Claude R. FAUBER, Jr., Administrator of the Estate of Bryan
D. Fauber, Deceased,
v.
KEM TRANSPORTATION AND EQUIPMENT COMPANY, INC., James E.
Pfautz, Hudson Trailer and Truck Rental Company, Gek
Rentals, Hughes Printing Company, a Division of Monroe
Printing Company, and Pennsylvania Power and Light Company
(Third Party Plaintiff)
v.
The BOROUGH OF EAST STROUDSBURG, Third Party Defendant.
Appeal of HUGHES PRINTING COMPANY, A DIVISION OF MONROE
PRINTING COMPANY.
Nos. 88-5729, 88-5765.
United States Court of Appeals,
Third Circuit.
Argued Jan. 31, 1989.
Decided May 31, 1989.
As Amended Aug. 21, 1989.
Joseph P. Lenahan (argued), Lenahan & Dempsey, P.C., Scranton, Pa., for appellant.
Terrence R. Nealon (argued), Thomas J. Foley, Jr. and Associates, P.C., Scranton, Pa., for appellee Claude R. Fauber, Jr., Administrator of the estate of Bryan D. Fauber, deceased.
Before HUTCHINSON, SCIRICA and NYGAARD, Circuit Judges.
OPINION OF THE COURT
HUTCHINSON, Circuit Judge.
I.
Hughes Printing Company (Hughes) appeals from two orders of the United States District Court for the Middle District of Pennsylvania.1 The first, dated September 1, 1988, imposed all taxable costs on Hughes and released the other defendants from the taxation of costs.2 The second, dated September 21, 1988, granted plaintiff/appellee Claude R. Fauber, Jr.'s (Fauber's) motion to reconsider an order dated August 14, 1987 denying Fauber's motion for assessment of delay damages against Hughes and instead awarded Fauber delay damages of $20,073.60. In awarding delay damages, the district court re-examined and reversed its earlier analysis of Craig v. Magee Mem. Rehab. Center,
On the merits, Hughes contends that the district court's initial conclusion was correct because Craig requires us to reconsider our decisions holding that the mandatory imposition of delay damages under the suspended rule is a matter of state substantive law. We reject Hughes's argument and hold that the Pennsylvania law on delay damages in tort, whether awarded under the suspended rule, Craig or the present version of Rule 238 is substantive for purposes of Erie R.R. v. Tompkins,
II.
The district court had subject matter jurisdiction over Fauber's claim for personal injuries under 28 U.S.C.A. Sec. 1332(a) (West Supp.1989). We have appellate jurisdiction pursuant to 28 U.S.C.A. Sec. 1291 (West Supp.1989). Review of the applicability of Rule 238 in this diversity case is plenary.5
III.
On September 13, 1983, a motorcycle driven by plaintiff's decedent Bryan Fauber collided with a truck driven by James Pfautz while the truck was backing into Hughes's loading dock. The truck was owned by KEM Transportation Company, Inc. (KEM). Fauber filed a complaint against Pfautz, KEM, and Hughes on September 11, 1985. He concurred in Hughes's motion to continue trial from the November, 1986 to the December, 1986 trial list. All parties agreed on an extension of the time for discovery and trial was again continued until the March, 1987 trial list. Counsel agreed to another continuance until April and the district court heard arguments on all outstanding motions on April 16, 1987.
Before jury selection, plaintiff had demanded a total of $1,000,000 in damages. Thereafter, his lowest demand was $400,000. Hughes was asked to contribute $200,000, one-half of the total. It offered only $50,000, and Fauber rejected that offer. The other defendants settled and signed releases absolving themselves of further liability. After a ten day trial, in which all defendants participated, the jury was asked to determine Fauber's total damages, whether Hughes was liable and, if so, the extent of its liability in comparison with that of the other parties. The jury found that the decedent was 50% negligent, Pfautz was 20% negligent, (attributable also to KEM) and Hughes was 30% responsible. The district court awarded Fauber $89,805.40 against KEM and Pfautz and $134,708.27 against Hughes out of a total jury verdict of $449,027.36.6
On May 7, 1987, Fauber filed a motion to assess delay damages against Hughes, relying on Craig. The district court denied this motion on August 14, 1987. Fauber filed for reconsideration on August 24, 1987. After argument on July 11, 1988, the district court granted reconsideration and awarded delay damages of $20,073.60 by order dated September 21, 1988.
Fauber then asked that costs be taxed against the defendants. The district court stayed this matter pending Hughes's appeal of the verdict to this Court. We affirmed that verdict by judgment order on January 28, 1988. Fauber v. KEM Transp. & Equip. Co.,
IV.
Former Rule 238 automatically provided delay damages in tort actions for personal injuries and death, without regard to the cause of the delay, whenever a jury awarded more than 125% of the settlement sum a defendant had offered. In Craig, the Supreme Court of Pennsylvania, citing Fourteenth Amendment concerns, suspended the provisions of Rule 238.7 Craig,
Considerable confusion about the circumstances requiring delay damages followed in both federal and state courts. Here, Fauber argues that Craig only changed Rule 238 from "an uncontestable presumption" to a rebuttable presumption that the defendant caused the delay, and that this change did not affect its substantive nature for Erie purposes.
In Jarvis v. Johnson,
In Salas v. Wang,
In Monessen Southwestern Ry. v. Morgan, --- U.S. ----,
We believe neither the Pennsylvania Supreme Court's decision in Craig nor the November 7, 1988 version of Rule 238 deprives Pennsylvania law on delay damages in tort of its substantive character for Erie purposes.12 The test of whether a rule of law is substantive or procedural for Erie purposes is neither its state label nor the purpose the state ascribes to it. Guaranty Trust Co.,
"Whether application of the rule would make so important a difference to the character or result of the litigation that failure to enforce it would unfairly discriminate against citizens of the forum State, or whether application of the rule would have so important an effect upon the fortunes of one or both of the litigants that failure to enforce it would be likely to cause a plaintiff to choose the federal court."
Hanna v. Plumer,
We can think of no better answer for Hughes's arguments than the statement in Jarvis analyzing the Erie decisions and explaining its rationale:13
While Rule 238 may have been designed to expedite the processing of litigation in Pennsylvania, its application nevertheless results in increasing the amount of damages a plaintiff can receive and a defendant must pay, over the amount of damages that would be awarded in the absence of the Rule. As a consequence, even though adopted by Pennsylvania for control of litigation in the Pennsylvania state courts, the existence of Rule 238 has a clear and undeniable effect on the monetary outcome of a suit. Its applicability in a given forum is therefore an influence on decisions of plaintiffs and defendants as to the desirability of bringing or defending litigation in that particular forum. To this extent at least, it is clear that the decision of a federal court to apply or not to apply Rule 238 is "outcome determinative."
Jarvis,
V.
Hughes also argues that Rule 238 is in conflict with Federal Rules of Civil Procedure 11 and 37, which make no provision for prejudgment interest or delay damages as such.14 We agree with Hughes that neither Rule 11 nor 37 makes provision for delay damages. See Jarvis,
Rule 238, in all its versions, permits a successful tort plaintiff to recover prejudgment interest on his claim unless the defendant can show the plaintiff himself improperly caused the delay. It is substantive for Erie purposes.15
VI.
Finally, we must determine whether delay damages in this case are governed by Craig or the November 7, 1988 version of Rule 238. Again, we look to Pennsylvania law for guidance. Rule 238(f) itself provides that "[t]his rule shall apply to actions pending on or after the effective date of this rule in which damages for delay have not been determined."
The Pennsylvania Supreme Court has not yet decided whether the November 7, 1988 version of Rule 238 applies to cases pending on appeal as of that date. Therefore, we look to intermediate appellate court decisions which, while not conclusive, aid us in predicting how the state's highest court might decide the issue. McGowan v. University of Scranton,
The key to the application of both the original and the current versions of Rule 238 is the defendant's presentation of a reasonable offer to settle. In both versions a reasonable offer has been made when the eventual jury verdict is not more than 125% of this offer. The major non-procedural change of the new rule is its substitution of a floating interest rate for the former flat 10% rate.
We are persuaded by the text of Pennsylvania Rule of Civil Procedure 238(f) and the decisions of the Pennsylvania Superior Court that the Pennsylvania Supreme Court will apply the November 7, 1988 text of Rule 238 to all cases in which the issue of delay damages has not yet been finally determined. Accordingly, we will so apply it here.
VII.
The decision of the district court taxing costs against appellant of $3,945.11 in addition to those allowed by the clerk in his original order of taxation is affirmed; its decision of September 28, 1988 is modified to award delay damages at the fluctuating rate provided by the November 7, 1988 version of Pennsylvania Rule of Civil Procedure 238, in the amount of $21,091.74, as calculated by the parties in their stipulation of February 6, 1988 and, as so modified, is affirmed.
Notes
These appeals were consolidated by order of this Court dated October 18, 1989
Regarding the taxation of costs, Hughes asserts the district court abused its discretion in three respects: (1) failing to consider the jury's findings on the comparative negligence of the settling co-defendants and so apportion the costs accordingly; (2) taxing the full expense for printing and duplicating photos not introduced at trial; and (3) taxing stenographic fees for pre-trial depositions. We have considered these arguments and hold they lack merit. We will therefore affirm the district court's order of September 1, 1988
Hughes also argues that the district court violated the doctrines of res judicata and law of the case in reconsidering its initial order denying delay damages. Hughes did not raise this argument before the district court. Rather, in its opposition to Fauber's motion for reconsideration, Hughes merely "reiterate[d] its position that Rule 238 Damages are not warranted." Appellant's Appendix (App.) at 90a. Therefore, this argument is waived and we will not consider it. We note, however, that Fauber's motion for reconsideration, though made under Local Rule 604, must be treated as one made under Federal Rule of Civil Procedure 59(e) to alter or amend the judgment. The district court's order denying delay damages would be subject to reconsideration under standard law of the case doctrine if there were an intervening change in the controlling law. In this respect, the post-Craig confusion in the law was not comprehensively dealt with until the Pennsylvania Superior Court decided Kuchak v. Lancaster Gen. Hosp.,
The district court applied the uniform 10% rate set forth in the former version of the rule and awarded delay damages of $20,073.60. The parties stipulated, however, that if the November 7, 1988 version's floating rate applies, the amount would be $21,091.74
Review of whether reconsideration of the Rule 238 issue was proper is for abuse of discretion. The same abuse of discretion standard applies with respect to the three issues on taxation of costs. As noted, we find none in any of these four results. See supra notes 2 and 3
Since KEM and Pfautz settled before trial, they were not required to make any payment to Fauber. Under Charles v. Giant Eagle Markets,
In promulgating the original version of Rule 238, the Pennsylvania Supreme Court determined its provisions for delay damages were procedural within the meaning of Pa. Const. art. V, Sec. 10(c), which gives that court power to promulgate procedural rules. Laudenberger v. Port Auth.
On November 7, 1988, Rule 238 was amended. Whereas the old version stated that "the court ... shall add" delay damages to the jury's verdict, the amended rule states that "damages for delay shall be added ... in the decision of the court." Pa.R.Civ.P. 238(a)(1). Other changes in response to concerns expressed in Craig about the original rule's validity under the equal protection clause of the Fourteenth Amendment to the United States Constitution eliminated a defendant's liability for delay caused by a plaintiff. Pa.R.Civ.P. 238(a)(1), (b)(2)
Bullins v. City of Philadelphia,
Erie distinguished matters of "substance" from "procedure" in determining what issues in diversity cases are controlled by state law. In Guaranty Trust Co., the Court refined the dichotomy by formulating an "outcome-determinative" test. It stated that "the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court." Guaranty Trust Co.,
It noted our conclusion in Poleto that Rule 238 is substantive in nature. Id. at 1843 n. 4
Of course, there are aspects of both the Craig decision and Rule 238 which are purely procedural. For example, Craig sets forth a procedure on petition and a rule for deciding the extent to which delay damages should be imposed under Rule 238. That provision does not govern in the district courts. Instead, the motion practice of the federal rules, specifically Rule 59(e), applies
We note that each of the other federal circuit courts apply state or local law to determine a party's right to prejudgment interest in diversity cases. See American Home Assur. Co. v. Dykema, Gossett, Spencer, Goodnow & Triggs,
Rule 11 requires the court to impose sanctions upon a party and/or his counsel if the court finds that a pleading, motion or other paper was signed in violation of the Rule. Rule 37 allows the court to impose sanctions for discovery violations
Moreover, not even the purpose of Pennsylvania's Rule 238 has changed. It has always had, pre- and post-Craig, the purpose of encouraging settlement and reducing forum congestion and delay. See Laudenberger,