Kline & Specter, PC v. Haviland, D. ( 2014 )

J-A20035-14
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
KLINE & SPECTER, P.C., : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellee :
:
v. :
:
DONALD E. HAVILAND, JR., :
:
Appellant : No. 3206 EDA 2013
Appeal from the Order entered on August 7, 2013
in the Court of Common Pleas of Philadelphia County,
Civil Division, No. 1922 July Term 2007
BEFORE: FORD ELLIOTT, P.J.E., MUNDY and MUSMANNO, JJ.
MEMORANDUM BY MUSMANNO, J.: FILED OCTOBER 22, 2014
Donald E. Haviland, Jr. (“Haviland”) appeals from the Order confirming
the arbitration panel’s Decision and Award dated March 4, 2013, and
entering Judgment against him in the amount of $210,220.95 plus 6%
annual interest. We reverse.
Haviland, an attorney practicing in this Commonwealth, was hired by
Kline & Specter, P.C. (“K&S”), in 2001 to manage a newly-formed “Class
Action Department” at the law firm. Haviland’s Employment Agreement set
forth the terms that would control the apportionment of client fees and cost-
sharing in the event Haviland left K&S. In particular, Paragraph 5 of the
Employment Agreement (“Employment Agreement”) provided that Haviland
must pay K&S a “referral fee” comprised of one-third of the gross amount of
client fees he received for any non-class action matter in which he continued
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to act as counsel after parting with K&S. Employment Agreement, ¶ 5.
Paragraph 10 of the Employment Agreement provided that the parties
agreed to enforce the Employment Agreement “by either binding arbitration
under [Pennsylvania’s] Arbitration Act of 1927 [“1927 Act”1] or through
court action, at the option of K&S.” Id., ¶ 10 (footnote added).
While employed at K&S, Haviland assumed K&S’s representation of the
Commonwealth of Pennsylvania (“Commonwealth”) in more than a dozen
lawsuits involving major brand-name prescription drug companies. The
litigation was referred to as Pennsylvania Average Wholesale Price
(hereinafter, “PA-AWP”). Haviland also worked for K&S on similar litigation
known as Lupron Blues. Haviland left K&S in 2006, and it was agreed that
he would continue to act as counsel for the Commonwealth in the PA-AWP
and Lupron Blues cases, as K&S was closing its Class Action Department.
Six months later, Haviland’s new law firm2 secured the Commonwealth’s first
favorable settlement with a defendant in PA-AWP.
1
The 1927 Act originally was codified at 5 P.S. § 161 et seq. However, the
1927 Act subsequently was repealed and replaced by the Pennsylvania
Uniform Arbitration Act of 1980 (“1980 Act”). See 42 Pa.C.S.A. §§ 7301-
7320. Despite the fact that the 1927 Act has been repealed, “parties remain
free to agree to proceed according to the 1927 Act.” See Pantellis v. Erie
Ins. Exch., 890 A.2d 1063, 1065 (Pa. Super. 2006); Nationwide Mut. Ins.
Co. v. Heintz, 804 A.2d 1209, 1214 (Pa. Super. 2002); see also Geisler v.
Motorists Mut. Ins. Co., 556 A.2d 391, 393 (Pa. Super. 1989) (stating that
arbitration conducted under the provisions of the 1927 Act constitutes a
statutory arbitration).
2
Upon leaving K&S, Haviland established his own firm, Haviland Hughes,
LLC (“Haviland Hughes”).
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On July 13, 2007, K&S filed a Petition for the Appointment of an
Arbitration to appoint arbitrators to adjudicate its claims under the
Employment Agreement, primarily the allocation of fees that Haviland
received, and would receive, in PA-AWP. K&S argued that Paragraph 5 of
the Employment Agreement obligated Haviland to pay K&S one-third of the
gross fees he received from the settlements and potential verdicts involving
PA-AWP and Lupron Blues. The matter initially proceeded to mediation,
which failed. Thereafter, the trial court ordered arbitration to proceed before
three arbitrators, one selected by each party, and the third selected by the
named arbitrators.
After the three arbitrators were selected, numerous hearings were held
between October 12, 2009, and April 5, 2011, pursuant to the 1927 Act. On
May 18, 2011, two of the three arbitrators (“the panel”) agreed to give K&S
a partial award on its claim for a one-third “referral fee.”3 The panel ordered
Haviland to pay approximately $1.9 million, plus interest from the date the
fees were received, to K&S.4 In addition, Haviland was ordered to pay one-
third, plus interest, of any fees he realized in future settlements involving
3
K&S originally argued that it should be paid one-third of the gross fees
received by all of the law firms (7 total) involved in PA-AWP, not just the
fees received by Haviland. The arbitration panel awarded K&S one-third of
the gross fees received by Haviland only. All other claims were denied,
including the claims against Haviland Hughes.
4
The cases included in this award included Lupron Blues, PA-AWP–Glaxo
Smith Kline (“GSK”), PA-AWP–Abbott, PA-AWP–Baxter, PA-AWP–
AstraZeneca, PA-AWP–TAP Pharmaceutical, and PA-AWP–Dey.
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PA-AWP. The third arbitrator, retired Judge Joseph Del Sole, disagreed with
the panel’s award, and opined that K&S was not entitled to a referral fee in
PA-AWP or Lupron Blues.5
Both K&S and Haviland filed Petitions to Vacate, Correct, or Modify the
arbitration award. However, while these Petitions were pending, the
Commonwealth reached settlements with PA-AWP—Aventis; PA-AWP—
Bayer; PA-AWP—Pharmacia and Pfizer; and PA-AWP—Schering Plough
(collectively “the Aventis settlement”).6 As part of this settlement, the
Commonwealth Court of Pennsylvania entered an Order awarding Haviland
$8,621,037.64 in fees. Thereafter, on September 20, 2011, the parties
agreed to enter into a Stipulation to Confirm Arbitration Award and Enter
Judgment (“Stipulation”). As part of the Stipulation, Haviland agreed to pay
K&S $327,014.23 for the Lupron Blues settlement and $5,412,475.92 for the
5
Judge Del Sole did not believe that Paragraph 5 of the Employment
Agreement applied to PA-AWP or Lupron Blues, as he considered that
litigation to constitute class-action matters, and Paragraph 5 only pertained
to “non-class matters.”
6
The only claims remaining following the Aventis settlement involved PA-
AWP—Johnson & Johnson and PA-AWP—Bristol Meyers Squibb. On August
31, 2011, the Commonwealth Court entered judgment in favor of the
Commonwealth and against Bristol Meyers Squibb in the amount of
$27,715,904. See Commonwealth v. TAP Pharm. Prods., Inc., 36 A.3d
1197, 1295 (Pa. Cmwlth. 2011). On that same date, the Commonwealth
Court entered judgment in favor of the Commonwealth and against Johnson
& Johnson. See Commonwealth v. TAP Pharm. Prods., Inc., 36 A.3d
1112, 1190 (Pa. Cmwlth. 2011). On June 16, 2014, the Supreme Court of
Pennsylvania vacated the Commonwealth Court’s Orders and remanded for
further proceedings. See Commonwealth v. TAP Pharm. Prods., Inc.,
94 A.3d 350, 363-64 (Pa. 2014); Commonwealth v. TAP Pharm. Prods.,
Inc., 94 A.3d 364, 366 (Pa. 2014).
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PA-AWP settlement, and the parties agreed to withdraw their Petitions to
Vacate, Correct, or Modify the arbitration award. On October 3, 2011, the
trial court entered the Stipulation as an Order of court and entered
Judgment in favor of K&S in the amount of $5,739,490.15.
However, on February 15, 2012, K&S filed a Petition to Re-Open the
Arbitration Proceedings (“Petition to Re-Open”) in order to present evidence
to modify the arbitration award. K&S alleged that Haviland perpetrated a
fraud on the panel by providing false information about the fees that he had
received in PA-AWP. Specifically, K&S alleged that Haviland did not make
the panel aware that he retained one-third of the fees distributed to Adam S.
Levy, Esq. (“Levy”), who assisted Haviland on PA-AWP, in addition to the
fees he received personally from the litigation. According to K&S, Haviland
received approximately $600,000 more than the amount indicated by the
distribution sheets presented to the panel. In response, Haviland argued that
there was evidence of his fee arrangement with Levy in the initial arbitration,
and, therefore, there was no fraud which would justify re-opening the
arbitration proceeding. On March 2, 2012, the trial court, without holding an
evidentiary hearing or making any factual finding, re-opened the arbitration
proceedings and referred the matter back to the previously constituted
arbitration panel.
Upon the trial court’s Order, the initial arbitration panel reconvened,
and heard testimony from Levy. On March 4, 2013, the panel rendered
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another split-decision, finding Haviland was required to pay K&S one-third of
the fees he retained from Levy in PA-AWP.7 The panel ordered Haviland to
pay an additional $201,220.95 to K&S, plus interest from the date the fees
were received.
Haviland filed a Petition to Vacate, Correct and Modify the arbitration
panel’s decision. On August 7, 2013, the trial court entered an Order
denying Haviland’s Petition, and entering Judgment against him in the
amount of $210,220.95 plus 6% annual interest from the date he received
the fees.8 Haviland filed a timely Notice of Appeal.
On appeal, Haviland raises the following issues for our review:
1. Whether the [t]rial [c]ourt erred in granting [K&S]’s request
to re-open an arbitration, months after the parties stipulated
and agreed to settle the judgment on the arbitration award,
on [K&S]’s unfounded accusations of fraud, which were
based upon the untested Affidavit of one biased witness,
[Haviland]’s former law partner, [] Levy, whose averments
about the alleged “fraud” were fully known to [K&S] prior to
the conclusion of the first arbitration and were presented to
the arbitration [p]anel for review and decision[?]
7
Judge Del Sole again dissented, citing the lack of fraud on the part of
Haviland and concluding that Haviland owed no additional money to K&S.
Judge Del Sole specifically found that the disputed evidence was presented
to the panel during the initial arbitration proceeding.
8
We note that the trial court’s entry of Judgment against Haviland in the
amount of $210,220.95 plus interest, does not correspond to the amount
ordered to be paid by the arbitration panel, i.e., $201,220.95. Compare
Order, 8/7/13, with Decision and Award of the Panel, 3/4/13; see also
Brief for Appellee at 25 (stating that the arbitration panel awarded K&S
$201,220.95 plus interest). Haviland addresses this discrepancy in his third
claim on appeal.
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2. Whether the [t]rial [c]ourt erred in granting [K&S]’s Petition
to [C]onfirm the second arbitration award, after Levy’s bald
accusations of fraud went unproven in the re-opened
arbitration concerning K&S’s claim for a one-third “referral
fee” out of Levy’s cost share payments made pursuant to his
[o]f [c]ounsel partnership agreement with non-party
Haviland Hughes[?]
3. Whether the [t]rial [c]ourt erred in granting [K&S]’s Petition
to [C]onfirm the second arbitration award, and in ordering
[Haviland] individually to pay a money judgment to [K&S] in
the erroneous amount of $210,220.95, based upon its
erroneous calculation of a one-third “referral fee” on cost
share payments made by Levy to Haviland Hughes without
jurisdiction over the firm or the client, the Commonwealth [],
both of whom are indispensible parties to this dispute over
fees[?]
4. Whether the [t]rial [c]ourt erred in requiring proof of actual
partiality on the part of one of the two arbitrators who
constituted the Majority Panel, ruling in favor of awarding
K&S[] its undisclosed and unconsented to “referral fee” in the
[PA-AWP] case, in view of the arbitrator’s concurrent
representation of the Commonwealth in litigation involving
the same defendants as the case in which the arbitrator was
deciding the propriety of referral fees[?]
Brief for Appellant at 5-6.
We will address Haviland’s first two claims together. In his first claim,
Haviland contends that the trial court erred as a matter of law in
disregarding the parties’ Stipulation and re-opening the arbitration based
upon unfounded claims of fraud. Id. at 23. Haviland argues that K&S, after
months of negotiation, was fully able to determine the risks and benefits of
entering into the Stipulation. Id. at 23-24. Haviland points out that the
Stipulation confirmed the “accuracy” of the initial arbitration award and that
the parties agreed to dismiss all pending motions. Id. at 24-25, 28.
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Haviland claims that K&S was bound by the Stipulation ending further
litigation, and that the trial court erred in refusing to enforce the Stipulation
and the subsequent entry of Judgment in favor of K&S by allowing a new
arbitration hearing. Id. at 25-28, 29-32, 36-39; see also id. at 35-36
(wherein Haviland argues that Pennsylvania favors settlement agreements
and that K&S is bound by the Stipulation). Haviland emphasizes that the
Stipulation and the entry of Judgment finalized the rights between the
parties and that the Judgment was never vacated. Id. at 32. Haviland
asserts that K&S failed to meet its burden of proving fraud by clear and
convincing evidence in order to rescind the Stipulation. Id. at 32-35.
In his second claim, Haviland contends that the trial court erred in re-
opening the arbitration in the absence of “clear, precise, and indubitable
evidence” of fraud. Id. at 39. Haviland argues that there was no fraud in
the initial arbitration, as the evidence that K&S claimed to have only recently
learned about concerning the alleged fraud was the same evidence it
possessed prior to the issuance of the original award. Id. at 40. Haviland
asserts that K&S’s claim for one-third of the referral fee made by Levy to
Haviland was clearly presented to the initial arbitration panel. Id. at 40-49.
Haviland points out that, prior to the first arbitration award, K&S sought an
accounting of Levy’s payments to Haviland in a letter sent to the arbitration
panel, and also argued in their closing argument that they accounted for
Levy’s payments in detailing Haviland’s obligation to K&S. Id. at 46-49.
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Haviland claims that because K&S knew about his arrangement with Levy,
K&S could not satisfy the stringent standards for opening an arbitration
proceeding. Id. at 49-51. Haviland further argues that the trial court erred
in confirming the new arbitration award after the arbitration was re-opened.
Id. at 52-54.9
Pennsylvania has a well-established public policy that
favors arbitration[.] … Arbitration is a matter of contract, and
parties to a contract cannot be compelled to arbitrate a given
issue absent an agreement between them to arbitrate that issue.
Even though it is now the policy of the law to favor settlement of
disputes by arbitration and to promote the swift and orderly
disposition of claims, arbitration agreements are to be strictly
construed and such agreements should not be extended by
implication.
Knight v. Springfield Hyundai, 81 A.3d 940, 947 (Pa. Super. 2013)
(citations and quotation marks omitted); see also 42 Pa.C.S.A. § 7303
(establishing the validity of arbitration agreements).
Here, pursuant to Paragraph 10 of the Employment Agreement, K&S
invoked the statutory arbitration clause under the 1927 Act to resolve the
9
We note that K&S raises various claims that Haviland waived or failed to
properly preserve his claims. However, upon our review of the record, we
cannot conclude that Haviland waived his claims.
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dispute between the parties. See Employment Agreement, ¶ 10.10 Where a
party seeks to modify an arbitration award conferred following proceedings
under the 1927 Act, trial courts may “grant relief from an arbitration award
where the award was legally erroneous.” Heintz, 804 A.2d at 1214; see
also 5 P.S. § 171 (repealed) (pertaining to modifying or correcting an
arbitration award). However, as noted above, the 1927 Act has been
repealed and replaced by the 1980 Act. The 1980 Act narrowed the grounds
10
As an initial matter, we express extreme disapproval of the parties’ (a law
firm and an attorney) inability to properly construe the unambiguous terms
of the Employment Agreement, which was ostensibly drafted by K&S.
Indeed, the parties alternatively apply the 1927 Act, the 1980 Act, and
common-law arbitration, see 42 Pa.C.S.A. §§ 7341-7342, legal standards to
this case. In his Statement of the Scope and Standard of Review, Haviland
asserts that the correct standard of review the trial court should have
employed in analyzing K&S’s Petition to Re-Open is the “contrary to law”
standard in the 1927 Act, as preserved in the 1980 Act. Brief for Appellant
at 2-4. However, in his Argument section, Haviland points out an alternate
standard to vacate a common law arbitration, and argues that the trial court
needed to find that K&S supported its request to vacate with “clear, precise,
and indubitable evidence of fraud.” Brief for Appellant at 50; see also id. at
39. Similar inconsistencies were found in K&S’s brief. K&S argued that the
common-law requirements for proving fraud were applicable in modifying
the arbitration award. See Brief for Appellee at 31. K&S also points to the
substantive requirements of the 1927 Act and the 1980 Act, which would
also allow for the modification of the arbitration. See id. at 31, 32; see
also id. at 7 (wherein K&S states that the arbitration proceeded under the
terms of the 1927 Act). However, the matter clearly proceeded under the
1927 Act, as set forth in the Employment Agreement. See Employment
Agreement, ¶ 10; see also Decision and Award of the Panel, 5/18/11, at 1
(stating that the parties agreed to enforce the arbitration clause in
Employment Agreement pursuant to the 1927 Act); Petition for Appointment
of an Arbitrator, 7/13/07, at 1 (unnumbered) (wherein K&S sought the
appointment of an arbitrator under the terms of the Employment
Agreement); Letter, 9/18/06, at 1-2 (unnumbered) (wherein K&S sent a
letter to Haviland demanding the resolution of the claims under the
arbitration clause of the Employment Agreement).
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for modifying or correcting statutory arbitration awards formed under the
1980 Act to a limited set of circumstances. See 42 Pa.C.S.A. § 7315;
Heintz, 804 A.2d at 1214. Nevertheless, the 1980 Act incorporated a
“preservation clause” under 42 Pa.C.S.A. § 7302(d)(2), regarding the scope
of review for arbitration awards made under the 1927 Act. See Heintz, 804
A.2d at 1214 (stating that the 1980 Act preserved the scope of review in the
1927 Act in 42 Pa.C.S.A. § 7302(d)(2)); see also Nationwide Ins. Co. v.
Calhoun, 635 A.2d 643, 645-46 (Pa. Super. 1993). The “preservation
clause” provides as follows:
Where this paragraph is applicable[,] a court in reviewing an
arbitration award pursuant to this subchapter shall,
notwithstanding any other provision of this subchapter, modify
or correct the award where the award is contrary to law and is
such that had it been a verdict of a jury the court would have
entered a different judgment or a judgment notwithstanding the
verdict.
42 Pa.C.S.A. § 7302(d)(2). Thus, the trial court must review a request for
modification of a 1927 Act arbitration award under the “contrary to law”
standard of section 7302(d)(2). See Pantelis, 890 A.2d at 1065 (stating
that where the parties agree to statutory arbitration under the 1927 Act, the
trial court must adhere to section 7302(d)(2) of the 1980 Act in reviewing
the panel’s award); see also Burke v. Erie Ins. Exch., 940 A.2d 472, 475
(Pa. Super. 2007).
While the 1980 Act preserved the expanded scope of review of an
arbitration agreement under the 1927 Act, the 1980 Act did not explicitly
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preserve the procedural aspects of the 1927 Act. In point of fact, no section
of the 1980 Act, including section 7302(d)(2), mentions or preserves the
1927 Act’s procedural requirements. See Dunlap by Hoffman v. State
Farm Ins. Co., 546 A.2d 1209, 1210 n.1 (Pa. Super. 1988); see also Seay
v. Prudential Prop. and Cas. Ins. Co., 543 A.2d 1166, 1168 (Pa. Super.
1988) (concluding that where terms of insurance contract called for
arbitration in accordance with provisions of the 1927 Act, section 7320 of the
1980 Act still governed appealability of the order confirming the arbitration
award).11 Under the 1980 Act, any application to the court to modify or
correct the award must be made “within 30 days after delivery of a copy of
the award to the applicant[.]” 42 Pa.C.S.A. § 7315(a).12 Thus, a request
that the court modify a statutory arbitration award arising under the 1927
Act must be made within 30 days after delivery of the award, as provided in
section 7315(a) of the 1980 Act. See Maxton v. Philadelphia Hous.
Auth., 454 A.2d 618, 619-20 (Pa. Super. 1982) (holding that the
preservation clause does not preserve the 1927 Act’s timeliness
requirements and concluding that the 30-day statute of limitations of the
1980 Act would apply to a petition for review of an arbitration award).
11
We note that the procedure set forth in the 1980 Act under sections 7316
and 7320 is similar to sections 172 and 175 of the 1927 Act. See Dunlap,
546 A.2d at 1210 n.1, n.2.
12
The 1927 Act provides that notice of a motion to vacate, modify, or
correct an award should be filed within three months after the award was
filed or delivered. 5 P.S. § 173 (repealed).
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Further, where a party requests the arbitrators, rather than the trial court,
to modify or correct the award, the application “shall be made within ten
days after delivery of the award to the applicant.” 42 Pa.C.S.A. § 7311(b);
see also id. § 7311(a) (stating that a party may seek modification from
arbitrators or the trial court may submit a modification petition to the
arbitrators).
If no petition for modification or correction is filed within 30 days of
the delivery of the arbitration award, the proper procedure for the trial court
is to enter an order confirming the arbitrators’ award. See 42 Pa.C.S.A.
§ 7315(b) (stating that where an application to modify or correct is not filed
or not granted, “the court shall confirm the award as made by the
arbitrators.”). In conjunction with the order confirming the arbitrators’
award, “a judgment or decree shall be entered in conformity with the order.
The judgment or decree may be enforced as any other judgment or
decree.” 42 Pa.C.S.A. § 7316 (emphasis added); see also 42 Pa.C.S.A.
§ 7320(a)(6) (stating that an appeal from an arbitrator’s decision may be
taken only from a final judgment or decree of court entered pursuant to the
provisions of the 1980 Act); Gargano v. Terminix Int'l Co., L.P., 784 A.2d
188, 192 n.2 (Pa. Super. 2001) (stating that the final order following an
arbitration is the confirming order and judgment entered by the trial court in
favor of prevailing party).
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Here, following the arbitration panel’s May 18, 2011 Decision and
Award pursuant to the 1927 Act, the parties entered into a Stipulation
resolving the issues of arbitration. Thereafter, on October 3, 2011, the trial
court entered an Order confirming the arbitration award based upon the
Stipulation, and entering Judgment in favor of K&S. See Stipulation to
Confirm Arbitration Award and Enter Judgment, 10/3/11. The Judgment
represented the full amount of the fees owed under the arbitration panel’s
decision, up to that point in time, including those incurred in Lupron Blues
and PA-AWP. See id.; see also Brief for Appellee at 34. Nevertheless, over
four months after the entry of Judgment, K&S filed the Petition to Re-Open,
seeking to re-open the arbitration so that the arbitration panel could modify
the common-law arbitration award. See Petition to Re-Open, 2/15/12, at 1,
7-8. On March 20, 2012, the trial court, without a hearing or additional
findings, granted K&S’s Petition to Re-Open and referred the matter to the
original arbitration panel. See Order, 3/20/12.
In this case, K&S’s Petition to Re-Open sought to modify the
arbitration panel’s award due to a clear demonstration of fraud under 42
Pa.C.S.A. § 7341, Common Law Arbitration. See Petition to Re-Open,
2/15/12, at 8; see also Heintz, 804 A.2d at 1214-15 (admonishing that
petitioners seeking to modify or correct an arbitration award “should be
careful to caption their petitions as petitions to modify or correct the
award.”). However, as noted above, this arbitration was conducted pursuant
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to the 1927 Act, not common law arbitration. Further, K&S did not point to
any statutory authority that would allow the trial court to re-open a 1927 Act
arbitration proceeding based upon a finding of fraud. Indeed, contrary to
K&S’s argument, it merely had to meet the lower burden of contrary to law
to modify an award under the 1927 Act. Importantly, K&S’s request that the
arbitration panel modify the award was made well outside the required ten-
day period and was patently untimely. As K&S’s Petition did not include a
statutory basis for the relief it sought, and was filed nine months after the
arbitration award was delivered, the trial court erroneously re-opened the
arbitration so that the arbitration panel could modify the original arbitration
award.
Furthermore, even if K&S sought modification of the award by the trial
court, the Petition was untimely filed. The initial arbitration award was
entered and delivered on May 18, 2011. K&S filed the Petition to Re-Open
on February 15, 2012. Accordingly, K&S’s Petition to Re-Open was patently
untimely under section 7315 as it was not filed within 30 days of the award.
See U.S. Claims, Inc. v. Dougherty, 914 A.2d 874, 877 (Pa. Super. 2006)
(stating that “[a] party must raise alleged errors in the arbitration process in
a timely petition to vacate or modify the arbitration award or the claims are
forever waived.”).13
13
We note that the parties filed timely Petitions to Vacate, Correct, or Modify
the May 2011 arbitration award. However, these Petitions were withdrawn
as part of the Stipulation.
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Moreover, based upon the Stipulation, the trial court entered an Order
on October 3, 2011, confirming the arbitration award and entering Judgment
in favor of K&S, which was the final determination of the claims at issue.
See 42 Pa.C.S.A. § 7316; Gargano, 784 A.2d at 192 n.2; see also
Pa.R.A.P. 341(b) (stating that a final order is any order that either disposes
of all claims and all parties, is expressly defined as a final order by statute,
or is entered as a final order upon an express determination that an
immediate appeal would facilitate resolution of the entire case). It is well-
settled that “a court upon notice to the parties may modify or rescind any
order within 30 days after its entry … if no appeal from such order has been
taken or allowed.” 42 Pa.C.S.A. § 5505; see also Key Auto. Equip.
Specialists, Inc. v. Abernethy, 636 A.2d 1126, 1128 (Pa. Super. 1994)
(stating that section 5505 only applies to final orders).
Under section 5505, the trial court has broad discretion to
modify or rescind an order, and this power may be exercised sua
sponte or invoked pursuant to a party’s motion for
reconsideration. The trial court may consider a motion for
reconsideration only if the motion for reconsideration is filed
within thirty days of the entry of the disputed order. The mere
filing of a motion for reconsideration, however, is insufficient to
toll the appeal period. If the trial court fails to grant
reconsideration expressly within the prescribed 30 days, it loses
the power to act upon both the motion and the original order.
PNC Bank, N.A. v. Unknown Heirs, 929 A.2d 219, 226 (Pa. Super. 2007)
(citations, quotation marks, and brackets omitted).
Here, K&S’s February 15, 2012 Petition to Re-Open, which did not
seek to open or strike the judgment, but instead sought to re-litigate the
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fees involving PA-AWP (settled by the October 3, 2011 Judgment) was
untimely filed. Because the trial court no longer had jurisdiction to act on
the Petition to Re-Open, the court erred in granting the Petition. 14 See
Pa.R.A.P. 903, 1701.
We note that our Courts have allowed for the extensions of statutory
appeal time where there is evidence of fraud. See Maxton, 454 A.2d at
620 (stating that where a petitioner filed an untimely petition to modify
under the 1927 Act, “[t]he courts have no power to extend statutory appeal
time or to allow an appeal nunc pro tunc in the absence of fraud, or its
equivalent, or some breakdown in the court’s operation.”); see also Joseph
v. Advest, Inc., 906 A.2d 1205, 1212 (Pa. Super. 2006) (stating that “[t]he
time for taking an appeal cannot be extended as a matter of grace or mere
indulgence, and extensions can be granted only where fraud or breakdown in
the court’s operations is present.”) (citation and quotation marks omitted);
14
It is well-settled that a judgment entered by confession or by default
“remains within the control of the court indefinitely and may be opened or
vacated at any time upon proper cause shown[.]” Shelly Enters., Inc. v.
Guadagnini, 20 A.3d 491, 493 (Pa. Super. 2011) (citation omitted).
Contrarily, a judgment entered in an adverse proceeding cannot be
disturbed if no appeal is filed within thirty days and “cannot normally be
modified, rescinded or vacated.” Id. at 494. Even if the Judgment entered
against Haviland based upon the Stipulation is considered a judgment
entered by confession, K&S admits that it did not seek to undo the May 18,
2011 Judgment, but instead sought the full amount owed by Haviland under
the award that was confirmed. Brief for Appellee at 35; see also Petition to
Re-Open, 2/15/12, at 1, 7-8. Contrary to K&S’s argument, it was
attempting to re-litigate claims that had been finally decided in the
Judgment entered on October 3, 2011. Further, as noted infra, K&S was
also aware of the fee arrangement between Haviland and Levy at the time
the initial Judgment was entered.
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see generally Guadagnini, 20 A.3d at 494 (stating that “judgments
regularly entered on adverse proceedings cannot be opened or vacated after
they have become final, unless there has been fraud ….”) (citation and
emphasis omitted).15
Here, the trial court ostensibly found that Haviland had committed
fraud when it re-opened the arbitration based upon K&S’s fraud allegations
in its Petition to Re-Open. While K&S did not allege fraud in order to extend
the statutory time limit, we will address whether the trial court properly
found fraud.
In order to prove fraud[,] the following elements must be
shown: (1) a representation; (2) which is material to the
transaction at hand; (3) made falsely, with knowledge of its
falsity or recklessness as to whether it is true or false; (4) with
the intent of misleading another into relying on it; (5) justifiable
reliance on the misrepresentation; and (6) the resulting injury
was proximately caused by the reliance.
Milliken v. Jacono, 60 A.3d 133, 140 (Pa. Super. 2012).
The fraud alleged by K&S, and used as justification to re-open the
proceedings, rested on Levy’s statements regarding his payments to
Haviland. In his Affidavit, Levy stated that he served “of counsel” at
Haviland Hughes, but was not an employee of the firm, from September 11,
15
We note that under the 1980 Act, an application to vacate an arbitration
award must be “made within 30 days after delivery of a copy of the award to
the applicant, except that, if predicated upon corruption, fraud, misconduct
or other improper means, it shall be made within 30 days after such grounds
are known or should have been known to the applicant.” 42 Pa.C.S.A.
§ 7314(b). However, the 1980 Act did not include such language in relation
to untimely applications to modify or correct an arbitration award under
section 7315.
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2006, to September 6, 2011. See Affidavit, 3/14/12, at 1; id. at 1-2
(wherein Levy states that, while he occasionally worked at the physical
location of Haviland Hughes, he rarely used any of the firm’s equipment or
support staff); see also N.T., 5/1/12, at 89. Levy stated that as part of his
agreement with Haviland for the PA-AWP work, Haviland would retain one-
third of his fees. See Affidavit, 3/14/12, at 2-3; see also N.T., 5/1/12, at
90-91.16 Levy acknowledged that he was unaware as to how Haviland used
the retained fees, but that he never agreed that the fees were payment for
“overhead costs” or “cost share payments.” See Affidavit, 3/14/12, at 3;
see also N.T., 5/1/12, at 91.
Kila Baldwin, Esquire (“Baldwin”), an attorney for K&S, provided a
separate Affidavit detailing a meeting she had with Levy, and the
information she received regarding fees paid to Levy arising out of the PA-
AWP work. Affidavit, 2/15/12, at 1-3. According to Baldwin, the evidence
revealed that Levy had received approximately $600,000 less than the
amount shown on the distribution sheets relied on by the panel in crafting
the initial award. Id. at 2-3.
However, on April 4, 2011, a month prior to the arbitration panel’s
initial decision, K&S sent a letter to the arbitration panel stating the
following, in pertinent part:
16
We note that in his Affidavit, Levy states that his agreement was with
Haviland and/or Haviland Hughes. See Affidavit, 3/14/12, at 1, 2-3.
However, this appeal pertains to the fees retained by Haviland, not the firm.
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Haviland’s chart[, from a prior letter to the panel,] reports
Haviland Hughes’ net fee in connection with the [PA-AWP – GSK]
settlement as $258,922.94. However, in its distribution sheet
previously produced by [] Haviland, the final net fee was
indicated as $275,247.22. … The net fee to [] Haviland is
$275,247.22, which includes his fee of $258,922.94[,] and
$16,324.28 paid by [] Levy to [] Haviland in connection with the
[PA-AWP – GSK] fee award. The calculation of [] Haviland’s net
fees must include any fees paid to him by any of his co-counsel
per his fee division agreements with them in the departed files.
It now appears that [] Haviland has not identified the
referral fees paid by [] Levy as part of the fees realized by him in
any of the settlements. Therefore, the amounts previously
requested by [K&S] in its findings of fact should be
appropriately amended to include one-third of the referral
fee paid by [] Levy to [] Haviland[.]
***
We have yet to receive a distribution sheet for [the PA-
AWP – TAP Pharmaceutical settlement,] and have no way of
knowing the costs, distributions to other law firms, and/or fees
paid by [] Levy to [] Haviland.
***
Enclosed are [K&S’s] revised proposed Orders for the
Panel’s Consideration. Proposed Order IIA is for the Panel to
award one-third of the gross fees, and Proposed Order IIB is for
the Panel to award one-third of the net fees to [] Haviland,
including referral fees paid by [] Levy to [] Haviland. …
K&S Letter, 4/4/11, at 1-3 (unnumbered) (emphasis added); see also N.T.,
4/5/11, at 34-35 (wherein K&S, during closing argument, stated that Levy
provided one-third of his legal fees to Haviland under a referral
arrangement); PA-AWP – GSK Distribution, 6/30/07 (reflecting that Haviland
provided the total amount paid to Levy, with a parenthetical indicating one-
third of that amount which was paid to Haviland, and included the total
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amount Haviland gained (the original amount he received plus the portion of
Levy’s fees)).17 Further, in an April 12, 2011 Letter to the arbitration panel,
Haviland’s attorney detailed the relationship between Levy, Haviland, and
Haviland Hughes. Haviland Letter, 4/12/11, at 1-3 (unnumbered). The
letter specifically states that Levy had an “of counsel” relationship with
Haviland Hughes and that the financial relationship between the parties
obligated Levy to return one-third of the fees he earned for contribution
toward the law firm’s overhead. Id. at 2; see also Deposition of Levy,
10/13/09, at 363-66 (wherein Levy detailed for K&S his fee arrangement
with Haviland Hughes); Haviland’s Answers to K&S’s Interrogatories,
10/8/09, at 11 (wherein Haviland states that Levy has an of counsel
agreement with Haviland Hughes that obligated Levy to return fees to the
law firm’s overhead).
Here, contrary to the trial court’s finding, K&S has not demonstrated
that Haviland committed fraud. K&S claims that the only way it could have
known about the fee arrangement was through Levy’s Affidavit and
subsequent testimony after the initial award was already in place. Brief for
Appellee at 21; see also id. at 19 (wherein K&S admits to knowing of, and
being suspicious of, the arrangement throughout the four years of
17
Additionally, during a deposition of Levy by K&S, Levy stated that he
received around $120,000 for the PA-AWP – Abbott settlement. See
Deposition of Adam Levy, 10/5/09, at 18. Levy’s answer was in stark
contrast with the distribution sheet provided by Haviland, which showed that
Levy was paid approximately $170,000.
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arbitration proceedings, yet claims that it was defrauded and had no way of
knowing that the arrangement existed in the other settlements).
However, our review discloses that K&S’s Letter evidenced its
awareness of the fee arrangement between Levy and Haviland six weeks
prior to the initial award, yet K&S asked for the same relief sought through
the re-opened arbitration proceedings. K&S explicitly addressed Haviland’s
“net fees” from the various cases in the distribution sheets that did not
incorporate the money paid to Haviland by Levy. Importantly, K&S was also
aware that Levy received fees for his work on the Aventis settlement, which
was settled after the conclusion of the arbitration proceedings, and prior to
entering into the Stipulation on September 20, 2011. See Order, 7/21/11,
at 1-2 (detailing the fees received by Levy and Haviland Hughes). Thus,
K&S had knowledge of the fee arrangement, knew about the payments to
Levy for the settlements that occurred after the arbitration proceeding was
concluded, and freely entered into the Stipulation. 18 Relevantly, Judge Del
Sole, in his dissent in the re-opened arbitration proceeding, noted the
following:
The evidence presented to the Panel, during the recent
proceedings, and from a review of the prior proceedings,
establishes that the Panel knew of the fee arrangement between
Haviland and Levy when it issued its initial Decision and Award.
There exists no basis for the Panel to revisit the Award, nor for
the court to direct a modification. A party dissatisfied with the
18
Neither party argues that the Stipulation was procured by fraud. See,
e.g., Brief for Appellee at 35 (stating that K&S does not seek to undo the
Stipulation).
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decision of the arbitrators must raise any claims within 30 days
of the award. Claims were raised, this issue was not raised, and
the parties settled the matter [in the Stipulation.] … There can
be no question that this specific issue was previously raised.
Decision and Award of Panel, 3/4/13, at 5 (unnumbered) (Del Sole,
dissenting). Consequently, as K&S was aware of Levy’s fee arrangement
prior to the initial arbitration proceeding, and yet voluntarily entered into the
Stipulation settling all claims, there was no evidence of fraud or any
justification for re-opening the arbitration proceedings.
To summarize, the arbitration award was secured pursuant to the
1927 Act. The trial court could only modify that award if K&S raised a timely
petition evidencing that the award was “contrary to law.” As noted above,
K&S failed to seek any timely relief permitted under the 1927 Act or the
1980 Act. Additionally, the trial court erred in re-convening the arbitration
panel based upon K&S’s allegation of fraud and neglecting to enforce the
Judgment entered based upon the Stipulation. As the arbitration was re-
opened in error, the subsequent Order confirming the March 4, 2013
arbitration award and Judgment entered in favor of K&S are void. The Order
and Judgment entered on October 3, 2011, in favor of K&S controls in this
case.
Because we have afforded Haviland relief, we decline to address his
remaining issues.
Order reversed. Jurisdiction relinquished.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/22/2014
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