author: McKAY, Circuit Judge.

text:
    Edward C. LeJEUNE; Deborah LeJeune, Appellants, v. BLISS-SALEM, INC.; E.W. Bliss Company; General Electric Co., Appellees.
    No. 95-1741.
    United States Court of Appeals, Third Circuit.
    Argued March 19, 1996.
    Decided June 10, 1996.

      Michael J. McCaney, Jr. (argued), Heller, Kapustin, Gershman & Vogel, Blue Bell, PA, for appellant.
    Keith D. Heinold (argued), Craig S. Hudson, Marshall, Dennehey, Warner, Coleman & Goggin, Philadelphia, PA, for appellee General Electric Co.
    John R. McHaffie (argued), Frayne & Hatzell, Philadelphia, PA, for appellee Bliss-Salem, Inc.
    Before: BECKER, McKEE and McKAY, Circuit Judges.

      The Honorable Monroe G. McKay, Judge of the United States Court of Appeals for the Tenth Circuit, sitting by designation.

   OPINION OF THE COURT

McKAY, Circuit Judge.

Appellants Edward and Deborah LeJeune appeal from the district court’s grant of summary judgment for the Appellees Bliss-Salem, Inc. and General Electric Co. The Le-Jeunes brought this negligence and strict products liability action against Appellees when Mr. LeJeune was injured while working on a piece of machinery Appellees had repaired. For the reasons that follow, we affirm the district court.

I.

Mr. LeJeune, a Pennsylvania resident, worked at a Delaware steel mill as an “oiler” or “lube man.” As such, he was responsible for checking the oil and lubrication of various machines. Mr. LeJeune’s accident occurred on a piece of machinery known as a “table.” Tables consist of a frame which holds large steel cylinders weighing two to five tons each. The cylinders, powered by motors, are rotated in order to transport hot steel slabs from one processing machine to another. Gaps, approximately two inches in width, exist between cylinders. Mr. LeJeune, believing a certain table was deactivated, jumped on top of the cylinders in order to do his maintenance work. The cylinders were activated, and, as they began to roll, Mr. Le-Jeune was caught in the gap between them. His injuries were serious and extensive.

Appellees’ involvement with the steel mill began when CitiSteel, the owner of the mill, hired Appellees in 1988 to refurbish the steel mill machinery. The mill had been shut down for two years and had deteriorated into a serious state of disrepair. General Electric employees were on-site for eight months repairing equipment. Some refurbishing work took place at a General Electric shop in Pennsylvania. Bliss-Salem performed most of its refurbishing work at its Ohio plant. Appellees finished their work at the steel mill approximately three years before Mr. Le-Jeune’s accident occurred.

Basing their claim on tort theories of negligence and strict products liability, Appellants argue that the contracts between CitiSteel and Appellees created a duty requiring Appellees to redesign the steel mill equipment, eliminating any safety problems. They argue that this duty included a duty to warn of any hazards inherent in the machinery. Appellees argue that the contracts simply required them to put the mill machinery back into working order and that any duty on their part did not extend to reevaluating the safety aspects of the various machinery involved.

II.

Before we address the tort issues in this case, we must first decide which state’s law applies. In choosing which law applies, a federal court sitting in diversity must apply the choice-of-law rules of the forum state. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941); Shuder v. McDonald’s Corp., 859 F.2d 266, 269 (3d Cir.1988). Appellants brought this action in the United States District Court for the Eastern District of Pennsylvania. Thus, we must apply Pennsylvania’s choice-of-law rules.

Pennsylvania choice-of-law analysis consists of two parts. First, the court must look to see whether a false conflict exists. Then, if there is no false conflict, the court determines which state has the greater interest in the application of its law. See Cipolla v. Shaposka, 439 Pa. 563, 565, 267 A.2d 854 (1970); Lacey v. Cessna Aircraft Co., 932 F.2d 170, 187 & n. 15 (3d Cir.1991) (applying Pennsylvania choice-of-law rules for purposes of forum non conveniens analysis). A false conflict exists where “only one jurisdiction’s governmental interests would be impaired by the application of the other jurisdiction’s law.” Lacey, 932 F.2d at 187. Here, no false conflict exists. Pennsylvania law recognizes strict products liability to protect its citizens from defective products and to encourage manufacturers to produce safe products. Delaware law, however, does not recognize strict products liability based on the rationale that such claims are preempted by the Uniform Commercial Code. Cline v. Prowler Indus. of Maryland, Inc., 418 A.2d 968 (Del.1980). Applying Delaware law would impair Pennsylvania’s interest in protecting its citizen, Mr. LeJeune.

On the other hand, Delaware’s interests would be impaired if Pennsylvania law were applied. Delaware has an interest in prescribing the rules governing torts occurring nonfortuitously within its borders. Under Pennsylvania choice of law analysis, a false conflict exists “where the accident is fortuitous and the state where the accident occurred has no interest in the regulatory standard at issue.” Reyno v. Piper Aircraft Co., 630 F.2d 149, 170 (3d Cir.1980), rev’d on other grounds, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981); accord Kuchinic v. McCrory, 422 Pa. 620, 624, 222 A.2d 897 (1966) (holding that false conflict existed because Georgia had no recognizable interest when accident’s occurrence in that state was wholly fortuitous).

Here the occurrence of the accident in Delaware was not fortuitous. Delaware was the site of the accident (as well as the place where much of the alleged negligent conduct took place) because of the steel mill’s fixed location in that state. If Pennsylvania law were applied, Delaware’s interest in regulating purposeful economic activity within its borders would be impaired. We cannot agree with Appellants’ assertion that Delaware has no interest in this case simply because Appellees have limited contacts with that state. A state’s interest in enforcing its tort law is not constrained to protecting residents from harm or suit. See Schmidt v. Duo-Fast, Inc., No. 94-6541, 1995 WL 422681, at *1-2 (E.D.Pa. July 11,1995) (holding that New Jersey law applied when New Jersey was the nonfortuitous site of accident even though defendant, which benefited from New Jersey law, was Illinois corporation). A state could have a host of reasons for limiting liability, including encouraging economic activity in the state (such as the rebuilding of the steel mill), and lowering costs to consumers (such as CitiSteel). Also without merit is Appellants’ argument that, because Delaware’s rejection of strict liability is based on its minority view that the Uniform Commercial Code preempts such a claim, its rejection of strict liability reflects no policy choice by the state. Delaware’s decision to adopt and maintain the Uniform Commercial Code in light of this interpretation is obviously a policy choice. Thus, a false conflict does not exist in this ease.

We must next examine which state has a greater interest in having its law applied. In making this determination, we look

to see what contacts each state has with the accident, the contacts being relevant only if they relate to the “policies and interest underlying the particular issue before the court.” When doing this it must be remembered that a mere counting of contacts is not what is involved. The weight of a particular state’s contacts must be measured on a qualitative rather than quantitative scale.

Cipolla v. Shaposka, 439 Pa. 563, 566, 267 A.2d 854 (1970) (citations omitted). In this case, Pennsylvania’s only contact with the accident is the fact that Mr. LeJeune is a Pennsylvania resident and that a small portion of General Electric’s work took place at a shop in Pennsylvania. The Delaware contacts, however, are more substantial. The accident occurred in Delaware, and most of the alleged negligent conduct took place there as well. Additionally, as pointed out before, the accident’s occurrence in Delaware was not fortuitous. Where the site of an accident is not fortuitous, “the place of injury assumes much greater importance, and in some instances may be determinative.” Shields v. Consolidated Rail Corp., 810 F.2d 397, 401 (3d Cir.1987); Shuder v. McDonald’s Corp., 859 F.2d 266, 272 (3d Cir.1988). Looking at these contacts qualitatively, we believe that Delaware has the greater interest in having its law applied. Delaware’s contacts with the accident relate to substantive aspects of the case such as how and why certain conduct occurred. Pennsylvania’s contact arises not from substantive matters in the litigation but rather from Mr. LeJeune’s residence. Thus, we hold that Delaware law applies to this case.

III.

Applying Delaware law, we can immediately dispose of Appellants’ product liability claim. Appellants’ claim fails because Delaware does not recognize strict products liability. Cline v. Prowler Indus. of Maryland, Inc., 418 A.2d 968 (Del.1980). Thus, we proceed to consider Appellants’ remaining claim of negligence. Essentially, the parties dispute whether Appellees owed any duty to Mr. LeJeune. Appellants propose several theories under which a duty would arise in this case. They argue that a duty was created by the contracts between the steel mill owner and Appellees, by the foreseeability of harm, and by public policy. Appellants also argue that a duty was created under Restatement Second of Torts § 404. Because these theories of liability are all predicated on a duty, and because the only way the Appellees could have created a duty in this case is through contract, we believe that a discussion of duty under section 404 will dispose of all the claims brought by Appellants. Where, as here, a contract is unambiguous, it is appropriate for the court to determine its meaning as a matter of law at the summary judgment stage. See Pellaton v. Bank of New York, 592 A.2d 473, 478 (Del.1991).

Before addressing section 404, we point out that the Delaware Supreme Court has never addressed the applicability of this particular section of the Restatement Second of Torts. We do not need to decide, however, whether the court would adopt the section because, even assuming that it would, we do not believe it creates a duty in this case. Section 404 provides:

One who as an independent contractor negligently makes, rebuilds, or repairs a chattel for another is subject to the same liability as that imposed upon negligent manufacturers of chattels.

Although this language sweeps broadly, it does not impose liability on an independent contractor for work which the independent contractor did not undertake to perform. See section 404 Comment a (independent contractor required to do competently everything “which he undertakes____”). Rather, it is the scope of the undertaking, as defined in the contract, which gives shape to the independent contractor’s duty in tort.

Appellants argue that the contracts entered into by Appellees required them either to warn of safety defects in the machinery or to redesign the machinery in such a way as to eliminate potential hazards. Appellants point to broad language in the contracts such as “General Electric will check the delineated apparatus, analyze, and report findings” and “[wjhereas [CitiSteel] desires to refurbish and revamp the equipment ... and [Bliss-Salem] is qualified and willing to do the work as specified....” App., Vol. II, at 583 (General Electric contract); id. at 628 (Bliss-Salem contract). In particular, Appellants make much of the term “revamp” in the contract. Because Webster’s Unabridged Dictionary defines that term as “to renovate, redo, or revise,” they argue, Appellees assumed a duty to redesign defective parts of the plate mill. However, not only does “renovate, redo, or revise” not necessarily mean “redesign,” our version of Webster’s lists “to put in repair” as the first definition of “revamp.” This definition is entirely consistent with Appellees defense: that their undertaking was limited to “repairing” the mill. In any event, the contract simply states, as a preamble, that Appellant “desires to refurbish and revamp the equipment.” The scope of work that Appellee (as opposed to Appellant) agreed to undertake (as opposed to merely desired) is described later in Article I.

The contracts contain, moreover, ' much more specific language indicating that Appellees were hired to do repair work only. Each contract fills several pages with detailed descriptions of repair work for each machine. For example, the General Electric contract provides the following “scope” for repair of a water pump:

External aluminum oxide blast clean.
Disassemble, clean & visual plus dimensional inspection.*
Assemble (new bearings, gaskets, “O” rings, bolts).
Report.

App., Vol. II, at 589 (General Electric contract). The Bliss-Salem contract is full of similar language. Appellants do not point us to any language in the contracts which specifically required Appellees to redesign a machine or to warn of safety defects. Although the Bliss-Salem contract does contain a few provisions which call for the redesign of particular machine parts, Appellants have failed to alert the court to any provisions which required the redesign of the machinery involved in Mr. LeJeune’s accident. No language in either contract specifically addresses the safety aspects of any piece of machinery. Thus, it is clear from reading the contracts that Appellees undertook to repair rather than redesign the steel mill machinery.

Appellants also attempt to show that Appellees undertook to do more than simple repair work by citing to the following deposition excerpt of Mr. Hearn, a CitiSteel official:

Q. Now let me ask you if the original specification was deficient, would you expect the contractor to tell you that?
A. Yes. If there was something deficient about a piece of equipment, I would expect somebody to tell me. I’m not an engineer myself. And if we sent a piece of equipment out to Bliss or GE was here and they saw something and said, “Joe, this is not designed correctly, we recommend you don’t do this,” fine, I listen.

App., Vol. I, at 176 (Hearn deposition excerpt). This statement is at best ambiguous concerning Appellees’ supposed duty to redesign and warn about safety aspects of the machinery. In fact, Mr. Hearn also stated in his deposition that Appellees were not required to evaluate safety procedures and were only required to bring machinery back to its original working order. Id. at 172-73. Even were we to construe Mr. Hearn’s statement as Appellants’ wish, it would be clearly contradicted by the clear intent of the parties as expressed in the contracts themselves. Mr. Hearn’s statement does not change the fact that the contracts did not require Appellees to concern themselves with safety design. Due to the limited nature of the contractual undertaking in this case, no duty in tort arose on the part of Appellees to redesign safety features of the equipment or to warn of potential hazards.

Even where the scope of an independent contractor’s undertaking does not give rise to liability for design problems in a product, a duty may still arise if the product is “so obviously bad that a competent contractor would realize that there was a grave chance that his product would be dangerously unsafe.” Section 404 comment a. Appellants argue that General Electric was aware of the safety problems inherent in the machinery they were fixing. They point to the fact that an accident similar to Mr. Le-Jeune’s almost occurred while General Electric employees were testing equipment. General Electric averted an accident by simply looking to see if anyone was on the equipment before energizing it. We do not believe that this single incident, in which no accident occurred, was so “obviously bad” that it would give rise to a duty not contemplated in the original contract.

The judgment of the district court will be affirmed.

      . Appellants do not appeal from the district court's grant of summaiy judgment for Appellee E.W. Bliss Co.


source: Caselaw Access Project

author: LEWIS, Circuit Judge.

license: Public Domain

text:
    Carol AMAN; Jeanette Johnson, Appellants, v. CORT FURNITURE RENTAL CORPORATION, Appellee.
    No. 95-5142.
    United States Court of Appeals, Third Circuit.
    Argued Jan. 24, 1996.
    Decided May 30, 1996.

      Ian Stuart, Daniel J. de Luca (argued), Audobon, NJ, for Appellants.
    Michael J. Vassalotti, Brown & Connery, Westmont, NJ, Edward Katze, Constangy, Brooks & Smith, Atlanta, GA, Michael L. Blumenthal (argued), Atlanta, GA, for Appellee.
    Before: STAPLETON, MANSMANN and LEWIS, Circuit Judges.
   OPINION OF THE COURT

LEWIS, Circuit Judge.

Carol Aman and Jeanette Johnson appeal from the district court’s grant of summary judgment in favor of Cort Furniture Rental Corporation on their employment discrimination claims brought under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e, et seq, and the New Jersey Law Against Discrimination, N.J. Stat. Ann. 10:5-12, et seq. They argue that the record contains evidence from which a jury could conclude: (1) that while employed at Cort Furniture, they were subject to a hostile work environment; (2) that Aman was constructively discharged; (3) that Johnson was discharged in retaliation for protesting discrimination at Cort Furniture; and (4) that black employees were paid less than similarly situated white employees.

For the reasons which follow, we will reverse the district court’s grant of summary judgment as to Aman’s and Johnson’s hostile environment, constructive discharge and retaliatory discharge claims, and will affirm its judgment as to their unequal pay claims.

I.

Carol Aman and Jeanette Johnson, both black, were hired by Cort Furniture’s Philadelphia district • office in 1986. Aman was hired as a bookkeeper and Johnson was hired as a credit manager. Both Aman and Johnson claim that during their employment at Cort Furniture, they were subjected to an atmosphere of racial contempt and harassment. Aman claims that this resulted in her constructive discharge. Johnson claims that she was discharged in retaliation for complaining about Cort Furniture’s discriminatory practices.

From 1986 through the termination of their employment in 1992, Aman and Johnson claim that co-workers and managers engaged in a pervasive and systematic pattern of harassment toward black employees. Aman and other black employees were referred to as “another one,” “one of them,” and “poor people.” Aman was also the target of at least three false accusations of favoritism allegedly exhibited toward her by her black supervisor, as well as dereliction of duty. On several occasions, co-workers physically snatched documents from Aman’s hands and stole time cards that she needed to perform her job.

This behavior, however, was not limited to Aman and Johnson’s co-workers; it was engaged in by management as well. For example, both Aman and Johnson heard Allen Shuttleworth, Regional Vice-President of Cort Furniture, make disparaging racial remarks about their supervisor, Joyce Lamp-kin. On one occasion, Shuttleworth came into the office and asked the white employees on Lampkin’s staff, “Where is that one in there?”

Despite this harassment, in 1989 Aman was promoted to the position of credit manager, and Johnson became supervisor of the administrative department after Lampkin moved to the sales department. As a credit manager Aman was responsible for approving credit and collecting on past due accounts. Cort Furniture salespeople were required to submit credit applications to a credit clerk, who would run a credit check in order to determine whether to grant credit to the customer. After these promotions, Johnson became Aman’s immediate supervisor. In November of that year, Johnson received a letter from the president of Cort Furniture congratulating her for her outstanding performance and for the performance of the department.

Aman’s new position as credit manager did nothing to increase the respect of her fellow employees. She continued to suffer harassment from white sales staff and management, including Karen Brady, Lisa Jentsch, Katie Gauthier, Laura Greathead, Chris Benzie, Robert Kurtz, and Barry Boswell. According to Aman, the general atmosphere of racial hostility “lead [sic] white employees to feel confident that what they said would be listened to over black and made the whites uncooperative and unsupportive to blacks.” As examples, Aman and Johnson point to the fact that Benzie instructed Johnson to put a derogatory memorandum in Aman’s personnel file because he wanted Aman “out.” Brady, Jentsch, and Greathead bypassed Aman and extended credit to customers against Cort Furniture policy, and there is no evidence that any of them were reprimanded for their behavior. In addition, Boswell, the sales manager, continually ignored Aman’s requests for information necessary to her job. He also allegedly harassed Aman and another black employee by making them do menial tasks which were not within their job descriptions, such as running his personal errands. There is no evidence to indicate that he ever asked similarly situated white employees to do those tasks.

On one particular occasion, while Aman was using the restroom, Gauthier, a sales representative, demanded that Aman approve a credit application immediately. Aman replied, “Katie, have you heard the latest, Lincoln freed slaves?” In response to that remark Gauthier complained to Shuttle-worth, who refused to speak to Aman fi-om that day forward. Shuttleworth then approached Johnson and told her that “Aman has got to go.” In response to this dispute, Jim Newton, the controller, called Johnson and stated that “if this continues we’re going to have to come up there and get rid of all of you.” When Johnson asked what he meant by “all of you,” Newton refused to elaborate. During this conversation, Johnson informed Newton that the racial problems at Cort Furniture were getting out of control.

In meetings with Boswell and Kurtz, Johnson informed Cort Furniture’s management that salespeople were harassing and insulting black warehouse employees by constantly telling them “Don’t touch anything” in customers’ homes and “Don’t steal.” Johnson also asked why black employees were being paid less than white employees, but was told only that that was a Human Resources Department issue.

When Kurtz became general manager in June of 1991, the harassment apparently increased. Kurtz began to yell at Aman on a regular basis. When he met with Aman for the first time as general manager, Kurtz told her that he “knew all about” Aman, Jeanette Johnson, and Bruce Buchanan. The only thing these three employees had in common was that they were black. Until Aman departed, Kurtz subjected her to careful scrutiny whenever she interacted with white female employees.

Johnson was also the focus of Kurtz’s harassment. According to Johnson, Kurtz made it known that he had offered her job to a white employee. Kurtz then made it more difficult for her to perform her job by withholding necessary financial information. On one occasion, as a result of conflicting instructions from Kurtz and Newton, Newton apparently slammed Johnson’s door and yelled at her. While he later apologized, Newton admitted that he never treated anyone else in the same manner.

During August of 1991, the racial problems at Cort Furniture appeared to be coming to a head. Kurtz received a letter of complaint about Aman from Stephen Urbish, a customer of Cort Furniture. After another incident between Kurtz and Aman in which Kurtz yelled at her in front of the entire office, he refused to discuss business , matters with Aman, and instead informed her that he was receiving complaints about her.

On October 10,1991, Kurtz forced Johnson to issue a formal warning to Aman, despite Johnson’s objection. Although the warning stated that customers had complained about Aman, Johnson could recall but a single complaint, one in which a customer complained that he did not appreciate being called and told that he owed money. Later, Johnson was instructed to give Aman a work plan which required Johnson to spend two hours everyday monitoring Aman. Johnson informed Cort Furniture that it was her opinion that the work plan was unnecessary, but was forced to comply in order to keep her job.

On October 18, 1991, Aman’s counsel sent a letter to Cort Furniture complaining of discrimination against Aman. Later that month in a district meeting attended by all administrative, sales and warehouse employees, Kurtz allegedly stated that “the blacks are against the whites,” and that if anyone didn’t like it at Cort Furniture, they could leave.

In January of 1992, Kurtz once again became angry with Aman, this time for not granting credit approval for a project which would have contradicted prior instructions she had received. In February, Aman resigned after giving four days notice, and filed a charge of discrimination with the EEOC. Aman testified that the hostile environment in which she worked had forced her to see a doctor for nervousness three times in 1991 and once in 1992.

Johnson also observed the discriminatory treatment of other black employees. Johnson testified that every time she hired a black person at Cort Furniture, there were complaints from salespeople and general managers about that person’s performance. In addition, in 1991 she personally witnessed the firing of James Washington, a black warehouse employee, who was terminated for accepting a tip from a customer, while on the same day a white warehouse employee failed his third drug test but was kept on in violation of company policy. In 1992, Johnson was forced to terminate Robin Flagg, a black customer service representative. According to Johnson, Flagg’s only offense was that she had not received the training from Cort Furniture which would have enabled her properly to do her job. Also in 1992, Johnson was forced to terminate a black warehouseman for too many accidents, even though at least one other white warehouseman with as many accidents was not fired.

After Aman resigned, Kurtz told Johnson to “hire an Italian, they won’t take no for an answer.” She was also instructed by members of management, including Tom Rogers and Regional Vice-President Shuttleworth, to gather as much derogatory information about Aman as she could. Johnson informed them that all relevant information was already in Aman’s personnel file, but management persisted. Johnson was told that Aman had filed a complaint with the EEOC, and they needed this information in order to prevail.

In response to Aman’s discrimination charge, Cort Furniture required the depositions of several employees, including Johnson. Shuttleworth telephoned Johnson on August 7, 1992, and asked her to give a statement the following week. When Johnson informed him that she would be on vacation until the 17th, he said that they would get in touch with her when she returned. On Sunday, August 16th, the day before Johnson was supposed to return to work following her vacation, Shuttleworth called Johnson at her home at 9:30 p.m. and informed her that she was scheduled for a deposition the following afternoon. According to Johnson, this was the first time anyone ever mentioned the term “deposition” to her.

The next morning, Johnson telephoned Human Resources and eventually spoke with Kim Martin, an employee in the department. Johnson informed Martin that she wanted to speak to her attorney and to other people in Human Resources before she proceeded with the deposition. Martin responded that Johnson’s proposal was acceptable, as long as she realized Cort Furniture would still want her to give a deposition. Johnson replied that she did not have a problem with giving a deposition once she knew what her rights were. After missing her scheduled deposition, Johnson was fired. Johnson was advised that she had been terminated because her failure to attend the deposition proved “that you are not loyal to this company.”

Aman and Johnson filed this suit against Cort Furniture alleging racial discrimination in violation of Title VII and the New Jersey Law Against Discrimination. They alleged that Cort Furniture created a racially hostile work environment, paid blacks less than whites, constructively discharged Aman, and fired Johnson in retaliation for protesting discriminatory practices. Cort Furniture moved for summary judgment on the Title VII claims, and the district court granted Cort Furniture’s motion. The court found that Aman and Johnson had failed to establish a claim of hostile environment because the evidence demonstrated only rudeness, and not racial animus; that they had failed to demonstrate that they were paid less than similarly situated white employees; that Aman had failed to demonstrate that a reasonable person would have resigned; and that Johnson had failed to present any evidence to demonstrate that she was fired for participating in protected activity. The district court then dismissed Aman and Johnson’s state claims with prejudice. This appeal followed.

II.

We have held repeatedly that the party moving for summary judgment under Fed. R.Civ.P. 56(c) bears the burden of demonstrating the absence of any genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Chipollini v. Spencer Gifts, Inc., 814 F.2d 893, 896 (3d Cir.1987). This burden remains with “the moving party regardless of which party would have the burden of persuasion at trial.” Chipollini, 814 F.2d at 896.

As we noted at the outset (and as our factual recitation in Part I of this opinion would indicate), when determining whether the moving party has proven the absence of a genuine material issue of fact, the facts asserted by the nonmoving party, if supported by affidavits or other evidentiary material, must be regarded as true, Scott v. Plante, 532 F.2d 939 (3d Cir.1976); and “the inferenees to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion.” Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356 (quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962)) (emphasis added); Celotex, 477 U.S. at 330 n. 2, 106 S.Ct. at 2556 n. 2 (“any doubt as to the existence of a genuine issue for trial should be resolved against the moving party.”). Viewed under this lens, “[i]f ... there is any evidence in the record from any source from which a reasonable inference in the [nonmoving party’s] favor may be drawn, the moving party simply cannot obtain a summary judgment....” Celotex, 477 U.S. at 330 n. 2, 106 S.Ct. at 2556 n. 2 (quoting In re Japanese Electronic Products Antitrust Litigation, 723 F.2d 238, 258 (1983), reversed on other grounds sub nom. Matsushita, 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).

A district court’s grant of summary judgment is subject to plenary review, Public Interest Research Group of N.J. v. Powell Duffryn Terminals, Inc., 913 F.2d 64, 71 (3d Cir.1990), and we are required “to apply the same test the district court should have utilized initially.” Goodman v. Mead Johnson & Co., 534 F.2d 566 (3d Cir.1976); see also Berner Int’l Corp. v. Mars Sales Co., 987 F.2d 975 (3d Cir.1993); and J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1530 (3d Cir.1990).

On summary judgment, Cort Furniture does not challenge the factual basis of Aman and Johnson’s supporting evidence, but claims instead that even if their evidence is true, it would be insufficient to establish impermissible employment practices under Title VII. Cort Furniture is, therefore, required to demonstrate that there is no evidence in the record upon which any reasonable jury could conclude that discrimination occurred. For the following reasons, we conclude that Cort Furniture failed to carry its burden.

III. Title VII Claims

A. Hostile Environment.

In order to establish a claim for employment discrimination due to an intimidating or offensive work environment, a plaintiff must establish, “by the totality of the circumstances, the existence of a hostile or abusive environment which is severe enough to affect the psychological stability of a minority employee.” Andrews v. City of Philadelphia, 895 F.2d 1469, 1482 (3d Cir.1990) (quoting Vance v. Southern Bell Tel. and Tel. Co., 863 F.2d 1503, 1510 (11th Cir.1989)). Specifically, a plaintiff must show: (1) that he or she suffered intentional discrimination because of race; (2) the discrimination was pervasive and regular; (3) the discrimination detrimentally affected the plaintiff; (4) the discrimination would detrimentally affect a reasonable person of the same race in that position; and (5) the existence of respondeat superior liability. Id.; West v. Philadelphia Elec. Co., 45 F.3d 744, 753 (3d Cir.1995). As the Supreme Court has emphasized:

whether an environment is “hostile” or “abusive” can be determined only by looking at the circumstances. These may include the frequency of the discriminatory conduct; its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with an employee’s work performance.

Harris v. Forklift Systems, Inc., 510 U.S. 17, -, 114 S.Ct. 367, 371, 126 L.Ed.2d 295, 302 (1993).

The issue in this case is whether the district court correctly determined that the plaintiffs faded to demonstrate that they suffered from intentional racial discrimination or that the discrimination was pervasive and regular.

In many respects, the facts of this case represent what has become the typical Title VII employment discrimination case of this decade. Anti-discrimination laws and lawsuits have “educated” would-be violators such that extreme manifestations of discrimination are thankfully rare. Though they still happen, the instances in which employers and employees openly use derogatory epithets to refer to. fellow employees appear to be declining. Regrettably, however, this in no way suggests that discrimination based upon an individual’s race, gender, or age is near an end. Discrimination continues to pollute the social and economic mainstream of American life, and is often simply masked in more subtle forms. It has become easier to coat various forms of discrimination with the appearance of propriety, or to ascribe some other less odious intention to what is in reality discriminatory behavior. In other words, while discriminatory conduct persists, violators have learned not to leave the proverbial “smoking gun” behind. As one court has recognized, “[defendants of even minimal sophistication will neither admit discriminatory animus or leave a paper trail demonstrating it.” Riordan v. Kempiners, 831 F.2d 690, 697 (7th Cir.1987). But regardless of the form that discrimination takes, the impermissible impact remains the same, and the law’s prohibition remains unchanged. “Title VII tolerates no racial discrimination, subtle or otherwise.” McDonnell Douglas Corp. v. Green, 411 U.S. 792, 801, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973).

The sophisticated would-be violator has made our job a little more difficult. Courts today must be increasingly vigilant in their efforts to ensure that prohibited discrimination is not approved under the auspices of legitimate conduct, and “a plaintiffs ability to prove, discrimination indirectly, circumstantially, must not be crippled ... because of crabbed notions of relevance or excessive mistrust of juries.” Riordan, 831 F.2d at 698.

Considered in the light most favorable to them, Aman and Johnson have produced sufficient evidence so that a reasonable jury could conclude that the working environment at Cort Furniture was pervaded by discriminatory “intimidation, ridicule, and insult.” Harris, 510 U.S. at -, 114 S.Ct. at 370, 126 L.Ed.2d at 301. The plaintiffs’ evidence demonstrates that from 1986 through 1992, employees of Cort Furniture made inherently racist remarks. Aman and Johnson were referred to as “another one,” “one of them,” “that one in there,” and “all of you.” Other black employees were harassed on a daily basis by employees at Cort Furniture, who hurled insults such as “don’t touch anything,” and “don’t steal.” Aman and Johnson were also subjected to apparently false accusations of favoritism, incompetence, and were made to do menial jobs. The evidence of record shows that white employees were not treated in a similar fashion. In addition, several employees refused to deal with Aman even in matters where she was directly responsible for approving a customer’s credit, and these employees were never reprimanded even though their actions were in direct violation of company policy.

Cort Furniture argued, and the district court agreed, that any racial harassment ended in 1989 because by then many of the individuals who had made these remarks were no longer employed by Cort Furniture. If that were true, then Aman and Johnson’s claims based solely on those incidents would be time-barred. But in addition to many other instances of abusive and harassing behavior, Aman and Johnson point to several particularly troubling comments made in 1991 by current management level employees.

First, in a discussion with Johnson, Jim Newton, the district controller, stated that if things were not resolved with Aman, “we’re going to have to come up there and get rid of all of you.” App. at 41. When asked whom he meant by “all of you,” Newton refused to answer. Id. Second, Robert Kurtz, the general manager, after slamming his hand on Aman’s desk, told her that he knew all about her and two other employees. The only factor the three shared in common was their race. Id. at 316. Third, in a district meeting attended by all administrative, sales, and warehouse employees, Kurtz stated that “the blacks are against the whites,” and that if anyone did not like it at Cort Furniture, they could leave. Id. at 323.

The district court’s conclusion that harassment ended in 1989 appears to be based upon a belief that these later comments were not racially motivated. Aman, slip op. at 12. In our view, however, the use of “code words” can, under circumstances such as we encounter here, violate Title VII. Indeed, a reasonable jury could conclude that the intent to discriminate is implicit in these comments. Cf. Andrews, 895 F.2d at 1482 n. 3 (“The intent to discriminate on the basis of sex in cases involving sexual propositions, innuendo, pornographic materials, or sexual derogatory language is implicit, and thus should be recognized as a matter of course.”). There are no talismanic expressions which must be invoked as a condition-precedent to the application of laws designed to protect against discrimination. The words themselves are only relevant for what they reveal — the intent of the speaker. See Futrell v. J.I. Case, 38 F.3d 342, 347 (7th Cir.1994) (holding that statements like “sharp young people” and that the employee was not a “forward enough thinker” could reasonably be interpreted as evidence of bias under the ADEA). A reasonable jury could find that statements like the ones allegedly made in this case send a clear message and carry the distinct tone of racial motivations and implications. They could be seen as conveying the message that members of a particular race are disfavored and that members of that race are, therefore, not full and equal members of the workplace. As we have held, the pervasive use of derogatory and insulting terms directed at members of a protected class generally, and addressed to those employees personally, may serve as evidence of a hostile environment. Andrews, 895 F.2d at 1485. Moreover, a reasonable jury could conclude that Kurtz’s statement that “the blacks are against the whites” represents management’s explicit recognition of a racially hostile environment at Cort Furniture.

In addition to those described above, Aman and Johnson testified to numerous other examples of harassment which, viewed in isolation, arguably may not have been motivated by racial animus. For example, Aman alleges that her time cards were stolen, making it harder for her to perform her job. Other employees physically snatched things from her. Aman was falsely accused of wrongdoing on at least two occasions. As discussed earlier, several employees, including a sales manager, ignored or refused to deal with Aman. Johnson was informed on several occasions that Aman “had to go.” In addition, Kurtz yelled at Aman on a daily basis, and there is conflicting evidence as to whether he yelled at any white employees at Cort Furniture. After Aman and Johnson began complaining about racial discrimination, employees were asked to keep complaint lists about Aman. Similarly, Kurtz withheld relevant financial information from Johnson and gave her orders that directly contradicted orders from the controller, Jim Newton, as well as company policy. In response to one of these occasions, Newton slammed the door to Johnson’s office and yelled at her. Even though he apologized, he admitted that he had never behaved in this fashion toward anyone else.

In light of the suspicious remarks discussed above, a reasonable jury could interpret this behavior as part of a complex tapestry of discrimination when examined in conjunction with the comments made by Cort Furniture’s employees and management. As we have said,

A play cannot be understood on the basis of some of its scenes but only on its entire performance, and similarly, a discrimination analysis must concentrate not on individual incidents, but on the overall scenario____ ‘... What may appear to be a legitimate justification for a single incident of alleged harassment may look pretextual when viewed in the context of several other incidents.’

Id. at 1484 (quoting Vance v. Southern Bell Tel. and Tel. Co., 863 F.2d 1503, 1510 (11th Cir.1989)) (concluding that missing files, anonymous calls, and vandalism could be evidence of a hostile environment). We do not imply that such acts of harassment must be accompanied by racially discriminatory statements. Indeed, we have previously held that overt racial harassment is not necessary to establish a hostile environment. See Andrews, 895 F.2d at 1485. All that is required is a showing that race is a substantial factor in the harassment, and that if the plaintiff had been white she would not have been treated in the same manner. Id. We simply note that the harassment of black employees, when combined with the discriminatory statements made by other Cort Furniture employees, can be viewed as making the plaintiffs’ racial discrimination claim all the more compelling. This is especially true given that a reasonable jury could conclude that Cort Furniture’s management was not only aware of these acts and statements, but was also a source of the harassment and comments.

Viewed in the light most favorable to the non-moving parties, Aman and Johnson not only have established a prima facie case of discrimination, but they have also provided sufficient evidence such that a reasonable jury could conclude that they were subject to intentional discrimination on a regular and pervasive basis. We conclude, therefore, that summary judgment as to Aman and Johnson’s hostile environment claim should not have been granted.

B. Constructive Discharge.

In order to establish a constructive discharge, a plaintiff must show that “the employer knowingly permitted conditions of discrimination in employment so intolerable that a reasonable person subject to them would resign.” Goss v. Exxon Office Systems Co., 747 F.2d 885, 888 (3d Cir.1984). In Goss, we upheld a finding of constructive discharge which stemmed from the reassignment of the plaintiff to a less lucrative territory based upon her sex. In doing so, we found two factors to be particularly persuasive: (1) the employee had lost confidence in herself and her employer; and (2) the reassignment represented a substantial cut in pay. Id. at 888-89. Similarly, in Levendos v. Stern Entertainment, Inc., 860 F.2d 1227, 1231 (3d Cir.1988), we reversed a district court’s grant of summary judgment on a claim of constructive discharge, stating:

While we can imagine a maitre’d who might not object to exclusion from management meetings, denial of authority to order supplies, false accusations of stealing from and drinking on the job, and who might not be disturbed by rumors and remarks that she would be replaced by a male, her employer’s refusal to talk with her, and to find wine bottles in her locker, we find that these events are clearly not trivial.

We held that a jury could ultimately decide that a reasonable person would be forced to quit. Id.

With regard to Aman’s constructive discharge claim, the district court held that: (1) she had not put forth sufficient evidence to support a finding of racial discrimination; (2) the conditions could not have been intolerable as a matter of law because she remained in her job for approximately four months after claiming that they were intolerable; and (3) the specific events that prompted her departure were insufficient as a matter law. Aman, slip op. at 16. We will address each conclusion in turn.

Because we believe that Aman has provided sufficient evidence to support her claim of racial discrimination as discussed above, we will not repeat that discussion here. Suffice it to say that courts have found constructive discharge based upon a continuous pattern of discriminatory treatment over a period of years, Nolan v. Cleland, 686 F.2d 806, 813 (9th Cir.1982); Clark v. Marsh, 665 F.2d 1168 (D.C.Cir.1981), and Aman has set forth sufficient facts so that a reasonable jury could conclude that her decision to leave was reasonable based upon the history of discriminatory treatment.

The district court’s second and third conclusions must be addressed in tandem. As an initial matter, we have rejected imposing an “aggravated circumstances” requirement upon constructive discharge claims. Levendos, 860 F.2d at 1232 (“we cannot state as a broad proposition of law that a single nontrivial incident of discrimination can never be egregious enough to compel a reasonable person to resign.”). The fact that Aman had been subject to continuous discrimination during her employment could support a conclusion that she simply had had enough. No other precipitating facts were legally required. Even if we did require aggravating circumstances, the courts in Nolan and Clark both found that a history of discrimination constituted aggravating circumstances and we see no reason to disagree with that conclusion. Accordingly, the fact that Aman left four weeks after her attorney contacted Cort Furniture alleging intolerable conditions does not preclude a finding that a reasonable person would be compelled to resign under the circumstances. A jury could conclude that the conditions of her employment were intolerable, and that while she had the fortitude to stay, her strength finally failed.

Finally, there is evidence from which a jrny could conclude that the circumstances of Aman’s employment changed during those four months. When asked about the incidents prompting her decision to leave, Aman answered:

I believe being called in and told that I had to be written up, this was after I tried to cooperate with the work plan that had been given me ... Mr. Kurtz behaving badly to me ... Making accusations that I wasn’t doing my job properly, the way he spoke to me, the way he yelled at me and ordered me in his office, disregarding my own supervisor and doing it in front of other people.

App. 287-88. When asked what happened between the time her attorney first contacted Cort Furniture and her departure, she testified that the harassment “stepped up.” App. at 284-86. Specifically, after her attorney contacted Cort Furniture, Kurtz and other employees became even more abusive than usual. It was during this period that Aman was informed that she was to be formally reprimanded and that employees had been instructed to compile complaint lists about her. It was also after her attorney’s letter that Kurtz made his statement that “the blacks are against the whites,” and that those who didn’t like it should leave. Taken as a whole, a reasonable jury could certainly conclude that after being subjected to these conditions, Aman was constructively discharged.

C. Retaliatory Discharge.

To establish a prima facie case for retaliatory discharge, a plaintiff must show: (1) that she engaged in a protected activity; (2) that she was discharged subsequent to or contemporaneously with such activity; and (3) that a casual link exists between the protected activity and the discharge. Jalil v. Avdel Corp., 873 F.2d 701, 708 (3d Cir.1989). Cort Furniture argues, and the district court agreed, that Johnson was not fired for engaging in a protected activity because failure to participate in the internal investigation was a legitimate ground for her termination. Aman, slip op. at 17. Once again, this conclusion is not supported by the evidence when considered in the light most favorable to Johnson.

As a preliminary matter, protesting what an employee believes in good faith to be a discriminatory practice is clearly protected conduct. 42 U.S.C. § 2000e-3(a); Griffiths v. CIGNA Corp., 988 F.2d 457, 468 (3d Cir.1993). Thus, “a plaintiff need not prove the merits of the underlying discrimination complaint, but only that ‘he was acting under a good faith, reasonable belief that a violation existed.’” Griffiths, 988 F.2d at 468 (quoting Sumner v. United States Postal Service, 899 F.2d 203, 209 (2d Cir.1990)). It is undisputed that Johnson complained to Cort Furniture’s management about what she believed constituted discriminatory practices at Cort Furniture. Thus, Johnson’s numerous complaints about discrimination and her refusal to “gather” more derogatory information to place in Aman’s file following Aman’s termination, separate and apart from her failure to attend the deposition, represent activities protected under Title VII.

But the fact that her discharge did not immediately follow these activities does not undermine her claim. We have held that the “mere passage of time is not legally conclusive proof against retaliation.” Robinson v. S.E. Pa. Transp. Authority, 982 F.2d 892, 894-95 (3d Cir.1993) (holding that the evidence was sufficient to demonstrate retaliation for activities that occurred two years prior to the termination). The issue remains whether a reasonable jury could conclude that Johnson was discharged because she engaged in protected activity. Cort Fumiture has offered a facially legitimate reason for her discharge (her failure to attend the deposition), but has failed to demonstrate that Johnson cannot produce direct or indirect evidence to support her claim. Chipollini, 814 F.2d at 899. To the contrary, Johnson has provided sufficient circumstantial evidence so that a reasonable jury could conclude that she was retaliatorily discharged. First, there is undisputed evidence that Johnson complained about discrimination at Cort Furniture. It is also undisputed that Johnson complained that Aman in particular had been treated unfairly, and that she repeatedly refused to “gather” more derogatory information against Aman so Cort Furniture “could win the ease against her.” App. at 115-16.

It is also undisputed that Johnson was fired after she failed to appear for the deposition concerning Aman’s employment at Cort Furniture. Cort Furniture’s explanation for Johnson’s dismissal was that her failure to attend the deposition was evidence of disloyalty. On the day she missed the deposition, she was told that “[y]ou have proven you are not loyal to this company, because of that I have to release you.” App. at 2. It is worth noting that Johnson was not told that she was fired for insubordination or failing to comply with the company’s internal policies. Instead, the contemporaneous reason offered for her discharge was disloyalty. In light of this evidence, Cort Furniture’s decision to terminate Johnson could be seen as making good on Newton’s threat to “come up there and get rid of all of you.”

Moreover, Johnson has provided evidence which casts doubt upon Cort Furniture’s reliance upon the deposition incident as the sole basis for her firing. Specifically, Johnson testified that she called various employees in Cort Furniture’s Human Resources Department to inform them that she was willing to participate in a deposition but wanted to consult with an attorney and with human resources. Johnso.n testified that “I told [Kim Martin] ... that I wanted to talk to my attorney before I went, and I wanted to talk to human resources before I went. She said ‘fine, keep in mind they will keep asking you to take the deposition.’ I said, T don’t have a problem with that as long as I know what my rights are.’ ” App. at 3. Cort Furniture failed to offer any evidence to rebut this testimony. Thus, there is evidence from which a reasonable jury could conclude that Cort Furniture was aware that Johnson did not refuse to participate in the internal investigation, but merely requested some time to understand the nature of the proceedings in which she was asked to participate. In light of this evidence and drawing all inferences in Johnson’s favor, a reasonable jury could conclude that there was no disloyalty and that Cort Furniture’s proffered reason is a pretext to mask a retaliatory motive.

Finally, the fact-finder would be entitled to consider all of the evidence of a hostile environment in order to determine the reason for Johnson’s firing. Evidence of discrimination against other employees or of a hostile work environment is relevant to “whether one of the principal non-discriminatory reasons asserted by [an employer] for its actions was in fact a pretext for ... discrimination.” Glass v. Philadelphia Elec. Co., 34 F.3d 188, 194. (3d Cir.1994); Estes v. Dick Smith Ford, Inc., 856 F.2d 1097, 1104 (8th Cir.1988) (“Evidence of prior acts of discrimination is relevant to an employer’s motive even where this evidence is not extensive enough to establish discriminatory animus itself.”). See also Heyne v. Caruso, 69 F.3d 1475, 1480 (9th Cir.1995) (alleged sexual harassment of other employees other than plaintiff is relevant to prove employer’s motive); EEOC v. Farmer Bros. Co., 31 F.3d 891, 897-98 (9th Cir.1994) (evidence of employer’s sexual harassment of female employees other than the plaintiff and evidence of disparaging remarks about women in general were relevant to determine motive). As we have recognized, “an atmosphere of condoned [racial] harassment in the workplace increases the likelihood of retaliation for complaints in individual cases.” Glass, 34 F.3d at 195 (quoting Hawkins v. Hennepin Technical Center, 900 F.2d 153, 156 (8th Cir.1990)). Viewed in the light most favorable to Johnson, a reasonable jury could conclude that given her exemplary employment history and the general evidence of a hostile environment, Johnson was fired because she had protested discrimination at Cort Furniture, and Cort Furniture believed that her hesitancy to attend the deposition meant that she would continue to complain of discrimination and testify against Cort Furniture in Aman’s EEOC investigation.

D. Unequal Pay.

The final claim raised by Aman and Johnson is a claim of discriminatory pay. As the district court correctly notes, in order to establish a case of unequal pay, plaintiffs must demonstrate “that [they] were performing work substantially equal to that of [white employees] who were compensated at [] higher rate[s] than [they were].” Hohe v. Midland Corp., 613 F.Supp. 210, 214 (E.D.Mo.1985), aff'd without op., 786 F.2d 1172 (8th Cir.1986). To support their claim that they were paid less than white employees, Aman and Johnson rely almost exclusively on a comparison of Cort Furniture employees’ job grade levels. With the exception of a single individual, Aileen Wilson who performs the same job as Johnson in a different office, they did not provide any evidence to demonstrate that the jobs performed by the white employees were the same or that the employees had similar credentials. Cort Furniture responded by providing evidence that an employee’s pay was not solely determined by job grade level, but by job duties and the differences in pay structure among the sales, warehouse, and administrative staff. Aman and Johnson have offered no evidence to rebut Cort Furniture’s explanation, and at oral argument, they conceded that with the exception of the difference in pay between Johnson and Wilson, Cort Furniture’s explanation of the pay differential between individuals with the same job grade was reasonable.

With respect to the pay disparity between Johnson and Wilson, Cort Furniture advanced three explanations for the difference. Cort Furniture submitted the affidavit of Victoria Stiles, the Director of Human Resources and Corporate Benefits. According to Director Stiles:

Ms. Wilson received a higher salary than Ms. Johnson because of several reasons: (1) Ms. Wilson, upon beginning her employment with Cort Furniture Rental, had academic credentials superior to those of Ms. Johnson; (2) prior to beginning her job with Cort Furniture Rental, Ms. Wilson had prior management experience in the field of administration and finance, but Ms. Johnson’s previous management experience in the filed of administration and finance was limited prior to beginning her job with Cort Furniture Rental; (3) some [sic] the difference in pay between Ms. Wilson and Ms. Johnson’s salary is based upon a differential allowed for the higher cost of living in the Boston area than in the Philadelphia area.

SA19 (Affidavit of Victoria L. Stiles ¶ 4). As Johnson has not identified any evidence tending to show that these explanations were pretextual, summary judgment as to this claim was appropriate as well.

Based upon the evidence and appellants’ concession, we conclude that there are no genuine issues of material fact with respect to the discriminatory pay claims. We, therefore, agree that summary judgment should be granted with respect to those unequal pay claims.

IV.

While Title VII does not prohibit racist thoughts, the law does require that employers prevent such views from affecting the work environment either by influencing employment decisions or creating a hostile work environment. This is true no matter what form the discrimination takes — overt, subtle or otherwise. For the foregoing reasons, we will reverse the district court’s grant of summary judgment and remand Aman’s and Johnson’s claims of hostile environment, constructive discharge, and retaliatory discharge. The remainder of the district court’s order with respect to the unequal pay claims will be affirmed. As Aman and Johnson’s NJLAD claims parallel the Title VII claims, see, e.g., Grigoletti v. Ortho Pharmaceutical Corp., 118 N.J. 89, 100, 570 A.2d 903 (1990) (“in outlining approaches and infusing discrimination claims under the LAD with substantive content, we have adopted the [United States] Supreme Court’s analysis of unlawful discrimination claims brought under Title VIL”), the district court’s dismissal of those state law claims was also erroneous and for the same reasons will be reversed in part and affirmed in part.

This case will be remanded to the district court for further consideration. In doing so, we emphasize once again that our discussion of the facts in this case is based upon the reasonable inferences which courts must afford the non-moving party in the summary judgment context.

      . We resolve all .factual doubts and draw all reasonable inferences in favor of Aman and Johnson, the nonmoving parties. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

      .In rejecting the plaintiffs' hostile environment claim, the district court found that "the few isolated and racially-neutral remarks on which plaintiffs rely do not rise to the level of proof necessary to sustain a prima facie case of discrimination.” Aman v. Cort Furniture Rental Corp., No. 93-1344, slip op. at. 11 (D.N.J. Dec. 6, 1994). This was based upon the district court's conclusion that the evidence offered by the plaintiffs are examples of "racially-neutral acts of rudeness” rather than racial discrimination. Id. In reaching this conclusion, the district court apparently failed to consider the evidence in the light most favorable to Aman and Johnson, and did not examine the hostile environment claim based upon the totality of the circumstances.

      . The court also determined that Cort could not rely on after-acquired evidence to support its decision to terminate Aman and Johnson. Cort has not appealed this issue.

      . The district court had jurisdiction under 28 U.S.C. § 1331 (federal question jurisdiction) and 28 U.S.C. § 1367 (supplemental jurisdiction). We have jurisdiction pursuant to 28 U.S.C. § 1291.

      . Cort has offered no evidence to rebut these assertions other than characterizing them simply as rude and race-neutral.

      . The district court’s conclusion is also inconsistent with the generally held belief that a reasonable employee should explore alternative avenues to resigning before reaching the conclusion that resigning is the only option. See Clowes v. Allegheny Valley Hospital, 991 F.2d 1159, 1161 (3d Cir.1993).

      . Johnson, who holds an MBA, was paid $29,000 per year while Wilson was paid $39,000 for the same job.


author: SCIRICA, Circuit Judge.

text:
    GREATER NEW YORK MUTUAL INSURANCE COMPANY, v. THE NORTH RIVER INSURANCE COMPANY; Crum and Forster Holdings, Inc.; Rodin Management Incorporated; Crown Park Investors NORTH RIVER INSURANCE COMPANY, v. GREATER NEW YORK MUTUAL INSURANCE COMPANY Greater New York Mutual Insurance Company, Appellant.
    (D.C. Civil No. 94-cv-05223).
    (D.C. Civil No. 94-cv-05554),
    No. 95-1484.
    United States Court of Appeals, Third Circuit.
    Argued March 11, 1996
    Decided June 10, 1996.

      James D. Crawford (argued), Schnader, Harrison, Segal & Lewis, Philadelphia, Pennsylvania, for Appellant.
    Francis J. Deasey (argued), Timothy Costello, Deasey, Mahoney & Bender, Philadelphia, Pennsylvania, for Appellees.

      Before: STAPLETON, SCIRICA and COWEN, Circuit Judges
   OPINION OF THE COURT

SCIRICA, Circuit Judge.

In Trustees of the Univ. of Pennsylvania v. Lexington Ins. Co., 815 F.2d 890 (3d Cir.1987), we predicted Pennsylvania law would allow a two-tiered or conditional settlement between a plaintiff and an insured when the insurer refused to defend against plaintiffs suit. In this case we predict Pennsylvania law would also permit a two-tiered settlement between a plaintiff, an insured and the insured’s excess insurer, when the primary insurer refused to settle plaintiffs claim.

I.

A

In January 1987, Sandra Mcllhenny slipped and bruised herself on the steps of the Crown' Park Apartments in Lansdale, Pennsylvania. Three months later she was diagnosed with multiple sclerosis. Shortly thereafter, Mcllhenny brought suit in the Court of Common Pleas for Philadelphia County against the owner and manager of the building, Rodin Management, Inc., alleging the fall had precipitated or aggravated a previously dormant condition.

Rodin purchased primary liability insurance from the Greater New York Mutual Insurance Company with a one million dollar limit per occurrence. Rodin also purchased excess general liability insurance from the North River Insurance Company, with coverage from one million to ten million dollars.

Greater New York retained counsel to defend Rodin in Mcllhenny’s personal injury action, as it was obligated to do under its policy. Mcllhenny initially made a demand of $770,000, but later increased the amount to $1 million. Defense counsel recommended settlement between $500,000 and $750,000, but Greater New York made no offer. The case went to trial and after the jury began deliberating, Greater New York offered $350,000. Plaintiffs counsel considered this amount to be a non-offer because “no reasonable person who had sat in that courtroom could make this offer.” The jury awarded Mcllhenny $4 million. The trial judge molded the verdict resulting in a total award of $5,796,000. Greater New York appealed to the Pennsylvania Superior Court.

The appeal was withdrawn, however, because North River on behalf of itself and Rodin, negotiated a settlement directly with Mcllhenny for $5.25 million. Under the settlement agreement, North River paid Mcllhenny $1,949,629 and provided her with a lifetime annuity. In return, Mcllhenny released North River and Rodin from all further liability. Because the $5.25 million settlement was greater than the amount Mcllhenny received from North River and Greater New York, North River agreed to “exercise its best efforts to recover the full settlement amount from Greater New York through litigation or other proceedings.” If North River prevailed, it would retain the first million and 60% of the overage; Mcllhenny would receive the remaining 40%. To fund the litigation, Mcllhenny channeled North River $400,000 of the one million she received from Greater New York.

B.

Before North River could bring an action against Greater New York, as it had agreed to do, Greater New York brought this suit in federal district court, alleging the settlement was invalid as a matter of law, and that North River and Rodin breached its duty of good faith. Greater New York also sought the return of the one million dollars it had paid Mcllhenny.

North River then filed suit in the Court of Common Pleas for Philadelphia County against Greater New York for bad faith on behalf of itself and as the assignee and equitable subrogee of Rodin. North River sought $4,250,000, representing the full value of the settlement less $1,000,000 already paid by Greater New York. Greater New York removed the claim to federal court, and the two cases were consolidated for discovery and trial.

In a pretrial order, the district court upheld the two-tiered settlement and dismissed all of Greater New York’s claims against North River. Greater New York Mut. Ins. Co. v. North River Ins. Co., 872 F.Supp. 1403 (E.D.Pa.1995). Holding two-tiered settlements are permitted under Pennsylvania law, it also determined an excess insurer owes no direct duty of good faith to a primary insurer when negotiating a settlement agreement. Greater New York appeals these orders.

At trial, a jury found Greater New York breached its duty of good faith to Rodin by failing to settle Mellhenny’s lawsuit in a timely and satisfactory manner. The jury also found Rodin did not breach its duty of good faith to Greater New York by entering into the two-tiered settlement agreement. It gave North River a verdict for $4,432,324 ($5.25 million minus one million already paid by Greater New York plus other costs). Greater New York contends it was entitled to a directed verdict that it did not breach its duty of good faith. It also appeals certain evidentiary rulings.

II.

A.

The district court had jurisdiction based on diversity of citizenship. 28 U.S.C. § 1332. We have jurisdiction under 28 U.S.C. § 1291. In diversity cases we must apply the substantive law of the state whose law governs the action. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938). The parties agree Pennsylvania, law governs. Our review of the district court’s interpretations and predictions of state law is plenary. Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 1220-21, 113 L.Ed.2d 190 (1991); Wiley v. State Farm Fire & Casualty Co., 995 F.2d 457, 459 (3d Cir.1993).

B.

The principal issue on appeal is whether the two-tiered conditional settlement assented to by Mcllhenny, Rodin, and North River is permitted under Pennsylvania law. Because no Pennsylvania ease has directly addressed the enforceability of two-tiered settlement agreements we must predict how the Pennsylvania Supreme Court would decide the issues before us. U.S. Underwriters Ins. Co. v. Liberty Mut. Ins. Co., 80 F.3d 90, 93 (3d Cir.1996). But this is not the first time we have examined a two-tiered settlement. In a similar case, after an exhaustive review of Pennsylvania case law and a thorough analysis of the relevant policies, we predicted the Pennsylvania Supreme Court would enforce a two-tiered settlement. Lexington, 815 F.2d 890.

Lexington involved a settlement by the Hospital of the University of Pennsylvania with a personal injury plaintiff. Under the settlement’s terms, HUP agreed to pay $2.2 million itself and an additional $4.8 million if it won a suit against its insurer, Lexington, which had refused coverage. Applying Pennsylvania law, we upheld the validity of the two-tiered settlement, subject to the requirements of good faith and reasonableness. Lexington, 815 F.2d at 902. “Prohibiting two-tiered settlements,” we noted, may “force insureds to turn down advantageous settlement offers.” Id. at 901-02.

We see nothing in the facts of this case that would lead us to a different outcome. Lexington’s central rationale that a prohibition on two-tiered settlements would prevent some insureds from accepting advantageous settlements also applies where an excess insurer, an insured and a victim/plaintiff collectively forge a settlement. The mere addition of an excess insurer into the settlement equation does not alter our sense of how the Pennsylvania courts would assess the legality of two-tiered settlements.

Greater New York contends Lexington is inapposite because it involved a bad faith failure to defend while this case involves a failure to settle. Greater New York points out that in failure-to-settle cases the victim/plaintiff, its counsel, and the excess insurer have an incentive to color their testimony about settlement negotiations in the underlying lawsuit in order to recover as much as possible from the primary insurer. In contrast, failure-to-defend-cases brought by an insured against an insurer revolve around contractual duties and typically will not require the testimony of the victim/plaintiff or its counsel.

As Lexington makes clear, there are dangers associated with two-tier settlements, including the prospect of self-dealing and self-serving testimony. See Lexington, 815 F.2d at 902. Arguably this danger is heightened in excess insurer versus primary insurer failure-to-settle cases. But many kinds of cases provide inducements to color testimony, and we routinely leave it to juries to assess the forthrightness and honesty of witnesses. Witness credibility and the reasonableness of settlement agreements are questions of fact. Nothing in Pennsylvania law indicates we should prohibit two-tiered settlements in order to guard against jury imperfection. In this case reasonableness and good faith are factual issues that were squarely put to the jury-

III.

A

The central issue at trial was whether Greater New York acted in bad faith in refusing to settle Mcllhenny’s claims. Greater New York maintains the evidence did not support the jury’s finding it had failed to meet its duty. It argues it presented an adequate defense and believed it would prevail at trial on causation. Contending it had no affirmative obligation to make a settlement offer, it claims it never received a settlement offer within the range suggested by its counsel.

The district court required North River to prove by clear and convincing evidence that Greater New York did not honestly, intelligently, and objectively evaluate the Mellhenny case for jury verdict potential and settlement value. See Puritan Ins. Co. v. Canadian Universal Ins. Co., 775 F.2d 76, 79 (3d Cir.1985) (enunciating standard of proof). Indeed, Greater New York does not challenge the jury instruction. Reviewing the record, we find there was ample evidence to support the jury’s verdict. See Walter v. Holiday Inns, Inc., 985 F.2d 1232, 1238 (3d Cir.1993) (a motion for judgment as a matter of law should only be granted if viewing all the evidence in the light most favorable to nonmovant, no jury could decide in favor of the nonmovant).

The record reveals North River presented substantial evidence of Greater New York’s bad faith in evaluating the claim and in refusing to settle. Regarding causation, Roberta D. Pichini, Mcllhenny’s counsel in the underlying litigation, testified defense counsel submitted a report from its medical expert, Dr. Alter, which agreed with plaintiffs medical expert, Dr. Poser, that trauma can cause dormant multiple sclerosis to become symptomatic. Furthermore, defense counsel supplied no expert report that could contradict the findings of plaintiffs rehabilitation witnesses.

With respect to damages, early in the litigation Pichini supplied Greater New York’s defense counsel with reports from medical and rehabilitation experts, projecting rehabilitation damages of $5,000,000. At that time, plaintiffs settlement demand was $700,000 plus repayment of the Workmen’s Compensation lien of $77,700. Pichini testified that she would have recommended acceptance of a pretrial offer of $750,000. As we have noted, neither defense counsel nor Greater New York made any offer of settlement before trial. After the jury began deliberating, Greater New York offered $350,000.

Max Solomon, Greater New York’s Executive Vice President for Claims, had authority to settle claims between $25,000 and $1,000,-000. Solomon testified that defense counsel wrote a pretrial report for Greater New York on July 12,1993, four days before trial, offering little or no hope that Rodin could escape liability for Mcllhenny’s fall. Defense counsel advised Greater New York there was a 50-50 chance the jury would believe the plaintiffs theory of medical causation and if so, could award a verdict from one to 'two million dollars. As a result, defense counsel recommended settlement between $500,000 and $750,000. On July 15, 1993, the day before trial, Solomon discussed the Mcllhenny case with defense counsel. Solomon admitted that he had not evaluated letters or reports from defense counsel. Despite not having read defense counsel’s pretrial report or having discussed the case in any detail with defense counsel, Solomon believed liability was questionable and the ease should be tried. As a result, there was no offer of settlement.

North River presented experts to support its claim of a bad faith refusal to settle. Perry S. Bechtle, Esq., testified Greater New York acted in bad faith in not evaluating the case after Dr. Alter examined plaintiff and in failing to settle within Greater New York’s policy limits. Some of Greater New York’s own witnesses also supported the jury’s finding of bad faith. For example, Maureen Rowan, Esq., the defense attorney in the underlying suit, testified she believed it “probably” would have been' reasonable to attempt to settle between $500,000 and $750,-000 before trial. During the course of her representation, Greater New York never asked her to provide an evaluation of jury verdict potential or settlement value (although four days before trial she wrote and transmitted an unsolicited report). Greater New York’s own insurance expert, Walter Zimmer, testified that written evaluations are a necessary part of claims evaluation where the potential exposure exceeds one million dollars. Nonetheless, he admitted that no written evaluations were contained in the Mcllhenny file. Together this evidence was more than sufficient for the jury to conclude Greater New York had acted in bad faith in refusing to settle.

B.

There was also substantial evidence of the reasonableness of the settlement. Pamela McKinney, a claims representative for North River, testified that following the verdict she engaged in settlement discussions with Mcllhenny’s counsel, Pichini. North River settled, she said, because it received an opinion from counsel that Rodin’s chances to prevail on appeal were less than 50%. In addition, post-judgment interest was accruing at the rate of $1,000 a day. The settlement agreement resulted in the complete release of all claims against Rodin and satisfied the judgment entered against Rodin.

Pichini testified that she believed the settlement was reasonable. Despite her confidence the verdict would be upheld on appeal, her client was in immediate need of funds for medical care. North River offered expert opinion from Joseph H. Foster, Esq., who testified that after a thorough examination of the trial record, he found the trial judge committed no reversible error. The chances of success on appeal, he said, were “very slim.”

Perry Bechtle, Esq., also testified that the chances of success on appeal were very slim. Because post-judgment interest was accruing at the rate of $1,000 a day, and because appeals to the Pennsylvania Superior Court and Pennsylvania Supreme Court would take one to one and a half and two years respectively, he concluded it was reasonable to settle the case for $5.25 million. The settlement agreement gave Mcllhenny money for immediate medical care while providing Rodin with complete releases and satisfaction of the judgment.

C.

Greater New York also contends the district court should have ruled as a matter of law that it did not breach its duty of good faith. We do not agree. The district court correctly observed that under Pennsylvania law primary insurers owe no direct duty of good faith to excess insurers. Greater New York, 872 F.Supp. at 1409. But it also correctly ruled North River could, as Rodin’s subrogee, sue Greater New York for acting in bad faith. Id. Therefore, we will affirm the district court’s refusal to dismiss all counts of North River’s complaint alleging a breach of Greater New York’s duty of good faith.

IV.

Additionally, Greater New York contends the two-tiered settlement here offends the principles of equitable subrogation. See Johnson v. Beane, 541 Pa. 449, 664 A.2d 96, 100 (1995) (discussing the doctrine under Pennsylvania law). As we have noted, North River brought this action as Rodin’s subrogee.

Greater New York contends that under Pennsylvania law a subrogee can only recover the amount it has paid on behalf of the subrogor. See, e.g., Johnson, 664 A.2d at 100 (subrogee stands in shoes of subrogor and may pursue an action to recover amounts paid to subrogor); Associated Hospital Service v. Pustilnik, 497 Pa. 221, 439 A.2d 1149, 1151 (1981) (“It is settled that the right of subrogation exists only to the extent of actual payment by the subrogee.”). Because North River never paid, nor will it ever pay the second tier of the settlement agreement, Greater New York maintains North River cannot recover the amount “payable” under this tier. Its liability, if any, therefore must be limited to the first tier.

But equitable subrogation is a legal construct, employed by courts when one person, acting involuntarily or under some obligation, pays the debt of another. The rule is designed to facilitate the placement of the burden of debt on the party who should bear it. Johnson, 664 A.2d at 100. And whether in contract or equity, subrogation “is to be regarded as based upon and governed by equitable principles.” F.B. Washburn Candy Corp. v. Fireman’s Fund, 373 Pa.Super. 479, 541 A.2d 771, 774 (1988) (quoting Allstate Ins. Co. v. Clarke, 364 Pa.Super. 196, 527 A.2d 1021, 1023-24 (1987)). An insurer, including an excess insurer, upon discharging an insured’s liability, can become equitably subrogated and may assert its insured’s claims against third parties, including a primary insurer. Cf. Brinkley v. Pealer, 341 Pa.Super. 432, 491 A.2d 894, 898 (1985) (insurer’s payment to insured renders insurer insured’s subrogee and places insured in precise position of insurer); see also Barry R. Ostranger & Thomas R. Newman, Handbook on Insurance Disputes § 13.05 (1995).

Subrogation aims to avoid unjust enrichment. United States Fidelity and Guar. Co. v. United Penn Bank, 362 Pa.Super. 440, 524 A.2d 958, 964 , appeal denied, 517 Pa. 609, 536 A.2d 1333 (1987). But the two-tiered settlement here will not result in North River obtaining any more money than it paid to Mcllhenny on behalf of Rodin. As the district court pointed out, the settlement only permits North River to reimburse itself for amounts already paid to Mcllhenny. Any amount in excess of the first tier will be paid to Mcllhenny. Greater New York, 872 F.Supp. at 1410. North River has not sued Greater New York for more than it owes on behalf of Rodin; what it pays for Rodin will turn on its suit against Greater New York. Moreover, the fact that Mcllhenny accepted a second-tier as part of the settlement does not create a cause of action for North River against Greater New York, nor does it make North River’s suit against Greater New York more likely to succeed on the merits.

What Greater New York contests is that the level of payment to Mcllhenny may vary depending on whether North River can make out a successful claim against Greater New York. As noted, Greater New York contends the right of subrogation exists only to the extent of actual payment by the subrogee. Yet in view of our discussion of the purposes of subrogation, without contrary direction from the Pennsylvania courts, we see no reason to proscribe two-tiered settlements because they involve payments conditioned on the outcome of suits by excess insurers against primary insurers.

V.

Greater New York also contends North River owed it a duty of good faith in negotiating the settlement, and the district court erred by dismissing its claim for breach of duty. Confronted with an absence of definitive Pennsylvania case law, the district court looked to our prior holding in Puritan Ins. Co. v. Canadian Universal Ins. Co., 775 F.2d 76, 79 (3d Cir.1985) (Pennsylvania would reject the theory of a direct duty running from primary to excess insurer), and to the Pennsylvania Supreme Court’s decision in D’Ambrosio v. Pennsylvania Nat’l Mut. Cas. Ins., 494 Pa. 501, 431 A.2d 966, 969-70 (1981) (there is no common law cause of action arising in tort for failure to act in good faith in connection with an insurance policy). Because a primary insurer owes no direct duty of good faith to an excess insurer, the district court could “see no reason” why this duty would run in the opposite direction. Therefore, the district court held that an excess insurer owes a primary insurer no direct duty of good faith under Pennsylvania law. Greater New York, 872 F.Supp. at 1406.

Nonetheless, Greater New York contends the district court was mistaken. It argues “[t]his duty arises as matter of law based on the doctrine of subrogation, and arises as a matter of necessity if an excess insurer is to be allowed to negotiate two-tiered settlement agreements.”

Because in Lexington we approved two-tiered settlements subject to the conditions of “reasonableness and good faith,” Greater New York contends that by negotiating a two-tiered settlement, North River assumed a duty of good faith. Greater New York also argues that because an insured owes a duty of good faith to its insurer, North River, by negotiating on behalf of its insured and becoming its subrogee, assumed the insured’s duty to act in good faith.

We are not convinced. Lexington’s requirement of “good faith and reasonableness” attaches to the settlement between the plaintiff and the insured or those standing in its place. It does not create an independent set of duties running between primary and excess insurers. Even if under Pennsylvania law an insured owes a duty of good faith to its insurer, equitable subrogation does not create a distinct duty of good faith between the insured’s subrogee, here the excess insurer, and a primary insurer.

Although Greater New York suggests two-tiered settlements necessitate the imposition of a duty of good faith on an excess insurer, nothing in Pennsylvania law indicates that equitable subrogation creates a duty of excess insurer to a primary insurer, independent of the duties the excess insurer assumed as subrogee. Of course, North River, as Rodin’s subrogee, in its suit against Greater New York became subject to the claims and defenses Greater New York was entitled to assert against Rodin. See U.S. Fire Ins. Co. v. Royal Ins. Co., 759 F.2d 306, 309 (3d Cir.1985) (with equitable subrogation “[i]t follows the excess insurer should assume the rights as well as the obligations of the insured in that position”).

Yet the existence of Rodin’s duty is undisputed. Indeed, the jury in the Greater New York-North River suit found that Rodin had not breached its duty of good faith to Greater New York. In so doing, the jury established that North River did not breach the only form of duty it might have had to Greater New York.

VI.

Finally, Greater New York argues the district court erred by precluding the testimony of one of its central witnesses, Joseph McMahon, an employee with responsibility for handling Mcllhenny’s personal injury claim. Before trial, Greater New York represented that McMahon was seriously ill and could not be deposed or testify at trial. Then, on the Friday before trial he was deemed well enough to appear. The jury had already been selected and the discovery deadline had long since passed. So had the date for submitting pre-trial memoranda. McMahon was not listed in pre-trial documents as a prospective witness. For several months Greater New York had insisted that McMahon would be unable to testify at deposition or at trial. North River relied on this representation in preparing for trial. For these reasons, the court determined his appearance would be highly prejudicial to North River. Balancing the equities, the court found the prejudice to North River from allowing McMahon to testify would be far greater than any potential prejudice to Greater New York.

Greater New York asserts this ruling “eviscerated” its ability to defend itself against the charge that it handled the Mcllhenny claim in bad faith, and challenges the district court’s ruling. We review such judgments under an abuse of discretion standard. See Sowell v. Butcher & Singer, Inc., 926 F.2d 289, 301 (3d Cir.1991). In light of the district court’s thoughtful consideration of the equities, and its sound reasons, articulated after a hearing, we find the court acted well within its authority. We see no abuse of discretion.

VII.

Neither these alleged evidentiary errors nor the court’s rulings on the issue of Greater New York’s duty of good faith provide any basis for concluding the district court abused its discretion. Therefore, we find Greater New York’s motion for a new trial was appropriately denied. See Dunn v. HOVIC, 1 F.3d 1362, 1364 (3d Cir.), cert. denied, — U.S. -, 114 S.Ct. 650, 126 L.Ed.2d 608 (1993) (denial of motion for new trial is reviewed for abuse of discretion).

VIII.

For the foregoing reasons we will affirm the judgment of the district court.

      . A settlement in which the plaintiff is paid additional money in the event a specified condition is met is called “two-tiered.” The conditional portion of the settlement constitutes the “second tier.” Cf. Lexington, 815 F.2d at 893 ("[t]his type of settlement provides for the tort victim to recover a larger amount if the insurer is liable than if the tortfeasor must pay the settlement out of its own pocket.”).

      . Initially, North River offered $2.5 million, but Mcllhenny demanded $5.8 million. North River then agreed to a settlement of $5.25 million. Shortly before settlement was reached, Greater New York tendered Mcllhenny its $1,000,000 policy limit.

      . At the time of the accident HUP’s malpractice insurance consisted of three levels. As required by Pennsylvania law, HUP covered itself for the first $100,000 of liability. The second level, provided by the Pennsylvania Medical Professional Liability Catastrophe Loss Fund, a state agency, consisted of $1 million for each health care provider. The third level was excess coverage, such as that provided to HUP by Lexington. For purposes of analyzing the Lexington decision, as we did in that decision, we will describe HUP as the insured and Lexington as the insurer.

      . "Insurance policies are risk-spreading devices. They exist primarily because the stakes of liability to an insured are greater than they are to the insurer, which can spread the loss across all of its customers. The impact of a settlement offer may be sufficiently great on an insured that it must risk the hazards of even greater liability after trial despite odds that make the settlement advantageous. Prohibiting two-tiered settlement may therefore force insureds to turn down advantageous settlement offers." Lexington, 815 F.2d at 901-02. Precluding such settlements is undesirable. This was the policy rationale set forth in Alfiero v. Berks Mut. Leasing Co., 347 Pa.Super. 86, 500 A.2d 169 (1985), appeal denied (Sept. 9, 1986), and as we indicated in Lexington, Alfiero is the most persuasive statement of Pennsylvania law. See Lexington, 815 F.2d at 902.

      . Indeed, we find some support for our conclusion in the Pennsylvania cases. Pennsylvania law allows an insured to assign his or her bad faith refusal to settle action over to the injured plaintiff. See Gray v. Nationwide Mut. Ins. Co., 422 Pa. 500, 223 A.2d 8, 11 (1966), We perceive no greater danger of self-dealing and self-serving testimony arising from such an assignment than from an excess insurer bringing a bad faith suit pursuant to a two-tiered settlement.

      . When asked why Greater New York paid its $1,000,000 policy limit toward the post-verdict settlement of the Mcllhenny action, Solomon testified:
      Well, because — we did because that would have only — that would have only indicated on our part that maybe there was more bad faith that you could have added on to that one. So we felt — -we felt that in good faith, we should pay a million dollars.

      . The district court charged: "if you find that the settlement between [Rodin and Mcllhenny] was reasonable in its terms and amount, [Greater New York] may be held liable for the entire amount of the settlement regardless of the [Greater New York] policy limits.”

      . In Lexington vie mentioned that a jury might properly hear "that two-tiered settlements are fraught with the danger of self-dealing and should be scrutinized with extra care.” Lexington, 815 F.2d at 902. Greater New York presented an expert witness, Peter Hoffman, Esq., who testified that because two-tiered settlements are forged by a non-adverse parties they present special risks. He opined these types of settlements are "fraught with danger of self-dealing and should be scrutinized with extra care.” Thus, the jury was aware of potential problems with two-tiered settlements.
      It also bears noting that, contrary to Greater New York’s assertions, the reasonableness of a two-tiered settlement contingent on a bad faith suit has nothing to do with the allocation of the total settlement amount between the tiers. Only the total sum matters. Liability in a bad faith suit is premised on injury caused by the refusal to settle and has no relationship to the allocation. If liable, the insurer must pay the damages found by the jury, which can equal the total settlement amount; if not liable, the insurer is simply unaffected by the settlement allocation. Only the injured party and settling insurer's interests are implicated in the allocation.

      . As a general matter "subrogation” is the "substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies, or securities.” Black’s Law Dictionary 1427 (6th ed.1990); see also U.S. Fire Ins. Co. v. Royal Ins. Co., 759 F.2d 306, 309 (3d Cir.1985) ("The basic idea of subrogation is that of substituting the insurance carrier for the insured in the insured’s action against a third party.”). "The right of subrogation may be contractually declared or founded in equity.” Allstate Ins. Co. v. Clarke, 364 Pa.Super. 196, 527 A.2d 1021, 1023-24 (1987). Equitable subrogation "does not arise from any contractual provision but is an assignment created by operation of law.” United States Fidelity and Guar. Co. v. United Penn Bank, 362 Pa.Super. 440, 524 A.2d 958 , appeal denied, 517 Pa. 609, 536 A.2d 1333 (1987).

      . See Cherry D. Williams, A New Twist on Insurance Litigation: Stowers Suits by Excess Carriers Against Primary Carriers, 33 S. Tex. L.Rev. 1, 21 (1992).

      . Under the 60%-40% allocation of proceeds from the suit against Greater New York, North River will not receive money in excess of amounts paid by it under the first tier of the settlement. See Greater New York, 872 F.Supp. at 1405. Nonetheless, we recognize that North River may benefit financially from the conditional character of the settlement. In some cases, a plaintiff could agree to forego some amount of assured payment in tier one for possible payment in tier two. In this case, for instance, plaintiff, taking account of the chance North River would prevail in its suit against Greater New York and the amount promised if North River prevails, would decide whether to accept a settlement with two tiers — one certain and one contingent. The practice of forging conditional settlements presents the theoretical possibility a subrogee will pay less than would be necessary to secure a one-tier settlement.
      Yet this is not the kind of “profit-making” by the subrogee Pennsylvania courts have precluded under the doctrine. Cf. Associated Hospital Service v. Pustilnik, 497 Pa. 221, 439 A.2d 1149, 1153 (1981) (prohibiting insurer from recovering the amount it had credited insured’s bills in its own records rather than the discounted amount it had actually paid the insured's hospital). Rather, in order for North River to settle for less than it would be able to under a one-tier regime, North River must have some chance of prevailing against Greater New York; otherwise the promise of a conditional payment would be of no value to Mcllhenny. Thus, the amount a subrogee like North River can “save” with a two-tier arrangement is constrained by the merits of its prospective suit. This dynamic prevents the economics of two-tiered settlements from transforming them into a way for subrogees to reduce their payments without bearing any risk.

      .Greater New York argues the jury in the Greater New York-North River suit knows the only way to make the injured plaintiff whole is to find Greater New York liable for the full amount of the second tier. Greater New York insists this provides an inducement for the jury to find Greater New York hafe acted with bad faith.
      Again, Greater New York demonstrates deep suspicion of the deliberative capabilities of juries. We do not share this view, but in any event, we cannot read such a notion into Pennsylvania law absent clear guidance from its courts.

      . North River argues that Greater New York has waived these arguments by not raising them in the trial court. We do not agree. The issue was raised before, and decided by, the district court. Although, on appeal, Greater New York has presented new theories on its duly of good faith claim, we find no waiver.

      . The district court found that Pennsylvania would apply the duty to act in good faith to each party to an insurance contract, including the insured. Greater New York, 872 F.Supp. at 1408. We need not reach this issue in deciding the matter before us.

      .At trial, there was no evidence that Rodin failed to cooperate with Greater New York in the defense of the Mcllhenny action. Ivan Krouk, an attorney representing Rodin, testified about Rodin’s cooperation with Greater New York in the defense of the Mcllhenny action and its lack of collusion in the postverdict settlement. Krouk testified that neither he nor any representative of Rodin had any involvement in the negotiation that lead to the settlement agreement. After signing the settlement agreement, Krouk said he was never advised by Greater New York that his approval and signing of the agreement would constitute a breach of the Greater New York policy. Nor did Krouk receive any notification from Greater New York that Rodin's approval and signing of the settlement agreement might constitute a breach of its duty to act in good faith.
      Pichini testified Krouk was not present at the settlement negotiations entered into between her and McKinney of North River. Pichini testified she never spoke to Krouk or any employee of Rodin about settlement negotiations.

      . The parties dispute the circumstances related to McMahon’s unavailability during his illness. North River strongly contends Greater New York improperly denied it access to McMahon prior to the trial.

      . We also affirm the other evidentiary rulings of the district court challenged by appellant — those involving the proffered testimony of witnesses Lachat, Egbert, Sibley, and evidence related to North River's claims handling practices and procedures. These judgments too were well within the court's discretion.