Fahnestock et al v. Letterkenny Business Park, LP et al

Filing 48

MEMORANDUM (Order to follow as separate docket entry) re 43 First MOTION to Intervene filed by Eastern Alliance Insurance Company. Signed by Honorable Sylvia H. Rambo on 12/21/16. (pw)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
:
:
:
:
Plaintiffs,
:
:
v.
:
EASTERN ALLIANCE INSURANCE :
:
COMPANY,
:
:
Petitioner,
:
:
v.
:
LETTERKENNY BUSINESS PARK, :
:
LP, LETTERKENNY BUSINESS
:
PARK, II, LP, INDUSTRIAL
:
REALTY GROUP, LLC, STUART
:
LICHER, UNITED STATES OF
AMERICA, and U.S. ARMY CORPS :
:
OF ENGINEERS, DEPARTMENT
OF THE ARMY UNITED STATES :
:
GOVERNMENT,
:
:
Defendants.
KENNETH FAHNESTOCK and
LISA S. FAHNESTOCK

Civil No. 1:13-CV-2417

Judge Sylvia H. Rambo

MEMORANDUM
In this diversity action, Plaintiffs allege that Defendants negligently
maintained an unsafe premises which caused Plaintiff Kenneth Fahnestock to slip
and fall, suffering permanent injuries at an army depot in Chambersburg,
Pennsylvania. Because Mr. Fahnestock was injured during the scope of his
employment, Eastern Alliance Insurance Company, his employer’s workers’
compensation carrier, indemnified him for lost wages and paid his medical

expenses. Presently before the court is Eastern Alliance Insurance Company’s
petition to intervene pursuant to Federal Rule of Civil Procedure 24(a)(2).
I.

BACKGROUND
On September 22, 2011, Plaintiff Kenneth Fahnestock (“Mr. Fahnestock”)

was employed as a “material handler” by Ram-Tech Support Services (“RamTech”), which is a government contractor that provides services to the Letterkenny
Army Depot (the “Depot”) in Chambersburg, Pennsylvania. (Doc. 12, ¶¶ 24-25.)
Mr. Fahnestock alleges that leaking water accumulated in a men’s bathroom at the
Depot, creating a “dangerous and hazardous condition” that caused him to slip and
fall and suffer “serious, permanent, and disabling personal injuries.” (Id. at ¶¶ 2728, 40.)
On September 19, 2013, Mr. Fahnestock and his wife, co-Plaintiff Lisa S.
Fahnestock (“Mrs. Fahnestock”), filed a complaint against Letterkenny Business
Park, L.P., Letterkenny Business Park, II, L.P., Industrial Realty Group, LLC,
Stuart Licher, the United States of America, the United States Army Corps of
Engineers, and the Department of the Army of the United States (collectively,
“Defendants”). (See Doc. 1.) On July 21, 2014, the court granted Plaintiffs leave to
file an amended complaint (Doc. 11), which was filed the same day (Doc. 12.) In
addition to Mr. Fahnestock’s negligence claim, Mrs. Fahnestock filed a loss of
consortium claim, which has precipitated the instant petition. (See id. at ¶¶ 58-60.)
2

Since the action was initiated, discovery and case management deadlines have
been routinely delayed because Mr. Fahnestock has been unable to participate in a
deposition due to the injuries he sustained at the Depot. (See Docs. 25, 27, 29, 34,
36, 38, 40, & 42.) Currently, jury selection and trial are scheduled for July 5, 2017.
(Doc. 47.)
As Ram-Tech’s worker’s compensation insurance carrier, Eastern Alliance
Insurance Company (“Eastern”) paid wage loss benefits to Mr. Fahnestock, as well
as his medical bills, because he was injured “within the course and scope of his
employment.” (Doc. 43, p. 2 of 4.) Eastern avers that its worker’s compensation
lien totals $129,288.47, which continues to rise.

1

(Id.) Eastern has petitioned to

intervene to “protect its sizeable lien” pursuant to Federal Rule of Civil Procedure
24(a)(2). (Id.) Plaintiffs oppose Eastern’s attempt to intervene as premature,
unwarranted, and argue that Eastern’s interests are adequately represented. (Doc.
45, pp. 1-2 of 26.) The petition has been fully briefed (Docs. 43-1 & 45) and is ripe
for disposition.
II.

LEGAL STANDARD
A party may intervene as of right if it “claims an interest relating to the

property or transaction that is the subject of the action, and is so situated that
1

While Plaintiffs dispute the amount of the worker’s compensation lien, they concede that it is
valid and legally enforceable. For purposes of Eastern’s petition to intervene, the amount of the
lien is immaterial.
3

disposing of the action may as a practical matter impair or impede the movant’s
ability to protect its interest, unless existing parties adequately represent that
interest.” Fed. R. Civ. P. 24(a)(2). A petition to intervene will be granted if the
movant can demonstrate that its petition is timely, that it has identified “a sufficient
interest in the underlying litigation” which would be “impaired or affected by the
disposition of the underlying action,” and “that the existing parties to the action do
not adequately represent the prospective intervenor’s interests.” Liberty Mut. Ins.
Co. v. Treesdale, Inc., 419 F.3d 216, 220 (3d Cir. 2005) (internal citation omitted).
A district court may not grant the petition to intervene unless all factors are
satisfied. Id. (quoting Mountain Top Condo. Ass’n v. Dave Stabbert Master
Builder, Inc., 72 F.3d 361, 366 (3d Cir. 1995)).
III.

DISCUSSION
As an initial matter, it is well-settled that “a federal court must apply the

substantive laws of its forum state in diversity actions.” Lafferty v. St. Riel, 495
F.3d 72, 76 (3d Cir. 2007) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78
(1938)).

Under Pennsylvania law, Eastern could partially or fully recoup its

subrogated lien if Plaintiffs settle or win a favorable jury verdict.2 However,
Eastern can only recover funds which are apportioned to compensate Mr.
2

Pennsylvania’s Worker’s Compensation law states, “[w]here the compensable injury is caused
in whole or in part by the act or omission of a third party, the employer shall be subrogated to the
right of the employe[e], his personal representative, his estate or his dependents, against such
third party to the extent of the compensation payable under this article by the employer.” 77 Pa.
Cons. Stat. § 671 (West 2016).
4

Fahnestock for his physical injuries and economic damages, not funds allocated to
Mrs. Fahnestock’s loss of consortium claim. (Id. at p. 3 of 4.) Thus, Eastern argues
that it must be allowed to intervene in this action to prevent Plaintiffs from
securing a settlement or jury verdict that inequitably allocates any monetary award
to Mrs. Fahnestock’s loss of consortium claim. (See Doc. 43, p. 3 of 4.) Plaintiffs
contend that intervention, especially at this early stage of the litigation, is not only
premature, but unnecessary because their interest is aligned with Eastern’s in
securing the largest monetary award possible. (See Doc. 45, pp. 1-2 of 26.) The
court will review the relevant factors to determine if intervention is appropriate at
this time.
A.

Is the Petition Timely?

A court reviews the timeliness of a petition to intervene based upon the
totality of the circumstances. Simmons v. Paran Mgmt. Co., Civ. No. 11-cv-0415,
2011 WL 2970969, *2 (M.D. Pa. July 20, 2011) (citing Pennsylvania v. Rizzo, 530
F.2d 501, 506 (3d Cir. 1976)). Plaintiffs filed their complaint on September 19,
2013. (Doc. 1.) Discovery in this case has been repeatedly postponed, and case
management deadlines have been extended, because Mr. Fahnestock has not been
available for a deposition due to his current physical condition. (See Docs. 25, 27,
29, 34, 36, 38, 40, & 42.) Eastern filed its motion to intervene on September 26,
2016. (Doc. 43.) Although the present action has languished for more than three
5

years, the court finds that Eastern’s petition is nevertheless timely. Delays in the
discovery process could not be avoided due to Plaintiff’s physical condition and
extensions to the case management deadlines have been granted upon mutual
request of the parties. Such delays cannot be held against Eastern. Furthermore, the
petition to intervene will not unnecessarily delay the discovery process or trial.
B.

Does Eastern Have an Interest in the Litigation That May Be
Impaired?

A proposed intervenor’s interest in the litigation “must be a legal interest as
distinguished from interests of a general and indefinite character.” Liberty Mut.
Ins. Co., 419 F.3d at 220 (quoting Mountain Top Condo. Ass’n, 72 F.3d at 366).
Economic interests alone do not justify intervention, and “the mere fact that a
lawsuit may impede a third party’s ability to recover in a separate suit ordinarily
does not give the third party a right to intervene.” Id.; see also Kleissler v. U.S.
Forest Serv., 157 F.3d 964, 972 (3d Cir. 1998) (“[I]ntervenors should have an
interest that is specific to them, is capable of definition, and will be directly
affected in a substantially concrete fashion by the relief sought.”) Under
Pennsylvania law, a worker’s compensation insurance carrier has a legally
cognizable interest in the outcome of a tortious action brought by an insured
employee against an alleged negligent third party, and the carrier could recover all
of its expenses if the third party is held liable for the employee’s injuries. See 77
Pa. Con. Stat. § 671.
6

As stated above, Eastern claims its subrogation lien equals $129,288.47,
which represents Eastern’s substantial interest in the outcome of the pending
litigation. Plaintiffs could potentially recover sufficient funds to fully reimburse
Eastern as a part of a settlement or upon a favorable jury verdict. Thus, the court
finds that Eastern has a sufficient interest in the underlying litigation.
Having established Eastern’s interest in the litigation, the next question is
whether that interest is under threat of impairment. Eastern argues that the recovery
of its lien could be jeopardized by a unilateral, arbitrary, or inequitable settlement
or jury award. Because any recovery based upon Mrs. Fahnestock’s loss of
consortium claim would be immune from Eastern’s subrogated lien, Plaintiffs
would have an interest in allocating as much of any recovery to that claim in order
to avoid Eastern’s lien. Accordingly, the court finds that Eastern’s interest is
indeed under threat of impairment. See Simmons, 2011 WL 2970969 at *2; see also
Urmann v. Rockwood Cas. Ins. Co., 905 A.2d 513, 522-23 (Pa. Super. Ct. 2006)
(citing Darr Const. Co. v. W.C.A.B. (Walker), 715 A.2d 1075, 1080 (Pa. 1998)).
C.

Are Eastern’s Interests Adequately Represented by Plaintiffs?

The final factor necessary for intervention as of right is whether the
prospective intervenor’s interests are adequately represented by the existing
parties. See Liberty Mut. Ins. Co., 419 F.3d at 220 (citing Kleissler, 157 F.3d at
969). “This factor ‘entails looking to such factors as proof of collusion between the
7

representative and the opposing party, any adverse interest between the applicant
and the representative, and whether there is any indication that the representative
has been less than diligent in prosecuting the litigation.’” Simmons, 2011 WL
2970969 at *3 (quoting Olden v. Hagerstown Cash Register, Inc., 619 F.2d 271,
274-75 (3d Cir. 1980)). Eastern has not demonstrated that Plaintiffs have failed to
diligently prosecute the case or colluded with Defendants to orchestrate a
settlement that will unreasonably compensate Mrs. Fahnestock in order to shield
Plaintiffs’ recovery from Eastern’s lien. See Del. Valley Citizens’ Council for
Clean Air v. Pennsylvania, 674 F.2d 970, 973 (3d Cir. 1982) (citing Olden, 619
F.2d at 274-75) (“Representation is generally considered adequate if no collusion
is shown between the representative and an opposing party.”) (emphasis supplied).
Although the discovery process is not yet complete because, as stated above,
Mr. Fahnestock’s injuries have prevented him from being deposed, such delays
could not have been avoided and cannot be attributed to a lack of diligence in
prosecuting the case. Eastern’s only allegation supporting its argument that the
current legal representation is inadequate is that Plaintiffs’ counsel has failed to
communicate regularly with Eastern about the status of the case. (See Doc. 43, p. 2
of 4.) Even if such allegation proves true,3 Plaintiffs’ silence towards the insurance

3

Plaintiffs’ counsel vehemently denies that he has been unresponsive to Eastern’s inquiries and
cites a letter, dated August 16, 2016, that highlights a dispute over the amount of medical bills
8

carrier alone does not demonstrate that counsel is colluding with Defendants or is
not adequately protecting Eastern’s subrogation lien.
Despite the lack of evidence of any collusion or inadequacy of
representation, there is no doubt that Eastern’s interest in recovering its worker’s
compensation lien is adverse to Plaintiffs’ interests in keeping as much of any
future recovery as possible. Mrs. Fahnestock’s loss of consortium recovery could
effectively nullify Eastern’s subrogation lien should any settlement or jury award
lopsidedly allocate the recovery to her claim instead of Mr. Fahnestock’s
negligence claim. Therefore, unlike actions that involve only negligence claims,
Eastern and Plaintiffs do not have a shared interest in pursuing the highest possible
recovery, see Kelley v. Wolff Petroleum, Inc., 595 A.2d 627, 628 (Pa. Super. Ct.
1991) (citing McGinnis v. United Screw & Bolt Corp., 637 F. Supp. 9, 11 (E.D. Pa.
1985)), because Plaintiffs would benefit more from a recovery as to the loss of
consortium claim, while Eastern would seek to recover as to the negligence claim
first in order to satisfy its lien.
Nonetheless, intervention at this stage of the litigation, while any recovery
on either claim remains speculative, is premature. See McGinnis, 637 F. Supp. at
11 (citing Olden, 619 F.2d at 275) (“[N]o conflict of interest [can] exist between
the plaintiff and the carrier prior to a recovery by the plaintiff, and that in the
that Eastern has paid. (Doc. 45, p. 26 of 26, Ex. “B”). Plaintiffs also note that they settled their
worker’s compensation claim against Eastern. (See Doc. 45, Ex. “A”).
9

(unlikely) event a conflict should arise after a verdict or settlement is reached, the
carrier has ‘ample opportunities to protect its interest’ at that time, e.g., by moving
to intervene prior to distribution of the fund created by the settlement or
judgment.”) (emphasis removed). Eastern will have an adequate opportunity to
renew its petition to intervene in the event that Plaintiffs secure some form of
recovery and Eastern believes that recovery is inequitably allocated to the loss of
consortium claim. See Urmann v. Rockwood Cas. Ins. Co., 905 A.2d 513, 522-23
(Pa. Super. Ct. 2006) (quoting Darr Constr. Co., 715 A.2d at 1081) (“In the event
the settlement is unreasonably apportioned, an employer may always seek recourse
in the court of common pleas.”). Should the case proceed to trial and a jury awards
Mrs. Fahnestock damages for loss of consortium, Eastern can petition to intervene
and request a judgment notwithstanding the verdict if it believes that the award is
meritless or unreasonably harms their worker’s compensation lien. See Fed. R. Civ.
P. 59(e).
Eastern’s remaining argument is that an insurance carrier does not have an
independent cause of action against a third-party tortfeasor and must enforce its
subrogated lien in the insured’s negligence action against the responsible third
party. See Reliance Ins. Co. v. Richmond Mach. Co., 455 A.2d 686, 690 (Pa. Super.
Ct. 1983). Therefore, if Eastern is denied intervention then it could be denied a
legal remedy to protect its subrogated lien. (See Doc. 43, p. 3 of 4.) The holding in
10

Reliance Insurance Co. v. Richmond Machine Co., however, is merely that an
insurance carrier’s exclusive remedy is out of the award to the injured employee,
not that an insurance carrier must be allowed to intervene at the earliest possible
stage of the insured’s negligence action. See id. Federal Rule of Civil Procedure
24(a)(2) does not prevent a proposed intervenor from re-filing a petition if
circumstances change as the litigation proceeds to a resolution. In fact, Eastern’s
lien “is against the recovery itself, not the claimant.” Mrkich v. W.C.A.B.
(Allegheny Cty. Children & Youth Servs.), 801 A.2d 668, 675 (Pa. Commw. Ct.
2002) (citing Rollins Outdoor Advert. v. W.C.A.B., 487 A.2d 794, 796 (Pa. 1985)).
Under Pennsylvania law, “subrogation rights will not be affected by the way in
which the claimant and third-party tortfeasor, or the fact-finder in their action,
characterize the nature of the third-party recovery.” Thompson v. W.C.A.B. (USF &
G Co.), 801 A.2d 635, 638 (Pa. Commw. Ct. 2002). As such, there is no danger
that Eastern will be prejudiced by its subrogated lien being irreparably harmed if
its petition to intervene is denied at this time.
Rather, there is a danger that Plaintiffs would be prejudiced if Eastern were
allowed to intervene at this early stage of the litigation. Eastern’s participation in
discovery, dispositive motions, or trial could very well leave Plaintiffs with an
additional adversary to the establishment of Mrs. Fahnestock’s loss of consortium

11

claim. This additional consideration further counsels against allowing Eastern to
intervene at this time.
IV.

CONCLUSION
For the foregoing reasons, the court finds that Eastern’s interests are

adequately protected at this time and, therefore, its petition to intervene (Doc. 43)
will be denied without prejudice to intervention at a later stage of this litigation,
should it become appropriate.
An appropriate order will issue.

s/Sylvia H. Rambo
SYLVIA H. RAMBO
United States District Judge
Dated: December 21, 2016

12