Kline & Specter, PC v. Haviland, D.

• Court: Superior Court of Pennsylvania
• Decided: October 22, 2014
• Docket: 3206 EDA 2013
• Status: Unpublished

Opinion

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37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 J-A20035-14

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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