Personal Jurisdiction on Out-of-State Entity Not Established by Presence of Subsidiary Company in Pennsylvania

Federal court personal jurisdiction issues were reviewed in the case of Esposito v. Las Vegas Sands Corp., No. 17 - CV - 2936 (E.D. Pa. Feb. 21, 2018 Surrick, J.).

In this Esposito decision, the court dismissed a non-resident Plaintiff’s slip and fall claims against a non-resident Defendant for lack of personal jurisdiction.  The Plaintiff allegedly fell at the Venetian Hotel in Las Vegas, Nevada.

The court found that the fact that the non-resident Defendant also operated a separately incorporated Pennsylvania subsidiary, which was the Sands Bethlehem Casino in Bethlehem, Pennsylvania, did not expose that Defendant to personal jurisdiction in Pennsylvania for out-of-state claims not involving any activity of that subsidiary. 

The court noted that, under Pennsylvania law, a parent corporation does not carry on “a continuous and systematic” business through separately incorporated subsidiaries. 

The court also found that the out-of-state Defendant was not subject to general jurisdiction because Pennsylvania was neither the state of that Defendant’s incorporation nor the location of that Defendant’s principal place of business.

The court ultimately ruled that this matter would be transferred to the place where the accident happened.  

Anyone wishing to review a copy of this decision may click this LINK.

I send thanks to Attorney James M. Beck of the Reed Smith law firm in Philadelphia for bringing this case to my attention.  

$21 Million Dollar Bad Faith Award Erased by Pennsylvania Superior Court (Update: Reargument Granted and Decision Vacated on May 31, 2018)

In its decision in the case of Berg v. Nationwide Mut. Ins. Co., Inc., No. 713 MDA 2015 (Pa. Super. April 9, 2018 Ott, Stabile, J.J., and Stevens, P.J.E.) (Op. by Stabile, J.) (dissenting Op. by Stevens, P.J.E.), the Pennsylvania Superior Court vacated a $21 million dollar judgment entered by a Berks County trial court judge and remanded the case for the entry of judgment in favor of the carrier in a property damage bad faith cause of action.  

As noted in the Opinion, this case has been up and down the appellate ladder over the past two decades.  This matter arose out of a property damage claim relative to the insured’s Jeep Grand Cherokee. 

According to the Opinion, this bad faith suit initially began with the filing of a Writ of Summons back in January of 1998, over twenty (20) years ago.  

The insured's Jeep Grand Cherokee was allegedly damaged in a motor vehicle accident as a result of which there were no personal injuries.  

The Plaintiffs’ causes of action against the carrier included breach of contract, negligence, fraud, conspiracy, violations of the Unfair Trade Practices and Consumer Protection Law (UTPCPL), and insurance bad faith.  

Back in 2004, the case proceeded to a jury trial and the jury entered a verdict in favor of the Defendants on all causes of action except the catch all provision of the UTPCPL.   The jury awarded the Plaintiff $1,925.00 in damages against one Defendant and $295.00 against the carrier Defendant for the UTPCPL violation.  

Thereafter, a second phase of the trial began in the form of a bench trial on the UTPCPL treble damages and bad faith.   That bench trial was in 2007 and resulted in a directed verdict in favor of the carrier.   That result was appealed and the case went to the Supreme Court before being remanded back to the trial court for another bad faith trial.  

The second bad faith bench trial took place in approximately June of 2014 before Judge Jeffrey K. Sprecher.   Judge Sprecher issued a verdict in favor of the Plaintiffs on their bad faith claim and ordered the carrier to pay $18 million in punitive damages and $3 million dollars in attorney’s fees.  

This bench trial verdict is the subject of the appeal in the above cited latest decision in the Berg case and, as stated, resulted in the Superior Court vacating that $21 million dollar bench trial verdict and entering judgment in favor of the carrier under the standard of review applicable to non-jury cases.  

In the Pennsylvania Superior Court’s detailed 61 page Opinion, the appellate court reviewed the current status of bad faith law in Pennsylvania and affirmed that clear and convincing evidence of bad faith conduct on the part of the carrier is required to support such a claim.  

The Berg court restated the basic law that “[I]n order to recover in a bad faith action, the Plaintiff must present clear and convincing evidence (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew or recklessness disregarded its lack of a reasonable basis.”  See Berg at p. 10 [citation omitted.].  

Here, the appellate court found many of the factual findings of the trial court were not supported by the record presented.  

In Berg, the basic issue raised by the Plaintiff was that the carrier allegedly acted in bad faith by repairing the Plaintiff’s Jeep rather than declaring the Jeep a total loss and compensating Plaintiffs for its value at the time of the loss.  The insured also asserted that faulty repairs were made to the Jeep and that the carrier should have been aware of such faulty repair work. 

The appellate court found that neither the Plaintiff nor the trial court had cited any legal authority supporting the conclusion that a carrier’s duty of good faith and fair dealing requires an inspection of repairs prior to returning a vehicle to an insured.  The court noted that, even if there were such a duty recognized under Pennsylvania law, the evidence in this case did not rise above a showing of negligence, and, therefore, the evidence did not support a finding of bad faith by clear and convincing evidence.  

Relative to the trial court’s findings of bad faith, the appellate court noted that it had the authority to reverse such findings when the trial court’s “critical factual findings are either unsupported by the record or do not rise to the level of bad faith.”  See Berg at p. 38 [citations omitted] .  

The Superior Court went on, at length, to describe the trial court’s findings as being devoid of merit at times and in reliance upon facts and opinions outside of the record at other times.  

The appellate court also faulted the trial court to the extent that the trial court based its findings of bad faith upon alleged discovery violations by the carrier during the course of the litigation.    The court noted that a trial court’s findings of bad faith based upon discovery violations amounted to a clear error.  See Berg at p. 48. 

The appellate court in Berg noted that, while it is true that a finding of bad faith under §8371 may be based upon an insurer’s conduct before, during, or after litigation, the courts of Pennsylvania have refused to recognize that a carrier’s discovery practices constitute grounds for a bad faith claim under §8371, absent the use of discovery to conduct an improper investigation.   Berg at p. 48-49 [citations omitted].  

 The Superior Court in Berg explained that §8371 is designed to provide a remedy for alleged bad faith conduct by a carrier in its capacity as an insurer for breach of its fiduciary duty to an insured by virtue of the parties’ insurance policy, and not as a legal adversary in a lawsuit filed against it by an insured.  Berg at p. 49.   The court went on to note that discovery violations are  to be separately governed under the exclusive provisions of the Pennsylvania Rules of Civil Procedure.   Id.  

The appellate court also rejected the trial’s findings of bad faith on the basis of allegations that the carrier allegedly hoped to overwhelm Plaintiffs with its superior resources and that the carrier had allegedly adopted a scorched earth policy towards this litigation.  Id. at 50.    The appellate court found that there was no basis in the record to support this finding by the trial court judge.   

The appellate court also found that the trial had incorrectly found that the carrier had engaged in bad faith on the basis of evidence of the extended length of this litigation.   In this regard, the Superior Court in Berg stated that “Plaintiffs had the right to prosecute their case zealously within the bounds of the law, just as [the carrier] had the right to defend itself if it believed its personnel did not act in bad faith.  We cannot arbitrarily impose a limit on the time and resources an insurer spends in defending a bad faith action.”   Berg at p. 52.  

As stated, in the end, the Superior Court in Berg vacated the judgment of the trial court primarily because of the appellate court’s finding that the record did not support many of the trial court’s critical findings of fact.   The Superior Court in Berg felt that it had no choice but to vacate the trial court’s judgment after an exhaustive review of the record before the appellate court. 

In concluding its Opinion, the majority in Berg disagreed with the dissenting judge’s assertion that the majority was improperly substituting its own findings for those of the trial court under the applicable standard of review.   The appellate court reiterated that the “trial court engaged in a limited and highly selective analysis of the facts and drew the most malignant possible inferences from the facts it chose to consider” all of which, in the eyes of the Superior Court supported a vacation of the verdict.   Berg at p. 60.  

Anyone wishing to review the Majority Opinion in Berg may click this LINK

The Dissenting Opinion can be viewed HERE.

UPDATE:  On May 31, 2018, the Pennsylvania Superior Court granted the Plaintiff's request for reargument and vacated this decision.

Pennsylvania Supreme Court Affirms Award of Quantum Meruit Damages in Attorney's Fees Dispute

In the case of Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman, P.C., No. 7 WAP 2017 (Pa. March 6, 2018 Dougherty, J.), the Pennsylvania Supreme Court ruled that the Superior Court erred in reversing a trial court’s award of quantum meruit damages to a predecessor law firm because the successor counsel received and retained a benefit from predecessor counsel’s work, thereby entitling the predecessor counsel to some payment.  

This matter arose out of a wrongful death lawsuit following a motor vehicle accident.  

The Supreme Court found, in part, that the predecessor counsel had conferred a benefit upon both the client and the successor counsel who later concluded the matter.   It was noted that the predecessor’s work on the litigation contributed towards the settlement eventually negotiated by the successor firm and that the predecessor firm was not paid for that work. 

As such, the court ruled that the predecessor counsel could recover damages in quantum meruit.   The court noted that the circumstances of this case established that the successor counsel received and retained the benefit from the predecessor counsel such that it would be unjust if the predecessor counsel was not provided with some payment.  

Anyone wishing to read this case may click this LINK.

Source:  “Digest of Recent Cases.”  Pennsylvania Law Weekly (March 20, 2018).  

Sanctions Issued in Pike County Case Due to Plaintiffs' Alleged Failure to Comply with Multiple Discovery Orders Compelling Completion of Depositions

Sanctions were granted against a Plaintiff in the Pike County Post-Koken auto accident case of Middaugh v. Horacek and State Farm Ins. Co., No. 691-2011 Civil (C.P. Pike Co. April 2, 2018 Miller, S.J.) due to the Plaintiff's alleged failure to cooperate with the defense efforts to complete the Plaintiff's deposition.  The motion for sanctions at issue was decided by visiting Judge Linda Wallach Miller of the Monroe County Court of Common Pleas sitting by assignment in Pike County.

Due to the failure to complete depositions, each of the three named Plaintiffs were ordered to pay $1,000 each as a sanction and, as a further sanction, the Plaintiffs were additionally prohibited from providing any evidence at trial in support of a claim for damages.

According to the opinion, the case had been in litigation for six years over which the Pike County Court had issued two separate Orders compelling that depositions be completed within certain deadlines.  When such depositions were not completed, the defense filed the Motion for Sanctions at issue.

In her Opinion, Judge Miller reviewed the factors to be considered under Pa.R.C.P. 4019 when addressing a discovery motion for sanctions.

The court ultimately ruled that sanctions were warranted where the case had been pending for six years and where the Plaintiff's depositions had not been completed despite the issuance of two separate court orders compelling the same.

As the case makes for an interesting read, I provide this LINK to the Opinion.

Adverse Inference Sanction Granted Due to Spoliation of Fire Scene

In the case of Dyvex  Industry v. Agilex Flavors & Fragrances, Inc., No. 12 - CV - 0979 (M.D. Pa. Feb. 27, 2018 Mannion, J.), the court granted a defense Motion for an  Adverse Inference Spoliation Sanction under a finding that the Plaintiff had spoliated a fire scene in a products liability suit.  

According to the Opinion, the Plaintiff had identified the Defendant’s product as a likely cause but went ahead with the demolition of the fire scene without giving the Defendant an opportunity to inspect.   The court also noted that the Plaintiff had informed the Defendant that the scene was being preserved, at which point demolition had already begun.  

The court found that the Defendant was prejudice by the destruction of potential alternative cause evidence.  

While the court noted that there was no blanket rule that a Plaintiff must always preserve an entire fire scene, here, there were no exigent circumstances requiring any alteration of the scene, such as safety hazards.   The court therefore found that the fault on this issue largely lay with the Plaintiff for disturbing the fire scene without notice to the defense.  

The court found that dismissal was not appropriate as the prejudice to the Defendant was partially mitigated by photographs and preservation of some evidence from the scene.

As such, the court found that the Plaintiff’s partial failure to preserve evidence was punishable with an adverse inference instruction.  

Anyone wishing to review a copy of this decision may click this LINK.  The Court's Order can be viewed HERE.

I send thanks to Attorney James M. Beck of the Reed Smith law firm in Philadelphia for bringing this case to my attention.  

Summary Judgment Denied in Water Park Accident Case

In the case of Deleon v. MHC Timothy Lake N. Ltd. Partnership, No. 8652 - CV - 2014 (C.P. Monroe Co. Nov. 29, 2017 Williamson, J.), Judge David J. Williamson of the Monroe County Court of Common Pleas denied a Defendant’s Motion for Summary Judgment in a case involving injuries allegedly sustained by a minor Plaintiff while riding down a water slide at the Defendant’s water park.   The court essentially found that genuine issues of material fact existed to allow the case to proceed to a jury.  

According to the Opinion, the Defendant operated a water park at which the Plaintiff visited with her family and friends.   The Plaintiff made several trips down a water slide.  On the last trip, the Plaintiff emerged with a forehead laceration.  

The Plaintiff’s Complaint alleged that the laceration was caused by a jagged edge on the water slide.  However, deposition testimony indicated that the injury may have occurred instead when the Plaintiff hit her head on the water slide.  

The Defendant moved for summary judgment, asserting that the Plaintiff admitted in discovery that the alleged jagged edge on the water slide did not exist.   In the alternative, the defense asserted that there was no evidence of actual or constructive knowledge on the part of the Defendant of the allegedly defective condition.   The Defendant also maintained that the Plaintiff’s claim under res ipsa loquitur was not substantiated, as injuries on water slides were common.

The court rejected the defense argument relative to the res ipsa loquitur argument by noting that there were genuine issues of fact to be considered by a jury.  

The court additionally found that the inconsistent allegations by the Plaintiff as to how the laceration occurred were not enough to warrant summary judgment as the factual determination in that regard should be left to the jury.  

The court also rejected the defense argument that summary judgment was warranted given that the slide had been formally inspected three (3) days prior to the Plaintiff’s alleged incident.    The court noted that, even if the Defendant had passed the inspection, that did not eliminate the possibility that the inspector had missed a defect or that some other condition had occurred between the inspection and the Plaintiff’s accident that could have caused the injury.   Again, since there were issues of fact in this regard, the court denied the Motion for Summary Judgment and allowed the case to proceed.  

Anyone wishing to review a copy of this decision may click this LINK. 

Source: “Digest of Recent Opinions,” Pennsylvania Law Weekly (Feb. 13, 2018).  

Judge Williamson Orders Production of Plaintiff's Instagram Log-In Information

In the case of Kelter v. Flanagan, No. 286-Civil-2017 (C.P. Monroe Co. Feb. 19, 2018, Williamson, J.), the court granted a Defendant’s Motion to Compel a Plaintiff to provide the Defendant’s counsel with her Instagram account log-in information.   The Order further mandated that the Plaintiff would not remove or delete any content from that account.   Judge Williamson also ordered defense counsel not to share this information with any one not related to the case.  

According to the Opinion, this personal injury action arose out of a  motor vehicle accident.  

Following the deposition of the Plaintiff, the Defendant filed the subject Motion to Compel.   The defense believed that there would be relevant information on the Plaintiff’s Instagram social media account concerning the Plaintiff’s alleged injuries suffered in the accident. 

In his Opinion, Judge Williamson noted that the use of a party’s social networking account information and litigation are becoming more frequent, even though there is limited case authority on the issues presented.  

The court confirmed that, as has been held before in the Monroe County Court of Common Pleas and within other trial courts, social networking accounts can be discoverable if it appears likely that the accounts contain information that could be relevant.  

Judge Williamson noted that “[a]rguably, there does not even appear to be an expectation of privacy on social media as it relates to litigation because the account holder is sharing information with others in a public or quasi-public domain.”   See Op. at p. 2 [citations omitted].  

According to the Opinion, the Plaintiff initially testified at her deposition that she did not maintain any social media accounts. When confronted with proof to the contrary, the Plaintiff admitted that she maintained an Instagram account and asserted that she had misunderstood the question presented.  

Defense counsel then reviewed posts from the Plaintiff’s Instagram account from the time period shortly after the accident that were available for public access on the Plaintiff’s Instagram account.  According to the Opinion, those posts seem to indicate that the Plaintiff was engaged in vigorous physical activity both before and after the accident, such as references to shoveling snow and going to the gym.  

When the Plaintiff declined to provide any additional Instagram account information, the defense filed this Motion to Compel, which, as noted, the court granted.  


Anyone wishing to review this decision may click this LINK.