A dispute between Penn State and the university’s general liability insurer stemming from the Jerry Sandusky sex-abuse scandal will play out in the Philadelphia Court of Common Pleas, the state Superior Court has ruled.
Pennsylvania Manufacturers’ Association Insurance Co., the university’s general liability insurer, sued Penn State in Philadelphia in early 2012 seeking a declaratory judgment that would limit defense costs and indemnity for which the university could claim coverage in a civil lawsuit filed against the university by an accuser of Sandusky, the convicted serial child molester and former Penn State assistant football coach.
Penn State followed with its own legal action in the Centre County Court of Common Pleas, alleging PMA breached its contract with the school and acted in bad faith by both initially denying coverage and then following with a lawsuit. It asked for a Centre County jury to decide all matters triable by jury.
A venue dispute ensued, PMA moved to coordinate and transfer Penn State’s lawsuit to Philadelphia under Pennsylvania Rule of Civil Procedure 213.1. Penn State lost at the trial level on two occasions.
With its February 21 ruling, a unanimous, three-judge panel agreed with the trial court’s that pursuant to Rule 213.1, Philadelphia was a "fair and efficient" venue for Pennsylvania Manufacturers’ Association Insurance v. Pennsylvania State University.
The quoted language comes from the 2010 Superior Court case Washington v. FedEx Ground Package System, which Superior Court Judge Anne E. Lazarus said helped dispose of the university’s arguments, along with the plain language of 213.1, that the trial court misapplied the rule’s factors, disregarded case law interpreting 213.1 and gave undue weight to the fact that PMA filed first in Philadelphia.
Rule 213.1 provides that courts consider the following: whether the common question of fact or law is "predominating and significant to the litigation"; the convenience of the parties, witnesses and attorneys; whether coordination would cause unreasonable delay or expense to a party, or otherwise prejudice a party; efficiency as it relates to judicial facilities and personnel; the perils of duplicative and inconsistent rulings; and the likelihood of settlement if coordination is denied.
Lazarus said the trial court, in finding for PMA, properly considered the Rule 213.1 factors.
"The court noted that PMA filed its action with the Philadelphia Commerce Court program, which specializes in such actions, and thus would be a more efficient venue than the Centre County courts," she said.
Seemingly, Penn State’s main argument was that the trial court did not put enough emphasis on the convenience of its witnesses, which the university said should be the paramount concern.
But Lazarus said the university provided no support for the argument that convenience trumps the other 213.1 elements.
She noted the trial court acknowledged it would "present some hardship" for Penn State’s witnesses to travel to Philadelphia, but added that the university’s counsel, some of whom are from Los Angeles and Chicago, would have an easier time traveling to Philadelphia than to the center of the state.
Having said that, the trial court concluded that Philadelphia was not so inconvenient as to warrant coordinating the case in Centre County.
"Ultimately, as we explained in Washington, the trial court’s primary task is not to balance the relative convenience of the parties, but to decide if the proposed coordination would provide ‘a fair and efficient method of adjudicating the controversy,’" Lazarus said. "Convenience is relevant to this analysis, but not dispositive. Accordingly, the trial court did not abuse its discretion in finding the Philadelphia County Court of Common Pleas as being a ‘fair and efficient’ forum for settling this controversy."
Senior Judge Gene Strassburger wrote a two-page concurring opinion to point out that the case presented several issues of first impression, namely that, while there were appellate cases dealing with whether to coordinate, there were none he could find dealing with the question of where to coordinate.
He agreed with the majority that an abuse of discretion standard should control the "where" question, adding he was "loathe to place much reliance on the first-to-file argument."
"The locus of suit should not be determined by a race to the courthouse," Strassburger said.
He also added that the attorney for the plaintiff in the underlying suit against the university was based out of Philadelphia, noting that the insurance dispute can’t settle unless the collateral matter does.
He also noted that all the judges in Centre County recused themselves from cases "spawned by Sandusky’s conduct."
PMA’s attorney, Steven Engelmyer of Philadelphia firm Kleinbard Bell & Brecker, said: "We’re pleased with the court’s decision and look forward to proceeding."
Engelmyer declined further comment.
Jerold Oshinsky, a Los Angeles-based Jenner & Block attorney representing the university, said: "We have the opinions, we’re studying them and we’re considering our options."
He also declined to further elaborate on the court’s decision.
The underlying case spurring the insurance litigation was Doe A v. The Second Mile, believed to be the first civil suit stemming from the Sandusky scandal. Several more lawsuits naming Sandusky, the university and Sandusky’s charity, The Second Mile, have followed.
And while the university continues to negotiate settlements, the insurance coverage landscape remains complex and laden with questions marks. For example, when the abuse, or alleged abuse, took place will trigger certain policies, and certain policies have different language regarding coverage, both for defense costs and indemnity.
PMA initially said in its action for declaratory judgment, related to Doe A, that the university could claim certain coverages for allegations before March 1, 1992. It denied its obligation after that date.
Meanwhile, attorneys involved in settlement negotiations have described them as "productive." Neither the university nor the accuser’s attorneys have publicly reported any settlements.
Sandusky is serving an effective life sentence after convictions on 45 of 48 counts of sex abuse.
(Copies of the nine-page opinion in Pennsylvania Manufacturers’ Association Insurance v. Pennsylvania State University, PICS No. 13-0441, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.)