Damages from an insolvent defendant

In tough economic times, like the present, one might try to be creative in seeking money damages from an insolvent defendant. The idea of using an equitable lien against the personal property of the another may prove tempting, but it is not likely to result in a successful outcome.

While equitable liens are commonly found in matters involving real property, attempting to attach to the personal, tangible property of another by use of the equitable lien theory has been disfavored by Pennsylvania Courts. The Courts have routinely applied a three part test to determine if an equitable lien has arisen. That is “there must be an obligation owing by one person to another, a res to which that obligation attaches, and an intent by all parties that the property serve as security for the payment of the obligation.” Hoza v. Hoza, 448 A.2d 100, 104 (Pa. Super. Ct. 1982). As a result, the court stated, in Hoza, that without “clear, precise and indubitable” evidence as to the intent of the parties, an equitable lien will not be found to exist. This requirement essentially forecloses any assertion of an equitable lien, but for those which are subject to a written agreement formally declaring that an equitable lien exists.

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Agency Home Health Aides: Not Exempt From Minimum Wage and Overtime Under Pennsylvania Law

After the U.S. Supreme Court ruled in 2007 that home health aides employed by third parties are exempt from overtime requirements under the federal “domestic services” exemption, the question of whether these same home health aides were also exempt from Pennsylvania’s minimum wage and overtime requirements under its “domestic services” exemption still remained. On September 4, 2008, the Pennsylvania Commonwealth Court answered that question in the negative in a case brought by Bayada Nurses, Inc. against the Pennsylvania Department of Labor & Industry (“L&I”).

As background, Pennsylvania’s Minimum Wage Act (“MWA”) exempts from minimum wage and overtime requirements “[d]omestic services in or about the private home of the employer.” Unlike the federal regulations, however, Pennsylvania’s regulation defines “domestic services” more narrowly as “work in or about a private dwelling for an employer in his capacity as a householder, as distinguished from work in or about a private dwelling for such employer in the employer’s pursuit of a trade, occupation, profession, enterprise or vocation.”   And unlike the federal regulations, Pennsylvania does not have a “companionship services” provision that would cover employees employed by third parties, such as Bayada’s and many other agencies’ home health aides.

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Compensation Required for Employees Receiving Treatment under OSHA Provision.

In Secretary of Labor v. Beverly Healthcare-Hillview, No. 06-4810, 2008 WL 4107489 (3rd Cir. September 4, 2008) the Court found that a nursing home operator was required to compensate employees for travel expenses and non-work time spent receiving treatment under the Bloodborne Pathogens Standard of the Occupational Safety and Health Act (OSHA). The Bloodborne Pathogens Standard requires that employers make the hepatitis B vaccine and other medical evaluations and treatments available to all exposed employees at no cost to the employee.

The Company at issue operated a nursing home in Pennsylvania, and two nurses who worked at the facility, received a “needlestick” while at work. Both nurses subsequently sought treatment for their wounds at an off-site medical facility. Their subsequent and ongoing treatment required them to return to that facility for periodic follow-up during non-work hours.

The Company paid for the cost of the medical evaluations and procedures, but failed to compensate the nurses for the non-work hours they spent receiving their follow-up treatments. Moreover, the Company did not compensate the employees for their travel expenses to and from the facility.

The Occupational Safety and Health Administration issued citations to the Company for failure to compensate the nurses for travel expenses and non-work time spent receiving treatment. The Company disputed the citations, and argued that the no-cost provision of the Act should not be read so broadly. 

Subsequently, an administrative law judge upheld the citations, but the Occupational Safety and Health Review Commission reversed, finding that the Company did not have “fair notice” of the broad interpretation of the no-cost provision.

Ultimately, the Third Circuit disagreed, and found that the Company had “fair notice” of the no-cost provision as a result of OSHA’s opinion letters, directives and prior caselaw. Specifically, the Court found instructive a 1999 opinion letter which stated that transportation under the Bloodborne Pathogens Standard may not need to be provided by the employer, but the employer must cover the cost of transportation. The same opinion letter also provided that when receiving a vaccine or commuting to have it administered, employees must be considered on-duty and compensated.   Accordingly, the Court agreed with the Secretary of Labor’s position that a “reasonable interpretation” of the no-cost provision required the Company to pay for travel expenses and non-work time.

The Gift that Kept on Giving

What happens when a gift to a charity remains unfulfilled during the life of the donor? The factual scenario is common. A couple are devoted to and passionate about the mission of a charity. During life, each makes pledges and gives gifts to the charity in support of the mission. A pledge of $1.5M is made during life but is not paid in full during life. The executors and the charity cannot agree on what should happen to the pledge when the surviving spouse dies.

The gift was made via a letter of understanding, pledging 6 annual payments of $150,000 each, followed by a $600,000 payment in the 7th year. Three years into the agreement, an amended letter of understanding was executed; the amended agreement reduced the annual payment and extended the number of years for payment. Payments were made during life, but upon testatrix’s death, her executors took the position that specific bequests in the will and other smaller gifts made during life satisfied the remaining obligation to the charity.

The executors did not argue that the pledge was invalid or non-binding on the estate; they argued that the pledge had been satisfied. Their argument was bolstered by the fact that the letter of understanding specifically stated that the testatrix would make provision in her will for the payment of the pledge.

The Westmoreland County Orphans’ Court disagreed with the executors.  The Court summed up the matter eloquently

It should come as no surprise that a person imbued with a generous attitude and affection toward an institution may make numerous gifts at different levels of giving, each intended to address a specific and timely need, and that such a pattern of giving is likely to continue even in the presence of a particularly large gift…[H]uman nature suggests that regular gift giving will persist contemporaneously with the larger contribution. Rather than confining their generosity, a person of means is more likely to continue donating in order to meet existing needs where it is within their ability to do so.

Charities can breathe a sigh of relief. The Court ordered the fulfillment of the pledge in addition to the payment of specific bequests in the will. 

Brownfield Estate v. St. Vincent Archabbey, 28 Fiduc. Rep.2d 231 (Westmoreland Co. 2008).

Primer: Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) is codified at 15 U.S.C. §78dd-1, et. seq. [See also, Section 30A of the Securities & Exchange Act of 1934.] The FCPA has two primary sections. The first section makes it illegal for U.S. persons, including U.S. companies and their subsidiaries, officers, directors, employees and agents, and any stockholders acting on their behalf, to bribe foreign officials. The anti-bribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. Since 1998, the FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States.

The second section requires U.S. companies and their subsidiaries to keep accurate and complete books and records and to maintain proper internal accounting controls. The FCPA requires companies whose securities are listed in the United States to meet its accounting provisions. See, 15 U.S.C. §78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions, require corporations covered by the provisions to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.

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A View From The Left Side Of the "v" And The Importance Of Pre-Pleading Planning To Receive Compensation.

  The adage that "it is more difficult to build a house than it is to tear a house down" is a phrase often used by legal practitioners to describe the role of the parties to litigation. The adage refers to the role the plaintiff has as architect of the lawsuit in his/her pursuit of satisfying the appropriate burdens of proof. Conversely, the role of the defendant is to poke holes or tear the plaintiff(s)' story--or house--apart. The most important single advantage that the plaintiff has is the benefit to design a house strong enough to fully inform, yet withstand the attack.

It would seem to be obvious that upon building the house, two issues are paramount. One, building a house sufficiently durable to withstand the inevitable forces that will arise for the ultimate objective of two, receiving compensation for harms and/or injuries sustained. During the course of my career representing parties on each side of the "v," I've seen seemingly far too many plaintiff practitioners lose sight of the second and ultimate objective and opt for a house with more amenities and extras, at the cost of durability and through poor pre-pleading planning have had "the money" taken off the table. This is almost always in the form pleading themselves out of what would otherwise be available insurance coverage. Notably, this applies equally to both personal injury, as well as commercial litigation.

By way of example, in many construction contracts, many plaintiffs find it far too tempting to resist the urge and ultimately allege that a contractor performed a given task in a "poor workmanlike manner" which, in far too many circumstances is not be a covered event pursuant to an applicable policy of insurance. In such instances, it may well be recommended that just because you can plead "poor workmanship" and add that to your house, that one avoid the "extra amenity" in exchange for a stronger more durable house.

In personal injury actions that involve aspects of intentional acts but where there may be another available defendant, again, proper pre-pleading planning may be the difference between receiving a paper judgment and receiving actual compensation. The examples are plenty, but one such example may arise (and has frequently) in the context of "really excited bar bouncers" in the process of removing the subsequently unwelcome patron that ultimately suffers an injury as a result of the "conduct of removal." While there may be little harm to allege the "intentional conduct" of the bouncer, actual recovery may well lie with the responsibility of the employer. Careful pre-pleading planning as to the house you build against the employer may well make the difference whether the client will actually recover for the injuries, or simply have bragging rights. In such an event, the practitioner must be mindful of the improper conduct of the employer, for example, negligent supervision, retention or hire of the particular employee and remain focused there in anticipation of the inevitable denial of coverage based upon intentional act exclusions anticipated within a policy.

When practicing from the left side of the "v" the value of proper pre-pleading planning can not be emphasized too much and ultimately your efforts will not be unappreciated from those that practice from the right.