.

      Oldrich F. Foucek III and George C. Hlavec, for defendant The Wood Company.

      James T Huber, for defendant Bausch.
    April 30, 2002
   WALLITSCH, J,

Before the court is a motion for summary judgment filed by the defendants, The Wood Company and Larry Bausch (sometimes collectively referred to as “the defendants”). The plaintiff, Patricia Davitt opposes the motion for summary judgment.

Davitt filed a complaint of discrimination against defendants with the Pennsylvania Human Relations Commission (PHRC) on September 10,1999. This complaint asserted claims against the defendants for sexual discrimination, harassment, and retaliation. This complaint was also cross-filed with the Equal Employment Opportunity Commission (EEOC), which issued Davitt a notice of right to sue on May 22, 2000. On March 20, 2000, Davitt commenced this action by filing a praecipe for writ of summons. Subsequently, after pre-complaint discovery was conducted, Davitt filed a complaint against the defendants on May 3, 2000. This initial complaint asserted common-law tort claims of slander and false light invasion of privacy. On August 17, 2000, Davitt filed an amended complaint adding claims against Wood for sexual discrimination, harassment and retaliation pursuant to title VII of the Civil Rights Act of 1964, 42 U.S.C. §§2000 et seq. The amended complaint also asserted additional common-law tort claims against Wood for negligent retention and negligent supervision.

Count I of Davitt’s amended complaint asserts discrimination, harassment, and retaliation claims against Wood pursuant to title VII. In support of these claims, Davitt relies upon alleged statements made and actions committed by Wood’s employees between July of 1986 and August of 2000 while she was employed by Wood at the Easton Hospital account. Defendants first argue that, to the extent that such claims are based on the conduct of Bausch, they are entitled to summary judgment because all of his alleged conduct occurred more than 300 days before Davitt filed her PHRC complaints.

In order to pursue a cause of action under title VII, a plaintiff must file an administrative complaint with the EEOC within 180 days of the alleged discrimination. 42 U.S.C. §2000e-5(a). This limitation period is increased to 300 days where the plaintiff initially institutes proceedings with a state or local agency with authority to grant or seek relief from such discrimination. Because the PHRC is such an agency, the 300-day limitation period applies. Since Davitt filed her PHRC complaints on September 10, 1999, 300 days prior to that filing would equate to November 14, 1998. Therefore, argue defendants, a title VII claim cannot be based on acts or statements that occurred prior to November 14, 1998. They cite to numerous federal cases to support their position including Cronin v. Martindale Andres & Co., 159 F. Supp.2d 1 (E.D. Pa. 2001); Kunwar v. Simco, 135 F. Supp.2d 649 (E.D. Pa. 2001); and LaRose v. Philadelphia Newspapers Inc., 21 F. Supp.2d 492 (E.D. Pa. 1998), aff’d, 205 F.3d 1329 (3d Cir. 1999). Davitt agrees that the 300-day limitation period applies but contends that there is an applicable theory here that allows an extension of that period of limitation. The “continuing violation theory” allows a plaintiff to pursue a title VII action for discriminatory conduct that occurred prior to the filing period if she can demonstrate that the act is part of an ongoing practice or pattern of discrimination of the defendant. Rush v. Scott Specialty Gases Inc., 113 F.3d 476 (3d Cir. 1997).

The continuing violation theory is premised on the equitable notion that the statute of limitations should not begin to run until a reasonable person would be aware that his or her rights have been violated. Jones v. WDAS FM/AM Radio Stations, 74 F. Supp.2d 455 (E.D. Pa. 1999). To establish that a claim that is otherwise time-barred falls within the continuing violation doctrine, a plaintiff must establish the following two elements: (1) that at least one discriminatory act occurred within the 300-day time period; and (2) that the harassment is more than the occurrence of isolated or sporadic acts of intentional discrimination. In evaluating whether the second prong of this test is met, the court should consider the subject matter, frequency, and permanence of the otherwise untimely discrimination. Kunwar, supra, 136 F. Supp.2d at 655 and LaRose, supra, 21 F. Supp.2d at 498.

Our first review, then, is to determine whether there is a material issue of fact concerning the existence of these two elements. Defendants argue that since Bausch transferred out of Easton Hospital in August of 1998, this first prong cannot be met. We disagree. The Third Circuit in West v. Philadelphia Elec. Co., 45 F.3d 744 (3d Cir. 1995), dealt with this same issue and reversed the trial court’s requirement that the plaintiff stay within the 300-day period unless he could show a continuing violation by the same individual. Therefore, we must look further to determine if there was at least one discriminating act after November 14, 1998.

The record does reveal instances which a jury could conclude that a hostile work environment continued to exist after November 14, 1998. Therefore, the record also may be sufficient to prove the second prong of the continuing violation doctrine, that the harassment was more than isolated or sporadic acts of intentional discrimination.

However, the record also reflects that Davitt knew or should have known well before 300-days prior to the filing of their charge with the EEOC and PHRC that her rights had been violated. As a result, the continuing violation theory is inapplicable. Jones, supra, 74 F. Supp.2d at 463; Cronin, supra, 159 F. Supp.2d at 5. Davitt has alleged, and she has supported by answers to sexual harassment questionnaires, incidents of sexual harassment to which she believed she was subjected at Easton Hospital. (See defendants’ exhibits 58-61, appendix to brief in support of motion for summary judgment.) Certainly, these allegations, going back years before 1998, were sufficient to put Davitt on notice that she believed that her rights were violated. Hence, the continuing violation theory is inapplicable and we will not permit consideration of events which took place prior to November 14, 1998.

Defendants next argue that to the extent that Davitt’s hostile work environment sexual harassment claims are based on Bausch’s actions, the conduct alleged is not sufficient to establish the existence of a sexually hostile work environment. Since we have concluded that no events which occurred before November 14, 1998, will be considered, we need not address this issue since Bausch was transferred from the Easton Hospital account in August of 1998. Therefore, no action of Bausch’s may be considered and he is entitled to summary judgment on this count.

Davitt has also set forth a claim for hostile work environment sexual harassment based on the conduct of her co-workers, namely Conklin, Lichtenwalner, McKelvey, and Frable. Wood contends that their conduct did not amount to the creation of an actionable hostile work environment.

A female plaintiff alleging that sexual harassment created an abusive or hostile working environment must show by the totality of the circumstances that a hostile or abusive working environment existed which is severe enough to affect her psychological stability. In order to prove a hostile work environment, plaintiff must show: (1) that she suffered intentional discrimination because of her sex; (2) that the discrimination was pervasive and regular; (3) that the discrimination detrimentally affected. the plaintiff; (4) that the discrimination would detrimentally affect a reasonable person in the same situation; and (5) the existence of respondent superior liability. Kunin v. Sears Roebuck and Co., 175 F.3d 289, 293 (3d Cir. 1999). Moreover, if the person(s) accused of creating the hostile environment are co-workers of a plaintiff, and not a supervisor, liability exists only where the defendant employer knew or should have known of the harassment and failed to take prompt remedial action. Id.

Some of the claimed acts/statements by these employees related to employees other than Davitt. Wood claims that such acts/statements cannot form the basis of a hostile environment claim and that, therefore, Davitt’s proof is lacking. We conclude, following the analysis in such cases as Creamer v. Laidlaw Transit Inc., 86 F.3d 167 (C.A. 10, 1996); Dellert v. Total Vision Inc., 875 F. Supp. 506 (N.D. Ill. 1995); and Stair v. Lehigh Valley Carpen ters Local Union No. 600 of the United Brotherhood of Carpenters and Joiners of America, 813 F. Supp. 1116 (E.D. Pa. 1993), statements or actions not directed to Davitt that did not pertain to her, and that did not occur in her presence cannot be considered in determining whether Davitt was subject to a hostile work environment.

Secondly, Wood claims that statements regarding Davitt’s sexual orientation may not form a basis for discrimination or harassment claims. Davitt claims that a few of the Wood employees made comments to other employees that Davitt is a lesbian. Wood cites to the case of Bibby v. Philadelphia Coca-Cola Bottling Co., 2001 U.S. App. Lexis 17075 (3d Cir. August 1, 2001) for support of its position. Davitt contends, and we agree, that Bibby is distinguishable from this case.

Bibby dealt with a same sex sexual harassment situation wherein plaintiff alleged that he was harassed because of his sexual orientation. Davitt does not claim that she was discriminated against or harassed because of her sexual orientation. In fact, she claims that the allegations of being a lesbian were untrue and that this untruth was just an example of her being harassed because she is a woman. Therefore, we agree with Davitt that Bibby does not control this case.

However, even though we agree with Davitt that the creation of rumors of the sexual activity alleged here is offensive, noxious, and inappropriate, we do not believe that it is actionable under title VII. As stated by the United States Supreme Court in Oncale v. Sundowner Offshore Services Inc., 523 U.S. 75 (1998), the plaintiff must prove that the conduct at issue was not merely tinged with offensive sexual connotations but actually constituted “discrimination . . . because of . . . sex.” Id. at 81. The alleged rumors do not constitute conduct that was sufficiently severe or pervasive to support a hostile work environment sexual harassment claim.

However, we agree with Davitt that a hostile work environment determination must be made upon “the totality of the circumstances.” Therefore, after eliminating the incidents that, as a matter of law, have no bearing on the hostile work environment determination, we will look at the remaining incidents collectively. After considering (and ruling upon) all of the foregoing, we are left with the following allegations of conduct on the part of co-employees, not in a supervisory position over Davitt, which Davitt claims constitute a hostile work environment: (1) Conlin massaged Davitt’s shoulders on a few occasions; (2) Conlin told Davitt that he had a latex allergy and therefore was unable to wear latex condoms; (3) Lichtenwalner asked Davitt out on dates on a few occasions; and (4) McKelvey, Frable, and Lichtenwalner made false statements about Davitt’s sexual orientation. We find these incidents fail to prima facie establish a hostile work environment. In order to constitute actionable sexual harassment pursuant to title VII, the alleged conduct must be so “severe or pervasive to alter the conditions of the victim’s employment.” Faragher v. City of Boca Raton, 524 U.S. 775, 786 (1998). The United States Supreme Court wanted to insure that the standards for establishing “hostility” with regard to these claims are “sufficiently demanding to ensure that title VII does not become a general civility code.” Id. at 788. While we do not condone the alleged actions or statements of Davitt’s co-employees, we find the remaining actions to clearly be less severe or pervasive as those seen in numerous cases that have been dismissed by summary judgment. See e.g., Saidu-Kamara v. Parkway Corp., 155 F. Supp.2d 436 (E.D. Pa. 2001); Bowman v. Shawnee State Univ., 220 F.3d 456 (6th Cir. 2000); Adusumilli v. City of Chicago, 164 F.3d 353 (7th Cir. 1998); Weiss v. Coca-Cola Bottling Co., 990 F.3d 333 (7th Cir. 1993); Coopers-Nicholas v. City of Chester, 1997 U.S. Dist. Lexis 20810 (E.D. Pa. 1997). We therefore grant Wood’s motion for summary judgment on the sexual harassment/hostile environment claim.

Davitt also made allegations in her complaint that there were retaliatory acts taken against her which impose liability against the defendants under title VII. Davitt has withdrawn all such claims except the one relating to the reorganization of Wood’s Easton Hospital account in 2000. However, we find that Davitt has not raised an issue of material fact sufficient to withstand defendants’ motion for summary judgment on this issue. A chronology of the facts is required for this analysis.

As mentioned previously, Davitt filed her PHRC complaint in September 1999. In March of 2000, Wood began planning the reorganization of the Easton Hospital account. In May of 2000, Davitt filed her complaint in state court, alleging slander and false light invasion of privacy. On July 13, 2000, Davitt was informed that her position would be eliminated in conjunction with the reorganization but was told by her immediate supervisor that a new position was available for her. However, Davitt indicated she did not want to work the hours of the new position and, on August 4, 2000, submitted her resignation. It must be noted that the reorganization affected numerous employees and positions at the Easton Hospital.

In order to establish a prima facie claim of retaliation under title VII, a plaintiff must establish: (1) that she engaged in protected activity; (2) that the employer took an adverse employment action against her after or contemporaneously with the protected activity; and (3) a causal link between the adverse employment action and the protected activity. Williams v. Pennsylvania State Police — Bureau of Liquor Control Enforcement, 108 F. Supp.2d. 460, 467 (E.D. Pa. 2000).

The United States Court of Appeals for the Third Circuit has held that:

“Retaliatory conduct other than discharge or refusal to rehire is thus proscribed by title VII only if it alters the employee’s ‘compensation, terms, conditions, or privileges of employment,’ deprives him or her of ‘employment opportunities,’ or ‘adversely affects his or her status as an employee.’ It follows that ‘not everything that makes an employee unhappy’ qualifies as retaliation, for ‘otherwise, minor and even trivial employment actions that an irritable, chip-on-the-shoulder employee did not like would form the basis of a discrimination smt.’'' Robinson v. City of Pittsburgh, 120 F.3d 1286, 1300 (3d Cir. 1997) (quoting Smart v. Ball State Univ., 89 F.3d 437, 441 (7th Cir. 1996)).

Here, Davitt admitted in her deposition that she was offered a new position and refused it. There is no evidence presented that there was any significant altering of compensation or other terms of employment except for a change in job duties and hours. Even if we concluded that the issue of whether the changed employment conditions should be submitted to a jury, Davitt fails to raise a genuine issue of material fact with regard to the third prong of this claim. She must also establish a causal link between the alleged protected activity (the filing of the PHRC complaint) and the adverse employment action. The six-month gap between the filing of the PHRC complaint and the initial planning of the reorganization may be considered by the court in viewing the issue of causal connection. The United States Court of Appeals for the Fourth Circuit has held that “[a] lengthy time lapse between the employer becoming aware of the protected activity and the alleged adverse employment action... negates any inference that a causal connection exists between the two.” Dowe v. Total Action Against Poverty in Roanoke Valley, 145 F.3d 653, 657 (4th Cir. 1998). As importantly, at the time of planning and implementation of the 2000 reorganization, the only pending claims against Wood were the common-law tort claims. The title VII claims were not added until after the reorganization was completed.

We now turn to the only remaining claims, the common-law torts of slander and false light invasion of privacy. Count VII of the complaint alleges a cause of action for slander. Davitt alleges that statements made by Bausch and “supervisory and managerial employees” of Wood regarding her sexual orientation (lesbianism) and conduct “imputed unchaste conduct” to her. Defendants argue that (1) this cause of action is barred by the one-year statute of limitation; (2) the statements made could not be reasonably capable of conveying a defamatory meaning; and (3) Davitt has failed to identify any special harm as the result of the publication of the alleged defamatory statements. Although Davitt’s slander cause of action probably fails on each of these arguments, we hold that it fails most egregiously on the basis that Davitt has failed to establish any special damages as a result of the alleged defamatory statements.

In order to sustain an actionable claim of slander, a plaintiff must demonstrate special harm resulting from the publication of the defamatory statements. 42 Pa. C.S. §8343(a)(6). “Special harm” means harm of an economic or pecuniary nature. Mere loss of reputation is not sufficient to prove special harm. Agriss v. Roadway Express Inc., 334 Pa. Super. 295, 483 A.2d 456 (1984); Bethel v. McAllister Bros. Inc., 1993 U.S. Dist. Lexis 4243, * 25-26 (E.D. Pa. March 30, 1993). A plaintiff is relieved of the requirement to prove “special harm” only where the alleged defamatory statements constitute slander per se. Slander per se requires words imputing either: (1) criminal offense; (2) loathsome disease; (3) business misconduct; or (4) serious sexual misconduct. Clemente v. Espinosa, 749 F. Supp. 672 (E.D. Pa. 1990).

Since she has failed to allege or prove any special harm, Davitt argues that the allegations of lesbianism inputed unchaste conduct to her, rising to the level of “serious sexual misconduct.” We disagree. To say that the allegations allegedly made by Bausch and Wood’s other employees, all relating to homosexual sexual practices constitute “serious sexual misconduct” would be contrary to today’s mores and community sentiment. As the briefs of the parties point out, nearly one-half of the American public believe that homosexuality is an acceptable alternative lifestyle. While the alleged actions were framed in a vulgar manner, it does not raise the underlying content of the statements to “serious sexual misconduct.” The United States District Court for the Eastern District of Pennsylvania recognized this fact in deciding the case of Rhine v. Dick Clark Prod., 2000 U.S. Dist. Lexis 58 (E.D. Pa. Jan. 1, 2000). That court held that publication of plaintiff’s homosexual orientation did not fall within any of the four categories of slander per se. Here, the publication of such alleged orientation, and attendant sexual practices, suffers the same fate.

Davitt also argues that the false statements made imputed “business misconduct” to her. The statement forming the basis of this argument was that Davitt and another female employee were “too busy engaging” in sexual activity “to care what was going on at work.” It is the court’s function to determine whether a statement constitutes slander per se. Fox v. Kahn, 421 Pa. 563, 221 A.2d 181 (1966). Such a comment clearly cannot be deemed to have alleged business misconduct.

Davitt’s last claim to be considered is false light invasion of privacy. Both defendants argue that this cause of action must fail because the false information was not “given publicity.” Wood further argues that it may not be held vicariously liable for any intentional torts of its employees unless the acts were committed during the course of and within the scope of their employment. Because we believe that genuine issues of material fact exist concerning both of these issues, we deny defendants’ motion for summary judgment on this claim and will permit it to be tried before a jury.

ORDER

And now, April 30, 2002, in consideration of the defendants’ motion for summary judgment, after argument thereon, and for the reasons set forth in the accompanying opinion, said motion is granted in part and denied in part. Judgment is entered in favor of the defendants and against the plaintiff on Counts I through III and Count VII. Defendants’ motion for summary judgment as to Count VHI is denied and jury trial on this claim is scheduled for August 26, 2002.

      . The complaint also set forth causes of action on behalf of another plaintiff, Cynthia Mlodzienski. After oral argument, her case has settled. We will, therefore, only deal with Davitt’s claims in this opinion.

      . Davitt has consented to the dismissal of her negligent supervision and negligent retention claims (Counts II, and IH), and all title VII retaliation claims with the exception of Davitt’s retaliation claim based on Wood’s reorganization of its Easton Hospital account in 2000.

      . Although defendants argue that Davitt has failed to plead a continuing violation theory, we disagree and will reach the substantive merits of this issue.

      . Those instances are summarized on p. 45 of plaintiffs’ brief in opposition to motion for summary judgment.

      . It should be noted that Davitt attempted to distinguish Cronin by stating that it is not known whether the complaint of discrimination made by plaintiff to the employer was based upon a theory of hostile environment. That interpretation of the case is, at best, strained, since that was the claim made in the lawsuit.

      . Again, for the reasons set forth above, we will limit consideration of these individuals’ actions to after November 14, 1998.

      . No dates have been established on the record but we will assume, for these purposes, that they occurred after November 14,1998.

      . Clerk of Courts, Civil Division, is directed to serve a copy of this order and opinion on plaintiff since her counsel have withdrawn their appearance.


author: FORADORA, P.J.,

text:
    Commonwealth v. Davis

      C.P. of Jefferson County,
    no. 349-2001.

      Grey Bazylak, for plaintiff.

      Michael Bogush, for defendant.
    February 8, 2002
   FORADORA, P.J.,

On July 18, 2001, the defendant, Zachary Davis, was charged with driving while under the influence of an intoxicating beverage, 75 Pa.C.S. §3731(a)(4)(ii) and 75 Pa.C.S. §3718. The defendant, in response to these charges, requested and was granted accelerated rehabilitative disposition by the court. On September 20,2001, the defendant did sign a waiver of rights as a condition of his acceptance into ARD. One of the enumerated privileges that the defendant surrendered was his driving privilege for a period of six months. The defendant surrendered his license to an officer of the court and signed a form acknowledging the suspension of his license as a condition of his acceptance into ARD. The license was then submitted to the Department of Transportation, along with the ARD agreement.

On October 27,2001, the defendant was again arrested for DUI. After a hearing, the court revoked the defendant’s ARD for violation of its terms and conditions. The defendant, no longer a participant of the ARD program, argues that he is no longer bound by the terms of the ARD agreement, i.e., the waiver of his driving privilege. The defendant has motioned the court to restore his driver’s license until the court has adjudicated the charges alleged against him.

Defendant’s motion raises two issues before the court: (I) Does the court have jurisdiction to entertain the defendant’s motion?; (II) Should the motion be granted?

DISCUSSION OF LAW

(I) Generally the suspension of a driver’s license is a matter between the issuing authority and the driver. Dariano v. Blocksom, 389 Pa. 96, 132 A.2d 186 (1957). The ability to suspend a driver’s license is not within the discretion of the judge presiding over a criminal proceeding. Therefore a judge cannot impose a suspension as a condition of punishment for conviction of a crime. See Dariano, 389 Pa. at 98, 132 A.2d at 188. The suspension of a driver’s license pursuant to a criminal conviction is a civil penalty imposed by the Department of Transportation in order to protect the safety of the pub-lie. Consequently neither the district attorney nor the court of common pleas has jurisdiction to bind the Department of Transportation to suspend a civil license suspension. See PennDOT v. Lefever, 111 Pa. Commw. 105, 110, 533 A.2d 501, 503 (Pa. Commw. 1987). In Lefever, the Commonwealth Court specifically precluded the court from using the statutory civil penalty of license suspension as a bargaining chip for obtaining a plea agreement. See Lefever, 111 Pa. Commw. at 110, 533 A.2d at 503.

Accelerated rehabilitative disposition is not a criminal conviction. It has been held to hold the status of a pretrial disposition without a verdict. Pompey v. Penn-DOT, 768 A.2d 372, 374 (Pa. Commw. 2001). In Pompey, the Commonwealth Court addressed an appeal by the DOT challenging the validity of the court’s refusal to suspend the license in the terms of an ARD agreement with the defendant. In that case, the Commonwealth Court distinguished Lefever which addressed jurisdiction subsequent to a criminal conviction and jurisdiction subsequent to ARD. The court turned to the explicit language of 75 Pa.C.S. §3731(e)(6)(ii), which expressly grants the authority to suspend driving privileges in the presiding judge:

“(6) Any person who accepts accelerated rehabilitative disposition of any charge brought under this section shall accept as conditions the imposition of and the judge shall impose in addition to any other conditions all of the following: ... (ii) A mandatory suspension of operating privilege of not less than one month not more than 12.” (emphasis added)

Observing that the judge was granted the power to impose the license suspension in an ARD agreement, the Commonwealth Court inferred that the authority was exclusive. The Commonwealth Court stated: “Clearly, the Vehicle Code does not provide DOT with the authority to suspend a licensee’s operating privilege once he or she is accepted into ARD. That authority is specifically reserved for the judge who must comply with the suspension requirements of that section.” Pompey, 768 A.2d at 374.

APPLICATION

(I) Clearly the complexity of the problem lies in the relationship between the judiciary and the Department of Transportation, Licensing Bureau. Although the court does not exercise jurisdiction over the DOT as a separate executive department, it is necessary for the judiciary to coordinate with the DOT in a number of instances. As discussed previously the court lacks the authority to impose a license suspension as an element of a criminal punishment. The finding of guilt by the court however validates the imposition of a civil penalty by the DOT. The DOT is therefore dependant upon the actions of the judiciary to carry out license suspensions pursuant to certain statutory violations.

In the present case the court was vested with exclusive authority to suspend the defendant’s driver’s license pursuant to the Commonwealth Court’s ruling in Pompey. See Pompey v. PennDOT, 768 A.2d 372 (Pa. Commw. 2001). Under this ruling and the language of section 3731 the court is granted the authority to direct the DOT to suspend a license. 75 Pa.C.S. §3731(e)(6)(ii). In this circumstance, although vested with the authority to suspend defendant’s driver’s license, the court is still dependant upon the DOT to carry out the suspension. The court has the power to limit the right of the defendant to drive; however, this does not carry out the practical effect of terminating the defendant’s ability to drive, i.e., alerting police personnel. In order to render the ruling enforceable, the court is required to contact the DOT and forward the ARD agreement articulating the nature and scope of the suspension along with the defendant’s license to the appropriate bureau.

In the case sub judice, the court is asked to exercise authority to direct the DOT to terminate a license suspension pursuant to an ARD agreement. Because the Commonwealth Court has ruled that the authority was vested solely in the presiding judge to prescribe the nature and duration of the suspension, it can be inferred that the basis of the suspension rests squarely on the order by the court. Taking into account the interrelated nature of the court with the DOT in these cases, it seems only rational that if the order is revoked then the authority upon which the DOT effectuates the suspension is terminated.

(II) The defendant agreed to the terms and conditions of ARD. This agreement did not constitute an admission of guilt by the defendant nor a finding of guilt by the court. Presently the ARD has been revoked and the defendant is no longer burdened by the conditions of the prior pretrial agreement between himself and the Commonwealth. The case is therefore essentially back to square one. The defendant stands before the court innocent until proven guilty of the charges alleged against him. This court therefore concludes that the defendant’s driving privilege shall be reinstated pending further proceedings.

ORDER

And now, February 8, 2002, in response to the defendant’s motion to the court to suspend defendant’s current license suspension, the court now enters the following order:

Defendant’s motion is granted and the defendant’s license suspension is terminated pending further proceedings. The Pennsylvania Department of Transportation shall return the defendant’s license immediately.