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Archive for the ‘Professional Liability and MPL’ Category

Bilt-Rite but Otherwise Wrong? – How Far does Design Liability Extend in Pennsylvania?

Posted on: August 4th, 2017

By: Scott C. Hofer

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It has long been held that construction design professionals and others who engage in the business of supplying information to others for pecuniary gain may be held liable if incorrect information is provided. See Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.23d 270, 285 (Pa. 2005). Since that time it has been argued by some, including some design professionals, that Bilt-Rite applies to anyone that supplies information regarding what goes into a construction project. The case Elliott-Lewis Corp. v Skanska Building, Inc., 2015 WL 4545362 (EDPA July 28, 2015) is an example of this phenomenon.

In the Elliott-Lewis case the mechanical contractor (“Elliott-Lewis”) sued the general contractor (“Skanska”) for its failure to pay in full for the labor and materials, including change order work, Elliott-Lewis provided. Skanska thereafter made third-party claims against the design team (hereinafter referred to as “Designers”), who then filed fourth-party claims against several other parties, including the pump manufacturer (“Patterson”) and its manufacturer’s representative (“Clapp”).

Thereafter Clapp[1] and Patterson filed motions to dismiss the action, pointing out that Designers’ tort claims were barred by the economic loss doctrine. Clapp and Patterson explained to the Court that while Clapp and Patterson provided some information about Patterson’s product to Elliott-Lewis they were in the business of providing a product, not providing information to be used by others. The designers responded by claiming that because Clapp and Patterson provided information about Patterson’s pumps they were suppliers of information for pecuniary gain under Bilt-Rite.

The Court soundly rejected the Designers’ argument. The Court found that Patterson manufactured and was in the business of providing a product and that Clapp was in the business of facilitating the sale of that product. It noted that manufacturing and selling a product is very different from the services provided by accountants, lawyers and architects that were noted in Bilt-Rite. The Court noted that any other outcome would effectively eviscerate the economic loss doctrine, as almost all sales involve at least some conveyance of information from the seller to the purchaser.

The Elliott-Lewis case does an excellent job of illustrating how narrow the Bilt-Rite exception to the economic loss rule is. This is incredibly valuable for construction professionals that help develop construction projects but do not engage in what is traditionally considered “design” work.

For additional information related to Pennsylvania law on issues related to design and construction liability in the Commonwealths of Pennsylvania and Virginia, the States of New Jersey and Maryland and the District of Columbia you can contact Scott C. Hofer of the law firm of Freeman, Mathis & Gary, LLP at (267) 758-6023 or [email protected].

[1] Via this writer.

No Immunity to Lawyers for Frivolous Lawsuits in Pennsylvania

Posted on: August 1st, 2017

By: Jennifer L. Ward

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On April 26, 2017, the Pennsylvania Supreme Court ruled that the Dragonetti Act was constitutional and did not provide immunity to lawyers for launching frivolous lawsuits. Frivolous lawsuits have long plagued the courts, wastefully consuming time and money. In response, the Dragonetti Act was enacted in 1980 and is designed to allow those who have been wrongfully named as defendants in frivolous civil actions to countersue.

The issue argued was whether the Pennsylvania Supreme Court had exclusive authority to oversee the conduct of attorneys. It was argued that the Dragonetti Act encroached upon that exclusive authority and was thus unconstitutional. Ultimately, the Pennsylvania Supreme Court ruled that the Dragonetti Act was merely a tool to compensate victims of frivolous litigation and that attorneys had no immunity from the Act. With this ruling, attorneys will now have to be more cautious about who they name as defendants.

If you have any questions or would like more information, please contact Jennifer Ward at 267.758.6012 or [email protected].

 

Florida Legislature Rewrites Laws for Condo Community Associations

Posted on: June 22nd, 2017

By: Melissa A. Santalone

Florida House Bill 1237, a bill which proposed significant changes to several laws governing condominium community associations, passed both houses of the Florida Legislature in the 2017 legislative session and is expected to go into effect as of July 1, 2017. The bill, written in response to public outcry over corruption and criminal activity in condo communities in South Florida, revised aspects of the Florida Statutes  to prohibit certain conflicts of interest for condo boards and board members; apply criminal penalties for certain actions by board members; and impose new requirements for financial statements, recordkeeping, and elections, among other things. Here are just some of the key changes pertaining to conflicts of interest and newly criminalized activities:

Conflicts of Interest

  • An association is prohibited from hiring an attorney who also represents the management company for the association.
  • A board member, manager, or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title in lieu of foreclosure.
  • An association, unless it is a timeshare condo association, may not employ or contract with any service provider that is owned or operated by a board member or officer, or any person who has a financial relationship with a board member or officer, or certain relatives of board members or officers, unless the board member or officer owns less than 1 percent of the equity shares.
  • If, after transfer of control to the association, 50% or more of the units in the community are owned by a party contracting to provide maintenance or management services to an association or by a board member or officer of such a party, the contract may be cancelled by majority vote of the unit owners other than the contracting party or the officer or board member of the contracting party.
  • Certain disclosures must be made by any officer or director proposing to engage in activity that is a conflict of interest. If the board votes against taking the action, the officer or director must notify the board in writing of his or her intention not to take the action or to withdraw from office. If the board finds an officer or director violated this provision, the officer or director shall be deemed removed from office.
  • A rebuttable presumption of a conflict of interest exists if, without prior notice, (1) a director or officer of an association or certain of their relatives enters into a contract for goods or services with the association or (2) a director or officer or certain of their relatives holds an interest in a corporation or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.

Newly Criminalized Activity

  • Officers, directors, and managers are prohibited from soliciting, offering to accept, or accepting any kickback for his or her own benefit or that of his or her immediate family, and violation of this provision is considered a violation of the criminal law. A violation of this provision may also subject an officer, director, or manager to civil penalties.
  • Forgery of a ballot envelope of voting certificate used in an election is a felony of the third degree and punishable by up to 5 years in prison.
  • The theft or embezzlement of funds of a condo association is considered a theft and punishable pursuant to Fla. Stat. § 812.014.
  • The destruction of or refusal to allow inspection or copying of an official record of a condo association in furtherance of a crime is punishable as tampering with physical evidence or as obstruction of justice.
  • An officer of director charged by information or indictment with a crime referenced above must be removed from office until the end of his or her period of suspension or the end of his or her term, whichever occurs first.
  • If a criminal charge is pending against the officer or director, he or she may not be appointed or elected to a position as an officer or director of any association and may not have access to the official records of any association, except pursuant to court order.
  • If the charges against the officer or director is resolved without a finding of guilt, the officer or director must be reinstated for the remainder of his or her term in office, if any.

These changes to the laws governing condo community associations will serve to complicate board and board member compliance with the new provisions. For guidance on these changes to condo association law or any aspect of Florida law governing community associations, please contact the attorneys in FMG’s Tampa office.

Can Wrongdoers Do No Wrong?

Posted on: January 31st, 2017

By: Kevin R. Stone

In Goldstein, Garber & Salama, LLC v. J.B., the Georgia Court of Appeals was faced with a case in which a nurse anesthetist (Paul Serdula) sexually assaulted a dental patient (J.B.) while she was sedated for a surgical procedure.  Serdula pleaded guilty and went to prison.  J.B. filed a civil lawsuit against the dental practice (GGS) where the assault occurred.  At the time of trial, Serdula was not a defendant in the lawsuit.  Still, he was included on the verdict form so the jury could apportion fault between him and GGS.  Surprisingly, the jury determined that (1) Serdula, who committed the intentional assault, was 0% at fault; and (2) GGS was 100% at fault for Serdula’s actions, leaving it on the hook for the entire $3.7 million verdict.

The Court of Appeals held that the verdict was not void or plainly erroneous even though a literal reading of it indicates that Serdula, who undisputedly committed the assault, bears no fault.  In his dissent, Judge Ray astutely noted that “A finding that Serdula did not contribute to J.B.’s injuries is wholly incomprehensible.  A finding that Serdula was not at fault would logically be a finding that he did nothing wrong.  If he did nothing wrong by molesting J.B., how then can GGS be liable for negligently placing him in the position to molest her?  A finding of no fault on Serdula’s part would seemingly equate to a finding of no fault on GGS’ part.”

The issue is now before the Georgia Supreme Court (Case No. S16G0744) and the consequences of the outcome are far-reaching.  If the opinion stands as is, it allows a jury to hold an allegedly negligent actor at 100% fault for intentional, criminal acts that were undisputedly committed by someone else.  The Georgia Defense Lawyers Association (GDLA) submitted an amicus brief in support of the dissent’s view of the apportionment issue.  We will continue to follow this case and keep you updated.

For any questions, please contact Kevin Stone at [email protected].

Third-Party Lending May be Bad Investment for Attorneys: Litigation Finance and Champerty Affect Validity of Fee Agreements and Ethical Duties

Posted on: November 1st, 2016

istock_000023265222_large_1By: Meaghan Londergan

Once universally disfavored, litigation finance (funding of lawsuits through third-party lending) is now commonly used to pursue litigation against well-funded defendants. However, the longstanding doctrine of “champerty” in many states provides the defense bar with a mechanism to prevent the buying and selling of lawsuits by third parties. While many jurisdictions have repealed the champerty defense, where applicable, it can result in invalid fee agreements, ethical violations and potential malpractice actions.

            Relying on the “doctrine of “champerty,” the Superior Court of Pennsylvania recently held invalid a contingency fee agreement between Bruce McKissock—an attorney at Marshall, Dehenney, Coggin & Werner—and Polymer Dynamics, Inc. (“PDI”). In 1999, McKissock—then of McKissock & Hoffman—represented PDI in a suit against Bayer Corporation in the Eastern District Court of Pennsylvania. The jury returned a verdict of $12.5 million against Bayer. In 2008, PDI and McKissock entered into a new fee agreement increasing his contingency fee to 33% and appealed to the Third Circuit. Because PDI could not afford to appeal, a third party, Litigation Fund Investors, funded the litigation in exchange for principal paid out of McKissock’s 33% contingency fee. The Third Circuit affirmed the lower court’s verdict.

            After Investors were paid out of McKissock’s fee, insufficient funds were left to pay McKissock. McKissock filed claims against the Investors in the Superior Court of Pennsylvania alleging he had a lien on the recovery funds pursuant to the fee agreement. The Court denied his claims, holding the 2008 Fee Agreement was champertous and unenforceable. In Pennsylvania, a fee agreement is invalid if: (1) an investor has no legitimate interest in a suit; (2) the investor gives money to carry out the suit; and (3) the investor is entitled to a share of the proceeds. A loan is valid if an investor has no expectation of benefiting from the litigation proceeds. Unlawful litigation finance agreements have financial and ethical implications for attorneys.

            How a state applies the champerty defense determines what agreements are enforceable and what ethical implications exist. While investors want to be informed about the lawsuit, attorneys must not waive attorney/client privilege without informed consent. Some states require an attorney to disclose this risk before entering into a litigation finance agreement. Further, litigation finance must not affect the duty owed to a client or influence a lawyer’s professional judgment.

            The Superior Court’s recent decision shows that regulation of litigation finance is alive and well in Pennsylvania. Fee agreements that involve champerty may be deemed invalid, and attorneys must always recognize privilege and duty concerns when addressing third-party financing.