White and Williams LLP Executive Newsletter Summer 2008 Andy Susko Completes a Year as Bar President by William D. Kennedy as president of the PBA, every day would seem incredibly long, but that the whole year would go by in a blink of an eye. As I recently passed the office of Andy Susko, Chair That statement has been true.” of White and Williams’ Litigation Department, I saw a As president, Andy was the spokesperson for both rare sight: Andy was hard at work in his office and not private practitioners and in-house counsel across the on the road at a bar association event. Over the past state. The principal voice of the legal profession to year, as he served as President of the the public and all three branches of government, Bar Association and during the multi-year run-up the PBA has 18 substantive law sections, and 45 period into that office, Andy traveled committees with which Andy worked. Crisscrossing the state, often working from White and the state countless times, Andy chaired meetings, Williams’ offices in Berwyn, Pittsburgh, addressed local bar associations, reviewed proposed and Allentown. I caught Andy long enough legislation, gave multiple television, radio and print to ask him about the remarkable experience media interviews, conferenced with legislators, caucused of leading the 30,000-member organization. with Governor Rendell, and met with all levels of the Andy remarked, “I remember being told that Pennsylvania judiciary. Despite the complexity of the (Continued on page 2)

Fr o m Th e Ch a i r Increasing and Embracing Diversity

by George J. Hartnett hiring, retaining, and mentoring individuals who are prepared Chair, Executive Committee to meet the challenges of a diverse society, White and Williams proudly supports statewide Minority Attorney Conferences At White and Williams LLP, we believe and diversity summits. It also sponsors the Martin Luther that diversity broadens and enriches our work King, Jr. Fellowship program. Our participation in these events environment and allows us to better serve you— allows our attorneys to hone their mentoring and leadership our clients. The core values of service, leadership, skills. These opportunities foster a creative environment to and acceptance of others are principles of our prepare our attorneys to meet present and future client needs. firm. These ideals have spanned our firm’s 100 year history. The By doing so, we not only assist in the development of diverse firm’s commitment to diversity and equal rights was seen, for attorneys, but also support community service activities. White example, in the 1950’s, when President Dwight D. Eisenhower and Williams remains committed to developing outstanding requested W. Wilson White—son of founding partner Thomas attorneys, encouraging diversity, and providing the best service Raeburn White—to author legal opinions that were instrumental to our clients. in enforcing the desegregation of Little Rock Arkansas’s public schools. A decade later, the firm became one of the very first law firms to elect a woman into the partnership. Virginia Barton Wallace, a First Lieutenant with the Women’s Table of Contents Army Air Corps, practiced 30 years, and continued to consult for Pennsylvania Trial Strategy: Expert Testimony the firm until she was in her 90’s. White and Williams enjoys a More than Magic Words: The Certainty of Expert Testimony ...... 3 diverse work force, from our staff through our partners. Alternative Dispute Resolution: Arbitration Our commitment No, We Won’t Take Your Word for It ...... 4 t o d i v e r s i t y i s s e e n e v e n Litigation: Service of Process Certified Mail: There is No Substitute ...... 5 in our recruitment of The Economy new attorneys: six of Navigating Your Way through a Turbulent Economy ...... 6 11 summer associates Insurance Law and law clerks are Pennsylvania Addresses an Insurer’s Right to Reimbursement of Defense Costs ...... 7 diverse, and seven New and Notable ...... 8 are women. As part The Economy of our commitment to Foreign Investment Strategies Help Create and Sustain a Successful Venture ...... 10 White and Williams LLP Page 2 Page 12

Andy Susko Completes a Year as Bar President (Continued from page 1) position, it reminded Andy of his 25 years of courtroom work. Bar Diversity Summit to help law firms and businesses promote “You gather information, data, facts, and opinions and then minority hiring, retention, and successful career paths. During you seek consensus. You assimilate these collective views into Andy’s tenure, the PBA’s longtime commitment to civic education meaningful, responsible positions, and then you advocate them to was furthered by a retreat hosted at White and Williams and the people who ultimately have the authority to decide on them.” attended by Pennsylvania’s First Lady and Third Circuit Court of Some of Andy’s most memorable achievements in this rapid-fire Appeals Judge Marjorie Rendell. Law-related education supported year include the 2007 judicial retention elections. As an outgrowth by the organized bar was the focus of Andy’s presentation at a of the 2005 governmental pay raise issue, several advocacy groups civics education summit held at the Governor’s residence. To raise urged the ouster of all judges eligible for retention. The PBA led money for abused and neglected children, Andy led the PBA’s a bipartisan effort to support judicial retention and educate voters Lawyers Bike Ride for Kids. For his efforts on behalf of the legal about the judiciary. “I understood some of the popular resentment profession and the justice system, and for his furtherance of civics as a result of the after midnight legislative process that enacted education in Pennsylvania, Andy received a Proclamation from the pay raise,” Andy explained. “But we thought it was vitally Governor Rendell at the PBA’s Annual Meeting. important that the understandable public reaction not extend to After his term ended in early June, Andy returned to full- judges who deserved to be judged on their individual records of time practice. Many of the White and Williams clients who saw judicial service. Many good, thoughtful, and hard-working men Andy in the capitol corridors and conference rooms welcome his and women judges were being unfairly targeted simply because return. Andy defends professionals and companies in their most they were wearing a black robe.” complex cases. “It’s a great privilege to be entrusted with the Also during Andy’s tenure as President, the PBA formed defense of cases involving the potential for significant damages, a coalition of business and professional groups to successfully even punitive damages,” Andy observed. “I’m grateful to clients oppose proposed legislation that would have made legal services and my partners who supported my commitment to the betterment more expensive to clients through the imposition of a sales tax. of our legal profession and the justice system and the PBA.” “Along with local bar association leaders, I spent many days Remarking that he needed a new outlet for his boundless energy, in Harrisburg, meeting with legislators to explain why a legal Andy grinned, “I am eager to get back into the courtroom.” sales tax would hurt Pennsylvanians; it would have made more prohibitive both access to justice and the planning of people’s Editor’s Note: Andy Susko’s year long commitment to personal and business affairs.” the profession was highlighted in a one hour “Profile Along those same lines, Andy championed throughout the Series” interview that was televised on Pennsylvania state the kind of pro bono services to which White and Williams Cable News, the statewide public affairs cable news has long been committed. “Our justice system is only as fair as network. During the interview, Andy emphasized that it is accessible to everyone,” Andy often expressed in meetings the efforts would not have been possible without the that spurred participation. Under Andy, the PBA developed an support of his partners at the firm and clients who aspirational goal of pro bono service by all attorneys to provide allowed his extensive participation during the course of representation to clients who cannot afford it. The PBA also the 2007-08 bar year. You can reach Andy at passed a resolution calling for increased state funding of legal 215-864-6228 or [email protected]. services, and in limited circumstances, a right of all litigants to counsel in particular civil cases. These efforts culminated during a PBA “Day on the Hill” in the state capital, where hundreds of lawyers gathered to educate and promote the topic. For their efforts, Governor Ed Rendell placed an increase in legal services funding budget. To honor Andy’s commitment to pro bono work, the Pennsylvania Legal Aid Network—the agency responsible for administering all state legal aid programs— awarded him the “Outstanding Leadership in Support of Legal Services Award.” Under Andy’s leadership, the PBA tapped the intellectual content and expertise of academia on important legal issues with an inaugural Law Policy Forum. Faculty from eight law schools debated the rule of law in the context of War on Terror and Immigration Reform. Andy also reconvened the Minority Page 3

Pe n n s y l v a n i a Tr i a l St r at e g y : Ex p e r t Te s t i m o n y More than Magic Words: The Certainty of Expert Testimony by William D. Kennedy examination—the expert’s opinion was not, by any means, held “within a reasonable degree of certainty.” The Court ruled that a When the facts of a case are complicated, litigants need an “51-49%” degree of “certainty” was merely an opinion that the expert. Any medical, scientific, or technical issues that stray alleged cause “could very properly account for” the injury, or beyond the knowledge customarily possessed by laypersons that it “more likely than not” caused the injury. Noting that such trigger the need for an expert. Although many experts hold phrases have been rejected in prior decisions as impermissibly specific degrees and certifications, Pennsylvania’s Rules of uncertain, the Court ruled that the Griffin expert’s testimony fell Evidence permit others to testify as an expert if the witness short of the minimum standards. It sent the case back to the trial has the appropriate knowledge, skill, experience, training, or court for entry of a Judgment notwithstanding the verdict in favor education for the subject matter in question. of the defendant-hospital. There are limits, however, on an expert’s testimony— When parties bearing the burden of proof cannot produce an particularly for plaintiffs, as bearers of the burden of proof. expert (either due to court rulings or the utter lack of a willing Qualification to testify as an expert for a plaintiff is not a license expert) to provide direct evidence of the elements of negligence, to speculate; instead, the expert must limit oneself to opinions that they may try to fall back on the doctrine of res ipsa loquitur. are supported by competent evidence and holds with reasonable Adopted by the Pennsylvania Supreme Court, assurance within the field. Plaintiff’s expert res ipsa is a rule of circumstantial evidence that must utter the magic words; he must testify that allows plaintiffs, without direct evidence of the the opinions being offered are held “within a elements of negligence, to present their case to the reasonable degree of certainty” within the field. jury based on an inference of negligence. For res Recently, however, the Pennsylvania Superior ipsa to apply, plaintiffs must show that the harm Court clarified that there is nothing magic about they are claiming is of a kind, which ordinarily such all-inclusive phrases. A general preface by does not occur in the absence of negligence. They a plaintiff-expert that all of the opinions being must also prove that other responsible causes, offered are held “within a reasonable degree of including the conduct of the plaintiff and third certainty” falls well short of the legal threshold persons, have been sufficiently eliminated by the for admissible expert opinion testimony. From a evidence. Lastly, the Court must conclude that pretrial development and trial perspective, the the indicated negligence is within the scope of decision emphasizes the advantage to defendants the defendant’s duty. Res ipsa loquitur is not a who develop and proffer a reasonable, alternative doctrine intended to excuse the absence of expert causal explanation for the injury. testimony—indeed, in res ipsa cases, plaintiffs Griffin v. University of Pittsburgh involved may rely on expert testimony to establish one claims of alleged medical malpractice. The or more of the elements of proof. Instead, it is a plaintiff-patient contended that an adult’s post- doctrine aimed at allowing the potential for a tort recovery even operative shoulder injury resulted from the negligent usage of in the absence of direct evidence of exactly what happened. physical restraints. The defendant-hospital denied usage of any In its 2007 decision, MacNutt v. Temple University Hospital, such restraints, and instead proffered that the injury resulted a Superior Court en banc panel (which included two Judges who from the patient having experienced an unwitnessed, nocturnal have since taken seats on the Pennsylvania Supreme Court) grand mal seizure. At trial, the plaintiff’s duly qualified expert reiterated the limited application of res ipsa loquitur. Relying on prefaced his testimony with the magic words: he agreed that all the Supreme Court’s 2006 decision in Quinby v. Plumsteadville of his opinions were held within a “reasonable degree of medical Family Practice, Inc., the Superior Court held that if the defendant certainty...” Later, however, the plaintiff-expert admitted that the can counter the plaintiff’s res ipsa proofs, the defendant may question of what caused the injury was a close call. He testified that negate the doctrine and be entitled to a directed verdict. “If the between two proffered causes of the injury, the allegedly negligent defendant produces evidence which is so conclusive as to leave causal event (the alleged used of restraints) was 51% likely to have no doubt that the event was caused by some outside agency for been actual cause of harm, compared to a 49% likelihood that the which the defendant was not responsible, or that it was of a kind injury resulted from the non-negligent cause (the seizure). which commonly occurs without negligence on the part of anyone The Superior Court noted that although the plaintiff-expert and could not be avoided by the exercise of all reasonable care, had, indeed, uttered the customary incantation of certainty, when his testimony was viewed in its entirety—direct and cross- (Continued on page 5) White and Williams LLP Page 4

Alt e r n at i v e Di sp u t e Re so l u t i o n : Ar b i t r a t i o n No, We Won’t Take Your Word For It by Mark L. Parisi and Christopher D. Ballod overworked court system. Congress wanted not only to overcome the obstacles to enforcing negotiated arbitrations, but also to Supreme Court Refuses to Expand Review of Federal Arbitration encourage this alternative. The resulting Act goes so far as to state that arbitration Awards, Regardless of the Parties’ Contract agreements are “valid, irrevocable, and enforceable.” This The benefit of an arbitration agreement is not only that it can presumption in favor of enforcing the parties’ contract also prevent costly litigation, but it also allows the parties to design sets forth the Act’s limitations on a court asked to review an their own procedures for dispute resolution. Parties can assure arbitration award. A court must enter judgment confirming an that the arbitration takes place in a convenient forum, or that only arbitration award unless one of the following conditions exists: certain issues will be addressed in order to prevent wasteful over- (1) the award was procured by corruption, fraud, or undue litigation should the business relationship become hostile. Parties means; can agree to the parameters defining a court’s review of the (2) there was evident partiality or corruption in the arbitration award—at least they could until a case decided during arbitrators; the United States Supreme Court’s latest term. (3) the arbitrators were guilty of misconduct in refusing In March 2008, the Supreme Court held that a Federal court to postpone the hearing… or in refusing to hear reviewing an arbitration award under the Federal Arbitration Act evidence pertinent and material to the controversy… or (“FAA”) is bound to confirm the award unless the court finds of any other misbehavior by which the rights of any one of the extreme circumstances enumerated in the Act. Unless party have been prejudiced; or the award is procured by fraud or the arbitrator is in league (4) the arbitrators exceeded their powers, or so imperfectly with one of the parties or there is some other truly outrageous executed them that a mutual, final, and definite award circumstance, the Federal courts must confirm the arbitration upon the subject matter submitted was not made. award even if the parties had previously agreed to allow a greater scope of judicial review. The Supreme Court’s decision introduces a new potential pitfall to be avoided when negotiating arbitration agreements. Parties already busy hammering out the substance of a contract will have to weigh the pros and cons of referring to the FAA in their agreements, trying to design something to get around this new decision, or giving up on arbitration altogether if they want a customized arbitration process. The Federal Arbitration Act Congress passed the FAA in 1925 because Federal courts were resistant to alternative dispute resolution. Before the FAA, parties who negotiated an alternative to litigation had to face judges who were unlikely to enforce an arbitration agreement, much less enforce an award made by In short, the court cannot review and revise any decision on an arbitrator. The absence of any uniform standards for ADR the substance of the dispute and must confirm the award unless made the award unreliable in the courts’ view, and made it very some outlandish scenario played out indicating that the arbitration difficult to review irregularities in the arbitrator’s methods. The process itself was unfairly flawed. Likewise, a reviewing court FAA’s framework addressed those concerns. cannot modify an award unless there was some “material Congress recognized that the litigation process could be miscalculation” or mistake in the form and any such modification prohibitively expensive and time consuming and that parties in a cannot affect the merits of the decision. dispute ought to be afforded a reliable and enforceable alternative. Notwithstanding the scope of allowable review set forth in Arbitration can be tailored to the parties’ needs on a case-by-case the FAA, with the parties’ intentions central in their minds, the basis, allowing for a flexible approach suiting certain types of disputes. Arbitration also alleviates some of the burden on the (Continued on page 6) Page 5

More Than Magic Words: Expert Testimony (Continued from page 3) he may be entitled to a directed verdict.” Citing Supreme Court his opinion. Development of a strong alternative to the causation cases going back over one hundred years, and with an emphasis theory may prevent plaintiffs from falling back on a res ipsa rarely seen in published opinions, the McNutt Court wrote that “if cushion. As experienced trial counsels know, there are times there is any other cause to which with equal fairness the injury when even the magic words—“a reasonable degree of certainty” may be attributed (and a jury will not be permitted to guess which —aren’t enough. condition caused the injury), an inference of negligence will not be permitted to be drawn against defendant.” Bill Kennedy is a Partner in the Litigation Department Decisions like these buttress the need for detailed trial who defends claims of injury, death, commercial preparation with respect to the opposing party’s experts. Clients damage, and other claims arising from health care, will be served best by asking defense counsel to review the construction, products, commercial premises, auto appropriate literature, regulations, policies, and studies that might accidents, and alcohol. You can reach Bill force an adverse expert to concede some uncertainty in her or at 610-240-4703 or [email protected].

Litigation: Se r v i c e of Pr o c e ss Certified Mail: There is No Substitute by John D. Balaguer and William L. Doerler to establish compliance with the terms of section 6856(3), and courts have “no authority to vary the terms of a statute of clear While many people equate deliveries by Federal Express, meaning or ignore mandatory provisions.” Because the plaintiff’s UPS, and others to delivery via the United States Postal Service, Notice of Intent to Investigate did not comply with the statute, his these methods are not interchangeable in the context of service of complaint was barred by the statute of limitations. statutorily mandated legal documents. That is the lesson learned While the result in Leatherbury could be viewed as a harsh from Leatherbury v. Greenspun, 939 A.2d 1284 (Del. 2007), a result based upon a technicality, equitable arguments cannot case that White and Williams LLP’s Appellate Practice Group overcome specific statutory directives. When a statute mandates successfully argued before the Supreme Court on the use of certified mail, there is no substitute. If there are behalf of Defendant Greenspun. concerns about delivery unrelated to a statutory mandate, rather In Leatherbury, the plaintiff sought to extend the statute than use a substitute method of delivery, litigants should abide of limitations in a medical malpractice case by invoking a by the statutory requirements and, if warranted, also send the statutory tolling provision. Under the tolling provision, which notice by a secondary method. Sending an additional notice is similar to provisions in many other states, the plaintiffs in eliminates the risk that a court will later conclude that a substitute medical malpractice cases can extend the two-year statute of or “equivalent” method of service did not comply with statutory limitations for a period of 90 days. The provision is intended to requirements. allow plaintiffs additional time to investigate potential claims. Plaintiffs can only toll the statute of limitations, however, if they serve the defendants a Notice of Intent to Investigate that complies John Balaguer, Managing Partner of the firm’s with the terms of the tolling statute, 18 Del. C. § 6856(3). One Wilmington office focuses his practice on complex statutory requirement is that the Notice of Intent to Investigate be litigation. You can reach John at 302-467-4501 sent “by certified mail, return receipt requested.” The plaintiff in or [email protected]. Leatherbury, however, sent his notice via Federal Express. The Delaware Supreme Court, following the old adage that unambiguous statutes are not subject to judicial interpretation, held that the term “certified mail” could only refer to the United States Postal Service’s certified mail. The term does not include Bill Doerler is a member of the firm’s Appellate delivery through private carriers such as Federal Express. Practice Group and has successfully briefed and Although some statutes provide for service “by certified mail, argued cases addressing a wide variety of issues, or its equivalent,” Section 6856(3) does not contain language including medical malpractice, personal injury, allowing service via an “equivalent” method. As the Supreme and workers’ compensation. Court noted, in order to secure the benefits of the tolling statute, You can reach Bill at 215-864-6383 plaintiffs in medical malpractice cases have an affirmative duty or [email protected]. White and Williams LLP Page 6

No, We Won’t Take Your Word For it (Continued from page 4) Th e Ec o n o m y

majority of federal circuit courts of appeals have held that parties Navigating Your Way Through a could modify the scope of review for a court called upon to review

an arbitration award. In other words, the majority of federal circuit Turbulent Economy courts would allow the parties to design their own arbitration Economic indicators including rising price of oil, high cost method and have allowed the parties to agree to have a Federal of groceries, unemployment rates, and federal interest rates are court review and revise a reward on a more liberal basis than the having an impact on the stability of today’s market. And many FAA would otherwise allow. Only the Ninth and Tenth Circuits banks, lenders, and financial institutions are facing a credit (covering the federal courts in much of the western United States) crunch as a result of turbulent times in our economy. held that parties are bound by the FAA’s scope of review. In an effort to keep up with the ever-changing marketplace, Hall Street Associates, L.L.C. v. Mattel, Inc. White and Williams LLP and KYW Newsradio teamed up on Friday, June 6, 2008 to host “The New Realities of Business In this case arising out of an Oregon commercial lease, Lending in the Turbulent Economy” at the Four Seasons the U.S. Supreme Court was called upon to resolve the circuit Hotel in Philadelphia. Panelists addressed questions and court’s split on the ability of parties to modify the scope of concerns, specifically related to the housing market, as these review. Mattel leased a manufacturing facility from Hall Street. institutions are seeing a lack of capital due to delinquencies Mattel agreed to indemnify Hall Street for any environmental and foreclosures from their borrowers. costs. When the hazardous chemical, TCE, was found on the William Dunkelberg, a Professor of Economics at site, the Oregon Department of Environmental Quality began an Temple University’s Fox School of Business and Management enforcement action under the Drinking Water Quality Act. Mattel moderated the discussion of expert panelists. Tom Rogers, agreed to clean up the site. Before the cleanup was completed, head of White and Williams’ Real Estate and Institutional Mattel terminated its lease with Hall Street. Hall Street sued Finance Practice Group, provided an analytical look at how Mattel in Federal court for breaching the lease agreement by some firm clients have adopted a conservative, lender-specific early termination and by failing to indemnify Hall Street for the approach in light of the increasing number of foreclosures. cleanup costs. Joel Naroff, Chief Economist for Commerce Bancorp and The parties agreed to stay the Federal court suit and to have Herb Taylor, Vice President, and Corporate Secretary for the the indemnification dispute instead determined by arbitration. Federal Reserve Bank of Philadelphia provided an economic The parties further agreed that the arbitration award would be overview, future outlook, and discussion of trends facing subject to the approval of the federal District Court where the lenders. William McPadden, Senior Managing Director of case had originally been filed. They also agreed that the court John Hancock Financial Service’s Real Estate Finance Group, could vacate or modify the award if the arbitrator’s findings provided insight into the commercial lending sector. of fact were not supported by substantial evidence, or if the “The New Realities of Business Lending” was the fourth arbitrator’s conclusions of law were erroneous. Significantly, the in a series of programs where KYW Newsradio and White and Federal judge to whom the case had been assigned approved the Williams have brought together hundreds of business leaders arbitration procedure designed by the parties. to educate, inform and network. Previous topics have included, The arbitration resulted in an award in Mattel’s favor, with “China and Greater Philadelphia: 21st Century Partners,” the arbitrator finding that the Drinking Water Quality Act dealt “Funding the Future: Private Equity and Your Company’s Next with issues of human health rather than environmental issues. Step,” and “Keeping Success in Business Succession: A Dollars The award was appealed on agreed grounds to the District and Sense Approach.” Court where the original suit had been filed. The judge who had A podcast of the program is available online at www. approved the arbitration procedure and the appeal grounds found kyw1060.com. A fifth breakfast seminar has been scheduled that the arbitrator had misconstrued the law, so he vacated the for later this fall. Details and registration information will award. After a series of appeals and remands, the Ninth Circuit be made available at a later date. Be sure to check www. reversed the District Court, holding that the judge had exceeded whiteandwilliams.com periodically for updates. the allowable scope of review under the FAA. Hall Street appealed to the Supreme Court. Tom Rogers heads the Real Estate and Institutional In a 6-3 decision, the Supreme Court affirmed the Ninth Finance Practice Group. He focuses his practice on Circuit. The Court held that parties cannot modify the scope commercial real estate matters. You can reach Tom of review set out in the FAA. Thus, even if the arbitrator did at 215-864-7190 or [email protected]. misconstrue the law, the District Court had to confirm the award. (Continued on page 11) Page 7

In s u r a n c e La w Pennsylvania Addresses an Insurer’s Right to Reimbursement of Defense Costs by Randy J. Maniloff and Taryn B. Kindred would have been unjustly enriched if the insurer incurred the expense of defending against the non-covered claims. (The court Is it the Duty to Defend or the Duty to Lend? also acknowledged that there are practical issues concerning the insurer’s ability to allocate defense costs between covered and It is widely known and not seriously disputed that the duty to uncovered claims.) defend is broad. It is perhaps for this reason that any attempt by Courts that reach the opposite outcome, rejecting an insurer’s an insurer to limit the duty to defend is sure to be met with policy- right to reimbursement of defense costs, often do so by relying holders crying “foul.” And at no time does the shrill get louder than on the rationale of Terra Nova Insurance Company, Ltd. v. 900 when, following a determination that the duty to defend did not in Bar, Inc., et al., 887 F.2d 1213 (3d Cir. 1989) (Pennsylvania fact arise, an insurer attempts to recover defense costs from an law). In Terra Nova, the Third Circuit held that permitting such insured to whom it provided a defense. Insureds typically respond recovery would be inconsistent with the insurer’s offer to defend vocally that reimbursement of defense costs is simply not a right under a reservation of rights. As the Terra Nova Court saw it, an that exists for insurers, and that any attempt at reimbursement is a insurer offers to defend under a reservation of rights because it is backdoor narrowing of the broad duty to defend. uncertain whether it will have a duty to indemnify. By defending Numerous courts nationally have addressed an insurer’s right the insured, the insurer avoids the risk that the insured’s defense to reimbursement of defense costs, but they are generally split on will be lackadaisical. If it is, the insurer’s exposure could be the issue. Two schools of thought have emerged. In May 2008, the greater if it is determined that coverage is owed. Thus, a defense first Pennsylvania appellate court to address the reimbursement under a reservation of rights benefits both the insurer and the issue had to decide in which school to enroll. The Pennsylvania insured. Therefore, the Terra Nova court reasoned that if an Superior Court opted to reject an insurer’s right to reimbursement insurer could recover defense costs, the insured foots the bill to of defense costs following a determination that a duty to defend protect the insurer’s interests. did not exist. The Two Schools of Thought The Pennsylvania Approach Recently, the Pennsylvania Superior Court decided American One of the first and best known decisions on an insurer’s & Foreign Ins. Co. v. Jerry’s Sport Center, Inc., 2008 PA Super right to reimbursement of defense costs is Buss v. Superior Court 94, becoming the first Pennsylvania appellate decision to weigh of Los Angeles County (Transamerica Ins. Co.), 939 P.2d 766 (Cal. in on an insurer’s right to reimbursement. The court reviewed the 1997). In Buss, a 27 count complaint was filed against the insured, Buss and Terra Nova rationales and adopted Terra Nova, ruling but only one count was potentially covered. Transamerica, the that a carrier was not entitled to reimbursement of defense costs liability carrier, provided a defense under a reservation of rights, absent policy language that explicitly permitted such right. In including the right to deny that any cause of action was actually Jerry’s Sport, the insured, a firearm wholesaler and distributor, covered and it also reserved the right to be reimbursed for defense was sued for negligence in the marketing and distribution of costs for non-covered handguns which resulted in injury and death. Jerry’s Sport causes of action. tendered the suit to American & Foreign, its liability insurer. The underlying suit A&F sent Jerry’s Sport a letter advising that it would provide settled for $8.5 million it with a defense under a full reservation of rights, including and Transamerica was the right to seek reimbursement of all defense costs advanced required to pay $1 in the event that it was determined that the insurer had no duty million in defense costs. to defend. A&F paid for discovery, the retention of five experts However, Transamerica and funded a six-week trial, which concluded with an adverse retained an expert who judgment against the plaintiffs for lack of standing. estimated that the defense for the one covered count cost between Before the trial court ruled on the tort claim, A&F commenced $21,000 to $55,000. Thus, Transamerica sought reimbursement a declaratory judgment action against Jerry’s Sport seeking an of the defense expenses it paid for the non-covered counts. The order that it had no duty to defend or indemnify and sought court held that, based on its policy, Transamerica did not have a reimbursement for attorney’s fees and costs paid on behalf of duty to defend the insured for claims that were not potentially the insured in the tort action. Following various procedural covered since it was not paid a premium to defend non-covered maneuvering, the question of A&F’s right to recover defense claims. Relying on the law of restitution, the court held that costs made its way to the Pennsylvania Superior Court. The Court Transamerica had a right of reimbursement because the insured (Continued on page 9) White and Williams LLP Page 8

New and Notable

Dori Desautel Broudy, of our Insurance Coverage Group, Dan Martz, of our Litigation Department, presented on has been appointed to serve on the Insurance Programs “The Current State of Medical Malpractice Law in PA” at the Committee of the Philadelphia Bar Association. Dori will May meeting of the Philadelphia Association of Defense also be a guest on “The Well Advised Woman” on WNJC Counsel. 1360 AM later this fall to discuss what it takes to be a successful woman working in the Philadelphia metro area. Mike Mentzel and John Pauciulo, both in our Business Department, gave a presentation on private equity funds and Merritt Cole, chair of our Securities Law Practice legal issues in acquisitions at the M&A Growth Conference Group, served as a panelist for “Private Placements—Legal hosted by the M&A Source. and Practical Considerations,” a program sponsored by the Pennsylvania Bar Institute. Merritt also served on the Wes Payne, of our Litigation Department, authored several Planning Committee for the 2008 Business Bar Leaders essays including “Carroll v. Avallone: The Pennsylvania Conference sponsored by the Business Law section of the Supreme Court Declines to Expand the Holding of Snider American Bar Association. Recently, he was appointed to the and Clarifies the Meaning of Uncontroverted Evidence” Advisory Panel of the Business Lawyers’ Institute sponsored (Pennsylvania Defense Institute), “Diversity: Contrary annually by the Pennsylvania Bar Institute. Trends in Politics and the Law” (The Legal Intelligencer), and “Diversity” (Defense Research Institute Committee Nancy Conrad, of our Labor and Employment Group, Spotlight). Wes was also appointed as chair of the Diversity was honored by Lehigh Valley Magazine as a 2008 Mover and Sub-Committee for the Life, Health and Disability Section of Shaper in recognition of her achievements and contributions the Defense Research Institute and vice chair of the Minority to the Lehigh Valley. Bar Committee of the Pennsylvania Bar Association.

Kevin Cottone, of our Litigation Department, has been Marie Plyter, of our Healthcare Group, spoke on medical appointed co-chair of the Medical Legal Committee of documentation issues to the Cardiothoracic Surgical ICU at the Philadelphia Bar Association. Kevin also spoke on the Hospital of the University of Pennsylvania and to the malpractice and personal injury law issues during an interview, Jefferson University School of Nursing. which aired on three of Clear Channel’s public affairs talk shows in Philadelphia. Mike Rausch, of our Litigation Department, spoke on the legal implications of vehicle logistics, shipping policies and Chuck Eppolito, of our Healthcare Group, has been state mandatory vehicle damage disclosure laws to vehicle elected to serve a second term as secretary of the Pennsylvania logistics personnel of Porsche Cars North America, Inc. Bar Association. Tom Rogers, chair of our Real Estate and Institutional Bill Hussey, of our Tax, Pensions and Estates Group, Finance Group, gave a presentation on title and survey matters presented “Life Insurance in Charitable and Planned Giving” to real estate paralegals during a seminar hosted by the at Planned Giving Day hosted by the Planned Giving Group Institute for Paralegal Education. of Greater New York. Jim Scott, of our Litigation Department, presented Kim Kocher, chair of our Appellate Group, has been “Pending Products Liability Cases before the Pennsylvania appointed to serve as chair of the Amicus Curiae Brief Supreme Court” to the Philadelphia Association of Defense Committee of the Pennsylvania Bar Association. Counsel.

Randy Maniloff, of our Commercial Litigation Judith Sullivan, of our Business Department, has been Department, published “Insurance-Palooza: 7th Annual Look appointed secretary of the International Law Subcommittee of at the Year’s Ten Most Significant Coverage Decisions” in the Bar Association. She also served as a panelist the January 10, 2008 issue of Mealey’s Litigation Report: at the New Jersey Institute for Continuing Legal Education Insurance. Randy also published “Course and Scope: A program, “Applying Principles of Contract Law to Drafting, Breath of Fresh Air for Insurers in Rogue Employee Claims” Negotiating, and Litigating Agreements.” in the April 2, 2008 issue of Mealey’s Emerging Insurance Disputes. Page 9

(Continued from page 7) Pennsylvania Addresses an Insurer’s Right to Reimbursement of Defense Costs: considered the Buss rule, but it was ultimately persuaded by Terra Following Jerry’s Sport, absent further word from an en Nova. Thus, the Court rejected A&F’s right to reimbursement banc Superior Court panel or perhaps the Pennsylvania Supreme absent an express provision in the insurance contract. The Court Court, Pennsylvania’s broad duty to defend does not include held that the insurance policy governed the parties’ relationship an exception for the recovery of defense costs from an insured and it did not contain a provision providing for reimbursement of following a determination that no duty to defend was owed. When defense costs expended on disputed claims. it comes to defense costs in Pennsylvania, the toothpaste cannot The Superior Court further considered Pennsylvania law go back into the tube. and the duty to defend. Pennsylvania courts require an insurer to defend the entire lawsuit against the insured whenever the Randy Maniloff is a Partner in our Commercial complaint potentially falls within the coverage of the policy, Litigation Department and concentrates his practice despite the presence of covered and non-covered claims. The on the representation of insurers in coverage disputes. insurer’s defense obligation was not only a duty, but also a right You can reach Randy at 215-864-6311 afforded to the insured. A&F exercised its right to defend Jerry’s or [email protected]. Sport by retaining counsel and sending the insured a reservation of rights letter explicitly reserving the right to recover defense costs for non-covered claims. The court interpreted A&F’s actions as evidence that A&F was prepared for a ruling that there was no coverage, but given that the claims may be potentially Taryn Kindred is also a member of our covered, A&F exercised its right to defend. Commercial Litigation Department. She represents The court noted that A&F retained control in the tort action insurers in various coverage disputes involving in order to mitigate any potential indemnification. Thus, relying general liability. You can reach her at 215-864-6308 or on the Terra Nova rationale, the Superior Court held that the trial [email protected]. court erred as a matter of law when it concluded that Jerry’s Sport was unjustly enriched by the provision of a defense by A&F.

Dick Kolb Elected President of Philadelphia Association of Defense Counsel

Richard A. Kolb, former Chair of the Healthcare Practice bar organizations, Dick follows Thomas Raeburn White Jr. (the Group, became the 43rd President of the Philadelphia firm’s founder), John Dautrich, Joseph Pinto, and Peter Samson Association of Defense Counsel (PADC) during its recent as the fifth attorney from the firm to be elected PADC president. Annual Meeting at Llanerch Country Club in Havertown, Dick is also a member of various professional organizations Pennsylvania. Dick brings over 30 years experience as an active working to promote the defense perspective and the interests of trial lawyer defending physicians and healthcare institutions healthcare providers including the Medical-Legal Committee into his new role as president. His position allows him to of the Philadelphia Bar Association, the Defense Research bring his understanding of the law to help promote and Institute and committees of the Pennsylvania and American further the interests of the PADC through involvement in Bar Associations. the legal community, legislative and judicial reform efforts, improvements in Court procedures and other professional and social advancements. “I hope to encourage a younger generation of defense You can reach Dick Kolb at 215-864-7112 lawyers to become part of our organization and to demonstrate or [email protected]. to long-time and newer attorneys in the community that a civil litigation practice is still relevant and highly rewarding,” Dick remarked upon assuming his new duties. Keeping with White and Williams’ long-standing commitment and involvement in professional associations and White and Williams LLP Page 10

Th e Ec o n o m y Foreign Investment Strategies Help Create and Sustain a Successful Venture

Foreign direct investment plays a major role in the U.S. Live and Work and the former United States Undersecretary economy, both as a key driver of the economy and as an of Commerce for Economic Affairs who gave a statistical important source of exports and jobs. The U.S. has been a overview of the economic affairs for foreign investment in the favorable place to do business, providing foreign investors with United States and Magnús Bjarnason, Executive Vice President a stable and welcoming market place. Still, there are a number of International Banking of Glitnir Bank who discussed of factors – from the legal system to tax infrastructures to labor challenges and opportunities for foreign investors looking to do and employment issues – to consider before you embark on such business in the United States. a venture. To explore those factors, White and Williams LLP hosted Judith J. Sullivan is a Partner in our Business “Riding the Wave of Foreign Investment: Strategies for Foreign Department and a member of our International Buyers, U.S. Sellers and their Advisors.” Held at the Four Practice Group. You can reach Judy at 212-631-4414 Seasons Hotel in New York City, the June 5, 2008 breakfast or [email protected]. seminar provided an overview and answered specific questions for our clients – potential foreign buyers, private equity firms, banks, consultants, accountants and other decision makers looking to do business on an international level. Carl Koerner is Counsel of our White and Williams attorneys, Judith Sullivan moderated Business Department and practices the seminar while Carl Koerner discussed the regulatory out of our New York office. aspects of foreign investment in U. S. companies. His topics You can reach Carl at 212-631-4403 ranged from the recent Foreign Investment and National or [email protected]. Security Act of 2007 to the various federal and state regulatory requirements which restrict foreign ownership of strategic U.S. industries. Scott Borsack talked about tax efficient structures Scott Borsack is a Partner in our Business for inbound foreign investments.” Department and focuses his practice on tax and Joining them as panelists were Dr. Robert J. Shapiro, estate planning and tax controversy defense. economist and author of Futurecast: How Superpowers, You can reach Scott at 215-864-7048 Populations, and Globalization Will Change the Way You or [email protected].

Insurance Coverage: “Coverage College” Returns

Insurance coverage law is constantly changing. Court decisions and minor nuances in policies can have major ramifications for our clients. Building on last year’s popular program, White and Williams is pleased to invite clients to return to school for “Coverage College” on September 17, 2008. Through presentations, break-out sessions, and networking opportunities, White and Williams’ “faculty” will address the emerging issues and trends including: • Intellectual property issues and related coverage problems • Bad faith • Relationships with reinsurers and “follow the settlements” • Construction defects and contractual liability • Additional Insured tenders • Trying an insurance coverage case For registration and additional information about our 2008 Coverage College, please visit www.whiteandwilliams.com and click on “Events” or call Katie McDonald at 215-864-7161. Page 11 Page 12

No, We Won’t Take Your Word For It (Continued from page 6) White and Williams LLP Implications www.whiteandwilliams.com The Hall Street v. Mattel decision is technically limited to agreements implicating Pennsylvania the FAA. That means that arbitration agreements subject to state law are not controlled The Frederick Building by this decision. That said, this decision will, at a minimum, carry great persuasive 3500 Winchester Road – Suite 200 weight in any state adopting the Uniform Arbitration Act (modeled after the FAA) or Allentown, PA 18104 otherwise modeling its laws on the FAA. This would include Pennsylvania, New Jersey, Phone: 610-435-8414 New York (whose Act was the model for the FAA), and Delaware. One Westlakes At first blush, restricting the ability of the courts to become too involved with 1235 Westlakes Drive, Suite 310 arbitrations appears to be a good thing. The whole point of ADR is to avoid the often- Berwyn, PA 19312 costly and burdensome court system. Allowing a court to address the merits of the Phone: 610-251-0466 dispute after the arbitration could threaten to make the arbitration process little more 1800 One Liberty Place than a discovery tool leading up to the “real thing.” Philadelphia, PA 19103 However, this can be a problem when the parties specifically negotiate the arbitration Phone: 215-864-7000 agreement with the understanding that there will be some fail-safe if the arbitrator’s decision is too far out of line. If the potential liability is so great that the risk of an award The Frick Building based on missed facts or misapplied law is just unacceptable, the parties have no choice 437 Grant Street, Suite 1001 but to abandon ADR as an option. Pittsburgh, PA 15219 Phone: 412-566-3520 With this in mind, it may be possible to avoid the problem by addressing it in the arbitration agreement. The arbitration clause could incorporate American Arbitration New Jersey Association guidelines, which specifically exempt the scope of review provisions in the LibertyView applicable state or federal arbitration act. Alternatively, the parties could simply state 457 Haddonfield Road, Suite 400 in their agreement that it is not to be governed by the FAA. Then, the agreement would Cherry Hill, NJ 08002 also include language making the enforceability of the arbitration result contingent Phone: 856-317-3600 on a modified scope of review as designed by the parties. The logic of designing an The Atrium arbitration clause in this fashion is to avoid invoking the FAA or any state arbitration law East 80 Route 4 and to create instead a custom dispute resolution agreement that makes appeal on any Paramus, NJ 07652 grounds more a matter of contract and breach of contract than a matter of federal or state Phone: 201-368-7200 arbitration rules. As an ultimate safe harbor, the parties can also state in the arbitration agreement that the arbitration will only be enforceable if the modified scope of review is Delaware 824 N. Market Street, Suite 902 found to be enforceable. Otherwise, the matter is retried in the courts. Such a provision P.O. Box 709 could be costly, for sure, but some parties in some matters may need it before they will Wilmington, DE 19899 want to agree to submit substantial matters to arbitration. It is always a good idea to save Phone: 302-654-0424 money on litigation—as long as the right result can be obtained in the process. The full impact of the Hall Street v. Mattel decision may not be felt until cases New York involving arbitration provisions work up to the state appellate courts. In the meantime, it One Penn Plaza is best to continue to bear in mind the fundamental tenet of contract law: the clearer the 250 W. 34th Street, Suite 1801 parties’ intent is expressed, the more likely it is to be enforced. With this new decision out New York, NY 10119 of the Supreme Court, the drafting of arbitration clauses just got a little more difficult. Phone: 212-244-9500

This newsletter is a periodic publication of White Mark Parisi is Chair of the firm’s Construction Law Practice Group. and Williams LLP and should not be construed as legal advice or legal opinion on any specific He can be reached at 215-864-7180 or [email protected]. facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation with any specific legal question you may have. For further information about these contents, please contact the Editor. Chris Ballod focuses his practice on complex matters involving product liability, construction related Editor: William D. Kennedy liability, appellate and commercial litigation. 610-240-4703 He can be reached at 215-864-7129 or [email protected]. [email protected] White and Williams LLP Page 11 Page 12

In t e r n a t i o n a l Bu s i n e ss Iceland: Land of Fire and Ice by Judith J. Sullivan Editor’s Note: Cool off from a summer heat wave with a page from Business partner Judith Sullivan’s travel journal about her work with clients in Iceland. My overnight flight from New York to the most western state in Europe, an island in the middle of the Atlantic Ocean touched down at dawn in the middle of an eerie black lava field, surrounded by steam laden mountain peaks, some of which I was convinced were volcanoes. The wind howled, the temperature was freezing, and the ice pellets were coming down sideways from a purple gray sky. I was only 600 miles from the Arctic Circle. I was here to see good friends, trusted colleagues, and treasured clients. I was in Iceland. After seeking the assistance of a kind local to de-ice the key lock on the door of my rental car, I traveled past mighty mountain ranges and picturesque seaside villages to the low, grassy isthmus and hot springs of the capital city, Reykjavik – an area known to Vikings in the late 800’s as “smoky creek.” The Vikings, however, were not the first inhabitants of Iceland. Before them, there were a few Irish hermit monks who journeyed to this lonely land of fire and ice in 32-oar boats in what must have been one of the most remarkable voyages in European seamanship. In the well-developed city of Reykjavik, I could easily take a taxi, and sometimes even walk to the offices of our largest Icelandic clients in this miniature titan of a nation. White and Williams counsels many prominent Icelandic companies and financial institutions in connection with their United States investments. Our legal advice covers areas such as corporate, merger and acquisition, securities, tax, real estate, immigration, banking and regulatory compliance, and litigation. Most people would be surprised to learn of the magnitude of our Icelandic clients’ investments in United States companies. You may have read about them in the Wall Street Journal, the New York Times, or, in the British newspapers. I met with our clients in diverse locales ranging from high tech state-of-the-art offices, tiny fishing restaurants along the bay, or my hotel (which was partly fueled by geothermal power). Iceland leads the world with broadband penetration rate, as well as literacy, longevity, income and social cohesion, all of which are first-rate by world standards. Our Icelandic clients include an international investment company, FL Group, a large Nordic bank, Glitnir Bank and a worldwide distributed live theatre show called “Theater Mogul,” just to name a few. With clients, I traveled to Thingvellier, thirty miles inland. High ranked amongst the most noblest of pilgrimage places of This is the original site of W.G. Collingwood’s famous 19th Century the world, Thingvellier is where the oldest continuing parliament interpretation of the Althing. (Continued on page 13) White and Williams LLP Page 13 Page 14

Iceland: Land of Fire and Ice (Continued from page 12)

(the Althing) met from 930 to 1798. Thingvellier is a fair five White and Williams Sponsors mile plain with a towering boundary of cliffs, encircled by Entrepreneurship Award mountains. It sits beside Iceland’s largest lake, amidst a rift where tectonic plates meet. The site appears much as it did in the 10th White and Williams was one of the sponsors for the century, as well as in W.G. Collingwood’s famous 19th Century 2008 Baiada Center Entrepreneurship Conference hosted interpretation of The Althing. Thingvellier was recently listed as by Drexel University’s LeBow College of Business on a World Heritage Site. It seemed a fitting place to conclude my June 4, 2008 at World Café Live in Philadelphia. visit as a lawyer in this fascinating land. Each year, the school hosts a business plan competition in which the winner of the event wins monetary awards, For more information on the firm’s international an opportunity to start their business from the Baiada practice, please contact Judy Sullivan, Center business center located on the school’s campus, as at 212-631-4414 or [email protected]. well as guidance from a legal, marketing, and strategic planning professional. Summalux Technologies emerged as the winner of the competition and will be provided five hours of free legal advice from John Pauciulo, Partner of our Business Department on a wide array of topics including structuring, negotiating and documenting complex business transactions, mergers and acquisitions, Corporate Directors Alert: A Threat To The corporate finance transactions, development projects and securities offerings. Business Judgment Rule? Rosebud Tween Undergarments, and Microstructure Sensitive Design of Materials were awarded second and The Delaware-based Bankruptcy Court recently issued a third place honors, respectively, of the 2008 Business decision that undermines the “business judgment rule” defense Plan Competition. against “breach of loyalty” complaints. In In re Bridgeport Holdings (May 30, 2008), the court held that averments that directors and officers failed to duly inform themselves of available John Pauciulo is a Partner in our Business information sufficiently alleged a breach of the duty of care so as Department and advises clients with respect to to avoid dismissal of the case pursuant to the “business judgment corporate and commercial transactions. He can rule.” For more information about the case, please contact Marc be reached at 215-864-7146 Casarino at 302-467-4520 or [email protected] or [email protected].

Sa v e t h e Da t e : Oc t o b e r 8, 2008

Virginia Barton Wallace Award

On October 8, 2008, female attorneys and clients of White and Williams will gather to celebrate the presentation of the Virginia Barton Wallace Award to Emmy Award winning radio and television news journalist Cokie Roberts. The Virginia Barton Wallace Award, named for Ginny Wallace who became White and Williams’ first female partner in 1961, includes a $10,000 donation to the awardee’s charity of choice. The Award was established to honor Ginny’s memory and commemorate her contributions as an exceptional female lawyer and pioneer. Past recipients have included Pulitzer Prize winning historian Doris Kearns Goodwin and Philadelphia news anchor Renee Chenault-Fattah. White and Williams LLP Page 14

Congratulations, “Super Lawyers”

At White and Williams, we think all of our attorneys are super. The results of a recent poll conducted by the publishers of Law & Politics show that for 28 of us, our peers agree. An annual poll across Pennsylvania invites attorneys to rank competitors and adversaries based on their performance and level of work. Please join us in congratulating the men and women of White and Williams who have been named to the 2008 slate of Pennsylvania “Super Lawyers.”

Thomas Allen Insurance Coverage Richard Jordan Business Litigation Michael Plevyak Civil Litigation Defense

Jerrold Anders Construction Litigation Lori Kachmar Workers’ Compensation Thomas Rogers Real Estate

Gary Biehn Mergers & Acquisitions Robert Kargen Bankruptcy Anthony Salvino Workers’ Compensation

Terry Cavanaugh Civil Litigation Defense & Creditor/Debtor Rights Peter Samson Civil Litigation Defense

Guy Cellucci Insurance Coverage Richard Kolb Health Care Patricia Santelle Insurance Coverage

Kevin Cottone Personal Injury Defense Donald Ladd Health Care Richard Shusterman Insurance Coverage

James Donohue General Litigation Christopher Leise Civil Litigation Defense Andrew Susko Civil Litigation Defense

Joseph Foster Personal Injury Defense Randy Maniloff Insurance Coverage Gale White Insurance Coverage

Thomas Goutman Class Action/Mass Torts Michael Olsan Insurance Coverage Stephen Zivitz Tax

George Hartnett Mergers & Acquisitions Peter Parashes General Litigation

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