tlight@brann-light.com

    Try hard to imagine -- in an imperfect world -- a perfect Pennsylvania judicial system.

    Somewhere in the Commonwealth, a man at work cries out in pain, mortally injured by the machine he is operating.  A call to 911 dispatches medical personnel along with a judge, jury, Workers' Compensation Referee, and court reporter.  Legal counsel for the victim, the employer, and the manufacturer of the machine speed to the scene.  Engineers and expert medical witnesses arrive just after the judge's opening remarks to the jury.  The Referee awards Workers' Compensation benefits.  The trial involving the products liability claim against the manufacturer of the machine ends that afternoon with a jury award in favor of the Plaintiff.

    The defense appeals.  That evening the appellate court reviews the videotape and affirms the lower court.  The following morning, the insurance company for the manufacturer writes a check to the victim's widow, who prudently invests the money as a substitute for the income stream that would have been provided by her late husband.

    Regrettably, in the real world, the elapsed time for the foregoing scenario usually consumes at least 25 months rather than 25 hours.  But, even in the real world, the amount of money to which the widow's victim was entitled, the moment the accident occurred, does not change.  In the perfect judicial world described above, the widow received that money immediately and she earned the return on its investment.  In the real world, however, it often takes years to sort out the amount to which she is entitled and the responsible party (or its insurance company), which became liable for that amount the moment the accident occurred, reaps the return on the investment of that money until it is paid out not the widow.  What logical rationale supports the conclusion that the insurance company should keep those earnings rather than paying it over to the widow when, years later, she finally collects?  Yet, listen to the whining and observe the hand-wringing that has accompanied efforts to promote fundamental fairness to the widow.

    Years ago, the Pennsylvania Supreme Court promulgated Rule of Civil Procedure 238, which introduced the concept of "delay damages".  This bastard child's stormy life can be traced directly to its illegitimate origin.  As we were reminded yet another time by the Pennsylvania Supreme Court  in Muhammad v. Strassburger, 526 Pa. 541, 587 A.2d 1346 (1991), the drafters of original Rule 238 had concluded, rightfully or wrongfully, that Pennsylvania Courts were burdened with excess cases, in part, because defendants were stonewalling and refusing to make reasonable offers to settle on a timely basis.  (And, who can blame the insurance industry given the interest they were earning on the money until they had to part with it!):

"Thus, the format of Rule 238 is responsive to its fundamental goal of prompting meaningful negotiations in major cases so as to unclutter the courts."  587 A.2d 1346, at 1349.  See also Anchorstar v. Mack Trucks, Inc., 533 Pa. 177, 620 A.2d 1120, 1121 (1993).

    Defendants bemoaned their fate.  Why should they be "punished" for delays which they did not cause?  Why should the victim receive a "bonus"?  Why is the interest rate so high?  Why should we have to pay when no one passed GO?

    Appeals were lodged.  The sacred name of the Constitution was invoked.  See the well-travelled (well-travailed?) opinion in Craig v. Magee Memorial Rehabilitation Center, 512 Pa. 60, 515 A.2d 1350 (1987) or the concurrence of President Judge Cirillo of the Superior Court in Rivera v. Philadelphia Theological Seminary, 398 Pa. Super. 264, 580 A.2d 1341, 1347 (1990).  Appellate cases and re-writes of Rule 238 ensued, leaving Pennsylvania plaintiffs and defendants with a delay damage Rule, which requires virtually a separate trial of its own to enforce.  Where have we gone wrong? Like the boy named Sue, it can all be traced back to that fateful day when the parents named this child "Delay Damages".

    The mothers and fathers of Rule 238 should have gazed upon their tiny infant and said, "You will be called 'Simple Interest' and you will be the kind-hearted bearer of fairness and justice, who will ensure that injured victims and their families, when they are finally compensated, will receive fair interest on the money to which they have been entitled since the day of the accident."

    Instead, Rule 238's parents looked down at the child and decreed, "You will be called 'Delay Damages' and you will be a fierce and stoic warrior, who will compel unwilling defendants and insurance companies to settle cases.  Your heroic deeds will clear the dockets of the Courts of Pennsylvania!"  In response to this defiant challenge, armies rose up to confront this gladiator and it was not long until the youthful Rule 238 found itself in the Pennsylvania Supreme Court. See Craig, supra. Like the well-intentioned, but misguided progenitors of Rule 238, the Craig Court could not see through the "Delay Damages" moniker to find the Simple Interest heart and soul of Rule 238.  Reasoning from a faulty Delay Damages premise, the Craig Court found Rule 238 defective and triggered a process, which spawned a veritable diaspora of "Delay Damages" cases, articles, and rules.

    So, unfortunately, for many years, no one in a position of authority recognized that there was nothing inherently wrong with the innocent child named Rule 238.  It seemed as if no one understood or, if they understood, would accept the basics.  The problem lay in the fact that it had been born and reared to do the wrong thing.  Is it now too late to reform the young adult Rule 238 and have it perform its rightful role?  I think not, but first we must understand and accept the basics.

    Anyone who has ever owned even a passbook savings account understands that if I have a client's money, put it in the bank, earn interest on it for myself, and then pay it to the client several years later -- without interest, I have cheated the client and am a candidate for judicial discipline.  Certainly, the Justices of the Supreme Court, who joined the majority in Craig, would abhor such conduct by a lawyer.  Yet, they did not perceive that defendants and insurance companies are doing the exact same thing -- taking somebody else's money, putting it in the bank (a/k/a a "reserve"), earning interest on it for themselves, and then, years later, turning over that money -- without interest.  If lawyers agree that they may not keep for themselves interest which is earned on other people's money, how could a spokesman for the defense industry assert, "When the prime rate reaches double digits on the plaintiff's money, it's like the plaintiff will receive treble damages."  Is the insurance company not earning the same double-digit interest on the money it is holding?

    President Judge Cirillo's concurrence in Rivera provided a powerful example of how Rule 238's "Delay Damages" name tag had dominated argument and analysis on this issue.  Phrases like

"a portion of the delay damages was not the fault of either party";

"Rule 238 commands us to assess delay damages against the Appellant";

"[it] makes defendant responsible for delays caused by neither party"; and

"[it] makes defendants culpable simply because they have chosen to defend their case"

"the victim's family has been living on a reduced income for five years";

"the victim has been unable to save any money for his children's college education";

"the victim has had to borrow money at 11% interest and re-mortgage his house in order to meet ordinary living expenses"; and

"the victim's creditors are adding 15% interest and late charges on overdue bills".

    From this perspective, doesn't it make sense to pass legislation or to strengthen Rule 238 to ensure that victims receive Simple Interest (not "Delay Damages") on the compensation which they are due?  Does it really matter whose "fault" it was that the case took five years to conclude when the interest clock was running the whole time?

    In 1991, the Pennsylvania Supreme Court gave a ray of hope to those of us who championed a simple interest view of Rule 238.  In Schrock v. Albert Einstein Medical Center, 527 Pa. 191, 589 A.2d 1103 (1991), the Court reiterated the familiar refrain:
 

      "Rule 238 ... provides incentive for the settlement of cases by awarding plaintiffs pre-judgment interest on the jury's verdict except for periods after which the defendant has made a written settlement offer amounting to at least eighty percent of the verdict or for periods during which the plaintiff caused delay of the trial."  589 A.2d 1103, at 1106.

      "Obviously, any verdict speaks nunc pro tunc, that is, it awards damages at the time of trial for injuries that occurred many years before.  If the court system was able to provide trials within a reasonable period of time, most successful plaintiffs would receive recoveries at least three to four years earlier than is now possible and would have the use of that money for that period of time.  Correlatively, the defendants have had the use of money properly belonging to the plaintiffs for a period on the average of three to four years."  [Emphasis in original.]  589 A.2d 1103, at 1106.

      "In addition, in concluding that Rule 238 is applicable to this action, we are guided by the fact that Rule 238 is designed to remedy two evils.  As noted above, [Defendant] Design chose to focus on one, preventing court congestion, in presenting its argument.  The second, as [Plaintiff] Sun notes, involves a substantive right of the prevailing plaintiff.  Rule 238 is designed to compensate the prevailing plaintiff for loss of use of funds that the jury verdict reflects were owed by the defendant to the plaintiff.  [Citing the "fundamental fairness" language of Schrock.]"  655 A.2d 112, at 119.

    "At a plaintiff's request, delay damages are awarded against a defendant found liable to the plaintiff in an action for personal injuries.  The purposes justifying such an award are two:  to alleviate delay in the courts, and to encourage the settlement of meritorious claims."  657 A.2d 496, at 498.

    It is time to clear away all the underbrush and give to injured victims what they have been entitled to since the day they were hurt:  "Fundamental fairness would require in the opinion of this Court, that plaintiffs receive interest on what is essentially their money for the period that it is held by the defendants who, of course, have had the use of that money."  Schrock, 589 A.2d 1103, at 1106, quoting Judge Forer.

Terry W. Light, J.D. © 1999 All Rights Reserved

[Terry W. Light is a 1974 graduate of the Harvard Law School, who practices personal injury law in Lewisburg, Pennsylvania.]

Published June 1996 in the Barrister, the official magazine of the Pennsylvania Trial Lawyers Association
 

tlight@brann-light.com

 

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