Category: Business Law

Philadelphia Business Lawyers: Supreme Court to Review Bad Faith Standard for Insurers

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The Pennsylvania Supreme Court will review the issue of establishing insurer bad faith under 42 Pa.C.S. § 8371. The main question at hand is whether the factor of a “motive of self-interest or ill-will” is a discretionary one rather than a mandatory requirement in proving bad faith.

The Superior Court, in the case Rancosky v. Washington National Insurance Company, ruled it was a discretionary factor. 130 A.3d 79 (Pa. Super. Ct., 2015). The plaintiff in the case, LeAnn Rancosky, was denied benefits from her insurance carrier after she was diagnosed with ovarian cancer. The insurance policy included a waiver of premium, which stated that premium payments would not be required after the policy owner is disabled due to cancer for more than 90 days after being diagnosed. There was a dispute as to when the disability started, with Rancosky believing the disability started the day she was diagnosed and the carrier believing it was a later date. The carrier ultimately found that the insurance policy had lapsed because Rancosky had not paid her premiums. Among other claims, Rancosky instituted a claim of bad faith against the insurance carrier.

Because the legislature did not provide a definition of bad faith in the statue, there has been some confusion in the courts on how to apply it. Prior cases have found plaintiffs do not need to prove ill-will to proceed with bad faith claims. The Superior Court restated a two-part test to determine bad faith of an insurer: “that (1) the insurer did not have a reasonable basis for denying benefits under the policy, and (2) the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim.” (at *92). The Superior Court then held that, “A ‘dishonest purpose’ or ‘motive of self-interest or ill will’ is not a third element required for a finding of bad faith,” but “may be considered in determining the second prong of the test for bad faith, i.e., whether an insurer knowingly or recklessly disregarded its lack of a reasonable basis for denying a claim.” (at *93). The Supreme Court will hear arguments to hopefully settle the issue.

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

Philadelphia Employment Lawyers: Superior Court Enforces Contingency Fee Arrangement Written in an E-mail

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The Pennsylvania Superior Court affirmed an Allegheny County Court decision that awarded $40,000 to a personal injury firm in Pittsburgh. Flaherty Fardo, LLC v. Keiser, No. 1260 WDA 2015 (Pa. Super. Ct., Aug. 8, 2016).

The dispute was between the firm, Flaherty Fardo, and one of its clients, Thomas Keiser. Keiser claimed that a contingency fee arrangement written in an e-mail was unenforceable, because it was not a “signed writing to reflect the terms of the parties’ agreement,” and relied on the Pennsylvania Rule of Professional Conduct 1.5(c) to solidify his argument.

Keiser hired Flaherty Fardo to defend him in a lawsuit against Citigroup, his former employer. Part of Keiser’s compensation package when he was hired included an employee forgivable loan of approximately $1.5 million under a nine-year arrangement. When Keiser left the company after only three years, Citigroup sued to recover the remaining $1.03 million, plus interest and attorneys’ fees of about $400,000.

The contingency fee arrangement e-mail contained a $32,000 flat fee up front, and an additional ten percent of any savings realized by the firm from the total amount Citigroup was asking. Following arbitration, Citigroup was awarded the entire remaining loan amount, but no interest or attorneys’ fees. Flaherty Fardo then sent Keiser an invoice for $40,000, believing it had saved Keiser $400,000. After Keiser fired the firm and refused to pay, the firm filed a complaint against him.

The Superior Court, relying on precedent, found that the Pennsylvania Rules of Professional Conduct do not have the effect of substantive law, but are instead only used in disciplinary proceedings. Furthermore, even if those rules did have legal effect, the Court found that the arrangement would have been enforceable, because it was in writing. Furthermore, even though the arrangement was not signed and does not comply with the statute of frauds, the Superior Court stated there is no prior case law that states contingency fee agreements have to comply strictly with the statute of frauds. Therefore, the ruling was affirmed and Flaherty Fardo was awarded the nearly $40,000.

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

 

Philadelphia Business Lawyers: New Jersey Cops Settle Whistleblower Case for $400,000

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In 2011, then-Detective Sergeant John A. Hamilton and then-Captain Douglas F. Carmen filed suit against the Linwood Police Department in New Jersey, alleging that Chief Jim Baker’s behavior created a hostile and retaliatory work environment. Among many allegations, the lawsuit claims Chief Baker asked the two officers to lie about police protection that was afforded to a woman who was later stabbed to death. The allegations also claim Chief Baker influenced one of the officers to make a deal that would favor Chief Baker and hurt other officers, as well as Chief Baker taking away the two officers’ chance to work overtime despite having a contractual right to overtime pay.

 

Many of these instances that disparaged the reputations of both officers occurred over phone conversations that were recorded. The ex-Detective Sergeant Hamilton was also passed over for a less qualified candidate for the position of Chief when Baker retired (ex-Detective Sergeant Hamilton did become chief in March of 2015 when Baker retired). Ultimately, the suit was settled against the city for $400,000.

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

Philadelphia Business Litigation Lawyers: NJ Superior Court Reverses $18M Verdict in Accutane Litigation

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In July, the New Jersey Superior Court, Appellate Division overturned an $18M jury verdict against Defendant Hoffmann-La Roche Inc., the manufacturer of Accutane, a popular drug for severe cystic acne. Rossitto v. Hoffman-LaRoche Inc., 2016 N.J. Super. Unpub. 2016 WL 3943335 (N.J. App. Div. Jul. 22, 2016). Plaintiffs were Accutane users who claimed that they developed ulcerative colitis, a chronic disease of the large intestine after using the product for years and that the manufacturer failed to adequately warn about the risk of developing this condition.

 

The Appellate Court overturned the verdict and ordered a new trial after the trial court allowed Plaintiffs’ counsel to admit into evidence a change to the drug’s warning label in 2000, after Plaintiffs had stopped taking the drug, even after that evidence was initially barred earlier in the trial. The court found this mistake to be prejudicial to Defendant, because it fostered the belief that the labels previous to the 2000 label did not meet the proper standards. Furthermore, the trial court erred in restricting the number of defense expert witnesses to testify on general causation.

 

Roche has continued to win on appeal in Accutane cases. In 2014 and 2015, the Superior Court reversed a $25 million verdict and a $2.1 million verdict against the company, respectively, in similar cases. In 2010, the same court overturned a $10.5 million verdict against the company, sending the case back for retrial based on a separate evidentiary issue. Roche discontinued the sale of Accutane in 2009.  

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

Philadelphia Business Lawyers: Third Circuit Revives Defamation Suit Involving Philadelphia Firefighter

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The U.S. Court of Appeals for the Third Circuit decided on July 26, 2016 to revive a firefighter’s defamation and false light claim against the New York Daily News after rehearing the claim on June 21. The claim involved a Philadelphia firefighter, Francis Cheney, whose photograph appeared with an article in January about a sex scandal involving Philadelphia firefighters and a paramedic.

The Third Circuit originally affirmed a dismissal of the suit because Cheney could not show that the allegedly defamatory material could reasonably be understood as referring to him, as the article never mentions his name and the photograph was just a stock photograph. However, in reviving the claim, the Court stated that a reasonable reader could, in fact, conclude that the text could be “of and concerning” him. One of the Court’s reasons was that the picture was placed directly next to the text, and it was the only picture of a firefighter that ran along with the story. Furthermore, many firefighters were implicated in the story, but Cheney’s name is the only one that appeared in print, despite the fact that he was not involved in the scandal. These circumstances together could lead a reasonable reader to believe Cheney was involved in the scandal.

The attorneys for Cheney will now continue to litigate the case.

The Philadelphia business lawyers at Sidkoff, Pincus and Green represent clients in defamation and disparagement claims.  For more information call 215-574-0600 or contact us online.

Philadelphia Business Lawyers: How Should FMLA Settlement Amounts Be Reported to the IRS?

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In Gunter v. Cambridge-Lee Industries, LLC, Vincent Gunter alleged that his rights under the FMLA were violated by his employer.  CV 14-2925, 2016 WL 3762992, at *1 (E.D. Pa. July 14, 2016). The two parties ultimately were able to reach a settlement. However, the parties were unable to agree on how the settlement proceeds should be reported to the Internal Revenue Service.

Gunter’s position was that the proceeds of the settlement were not wages and were not subject to withholding or reporting to the IRS on Form W-2 but instead should be reported to the IRS on Form 1099. The Defendant employer contended that the proceeds of the settlement did constitute wages that must be reported to the IRS on form W-2 subject to the withholding of taxes and other payroll charges. However, there was no binding Third Circuit precedent with regard to this particular issue.

In deciding this issue, the Court found two cases be persuasive. In Churchill v. Star Enters, the Court found that the relevant regulations and the FMLA statute specifically required the performance of services in order for the payment to constitute wages for withholding purposes. 3 F. Supp.2d 622 (E.D. Pa. 1998). As a result, the Court held that no withholding of the judgment was mandated under either federal or state law. In Carr v. Fresenius Med. Care, the Court found that recovery under the FMLA “does not constitute back pay but an amount of damages equal to the sum of various components, including, but not limited to, lost wages.”  2006 U.S. Dist LEXIS 29627, at *7-8, 2006 WL 1339970. Following this reasoning of these two cases, the Grunter Court held that an award, and in this case a settlement, does not constitute wages for Plaintiff that are subject to the withholding of taxes.

Philadelphia Employment Lawyers: Employers have Privilege when Providing References about Former Employee

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On June 28, 2016, the Third Circuit ruled in favor of employers who sought a conditional privilege when providing employee references to other employers. In Bentlejewski v. Werner Enterprises Inc., No. 15-2870, 2016 WL 3523303, at *1 (3d Cir. June 28, 2016), Defendant sent Plaintiff’s prior accident and driving report to two prospective employers. In the report, there were four “preventable” minor accidents noted, which prevented Plaintiff’s employment at the two trucking companies. Plaintiff then filed suit, alleging those driving reports contained “false and misleading” information, which prevented him from obtaining employment.
The Court recognized that employers have a conditional privilege to provide prospective employers with honest references concerning a former employee. In order to show an employer abused this privilege, a former employee must show the employer knowingly provided false information. It is not enough that an employer simply provided false information.

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

 

Philadelphia Business Lawyers: Copyright Infringement Lawsuit

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The Supreme Court recently weighed in on certain copyright infringement issues that have long been unsettled in American law. First, the Court ruled that the resale of foreign-manufactured books in the United States does not violate the “first-sale” provision. In a second related lawsuit, the Court found that the award of attorneys’ fees to the reseller was appropriate. The case, Kirtsaeng v. John Wiley & Sons, Inc., has important implications for intellectual property litigants, because it clearly sets forth the factors courts must consider in determining whether to award attorneys’ fees to a prevailing party.

The case arose when Kirtsaeng instructed family and friends living in Thailand to purchase copies of John Wiley & Sons’ books and ship them back to him in the United States. The books were priced substantially less in Thailand than in the U.S., so Kirtsaeng resold them for a profit. Wiley then sued him for copyright infringement.

The lawsuit alleged that Kirtsaeng infringed Wiley’s right to exclusive distribution under Section 106(3) of the Copyright Act. Kirtsaeng claimed that his purchases and resales were protected under the “first-sale” provision. Wiley’s rebuttal that the provision does not apply to books manufactured abroad was not accepted by the Court, who ruled in favor of Kirtsaeng.

In a second round of litigation arising out of the same set of facts, Kirtsaeng argued that he was entitled to attorneys’ fees under the Copyright Act’s discretionary fee shifting provision, which allows a court to award reasonable attorneys’ fees to a prevailing party. Author of the opinion, Justice Kagan, stated that payment of attorneys’ fees is important to uphold the intent behind the copyright act, which aims to enrich the general public through access to creative works.

Kagan stated that the reasonableness of the losing party’s position should be taken into account in awarding attorneys’ fees, along with other so-called “Fogerty factors,” including:

  • The frivolousness of the losing party’s position.
  • The losing party’s motivation for bringing the suit.
  • Objective unreasonableness of the losing party’s claim.
  • The need in particular circumstances to advance considerations of compensation and deference.

This decision is important for any intellectual property litigant for many reasons, one being that it can help inform a decision whether to settle and for how much. For example, if a litigant’s claim is weak, knowing that going to trial could result in having to pay attorneys’ fees should serve to encourage settlement.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Have Extensive Experience in All Aspects of Business Litigation

Philadelphia business lawyers at Sidkoff, Pincus & Green P.C. have extensive experience in all types of business tort litigation, including complex copyright infringement matters. With offices conveniently located in Philadelphia, we represent businesses throughout Pennsylvania and South Jersey. To schedule a consultation, call us at 215-574-0600 or contact us online today.

Philadelphia Business Lawyers: NJ Court Declares Car Dealer’s Arbitration Clause Unenforceable

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The Appellate Division has recently ruled that the arbitration provisions in a New Jersey used car dealer’s sales contract were too confusing to enforce. The dealer had moved to dismiss a customer’s complaint and compel arbitration, despite claims that the dealer had violated the New Jersey Consumer Fraud Act, committed a breach of warranty, and other infractions. However, the court denied the motion on grounds that the documents included three different arbitration clauses with several “hopelessly confusing” contradictory provisions.

The court was concerned that an average consumer who signed one of these sales agreements would have no idea what essential terms they were signing. Consumers would not know how to file a demand for arbitration, within what timeframe and where to file it, or what it would cost. Another concern was conflicting, contradictory requirements. Conflicting statutes of limitations were incorporated, and the document set forth contradictory provisions as to whether the American Arbitration Association or some other forum must be used.

In another contradiction, one clause stated that consumers must provide written notice of a dispute to the dealership 30 days before filing arbitration, but another clause stated that there was no waiting period. The dealer, Federal Auto Brokers, conceded that such contradictory provisions may void an agreement to arbitrate.

In short, arbitration is an agreement between two parties to attempt to resolve a dispute outside of the court system. Parties agree on a neutral third party to serve as arbitrator, and that person acts as both judge and jury. The rules of arbitration are typically a matter of contract between the parties. Arbitration can be either binding or non-binding, depending on the provisions in the contract. The primary benefit of arbitration is that it enables parties to resolve disputes quickly and easily, whereas lawsuits in the judicial system can last for years.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green, P.C. Counsel Businesses and Individuals on Contracts and Frequently is involved in Contract Litigation

If you need assistance negotiating, drafting, or reviewing business contracts – or are involved in litigation related to a contract – the experienced Philadelphia business lawyers at Sidkoff, Pincus & Green can help. To schedule a consultation, call us at 215-574-0600 or contact us online today. With offices located in Philadelphia, we represent clients throughout Pennsylvania and South Jersey.

Philadelphia Business Lawyers: Third Circuit Rehears Defamation Claim Involving Philadelphia Firefighter

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On June 21, 2016, the U.S. Court of Appeals for the Third Circuit reheard en banc a defamation and false light claim against the New York Daily News. The paper was sued by a Philadelphia firefighter whose photograph appeared with an article in January of 2016 about a sex scandal involving Philadelphia firefighters and a paramedic.

The Third Circuit affirmed a dismissal of the suit back in February after finding that Cheney could not show that the allegedly defamatory material in the article was capable of being reasonably understood as referring to him. The panel concluded that the article does not name Cheney in any way and that the caption on the picture makes it clear that it was a stock photograph meant to illustrate firefighters in general, not those involved in the scandal. The photograph of Cheney had the caption, “Philadelphia firefighter Francis Cheney holds a flag at a 9/11 ceremony in 2006.”

The attorney for Cheney argued during the rehearing that his client should get a second chance at suing the paper because Cheney only found out about the article after people who saw it contacted him and thought he was involved in the scandal. The attorney argued that therefore, a reasonable reader could in fact conclude the article is about Cheney.

During the rehearing, Judge Chagares raised concerns about the confusing and high standard for dismissing defamation cases, and stated, “We better be sure [there’s no possibility of defamation] before we render a final decision at this point. This is utterly incapable of a defamatory meaning?”

Cheney v. Daily News L.P., No. 15-2251, 2016 WL 456625 (3d Cir. Feb. 5, 2016)

Philadelphia Business Lawyers at Sidkoff, Pincus & Green Handle Defamation and Disparagement Litigation

Philadelphia business lawyers at the Law Offices of Sidkoff, Pincus & Green offer superior legal representation in cases involving defamation and disparagement. Call 215-574-0600 today to schedule a consultation or contact us online.