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Posts Tagged ‘Pennsylvania’

Waiving the Right to Remove State Court Actions

Posted on: February 13th, 2019

By: Justine Baakman

Boilerplate Demands for Relief in Pennsylvania Complaint Alone Sufficient to Support an Amount in Controversy Exceeding $75,000

The Eastern District Court of Pennsylvania recently held that one may waive the right to removal to federal court even when there exists uncertainty as to whether the amount in controversy exceeds the $75,000.00 threshold for diversity citizenship. In Hutchinson v. State Farm Fire & Casualty, on January 17, 2018, the plaintiffs filed a breach of contract suit against the defendant in Pennsylvania state court. In their state action, the plaintiffs sought minimal damages totaling approximately $25,000.00 for specific costs relating to property damage they allege to have suffered. Despite those specifically-pled damages, the complaint included the nearly always pled boilerplate demands in Pennsylvania complaints for compensatory and punitive damages along with interest and attorneys’ fees against the defendant. Moreover, the plaintiffs filed their state court action in the Pennsylvania major trial division, thereby acknowledging the potential for the damages they sought to exceed the Pennsylvania compulsory arbitration cap of $50,000.00.

About three months following initiation of the state action, in April 2018, the defendant served the plaintiffs with requests for admission seeking an admission that the plaintiffs damages either exceeded or did not exceed the $75,000.00 threshold for removal. About one month later, in May 2019, the plaintiffs served their responses to those requests for admission. Although the plaintiffs admitted that their actual damages fell well below the $75,000.00 threshold, they indicated that once punitive damages, interest, and attorneys’ fees were accounted for, “their total damages could very well exceed $75,000.00.”

About one month later, in June 2018, the defendant removed the matter to the Eastern District Court of Pennsylvania. Shortly thereafter, the plaintiffs moved to remand the matter back to state court. The basis for that remand was the defendant’s untimely removal. In support of their request for remand, the plaintiffs argued that the defendant had known since initiation of the action in January 2018 that the amount in controversy exceeded $75,000.00. In arguing so, the plaintiffs focused on the boilerplate language in the complaint wherein they sought punitive damages, interest, and attorneys’ fees. In arguing against remand, the defendant focused on the boilerplate language of the relief sought in the complaint. Specifically, the defendant argued it was not legally certain that the damages the plaintiffs sought exceeded the $75,000.00 threshold until the plaintiffs answered its requests for admission. The Eastern District Court of Pennsylvania ultimately remanded the matter back to state court for the defendant’s failure to timely remove the action.

The impact of the Eastern District Court of Pennsylvania’s ruling on removal of state court actions is yet to be seen. It certainly leaves open the possibility that nearly all state court complaints in Pennsylvania could support a reasonable finding that the amount in controversy exceeds the $75,000.00 threshold for removal based on diversity of citizenship. And, more importantly, that failure to remove Pennsylvania state court actions – most of which are initiated via complaints seeking similar boilerplate relief as was at issue in the Hutchinson matter – within thirty (30) days of service of the complaint could result in waiver of the right to remove.

For additional information related to this topic and for advice regarding how to navigate removal of Pennsylvania state court actions, including torts, products liability, and catastrophic loss litigation, you may contact Justine Baakman at 267-908-7882 or [email protected]

Court Rules No Coverage For Pa. Law Firm’s Malpractice Suit

Posted on: November 26th, 2018

By: Barry Brownstein

An insurer does not have to cover a Pennsylvania law firm in a professional malpractice suit that a client filed after the firm allegedly used privileged information to benefit its attorneys’ side business in a real estate development.

The United States District Court for the Western District of Pennsylvania granted Westport Insurance Corp.’s motion for summary judgment in its case against Hippo Fleming & Pertile Law Offices (“HFP”) and attorney Charles Wayne Hippo Jr., agreeing with the insurer that the dispute over a shopping center development was exempted from coverage by the outside businesses exclusion in the firm’s professional liability policy.

Gregory Morris and Morris Development, one of HFP’s longtime clients, alleged that HFP had used information disclosed to the firm under attorney-client privilege to benefit a project by its side businesses, Templar Development and Templar Elmerton. Westport’s insurance policy contained a clear and unambiguous exclusion for lawsuits stemming from any of the policyholders’ outside businesses, and Hippo had not disclosed his involvement in the Templar companies when applying for the policy.

HFP argued that since the underlying lawsuit’s first two allegations of legal malpractice and breach of contract stemmed from the firm’s attorney-client relationship to Morris, Westport had a duty to defend them under the professional liability policy. The court, however, said it was Hippo’s dual role that gave rise to the claims against him.

The court emphasized that the plain language of the complaint in the underlying suit entirely discredits defendants’ argument that counts I and II are based solely on HFP’s role as Morris’s attorney. Counts I and II of the complaint allege that Hippo committed legal malpractice and breach of contract by simultaneously acting as Morris’s attorney and a competing real-estate developer. Therefore, the court held that Westport has no duty to defend because each claim in the underlying suit falls unambiguously within the policy’s outside business exclusion.

If you have any questions or would like more information, please contact Barry Brownstein at [email protected].

Arbitration Agreements in New Jersey Need More Details

Posted on: November 16th, 2018

By: Chris Curci

On November 13, 2018, the Superior Court of New Jersey, Appellate Division, issued an important decision holding that an arbitration agreement between the employer and employee was not enforceable. Flanzman v. Jenny Craig, Inc., Docket No. L-6238-17.  The arbitration agreement read:

Any and all claims or controversies arising out of or relating to [plaintiff’s] employment, the termination thereof, or otherwise arising between [plaintiff] and [defendant] shall, in lieu of a jury or other civil trial, be settled by final and binding arbitration. This agreement to arbitrate includes all claims whether arising in tort or contract and whether arising under statute or common law including, but not limited to, any claim of breach of contract, discrimination or harassment of any kind.

According to the Appellate Division, this agreement was unenforceable because it “failed to identify the general process for selecting an arbitration mechanism.” What exactly does that mean?

In its effort to clarify this standard, the Appellate Division stated that an employer is not required to “detail in the arbitration agreement the exact manner in which the arbitration” will proceed. However, an employer must identify the “forum” for the arbitration and clearly explain how the employee’s judicial rights to a jury trial are being replaced by the arbitration rights.

For example, the Court noted that it would be sufficient for an employer to (1) identify a forum such as the American Arbitration Association (“AAA”) or the Judicial Arbitration and Mediation Services (“JAMS”), and (2) adopt that forum’s rules and procedures. The Court opined that this would be sufficient because AAA and JAMS’s rules and procedures address numerous procedural issues, such as: (1) notification requirements, (2) how to initiate proceedings, (3) management conferences, (4) discovery, (5) the location of the hearings, (6) the number of arbitrators, (7) how to communicate with the arbitrator, (8) attendance requirements, (9) dispositive motions, (10) evidence, (11) modification of awards, (12) and applications for fees, expenses and costs.

In other words, while the arbitration agreement is not required to “detail the exact manner in which the arbitration will proceed,” an employer must specifically identify a forum such as AAA or JAMS and incorporate that forum’s rules and procedures. This allows the employee to fully understand how his or her judicial rights to a jury trial are being replaced by arbitration.

Employers should review their employee arbitration agreements to ensure their enforceability. If you need help with this or any other employment related question, Chris Curci practices Labor & Employment law in Pennsylvania and New Jersey and is a member of Freeman Mathis & Gary’s Labor and Employment Law National Practice Section. He represents employers in litigation and advises clients on all aspects of employment law. He can be reached at [email protected].

Discrimination Suit Over Service Dog Revived By Third Circuit

Posted on: August 23rd, 2018

By: Barry Brownstein

The Third Circuit has revived a lawsuit by the parents of an epileptic girl who claim a Pennsylvania school discriminated against her by barring her service dog.

In 2014, Traci and Joseph Berardelli sued the Allied Services Institute of Rehabilitation Medicine, which operates a school with a specialized program for dyslexic students, after it barred their daughter from bringing her service dog to school to help alert staff to her epileptic seizures. The school claimed the dog would be a distraction, and the Berardelli’s daughter missed many school days when her seizures were bad. When the school finally permitted the service dog to accompany her, the reprieve did not last long, as school officials required that it wear a “special therapeutic shirt designed to decrease allergens” that caused the dog to overheat. The parents’ lawsuit alleged that the school violated the ADA, the Rehabilitation Act, and a Pennsylvania discrimination law.

The United States District Court for the Middle District of Pennsylvania dismissed the ADA and state discrimination claims, ruling that they improperly sought damages.

On appeal, Traci and Joseph Berardelli argued that “reasonable modifications” required under the ADA are substantively the same as “reasonable accommodations” provided for in the Rehabilitation Act, and thus, service animal requirements in the ADA apply to both laws.

The Third Circuit ruled that the district court erred in its instructions to the jury about the Rehabilitation Act claim and improperly disallowed testimony about ADA service animal regulations because that was not the law being considered.  In its enforcement of the ADA, the Department of Justice has ruled that service animals are reasonably permitted to be used by disabled persons in public places as long as they are housebroken, not out of control, and pose no risk to the public.

The Third Circuit ruled that the Rehabilitation Act of 1973 and its progeny the Americans With Disabilities Act of 1990 must be interpreted the same way with respect to reasonable accommodations that must be provided to those with disabilities, including the use of service animals. Thus, under the Rehabilitation Act just as under the ADA, a covered actor ordinarily must accommodate the use of service animals by individuals with disabilities. The Third Circuit also overturned dismissal of the claim made under Pennsylvania discrimination law, ruling that the district court erred because that law does permit damages as a remedy.

If you have any questions or would like more information, please contact Barry Brownstein at [email protected].

Amendments To Pennsylvania’s CASPA Will Change The Landscape Of Payment Disputes

Posted on: August 3rd, 2018

By: Jonathan Romvary

Anyone who has ever done any amount of work as a contractor or who has represented them in collections cases has learned from hard experience that it can be all but impossible to get paid for one’s work. In Pennsylvania, the Contractor and Subcontractor Act (CASPA) was introduced in 1994 as a complement to the Pennsylvania Mechanic’s Lien Law and was intended to provide contractors (and subcontractors) with additional remedies against those owners/contractors withholding payment for their services. However, the landscape of these payment disputes is likely to significantly change as a result of recent legislation.

Last year, a Pennsylvania state representative introduced a bill, which sought to substantially amend the act and for the first time since 1994, provide further protections for contractors against those withholding funds for the work. That bill has languished in the House Commerce Committee since last year. Nonetheless, a similar bill amending CASPA was referred to the state senate and in June 2018, Governor Tom Wolf signed the bill into law as Act 27. Amongst the numerous amendments to CASPA, Act 27 now provides:

  • If an owner fails to adhere to the terms or withholds payment, contractors and subcontractors may stop performance of the work (subject to contractual limits);
  • There is no permissible waiver of any provision of CASPA;
  • Failure to provide the contractor with a 14 day written notice of a deficiency results in a waiver of the right to withhold payment for the deficiency and requires full payment of the invoice;
  • If a party alleges an invoice contains an error, that party must pay the correct amount on the date payment would otherwise be due otherwise it will be an improper withholding; and,
  • Withholding retention for longer than 30 days after final acceptance of the work generally qualifies as improper withholding.

These new changes are scheduled to take effect on October 10.

Without question, these changes increase the negotiation power of contractors and subcontractors, however, more importantly, the changes reinforce the need for owners and contractors to maintain clear payment records as only clear payment records will provide owners and contractors a sufficient defense in any payment dispute. Owners, contractors and subcontractors involved in payment disputes need to be aware of their respective obligations and rights.

Anyone in the construction industry that has questions about these amendments and how they may affect their business or current projects, please contact Jonathan Romvary at [email protected].