Category: Business Law

PA Superior Court Requires High Burden of Proof When Challenging Nursing Home Arbitration Agreement Provisions

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A recent Pennsylvania Superior Court ruling found that nursing home patients who challenge the validity of arbitration agreements due to mental incapacity have a high burden to prove their case. In Cardinal v. Kindred Health Care, No. 1547 MDA 2014 (Pa Super. 2017), the plaintiff, Bret Cardinal (“Cardinal”) brought suit on behalf of the estate of the decedent Carmen Cardinal against the defendant, Kindred Nursing Centers (“Kindred”). The decedent was admitted as a patient to a Kindred facility on June 21, 2012.They then signed a contract the next day agreeing that any disputes related to their admission at the facility would be resolved through arbitration. The plaintiff brought suit alleging claims of negligence, custodial neglect and wrongful death of the decedent, and challenged the arbitration agreement due to the decedent’s lack of mental capacity to enter into the agreement at the time of signing it. The plaintiff alleged that on the day of the decedent’s admission to the Kindred facility, medical records indicate the decedent was lethargic and disoriented. Furthermore, the following day when the agreement was signed, records also show that the decedent had trouble signing the agreement. The plaintiff argued that the facts taken collectively make it clear the decedent was not of sound mental capacity to comprehend the agreement and thus wasn’t able to enter into the agreement knowingly and voluntarily.

The court disagreed; it ruled that Pennsylvania law requires the patient challenging the agreement to prove by “clear, precise and convincing” evidence the patient’s mental incapacity, and “mere weakness of intellect resulting from sickness is not legally sufficient grounds to set aside an executed contract if sufficient intelligence remains to comprehend the nature and character of the transaction.”

For more information, call our business lawyers in Philadelphia at 215-574-0600 or contact us online. The legal team at Sidkoff, Pincus & Green represents clients in Pennsylvania and New Jersey.

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Supreme Court to Rule on Legality of “Fair-Share Fees”

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On February 26th, the Supreme Court heard arguments in Janus v. American Federation of State, County, and Municipal Employees, Council 31, 851 F.3d 746 (7th Cir. 2017). Although the Court will not circulate a decision until summer of 2018, commentators are speculating that Janus will succeed in overturning the precedent set in Abood v. Detroit Board of Education, 431 U.S. 209 (1977).

In Abood, the Supreme Court allowed a public employer to require its non-union member employees to pay a fee because they benefitted from the unions collective bargaining agreement with the employer. The fees were not permitted to cover any political funding whatsoever, only the proportionate costs incurred during contracting.

In this case, Mark Janus, a public employee, is challenging an Illinois state law that requires non-union members to pay a “fair share” fee to the union that negotiated on the non-members’ behalf. The “fair share” fee was enacted to cover a proportionate share of the costs the union accrued in negotiating the contract. The fee combats against “free-riding”, whereby a non-union member enjoys the benefits of the contractual work performed by a union without having to pay a fee for those benefits. Janus contends that the fee violates his First Amendment rights because the fees are a form of compelled speech and association which should be reviewed under heightened scrutiny.

The Supreme Court’s ruling could prove costly for unions in America. Invalidating the “fair share” fee could drastically reduce union funding and membership.

For more information, call our Philadelphia business lawyers at Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

Philadelphia Court Refuses to Enforce Arbitration Provision

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On April 3, 2017, the Philadelphia Court of Common Pleas refused to uphold an arbitration provision in a Responsible Person Agreement (“RPA”) signed by a nursing home resident’s daughter, but not signed by the resident herself. Clementson v. Evangelical Manor, Civil Action No. 160601775 (C.P. Philadelphia 2017). On September 17, 2014, Plaintiff, Elsie Clementson, was a resident of Defendant Evangelical Manor’s nursing home when she suffered a serious fall, resulting in a tibia fracture. When Plaintiff was admitted to the nursing home in 2012, Plaintiff’s daughter signed an RPA, which stated that the person signing the agreement may be “the Guardian, the Agent under a Power of Attorney, or any person authorized by the Resident to serve as Resident’s Responsible Person.” The RPA also contained a mandatory arbitration provision. At the time the RPA was signed, Plaintiff’s daughter did not have power of attorney over her mother, nor was she authorized by her mother to serve as her mother’s “Responsible Person.”

Plaintiff filed her Complaint on June 17, 2016. On November 3, 2016, Defendant filed a Petition to Compel Arbitration. On December 19, 2016, the Court denied Defendant’s Petition, which it timely appealed. On appeal, the Court upheld the decision to deny Defendant’s Petition, as Pennsylvania law does not allow an agent, by his own words, to invest himself with apparent authority, as such authority has to derive from the action of the principal, not the agent. The Court ruled that Defendant failed to provide any evidence that Plaintiff was present at the time that her daughter signed the RPA, or that her daughter could sign for her. Defendant also failed to offer any evidence of actions taken by Plaintiff that would create an agency relationship.

For more information, call our business lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

Court Dismisses False Claims Against CVS

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The Third Circuit Court of Appeals has affirmed the decision to dismiss a whistleblower action against CVS Caremark. The Court found that the evidence was insufficient to prove that CVS knew Medicare Part D sponsors were intentionally submitting false information about costs to Medicare and Medicaid.

Anthony R. Spay is a former pharmacist who co-founded a company that audits pharmacies. In the whistleblower action, Spay alleged that Medicare Part D sponsors intentionally submitted false information about costs to the government during the reconciliation process. Specifically, Spay says these sponsors populated prescriber ID records with falsified IDs, which they claimed were used to replace ID data that was entered in error.  According to Spay, as a result of these falsified submissions, the government paid these sponsors more than they were entitled to.

A panel of three appellate judges ruled that the government was aware of the industry practice of using falsified IDs, yet paid the claims and never sought repayment from CVS Caremark. According to Third Circuit Judge Theodore McKee’s opinion, CVS could not be held liable for making false claims because Medicare and Medicaid were aware of the practice. Medicare Part D sponsors are companies that sell prescription plans and enter into subcontracts with pharmacies like CVS.

The Court’s decision was expressly informed by the government knowledge inference doctrine. Pursuant to this doctrine, if the government knows about the alleged misconduct, then it is already aware of the false claims and does not need assistance from private whistleblowers to identify them.  Although the Court affirmed the dismissal of the case, it disagreed with the trial court on its interpretation of that doctrine as applied to the facts at bar. The Third Circuit itself discussed the issue in depth in 1999, stating in Cantekin v. University of Pittsburgh that if the government was aware of the alleged false claims yet took no action, then any private suit was likely motivated by the sizable damages award promised to whistleblowers under the law.

However, the Third Circuit found that the doctrine was inapplicable here because CVS was unaware that the government knew about the false claims. The Court found that there was no evidence of tacit approval from the government to CVS Caremark of the stopgap industry practice.

Philadelphia Whistleblower Lawyers at Sidkoff, Pincus & Green P.C. Provide Confidential Consultations to Whistleblowers

If you have knowledge of false claims being submitted to the government, schedule a consultation with the Philadelphia whistleblower lawyers at Sidkoff, Pincus & Green P.C. today. Our legal team represents clients in qui tam actions and whistleblower claims under the False Claims Act in Pennsylvania and New Jersey. Call us today at 215-574-0600 or contact us online to schedule a confidential consultation.

Hearst Corporation in Unpaid Intern Lawsuit

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Approximately five years after interns filed a lawsuit against Hearst Corporation, the Second Circuit Court of Appeals has ruled that the company did not systematically exploit interns by having them perform entry-level work without pay. The interns claimed that Hearst Corp. violated federal and state law when it declined to pay thousands of interns.

Internship vs Entry-Level

The lead plaintiff, Xuedan Wang, alleged that 3,000 interns at Hearst’s numerous publications, including Elle, Marie Claire, Cosmopolitan, and Seventeen magazines, were exploited in violation of the Fair Labor Standards Act (FLSA) and New York state laws. The FLSA and state laws set forth specific requirements for internships, which distinguish them from entry-level jobs. To be exempt from the minimum wage requirements, employers must ensure that internships benefit the interns, among other things.

According to Second Circuit Judge Dennis Jacobs, the question before the Court was whether Hearst Corp. offers bona fide for-credit internships, or whether it relied on student labor to avoid compensating entry-level employees. The key case that speaks to the legal standard is Glatt v. Fox Searchlight Pictures Inc. In this case, the Court considered whether the intern or their employer was the primary beneficiary of the relationship. If the employer is the primary beneficiary, it cannot be deemed an internship, and is subject to the minimum wage requirements set forth under the Fair Labor Standards Act.

In the Hearst Corp. case, Judge Jacobs found that Hearst made it clear to the interns that they would not be paid, and that the internships provided training similar to those provided in an educational environment. The students were also told that the internships were tied to a formal education program.

Distinguishing the Difference

The plaintiffs argued that internships should not include menial and repetitive tasks, with little supervision or guidance.  These, according to the plaintiffs, were tasks more likened to employment than an educational internship. However, the Judge found that many useful internships are designed to correct the impression that work is just as rewarding and fulfilling as school. Repeating administrative and organizational tasks, she ruled, can provide useful skills such as how to be more organized and focused in a professional setting. Plaintiffs can still appeal this ongoing ruling to the United States Supreme Court.

Philadelphia Employment Lawyers at Sidkoff, Pincus & Green P.C. Represent Victims of FLSA Violations

Philadelphia Employment Lawyers at Sidkoff, Pincus & Green P.C., we handle all types of employment litigation, including claims that an employer has violated the Fair Labor Standards Act, or local laws, by failing to pay overtime, meet minimum wage requirements, and more. To learn more about how we can help you and to schedule a confidential consultation, call us today at 215-574-0600 or contact us online. We represent clients in employment litigation in Pennsylvania and New Jersey.

FINRA v. Morgan Stanley

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The Financial Industry Regulatory Authority (FINRA) is a non-profit organization that Congress has tasked with ensuring the securities industry operates in accord with government regulations. FINRA operates to ensure that investors receive basic protections. Recently, FINRA ordered the Wall Street investment bank and securities brokerage firm, Morgan Stanley, to pay $13 million in fines and restitution to clients of the bank for failing to properly supervise short-term trades. The regulatory body fined Morgan Stanley $3.25 million, and the remaining nearly $10 million was to be paid back to investors.

According to FINRA, between January 2012 and June 2015, brokers had given thousands of clients poor advice regarding unit investment trusts, or UITs. A unit investment trust pays investors a return based on how the investment performs, not unlike mutual and closed-end funds. They are designed to be held only for a certain period. They are designed to provide capital appreciation and in some cases, dividend income.

Morgan Stanley brokers advised clients to sell unit investment trusts before the products had matured. The brokers then instructed them to roll the trusts over into a new trust, resulting in higher sales charges over time.  After interviewing more than 65 Morgan Stanley employees, FINRA found that the practice was highly questionable. The agency was concerned that the practice was not in the best interests of Morgan Stanley investors.

In addition to finding that individual Morgan Stanley brokers made questionable decisions relating to unit investment trusts, FINRA also held supervisors accountable. Supervisors were not adequately trained to recognize unsuitable short-term rollovers. It also found that Morgan Stanley did not have a proper system in place to detect and stop the negligent transactions before they were carried out. Although Morgan Stanley consented to the agency’s findings, the company had refused to admit or deny the charges and the matter was resolved without admission of guilt on the bank’s behalf.

Philadelphia FINRA Lawyers at Sidkoff, Pincus & Green P.C. Represent Clients in FINRA and Securities Actions

Securities and investment management is complicated business. At Sidkoff, Pincus & Green P.C., we help our business clients resolve the most complex and daunting FINRA actions. We also represent investors in all types of securities fraud and misrepresentation actions. To schedule a consultation with a Philadelphia FINRA lawyer, call us today at 215-574-0600 or contact us online.

Pennsylvania Supreme Court Rules

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Only Physicians Can Obtain Informed Consent From Patients

A recent Pennsylvania court ruling found that only physicians, not their subordinates, can obtain informed consent from patients prior to procedures. In Shinal v. Toms, 162 A.3d 429 (Pa. 2017), Plaintiff, Shinal, was a patient of Defendant, Dr. Toms. Shinal had consulted with Dr. Toms to discuss removal of a new tumor growth in her brain. In this consultation, Dr. Toms advised her of the risks associated with surgery and reviewed alternatives including a less aggressive approach called a subtotal resection (safer in the short run) versus a more aggressive approach called a total resection, which would be more dangerous in the short run but offer a better chance of resecting the entire tumor. After this consultation, Shinal decided to have the surgery but had not decided on the approach.

Following this consultation, Shinal’s interactions were entirely with Dr. Toms’ physician assistant. The assistant discussed potential scarring, whether radiation therapy would be necessary, and the date of the surgery. The assistant also answered Shinal’s questions about the craniotomy incision, and met with Shinal to obtain her medical history, conduct a physical and provide her with more information regarding the surgery. In this meeting, Shinal signed an informed consent form granting Dr. Toms permission to perform a resection of her tumor and the risks associated with this procedure. The form also acknowledged that Shinal had discussed the advantages and disadvantages of alternative treatments and that she understood the form’s contents, had an opportunity to ask questions and had sufficient information to give her informed consent to the operation. The form did not address the specific risks of total versus subtotal resection.

When Shinal underwent the procedure, the surgeon conducted a total resection and perforated her carotid artery resulting in hemorrhage, stroke, brain injury and partial blindness. Shinal initiated this medical malpractice lawsuit alleging that Dr. Toms failed to obtain her informed consent for the procedure. Shinal stated that if she had known the alternative approaches and risks of the total resection, she would have chosen the subtotal approach (less aggressive) alternative.

The Supreme Court of Pennsylvania held that a physician cannot rely upon a subordinate to disclose the information required to obtain informed consent, and cannot delegate to others his obligation to provide sufficient information to a patient prior to a procedure. The court ruling additionally stated that “without direct dialogue and two-way exchange between the physician and patient, the physician cannot be confident that the patient comprehends the risks, benefit, likelihood of success and alternatives.” The defendant’s actions ultimately violated the Medical Care Availability and Reduction of Error (MCARE) Act.

For more information, call our business lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

Letters And Phone Calls Regarding Intent To Not Follow Agreement

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Enough To Find Anticipatory Breach Of Contract

In General Diversifield, Inc. v. Poole Truck Line, Inc., 1991 WL 53673 (E.D. Pa 1991) General Diversified (“Diversified”), a motor carrier broker, sued Poole Truck Lines (“Poole”), a motor carrier of freight, for Poole’s anticipatory breach of contract, because of its intent to not provide transportation of solid waste for a Diversified customer, as required in an agreement between Diversified and Poole.

Four days after signing the agreement, the Regional Sales Manager of Poole discovered that one of Poole’s main competitors was hauling waste for Diversified at a higher rate than Poole had agreed to (allowing the competitor to make more money than Poole). After complaining about the price difference, Poole’s Manager sent a letter to Diversified stating that they were left with “no other choice than to cancel our agreement” and “the atmosphere is not just one in which I nor Poole can do business.” Poole’s Manager also contacted Diversified customer that Poole was to do work for under the agreement, and informed them “the deal was off” and “Poole would not haul [the customer’s waste] on behalf of [Diversified].”

The District Court for the Eastern District of Pennsylvania held that these facts were sufficient to prove anticipatory breach of the agreement by Poole. The Court explained that between the letter and the phone conversation by Poole’s Manager, Poole made the decision not to haul under the terms of the agreement prior to the date on which performance was due, and communicated this to Diversified unequivocally. To make Diversified whole, the Court awarded damages to Diversified in the amount of its lost profits on loads hauled for its customer in the time Poole was to be hauling such loads.

For more information, call our business lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

PA Supreme Court Agrees to Examine Contractual Relationships Between Law Firms and Non-Lawyers

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The Pennsylvania Supreme Court has agreed to evaluate whether an alleged fee-splitting arrangement between a law firm and a non-lawyer was proper, and whether the arrangement violated state law and public policy.

In SCF Consulting, LLC v. Barrack, Rodos & Bacine, No. 1413 EDA 2015, 2016 WL 4962900 (Pa. Super. Ct. July 8, 2-16), Plaintiff, SCF Consulting, LLC (SCF), alleged it was entitled to a promised share of profits for cases SCF had worked on as part of an oral consulting contract with Defendant, Barrack, Rodos and Bacine (“Barrack”). The contract regarded representation of various institutional investors who sought to bring class actions alleging securities violations. Pursuant to this contract, SCF claims it was paid a yearly consulting fee, plus “a five percent (5%) share of the firm’s annual profits attributable to the cases originated and worked on by Barrack, and a 2.5% of cases originated by other members of the firm.” Based on this compensation package, SCF assisted Barrack in becoming legal counsel for the class representatives in virtually all of its cases. SCF admitted that Barrack paid them their fixed annual consulting fee for each of the years worked, but alleges that Barrack failed to pay the share of profits due at the end of 2014.

SCF filed this suit claiming that Barrack breached the parties’ agreements by refusing to make the promised profit share payments for cases that were originated, worked on and resolved by SCF.

The trial court sustained Barrack’s demurrer to all counts of SFC’s complaint on the basis that the compensation plan they entered into was against public policy due to violation of Pennsylvania Rule of Professional Conduct, 5.4. The rule prohibits a lawyer or law firm from sharing legal fees with a nonlawyer exclusive of various exceptions. While SFC claimed the plan was an express exception to the rule [under section (a)(3)], both the Trial Court and Superior Court disagreed.

On February 1st, 2017, SCF appealed to the Supreme Court of Pennsylvania to determine “whether the trial court and superior court erred in sustaining Barrack’s demurrer to all counts of SFC’s complaint, even assuming that the compensation plan was in violation of 5.4., Pennsylvania law, public policy and the interests of justice require such an agreement to be enforced because an attorney must not be shielded from liability, nor financially rewarded for violating the Rules of Professional Conduct.”

For more information, call our business lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

Pennsylvania Supreme Court Finds Strict Liability

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Improper Basis of Recovery Against Medical Device Manufacturers

Pennsylvania courts consider strict liability to be an improper basis for recovery in cases where manufacturers fail to provide adequate warnings regarding prescription drugs. In Hahn v. Richter, 543 Pa. 558 (Pa. 1996), the Plaintiff, Hahn, was treated for back pain by one of the defendants, Dr. Richter. The treatment included several surgical procedures and multiple intrathecal injections of Depo-Medrol, a drug manufactured by the other defendant involved in the case, Upjohn. A package insert accompanying the drug provided warnings to physicians that a condition called “arachnoiditis” was reported after doctors administered the drug by way of intrathecal injection, and that this method was not an approved usage by the Federal Drug Administration. Following his treatment, Hahn developed the condition “arachnoiditis”, which required further surgery and ultimately resulted in serious, permanent injury. Hahn filed a suit against both Dr. Richter and Upjohn alleging that his condition was caused by the Depo-Medrol and that Upjohn failed to provide adequate warnings to physicians regarding intrathecal use of the drug.

The court ruled that where the adequacy of warnings associated with prescription drugs is at issue, the failure of the manufacturer to exercise reasonable care to warn of dangers (i.e. manufacturer’s negligence) is the only recognized basis of liability. The court ruled that a “manufacturer of drugs is not strictly liable for unfortunate consequences attending the use of otherwise useful and desirable products which are attended with a known but apparently reasonable risk.”

For more information, call our Philadelphia business lawyers at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.