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Houston Harbaugh Blog

October 2013 Archives

District Court Dismisses Auction Rate Securities Claims under Pennsylvania Securities Act, Permits Breach of Fiduciary Duty and Negligence Claims to Proceed against Broker-Dealer

District Court Enforces International Arbitration Provision against "Follow Form" Excess Carrier, Clarifies Standard of Review under Federal Arbitration Act

Victims' Estates Could Not Recover Underinsured Motorist Insurance Benefits After A Single-Car Accident Involving Tortfeasor Driving Vehicle Owned By Victim

Superior Court Considers Partner's Right to Accounting upon Dissolution, Construes Rule of Professional Conduct on Fee Sharing Between Lawyers and Nonlawyers

District Court Declines to Dismiss Tortious Interference Claim Asserted Against CEO in Personal Capacity

In Kearney v. JPC Equestrian, NO. 3:11-1419, 2013 U.S. Dist. LEXIS 142409 (M.D. Pa. Oct. 2, 2013), the U.S. District Court for the Middle District of Pennsylvania considered whether the plaintiff had properly stated a claim for tortious interference with contractual relations against the chief executive officer of a company with whom the plaintiff had entered into a contract. The plaintiff alleged that the CEO, acting in his individual capacity, had diverted sales away from him, thereby interfering with the sales agreement that he had with the company to sell and receive commissions on the company's products. Under these facts, the court allowed the tortious interference claim to be asserted against the CEO personally, despite the general rule that directors and officers are insulated from personal liability for action taken in their corporate capacities.

Pennsylvania Superior Court Holds That Insurer Cannot Enforce Subrogation Rights in Independent Suit Against Third Party in Workers Compensation Claim

In Liberty Mutual Insurance Co., v. Domtar Paper Co., No. 1052 WDA 2012, 2013 PA Super 262 (September 27, 2013), the Pennsylvania Superior Court examined the issue of whether Section 319 of the Pennsylvania Workers' Compensation Act, codified at 77 P.S. §671, provides an independent cause of action for insurers to directly sue third parties.

District Court Dismisses Malicious Prosecution Claim Arising Out of Alleged Breach of Equipment Lease

In Villari Brandes & Giannone v. Wells Fargo Fin. Leasing, No. 13-297, 2013 U.S. Dist. LEXIS 141391 (E.D. Pa. Sept. 30, 2013), the U.S. District Court for the Eastern District of Pennsylvania dismissed a tort claim for wrongful use of civil proceedings under the Dragonetti Act (the "Act"), codified at 42 Pa. Cons. Stat. Ann. §§ 8351-8354. The dispute arose out of an equipment lease, pursuant to which the plaintiff law firm leased office equipment from the lessor. The lease consisted of multiple documents, including separate equipment rental and sales agreements. One of the other documents, which set forth additional terms and conditions, gave the plaintiff the right to terminate the agreement setting forth the additional terms and conditions and the sales agreement early. Unbeknownst to the plaintiff, however, the lessor had assigned its rights under the lease to the defendant from the outset. Accordingly, when the plaintiff sought to terminate the lease early, the defendant assignee objected and filed suit in state court to enforce its rights under the equipment lease. The defendant, however, did not disclose the portion of the lease that gave the plaintiff the right to terminate early. On the eve of trial, the defendant voluntarily dismissed the state court suit. The plaintiff subsequently commenced suit, which was later removed to federal court, essentially alleging that the defendant and its law firm had improperly filed suit and withheld the operative portion of the lease. Under these facts, the court refused to recognize a claim under the Act.

District Court Interprets Pennsylvania's Uniform Fraudulent Transfer Act, Partially Reverses Published Bankruptcy Court Decision

In a consolidated appeal from an adversary proceeding in bankruptcy court (Bohm v. Titus (In re Titus), 467 B.R. 592 (Bankr. W.D. Pa. 2012)), the United States District Court for the Western District of Pennsylvania was recently called upon to interpret Pennsylvania's Uniform Fraudulent Transfer Act ("PUFTA"). Titus v. Shearer, Nos. 12-1559, 12-1560, 2013 U.S. Dist. LEXIS 140269 (W.D. Pa. Sept. 30, 2013). At issue in the case was whether the bankruptcy court properly found a constructive fraudulent transfer had taken place under PUFTA after the debtor, who was separately determined to be personally liable under a commercial lease entered into on behalf of his former law firm, allegedly had his new law firm deposit his wages in a checking account he owned with his wife as tenants by the entireties. The landlord creditor originally commenced the fraudulent transfer action in state court, but it was subsequently prosecuted by a bankruptcy trustee after the debtor successfully removed the action to bankruptcy court following the creditor's separate filing of an involuntary bankruptcy petition against the debtor under Chapter 7.

Class Certification Granted in Dispute over Royalties under Oil and Gas Leases

On the recommendation of a United States Magistrate Judge for the Pittsburgh Division, the U.S. District Court for the Western District of Pennsylvania has granted class certification in a dispute between lessors and a lessee over royalty payments made under oil and gas leases. In Pollock v. Energy Corp. of Am., No. 10-1553, 2013 U.S. Dist. LEXIS 141139 (W.D. Pa. Sept. 16, 2013), the putative class representatives, all of whom had entered into oil and gas leases with the lessee defendant, essentially raised three allegations against the lessee defendant that were used to certify subclasses under Rule 23(c)(4).

District Court Interprets "Morals Clause" in Employment Contract in Employer's Favor

In Haywood v. Univ. of Pittsburgh, NO. 11-1200, 2013 U.S. Dist. LEXIS 140263 (W.D. Pa. Sept. 30, 2013), the U.S. District Court for the Western District of Pennsylvania considered whether the University of Pittsburgh breached its employment contract with a former football coach who was terminated following his arrest in connection with a domestic incident several weeks after his hiring. In support of its decision to terminate the coach's employment, the university invoked the so-called "morals clause" in the contract, which essentially provided that the university would not have to pay the coach the amounts owed under the contract if the contract was terminated for "just cause" based on conduct that was contrary to the best interests of the university. The coach disputed the university's interpretation of the clause, arguing that, even though the university had the contractual right to terminate the employment contract for just cause, the university breached the duty of good faith and fair dealing inherent in the parties' contract by terminating him without conducting a proper investigation. The coach also separately sought to enforce an alleged oral agreement with the university to buy out his former coaching contract, which had been discussed, but was not realized, because of the coach's untimely termination. Also at issue was the university's counterclaim predicated on the coach's alleged disclosure of confidential information in the form of his compensation via a press release after he was terminated.

Pennsylvania Superior Court Reverses Trial Court's Coordination Order in Legal Malpractice Dispute

In a non-precedential opinion, the Pennsylvania Superior Court has rejected an attempt by a law firm to resolve a legal malpractice dispute with a former client in its forum of choice through the filing of a preemptive declaratory judgment action.

Middle District of Pennsylvania Finds Documents Properly Withheld When Counsel Acted as Coverage Counsel, not as Claims Adjuster

In Walter v. Travelers Personal Ins. Co., 2013 U.S. Dist. LEXIS 72771 (M.D. Pa., May 22, 2013) (opinion by J. M.C. Carlson), the United States District Court for the Middle District of Pennsylvania held that "coverage counsel was, in fact, serving the client in an attorney-client capacity, and not in some other functionshutterstock_130099715xsmall.jpg such as a business advisor or claims adjuster." As a result, the court ruled that documents were properly withheld by an insurance company under the attorney-client privilege and work-product doctrine.