By Thomas P. Donnelly, Esquire Reprinted with permission from the May 29, 2015 issue of The Legal Intelligencer. (c) 2015 ALM Media Properties. Further duplication without permission is prohibited.

Confidentiality agreements have become commonplace in commercial litigation.  The purpose of a confidentiality agreement as the protection from disclosure of either private personal or sensitive business information which gives a party a competitive advantage is certainly a noble one and one which mandates an agreement against such disclosure in a wide variety of circumstances.  Often, the parties seek the imprimatur of the court by requesting the court adopt the agreement of the parties as an order thereby incorporating the court’s power to impose sanctions in the event of breach.  The entry of such an order, whether intentionally or as an unintended consequence,  may change the nature of a third party, foreign to the dispute with respect to which the confidentiality order was entered, to obtain information produced in the prior litigation.  

By Thomas P. Donnelly, Esquire, Reprinted with permission from the November 24, 2014 issue of The Legal Intelligencer. (c) 2014 ALM Media Properties. Further duplication without permission is prohibited.

I do not generally characterize myself as a fan of arbitration.  While proponents argue arbitration is a superior form of dispute resolution and more efficient than litigation, my personal experience in the representation of privately held businesses and individuals is otherwise.  In many situations, the sheer cost to initiate an arbitration proceeding may be prohibitive.  For a claimant, even if that initial cost is not an effective deterrent, the budget of ongoing hourly fees required of a qualified arbitrator in addition to the parties’ own anticipated legal fees, can quickly impair the potential recovery. For a Respondent, many times the cost of proceeding was not considered at the time of execution of an agreement which compels arbitration; thus the obligation to make payment for a service technically rendered by the courts without cost comes as a surprise. In either case, the parties must realize that at arbitration each is compensating not only its own lawyer, but, at least partially, another lawyer and a private dispute resolution industry as well. While arguably profitable for the legal profession, the realities of proceeding can result in difficult client discussions.

The above being said, there are situations where arbitration clauses can be of substantive, procedural and, consequently, financial benefit.  In such cases, even a skeptic of arbitration must recognize the benefits of the bargained for exchange which is an arbitration agreement.  Under the current state of the law, and given the trends in the enforcement of the right to contract, a carefully considered and artfully drafted arbitration agreement can be an essential aspect to certain business relationships and an important term of negotiation.

Employers should almost always include the broadest possible arbitration clause in any employment agreement and, generally, as a term of employment.  In most cases, an action arising in an employment situation concerns a claim raised by an employee, or worse, a class of employees against the employer.  The employer is generally a defendant.  In such cases, arbitration clauses can serve several functions.  First, an employee initiating the action must satisfy the initial fee if mandated by the prevailing agreement. As such fees are often determined by the amount at issue, the larger the claim, the higher the fee, and the greater deterrent toward commencement of the action.  As of November 1, 2014, the filing fee for the commencement of an American Arbitration Association claim involving more than one million but less than ten million dollars was $7,000.00.  Note there is no refund of the filing fee should the matter resolve.  Certainly, the requisite fee is a deterrent to the filing of a border line claim, but could also be a deterrent to a claimant’s joinder of additional even less viable claims which include different damage components.  Under any circumstances, the employee faces an early branch to the decision tree.

The flexibility of arbitration clauses within employment agreements may prove even more critical.  With careful drafting, an employer can effectively insulate itself from certain employment related class actions.   In Quillion v. Tenet HealthSystem Philadelphia, Inc. the United States Court of Appeals for the Third Circuit compelled arbitration of a Fair Labor Standards Act claim and, more importantly, declined to strike down a provision of an employment agreement requiring such claims be brought on an individual basis precluding proceedings as a class.  The Quillion Court indicated that such a class action waiver was consistent with the Federal Arbitration Act and suggested in the strongest of terms that Pennsylvania’s preclusion of class action waiver in the employment context was preempted by Federal Law.  Certainly, the equities of any such situation, including preservation of remedies and additional recovery of fees and costs are important to the court’s inquiry, but the current trend is to support the rights of the parties to contract, even to their own peril.

The flexibility of the arbitration agreement also allows for exclusions from the scope and reservation of certain matters for litigation.  Matters of equity such as enforcement of restrictions against competition or solicitation can be reserved for the courts, thereby preserving immediate access to judicial process for enforcement of employer remedies.  Interestingly, the reverse may not necessarily be true.  The Montgomery County Court of Common Pleas recently dismissed a complaint for declaratory judgment seeking a judicial determination voiding certain restrictions against competition determining that such equity claim was within the scope of the arbitration agreement and, therefore, for the arbitrator to decide.                 

Arbitration also plays a vital role in the ever broadening world economy.  In 2014, international business is the norm rather than the exception.  The courts of the United States and the signatories to the New York Convention on Arbitration have routinely enforced arbitration clauses establishing the parameters of dispute resolution as consistent with the parties’ right to contract.  Critically, the arbitration clause can protect a company operating in this country from the many pitfalls, incremental expenses and inconsistencies of litigating in a foreign country or even against a sovereign nation in its own judicial system by selecting a choice of law and a situs of the arbitration proceeding.  Such forum selection also provides a certain substantive component not only as to applicable law, but also in the qualification of fact finders as the roles of qualified arbitrators available for commercial disputes continue to grow.   Finally, arbitration may be preferable to litigation in the United States District Courts as the parties may be granted greater flexibility and input to the development of the schedule of proceedings rather than subject to the rule of the federal judge, who may or may not be familiar with often complex substantive issues.           Finally, arbitration may also be preferable in any relationship where confidentiality is key.  In some cases, the simple fact of a public filing is of concern.  In many others, the factual allegations of a complaint, even if eventually proven unfounded, can be damaging.  While an arbitration clause cannot prevent a claimant from filing an initial public complaint in court, an enforceable arbitration clause can bring an abrupt end to the public aspect of the dispute.

The courts remain the preferred forum for dispute resolution in many circumstances.  However, with the growing trend of contract enforcement to the terms of arbitration agreements even a skeptic must admit that the inclusion of an arbitration clause in certain circumstances can provide a substantive advantage and dramatically impact the landscape of dispute resolution to your client’s benefit.

By Thomas P. Donnelly, Esquire, Reprinted with permission from the March 27, 2014 issue of The Legal Intelligencer. (c)
2014 ALM Media Properties. Further duplication without permission is prohibited.

It happens all the time.  A potential or existing client calls and advises they have been stiffed by a customer on a commercial contract.  Often times, your client has provided goods or services to a client business only to be advised their client, the other named party to agreements in place, has ceased business operations.  [As filing under Chapter 7 of the Bankruptcy Code does not result in a discharge of corporate obligations, a bankruptcy filing is generally not forthcoming.]  There is no event which gives the client finality as to their loss.  The client is left with only their suspicions that operations have commenced under a new corporate umbrella and whatever assets remained have simply been transferred out of the client’s reach.   

While certainly not in an advantageous position, your client’s claims may not be dead.  Under the right factual circumstance, recovery may still be had.  Claims against successors, affiliated business entities, and corporate principals are fact specific and often necessitate pre complaint development through available public information or, potentially, through the issuance of a writ of summons.  If sufficient information can be mined, causes of action for violation of the Uniform Fraudulent Transfers Act, successor liability under the de facto merger doctrine, unjust enrichment, and claims for piercing the corporate veil may have merit and be successfully pursued.

By Patricia C. Collins, Esquire Reprinted with permission from June 14, 2013 issue of The Legal Intelligencer. (c)

2013 ALM Media Properties. Further duplication without permission is prohibited.

            It is a reality of litigation that the facts of a case can change in significant ways between the filing of the complaint and trial, but litigants do not always amend pleadings to address these changes.   A recent decision by the United States Court of Appeals for the Third Circuit offers incentive to amend in those situations. In West Run Student Housing Associates, LLC v. Huntington National Bank, 7 F.3d 165 (3d Cir. 2013), the Third Circuit held that averments in a complaint that is later amended do not amount to judicial admissions.

The procedural posture of the West Run case is not unique. The plaintiff filed a complaint alleging, inter alia, a breach of contract. The plaintiff claimed that the defendant bank breached its agreement to provide financing for a housing project. The contract required the bank to provide the financing if plaintiff sold the requisite number of housing units. The original complaint included averments regarding the number of units sold, and those numbers were not sufficient to trigger the financing requirement. Defendant moved to dismiss the original complaint, and plaintiff, not unexpectedly, amended. The amended complaint did not contain averments regarding the number of housing units sold.

            Predictably, the defendant again moved to dismiss, alleging that the averments contained in the original complaint were judicial admissions, that is, admissions that cannot later be contradicted by a party, which barred the breach of contract claim. The district court agreed and dismissed the claim.

            The Third Circuit disagreed. The Court found that an amended pleading supersedes an original pleading, and parties are free to correct inaccuracies in pleadings by amendment.   The Court noted that the original pleading is of no effect unless the amended complaint specifically refers to or adopts the original pleading. In this way, the amended pleading results in “withdrawal by amendment” of the judicial admission.

Reprinted with permission from April 5, 2013 issue of The Legal Intelligencer. (c)
2013 ALM Media Properties.
Further duplication without permission is prohibited.

The Pennsylvania Supreme Court is set to hear argument on April 10, 2013 regarding the scope of the work product doctrine and the discovery of materials contained in a testifying expert’s file on April 10, 2013.    The specific issue on appeal is whether Pennsylvania Rule of Civil Procedure 4003.3 provides absolute work product protection for all communications between a party’s counsel and its testifying trial expert.  The decision may provide clarity and guidance to litigation counsel facing an otherwise clouded issue.

In Barrick v. Holy Spirit Hospital, 32 A. 3d. 800 (Pa. Super. 2011), the trial court was faced with a subpoena directed to a medical provider who was both a treating physician and an expert retained for the purpose of offering trial testimony.  The trial court, after an in camera inspection, ordered the enforcement of the subpoena and the disclosure of communications between the expert and the Plaintiff’s counsel.  Plaintiff appealed, arguing the application of the work product doctrine under Pennsylvania Rule of Civil Procedure 4003.3 and trial preparation materials under Rule 4003.5 protected the communications from disclosure.