Lomas, R. v. Kravitz, J.
130 A.3d 107
| Pa. Super. Ct. | 2015Background
- In 1994 Cherrydale contracted with Lomas to supply/install flooring; Cherrydale stopped payment and arbitration resulted in a final award of $200,601.61 under CASPA. After the award, Kravitz transferred assets among Andorra Group entities and to himself.
- Lomas sued (2000) to collect the arbitration judgment, seeking veil piercing, fraudulent-transfer and fraud remedies; the trial was bifurcated into liability and damages phases (liability verdict for Lomas in 2007).
- During the damages phase Judge Thomas P. Rogers presided; Judge Thomas C. Branca (formerly Lomas’s lawyer, later a Montgomery County judge) testified that he would receive a contingent referral fee (one-third of net proceeds) if money was collected.
- After the damages record closed but before the court issued the damages order, Appellants sought recusal of the entire Montgomery County bench (asserting an appearance of impropriety tied to Judge Branca’s financial interest). Judge Rogers denied recusal and later awarded damages, punitive damages, CASPA interest/penalties and attorney’s fees, totaling $1,688,379.10.
- On appeal the Superior Court (en banc) unanimously affirmed the liability verdict. The Court (equally divided) affirmed the damages order; the majority held the bench-recusal claim was waived/untimely and that Judge Rogers did not abuse discretion on recusal, veil-piercing, punitive damages, or CASPA awards.
Issues
| Issue | Appellants’ Argument (Kravitz Entities) | Appellee’s Argument (Lomas) | Held |
|---|---|---|---|
| Recusal of entire Montgomery County bench for appearance of impropriety | Judge Branca’s continuing financial interest (contingent referral fee) created an appearance of impropriety requiring recusal of the entire bench or change of venue | Motion untimely; no evidence Judge Rogers was biased; trial judge disclosed prior connection; recusal was waived and Judge Rogers properly denied it | Motion to recuse was waived as untimely; even if timely, denial was not an abuse of discretion — no presumption of unfairness and no evidence of actual bias (majority) |
| Admission of plaintiff’s expert report | Expert was allegedly influenced/edited by Judge Branca and appellee’s counsel, making the report unreliable and inadmissible | No objection preserved below; no evidence Branca influenced the report | Waived for appeal because appellants failed to preserve the evidentiary challenge; no reversible error found |
| Piercing corporate veil and fraudulent transfer liability | Transactions were non-cash accounting/tax-driven and lawful tax planning; veil should not be pierced for such entries | Kravitz used intercompany loans, write-offs, distributions, and journal entries to strip assets and frustrate creditors; corporate formalities were ignored | Affirmed: trial court findings supported — undercapitalization, disregard of corporate formalities, commingling and transfers to perpetrate fraud justified veil piercing |
| Punitive damages, attorney’s fees, CASPA interest/penalties | Punitive damages improper (mere fraud not enough); punitive award excessive (argued 1:1 constitutional cap); CASPA remedies not available because Lomas did not plead CASPA | Conduct was outrageous and intended to evade creditors; punitive award reasonable; CASPA authorizes penalties, interest and fees and is remedial | Punitive damages (3:1 ratio) and CASPA interest/penalties/fees affirmed; punitive damages supported by record and comport with due process; CASPA-based interest/penalties and attorney’s fees were properly calculated and awarded |
Key Cases Cited
- In re Lokuta, 11 A.3d 427 (Pa. 2011) (timeliness rule for recusal motions; raise at earliest opportunity)
- Goodheart v. Casey, 565 A.2d 757 (Pa. 1989) (two-tier recusal framework; judge’s self-evaluation and appearance-of-impropriety inquiry)
- Reilly by Reilly v. SEPTA, 479 A.2d 973 (Pa. Super. 1984) (recusal motion must be timely; policy against judge-shopping)
- Caperton v. A.T. Massey Coal Co., 556 U.S. 868 (2009) (objective due-process limits on judicial participation where extrajudicial financial influence creates probability of bias)
- Lumax Indus., Inc. v. Aultman, 669 A.2d 893 (Pa. 1995) (factors for piercing corporate veil: undercapitalization, disregard of formalities, commingling, use to perpetrate fraud)