text:
    Eagle Nat’l Bank v. ISCP Funding, Inc.

      Eric E. Reed, for plaintiff.

      Bret M. Binder, for defendant.
    May 3, 2011
   BERNSTEIN, J.,

The petition for special and/or preliminary injunction filed by plaintiffs Eagle National Bank and Eagle Nationwide Mortgage Company requires this court to determine whether defendant ISCP Funding, LLC should be enjoined from using funds which were transferred to ISCP Funding LLC pursuant to an asset purchase agreement executed by the parties. For the reasons below, ISCP Funding LLC is enjoined from using the disputed funds pending resolution of the dispute.

Background

Plaintiff Eagle National Bank (“Eagle Bank,”) is a national banking association based in Upper Darby, Pennsylvania. Plaintiff Eagle Nationwide Mortgage Company (“Eagle Mortgage,”) is a corporation based in Chadds Ford, Pennsylvania. Defendant, ISCP Funding LLC (“ISCP,”) is a limited liability company with an address at 2929 Arch Street, Philadelphia, Pennsylvania.

Until 2010, Eagle Mortgage was in the mortgage-lending business and operated through a number of affiliated branch offices. Each branch office generated proceeds from the mortgage business and transferred all the proceeds to Eagle Mortgage as the parent company. Eagle Mortgage received the funds, recorded receipt in specific ledger entries, and held the proceeds in a general reserve account. Eagle Mortgage held the funds in reserve to pay all costs and expenses incurred by each branch office in the course of a business period. Once the costs and expenses were paid, Eagle Mortgage released any remaining funds to each branch office in an amount commensurate with the business generated therefrom.

On August 5, 2010, Eagle Bank and Eagle Mortgage sold their business assets to ISCP pursuant to an Asset Purchase agreement (the “agreement.”) The agreement stated:

Section 2.1 Sale and Transfer of Assets. The Sellers [Eagle Bank and Eagle Mortgage] hereby agree to sell...all of the personal, tangible, intangible ... rights and assets used in the operation of...the Business... (the ‘Assets.’) The Assets shall include:
* * *
(g) all...deposits (including branch accounts relating to operating expenses and reserves...)
Section 2.3 assumption of Liabilities ... the purchaser shall assume, effective as of closing, the following liabilities of the sellers (collectively, the “assumed liabilities”):
(d)... all of [Eagle Mortgage’s] ordinary and customary operating expenses incurred in connection with operation of the branch offices relating to business after the closing (as well as prior to the closing, but only to the extent of the aggregate dollar amount contained in the branch accounts expressly described in section 2.1(g) above at closing).
Section 2.3(A)
Excluded Liabilities. No Purchaser shall assume or be liable for any Excluded Liabilities. Each Seller shall timely perform, satisfy and discharge ... all Excluded Liabilities of such Seller. “Excluded Liabilities” shall mean all liabilities of a Seller, other than the assumed liabilities, including:
***
(k) any amounts due to any Affiliate of a seller, including any amounts owed to any branch office or any employee thereof, in respect of the period prior to the closing.

Upon execution of the agreement, Eagle Bank and Eagle Mortgage transferred their assets to ISCP, including the reserve deposits held for the benefit of the branch offices. At the time the parties executed this agreement, a number of branches declined affiliation with ISCP, and asked Eagle Mortgage to release any funds held in the reserve deposits, after payment of any costs and expenses. Plaintiffs forwarded the request to release the funds to the new owner of the reserve deposits, ISCP.

On March 7, 2011, ISCP sent a letter to Eagle Bank and Eagle Mortgage in reply to their demand for the release of funds. The letter denied that ISCP had any obligation to release any deposits held in reserve. Specifically, the letter stated that ISCP had no obligations to release the funds pursuant to section 2.3(A)(k) of the agreement which excluded from the liabilities of ISCP ~

Any amounts due to any affiliate of seller [Eagle Bank and Eagle Mortgage,] including any amounts owed to any branch office or any employee thereof, in respect of the period prior to closing.

On March 10, 2011, Eagle Bank and Eagle Mortgage filed suit against ISCP. The complaint asserts the claims of Breach of Contract, Constructive Trust, and a request for Accounting. The following day, March 11, 2011, Eagle Bank and Eagle Mortgage filed the instant petition for special and/or injunctive relief. On March 22, 2011, ISCP filed a response in opposition to plaintiff’s petition for special and/or injunctive relief. The following day, March 23, 2011, this court held a hearing on the matter presented by the petition. During the hearing, testimony was offered which revealed that ISCP is experiencing financial constraints caused by a downturn in the mortgage business.

Discussion

In the petition for special and/or preliminary injunction, Eagle Bank and Eagle Mortgage assert that ISCP is experiencing financial constraints which could conceivably compel ISCP to use or dissipate the disputed funds. Eagle Bank and Eagle Mortgage conclude that they would suffer irreparable harm if ISCP were allowed to use the reserve funds. Opposing the petition, ISCP argues that plaintiffs’ right to injunctive relief “is extremely doubtful” because granting the petition would “upset the status quo by rewriting the terms of the asset purchase agreement.”

To obtain a preliminary injunction, a petitioner must establish that:

(1) relief is necessary to prevent immediate and irreparable harm that cannot be adequately compensated by money damages;
(2) greater injury will occur from refusing to grant the injunction than from granting it;
(3) the injunction will restore the parties to their status quo as it existed before the alleged wrongful conduct;
(4) the petitioner is likely to prevail on the merits;
(5) the injunction is reasonably suited to abate the offending activity; and
(6) the public interest will not be harmed if the injunction is granted.

I. Plaintiffs have established the element of immediate and irreparable harm.

In Pennsylvania, a preliminary injunction may be granted to enjoin the dissipation of funds. In Citizens Bank of Pennsylvania v. Myers, 872 A. 2d 827 (Pa. Super. 2005), plaintiff filed a complaint asserting that defendants had embezzled funds together with a petition for injunctive relief seeking to prevent defendants from dissipating such funds. The trial court granted the injunction and issued an order freezing the funds. A subsequent hearing was held to determine whether the injunction should be continued. At the hearing, counsel for defendants stipulated to offers-of-proof which disclosed that defendants had indeed embezzled the funds. The injunction freezing the funds was preserved. Defendants appealed. Defendants stated that injunctive relief had been improperly granted because plaintiff had an adequate remedy at law under a breach-of-contract theory. Affirming the trial court’s order, the Superior court noted that there was a “reasonable likelihood that absent an injunction, the assets will simply disappear or be dissipated.” The Superior Court “affirmed the grants of preliminary injunctions to enjoin the dissipation of funds.”

In this case, testimony offered at the hearing by Steve Rickie, on behalf of ISCP, disclosed that ISCP is experiencing financial constraints, has been compelled to reduce its workforce to meet financial obligations, and has insufficient unencumbered funds to meet obligations to the branch offices formerly affiliated with Eagle Bank and Eagle Mortgage. Based on the foregoing and on ISCP’s claim of ownership of the funds, this court finds a reasonable likelihood that the reserve deposits could be dissipated absent an injunction. Eagle Bank and Eagle Mortgage have established the first element necessary to obtain an injunction.

II.Greater injury would result from refusing to grant the injunction.

Under the terms of the asset purchase agreement, ISCP is required to assume certain liabilities of Eagle Bank and Eagle Mortgage. The liabilities to be assumed include all of Eagle Mortgage’s ordinary and customary operating expenses incurred in connection with operation of the branch offices. Refusing to grant the injunction in this case would result in greater injury because it would violate provisions of the Asset Purchase agreement agreed to by the parties. The relief requested by the petition seeks to merely enjoin ISCP from using the disputed funds. Eagle Bank and Eagle Mortgage have established the second element necessary to obtain an injunction.

III.The injunction merely preserves the status-quo.

“The purpose of a preliminary injunction is to preserve the status quo as it exists or previously existed before the acts complained of, thereby preventing irreparable injury or gross injustice.” In this case, enjoining ISCP from using the disputed funds preserves the status quo among the parties. Eagle Bank and Eagle Mortgage have established the third element necessary to obtain an injunction.

IV.Petitioners are likely to prevail on the merits.

In the petition for special and/or preliminary injunction, Eagle Bank and Eagle Mortgage assert that ISCP assumed all of Eagle Mortgage’s “ordinary and customary expenses incurred in connection with operation of the branch offices...” Eagle Bank and Eagle Mortgage conclude that under this language, ISCP assumed the obligation to pay the branch offices with the funds held by ISCP in the reserve deposits. ISCP denies it assumed the obligation to pay the branch offices, and asserts that the agreement specifically excludes from its assumed liabilities any obligation to pay the branch offices with funds held in the reserve deposits. ISCP cites a specific provision of the agreement in support of this argument. The specific section of the agreement states that “excluded liabilities” comprise “any amounts owed to any branch office or employee thereof....” ISCP concludes that under this language, it has no obligation to pay the branch offices with funds held in the reserve deposits.

In Pennsylvania, “the party seeking an injunction must show that the activity it seeks to restrain is actionable, that its right to relief is clear, and that the wrong is manifest, or, in other words, must show that it is likely to prevail on the merits.”

In this case, the pertinent provisions of the Asset Purchase agreement state:

Section 2.3 Assumption of Liabilities.
...the Purchaser shall assume, effective as of the Closing, the following liabilities of the Sellers (collectively, the “Assumed Liabilities”):
***
(d)... all of [Eagle Mortgage’s] ordinary and customary operating expenses incurred in connection with operation of the branch offices....
section 2.3(A)
Excluded Liabilities. No Purchaser shall assume or be liable for any excluded liabilities.... “Excluded Liabilities” shall mean all liabilities of a seller other than the Assumed Liabilities, including:
***
(k) ... any amounts owed to any branch office or any employee thereof....

These provisions state that ISCP assumed Eagle Mortgage’s obligations toward the branch offices. Although the provisions also state that ISCP is not liable for “any amounts ... owed to any branch office or any employee thereof,” the all-encompassing obligation “to assume all of [Eagle Mortgage’s] ordinary and customary operating expenses incurred in connection with operation of the branch offices” is clearly and unambiguously stated in section 2.3(d) of the agreement. The language excluding from the liabilities of ISCP “any amounts owed to any branch office or any employee thereof,” contained in section 2.3(A)(k), applies only to amounts owed to any branch “other than the Assumed Liabilities” of ISCP. Pursuant to the agreement. Petitioners are likely to prevail on the merits. Eagle Bank and Eagle Mortgage have established the fourth element necessary to obtain an injunction.

V. The injunction is reasonably suited to abate the offending activity and will not harm the public interest.

The petition for special and/or preliminary injunction seeks to enjoin ISCP from using expending or transferring any of the funds held in the reserve deposits, other than for payment to the former Eagle Bank and Eagle Mortgage branch offices. The injunction is reasonably suited to abate dissipation of the funds held in reserve. No harm to the public can arise out of such an injunction. Eagle Bank and Eagle Mortgage have established all the elements required to obtain an injunction which is contemporaneously entered.

      . Asset purchase agreement, Exhibit B to plaintiff’s petition for special and/or preliminary injunction, sections 2.1,2.1(g).

      . Asset purchase agreement. Exhibit B to plaintiff’s petition for special and/or preliminary injunction, sections 2.3, 2.3(d).

      . Asset Purchase Management. Exhibit B to plaintiff’s petition for special and/or preliminary injunction, section 2.3(A) (emphasis supplied).

      . Letter dated March 4,2001, from Eagle Bank and Eagle Mortgage to ISCP, Exhibit D to plaintiff’s petition for special and/or preliminary injunction.

      . Letter from ISCP to Eagle Bank, Exhibit C to plaintiff’s petition for special and/or preliminary injunction (citing section 2.3(A)(k) of the Asset Purchase agreement).

      . Plaintiffs’ petition for special and/or injunctive relief, ¶ 30.

      . Defendant’s Memorandum of Law in Support of its Response in Opposition to the petition for special and/or injunctive relief, p. 4.

      . Brayman Constr. Corp. v. DOT, 13 A.3d 925, 935 (Pa. 2011).

      . Citizens Bank v. Myers, 872, A.2d 827, 836 (Pa. Super. 2005).

      . Citizens Bankv. Myers, 872, A.2d at 836 (Pa. Super. 2005).

      . Citizens Bank v. Myers, 872, A.2d at 836 (Pa. Super. 2005).

      . Asset Purchase agreement. Exhibit B to the petition for special and/or preliminary injunction, section 2.3(d).

      . Martirans GP, Inc. v. Pepper, Hamilton & Scheetz, 602 A.2d 1277, 1286 (Pa. 1992).

      . Plaintiffs’ petition for special and/or injunctive relief, ¶ 13.

      . Plaintiffs’ petition for special and/or preliminary injunction, ¶¶ 14, 19, 22.

      . Defendants’ Memorandum of Law in Opposition to plaintiffs’ petition for special and/or preliminary injunction, p. 5.

      . Summit Towne Ctr., Inc. v. Shoe Show of Rocky Mt., Inc., 828 A.2d 995, 1001 (Pa. 2003).

      . Asset Purchase agreement, sections 2.3(d), 2.3(A)(k), Exhibit B to the plaintiffs’ petition for special and/or preliminary injunction (emphasis supplied).

      . “The task of interpreting a contract is generally performed by a court rather than by a jury.”’ Standard Venetian Blind Co. v. American Empire Ins. Co., 469 A.2d 563. 566 (Pa. 1983).


source: Caselaw Access Project

author: TERESHKO, J.,

license: Public Domain

text:
    Batista v. Yellowbird Bus Co., Inc.

      Edward F Chacker and Brian S. Chacker, for appellants.

      John J. Snyder and James C. Haggerty, for appellees Cowan Systems and Andrew Schultz.

      James L. Griffith and Edward J. McGinn Jr., for appellees Yellowbird Bus Co. and Kevin Talbert.
    April 27, 2011
   TERESHKO, J.,

Plaintiffs appeal from this court’s order of December 3,2009, bifurcating the five (5) remaining cases of an action that originally involved more than forty (40) plaintiffs. This court ordered the five cases to be tried initially on liability, then separately on the damage claims of individual plaintiffs.

FACTUAL BACKGROUND

Plaintiffs commenced this action following a motor vehicle accident on July 5,2006, involving a tractor trailer owned by defendant Cowan Systems, LLC and operated by defendant Andrew Schultz and a Yellowbird school bus operated by Yellowbird employee Kevin Talbert, Jr.. (Complaint, ¶¶8-13). On that date plaintiffs allege that both the tractor trailer and the Yellowbird bus attempted to move into the same lane and collided. (Id.). Plaintiffs contend that Talbert lost control of the bus as a result of the collision, swerving into the median and then back across both lanes of Northbound 1-95 before the bus flipped over and landed on its side on the shoulder of the roadway. The Yellowbird school bus was carrying minor children returning from a camp field trip to the Aquarium in Baltimore, Maryland. Several of the children received various degrees of injury as a result of the accident. (Id.). On June 11, 2007, plaintiff Carmen Batista individually and as parent and natural guardian of Elias Torres and Lisandra Perez commenced their action by filing their complaint alleging counts of negligent operation of a motor vehicle against defendants Talbert and Schultz and counts of negligent entrustment against defendants Yellowbird and Cowan. In addition, over fifteen (15) separate lawsuits were filed by approximately forty (40) different plaintiffs. Id. ¶ 2.

On September 18, 2007, defendants, Cowan Systems, LLC and Andrew Schultz filed a motion to consolidate the cases for purposes of discovery and trial, and pursuant to orders dated both October 16, 2007 andApril 14,2008, the individual cases were consolidated. The Honorable Sandra Mazer Moss stated in her April 14, 2008 consolidation order that the court would fully consider all issues pertaining to trial consolidation after the close of discovery.

On September 29, 2009, this court issued an order removing five cases from the existing consolidation and consolidating them separately under the lead case of Batista, et al. v. Yellowbird Bus Company, Inc., et al. because the remaining matters settled. In addition, on November 23, 2009, this court granted motions for summary judgment against plaintiffs who were not passengers on the incident bus. The remaining minor plaintiffs are: Elias Torres, Josue Rios, Juan Karlos Martinez, Neena Meeker and Susan Pena.

On October 22, 2009, defendants Cowan Systems, LLC and Andrew Schultz filed a motion with this court to issue a Case Management order and requesting that the five cases that were consolidated pursuant to the September 29, 2009 order be bifurcated and tried initially on liability then separately on the damage claims of individual plaintiffs. (Exhibit “D” to plaintiffs’ motion to Consolidate). Plaintiffs filed their response on November 6,2009. On December 3,2009, this court entered an order establishing case management deadlines and ordering that the remaining cases “be bifurcated and tried initially on liability....following the consolidated liability trial, the damages claims of the individual plaintiffs in each case are to be tried separately...” (Exhibit “H” to plaintiffs’ motion to consolidate).

Plaintiffs did not file a motion for reconsideration of the December 3rd order, but rather filed a motion to consolidate on July 6, 2010, seven months after the order was entered. This court denied the motion by order dated August 10, 2010. This order was interlocutory. On August 17, 2010, plaintiffs filed a motion to amend the court’s August 10th order to include language granting permission to pursue an interlocutory appeal. This court denied the request by order dated September 13, 2010.

Subsequently, on September 23, 2010 plaintiffs filed a petition for review with the superior court of Pennsylvania seeking immediate review of the this court’s orders of August 10, 2010 and September 13, 2010 denying plaintiffs’ motion to consolidate and motion to amend to grant permission to pursue an interlocutory appeal. On November 8, 2010, the superior court granted plaintiffs’ petition for review and permitted plaintiffs to proceed with an appeal of the August 10, 2010 order.

Plaintiffs filed their notice of appeal on September 23, 2010. Plaintiffs then filed their concise statement of matters complained of on appeal pursuant to Pa.R.A.P. 1925(b) on November 23, 2010.

The sole issue to be addressed on appeal is whether this court abused its discretion in bifurcating liability and damages and ordering separate damages trials for each of the five plaintiffs in order avoid confusion of liability, causation and damages issues presented on behalf of multiple plaintiffs, to prevent unfair prejudice to the parties and to avoid undue influence injury deliberations.

LEGAL ANALYSIS

“The decision whether to bifurcate is entrusted to the sound discretion of the trial court, which is in the best position to evaluate the necessity for such measures.” Gallagher v. Pa. Liquor Control Board, 584 Pa. 362, 374, 883 A.2d 550, 557 (2005). “A court decision to bifurcate will not be disturbed on appeal absent an abuse of discretion.” Coleman v. Philadelphia Newspapers, Inc., 391 (Pa. Super. 140, 146, 570 A.2d 552, 555 (1990)). “ [Bifurcation is strongly encouraged and represents a reasonable exercise of discretion where the separation of issues facilitates the orderly presentation of evidence and judicial economy, or avoids prejudice.” Id. at 146-47, 555 (internal citations omitted). The decision to bifurcate has been affirmed on appeal where there is a risk that sympathy occasioned by the severity of plaintiffs’ injuries could taint the jury’s deliberations. Ptak v. Masontown Men’s Softball League, 414 Pa. Super. 425, 430, 607 A.2d 297, 300 (1992). See also Santarlas v. Leaseway Motorcar Transp. Co., 456 (Pa. Super. 34, 689 A.2d 311 (1997)).

Pennsylvania Rule of Civil Procedure 213 establishes the right of the court to bifurcate actions or issues. Pa. R.C.P. 213(b) states:

The court, in furtherance of convenience or to avoid prejudice, may, on its own motion or on motion of any party, order a separate trial of any cause of action, claim, or counterclaim, set-off, or cross-suit, or of any separate issue, or of any number of causes of action, claims, counterclaims, set-offs, cross-suits, or issues.

(emphasis added).

In assessing the advisability of bifurcation, the trial court is required to consider the issues raised and the evidence to be presented to determine whether or not liability and damages are interwoven to such an extent that bifurcation would be improper. Ptak v. Masontown Men’s Softball League, 414 (Pa. Super. 425, 429, 607 A.2d 297, 300 (1992)). There are numerous policy considerations that support bifurcating liability and damages in personal injury cases, including avoiding the expense of preparing for a trial on damages prior to a finding of liability and promoting settlement. Stevenson v. General Motors Corp., 513 Pa. 411, 415-16, 521 A.2d 413, 415 (1987).

In this case, bifurcating liability and damages and holding separate damages trials will prevent confusion of the jury and any unfair prejudice by: 1) allowing the jury to remain focused on the liability aspect of the case and the multiple issues and parties involved; 2) preventing sympathy for plaintiffs’ injuries to unduly influence jury deliberations on liability; and 3) preventing evidence from the more severely injured plaintiffs’ cases from improperly influencing and inflating damages of other plaintiffs with less severe injuries and conversely preventing the damages from the lesser injured plaintiffs to diminish the value of the damages of the more severely injured plaintiffs.

While plaintiffs argue that liability is a “foregone conclusion,” the jury nevertheless will be called upon to determine causal negligence, and if the jury finds more than one of the four defendants was negligent, the proper apportionment of liability must be determined. As plaintiffs further point out in their pre-trial memorandum, the jury will have to consider a number of sub-issues in determining whether defendants Talbert and Schultz (drivers) are liable, including whether defendant Talbert was illegally operating a school bus across state lines or improperly using his cell phone at the time of the accident. In deliberating the liability of defendant drivers, the jury will be called upon to evaluate the credibility and conclusions of accident reconstruction experts. Additionally, the jury will have to decide whether the defendant drivers’ employers, Cowan Systems,. LLC and Yellowbird Bus Company, Inc., are liable under theories of respondent superior or negligent entrustment.

The fact that there are four defendants and various sub-issues that must be resolved as to each, in addition to multiple theories of liability put forth by plaintiffs, it would be difficult for a jury to hear evidence on and decide causation and damages currently with liability. Subjecting jurors to the complex liability aspects of this case at the same time they are hearing evidence of injuries to minor plaintiffs would result in confusion and the potential for prejudice.

If a jury finds that one or more defendants are not liable, judicial economy will be promoted by sparing those defendants the time and expense of preparing for separate damages trials.

Thus, a bifurcated trial will allow the jury to consider the complicated issue of liability and causal negligence independently, minimizing the potential for confusion or prejudice, while promoting judicial economy.

In addition to the confusion that will result if the jury is required to determine liability, causation and damages during a single trial, the circumstances surrounding plaintiffs’ injuries present a substantial risk of unfair prejudice because plaintiffs are young children who were involved in a traumatic accident. If liability and damages are presented in a single trial, the jury may be swayed to find defendants liable as a result of jurors’ sympathy for injured children (plaintiffs). The potential sympathy occasioned by this accident involving injuries to minors may also influence the jury’s decisions on assessing the damages for each minor plaintiff.

According to plaintiffs’ pretrial memorandum, the damages sustained by the five minor plaintiffs in the accident vary greatly in terms of severity. This creates the potential that the evidence of the more severely injured plaintiffs could unduly influence the jury assessment of value for the less severe injuries of the others and viceversa.

Plaintiff, Elias Torres suffered the most severe injuries and is demanding $9.5 million in damages. As a result of the accident, plaintiff Torres was diagnosed with nerve injury to his dominant right arm, internal injury to his liver, a laceration to his head requiring 14 staples to close and a fracture of his left scapula. His hospital stay lasted approximately one month, during which time he underwent six procedures. Plaintiff Torres also underwent several procedures following his hospital stay to attempt to revise the disfigurement of his back, shoulder, arms and leg. In addition, plaintiff Torres has allegedly suffered emotional and psychological problems as a result of the accident for which he has undergone both inpatient and outpatient treatment.

Josué Rios sustained severe injury to his left elbow as a result of the accident. Testing revealed the presence of foreign bodies in the elbow further resulting in osteopmyeolitis. Rios was required to undergo irrigation and debridement of the elbow to remove the foreign bodies. He still has pain in the elbow and noticeable scarring. Additionally, he had surgery to decompress the ulnar nerve, which was causing him persistent pain. Rios also suffered a concussion in the accident and was diagnosed with post concussive headaches. Furthermore, Rios was diagnosed with post traumatic stress disorder, continuing depression and suicidal ideation that he attributes to this accident. Rios has outstanding medical bills, as well as recommendations for future medical care and allegations of future lost earning capacity. Rios’s demand for his injuries is $2.5 million dollars.

Conversely, plaintiff Neena Meeker is demanding $165,000 in damages as a result of whiplash associate disorder, post-traumatic onset cephalgia, and cervical, thoracic and lumbar strain and sprain allegedly sustained in the accident. Susan Pena is demanding $275,000 for post-concussive syndrome, headaches and left ankle paint attributed to tarsal coalition and calcaneonavicular. Juan Karlos Martinez is demanding $750, 000 for a fracture of the left arm and injuries to the left shoulder with a surgical recommendation to stabilize the left shoulder.

The concern is that a jury could either maximize the recovery based on the severe injuries suffered by plaintiff Torres and Rios or undervalue the damages for all plaintiffs after hearing injury evidence of Neena Meeker, SusanPena or Juan Karlos Martinez. An additional concern with five plaintiffs and numerous causation and damages experts testifying on behalf of individual plaintiffs is the potential risk that jurors could confuse evidence of plaintiffs’ injuries resulting in an improper award. Requiring separate damages trials for the individual plaintiffs following a finding of liability will prevent unfair prejudice and ensure that each plaintiff is awarded damages commensurate with the injuries he or she sustained in the accident.

Bifurcation is an appropriate choice in this case because it would reduce the risk of unfair prejudice and confusion and promote judicial economy. The issues of liability and damages are not so intertwined in this case that bifurcation would be a waste of time and judicial resources.

CONCLUSION

For the foregoing reasons, this court respectfully requests that its decision to bifurcate liability and damages and hold separate damages trials for each of the five plaintiffs be affirmed.

      . Batista, et al. vs. Yellowbird Bus Company, Inc., et al., 070601319; Meeker, et al. vs. Yellowbird Bus Company, Inc., et al., 080700179; Rosado, et al. vs. Yellowbird Bus Company, Inc., et al., 070602690; Cepeda, et al. . vs. Yellowbird Bus Company, Inc., et al., 070603591; and Lopez, et al. vs. Yellowbird Bus Company, Inc., et al., 070701409.


author: ALBRIGHT, J.,

text:
    Lower Perkiomen Valley Regional Sewer Auth. v. Beyer

      George J. Ozorowski, for apellee.

      Robert L. Brant Jr. and Wendy F. McKenna, for appellants.
    April 29, 2011
   ALBRIGHT, J.,

Catherine Beyer, Frederick J. Kaczor and Mary T. Kaczor (collectively referred to as “condemnees”) appeal from this court’s orders, dated November 12, 2010, overruling the condemnees’ preliminary objections to the Lower Perkiomen Valley Regional Sewer authority’s declarations of taking of certain properties of the condemnees, pursuant to the condemnor’s resolutions 2009-17 and 2009-18, respectively. For the reasons that follow, the undersigned believes that the condemnees’ appeals are without merit and that the trial court’s orders of November 12, 2010 should be affirmed.

FACTUAL AND PROCEDURAL BACKGROUND

On December 23, 2009, the Lower Perkiomen Valley Regional Sewer authority (the “Condemnor” or “authority”) filed two declarations of Taking (the “declarations”) for the purpose of acquiring temporary construction easements and permanent sanitary sewer easements needed to facilitate the expansion, construction, improvement, maintenance and operation of the Condemnor’sPerkiomenCreeklnterceptor. The Perkiomen Interceptor is the system through which wastewater flows by gravity from the authority’s six member municipalities to the Oaks Wastewater Treatment Plant located in Oaks, Pennsylvania.

In response to the declarations, the condemnees filed timely preliminary objections on January 22, 2010, raising the following issues:

1. The declarations contain insufficient recital of the action by which the declaration of taking was authorized, as required by 26 Pa. C.S. § 302(b)(3).
2. The declarations contain an insufficient recital of the purpose of the condemnation, as required by § 302(b)(4) of the Eminent Domain Code, 26 Pa. C.S. §302(b).

While the condemnees did not assert in their preliminary objections that the authority’s declarations were either related to or failed to comport with the participating municipalities then current or proposed Act 537 plan, reference to that issue was subsequently raised in their Supplemental Brief, but failed to elicit a written response from the Condemnor. Nor, in fact, was the subject Act 537 Plan ever made part of the record in this case, as a result of which the trial court’s familiarity with the Plan itself is extremely limited, and, by implication, its relevance to this discussion, in any event, remains unproven and thus of no particular import to the resolution of the issues presented in this case. Accordingly, after argument and a thorough review of the record presented, the undersigned overruled the condemnees’ preliminary objections by orders, dated November 12, 2010, following which the condemnees, in a timely manner, filed their notices of appeal with the Commonwealth Court of Pennsylvania. Thereafter, in response to the trial court’s directive of January 14, 2011, the condemnees filed and served upon the undersigned two identical concise statements of matters complained of on appeal (“1925(b) statements”), presenting the following issues for review:

1. The court erred in overruling the appellant’s preliminary objections to condemnor’s declaration of taken [sic] which challenged the power of condemnor to condemn land for a permanent sanitary sewer easement an [sic] location that is inconstant [sic] with the approved Act 537 Plan.
2. Does condemnor have the power to condemn land in a location inconsistent with the approved Act 537 Plan and therefore confers no public benefit in violation of article 1, section 10, of the Pennsylvania Constitution.

DISCUSSION

In eminent domain cases, the trial court is the fact finder and its findings will not be disturbed if supported by substantial evidence. In re Dept. of Transp., of the Right of Way for State Route 0202, Section 701, 871 A.2d 896, 900 n. 2 (Pa. Commw. Ct. 2005). Therefore, where the trial court has overruled preliminary objections, the Commonwealth Court’s scope of review is limited to a determination of whether the trial court committed an abuse of discretion or an error of law. Condemnation by Valley Rural Elec. Co-op., Inc. v. Shanholtzer, 982 A.2d 566, 570 n.4 (Pa. Commw. Ct. 2009) (Quoting York City Redevelopment Auth. v. Ohio Blenders, Inc., 956 A.2d 1052, 1057 n. 4 (Pa. Commw. Ct. 2008)). In the context of eminent domain actions, preliminary objections are a mechanism to expeditiously resolve factual and legal challenges to a declaration of taking before the parties proceed to determine damages.

See 26 Pa. C.S. § 306(a). Finally, preliminary objections are the exclusive means of challenging the condemnor’s authority, the declaration of taking itself, and any alleged procedural irregularities by the condemnor. 26 Pa. C.S. § 306(a).

In this case, the “irregularities” complained of appear now to center upon the condemnees’ argument that the properties which are the subject of the Condemnor’s declarations do not appear to be included within the scheme of the Condemnor’s previously referenced, Act 537 plan. As indicated, Pennsylvania’s Act 537 mandates that all Commonwealth municipalities develop and implement comprehensive sewage management plans. However, in light of the condemnees’ failure to provide the trial court with any legal authority to support their apparent contention that the declarations must comport with either a current or proposed Act 537 plan, the undersigned is not persuaded of any adverse impact or effect which such a plan might have upon the validity of the condemnor’s declarations. Accordingly, the issues raised by the condemnees will be addressed only in the context of their presentation made within the condemnees’ preliminary objections.

The declarations Contain The Requisite Statutory Recitals of authority.

As a municipal authority duly organized pursuant to the Pennsylvania Municipality Authorities Act, the Condemnor is vested with the power of eminent domain. See 53 Pa. C.S. § 5601, et seq.; In re Condemnation of a Permanent Right-of-Way, 873 A.2d 14, 17-18 (Pa. Commw. Ct. 2005). In Pennsylvania, condemnation proceedings are governed by 26 Pa. C.S. § 101, et seq. (“Eminent Domain Code”). The condemnees’ preliminary objections appear to stem from the condemnor’s alleged failure to meet its statutory obligations under 26 Pa. C.S. § 302(b). Section 302(b) provides, in part:

(b) Contents. - The declaration of taking shall be in writing and executed by the condemnor and shall be captioned as a proceeding in rem and contain the following:
(1) The name and address of the condemnor.
(2) A specific reference to the statute and section under which the condemnation is authorized.
(3) A specific reference to the action, whether by ordinance, resolution or otherwise, by which the declaration of taking was authorized, including the date when the action was taken and the place where the record may be examined.
(4) A brief description of the purpose of the condemnation.

26 Pa. C.S. § 302(b)(1)-(4).

The condemnees claim that the authority’s declarations’ did not comply with 26 Pa. C.S. § 302(b)(3), which requires that a condemnor include “[a] specific reference to the statute and section under which the condemnation is authorized.” See 26 Pa. C.S. § 302(b)(3). Contrary, however, to that assertion, the condemnor met its statutory burden in each of the two instances under review by providing the following recitation:

This declaration of taking is authorized by the Municipality Authorities Act, 53 P.S. §5601 et seq., as amended, pursuant to Section 5607 of the Municipality Authorities Act, Title 53 Purdon’s Pennsylvania Consolidated Statutes, Part V, Subpart A, Chapter 56, Section 5607, as amended, the authority is vested with the necessary power and authority to acquire, by purchase or eminent domain, real property to furnish sewers, sewer systems or parts thereof, and sewage treatment works; and pursuant to section 5615 of the Municipality Authorities Act, Title 53 Purdon’s Pennsylvania Consolidated Statutes, Part V, Subpart A, Chapter 56, Section 5615, as amended, the authority is authorized to acquire by purchase or eminent domain proceedings either the fee or the rights, title, interest or easement in such lands as the authority deems necessary to furnish sewers, sewer systems or parts thereof, and sewage treatment works.

[Condemnor’s declarations, at ¶ 5 (emphasis added), filed on 12/23/09].

Furthermore, pursuant to 26 Pa. C.S. § 302(b)(3), the declarations contain “a specific reference to the action...by which the declaration of taking was authorized, including the date when the action was taken and the place where the record may be examined,” by providing that:

The taking described herein is authorized by a Resolution passed by the Lower Perkiomen Valley Regional Sewer authority Board of Directors at a meeting of such Board held on December 17, 2009, after due and proper consideration of the contents thereof by the Board. A copy of the Resolution, including applicable exhibits, is attached hereto as Exhibit “A” and made a part hereof. The record of such Resolution may be examined at the offices of the Condemnor. [Condemnor’s declarations, at ¶ 6, filed 12/23/09 (emphasis added)]. Resolutions 2009-17 and 2009-18, referenced in the declarations, were filed simultaneously with the declarations on December 23, 2009.

In examining the scope of the specific statutory authority referenced by the Condemnor in its declarations, Title 53, Section 5607, which permits the Condemnor to proceed with projects such as the Perkiomen Creek Interceptor, states, in relevant part:

(a) Scope of projects permitted. — Every authority incorporated under this chapter shall be a body corporate and politic and shall be for the purposes of financing working capital; acquiring, holding, constructing, financing, improving, maintaining and operating, owning or leasing, either in the capacity of lessor or lessee, projects of the following kind and character and providing financing for insurance reserves:
(5) Sewers, sewer systems or parts thereof.
(6) Sewage treatment works, including works for treating and disposing of industrial waste.

53 Pa. C.S. § 5607(a)(5), (6)(Emphasis added). Pursuant to section 5607, and as set forth in the its Resolution 2009-17, the Condemnor “is vested with the necessary power an authority to acquire, by purchase or eminent domain, real property to furnish sewers, sewer systems or parts thereof, and sewage treatment works.” [See condemnor’s resolution 2009-17, adopted 12/17/09, at p.3]

As additional support for the declarations made in each of the two takings at issue, the Condemnor makes reference to section 5615 of title 53, which states, in relevant part:

a) Authorization. —
(1) Except as provided in paragraph (2), the authority shall have the power to acquire by purchase or eminent domain proceedings either the fee or the rights, title, interest or easement in such lands, water and water rights as the authority deems necessary for any of the purposes of this chapter. Water and water rights may not be acquired unless approval is obtained from the Department of Environmental Protection.

53 Pa. C.S. §5615(a)(1). Pursuant to section 5615, and as set forth in the Condemnor’s Resolution 2009-17, it “is authorized to acquire by purchase or eminent domain proceedings either the fee or the rights, title, interest or easement in such lands as the authority deems necessary to furnish sewers, sewer systems or parts thereof, and sewage treatment works.” [See Condemnor’s Resolution 2009-17, adopted 12/17/09, at p.3]. Accordingly, the condemnees’ preliminary objections to the declarations alleged noncompliance with § 302(b)(2) is meritless and, as such, the trial court properly rejected any such assertion made in support of those objections.

The Declarations Contain The Requisite Statutory Recitals of Purpose.

The condemnees claim further that the subject declarations lack sufficient recitals of purpose as required under 26 Pa. C.S. § 302(b)(4). However, as is easily revealed by only a cursory review of the declarations in question, the statutory requirement of inclusion therein of a clearly stated purpose was satisfied with the following explanation:

The purpose of the condemnation is to acquire a temporary construction easement and a permanent sanitary sewer easement, which easements are necessary to expand, construct, improve, maintain and operate the authority’s Perkiomen Creek Interceptor.

[Condemnor’s declarations, at ¶ 7, filed 12/23/09]. The declarations’ express explanation that these Takings were necessary for the expansion of the Perkiomen Creek Interceptor provides a statutorily sufficient articulation of purpose supporting the underlying takings. Therefore, the condemnees’ preliminary objections were, in their reliance upon the declarations’ failure to comply with 26 Pa. C.S. § 302(b)(4), ill-advised and unfounded.

As demonstrated, the authority fulfilled its statutory obligations and any contention by the condemnees that the declarations do not comport with current Act 537 Plan is insufficient to negate the legality of those declarations.

CONCLUSION

In accordance with the aforementioned, the trial court believes that its orders, dated November 12, 2010, overruling the condemnees’preliminary objections, should be affirmed.

      . According to Pa. R.A.P. 311(e), “[a]n appeal may be taken as of right from an order overruling preliminary objections to a declaration of taking.”

      . On December 17, 2009, the Lower Perkiomen Valley Regional Sewer authority’s Board of Directors passed Resolution 2009-17, authorizing the taking of certain real property owned by Catherine Beyer and more specifically identified as 3568 Areola Road, Lower Providence Township, Montgomery County, Pennsylvania, Tax Parcel Number 43-00-00547-00-4, as described in Deed Book 5492 Page 00057, recorded in the Montgomery County Recorder of Deeds Office.

      . On December 17, 2009, the Lower Perkiomen Valley Regional Sewer authority’s Board of Directors passed Resolution 2009-18, authorizing the taking of certain real property owned by Frederick J. Kaczor and Mary T. Kaczor and more specifically identified as 3572 Areola Road, Lower Providence Township, Montgomery County, Pennsylvania, Tax Parcel Numbers 43-00-00550-00-1 and 43-00-00553-00-7, as described in Deed Book 5492 Page 00057, recorded in the Montgomery County Recorder of Deeds Office.

      . The Beyer and Kaczor appeals deal with identical issues, therefore, the undersigned will address both appeals in this opinion.

      . The Lower Perkiomen Valley Regional Sewer authority is a municipal authority duly organized pursuant to the Pennsylvania Municipality Authorities Act, 53 Pa. C.S. §5602, et seq.

      . According to Condemnor’s website, at http://www.lpvrsa. org/projects.htm, The Perkiomen Interceptor “is the system by which wastewater flows by gravity from the authority’s six member municipalities to the Oaks Wastewater Treatment Plant,” in Oaks, Pennsylvania.

      . 26 Pa. C.S. § 306(a) (1) (“Within 30 days after being served with notice of condemnation, the condemnee may file preliminary objections to the declaration of taking.”)

      . The trial court deems waived issues, previously asserted by condemnees in their preliminary objections, which were abandoned by counsel for condemnees at argument.

      . The Pennsylvania Sewage Facilities Act (Act 537), enacted on January 24, 1966, “requires that all Commonwealth municipalities develop and implement comprehensive official plans that provide for the resolution of existing sewage disposal problems, provide for the future sewage disposal needs of new land development and provide for the future sewage disposal needs of the municipality.” See e.g., http://www. dep.state.pa.us/dep/deputate/watermgt/wqpAvqp_wm/537Map/537Plan. htm.

      . See e.g., http://www.dep.state.pa.us/dep/deputate/watermgty wqp/wqp_wm/537Map/537Plan.htm.

      . 53 Pa. C.S. § 5607(d) “Powers. — Every authority may exercise all powers necessary or convenient for the carrying out of the purposes set forth in this section, including, but without limiting the generality of the foregoing, the following rights and powers: (15) To have the power of eminent domain.”


author: PICCIONE, J.,

text:
    Oesterling v. Allstate Ins. Co.

      Catherine Cirrincione, for plaintiff.

      David J. Obermeier, for defendants.
    June 28, 2011
   PICCIONE, J.,

Before the court for disposition is defendants’ motion for summary judgment. The current action arises from an insurance claim submitted by the plaintiff, Robert F. Oesterling, to the defendant, Allstate Insurance Company (hereinafter “Allstate”), after the plaintiff suffered injuries related to a motor vehicle accident on July 13, 2006. At the time of the accident, the plaintiff was operating a 2005 Honda motor scooter, which collided with a vehicle operated by Jacqueline Wyant; it is alleged that Ms. Wyant was the driver responsible for the accident. Plaintiff subsequently presented a liability claim against Ms. Wyant’s insurance company and received the liability limit of $15,000.00. Plaintiff also presented an uninsured motorist (UIM) claim to Liberty Mutual Insurance Company, as the insurer of plaintiff’s motor scooter. Plaintiff again received the policy limits of $15,000.00.

Plaintiff, believing that the value of his injuries exceeded $30,000.00, then submitted a UIM claim to Allstate. Plaintiff had previously obtained an insurance policy for two other vehicles owned by plaintiff with Allstate in November 1998. Defendant J. Richard Will sold plaintiff the policy. In August 2005, defendant J. Richard Will retired, and plaintiff’s policy was transferred by Allstate to defendant Keith Laidlaw. As such, at the time of plaintiff’s motor scooter accident, Allstate was still the insurance care provider for plaintiff’s two other motor vehicles, but according to defendant Allstate, plaintiff’s current policy did not extend coverage to plaintiff’s motor scooter. As such, Allstate promptly denied plaintiff’s claim, and plaintiff in turn initiated the above listed action by filing a complaint against the defendants on August 22, 2008. An amended complaint was later filed on October 7, 2008, and the defendants responded by filing preliminary objections on November 7, 2008, asserting that counts II, VI, VII, X, XI and XIV of the amended complaint were legally insufficient. After hearing argument on defendants’ preliminary objections, the Honorable President Judge Dominick Motto issued an order of court, dated June 30, 2009, denying defendants’ preliminary objections and requiring the defendants to file an answer to the complaint within twenty days. The same was completed, and on November 5, 2010, defendants filed a motion for summary judgment, which is presently before the court for a determination.

Under Pennsylvania law, the standard for summary judgment is set forth by Rule 1035.2 of the Pennsylvania Rules of Civil Procedure. The Rule states:

After the relevant pleadings are closed, but within such time as not to unreasonably delay trial, any party may move for summary judgment in whole or in part as a matter of law
(1) whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert report, or
(2) if, after the completion of discovery relevant to the motion, including the production of expert reports, 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 or defense which in a jury trial would require the issues to be submitted to a jury. Pa.R.C.P. 1035.2.

The moving party bears the burden of proving that no genuine issue of material fact exists. Rush v. Philadelphia Newspapers, Inc., 732 A.2d 648, 650 (Pa.Super. 1999). In determining whether summary judgment is appropriate, the trial court is required to view the record in a light most favorable to the non-moving party, and “all doubts as to the existence of a genuine issue of material fact must be resolved in favor of the nonmoving party.” P.J.S. v. Pennsylvania State Ethics Comm’n, 732 A.2d 174 (Pa. 1999) (citing Kapres v. Heller, 536 Pa. 551, 640 A.2d 888 (1994)). Summary judgment is proper only when the uncontroverted allegations of record and submitted affidavits demonstrate that no genuine issue of material fact exists, and that the moving party is entitled to judgment as a matter of law. Potter v. Herman, 762 A.2d 1116, 1117 (Pa. Super. 2000).

In their motion for summary judgment, the defendants first request this court to dismiss count I of plaintiff’s complaint. Count I seeks declaratory judgment against defendant Allstate, whereby the plaintiff’s rights as set forth in his original policy at policy #0 01 395527 11/14 would be upheld, and policy endorsement AU10781-1 would be void and unenforceable. In support of their motion, defendants argue that in 2005, more than a year before plaintiff’s accident, Allstate provided plaintiff with notice regarding changes to his insurance policy, which specifically referenced UIM coverage and the exclusion of coverage based on the “household exclusion”. This fact is not contested by the plaintiff. Defendant further argues that the Pennsylvania courts have consistently held that household exclusions are valid and enforceable clauses in any insurance policy. Defendants also refer this court to a plethora of cases including, but not limited to, Erie Ins. Exch. v. Baker, 601 Pa. 355, 972 A.2d 507 (2009), Alderson v. Nationwide Mut. Ins. Co., 884 A.2d 288 (Pa. Super. 2005) and Eichelman v. Nationwide Ins. Co., 551 Pa. 558, 711 A.2d 1006 (1998), which all stand for this veiy proposition.

After reviewing the case law referenced by the defendants, this court agrees with defendants’ assertion: household exclusions are valid and enforceable clauses in an insurance policy. This general rule, however, is qualified by the presupposition that such a clause is properly introduced into the policy in the first place. The Pennsylvania Supreme court has clearly ruled that where “an individual applies and prepays for specific insurance coverage, the insurer may not unilaterally change the coverage provided without an affirmative showing that the insured was notified of, and understood, the change, regardless of whether the insured read the policy.” Tonkovic v. State Farm Mut. Auto Ins. Co., 513 Pa. 445, 455, 521 A.2d 920, 925 (1987).

Neither party contests the fact that plaintiff initially purchased a policy from Allstate in November 1998. Nor do they contest the fact that at the time this policy was issued, and through May 2005, plaintiff’s policy did not provide for a “household exclusion”, as such any vehicle operated by the plaintiff, here the motor scooter, would have been covered under the initial policy. In April of 2005, however, defendant Allstate sent plaintiff notice of a change in his policy that added the exclusion of coverage to a motor vehicle owned or leased by a policy holder and not expressly insured under the policy. This additional language has been commonly referred to as the “household exclusion”.

Plaintiff argues that the notice provided to the plaintiff by defendant Allstate was insufficient action to warrant a change in plaintiff’s policy, as an insurance provider is obligated to establish that the insured understood the change, regardless of whether he actually read the policy. Plaintiff further argues that he reasonably expected the July 13, 2006 accident to be covered under his policy, given his understanding of his original policy and the terms and conditions provided therein. The reasonable expectation of the insured is the focal point of the insurance transaction involved here. E.g. Tonkovic. supra; Beckham v. Travelers Insurance Co., 424 Pa. 107, 118, 225 A.2d 532, 537 (1967).

In evaluating any insurance transaction, courts must consider whether the insured’s reasonable expectations are fulfilled, as the public has a right to expect that they will receive something of comparable value in return for the premium paid. This expectation is clearly based on the fact that “the expectations of the insured are in large measure created by the [representations of the] insurance industry itself.” Tonkovic, 521 A.2d at 925. “Such representations may or may not accurately reflect the contents of the written document and therefore the insurer is often in a position to reap the benefit of the insured’s lack of understanding of the transaction.” Id. (citing Allen v. Metropolitan Life Ins. Co., 208 A.2d 638,642 (N.J. 1965); Rempel v. Nationwide Ins. Co., 471 Pa. 404, 370 A.2d 366 (1977).

After considering the applicable case law, the court turns to the case sub judice. The facts as stated before the court clearly establish that the plaintiff initially purchased an insurance policy in November 1998. The policy was later changed by defendant Allstate to include a “household exclusion” in April 2005 upon notifying the plaintiff of the same. What is not clear at this stage of the proceedings is whether the plaintiff understood the changes made to his policy. Plaintiff’s argument that he did not read the policy changes is supported by the fact that the same was included in a standard policy renewal form customarily issued by defendant Allstate. As such, defendant’s motion for summary judgment with respect to count I of plaintiff’s complaint is denied.

Defendants next petition this court to dismiss counts II, VII, and XI of the amended complaint. In their brief to the court, the defendants argue that given the fact that the plaintiff is not entitled to UIM benefits under his current Allstate auto policy, all claims against the defendants for negligence must in turn be dismissed. The court, however, in the discussion set forth above has determined that there are still factual disputes regarding count I of plaintiff’s amended complaint. Consistent with the court’s prior analysis, the court determines that because the defendants have based their argument on the assumption that plaintiff is not entitled to benefits, and the fact that factual disputes still exist there under, defendants’ motion for summary with respect to various counts of negligence as set forth in plaintiff’s amended complaint must be denied.

Defendants’ motion further petitions this court to dismiss counts III, VIII and XII of plaintiff’s amended complaint. Defendant’s again predicate their argument on the assumption that plaintiff is not entitled to UIM benefits under his current Allstate auto policy, and in turn conclude all claims against the defendants for breach of contract must be dismissed. The court must DENY defendants’ motion for reasons set forth above.

ORDER OF COURT

And now, June 28, 2011, with this matter being before the court on February 28, 2011 for argument on a motion for summary judgment, filed on behalf of the defendants, by and through their counsel, David J. Obermeier, Esquire, and with Catherine Cirrincione, Esquire, appearing and representing the plaintiff, and after having considered the arguments made by counsel as well as their respective briefs, and in accordance with the attached opinion, it is hereby ordered and decreed as follows:

1. Defendants’ motion for summary judgment with respect to count I of plaintiff’s complaint is denied.

2. Defendants’ motion for summary judgment with respect to counts II, VII, and XI is denied.

3. Defendants’ motion for summary judgment with respect to counts III, VIII, and XII is denied.

4. The defendants’ motion for summary judgment with respect to count V, which alleges a violation of 42 Pa.C.S.A. § 8371, has not been properly briefed for the court or addressed by counsel at the scheduled argument. The same is therefore denied.

5. Upon agreement of the parties, counts IV, IX, and XII of the amended complaint, with respect to various allegations of fraud, are hereby dismissed.

6. Upon agreement of the parties, counts VI, X, and XIV of the amended complaint, with respect to various allegations of violations of the Unfair Trade Practices and Consumer Protection Act, 73 P.S. §201-1 et. seq. are hereby dismissed.

7. The Prothonotary shall properly serve notice of this order of court and attached opinion upon counsel of record for the parties.


author: FOX, J.,

text:
    Burke v. Independence Blue Cross

      Joseph Caldwell Leonard and David G. Gates, for plaintiff.

      Gerald J. Dugan, for defendant.
    July 19, 2011
   FOX, J.,

Plaintiff has appealed the decision of an IPRO, an external review agency appointed by the Pennsylvania Department of Insurance, which found that applied behavior analysis services rendered in a school setting are not covered under the policy with Independence Blue Cross.

FACTUAL and PROCEDURAL HISTORY

The parties agree on the relevant facts. Anthony Burke, a minor child of John Burke, suffers from an autism spectrum disorder. He had been receiving Applied Behavior Analysis (ABA) services in the home to treat his condition before August 25, 2009. On that date, the plaintiff’s father, John Burke, requested that Independence Blue Cross (IBC) pay for similar ABA services at Anthony’s elementary school, a local Catholic parish school. Magellan Health Services, IBC’s administrator for mental health and substance abuse coverage, denied this request. In denying coverage, Magellan pointed to a provision in the Health Plan Policy which stated that “no benefits will be provided for services...[f]or care in a school.” Burke appealed this decision and it was eventually submitted to IPRO, an independent “Certified Review Agency,” which upheld Magellan’s denial. At the time his claim came before IPRO, Anthony was six years old.

On January 1, 2010, Act 62 came in to effect, codified in 40 P.S. § 764h(a). Act 62 provides that “[a] health insurance policy...shall provide to covered individuals... forthetreatmentofautismspectrumdisorders.”“Treatment” is defined by the Act to include “rehabilitative care,” which, in turn, is defined to “include applied behavioral analysis.” 40 P.S. 764h(f)(15); 40 P.S. 764h(f)(12). Act 62 further provides that “[c] overage under this section shall be subject to...general exclusions...to the same extent as other medical services or programs covered by the policy are subject to these provisions.” 40 P.S. § 764h(c).

On July 1, 2010, Mr. Burke’s health plan converted to a self funded policy of a sort not subject to the requirements of Act 62. The parties agree that IBC cannot be liable for a failure to provide coverage either before January 1, 2010 or after July 1, 2010. The question before this court is only whether Act 62 required IBC to cover Anthony’s “in school” ABA services from the period between January 1 st and July 1 st of 2010. The parties submitted to the court the following stipulation of facts:

1. The Independence Blue Cross policy which provided coverage to the plaintiff until July 1, 2010 contained the following exclusion, which applies to all services under the policy: “Except as specifically provided in this contract, no benefits will be provided for services, supplies or charges:
a. For care in a nursing home, home for the aged, convalescent home, school, institution for retarded children, custodial care in a skilled nursing facility”
2. On January 1, 2010, Act 62 (40 P.S. §764h, “Autism Spectrum Disorders Coverage”) became effective as it relates to the plaintiff, January 1st being the anniversary date of the Independence Blue Cross policy in question.
3. Effective July 1,2010, the coverage provided both Suzanne M. Burke and her husband, John T. Burke, converted from fully funded insurance policies to self funded healthcare coverage.
4. Act 62 is inapplicable to such self funded healthcare programs.
5. Independence Blue Cross has no responsibility to provide insurance coverage, pursuant to the quoted exclusion in its policy, for any “in school” services to plaintiff.
6. The only issue before this court going forward is whether or not Act 62 voids the “place of service” exclusion in the Independence Blue Cross policy for the period of January 1,2010 through July 1, 2010.

DISCUSSION

The question is essentially one of statutory construction. IBC believes that the term in the contract specifying that “no benefits will be provided for services...[f]or care in a school” is the kind of “general exclusion” permitted by the Act under § 764h(c). Burke contends that because ABA services is specifically mentioned in § 764h(a) (through incorporation of subsections (f)(15) and (f) (12)) as a service which must be provided, it cannot be subject to the “exemption” language. While each of these interpretations is colorable, for the reasons which follow, the Burke interpretation is more consonant with the principles of statutoiy construction and the intent of the Legislature.

IBC’s Interpretation

IBC by exclusion contained in its policies, does not provide treatment or services for any illness or condition in schools, nursing homes, convalescent homes, institutions for retarded children, or for individuals in custodial care in a nursing facility. It excludes services provided in these settings because it is unable to monitor the services as they are being delivered; this exclusion, according to IBC, is therefore a form of quality control. IBC argues that because it does not provide these services for any sufferers of any condition, this policy is a general exemption that relieves them from providing ABA service “in schools” under § 764h(c).

In support of this position, IBC draws attention to the allegedly unambiguous meaning of the language itself. IBC notes that Pennsylvania’s rules for statutory construction, as codified in 1 Pa. C.S.A. § 1921(b), provide that “[w]hen the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.” IBC further argues that, since the words of § 764h(c) clearly and unambiguously permit IBC to exclude “in school” services from coverage, this court ought not to engage in statutoiy interpretation or investigate the legislative intent of the statute. This argument fails however, because Act 62 is not clear and unambiguous.

§ 764h(c) does not exist in a vacuum. While it does facially state that insurers may opt not to provide coverage pursuant to a “general exclusion,” § 764(a) of the same law states that insurers must cover ABA services. Because a facial reading of these two provisions would cause them to conflict with one another, there is an ambiguity in the statute as a whole even though there may not be one inherent in the text of § 764h(c) when viewed in isolation. In fact, the ambiguity caused by the tension between these two provisions is notable enough that the Pennsylvania Insurance Department published a notice specifically to address this conflict. 39 Pa.B. 1927 (2009). Beyond the tension between these two provisions, the very phrase “general exclusions” is susceptible enough to interpretation that it creates some ambiguity in and of itself. The existence of these ambiguities mean that the more apt rule of statutory construction is 1 Pa. C.S.A. § 1921(a), which provides that “[t]he object of all interpretation and construction of statutes is to ascertain and effectuate the intention of the General Assembly.”

IBC also urges that § 764h(c) exempts it from covering ABA services “in schools” because of existing federal mandates under the Individuals with Disabilities Education Act (IDEA) and analogous Pennsylvania statutes for autism treatment services “in school”. IBC makes three arguments in support of this position: (1) that the existence of other statutes requiring ABA service be provided “in schools”, means that the legislature did not intend for Act 62 to require coverage of the service by insurance carriers; (2) that, as a matter of policy or equity, the fact that the plaintiff and others in his position have access to such services would make insurance coverage unnecessary and duplicative; and (3) that IDEA may federally preempt Act 62, if Act 62 is interpreted to require insurance carriers to cover ABA services “in school”. Even assuming that the ABA services provided pursuant to IDEA are fully coextensive with and identical to those provided for under Act 62, none of these arguments are persuasive.

There is no compelling reason to believe that the General Assembly drafted Act 62 with the intention of ensuring autism treatment only in situations in which that treatment was previously unavailable. Legislatures commonly create overlapping statutes as a way to ensure some particular result. A rule of statutory construction that presumed that every statutory scheme was sole lord and sovereign over the facts it was designed to address would require drastic reimagining of, for example, the Rehabilitation Act and the Americans with Disabilities Act, or of the Clean Water Act; or the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act of 1980. These situations involve multiple statutory schemes that overlap to fulfill legislative purposes, and courts are comfortable with these statutes providing somewhat duplicative services or protections. In this case, there are in fact very good reasons why the General Assembly might have chosen to adopt this kind of overlapping protection. While requiring insurance carriers to cover ABA in schools might seem to obviate the need for state-funded services, it only does so for those children who are, in fact, insured. By creating overlapping statutes requiring the provision of services, the legislature may thus have chosen to pass some of the cost of ABA services to insurance carriers (and by extension insurance policy holders) while still maintaining state sponsored services for uninsured children. For these reasons, it is easily imaginable that the General Assembly intended for both IDEA-associated statutes and Act 62 to provide overlapping protections by operating in concert with one another.

Neither is there a compelling policy or equity rationale for interpreting Act 62 as not requiring ABA services in schools. IBC implies that it would be unfair to impose upon it the cost of covering ABA, since the Burke family could have accessed those services through IDEA. Even assuming that the Burkes could have gotten ABA services through IDEA, this point does not speak to the correct interpretation of Act 62 or to the propriety of holding IBC liable. The possibility that the Burkes could have gotten the same services elsewhere is rather a mitigation of damages issue that IBC can raise at that stage of the proceedings. The gravamen of the Burke’s claim is that IBC agreed to provide coverage and Act 62 removed any ability to exclude this particular type of treatment regardless of the setting. The resolution of that issue does not depend on whether or not the Burkes could have obtained that service elsewhere, such as a different school or at home. Even if IBC’s coverage would have been duplicative or unnecessary, it is still liable if it agreed to provide such coverage.

The argument that Act 62 is federally preempted to the extent that it purports to require insurance carriers to cover ABA services “in school” also fails. It is very doubtful that a federal preemption argument would be successful here, or even colorable. IBC argues that Act 62 would be subject to conflict preemption because it would “work to displace or override” IDEA. This is unlikely. Conflict preemption exists when “compliance with both laws is impossible or if the state law frustrates the objectives of the federal law,” and it is difficult to imagine that this standard could be met here. Malik v. Lehigh Valley Balloon Festival, 20 Pa. D. & C.4th 41, 46 (Pa. C.P. 1993) (citing Boyle v. United Technologies Corp., 487 U.S. 500, 507-08 (1988)).

Burke’s Interpretation

Burke argues that this court should Interpret Act 62 as imposing at least a minimum level of coverage - specifically, a level of coverage which includes those treatments which are specifically listed in the statute. The “general exclusions” provision, under this reading, would allow insurance carriers to exclude treatments and services not specifically articulated by the statute, but only to “the same extent as other medical services covered by the policy.” 40 P.S. § 764h(c). The Insurance Department urges an identical understanding of Act 62, asserting that the Act requires coverage of medically necessary ABA services “irrespective of whether [ABA service is] otherwise excluded by the policy.” 39 Pa.B. 1927. This reading of the law would turn § 764h(c) into essentially an antidiscrimination provision requiring that if an insurance carrier chooses to cover a type of treatment or service for any other condition, then it must cover that treatment or service for autism spectrum disorders as well.

In support of this argument, Burke cites to 1 Pa.C.S. § 1921(c), which specified that “the intention of the General Assembly may be ascertained by considering, among other matters...administrative interpretations of [a given] statute [emphasis added].” It is true that the relevant administrative interpretation of the statute supports Burke’s argument. However, this court cannot simply end its inquiry with that. 1 Pa.C.S. § 1921(c) does not require this court show any deference to the Insurance Department’s interpretation; rather, it simply suggests that such an interpretation may be relevant to the court’s inquiry. Therefore, the Insurance Department’s interpretation, as articulated in 39 Pa.B. 1921 and in its amicus brief, is to be given weight but cannot control.

This court finds that the better interpretation of Act 62 is the one urged by Burke and the Insurance Department. This is because that interpretation best comports with the normal canons of statutory construction, avoids the possible neutering of the Act, and gives weight to the Insurance Department’s interpretation of the General Assembly’s intent.

There is a principle of statutory interpretation — classically formulated as generaba specialibus non derogant, or “the general does not detract from the specific” — that a more specific rule or provision will control a later and more general rule or provision where both apply to the same facts. This canon was explained by the United States Supreme court thusly:

“The reason and philosophy of the rule is, that when the mind of the legislator has been turned to the details of a subject, and he has acted upon it, a subsequent statute in general terms or treating the subject in a general manner, and not expressly contradicting the original act, shall not be considered as intended to affect the more particular or positive previous provisions, unless it is absolutely necessary to give the latter act such a construction, in order that its words shall have any meaning at all.”

Rodgers v. U.S., 185 U.S. 83, 88 (1902) (quoting Theodore Sedgwick, A TREATISE ON THE RULES WHICH GOVERN THE INTERPRETATION AND APPLICATION OF STATUTORY AND CONSTITUTIONAL LAW at 98 (1857)).

Act 62 contains just such specific and general provisions. § 764h(a) incorporates by reference a highly detailed definition of “treatment” as well as a specific list of treatments that insurance carriers must cover, including not only ABA services but also speech language pathology, occupational therapy and a number of other services. It is clear from the specificity of this provision that “the mind of the legislator [was] turned to the details of the subject,” in just such a way as to justify the application of the traditional rule. Id. By contrast, § 764h(c) does not define “general exclusions” or list any types of services or treatments, such as services in schools, that may be excluded. Thus, by traditional rule of generaba specialibus non derogant, the best reading of Act 62 is that § 764h(a) controls and limits the operation of § 764h(c) rather than the reverse.

This reading of Act 62 is supported by 1 Pa.C.S. § 1921(a), which provides that “every statute shall be construed, if possible, to give effect to call its provisions.” Act 62 specifically defines applied behavioral analysis at 40 P.S. §764h(f)(1) as “the design, implementation and evaluation of environmental modifications, using behavioral stimuli and consequences, to produce socially significant improvement in human behavior or to prevent loss of attained skills or function, including the use of direct observation, measurement and functional analysis of the relations between environment and behavior.” IBC’s interpretation of Act 62 would allow it to continue its exclusions of this service when provided “in school.” The delivery of ABA services in a school environment has been proven effective as a treatment for autism spectrum disorder. Thus, even though Burke is covered for ABA outside of the school setting, IBC’s interpretation would render meaningless the mandate that insurance carriers cover “the treatment of autism spectrum disorders.”

Finally, the Insurance Department’s interpretation of the statute carries some weight. As noted above, the Insurance Department’s interpretation does not control this court nor does it absolve this court of the responsibility to construe Act 62 for itself. However, as provided in 1 Pa.C.S. § 1921(c), the Department’s interpretation is relevant to the intent of the General Assembly, insofar as this is true, the Department’s interpretation also mitigates in favor of a finding for Burke.

This court finds that the most correct interpretation of Act 62 is to require IBC to provide ABA service “in school” despite the “general exclusions” exception in §764h(c). This interpretation is most consistent with the principle of statutory construction that the specific provision controls the general provision.

And now, July 19, 2011, upon consideration of the appeal from the decision of IPRO, the response thereto, a review of the certified record, the briefs submitted by the parties and after oral argument, it is hereby ordered and decreed that the appeal is granted and the decision of IPRO is reversed. It is further ordered that defendant Independence Blue Cross take action consistent with this decision.

      . Initially this matter was filed by plaintiff as a complaint for breach of contract to which IBC filed responsive pleadings. Thereafter, plaintiff filed for judgment on the Pleadings. Pursuant to a conference with counsel it was agreed that this was an appeal pursuant to 40 P.S. 764h(k) (2) and was presented to the court as an agency appeal. The parties submitted a Stipulation, the court received the certified record, briefs were submitted, and the court heard oral argument.

      . This point is in doubt, given plaintiff’s counsel’s argument in hearing transcript vol. 1 at 44:16-45:12.