For a long time, auto insurance defense attorneys have considered it the cost of doing business in Luzerne County -- the difficulty of finding an agreeable neutral arbitrator, the large settlements, the funny feeling that something was off.
But, as the saying goes, what you know and what you can prove are two different things.
In the wake of U.S. Attorney for the Middle District of Pennsylvania Martin C. Carlson's announcement last month of fraud charges against former President Judge Mark A. Ciavarella and Senior Judge Michael T. Conahan and charges of embezzlement against a third court official last week, buzz that the U.S. Attorney's Office is targeting lawyers has reached a fever pitch. There are rampant rumors that federal authorities are investigating alleged case fixing.
Carlson, in an interview Tuesday, would not discuss aspects of his investigation beyond the charges already filed, but did say that it is ongoing.
Although law enforcement has not made allegations of case fixing, sources have said in numerous interviews with The Legal Intelligencer that an alleged quid pro quo scheme for some plaintiffs attorneys was established in uninsured motorist/underinsured motorist arbitration cases in Luzerne County long ago.
"That's been the rumor and innuendo for years here," said Lesa Gelb, a Kingston, Pa., plaintiffs attorney.
"There's nothing inherently wrong with going to the court for a neutral [arbitrator]," she continued. "The question is if it's stacked. The rumor in Luzerne County -- and it is a rumor -- is that the decks were stacked."
James K. Thomas, the managing partner of Thomas Thomas & Hafer's office in Harrisburg, said he sees Luzerne County as a "very difficult place to be a defense lawyer."
"You always wound up with people we considered to be very pro-plaintiff," Thomas said. "You wound up with what we considered to be outrageous awards."
"Frankly we recommended to a number of our clients that they move to get the arbitration provisions out of their policies because of what we perceived to be rampant abuses in the Wilkes-Barre/Scranton area," Thomas said.
Thomas C. Raup, a retired Lycoming County Common Pleas judge, said he was shocked when he began working as an arbitrator in 1998 by the stories he heard from insurance defense lawyers about "ridiculous settlement offers" and the appointment of plaintiffs lawyers as neutral arbitrators.
"I have refused to sit there," Raup said. "But I did sit on one case as a defense arbitrator to see if I could see it from the inside."
In that case, Raup said, the plaintiff's counsel opened with a statement that the case was worth $2.5 million. Raup said he stated why he had agreed to serve as the defense arbitrator and the case eventually settled for far less than the seven figures the plaintiff initially sought.
"I thought it would be interesting and in the interest of the profession to do that," said Raup. "I have never been asked to be a neutral over there."
However, another plaintiffs attorney said there was nothing improper about the system.
Talk of case assignments surfaced during the trial of former Luzerne County Judge Ann H. Lokuta before the state Court of Judicial Discipline, more than a year ago. Lokuta is now challenging the court's finding that she violated the Code of Judicial Conduct and the state constitution and its decision to remove her from the bench.
Lokuta testified that she has spoken to the U.S. Attorney's Office and FBI agents about instances in which three cases assigned to her were suddenly reassigned to Ciavarella or Conahan, according to the transcripts. Francis J. Puskas, deputy chief counsel for the Judicial Conduct Board, and the man who prosecuted the case against Lokuta, told The Legal Intelligencer recently that Lokuta testified during her trial that she spoke to the FBI about docketing in Luzerne and identified three cases that had been reassigned from her.
A PROFOUND EFFECT
James C. Haggerty, of the Philadelphia defense firm Swartz Campbell, said arbitration practices in Luzerne County have had a profound effect on Pennsylvania law.
"[Insurance Federation of Pennsylvania v. Commonwealth, Department of Insurance (Koken),] was pursued because of the outrageous UM/UIM awards coming out of Luzerne County," said Haggerty, who is chairman of the Pennsylvania Defense Institute's auto insurance committee.
In that 2005 state Supreme Court decision, the Insurance Federation won a holding that automobile insurance carriers are not required to include a mandatory arbitration clause in auto insurance policies for the resolution of UM/UIM cases. Defense and plaintiffs lawyers, alike, agree that Koken has altered the landscape of auto insurance arbitration.
"It has changed," said an attorney with a Philadelphia defense firm who does defense work in Luzerne. "Koken had a chilling effect. These guys know now that they cannot control the process. A lot of these cases are still going to arbitration, but this now allows us to get a fair arbitration panel."
A Luzerne County lawyer who has handled UM/UIM arbitration cases there said plaintiffs attorneys involved in the alleged scheme rarely approached defense counsel to compromise on a neutral arbitrator -- a practice common in many other counties. Instead, defense counsel would often receive a phone call informing him or her that the plaintiffs attorney had already filed a petition for a neutral arbitrator.
And that is where connections allegedly came into play.
The judge handling the petition was left to pick a name, the lawyer said, because there was no list from which UM/UIM arbitrators were pulled.
It was an arrangement that allowed for a system in which plaintiffs attorneys could receive an arbitrator who would lean their way and raise the value of the case, the source alleged. In exchange, the plaintiff's attorney allegedly returned the favor.
"It's the same players getting the same people appointed," the lawyer said.
Conrad Falvello, a Sugarloaf, Pa., plaintiffs attorney, said he doesn't believe there was ever a practice of rigging UM/UIM arbitration. He also said he has seen no indication that members of the plaintiffs bar are under investigation.
However, Falvello said there were idiosyncrasies in Luzerne County's civil court procedures that did leave defense lawyers out of the loop when it came time to appoint a neutral arbitrator.
Falvello said in most arbitration cases, he was able to agree with defense counsel on a neutral arbitrator. When he failed to reach an agreement, he would tell his opposing counsel that he planned to present a petition in motions court and tell them the date.
"Some guys would just pop up with a petition to appoint a neutral without giving defense notice," Falvello said. "I don't doubt that was done by some guys. But I also don't know of any rule that required notice."
Falvello said there were also inconsistencies between members of the bench.
"It depended on the judges. Some would appoint. Some would say, 'Notify defense counsel and come back,'" Falvello said. "At that time, I don't think there was a specific local rule that addressed that procedure. So, in that sense, I don't know that any rules were violated."
One insurance defense lawyer who works in-house for a major insurance carrier in Luzerne County said the effort to control the appointment of neutral arbitrators was more regimented. He claimed to recall that in about 2003 an order was printed in the Luzerne County Register, a weekly publication of the Luzerne County Law and Library Association, that directed all petitions to appoint neutral arbitrators to be brought before Conahan, who was then president judge. Later, a similar order was allegedly published directing such petitions to Ciavarella, who was elected president judge in 2006.
"If I knew what I know now, I should have saved those and bronzed them," the attorney said.
A search of the Luzerne County Court rules failed to turn up such an order. The county law librarian said such orders are not kept beyond a year. A call to the prothonotary's office was not returned before press time.
A LOOK AT THE DOCKET
Though court records seem to back up allegations that plaintiffs lawyers took turns serving as neutral arbitrators in each other's cases, the Luzerne County lawyer said only a fraction of the arbitration conducted in the county would have been linked to the names of insurance companies.
Some petitions for a neutral arbitrator are filed with the third party as the defendant and others don't get docketed at all, the lawyer said.
Most often, though, the threat of a petition is enough to convince a defense attorney to agree to an arbitrator without involving judges.
The lawyer said it can be better that way.
"[You think to yourself,] 'I know I'm not going to do very well with the court,' so you agree to somebody who's not going to screw me completely," the lawyer said. "You're not going in there thinking you're getting somebody who's a decent arbitrator."
According to court records examined by The Legal Intelligencer involving a selected group of 10 major auto insurance companies, plaintiffs lawyers filed petitions to appoint neutral arbitrators on 43 occasions between 1995 and 2008.
In 29 of those cases, the same six law firms represented the plaintiffs. In 13 of the 43 cases, attorneys from the same six firms, all of which market themselves as plaintiffs firms, were also appointed as neutral arbitrators. Twice, there were no records for plaintiffs attorneys. The names of the appointed arbitrators were not recorded in seven cases.
In 22 of the 43 cases, the judge was either Conahan or Ciavarella. There was no record of a judge in two of those cases.
The outcome of arbitration in which the lawyers named participated is not a public record. There is no evidence to suggest that the result of arbitration in the cases examined was improper. Nor is there anything to suggest plaintiffs law firms did anything improper to be appointed neutral arbitrators. Ciavarella and Conahan have not been charged with anything related to allegations of case fixing UM/UIM cases.
In one of the cases reassigned from Lokuta to Ciavarella, Pockevich v. Lindstrom, a jury returned a $352,500 verdict that included no economic damages. The verdict included $250,000 for past and future emotional distress, $75,000 for loss of life's pleasures and $27,500 for pain and suffering. The verdict came after Ciavarella granted a plaintiff's motion to preclude a defense psychiatric expert from testifying.
The lawyer with the Philadelphia defense firm said he often perceived the appointment of neutral arbitrators to be predetermined, even when he had a chance to weigh in.
"I've submitted lists of 25 to 30 names of extraordinarily qualified judges and lawyers as arbitrators," he said. "They'd all be rejected."
The in-house lawyer said he has also grown accustomed to reasonable suggestions being rejected.
"I've recommended [former] Supreme Court Justice [Russell M.] Nigro and they've rejected him," he said. "I've recommended these guys who are fairer than the day is long and they've rejected them."
"It's beyond coincidence that these guys constantly got each other as neutrals," the lawyer said.
If there have been improprieties in the conduct of Luzerne County insurance arbitration, it would be very difficult to prove, the lawyer with the Philadelphia firm said.
He said plaintiffs lawyers used inflated demands to deflect questions about the fairness of neutral arbitrators.
"They put these huge, ungodly numbers on the board, but that's their cover. When a smaller number comes back, no one gives it a second look," he said. "Even if the neutral arbitrator comes back with half that ungodly number, everyone says, 'Oh, that wasn't bad. He only gave her half the economic loss.'"
But in a system that functions on honesty and judgment of lawyers sworn to seek justice, perceptions carry little weight, the lawyer said.
"There's no smoking gun, and until you get your smoking gun you're not going to get anything," he said.