Gemini v. State Farm Ins. Co. ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
11-16-1994
Gemini v. State Farm Ins. Co.
Precedential or Non-Precedential:
Docket 94-1395
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Recommended Citation
"Gemini v. State Farm Ins. Co." (1994). 1994 Decisions. Paper 193.
http://digitalcommons.law.villanova.edu/thirdcircuit_1994/193
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
NO. 94-1395
____________
GEMINI PHYSICAL THERAPY AND REHABILITATION, INC.,
Appellant
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
____________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. No. 91-cv-00013
____________
Argued September 19, 1994
Before: SCIRICA, ROTH, and ROSENN, Circuit Judges
Opinion Filed November 16, l994
____________
DAVID S. DESSEN, ESQUIRE (Argued)
Dessen, Moses & Sheinoff
1814 Chestnut Street
Philadelphia, PA 19103
Attorneys for Appellant
EARL T. BRITT, ESQUIRE (Argued)
MARK P. HARBISON, ESQUIRE
Britt, Hankins, Schaible & Moughan
Two Penn Center, Suite 515
Philadelphia, PA 19102
Attorneys for Appellee
____________
OPINION OF THE COURT
ROSENN, Circuit Judge.
Gemini Physical Therapy and Rehabilitation, Inc.
("Gemini") is a health care provider who treated various
individuals who were injured in automobile accidents and insured
by State Farm Mutual Automobile Insurance Company ("State Farm").
Gemini and other health care providers who are no longer parties
to this action ("the plaintiffs") filed a complaint in the United
States District Court for the Eastern District of Pennsylvania.1
The plaintiffs claimed to be the assignees of the insureds'
rights under their automobile insurance policies, and alleged
that State Farm unreasonably refused to pay the insureds' bills
in full in violation of the insureds' contracts and the
Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa.
C.S. § 1701 et seq. ("MVFRL"). The complaint sought payment in
full, compensatory and punitive damages for tortious interference
with contractual relations, and punitive damages pursuant to 42
Pa. C.S. § 8371.
State Farm filed a motion to dismiss plaintiffs' claims
for punitive damages under 42 Pa. C.S.A § 8371 and for
intentional interference with contractual relations, which the
district court granted. The plaintiffs subsequently filed a
first amended complaint which included new claims pursuant to the
Pennsylvania Unfair Trade Practices and Consumer Protection Law,
73 P.S. §§ 201-1, et seq. ("CPL"). The district court granted
State Farm's motion to dismiss the plaintiffs' CPL claims for
lack of standing.
1
. The district court dismissed the claims of certain
plaintiffs for lack of subject matter jurisdiction, and dismissed
the other claims without prejudice for misjoinder.
Plaintiffs filed a second amended complaint. State
Farm filed a motion for partial summary judgment seeking
dismissal of all breach of contract claims under the MVFRL for
reimbursement of medical bills submitted to State Farm after
April 15, 1990, because of plaintiffs' alleged failure to exhaust
their remedies under the MVFRL. The district court denied the
motion. State Farm renewed its motion for partial summary
judgment in light of a recent Pennsylvania Superior Court
decision in Terminato v. Pennsylvania Nat'l Ins. Co., 618 A.2d
1032 (Pa. Super. 1993), rev'd and remanded 645 A.2d 1287 (Pa.
1994). The district court granted the motion and dismissed all
claims for reimbursement of medical bills submitted to State Farm
after April 15, 1990.
In a bifurcated trial, the jury returned a verdict in
favor of State Farm, finding that none of the treatment rendered
by Gemini to the State Farm insureds was medically necessary.
The district court denied Gemini's motion for a new trial.
Gemini filed a timely appeal from those parts of the district
court's orders dismissing Gemini's claim for punitive damages and
intentional interference with contract claims, dismissing its
claim under the CPL, and granting partial summary judgment for
State Farm. We affirm in part and reverse in part.
I.
As a preliminary matter, State Farm concedes that in
light of the Pennsylvania Supreme Court's recent decision in
Terminato v. Pennsylvania Nat'l. Ins. Co, 645 A.2d 1287 (Pa.
1994), the order of the district court granting State Farm's
motion for partial summary judgement must be vacated. In
Terminato, the court held that exhaustion of Peer Review
Organization procedures under the MVFRL is not a prerequisite of
bringing suit in a court of law for nonpayment of medical bills.
Therefore, we will remand this case for a trial on Gemini's
breach of contract claims under the MVFRL for reimbursement of
medical bills submitted to State Farm after April 15, 1990.
II
Gemini's challenges primarily involve legal
determinations by the district court, and therefore we exercise
plenary review. See Louis W. Epstein Family Partnership v. KMart
Corp., 13 F.3d 762, 766 (3d Cir. 1994). Gemini first argues
that it has a valid claim under the Pennsylvania Unfair Trade
Practices and Consumer Protection Law, 73 P.S. §§ 201-1, et seq.
The CPL provides in pertinent part:
Any person who purchases or leases goods or
services primarily for personal, family or
household purposes and thereby suffers any
ascertainable loss of money or property, real
or personal, as a result of the use or
employment by any person of [unfair or
deceptive acts or practices] may bring a
private action, to recover [damages].
73 P.S. § 201-9.2(a).
The district court dismissed Gemini's claims under the
CPL because it lacked standing. The court reasoned that Gemini,
a provider of health care to purchasers of insurance policies, is
not a member of the class protected by the statute. It rejected
Gemini's argument that it has standing by virtue of its status as
assignee under the insurance policies. The court held that
Gemini is only an assignee of the limited right to receive
payment under the policies.
The CPL contemplates as the protected class only those
who purchase goods or services, not those who may receive a
benefit from the purchase. See Zerpol Corp. v. DMP Corp., 561 F.
Supp. 404, 415 (E.D.Pa. 1983) (dismissing corporate plaintiff's
claim because private cause of action under the CPL is limited to
purchasers or lessors of goods used primarily for personal,
family, or household purposes). Accord Klitzner Industries Inc.
v. H.K. James & Co., 535 F. Supp. 1249, 1258 (E.D.Pa. 1982);
Permagrain Products, Inc. v. U.S. Mat & Rubber Co., 489 F. Supp.
108, 111 (E.D.Pa. 1980). Although Gemini may have been
indirectly injured, it is not a purchaser or consumer of goods or
services under the CPL and therefore has no private right of
action under the statute.
Gemini relies on Hedlund Manufacturing Company v.
Weiser, Stapler & Spivak, 539 A.2d 357 (Pa. 1988) in support for
its argument that the insureds' CPL claims are assignable. In
Hedlund, the Pennsylvania Supreme Court acknowledged
Pennsylvania's well-established policy of permitting causes of
actions to be assigned and held that a claim for damages based
upon legal malpractice is assignable. This case is
distinguishable for two reasons. First, Gemini has sued under a
specific statute intended to restrict fraud against consumers.
However, Gemini is a commercial purchaser of the insureds'
claims; its complaint does not allege that it is a purchaser or
consumer of goods or services from State Farm. Second, in
Hedlund, the assignor expressly "assigned all rights and causes
of action" pursuant to a patent application. Id. at 358. Here,
the complaint alleges that the patients assigned only their
rights under their insurance contracts. It does not follow
consequentially that the patients also assigned their rights to
bring suits under the CPL. Because the CPL focuses narrowly on
the protection of consumers in the purchase of goods or services,
we predict that the Pennsylvania Supreme Court would not infer an
assignment of claims under the CPL. Accordingly, we perceive no
error in the district court's holding that Gemini lacks standing
to bring an action against State Farm under the CPL.
III.
Next, Gemini challenges the district court's dismissal
of its claim for intentional interference with contractual
relations brought pursuant to section 766A of the Restatement
(Second) of Torts.2 In contrast to section 766 of the
Restatement,3 which has been adopted by Pennsylvania, a party is
2
. Section 766A provides:
One who intentionally and improperly
interferes with the performance of a contract
. . . between another and a third person, by
preventing the other from performing the
contract or causing his performance to be
more expensive or burdensome, is subject to
liability to the other for the pecuniary loss
resulting to him.
3
. Section 766 provides:
One who intentionally and improperly
interferes with the performance of a contract
. . . between another and a third person by
inducing or otherwise causing the third
person not to perform the contract, is
subject to liability to the other for the
liable under section 766A for merely making a third party's
performance of his contract with another party more expensive or
burdensome. As this court stated in its careful analysis of the
two sections in Windsor Secur., Inc. v. Hartford Life Insurance
Co., 986 F.2d 655 (3d Cir. 1993), "[s]ection 766 addresses
disruptions caused by an act directed not at the plaintiff, but
at a third person: the defendant causes the promisor to breach
its contract with the plaintiff. Section 766A addresses
disruptions caused by an act directed at the plaintiff: the
defendant prevents or impedes the plaintiff's own performance."
Id. at 660. Not only are the targets of the two sections
different, but section 766A is much more difficult to apply and
conducive to disputes.
In Price v. Sorrell, 784 P.2d 614 (Wyo. 1989), quoted
in Windsor, 986 F.2d at 661, n.10, the Supreme Court of Wyoming
directly faced the application of section 766A of the
Restatement: the defendant's interference made the plaintiff's
performance of a contract more costly. Although the court had
previously adopted §§ 766 and 766B of the Restatement, it refused
to adopt § 766A. It reasoned, and we agree, that causing
performance of a contract to be more costly "as an element of
proof is too speculative and subject to abuse to provide a
meaningful basis for a cause of action." 784 P.2d at 616. Thus,
(..continued)
pecuniary loss resulting to the other from
the failure of the third person to perform
the contract.
we are not persuaded that the Pennsylvania Supreme Court would
adopt section 766A, and we see no error in the district court's
dismissal of Gemini's section 766A claim.
IV.
Gemini also contends that it has a valid claim for
punitive damages under 42 Pa. C.S. § 8371. Section 8371
provides:
In an action arising under an insurance
policy, if the court finds that the insurer
has acted in bad faith toward the insured,
the court may take all of the following
actions:
(1) Award interest on the amount of
the claim from the date the claim
was made . . . .
(2) Award punitive damages against the
insurer.
(3) Assess court costs and attorney fees
against the insurer.
42 Pa. C.S. § 8371. The district court dismissed Gemini's
section 8371 claim, reasoning that the Pennsylvania legislature
intended the MVFRL, 75 Pa. C.S. § 1797, to provide the exclusive
first party remedy for bad faith denials by insurance companies
with respect to claims arising out of automobile accident
injuries.
In Barnum v. State Farm Mutual Automobile Ins. Co., 635
A.2d 155 (Pa. Super. 1993), the court held that the provisions of
section 1797, and not section 8371, are to be applied to claims
for first party benefits under the MVFRL. Relying on the
Pennsylvania statute controlling statutory construction, 1
Pa.C.S. § 1933, the court noted that the two statutory provisions
cannot be reconciled because the damages in the event of wanton
or bad faith conduct and the rates of interest specified by each
are different. Barnum, 635 A.2d at 158. Moreover, the
procedures and remedies under section 1797 are set forth with
specificity. Id. The court concluded that because the two
provisions were enacted at the same time and cannot be
reconciled, the specific provisions of 75 Pa.C.S. § 1797 must be
deemed an exception to the general remedy for bad faith contained
in 42 Pa.C.S. § 8371. Id. at 159 (citing supporting district
court cases). We find this statutory construction to be
convincing and predict the Pennsylvania Supreme Court would
similarly rule on this matter. Thus, the district court did not
err in dismissing Gemini's claim brought under 42 Pa. C.S. §
8371.
Finally, Gemini raises several issues pertaining to the
evidentiary admission of expert testimony, settlement
discussions, and rebuttal witnesses. We summarily reject these
arguments as lacking merit.
V.
The district court's grant of partial summary judgement
in favor of State Farm must be reversed in light of Terminato.
Accordingly, we will remand this matter for a new trial as to
Gemini's claims for reimbursement of medical bills submitted to
State Farm after April 15, 1990. In all other respects, the
orders of the district court will be affirmed. Three-fourths of
the costs to be taxed against Gemini.
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