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Now that two more Eastern District of Pennsylvania federal judges have weighed in, the score is 4-to-1 in favor of the insurance companies in the quickly percolating issue of whether plaintiffs in ERISA suits may also bring a claim under Pennsylvania’s bad-faith statute. The question now is whether the 3rd U.S. Circuit Court of Appeals will take the issue up soon or let it percolate a while — or if the conflict in the Eastern District will simply resolve itself. All three scenarios are possible. The flurry of activity began in July when Senior U.S. District Judge Clarence C. Newcomer handed down Rosenbaum v. UNUM Life Insurance Co. — a decision that thrilled plaintiffs’ lawyers because it held that ERISA does not pre-empt a bad-faith claim. The ruling opened the door to punitive damages in ERISA cases, prompting one plaintiff’s lawyer to comment that, after Rosenbaum, “it’s a brand-new day.” Newcomer found that two recent decisions from the U.S. Supreme Court had effectively set a “new trend in the federal law” that called for a more liberal application of ERISA’s “savings clause,” which exempts a law from pre-emption if it “regulates insurance.” The high court’s two decisions — UNUM Life Insurance Co. of America v. Ward in 1999 and Rush Prudential HMO Inc. v. Moran in 2002 — clarified that a state law need not meet all three of the McCarran-Ferguson factors to qualify for ERISA’s savings clause. But the thrill for the plaintiffs didn’t last long. In August, the score was tied 1-1 when U.S. District Judge Ronald L. Buckwalter handed down Sprecher v. Aetna U.S. Healthcare, finding that even if Pennsylvania’s bad-faith statute qualified for the savings clause, it was nonetheless pre-empted because it adds to ERISA’s carefully limited remedy scheme. “Pennsylvania’s bad faith statute, authorizing punitive damages and interest penalties, would significantly expand the potential scope of ultimate liability imposed upon employers by the ERISA scheme,” Buckwalter wrote. But in the wake of Newcomer’s decision, plaintiffs’ lawyers had already begun moving to amend their ERISA lawsuits to add bad-faith claims. In early September, the insurance companies took a 2-1 lead when U.S. District Judge Harvey Bartle III handed down Kirkhuff v. Lincoln Technical Institute. Bartle sided with Buckwalter and found that since Pennsylvania’s bad-faith law allows plaintiffs to pursue punitive damages, it “conflicts with the carefully crafted and exclusive remedial scheme of ERISA and is pre-empted.” Now two more Eastern District judges — Jay C. Waldman and Michael M. Baylson — have weighed in with opinions that essentially adopt Buckwalter’s view. Baylson, in a 14-page decision in Bell v. UNUM Provident Corp., found that the bad-faith claim does not qualify for the savings clause, but that, even if it did, it would nonetheless be pre-empted under the Supreme Court rationale in Pilot Life Insurance Co. v. Dedeaux. “ Pilot Life specifically concerned bad faith claims, but Ward and Rush did not. Also, there is not a whisper in either Ward or Rush which purports to overrule Pilot Life, and which must still be considered as controlling,” Baylson wrote. Likewise, Waldman wrote in Smith v. Continental Casualty Co. that “the pronouncement in Pilot Life that ERISA provides a comprehensive civil enforcement scheme which is intended to be exclusive was left intact and indeed reinforced by the Court’s later opinions in UNUM Life [ v. Ward] and Rush.” In the meantime, the plaintiffs’ lawyers in the cases before Buckwalter and Bartle have filed motions asking for the right to take an immediate appeal to the 3rd Circuit. In Buckwalter’s case, the motion is unopposed. Aetna’s lawyer, Burt M. Rublin of Ballard Spahr Andrews & Ingersoll, said in his brief that he believes an immediate appeal makes sense. “The mere fact that this court found pre-emption to exist, while a contrary conclusion was reached three weeks earlier … has itself created considerable uncertainty and confusion concerning the recurring issue of whether the bad faith statute is preempted by ERISA,” Rublin wrote. “This important issue, which has been the subject of numerous decisions by Pennsylvania district courts since 1991, should finally be resolved once and for all by the 3rd Circuit, the sooner the better, so that it does not need to be litigated and adjudicated over and over again in case after case,” Rublin wrote. Plaintiff’s counsel in the case before Bartle, attorney Jane Roach (who is reporter Shannon Duffy’s sister), is also asking for the issue to be certified for an immediate appeal. “If an appeal is not permitted at this time, plaintiff will have no choice but to try the ERISA case to verdict and … to subsequently appeal the denial of her bad faith claims,” Roach wrote. If her client wins that appeal, Roach said, the case would have to go back to the discovery stage and on to a second trial that could be seriously complicated by the first. “Because plaintiff is entitled to a jury trial on her bad faith claims and is not entitled to a jury trial on her ERISA claims, the court’s factual findings at the ERISA trial will not be binding on the bad faith claims. Since plaintiff’s ERISA claims and her bad faith claims arise from a common set of facts, an immediate appeal will lead to a more efficient termination of these proceedings and will prevent inconsistent verdicts,” Roach wrote. Neither Buckwalter nor Bartle has yet ruled on whether to certify an appeal limited to the issue of whether ERISA pre-empts a bad-faith claim. But another motion, now pending before Newcomer, could significantly alter the landscape. If Newcomer grants a motion filed by attorney E. Thomas Henefer of Stevens & Lee to reconsider his July decision, the split in the Eastern District would disappear, and Buckwalter, Bartle and the 3rd Circuit would all be less inclined to rule in favor of an interlocutory appeal.

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