Category: Business Law

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.

Fraud in the Inducement Hurdle

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Parole Evidence Rule

When a contracting party has been painted a “false picture” of how a contract will operate, that party may have a fraud in the inducement claim. One instance of this is when an individual signs a materially different contract after the parties had agreed to language in earlier drafts. Under Pennsylvania law, plaintiffs are required to prove the following elements in a claim for fraud in the inducement: (1) a representation; (2) material to the transaction at hand; (3) made falsely with knowledge of its falsity or recklessness as to its truth; (4) with intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) resulting injury. Broederdorf v. Bachelor, 129 F.Supp.3d 182, 198 (E.D. Pa. 2015). Successfully pled, such contracts are voidable. Giannone v. Ayne Institute, 290 F.Supp.2d 553, 564 (E.D. Pa. 2003).

However, in Pennsylvania, such claims are subject to the parole evidence rule. If the court finds that the agreement at issue constitutes “a writing that represents the ‘entire contract between the parties,’ then the court may not consider ‘preliminary negotiations, conversations[,] verbal agreements,’ or any other extrinsic evidence of representations made by the parties prior to the execution of the written contract.” Batoff v. Charbonneau, 130 F.Supp.3d 957, 970 (E.D. Pa. 2015). And so, the parole evidence rule will bar the admission of statements necessary to establish a fraud in the inducement claim, resulting in its dismissal. For instance, in Batoff, the court dismissed the fraud in the inducement claim because the settlement agreement clearly represented the entire contract between the parties through its integration clause. In a similar case, the District Court dismissed a fraud in the inducement claim because the contract expressly stated, “This Agreement contains the whole agreement between Seller and Buyer, and there are no other terms,” which triggered the parole evidence rule. Charlton v. Gallo, 2010 WL 653155, at *4 (E.D. Pa. 2010).

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

Website Operator Denied Copyright Protection

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A recent Central District of California decision shed some light on the application of the Digital Millennium Copyright Act’s (DMCA) Section 512(c) safe harbor provision. Under the safe harbor, online service providers that meet certain requirements may avoid liability for damages that may arise from infringing content uploaded by service users. In Greg Young Publishing, Inc. (GYPI) v. Zazzle, Inc. (Zazzle), the court addressed the question of whether Section 512(c) safe harbor may protect an online service provider that commercially exploited infringing content.

Zazzle operates a website on which users may upload images. Other users may have the images printed on various merchandise including coffee mugs, posters, and t-shirts. The users typically do not own the images and have not obtained authorization from the owners to upload them. Zazzle does not ensure that images are not infringing, rather the company manufactures the product once it is ordered, delivers it to the purchaser, and pays a royalty to the user who uploaded the image.

Zazzle displayed 41 paintings owned by GYPI and created consumer products for sale from the paintings. GYPI sued Zazzle for copyright infringement and Zazzle asserted Section 512(c) safe harbor as an affirmative defense. GYPI argued that Zazzle could not rely upon safe harbor because: (1) Zazzle is not a service provider, (2) Zazzle knew that their services infringed upon GYPI’s copyright, and (3) Zazzle had the right and ability to control the infringing activity, choosing to exploit the paintings for financial benefit.

Case Argument

First, GYPI argued that Zazzle is not a service provider because it does not accept and display user-submitted images, but also manufactures and sells products based on those images. The court rejected this argument, finding that Zazzle was unquestionably a provider of online services and therefore a service provider within the definition of that term in Section 512(c) safe harbor.

Second, GYPI argued that Zazzle had specific knowledge of the infringing content, rendering Zazzle ineligible for safe harbor protection. The court held that a service provider only has such knowledge when the copyright holder submits a DMCA-compliant or a third party submits a sufficiently specific complaint. Therefore, GYPI’s complaints to Zazzle about infringing content and the fact that GYPI sent Zazzle a catalogue of images for them to check for infringement, were not enough to constitute specific knowledge.

Finally, the court held that Zazzle received a financial benefit from, and that it had the right and ability to control, the infringing activity. The court acknowledged that Zazzle had the ability to remove infringing content, terminate repeat infringers’ accounts, and engage in limited monitoring of the site. However, this does not amount to a right and ability to control, which only exists when a service provider plays a more active role in user content. This happens specifically when the service provider exerts substantial influence over activities such as selection, monitoring, and marketing of user content.

In this case, the court held that Zazzle did exert the substantial influence necessary to render it unable to be shielded by Section 512(c) safe harbor because Zazzle’s content management team approved user’s orders; the subsequent automated nature of the process is irrelevant. Therefore, Zazzle will be liable for copyright infringement damages resulting from the sale of products displaying the protected images.

Philadelphia Intellectual Property Lawyers at Sidkoff, Pincus & Green P.C. Represent Clients in Copyright Disputes

Philadelphia intellectual property lawyers at Sidkoff, Pincus & Green P.C. represent clients in copyright disputes throughout Pennsylvania and New Jersey, including Philadelphia and South Jersey. Contact us online or call us at 215-574-0600 to discuss your case.