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    Wurtzel v. Park Towne Place Apartments Limited Partnership

      Marc J. Lucker, for plaintiff.

      Ronald Shaffer, for defendant.
    August 11, 2001
   HERRON, J.,

In this individual, derivative and class action, a limited partner asks the court to preliminarily enjoin the limited partnership from merging with an entity affiliated with the general partner. The court will grant the preliminary injunction because a supermajority of the limited partners did not approve the merger as required by the limited partnership agreement. The following findings of fact, discussion and conclusions of law support the court’s contemporaneously-filed order.

FINDINGS OF FACT

I. The Parties

(1) Plaintiff Alan Wurtzel has been a limited partner in defendant Park Towne Place Associates Limited Partnership since 1986. Stip. ¶1.

(2) The partnership was formed in 1985. It owns Park Towne Place, an apartment complex in Philadelphia. Stip. ¶2.

(3) The partnership sold 380 limited partnership units to investor limited partners for $75,000 to $100,000 per unit. Wurtzel bought one unit. Stip. ¶6.

(4) Defendant PTP Properties Inc. is the sole general partner of the partnership. Stip. ¶3.

(5) On February 26,1999, PTP became a wholly owned subsidiary of defendant AIMCO Properties L.P. Stip. ¶¶3, 7; exhibit D-l; exhibit D-9.

(6) AIMCO Residential Group L.P. is the manager of the property. AIMCO controls AIMCO Residential Group. Exhibit P-14; stip. ¶7.

II. The Partnership Agreement

(7) In 1986, the partnership’s original general partner and its original limited partner signed a partnership agreement. Stip. ¶5; exhibit D-4.

(8) Delaware law governs the constmction and enforcement of the agreement. Exhibit D-4, agreement §11.6.

(9) In 1996, the partnership amended the agreement to add a new section 5.8. Exhibits P-11 and D-D, amendment §5.8. Section 5.8(c) requires the consent of the general partner and a two-thirds interest of the limited and general partner for any action by the general partner “[clausing the partnership to consolidate, merge or enter into any form of consolidation with or into any other entity or to convey, transfer or lease its assets substantially as an entirety to any person or entity except to a bona fide purchaser for cash consideration.” Exhibit P-11.

IE. The Tender Offers and Merger

(10) In March 1999, Equity Resources Boston Fund offered to buy partnership units from the limited partners for $5,000 per unit. Around the same time, AIMCO offered $8,208 per unit. Stip. ¶8. AIMCO’s offer contained the statement that the general partner believed AIMCO’s price to be fair. Exhibit P-14 at S-10.

(11) In March 2000, Equity increased its offer to $12,000 per unit or $6,000 per half unit. Stip. ¶10.

(12) In May 2000, AIMCO increased its offer to $48,533. Stip. ¶11. AIMCO’s offer contained the statement that the general partner believed AIMCO’s price to be fair. Exhibit P-4 at 7.

(13) In February 2001, AIMCO increased its offer to $66,788 per unit. Stip. ¶12. AIMCO’s offer contained the statement that the general partner believed AIMCO’s price to be fair. Exhibit P-5 at 2.

(14) Some limited partners sold their partnership units to AIMCO. By May 29, 2001, AIMCO owned 58.14 percent of the limited partnership units. Stip. ¶13.

(15) On or about May 29,2001, the partnership sent a letter and information statement to the limited partners. The letter announced that

“(a) the partnership would merge with Park Towne Place Transitory Company LLC, an entity wholly owned by AIMCO;
“(b) the merger would occur on June 29, 2001;
“(c) the partnership would be the surviving entity;
“(d) the merger would force the minority limited partners to give up their interests in exchange for $81,422 in cash or 1776 AIMCO partnership units;
“(e) AIMCO based the consideration on an appraisal of the liquidation value of the partnership interests;
“(f) the purposes of the merger were to decrease the expenses associated with the minority limited partners, to provide the limited partners with liquidity for their investment, and to offer them an opportunity to swap their partnership’s interest for the more diversified AIMCO interests;
“(g) because AIMCO owned 58.14 percent of the outstanding interests in the partnership, the partnership did not require the approval of the other limited partners;
“(h) limited partners who failed to make an election between cash and AIMCO units would receive cash;
“(i) appraisal rights were available, but each limited partner would have to pursue appraisal individually; and
“(j) AIMCO and PTP consented to the merger offer and believed it to be fair.” Exhibit D-E; stip. ¶16.

(16) The partnership did not obtain the approval of two-thirds of the partnership interests for the merger. Exhibit D-E; stip. ¶16.

(17) On June 28,2001, Wurtzel filed this action claiming breach of fiduciary duty, breach of the partnership agreement and fraud. The proposed class consists of 194 limited partners in the partnership. Complaint ¶9.

(18) Wurtzel also petitioned for a temporary restraining order and preliminary injunction against the defendants. By order dated June 28, 2001, and entered June 29, 2001, the court granted a TRO barring the defendants from engaging in “any transaction which would limit, transfer, assign or extinguish the rights of any limited partner in [the partnership], including but not limited to the contemplated merger of [the transitory company] with and into the partnership.”

DISCUSSION

The defendants threaten to merge the partnership with the transitory company without obtaining the required consent of partners with two-thirds of the partnership interests. The merger and forced buyout of the minority limited partners would irreparably harm Wurtzel and his fellow limited partners by depriving them of their right to vote on the merger. Therefore, the court will grant the petition and preliminarily enjoin the defendants from undertaking the illegal merger or from further buying limited partners’ partnership units.

I. Standard for Preliminary Injunction

The court may grant the injunction if Wurtzel establishes the following elements: (1) relief is necessary to prevent immediate and irreparable harm that cannot be compensated by damages, (2) greater injury will occur from refusing the injunction than from granting it, (3) the injunction will restore the parties to the status quo as it existed immediately before the alleged wrongful conduct, (4) the wrong is actionable and Wurtzel’s right to relief is clear, and (5) the injunction is reasonably suited to abate that wrong. School Dist. of Wilkinsburg v. Wilkinsburg Education Ass’n, 542 Pa. 335, 338 n.2, 667 A.2d 5, 6 n.2 (1995); New Castle Orthopedic Associates v. Burns, 481 Pa. 460, 464, 392 A.2d 1383, 1385 (1978). These requisite elements “are cumulative, and if one element is lacking, relief may not be granted.” Norristown Municipal Waste Auth. v. West Norriton Township Municipal Auth., 705 A.2d 509, 512 (Pa. Commw. 1998).

II. Wurtzel’s Right to Relief for an Actionable Wrong Is Clear

A. The Impending Merger Is Illegal Because Two-Thirds of the Partnership Interests Did Not Consent to the Merger

Wurtzel argues that his right to relief is clear because a supermajority of the partners did not agree to the merger. The court agrees. In 1996, the partnership amended the agreement to add a new section 5.8. Exhibits P-11 and D-D, amendment §5.8. Section 5.8(c) requires that the general partner and a two-thirds interest of the limited and general partners consent to any action by the general partner “[clausing the partnership to consolidate, merge or enter into any form of consolidation with or into any other entity or to convey, transfer or lease its assets substantially as an entirety to any person or entity except to a bona fide purchaser for cash consideration.” Exhibit P-11. Therefore, the proposed merger requires the consent of PTP and a two-thirds supermajority of the partnership interests. PTP did not get the consent of the two-thirds of the partnership interests, and a merger without that consent is illegal.

1. The bona fide purchaser exception in section 5.8(c) does not apply to mergers

The defendants’ first argument is that the supermajority requirement for this merger does not apply because the merger is a sale or transfer to a bona fide purchaser for cash consideration. The court disagrees. Section 5.8(c) deals with two classes of transactions: (1) mergers and consolidations, and (2) conveyances, transfers and leases of assets. The only reasonable reading of the bona fide purchaser exception to section 5.8(c) is that the exception applies only to conveyances, transfers and leases of assets, and not to mergers and consolidations. Any other reading would make no sense: the partnership cannot “consolidate, merge or enter into any form of consolidation ... to a bona fide purchaser.”

Even were the bona fide purchaser exception applicable to mergers, the exception could not apply here. The defendants do not identify the purchaser and the cash consideration. The AIMCO units being offered as consideration are not cash. But even assuming the Transitory Company or AIMCO is the purchaser and the $81,442 per share the cash consideration, the purchase is not bona fide. Whatever “bona fide purchaser for cash consideration” means in section 5.8, it must at least mean an outsider dealing at arms-length with the partnership and with no notice of defects in the general partner’s authority. AIMCO and its wholly-owned transitory company are not outsiders. AIMCO admitted in its merger information statement that it “determined the terms of the merger, including the amount of consideration to be paid to [the limited partners] in the merger, without arms-length negotiations.” Exhibit D-ll, information statement at 12. And AIMCO knew of the failure to comply with the supermajority provision.

2. The defendants cannot eliminate the supermajority provision without the consent of partners holding two-thirds of the partnership interests

The defendants’ second argument is that the court should ignore the supermajority requirement because AIMCO, as the holder of the majority of the partnership interests, could simply amend the agreement to eliminate the supermajority requirement. Therefore, they argue that equitable enforcement of section 5.8(c) would be fruitless. See Virginian Ry. Co. v. System Fed’n No. 40, 300 U.S. 515, 550 (1937) (“[A] court of equity may refuse to give any relief when it is apparent that that which it can give will not be effective or of benefit to the plaintiff.”). The court disagrees. The simple response to this argument is that, even if AIMCO can amend the agreement, it has not done so. Section 5.8(c) is still effective, and the defendants must abide by it. More fundamentally, the court holds that the amendment of the supermajority voting provision requires the approval of a like supermajority of the partners. With only 58 percent of the interest, AIMCO cannot eliminate a 75 percent supermajority requirement by itself.

There seem to be no published decisions in Delaware addressing amendment of a supermajority voting provision in a limited partnership agreement. The Delaware corporation code requires a supermajority vote to amend a supermajority provision in a corporate charter. 8 Del.C. §242(b)(4). Section 242(b)(4) codified a common-law rule first expressed in Sellers v. Joseph Bancroft & Sons Co., 2 A.2d 108, 111-12 (Del. Ch. 1938). In Sellers, the corporation’s charter required a 75 percent or 100 percent vote to amend certain rights of holders of preferred shares, including voting rights. The charter did not expressly require a supermajority vote to amend those rights. The company’s shareholders tried to reduce the 75 percent and 100 percent requirements to 60 percent and 65 percent respectively through a charter amendment at the annual shareholders meeting. The shareholders approved the amendment by a 55 percent vote of the preferred shares. The plaintiff challenged the amendment. The defendant argued that a simple majority vote was sufficient to eliminate the supermajority provisions. The court rejected this argument as “quite contrary to the evident purpose of the percentage provisions. If it be permissible, the protection to the preferred stockholders who invested their money on the faith of those percentage safeguards, was utterly illusory.” Sellers, 2 A.2d at 112. The court voided the amendment.

In Centaur Partners IV v. National Intergroup Inc., 582 A.2d 923, 929 (Del. 1990), the court held that amendment of supermajority provisions in a corporation’s shareholder-adopted charter and bylaws by less than a like supermajority would “completely abrogate[ ] the intention of the stockholders who adopted those provisions ....”

The court predicts that Delaware courts would apply the Sellers/Centaur Partners rule to a supermajority provision in a limited partnership agreement. The obvious purpose of section 5.8 was to give the limited partners greater approval rights over certain extraordinary partnership transactions. Allowing the defendants to circumvent these clear rights by a simple majority amendment would render section 5.8 illusory. The court cannot hold that the limited partners intended to adopt a provision that, as the defendants argue, would for practical purposes be unenforceable. Sonitrol Holding Co. v. Marceau Investissements, 607 A.2d 1177, 1184 (Del. 1992) (“The cardinal rule of contract construction is that, where possible, a court should give effect to all contract provisions.”). Therefore, partners with two-thirds of the partnership interests must consent to an amendment of section 5.8(c). The defendants cannot get that consent without a vote of the limited partners, and merger without consent would not be legal.

B. PTP Breached Its Fiduciary Duties to the Limited Partners By Misrepresenting to Them That AIMCO and PTP Alone Could Approve the Merger

Though the record might support other breaches of fiduciary duty, the court need now only find one to support the injunction order: PTP breached its fiduciary duty of full and fair disclosure to the limited partners by not informing them that they could vote on the merger.

Corporate directors owe a fiduciary duty to their shareholders to disclose fully all facts material to the transaction in an atmosphere of entire fairness. Smith v. Van Gorkom, 488 A.2d 858, 890 (Del. 1985); Eisenberg v. Chicago Milwaukee Corp., 537 A.2d 1051, 1057 (Del. Ch. 1987). A fact is material if the plaintiff shows a “substantial likelihood that under all circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder.” Id. A corporate general partner owes a fiduciary duty to limited partners of the limited partnership of which it is a general partner. Gotham Partners L.P. v. Hallwood Realty Partners L.P., 2000 WL 1476663 at *20 (Del. Ch.). Because the relationship between general partners and limited partners is similar to the relationship between directors and shareholders, general fiduciary principles for directors apply to general partners. Cincinatti Bell Cellular Sys. Co. v. Ameritech Mobile Phone Serv. of Cincinatti Inc., 1996 WL 506906 at * 12 (Del. Ch.), aff’d, 692 A.2d 411 (Del. 1997); Litman v. Prudential-Bache Properties Inc., 611 A.2d 12, 15 (Del. Ch. 1992). Thus, a general partner has a like duty of full and fair disclosure.

Wurtzel has shown that PTP omitted a material fact from the May 29, 2001 letter. In the letter, PTP represented to the limited partners that it could effect the merger without a vote of the limited partners. This was untrue. While PTP told the limited partners that their only choices were tendering their partnership units for cash or tendering them for AIMCO units, the limited partners had an undisclosed third choice: keeping their partnership units pending a vote on the merger. There is a substantial likelihood that the omitted fact would have had actual significance in a reasonable limited partner’s decision to tender partnership units. PTP’s omission of this material fact violated its fiduciary duty.

III. The Deprivation ofWurtzel’s Right To Vote on the Merger Is Irreparable Harm

Wurtzel has clearly shown that the defendants proposed merger would deprive him of his right as a limited partner to vote on the merger. Though Delaware law governs those rights, Pennsylvania law governs whether a deprivation of those rights constitutes an immediate and irreparable harm issue. There seems to be no published opinion by a Pennsylvania appellate-level state court addressing the issue. Under Delaware law, however, the deprivation of a shareholder’s right to vote is irreparable harm. R.D. Hubbard v. Hollywood Park Realty Enters., 1991 WL 3151 at *5 (Del. Ch.) (holding that board’s “thwarting shareholders’ voting rights” to choose a board of directors constituted irreparable harm); Mariner LDC v. Stone Container Corp., 729 A.2d 267, 279 (Del. Ch. 1998) (stating in dicta that deprivation of the claimed right to vote on a merger cannot be remedied once the merger has been accomplished). This rationale is consistent with decisions in Delaware enjoining companies to make full and fair disclosures to allow shareholders to make informed and uncoerced decisions between two alternatives. Eisenberg v. Chicago Milwaukee Corp., 537 A.2d 1051, 1062 (Del. Ch. 1987) (enjoining tender offer because directors did not adequately disclose terms); Sealy Mattress Co. of N.J. v. Sealy Inc., 532 A.2d 1324, 1340-41 (Del. Ch. 1987) (enjoining cash-out merger because “plaintiffs have not received sufficient information to make an informed decision among the available alternatives .... In this case the inability to make that choice constitutes irreparable harm. . . In re Anderson Clayton Shareholders’ Litig., 519 A.2d 669, 677, 679 (Del. Ch. 1986) (enjoining recapitalization plan where shareholder vote approving that plan did not accurately reflect shareholders’ choice because the shareholders based their vote on inaccurate and misleading disclosures by directors); Joseph v. Shell Oil, 482 A.2d 335, 344 (Del. Ch. 1984) (enjoining tender offer because permitting minority shareholders to tender their share without full disclosure of terms of offer “might forever deny to those tendering stockholders their right to be treated fairly”). See also, In re Western Nat’l Shareholders Litig., 1998 WL 51733 at *1-2 (Del. Ch.) (holding that the focus of irreparable harm determination in Eisenberg, Andersen and Joseph was whether the inadequate disclosure rendered the shareholder’s vote an inadequate expression of his choice). Because Delaware law governs the right deprived, and because general principles of corporation law define the duties that a general partner owes to limited partners, the court finds these Delaware corporation cases persuasive. If equity will bar a company from forcing a shareholder to make an uninformed vote, then equity will certainly bar the company from preventing the shareholder from voting at all.

Defendants are wrong in arguing that this case is only about money. Had the defendants gotten the supermajority consent of the partners after fully and fairly disclosing the terms of the merger, but paid an unfair price, damages would be an adequate remedy for Wurtzel. See Kohls v. Duthie, 765 A.2d 1274, 1289 (Del. Ch. 2000) (“Because I cannot now conclude that they are being asked to make decisions regarding the transaction on the basis of improper disclosures, there is no irreparable harm in putting them to the decision of how to respond to the proposed transaction.”). Wurtzel has shown that the defendants have done more than simply pay a low price. They have deprived Wurtzel of his right to vote on the merger and they have coerced the limited partners to tender their partnership interests based on a misrepresentation that the merger could occur without a vote of the limited partners. Their actions threaten imminent irreparable harm that damages will not compensate.

IV. An Injunction Barring the Defendant From Buying Other Limited Partners’ Shares and From Undertaking the Merger Will Preserve the Status Quo and Will Be Reasonably Suited To Abate the Defendants’ Wrongs

In granting a preliminary injunction, a court must “preserve the status quo, as it exists or previously existed before the acts complained of..." Smotkin v. Manhattan-Ward Inc., 363 Pa. Super. 597, 600, 526 A.2d 1223, 1224 (1987). Furthermore, a preliminary injunction must be reasonably suited to abate the wrong. School Dist. of Wilkinsburg v. Wilkinsburg Education Ass’n, 542 Pa. 335, 338 n.2, 667 A.2d 5, 6 n.2 (1995). These two tests require the court to decide exactly what conduct to enjoin.

Wurtzel asks the court to continue the relief granted in the TRO by enjoining the defendants from engaging in “any transaction which would limit, transfer, assign or extinguish the rights of any limited partner in [the partnership], including but not limited to the contemplated merger of [the transitory company] with and into the partnership.” Plaintiff’s proposed order at 2. The court interprets this as a request to enjoin the merger and to enjoin the defendants from buying the limited partners’ partnership units. The court will grant this relief.

The defendants plan to merge without the required consent of the partners. By sending out an information statement misrepresenting that the minority limited partners had no choice in the matter, the defendants have coerced the minority limited partners to surrender their partnership interests. A preliminary injunction barring the illegal merger and barring the defendants from further purchasing the limited partners’ interests is reasonably suited to abate these harms. Such an injunction will preserve the status quo by preventing the defendants from buying limited partnership interests and from carrying out the merger.

Wurtzel’s request for a TRO, which the court granted, sought prospective relief only. Likewise, the proposed injunction order and petition seek prospective relief. Wurtzel has not expressly asked the court to undo any pre-TRO transfers of partnership units and Wurtzel does not propose how the court would do so. Therefore, the order will merely continue the relief granted by the TRO.

The court makes no decision as to the effect of pre-TRO transfers or whether AIMCO may exercise rights coincident with partnership interests that it bought from May 29 to June 28,2001. But, see Continental Ins. Co. v. Rutledge & Co., 750 A.2d 1219, 1239 (Del. Ch. 2000) (“In Delaware, it remains a fundamental principal that a disloyal fiduciary may not profit from his breach.”). There is evidence that AIMCO continued to purchase partnership units after June 28, 2001, in violation of the TRO. That evidence is not clear, and the court makes no decision as to the effect of any partnership unit transfers undertaken in violation of the TRO. If future evidence shows that the defendants violated the TRO, the court will grant appropriate relief as necessary.

V. Refusing the Injunction Would Cause Greater Injury Than Denying the Injunction

Wurtzel must show that there would be greater injury resulting from denying the injunction than from grantingit. DiLucente Corp. v. Pennsylvania Roofing Co. Inc., 440 Pa. Super. 450, 456, 655 A.2d 1035, 1037 (1995).

The defendants argue that enjoining the merger will •cause the partnership to continue to bear expenses disproportionate to the number of partners. The defendants have produced no evidence of this harm. In any event, the alleged harm is monetary. The defendants argue that enjoining the merger will prevent other limited partners from receiving cash or AIMCO units for an illiquid investment. See Kohls v. Duthie, 765 A.2d 1274, 1289 (Del. Ch. 2000) (“This court is understandably cautious when the issuance of an injunction ‘would deprive . . . shareholders of the benefits of [a] merger transaction without offering them any realistic prospect of a superior alternative, or for that matter, any alternative.’ ”). Though this harm is compelling, it is not imminent. The suitor, AIMCO, is an insider that is not likely to go away. Preliminarily enjoining the merger will not prevent AIMCO from trying the merger if the court later vacates the injunction. On the other hand, allowing the merger to take place will definitely deprive Wurtzel and the other minority limited partners of their right to approve or disapprove the merger — a harm that is imminent and not reparable by damages.

CONCLUSIONS OF LAW

(1) The general partner and two-thirds of the interests of the limited partners and general partner must consent to the merger.

(2) A merger without the two-third consent would violate the partnership agreement.

(3) PTP had a fiduciary duty to disclose to the limited partners that the merger required the consent of two-thirds of the interests of the limited partners and general partner.

(4) Wurtzel has a clear right to relief on his claim that the partnership and PTP breached the partnership agreement by failing to obtain the required supermajority approval.

(5) Wurtzel has clear right to relief on his claim that the PTP breached its fiduciary duty to the limited partners by misrepresenting that the merger could take place with the consent of only AIMCO and PTP.

(6) The threat that the defendants will deprive Wurtzel of his right to vote on the merger and coerce the limited partners to tender their partnership interests based on a misrepresentation that they had no voting rights is an imminent irreparable harm for which damages are not an adequate remedy.

(7) Preliminarily enjoining the defendants from undertaking the illegal merger and from purchasing limited partners’ shares would preserve the status quo.

(8) Greater injury will occur from refusing the injunction than from granting it.

(9) A preliminary injunction barring the illegal merger and barring the defendants from purchasing limited partners’ units will be reasonably suited to abate the defendants’ wrongs.

CONCLUSION

On the basis of the record, the court will enter a contemporaneous order preliminarily enjoining the defendants from undertaking the illegal merger and purchasing limited partners’ units.

ORDER

And now, September 11, 2001, on consideration of the plaintiff’s petition for a preliminary injunction, the defendants’ response, the oral argument and all relevant documentation, and in accordance with the court’s contemporaneously-filed opinion, it is hereby ordered that

(1) The petition is granted;

(2) The defendants are preliminarily enjoined from purchasing limited partnership units from the limited partners of defendant Park Towne Place Associates Limited Partnership;

(3) The defendants are preliminarily enjoined from undertaking the announced merger of defendant Park Towne Place Associates Limited Partnership with Park Towne Place Transitory Company LLC; and

(4) The plaintiff shall post a bond of $10,000 in accordance with Pa.R.C.P. 1531(b) within 10 days of the entry of this order.

      . The partnership agreement expressly authorizes disposing of the partnership units of an unwilling partner in only three ways: (1) buying the units of a limited partner who defaults on a capital contribution, (2) buying the units of a general partner who is removed, and (3) distributing assets to all partners upon the sale of all or substantially all of the partnership assets or upon any other event triggering dissolution of the partnership. Agreement §§2.5, 4.2, 5.5 and 9.3. See also, n.10, infra. In all three situations, the amount paid to the partner is based on the fair market value of the partner’s interests. Nonetheless, PTP, as general partner, consented to a merger forcing the limited partners to sell their shares at liquidation value.

      . The original agreement did not expressly set forth limited partners’ rights in the case of a merger of the partnership. Where a limited partnership does not address the approval of a merger, a merger requires the consent of all general partners and the consent of the limited partners with a simple majority of the interest in profits. 6 Del.C. §17-211(b).

      . The version of section 5.8 in the defendants’ exhibits, which is undated and not signed by all parties, sets the voting requirement at “66_percent:” the scrivener seems to have left a space for a fraction to be inserted at a later date. Exhibit D-D; exhibit D-5. The version of section 5.8 in Wurtzel’s exhibits, which is undated but signed by all parties, sets the voting requirement as “66 2/3 percent.” Petition, exhibit 1; exhibit P-11. As the defendants have admitted in a brief that 66 2/3 percent is the correct percentage, the court finds that 66 2/3 percent is the percentage that the limited partners ultimately agreed upon. Memorandum of defendants in opposition to plaintiff’s petition for a preliminary injunction at 5 n.2, 7/27/01.

      . It is difficult to shoehorn the concept of bona fide purchaser into a determination of whether the limited partners must approve a merger. A bona fide purchaser is one who has given value for property in good faith and without notice of defects in the vendor’s title to the property. See Haas v. Haas, 119 A.2d 358, 363 (Del. Ch. 1955); see also, 6 Del.C. §3-302 (defining holder in due course) and 6 Del.C. §1-201(9) (defining buyer in the ordinary course of business). Generally, a purchaser invokes the bona fide purchaser doctrine to shield itself from a claim that a third party has against the vendor after the vendor has transferred the property to the purchaser. 6 Del.C. §2-403 (rights of good faith purchasers of goods); 6 Del.C. §3-305(b) (rights of a holder in due course); 6 Del.C. §9-320(a) (2001 revision) (rights of a buyer in the ordinary course of business). But here the vendor, i.e., the general partner acting for the partnership, has invoked the bona fide purchaser exception to shield itself from claims before any transfer has occurred.

      . The agreement provides that it can be amended in most cases by simple majority vote. This amendment procedure is a permissible deviation from the statutory default rule for limited partnership agreements, which requires a unanimous vote to amend the partnership agreement. 6 Del.C. §17-302(f).

      . The partnership adopted that requirement as a condition for obtaining financing. Exhibit D-E. The court notes that defendants’ allegation that they would eliminate that provision is somewhat suspect, since revoking it might breach the financing agreement.

      . Section 242(b)(2) reads as follows:
      “Whenever the certificate of incorporation shall require for action by the board of directors, by the holders of any class or series of shares or by the holders of any other securities having voting power the vote of a greater number or proportion than is required by any section of this title, the provision of the certificate of incorporation requiring such greater vote shall not be altered, amended or repealed except by such greater vote.” 8 Del.C. §242(b)(4).

      . Along with considering the shareholders’ intent, as the chancery court did in Sellers court did, the Supreme Court in Centaur Partners reached its conclusion by balancing competing policies. Centaur Partners, 582 A.2d at 927. On the one hand, supermajority provisions have the positive effect of protecting minority shareholders from oppression. Id. at 927-28. On the other hand, unless otherwise provided for, amendment of corporate charters, like other shareholder action, is generally by majority vote. 8 Del.C. §242(b)(l). Supermajority voting provisions have the negative effect of giving “minority shareholders the power to veto the will of the majority, effectively disenfranchising the majority.” Centaur Partners IV, 582 A.2d at 927. Balancing these competing policies, courts have enforced supermajority voting requirements in corporate charters and bylaws only where the provisions are “clear and unambiguous.” Id. These policies would apply equally in (he context of this limited partnership, and balancing the policies would yield the same result as in Sellers and Centaur Partners.

      . Citing Frankino v. Gleason, 1999 WL 1032773 at *4 (Del. Ch.), aff’d sub nom., McNamara v. Frankino, 744 A.2d 988 (Del. 1999), the defendants argue that the court should not extend Sellers to limited partnership agreements. In Frankino, the court held that approval by a simple majority of shareholders was sufficient to amend a supermajority voting requirement in a corporation’s director-approved bylaws. Id. at *4. The court distinguished Sellers and Centaur Partners as limited to amendments of shareholder-approved charters and bylaws. Id. at *4-5. Because the defendants want to amend a limited-partner-adopted limited partnership agreement, Sellers and Centaur Partners, not Frankino, are the more persuasive cases.

      . In light of this holding, the court does not now decide whether the general partner could have forced unwilling limited partners to sell their interests even had a supermajority of partners approved the merger. Section 2.4 of the agreement specifically bars the general partner from authorizing the purchase, cancellation or disposal of partnership units except as expressly provided for in the agreement. Section 5.8 specifically authorizes mergers, but does not specifically authorize mergers entailing purchases of partnership interests from unwilling partners. No other provision in the agreement expressly authorizes such a cash-out merger. See agreement §4.2 (authorizing partnership to purchase limited partner’s interest at fair market value on limited partner’s default in making his capital contributions); agreement §§2.5, 9.3 (requiring distribution of assets at fair market value on the sale of all or substantially all of the partnership assets or other event triggering the dissolution of the partnership); agreement §5.5 (giving the limited partners the option to buy the interest of a general partner at fair market value if the general partner is removed); and agreement §7.1 (allowing a limited partner to voluntarily transfer his interests only with the general partner’s approval). And the court does not decide whether the defendants could amend section 2.4 by a simple majority vote. Compare section 5.5(h) (requiring a simple majority vote to amend the agreement) with 11.13(A) (requiring unanimous written consent to amend the limited partners’ distribution rights).

      . In support of his petition, Wurtzel has produced evidence that PTP breached its fiduciary duties to the limited partners by paying excessive management fees to its affiliate, failing to make distributions, informing the limited partners that prior tender offers by AIMCO were fair, misrepresenting that there were no merger plans when AIMCO made the prior tender offers, and approving the merger at an unfair price. The court does not address these claims. If Wurtzel succeeds on them, damages will be an adequate remedy.

      . Unless expanded or limited by the partnership agreement, the general partner has the fiduciary duty to manage the partnership in its interest and in the interests of the limited partners. 6 Del.C. §17-1101(d). Sonet v. Timber Co. L.P., 722 A.2d 319, 322 (Del. Ch. 1998). There is nothing in the partnership agreement that would negate PTP’s duty to fully and fairly disclose material information concerning the merger. Section 5.4 of the agreement allows PTP to perform any act if it determines in good faith that the act is in the best interests of the partnership and that the act does not constitute negligence or misconduct. Section 5.4 does not apply because PTP cannot have determined in good faith that a merger without the required supermajority consent would be legal. The court also rejects the defendants’ argument that section 5.7, which authorizes the general partner to engage in competing business ventures outside the partnership, abrogates any prohibition against self-dealing within the partnership. Continental Ins. Co. v. Rutledge & Co., 750 A.2d 1219, 1236-37 (Del. Ch. 2000) (holding that the plain meaning of a substantially similar provision was to permit the general partners to engage in competing business activities outside of the partnership, not to alter the general partner’s fiduciary duty to refrain from self-dealing).

      . Wurtzel asserts several other sources of irreparable harm, including (1) the merger will cause Wurtzel to lose his standing to assert a derivative claim, (2) the merger will cause Wurtzel to lose his rights as a limited partner, and (3) the limited partnership interest is an investment in real estate and thus is unique. These asserted harms would likely not support granting an injunction. See Kohls v. Duthie, 765 A.2d 1274, 1289 (Del. Ch. 2000) (holding under Delaware law that loss of standing to make a derivative claim is not irreparable harm); Scattergood v. Perelman, 1990 WL 72801 at *4 (E.D. Pa. 1990) (holding that deprivation of the future value of stock is not irreparable harm); 6 Del.C. §17-701 (“A partnership interest is personal property. A partner has no interest in specific limited partnership property.”). But the court need not address that issue because loss of the right to vote on the merger is irreparable harm.

      . According to AJMCO’s vice president, Dora Chi, about 30 limited partners had elected as of My 27, 2001 to trade their partnership units for AIMCO units, and 50 had elected to receive cash. One limited partner had elected to invoke appraisal rights, and two had entered into separate purchase agreements with AIMCO. Not all partners had made an election. Exhibit D-H, Chi aff. ¶¶6-9. Chi’s affidavit does not disclose if and when AIMCO completed these transactions, but there is evidence that AIMCO continued to buy partnership units after the court’s Mie 28, 2001 TRO restrained the defendants from making any transactions that would limit, transfer, assign or extinguish the rights of any limited partner. Exhibit P-24, list of partners who opted to receive cash or AIMCO units; exhibit P-10, Foye dep. at 114.

      . In her affidavit, AIMCO Vice President Dora Chi averred “that the annual maintenance costs for the partnership in its current form are approximately $360,000.” Chi aff. ¶4. Since Chi did not aver the amount of the maintenance costs for the partnership in its merged form, the court cannot find that any savings would result from the merger.


source: Caselaw Access Project

author: KISTLER, J.,

license: Public Domain

text:
    Tompkins v. VanOrden

      C.P. of Centre County,
    no. 2000-2410.

      Joseph F. Orso III, for plaintiffs.

      Mary Lou Maierhofer, for defendants.
    July 8, 2003
   KISTLER, J.,

Presently before the court for consideration is plaintiffs’, Betsy and Howard Tompkins, motion in limine seeking to exclude from evidence a video surveillance tape produced by a private investigator hired by defendants.

PROCEDURAL BACKGROUND

(1) On October 4, 2002, plaintiffs Betsy and Howard Tompkins initiated the instant civil action at law by filing a complaint against defendants in the Court of Common Pleas of Centre County.

(2) In the complaint, Betsy Tompkins is seeking damages for “severe personal injuries” suffered as a result of an automobile accident with a vehicle driven by William VanOrden Jr.

(3) On May 7,2003, plaintiffs filed the instant motion in limine seeking to exclude, at trial, surveillance tapes of Betsy Tompkins produced by a private investigator.

(4) As argument has been heard and briefs have been received by both parties, the court is prepared to render its decision.

CONCLUSIONS OF LAW

(1) “ ‘Relevant evidence’ means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” Pa.R.E. 401.

(2) All relevant evidence is admissible except as otherwise provided by law. Pa.R.E. 402.

(3) Clearly, a defendant’s videotaped surveillance of a plaintiff, who claims to have been injured as a result of the defendant’s negligence, is “relevant” to the subject matter of the lawsuit. Dominick v. Hanson, 753 A.2d 824 (Pa. Super. 2000).

DISCUSSION

Plaintiffs maintain that the video surveillance tape made of Betsy Tompkins at her personal residence in Clinton County, Pennsylvania, must be excluded from evidence at trial on this matter. Plaintiffs contend that the private investigator, Brandon McHenry, who was hired by defendants, trespassed on plaintiffs’ private property in order to produce this video surveillance tape. Plaintiffs request that this court “enter an order precluding the introduction of the surveillance tapes of plaintiff Betsy Tompkins at her residence and any testimony from the investigator and/or other expert witnesses regarding the contents of the videotapes.” (Motion in limine, ¶7.) The court does not agree that exclusion of this videotape is required under current law.

Initially, there exist no constitutional barriers prohibiting the introduction of this video surveillance tape simply because the private detective may have been on private property. “The Fourth Amendment proscribes only governmental action; it is wholly inapplicable to a search or seizure, even an unreasonable one, effected by a private individual not acting as an agent of the government or with the participation or knowledge of any governmental official.” Commonwealth v. Ellis, 415 Pa. Super. 220, 223, 608 A.2d 1090, 1091 (1992). (emphasis added) The exclusionary rule does not apply to evidence obtained by a private citizen not acting on behalf of the government. Commonwealth v. Dingfelt, 227 Pa. Super. 380, 323 A.2d 145 (1974). Furthermore, Pennsylvania courts have consistently held that evidence, even if obtained in violation of a person’s constitutional rights, is admissible in a proceeding that is civil in nature. See Commonwealth ex rel. Young v. Young, 213 Pa. Super. 515, 247 A.2d 659 (1968) (Evidence obtained by husband and private detective, as to wife’s alleged adultery, even if obtained in violation of wife’s constitutional rights, was admissible in support of husband’s motion to vacate support order.); Levan v. Commonwealth of Pennsylvania Game Commission, 59 Pa. Commw. 348, 429 A.2d 1241 (1981). (Even if hunter was unfairly influenced in violation of his Fifth Amendment rights protecting him against self-incrimination . . . nature of defect would be in determination of guilt relative to violation of Game Law, criminal proceeding, and could not subsequently be attacked relative to revocation of licensed privileges, which is civil in nature.) It is undisputed that the private investigator in the instant matter was not acting on behalf of a government agency which would trigger the protections of the Fourth Amendment. Similarly, it is undisputed that the instant proceeding is civil in nature which negates the exclusion of evidence obtained in violation of another’s constitutional rights.

Next, there are no statutory provisions enacted by the legislature prohibiting the introduction of this video surveillance tape simply because the private detective may have been on private property. The Pennsylvania Wiretapping and Electronic Surveillance Act, 18 Pa.C.S. §5701 et seq., does provide a statutory exclusionary rule for any proceeding where a violation of this Act is present. See 18 Pa.C.S. §5721.1(b). However, plaintiff does not assert that the private detective’s actions violated the Act, nor are the provisions of the Act applicable in the instant matter. The Act proscribes intercepting... any wire, electronic, or oral communication. 18 Pa.C.S. §5703(1-3). The videotape surveillance in the instant matter did not intercept wire, electronic, or oral communications of Betsy Tompkins.

Finally, plaintiffs have failed to cite any common law in support of their contentions. The court notes that plaintiffs have failed to provide any case law in their brief holding that the arguments presented have any bearing on the admissibility of evidence.

For these reasons, the court determines that the video surveillance tape is admissible at trial on this matter and plaintiffs’ motion in limine must be denied. Clearly, a defendant’s videotaped surveillance of a plaintiff, who claims to have been injured as a result of the defendant’s negligence, is “relevant” to the subject matter of the lawsuit. Hanson, 753 A.2d 824 (Pa. Super. 2000). The arguments presented by plaintiffs may be the basis for a possible separate civil action for invasion of privacy against the private detective but they do not provide guidance as to the admissibility of such evidence at a civil trial for damages as a result of personal injury.

ORDER

And now, July 8, 2003, after hearing oral argument and considering briefs filed by both parties, it is the order of this court that plaintiffs’, Betsy Tompkins and Harold Tompkins, motion in limine is hereby denied.


author: NANOVIC, J.,

text:
    Van Horn v. Reinhart Flynn Inc.

      C.P. of Carbon County,
    no. 01-1794.

      Charles Shaffer, for plaintiffs.

      Dennis P. Herbert, for defendant Reinhart Flynn Inc.

      John W. Stahl, for the Commonwealth.

      Michael J. O’Malley, for defendant General Motors Corporation.
    July 23, 2003
   NANOVIC, J.,

Plaintiffs are David A. Van Horn and Betty Lou Van Horn, his wife. On August 29, 1999, Mr. Van Horn sustained serious physical injuries in a one-vehicle motor vehicle accident. At the time, Mr. Van Horn was test driving a 1996 Chevrolet Tahoe owned by the defendant, Reinhart Flynn Inc., d/b/a Reinhart Ford, in a northbound direction on S.R. 2001 (locally known as Forest Inn Road). Forest Inn Road is a state highway maintained by the defendant, Commonwealth of Pennsylvania, Department of Transportation.

The Van Homs claim that the cmise control on the vehicle failed to disengage when Mr. Van Horn braked while rounding a left-hand curve in the road. In consequence, Mr. Van Horn was unable to complete the left turn in the road, lost control, and traveled across the east berm of the road down an embankment and into an open drainage ditch where the vehicle eventually stmck the end of a metal storm drainage pipe. This pipe, and most of the drainage ditch leading away from it, are located outside of PennDQT’s right-of-way.

Suit was commenced, by complaint, on August 1,2001, against Reinhart and PennDOT. Plaintiffs’ claim against Reinhart is premised on principles of strict liability and negligence. Plaintiffs claim the vehicle was defective and unreasonably dangerous due to the alleged malfunction of the cmise control and the failure of the cmise control to disengage when Mr. Van Horn applied the brakes. (Count I — strict liability.) Plaintiffs further claim that Reinhart supplied the vehicle to Mr. Van Horn at a time when it knew or should have known of the vehicle’s unreasonably dangerous condition, and failed to warn of or correct this dangerous condition. (Count II — negligence.) Reinhart is a merchant engaged in the business of selling and supplying new and used motor vehicles for use by the public. Mr. Van Horn was test driving the vehicle as a prospective purchaser.

Liability against PennDOT is asserted on the theory that Forest Inn Road, at the location of the accident, was unreasonably dangerous as a result of “the curve to the left, adjacent to a steep-sided drainage ditch leading to an unyielding open metal culvert which terminated in a metal storm drain.” (Amended complaint, ¶22.)

Reinhart joined General Motors Corporation, the manufacturer of the vehicle, as an additional defendant.

Both defendants and the additional defendant have moved for summary judgment. Summary judgment is appropriate when, after examining the record in the light most favorable to the non-moving party, there is no genuine issue of material fact, and the moving party clearly establishes that he is entitled to judgment as a matter of law. Pa.R.C.P. 1035.2(1). Summary judgment is also appropriate where the party who bears the burden of proof has failed to produce facts essential to establish a prima facie case prior to trial. Pa.R.C.P. 1035.2(2). See also, Troup v. Tri-County Confinement Systems Inc., 708 A.2d 825, 826 (Pa. Super. 1998).

I. MOTION FOR SUMMARY JUDGMENT BY PennDOT (SOVEREIGN IMMUNITY)

PennDOT claims that the Sovereign Immunity Act, 42 Pa.C.S. §§8521-8528, protects it from plaintiffs’ claim.

“The Act provides that sovereign immunity is only waived for damages arising out of a negligent act where the common law or a statute would permit recovery if the injury were caused by a person not protected by sovereign immunity. 42 Pa.C.S. §8522(a). In order for the Commonwealth to be found liable, a plaintiff must also establish that the cause of action falls under one of the specifically enumerated exceptions to immunity. 42 Pa.C.S. §8522(b). Because of the clear intent to insulate government from exposure to tort liability, the exceptions to immunity are to be strictly construed. Kiley v. City of Philadelphia, 537 Pa. 502, 645 A.2d 184, 185-86 (1994).” Dean v. PennDOT, 561 Pa. 503, 507-508, 751 A.2d 1130, 1132 (2000).

In this case, we must determine whether plaintiffs’ claim is actionable under the real estate exception to sovereign immunity, the only potentially relevant exception to this claim. The real estate exception states that liability may be imposed on the Commonwealth for damages caused by “[a] dangerous condition of Commonwealth agency real estate ... including ... highways under the jurisdiction of a Commonwealth agency.” 42 Pa.C.S. §8522(b)(4). In order for the real estate exception to apply, “a claim . . . must allege that the dangerous condition 'derive[d], originiate[d], or ha[d] as its source the Commonwealth realty’ itself.” Jones v. SEPTA, 565 Pa. 211, 225, 772 A.2d 435, 443 (2001) (quoting Snyder v. Harmon, 522 Pa. 424, 433, 562 A.2d 307, 311 (1989)). Further, the Commonwealth may not raise sovereign immunity as a defense “when a plaintiff alleges, for example, that a substance or an object on Commonwealth realty was the result of a defect in the property or in its construction, maintenance, repair, or design.” Id. at 225, 772 A.2d at 443-44. (footnote omitted)

The real estate exception is inapplicable to plaintiffs’ claim. PennDOT has no duty to guard against dangerous conditions off the highway. Yet, this is the essence of plaintiffs’ claim: an alleged dangerous condition arising out of the location and configuration of the road in relation to the adjacent embankment, drainage ditch and metal pipe.

In Dean, our Supreme Court held that “the absence of a guardrail cannot be said to be a dangerous condition of the real estate that resulted in a reasonably foreseeable injury to [plaintiff]. Stated differently, the lack of a guardrail does not render the highway unsafe for the purposes for which it was intended, i.e., travel on the roadway.” Dean, 561 Pa, at 511, 751 A.2d at 1134. (footnote omitted) “The Commonwealth ... is not a guarantor of the safety of the highway, but is only exposed to liability for dangerous conditions thereof.” Id. at 512 n.8, 751 A.2d at 1134 n.8.

In Dean, the plaintiff “was injured while a passenger in a car that fishtailed on a snow covered roadway and traveled over a steep embankment, where it overturned. The plaintiff alleged the Department was negligent in failing to shield the steep embankment with a guardrail and in failing to properly design, construct and maintain a safe highway.” Piazza v. PennDOT, 786 A.2d 328, 330 (Pa. Commw. 2001), appeal denied, 568 Pa. 732, 798 A.2d 1294 (2002).

Plaintiffs’ argument before us is simply the converse of that made in Dean and is controlled by the reasoning of that decision. The injuries there, as here, occurred because the motor vehicle left the portion of the highway intended for travel. Where the claimed danger or defect does not arise out of the Commonwealth’s real estate, liability will not be imposed simply because the Commonwealth could have taken steps to improve its property so as to avoid or minimize injuries from dangers outside of the traveled portion of the road — in this case, on property owned by third parties. Dean, supra, 561 Pa. at 512, 751 A.2d at 1134; see also, Snyder v. Harmon, 522 Pa. 424, 435, 562 A.2d 307, 312 (1989). (“[T]he appellees next assert that the close proximity between L.R. 33060 and the deep chasm, and the unlit and deceptive appearance of the shoulder of the road presented an inherently dangerous condition. Thus, liability is not predicated on a defective condition on Commonwealth land, but rather the knowledge of an inherently dangerous condition contiguous with Commonwealth property which the Commonwealth knows or should reasonably know and takes no action to prevent any harm from occurring. While this theory appears attractive, it is not supported by any exception to our immunity statute.”)

Here, as in Dean, failure to erect a guardrail or to take other measures to reduce the likelihood of injury from a motor vehicle traveling off the portion of Forest Inn Road intended for travel did not create a dangerous condition of real estate for purposes of immunity. Plaintiffs’ allegations that PennDOT could have erected barriers or designed the road in such a way as to mitigate the effects of driving off the road does not alter the fact that the drainage ditch, open culvert and metal pipe cannot be considered to have “derived, originated, or had as [their] source” the highway itself.

In this case, as in Dean, the issue is not whether a dangerous condition exists — a question of fact for a jury, but whether PennDOT would be liable for it under the real estate exception to sovereign immunity. On this issue, a question of law, we conclude PennDOT is immune from plaintiffs’ claim and will grant the motion.

II. MOTION FOR SUMMARY JUDGMENT BY REINHART

Plaintiffs have neither secured an expert nor presented an expert’s report with respect to their products liability claims against Reinhart. In the absence of expert opinion testimony, Reinhart contends plaintiffs are unable and have failed to present a prima facie case of liability. In ruling on Reinhart’s motion for summary judgment on this basis, we must distinguish between the nature of plaintiffs’ claims for strict liability and negligence.

The cause of action in a negligence claim has been defined as “the negligent act or acts which occasioned the injury.” Saracina v. Cotoia, 417 Pa. 80, 85, 208 A.2d 764, 767 (1965). But, see Kuisis v. Baldwin-Lima-Hamilton Corp., 457 Pa. 321, 325 n.7, 319 A.2d 914, 918 n.7 (1974) (because the meaning varies with the circumstances, the Supreme Court has never adopted a comprehensive definition of what constitutes a “cause of action”). Inherent in this meaning is the standard of reasonableness by which a defendant’s conduct is to be measured.

In contrast, the cause of action under section 402A is the defect itself. Id. at 325, 319 A.2d at 918. “The ‘reasonable man’ standard in any form has no place in a strict liability case.” Berkebile v. Brantly Helicopter Corp., 462 Pa. 83, 96, 337 A.2d 893, 900 (1975). While the theory of liability as to how the accident occurred may be the same in both negligence and strict liability claims, the principle of strict liability simplifies plaintiff’s proof by eliminating the issue of negligence from the case. Kuisis, supra at 325, 319 A.2d at 918.

(a) Strict Liability

Malfunction Theory of Products Liability

The plaintiff in a strict product liability case has the burden of proving (1) that the product was defective; (2) that the defect was the proximate cause of his or her injuries; and (3) that the defect existed at the time the product left the manufacturer/seller. Ducko v. Chrysler Motors Corp., 433 Pa. Super. 47, 50, 639 A.2d 1204, 1205 (1994). “The questions when and where a defect originated should be left to the finder of fact so long as reasonable and well balanced minds [could] be satisfied from the evidence adduced that the defective condition existed when the machine was delivered.” Kuisis, supra at 334, 319 A.2d at 922. (citations and quotations marks omitted)

As to proof of a defect, the malfunction theory of products liability permits evidence of a malfunction — in the absence of abnormal use or reasonable, secondary causes for the malfunction — to be used as circumstantial evidence of a defective condition.

“Generally, a plaintiff will produce direct evidence of a product’s defective condition. In those cases where the plaintiff is unable to prove the precise nature of the product’s defect, however, he may, in some cases, rely on the ‘malfunction theory’ of product liability. Rogers v. Johnson & Johnson Products Inc., 523 Pa. 176, 182, 565 A.2d 751, 754 (1989).

“The malfunction theory allows the plaintiff to use circumstantial evidence to establish a defective product. In Rogers v. Johnson & Johnson Products Inc., supra, the court stated:

“[The malfunction theory] permits a plaintiff to prove a defect in a product with evidence of the occurrence of a malfunction and with evidence eliminating abnormal use or reasonable, secondary causes for the malfunction. [The plaintiff is relieved] from demonstrating precisely the defect yet it permits the trier-of-fact to infer one existed from evidence of the malfunction, of the absence of abnormal use and of the absence of reasonable, secondary causes.
“Id. (citations omitted) Although proof of a specific defect is not essential to establish liability under this theory, the plaintiff cannot depend upon conjecture or guesswork. ‘The mere fact that an accident happens, even in this enlightened age, does not take the injured plaintiff to the jury.’ Stein v. General Motors Corp., 58 D.&C.2d 193, 203 (Bucks 1972), aff’d, 222 Pa. Super. 751, 295 A.2d 111 (1972).
“Id., 427 Pa. Super. at 492, 629 A.2d at 975-76. The malfunction theory, thus, does not relieve the burden of establishing a defect. Harkins v. Calumet Realty Co., 418 Pa. Super. 405, 418, 614 A.2d 699, 706 (1992). See also, Sochanski v. Sears, Roebuck & Co., 689 F.2d 45, 50 (3d Cir. 1982). However, ‘[t]he malfunction itself is circumstantial evidence of a defective condition,...’ D’Antona v. Hampton Grinding Wheel Co. Inc., 225 Pa. Super. 120, 124, 310 A.2d 307, 309 (1973). When a party relies on the malfunction of a product to prove that it was defective, testimony identifying the exact nature of the alleged defect is not essential. ‘Although it is helpful for a plaintiff to have direct evidence of the defective condition which caused the injury or expert testimony to point to that specific defect, such evidence is not essential in a strict liability case based on section 402A [of the Restatements (Second) of Torts].’ Cornell Drilling Co. v. Ford Motor Co., 241 Pa. Super. 129, 136, 359 A.2d 822, 825 (1976). (emphasis in original)” Ducko v. Chrysler Motors Corp., 433 Pa. Super. at 50-51, 639 A.2d at 1205-1206. See also, MacDougall v. Ford Motor Co., 214 Pa. Super. 384, 391, 257 A.2d 676, 680 (1969) (“[T]he occurrence of a malfunction of machinery in the absence of abnormal use and reasonable secondary causes is evidence of a ‘defective condition’ within the meaning of section 402A . . . .”), implicitly overruled on other grounds by REM Coal Co. Inc. v. Clark Equipment Co., 386 Pa. Super. 401, 413 n.5, 563 A.2d 128, 134 n.5 (1989). Cf. Surowiec v. General Motors Corp., 448 Pa. Super. 510, 672 A.2d 333 (1996) (trial court’s improper exclusion of defendant’s evidence of plaintiff’s intoxication as cause of motor vehicle accident justified grant of new trial but not judgment n.o.v.).

The requirement that plaintiff negate reasonable, secondary causes applies to the evidence presented in plaintiff’s case in chief.

“[I]n plaintiff’s case in chief, plaintiff [need not] negate every theoretically conceivable secondary cause for the malfunction. Rather... the plaintiff fails to establish a prima facie case only if the plaintiff does not negate evidence of other reasonable, secondary causes or abnormal use that is actually introduced during plaintiff’s case in chief. In other words ... if, based upon his own proof, more than one cause could account for the accident.” Dansak v. Cameron Coca-Cola Bottling Co. Inc., 703 A.2d 489, 497 (Pa. Super. 1997), appeal denied, 556 Pa. 669, 727 A.2d 131 (1998) (emphasis in original) (quoting Schlier v. Milwaukee Electrical Tool Corp., 835 F. Supp. 839, 841 (E.D. Pa. 1993)).

Further, in Thompson v. Anthony Crane Rental Inc., 325 Pa. Super. 386, 395, 473 A.2d 120, 124 (1984), the court stated:

“We do not hold that a plaintiff must refute all possible explanations offered by a defendant.... ‘It is not necessary that plaintiff prove with mathematical exactness that the accident could only have been caused in one manner to the exclusion of all other possibilities . . . but he must eliminate those other causes, if any, as were fairly suggested by the evidence.... And it is the duty of the trial court to determine whether or not this requirement has been met in the first instance before the issue can be submitted to the jury ....’ [citing Cuthbert v. Philadelphia, 417 Pa. 610, 614-15, 209 A.2d 261, 263-64 (1965).] 242 Pa.Super. at 92, 363 A.2d at 1175.”

Finally, a plaintiff who has presented a malfunction case is not necessarily precluded from proceeding upon an alternate theory of negligence. “It is altogether possible that a plaintiff’s injuries could be caused jointly by a defective product and also by third-party negligence so long as the negligence does not constitute a supervening cause of the malfunction.” Rogers v. Johnson & Johnson Products Inc., 523 Pa. 176, 184-85, 565 A.2d 751, 755 (1989). With respect to abnormal use, “[wjhen a malfunction occurs, a concurrent abnormal use of the machine forecloses an inference of a defective condition only if the abnormal use itself contributed to the malfunction.” Kuisis, 457 Pa. at 330, 319 A.2d at 920.

The evidence in this case indicates that Mr. Van Horn obtained the vehicle from Reinhart on August 28,1999, the day before the accident. The vehicle was received by Reinhart on a trade-in on March 15,1999, at which time it had 57,777 miles on the odometer. The vehicle was last serviced and inspected on March 19,1999, and then driven an additional 1,502 miles before being turned over to Mr. Van Horn. There is no evidence that suggests Mr. Van Horn was using the vehicle abnormally at the time of the accident. Defendant’s argument that plaintiffs claim that Forest Inn Road was defective and unreasonably dangerous and thereby presented a reasonable, secondary cause of the accident is foreclosed by the reasoning of Rogers, supra (use of the malfunction theory to prove a defect does not relieve the supplier from liability simply because another concurring cause is also responsible for producing injury).

Under the circumstances, at this stage of the proceedings we believe plaintiffs’ evidence of a claim for strict products liability is sufficient to withstand defendant’s motion for summary judgment. Defendant’s motion will be denied.

(b) Negligence

The elements, defenses, and measures of proof for negligence are different from those in a strict liability claim. In order to establish a prima facie cause of action in negligence, the plaintiff must prove (1) the existence of a duty on the part of the defendant to conform to a certain standard of conduct with respect to the plaintiff; (2) a breach of that duty; (3) a reasonably close causal connection between the defendant’s conduct and some resulting injury to the plaintiff; and (4) actual loss or damages sustained by the plaintiff as a direct result of that harm. See e.g., Atcovitz v. Gulph Mills Tennis Club Inc., 571 Pa. 580, 586, 812 A.2d 1218, 1222 (2002).

Except as the doctrines of res ipsa loquitur or exclusive control may apply, “a plaintiff asserting liability on grounds of negligence must connect injury with a specific defect in the manufacture or design of a product.” MacDougall v. Ford Motor Co., 214 Pa. Super. at 387, 257 A.2d at 678. Mere proof of a malfunction is insufficient. Liability under section 402A is dependent “on a lack of fitness in the defendant’s product, [the same] as in the case of an action for breach of warranty, rather than on the breach of a particular duty of care,... as in the case of an action for negligence.” Kuisis v. Baldwin-Lima-Hamilton Corp., 457 Pa. at 329, 319 A.2d at 918.

In MacDougall v. Ford Motor Co., supra, the court found:

“The evidentiary requirements of negligence law demand proof that injury is proximately caused by a specific defect in design or construction because liability hinges upon whether the accident could have been avoided by the exercise of reasonable care. In contrast, the concern of both section 402A and warranty law is with the fitness of the product, not the conduct of the producer as measured by due care. While proof of a mechanical malfunction does not support an inference of the absence of due care in the construction or design of equipment, it is circumstantial evidence of the unfitness of the equipment. Accordingly, we hold that the occurrence of a malfunction of machinery in the absence of abnormal use and reasonable secondary causes is evidence of a ‘defective condition’ within the meaning of section 402A, as it is evidence of lack of fitness for warranty liability.” 214 Pa. Super. at 391, 257 A.2d at 680.

A claim for strict liability, as already stated, does not require that plaintiff prove a specific defect to prevail, although doing so will likely strengthen the claim.

It is because of the need for plaintiffs in their negligence claim to identify the specific defect which caused the cruise control to allegedly malfunction and, then, to prove how defendant’s conduct deviated from the requisite standard of care and that the deviation was a substantial factor in causing the accident such that defendant can be held responsible for plaintiffs’ injuries, that plaintiffs’ claim is vulnerable to attack. This burden, in this case, we believe requires expert testimony.

“Expert testimony [is] necessary when the subject matter of the inquiry is one involving special skills and training not common to the ordinary layperson.” Storm v. Golden, 371 Pa. Super. 368, 376, 538 A.2d 61, 64 (1988), appeal denied, 524 Pa. 630, 574 A.2d 71 (1989).

“Frequently, the jury, or the court trying a case without a jury, is confronted with issues which require scientific or specialized knowledge or experience in order to be properly understood. Certain questions cannot be determined intelligently merely from the deductions made and inferences drawn from practical experience and common sense. On such issues, the testimony of one possessing special knowledge or skill is required in order to arrive at an intelligent conclusion. ... In these matters, where laymen have no knowledge or training, the court and jury are dependent on the explanations and opinions of experts.

“In a logical and fundamental sense, a verdict is worth only as much as the evidence upon which it is based. In a complex case, a jury, in order to reach an intelligent conclusion, is dependent on expert testimony. If the jury is enlightened, it will reach the right verdict. Unaided by the explanations and opinions of those with specialized knowledge or skill, the ultimate conclusion might just as well be based on evidence presented in a language unfamiliar to the jury. Unless the jury is comprised of experts in the field, the verdict is based on mere conjecture. Such a verdict is worthless.” Dion v. Graduate Hospital of University of Pennsylvania, 360 Pa. Super. 416, 425, 520 A.2d 876, 881 (1987). (citation omitted)

“Conversely,

“[I]f all the primary facts can be accurately described to a jury, and if the jury is as capable of comprehending and understanding such facts and drawing correct conclusions from them as are witnesses possessed of special training, experience or observation, then there is no need for the testimony of an expert.” Young v. PennDOT, 560 Pa. 373, 377, 744 A.2d 1276, 1278 (2000) (quoting Reardon v. Meehan, 424 Pa. 460, 465, 227 A.2d 667, 670 (1967)).

In this case, other than plaintiffs’ claim that the cruise control failed to disengage when Mr. Van Horn stepped on the brake pedal, we do not know what the specific cause of this failure was. We do not know whether the claimed defect is a design defect or a manufacturing defect. We do not know what inspections or tests are required to discover the specific defect involved, whether such inspections or tests are extraordinary or routine, or even whether the defect was discoverable in advance of the accident. Was the defect a latent or hidden defect and one not able to be discovered upon reasonable inspection of the defendants? Again, we don’t know. The answers are not “so simple, and the lack of skill or want of care so obvious, as to be within the range of ordinary experience and comprehension of even non professional persons.” Brannan v. Lankenau Hospital, 490 Pa. 588, 598, 417 A.2d 196, 201 (1980). Nor are the answers within the ability of the average person of ordinary intelligence to determine on their own.

The answers to these questions, however, are critical to proving plaintiffs’ claim. It is for this reason and because the answers require technical knowledge, acquired by study and experience, that an expert is necessary and required to prove plaintiffs’ case in chief on negligence. Absent the assistance and explanation of a qualified expert, the jury’s verdict on this claim can be nothing more than speculation or conjecture. See Schmoyer v. Mexico Forge Inc., 437 Pa. Super. 159, 163, 649 A.2d 705, 707 (1994) (“the trial court has a duty to prevent questions from going to the jury which would require it to reach a verdict based on conjecture, surmise, guess or speculation.”). Cf. Masgai v. Franklin, 787 A.2d 982, 985 (Pa. Super. 2001) (“[Bjecause ‘the complexities of the human body place questions as to the cause of pain or injury beyond the knowledge of the average layperson,’ a medical malpractice plaintiff generally must produce the opinion of a medical expert to demonstrate the elements of his cause of action.”); Storm v. Golden, supra (expert testimony ordinarily necessary to establish legal malpractice).

Summary judgment is proper when an adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action, which, in a jury trial, would require the issues to be submitted to a jury. Young v. PennDOT, supra, 744 A.2d at 1277. “Where a plaintiff fails to produce an expert in a situation requiring one, the court should grant a defendant’s motion for summary judgment.” Masgai v. Franklin, supra at 985. Accordingly, we will grant defendant’s motion on this claim.

III. MOTION FOR SUMMARY JUDGMENT BY GMC

Reinhart’s joinder complaint is in standard form, incorporates the allegations of plaintiffs’ complaint, and asserts the same claims of negligence and strict liability against GMC as plaintiffs have made against Reinhart. GMC raises the same issues in its motion for summary judgment against Reinhart as Reinhart raised against plaintiffs, and our decision will be the same for the same reasons.

Additionally, GMC claims Reinhart’s sale of the vehicle for salvage prior to institution of plaintiffs’ suit has resulted in spoliation of evidence and prevented GMC from inspecting the vehicle and verifying system functionality for the braking, cruise control and electrical systems of the vehicle. Reinhart’s response alleges that no request or notice to preserve the evidence was ever made by plaintiffs and that, prior to the salvage of the vehicle, it had no knowledge or reason to believe the Van Homs were claiming the accident was caused by other than driver error.

“Spoliation is an exclusionary doctrine grounded in principles of equity.” Cohen v. Chateau at Camelback, 37 D.&C.4th 317, 319 (Monroe Cty. 1997). There is no per se rale that a party has an inflexible duty in a products liability action to preserve the product for future inspection or forfeits its claim. Instead, a three-pronged analysis is required in determining the proper sanctions, if any, for spoliation of evidence: “(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) the availability of a lesser sanction that will protect the opposing party’s rights and deter future similar conduct.” Schroeder v. PennDOT, 551 Pa. 243, 250, 710 A.2d 23, 27 (1998).

Neither party has extensively developed the record or analyzed the relevant factors in determining whether GMC’s request for dismissal is warranted on grounds of spoliation. Reinhart’s response to the motion that it was unaware prior to the salvage of the vehicle that the plaintiffs claimed the accident was caused by a defect in the vehicle, and that Reinhart received no prior request or notice to preserve the evidence, is certainly relevant to the “degree of fault” consideration. There is no evidence that salvaging of the vehicle was undertaken in bad faith or for ulterior motives.

On the other hand, GMC’s claim of prejudice is a real one. The unavailability of the vehicle for inspection has undeniably deprived GMC of an opportunity “to have an expert examine the [vehicle] and to testify, if appropriate, that a defect did not cause the [vehicle] to malfunction.” Martin and Greenspan v. Volkswagon of America, 1989 WL 81296 (E.D. Pa. July 13, 1989) (no. civ. a. 88-8261). Indeed, GMC’s expert has opined that Reinart’s failure to preserve the vehicle has prevented GMC’s ability to verify system functionality.

In Long v. Yingling, 700 A.2d 508 (Pa. Super. 1997), appeal denied, 555 Pa. 725, 725 A.2d 182 (1998), the court recognized the public policies underlying the theory of spoliation as being “(1) to prevent fraudulent claims; and (2) to remove plaintiffs from the position of deciding whether the availability of the allegedly defective product would help or hurt their case.” Here, as previously stated, there is no reason to suspect that Reinhart’s claim is fraudulent. Nor has Reinhart benefited from the unavailability of the vehicle. To the contrary, in this case, where plaintiffs do not have a direct cause of action against GMC because of the running of the applicable statute of limitations (Dickson v. Lewandowski, 228 Pa. Super. 57, 323 A.2d 169 (1974)), Reinhart must shoulder entirely the burden of proving liability against GMC. Wnek v. Boyle, 374 Pa. 27, 96 A.2d 857 (1953). Without itself having examined or inspected the vehicle after the accident and being able to identify a specific defect, Reinhart’s reliance on the malfunction theory to prove a defect, while at the same time defending plaintiffs’ claim on the basis of driver error, will weaken, if not defeat, Reinhart’s ability to satisfy its burden of proof with respect to GMC. Thompson v. Anthony Crane Rental Inc., 325 Pa. Super. at 394, 473 A.2d at 125.

Under the circumstances presented, we do not believe it would be appropriate to dismiss Reinhart’s claim on the basis of spoliation of evidence. Reinhart’s conduct has not resulted in a tactical advantage justifying this extreme sanction. Additionally, the burden of proof applicable to Reinhart’s claim against GMC will serve to protect GMC against an unfounded claim.

      . The Act, section 8522, provides in pertinent part:
      “(a) Liability imposed. — The General Assembly, pursuant to Section 11 of Article I of the Constitution of Pennsylvania, does hereby waive, in the instances set forth in subsection (b) only and only to the extent set forth in this subchapter and within the limits set forth in section 8528 (relating to limitations on damages), sovereign immunity as a bar to an action against Commonwealth parties, for damages arising out of a negligent act where the damages would be recoverable under the common law or a statute creating a cause of action if the injury were caused by a person not having available the defense of sovereign immunity.
      “(b) Acts which may impose liability. — The following acts by a Commonwealth party may result in the imposition of liability on the Commonwealth and the defense of sovereign immunity shall not be raised to claims for damages caused by: . ..
      “(4) Commonwealth real estate, highways and sidewalks. — A dangerous condition of Commonwealth agency real estate and sidewalks, including Commonwealth-owned real property, leaseholds in the possession of a Commonwealth agency and Commonwealth-owned real property leased by a Commonwealth agency to private persons, and highways under the jurisdiction of a Commonwealth agency, except conditions described in paragraph (5) [dealing with potholes and sinkholes].” 42 Pa.CS. §8522(a), (b)(4).

      . No claim has been made of a dangerous condition arising from the geometry of the curve, the speed limit or signage, stopping site distances, or that plaintiffs’ injuries were in any manner caused by the pavement surface or the traveled portion of Forest Inn Road. Here, for reasons not related to the road, Mr. Van Horn’s vehicle completely left the traveled portion of the road, encountered a drainage ditch and struck a metal pipe.

      . To the extent PennDOT claims 53 P.S. §4104 also provides immunity from plaintiffs’ claims, we disagree. Section 4104(b) protects PennDOT from liability in damages “for any injury to persons or property arising out of the issuance or denial of a driveway permit, or for failure to regulate any driveway .. ..” 53 P.S. §4104(b). As plaintiffs concede “Plaintiff is not claiming damages against PennDOT arising out of the issuance or denial of a driveway permit or for failure to regulate any driveway” (plaintiffs’ brief in opposition to PennDOT’s motion, p. 4), section 4104 is irrelevant to the claims raised in plaintiffs’ complaint.

      . In Young v. PennDOT, 560 Pa. 373, 376, 744 A.2d 1276, 1277 (2000), the Pennsylvania Supreme Court quoted with approval the following language from Gift v. Palmer, 392 Pa. 628, 630, 141 A.2d 408, 409 (1958):
      “Negligence is the want of due care which a reasonable man would exercise under the circumstances. Conduct is negligent only if the harmful consequences thereof could reasonably have been foreseen and prevented by the exercise of reasonable care.”

      . There is no evidence of the circumstances surrounding the determination that the vehicle was a total loss and should be salvaged, and when this occurred. We do note, however, that plaintiffs’ action was not commenced until August 1,2001, almost two years after the accident.

      . Because the identity of the manufacturer of the vehicle is not in dispute, this is not a case warranting dismissal for failure to preserve evidence critical to identifying a responsible party. Cf. Roselli v. General Electric Co., 410 Pa. Super. 223, 599 A.2d 685 (1991) (plaintiff failed to preserve shattered glass carafe thereby precluding defendant from verifying the product manufacturer of the carafe for indemnity purposes). Further, to the extent Reinhart may intend to argue a design defect, the prejudice claimed by GMC is lessened. Schroeder, supra (design defects common to all trucks of the same make and model; therefore the need to examine the actual truck to prepare a defense is not as great as when a manufacturing defect is claimed, because all trucks of the same make and model would contain the same defect); see also, O’Donnell v. Big Yank Inc., 696 A.2d 846 (Pa. Super. 1997).


author: SCHMEHL, J.L., J.,

text:
    Dashner v. Hamburg Center of the Department of Public Welfare

      C.P. of Berks County,
    no. 00-11202.

      Jay N. Abramowitch, for plaintiffs.

      John W. Stahl, for defendant.
    July 7, 2003
   SCHMEHL, J.L., J.,

John W. Dashner Jr. and Michael A. Moatz are two mentally retarded men and both were residents of the Hamburg Center, a residential care facility operated by the Pennsylvania Department of Public Welfare. Craig Muthersbaugh was employed as an attendant at the Hamburg Center. Between August 1, 1999 and the spring of 2000, Craig Muthersbaugh took advantage of his position by sexually assaulting John W. Dashner Jr. and Michael A. Moatz. On October 30, 2000, in accordance with a plea agreement, Craig Muthersbaugh pleaded guilty to indecent assault and indecent exposure and was sentenced by the Honorable Linda K.M. Ludgate to a six-year term of probation with no jail time. During the guilty plea colloquy, Craig Muthersbaugh specifically admitted the following facts as stated by the assistant district attorney:

“Ms. West: On or around August 1 of 1999, the defendant had John Dashner, a 29-year-old mentally handicapped adult, touch his penis twice; after the defendant pulled it out of his pants, the defendant placed his penis in Dashner’s mouth.
“Also, while giving a bath to Michael Moatz, a 30-year-old mentally handicapped adult, the defendant had Michael Moatz touch his penis twice; the defendant touched Mr. Moatz’ penis and he showed Mr. Moatz his underwear and penis and he rubbed Moatz’ buttocks with his penis.” (N.T. 10/30/2000 p. 4.)

On November 9, 2000, John W. Dashner Jr. and Michael A. Moatz and their parents filed a complaint, alleging, inter alia, that the Hamburg Center negligently hired Muthersbaugh, negligently supervised Muthersbaugh, and failed to provide a safe treatment facility. The plaintiffs’ complaint also contains allegations of vicarious liability and corporate negligence.

On November 7, 2002, the Commonwealth filed a motion for summary judgment. On April 21,2003, after argument held, this court entered an order, granting the Commonwealth’s motion for summary judgment with respect to all counts concerning vicarious liability and corporate negligence. However, the court did not dismiss the first four counts of the plaintiffs’ complaint. This court’s order stayed all proceedings pending defendant’s petition for permission to appeal to the Commonwealth Court of Pennsylvania.

On June 6, 2003, the Commonwealth Court granted the Commonwealth’s petition for interlocutory appeal. This court then requested and received a concise statement of matters complained of on appeal. The Commonwealth asserts that the court erred in denying the Commonwealth’s motion for summary judgment because:

“(1) All of the alleged duties and negligent acts set forth in paragraphs 32(a) through 32(j), 36,40 and 44(a) through 44(e) of the complaint are institutional duties and acts falling within the “doctrine of corporate liability” categories set forth in Moser v. Heistand, 545 Pa. 554, 558, 681 A.2d 1322, 1324 (1996), as follows: [omitted].
“(2) Plaintiffs, who would have the burden at trial, failed to produce evidence of facts essential to the cause of action which would require submission to a jury as follows:
“(i) The evidence established that the Hamburg Center performed a background investigation which included contacting references and prior employers and obtaining a criminal history record information check. Plaintiffs produced no evidence of dangerous or violent propensities;
“(ii) The evidence established that the Hamburg Center placed Muthersbaugh on probation for six months, required hours of training and conducted annual performance evaluations. Plaintiffs produced no conflicting evidence;
“(in) In this medical/professional liability claim, plaintiffs produced no expert reports setting forth the standards of care and opining that there was a variance from the standards to a degree which establishes gross negligence or incompetence as required under 50 P.S. §4603. Plaintiffs did provide the report of Susan E. Kraus Ph.D. in their answer to the motion for summary judgment. However, as was noted at oral argument, the report mentions no specific policies nor any specific recommendations. It does not set forth standards of care nor opine that any alleged variance was gross negligence or incompetence. The applicable statute, 50 P.S. §4603, was cited to this honorable court.”

This opinion is written pursuant to Rule 1925(a) of the Pennsylvania Rules of Appellate Procedure, and for the following reasons, this court asks that the instant appeal be denied.

THE DEFENDANT’S ALLEGED ACTS AND/OR OMISSIONS ARE NOT SHIELDED BY THE DOCTRINE OF SOVEREIGN IMMUNITY

Sovereign immunity in Pennsylvania arose by the end of the eighteenth century because the state had accumulated large debts resulting from the War of Independence. Pennsylvania chose to invoke the doctrine of sovereign immunity in order to avoid financial disaster. Although the doctrine was abolished by the Supreme Court in Ayala v. Philadelphia Board of Public Education, 453 Pa. 584, 305 A.2d 877 (1973), on the rationale that modem all-pervasive government should be held responsible for its tortious conduct, the legislature re-established sovereign immunity in 1978.

The test to determine if the Commonwealth is protected from liability by the state’s sovereign immunity is to consider whether an employee was acting within the scope of employment, whether the alleged act which causes injury was negligent and damages would be recoverable but for availability of immunity defense, and whether the act fits within statutory exceptions to sovereign immunity. La Frankie v. Miklich, 152 Pa. Commw. 163, 618 A.2d 1145 (1992).

There are nine exceptions to sovereign immunity under 42 Pa.C.S. §8522: (1) vehicle liability; (2) medical professional liability; (3) care, custody or control of personal property; (4) Commonwealth real estate highways and sidewalks; (5) potholes and other dangerous conditions; (6) care, custody and control of animals; (7) liquor store sales; (8) National Guard activities; and (9) toxoids and vaccines.

The plaintiffs claim that the acts of the Hamburg Center fall under the medical-professional liability exception, which provides:

“(2) Medical-professional liability. — Acts of health care employees of Commonwealth agency medical facilities or institutions or by a Commonwealth party who is a doctor, dentist, nurse or related health care personnel.” 42 Pa.C.S. §8522(b)(2).

In its motion for summary judgment, the Commonwealth argued that the Hamburg Center and Muthersbaugh are not “health care employees” as defined in the exception. In Alexander v. DPW, 137 Pa. Commw. 342, 586 A.2d 475 (1991), the Commonwealth Court stated that the medical-professional waiver is expressly limited to “[ajcts of health care employees.” The court also stated that exceptions to the rule of immunity must be “narrowly interpreted.” Alexander, 137 Pa. Commw. at 348, 586 A.2d at 478, citing Mascaro v. Youth Study Center, 514 Pa. 351, 523 A.2d 1118 (1987). The Commonwealth Court further held that sovereign immunity was not waived on the basis of medical-professional liability exception where there was an abduction and rape of a patient from the Department of Public Welfare-operated state residential facility for profoundly retarded and disabled persons and that the physical characteristics of building did not cause abduction and rape, but rather the intervening act of an unknown criminal caused the rape. Id.

Conversely, there are at least two cases that stand for the proposition that the term “health care employee” can mean a “mental health employee or entity.” For instance, in Goryeb v. DPW, 525 Pa. 70, 575 A.2d 545 (1990), the Pennsylvania Supreme Court held that the Commonwealth does not enjoy sovereign immunity when a man is discharged from a section 302(a) commitment and then goes on a shooting rampage. Specifically, the court held that since the Commonwealth participated in the decision to treat and discharge him, it could be held liable under the Mental Health Procedures Act. The Supreme Court came to this decision by reading section 114 of the MHPA in conjunction with section 8522(b)(2). See also, Holland v. Norristown State Hospital, 136 Pa. Commw. 655, 584 A.2d 1056 (1990) (sovereign immunity waived where state employee was assaulted and raped during course of her employment by psychiatric patient). Clearly, the doctor and facility that discharged him were providing mental health care.

Based on these two cases, this court disagreed with the Commonwealth that the Hamburg Center and Muthersbaugh are not “health care employees” as defined in the exceptions to sovereign immunity. Since the court felt there was no immunity that applied to the individuals who hired and supervised Muthersbaugh, the court felt that however weak the allegations were, that it was still for a jury to decide whether or not they “negligently” hired or supervised him. Despite that ruling, this court still dismissed all counts of the complaint concerning vicarious liability since a claim for vicarious liability cannot stand where a servant’s intentional torts are actuated by personal motives only and are not in furtherance of the interests of his employer. See e.g., Ira S. Bushey & Sons v. United States, 398 F.2d 167, 170 (2d Cir. 1968).

THE COMMONWEALTH’S RELIANCE ON MOSER v. HEISTAND IS MISPLACED

In Moser v. Heistand, 545 Pa. 554, 681 A.2d 1322 (1996), a plaintiff sought medical treatment from Ashland State Hospital for a fractured right lower leg and ankle. The plaintiff had two surgeries performed at this state hospital for these injuries. After her last surgery, the plaintiff continued to experience pain in her right leg and had difficulty walking. A subsequent doctor diagnosed that she was suffering from a nonunion of the fibular fracture of the right leg and a nonunion of the lateral malleolus. The plaintiff and her husband filed a complaint for negligent treatment against her doctor, Ashland State Hospital and the Department of Public Welfare on a theory of corporate liability. Moser at 556-57, 681 A.2d at 1324. The trial court sustained the Commonwealth’s parties’ preliminary objections on the grounds of sovereign immunity and dismissed the complaint. The Commonwealth Court affirmed the trial court’s dismissal. The Supreme Court of Pennsylvania affirmed the order of the Commonwealth Court on different grounds. The court held that a plaintiff may not bring an action in corporate negligence against a Commonwealth medical facility. Id. at 562, 681 A.2d at 1326.

Under the doctrine of corporate negligence, a hospital’s duties include reasonable care and maintenance of safe and adequate facilities and equipment, selecting and retaining only competent physicians, overseeing all persons who practice medicine within hospital walls as to patient care, and formulating, adopting and enforcing adequate rules and policies to ensure quality care for patients. Id. at 558, 681 A.2d at 1324-25. The Supreme. Court, however, made clear that “[wjhile Commonwealth medical facilities are not immune from suit based on the negligence of their health care employees (respondeat superior), 42 Pa.C.S. §8522(b)(2) does not provide for a waiver of immunity for the facilities themselves.” Id. at 561, 681 A.2d at 1326.

In the instant case, the court dismissed the plaintiffs’ corporate negligence counts. The defendant presently argues that the remaining counts that the court did not dismiss constitute corporate negligence as outlined in Moser, supra. This court disagrees.

The specific acts that the plaintiffs have alleged against the Hamburg Center are contained in paragraph 32 of the plaintiffs’ complaint:

(a) Failing to conduct adequate background checks and/or evaluations on its employees such as Craig Muthersbaugh;

(b) Failing to adequately investigate the qualifications of Craig Muthersbaugh prior to his hiring and/or thereafter;

(c) Failing to warn plaintiff about the violent and dangerous propensities of Craig Muthersbaugh when it. knew or should have known of said propensities;

(d) Failing to place plaintiffs’ dependents in a place where they would be free from the abuse of Craig Muthersbaugh;

(e) Failing to enact and/or enforce proper and adequate procedures which would have prevented Craig Muthersbaugh’s abuse of plaintiffs’ dependents;

(f) Failing to adequately address and investigate the improper relationships between plaintiffs’ dependents and Craig Muthersbaugh when its supervisors and/or other employees knew or should have known of said improper relationships;

(g) In allowing one of its employees, Craig Muthersbaugh, to abuse his position and trust by initiating and/ or conducting an improper relationship with plaintiffs’ dependents on the premises of the Hamburg Center;

(h) In disregarding the welfare of plaintiffs’ dependents as their patients after the initiation of the improper relationship that Craig Mutherbaugh initiated when they knew or should have known of said relationship.

(i) In failing to take all necessary steps to separate plaintiff dependents and Craig Muthersbaugh after they knew or should have known of the improper relationship.

These alleged acts or omissions of the Hamburg Center go well beyond the theory of corporate liability, as outlined in Moser, supra. The alleged acts or omissions are not those of Muthersbaugh or even a doctor, but of the employees of the Commonwealth who are not immune. Accordingly, this court did not err in denying the defendant’s motion for summary judgment.

THE DEFENDANT’S CLAIM THAT THE PLAINTIFFS FAILED TO PRODUCE ACTS ESSENTIAL TO THE CAUSE OF ACTION IS IMPROPERLY BEFORE THE COURT

In its brief in support of the motion for summary judgment, the Commonwealth presented the following two questions to the court:

“Is the Hamburg Center immune from liability to plaintiffs for the acts of abuse committed by Muthersbaugh?
“Is the Hamburg Center immune from liability to plaintiffs for its alleged institutional, administrative negligence?”
“There can be no doubt that [pursuant to the provisions of Rule 302] issues not raised in the lower court are waived and cannot be raised for the first time on appeal.” Truesdale by Truesdale v. Albert Einstein Medical Center, 767 A.2d 1060, 1063 (Pa. Super. 2001) (quoting Commonwealth, Liquor Control Board v. Willow Grove Veterans Home Association Inc., 97 Pa. Commw. 391, 397, 509 A.2d 958, 961 (1986)).

This court agreed to certify this case for appeal only with regard to questions concerning sovereign immunity and related issues, not for a general claim that the plaintiffs have failed to produce evidence to support their cause of action. Nevertheless, this court has reviewed the plaintiffs’ evidence and believes that they have produced sufficient evidence to withstand a challenge by way of the Commonwealth’s motion for summary judgment. If sovereign immunity does not end this case, then it is for a jury to decide. Accordingly, the instant appeal should be denied.

      . See Commonwealth v. Muthersbaugh, Berks County criminal docket no. 4245 of 2000.