No. 80 - 1 - 160, Appeal from the Judgment entered 7/30/80 in the Court of Common Pleas, Civil Division, of Allegheny County, at No. G.D. 78-5062.
Homer W. King, Pittsburgh, for appellant.
David S. Shrager, Shrager, McDaid & Loftus, P.C., Philadelphia, for amicus curiae -- Pa. Trial Lawyers Association.
Warren G. Ferry, Arthur R. Carter, Pittsburgh, for Port Authority.
James R. Coyne, Pittsburgh, for Frederick E. Bucheit.
Edward P. Zemprelli, Clairton, for amicus curiae -- Insurance Federation of Pennsylvania.
Theodore W. Flowers, Ronald J. Restrepo, Philadelphia, for amicus curiae -- Ins. Co. of N. America.
O'Brien, C. J., Roberts, Nix, Larsen, Flaherty and Kauffman, JJ. Roberts, J., filed a dissenting opinion.
Today we are called upon to determine the constitutionality of Pa.R.C.P. 238, promulgated by this Court pursuant to our constitutional rule-making authority. Rule 238 pertains to prejudgment interest granted in certain instances to plaintiffs who receive jury verdicts in excess of any settlement offer made by a defendant prior to trial. The trial court in the instant case held this rule to be unconstitutional and refused to remold the verdict in accordance with Rule 238.
This rule is attacked from several directions. The authority of the Supreme Court to formulate such a device as this is initially questioned. The rule is also subjected to allegations that it violates the standards of due process and equal protection as guaranteed by both the Pennsylvania and the United States Constitutions. We find that Rule 238 withstands all objections, and reverse the order of the trial court.
The Supreme Court of Pennsylvania is empowered to:
"prescribe general rules governing practice, procedure, and the conduct of all courts . . . if such rules are consistent with this Constitution and neither abridge, enlarge, nor modify the substantive rights of any litigant . . ."
Pa.Const. art. V, § 10(c). Pursuant to this power, this Court promulgated Pa.R.C.P. 238 on November 20, 1978, effective April 15, 1979.*fn1 Rule 238 states in part:
"(a) Except as provided in subdivision (e), in an action seeking monetary relief for bodily injury, death or property damage, or any combination thereof, the Court . . . shall
"(1) Add to the amount of compensatory damages in the award of the arbitrators, in the verdict of a jury, or in the court's decision in a non-jury trial, damages for delay at ten (10) percent per annum, not compounded, which shall become part of the award, verdict, or decision;
"(e) If a defendant at any time prior to trial makes a written offer of settlement in a specified sum with prompt cash payment to the plaintiff, and continues that offer in effect until the commencement of trial, but the offer is not accepted and the plaintiff does not recover by award, verdict or decision, exclusive of damages for delay, more than 125 percent of the offer, the Court or the arbitrators shall not award damages for delay for the period after the date the offer was made . . ."
The trial court declared this rule to be unconstitutional, contending that it involves a substantive right and is therefore beyond the procedural rule-making authority of the Supreme Court. In order to determine if this Court did indeed over-extend its authority, we must review the above rule and decide whether it "abridges, enlarges, or modifies" any substantive rights or if the rule governs elements of practice and procedure in tort cases.
The attempt to devise a universal principle for determining whether a rule is inherently procedural or substantive in nature has met with little success in the history of our jurisprudence. In addressing this issue, the Supreme Court of the United States attempted to define procedural law as:
"the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them."
Sibbach v. Wilson & Co., 312 U.S. 1, 14, 61 S.Ct. 422, 426, 85 L.Ed. 479 (1941). Unfortunately, this analytic determination would only be useful if "substance" and "procedure" were two "mutually exclusive categories with easily ascertainable contents." Sibbach v. Wilson & Co., supra at 17, 61 S.Ct. at 428, (dissenting opinion by Frankfurter, J., in which Black, Douglas and Murphy, JJ., concurred.)*fn2 Rather, "[t]he demarcation between procedure and substantive rights frequently is shadowy and difficult to determine."*fn3 Procedural law is undeniably an integral thread in the fabric of the law. As threads are woven into cloth, so does procedural law interplay with substantive law. Together, they create a cohesive whole. However, it is this very proximity which often leads to difficulty in identifying one thread as procedural and another as substantive. As Justice Rutledge once observed:
"[I]n many situations procedure and substance are so interwoven that rational separation becomes well-nigh impossible. But, even so, this fact cannot dispense with the necessity of making a distinction."
Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 559, 69 S.Ct. 1221, 1231, 93 L.Ed. 1528 (1949), (Rutledge, J., dissenting.) Such is the position in which we currently find ourselves. In seeking to unravel this Gordian knot, we must not be swayed by simplistic solutions. One noted legal scholar cautioned:
"The tacit assumption that the precise point at which the line between the two is to be drawn is the same for all purposes . . . is of course connected with the other assumptions . . . namely, that the 'line' is to be 'discovered'
rather than 'drawn' and that it can be located without keeping in mind the purpose of the classification. If once we recognize that the 'line' can be drawn only in the light of the purpose in view, it cannot be assumed without discussion that as our purposes change the line can be drawn at precisely the same point."
W. Cook, Logical and Legal Bases of the Conflict of Law 158-159 (1942). We must therefore seek to determine the purpose of the rule in order to properly characterize its nature.
In September, 1978, the Civil Procedural Rules Committee proposed Rule 238 to this Court for its review and promulgation. In the accompanying explanatory comments, the Committee stated:
"The judicial system has long been vexed by the problem of congestion and delay in the disposition of civil actions for bodily injury, death or property damages pending in the trial courts. Various techniques, such as compulsory arbitration, have helped to dispose promptly of the bulk of such cases in amounts under $10,000 in Philadelphia and Allegheny Counties and under $5,000 in other counties which have adopted compulsory arbitration. Nevertheless, there is still a considerable residue of so-called major cases not presently subject to arbitration. There are also the appeals from arbitration which require further proceedings in the trial court.
"Statistics show that . . . [t]hirty-eight percent are settled without going to trial. Some are settled through pretrial conciliation techniques, but in too many cases meaningful negotiations commence only after a trial date is fixed or on the courthouse steps or in the courtroom, thus leading to delay in the disposition of cases and congestion in the courts. The present practice provides no incentive for early settlement.
"In the usual civil action for bodily injury, death or property damage there is no compensation to the successful plaintiff and no sanction against the defendant for the long delay between commencement of the action and the trial."
Pa. Bulletin 2668 (1978). These explanatory notes have not been officially adopted or promulgated by this Court, nor do they constitute part of the rule. However, they indicate the spirit and motivation behind the drafting of the rule, and they serve as guidelines for understanding the purpose for which the rule was drafted.
Rule 238 awards damages for delay only in cases where the defendant made no settlement offer prior to trial or where the defendant made an offer of settlement which was 25% less than the amount of the jury verdict. Such language clearly reflects a primary desire to encourage pre-trial settlement. In those instances where the settlement offer is not accepted and the jury verdict does not exceed the offer by 25%, the interest is only computed up to the date of the settlement offer. By tolling the running of interest, this provision demonstrates the prominent goal of fostering early settlements. Undeniably, this rule serves to compensate the plaintiff for the inability to utilize funds rightfully due him, but the basic aim of the rule is to alleviate delay in the disposition of cases, thereby lessening congestion in the courts.
This objective is even more visible when compared with pre-judgment interest rules in other states. New Jersey's Rule 4:42-11, which also has been subjected to procedural-substantive scrutiny,*fn4 uniformly provides interest at 6% per annum on the amount of the jury verdict or award from the date the lawsuit is filed or six months after the tort, whichever is later. Successful plaintiffs are compensated for delay whether they receive and reject any reasonable settlement offers or not. There is no impetus to the plaintiff to accept an early yet reasonable settlement offer, since the interest continues to run after the offer is made.
The restrictions placed on the Pennsylvania rule encourage early disposition of tort litigation in a way that New Jersey's rule does not. In Pennsylvania, defendants may protect themselves from exposure to pre-judgment interest
by making a reasonable written settlement offer in a timely fashion. Should the plaintiff reject it and not recover an award 25% greater than the offer, the defendant is assessed interest only from the date on which the complaint is filed or one year from the accrual of the action, whichever is later, up to the date of the settlement offer. 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.
The promulgation by this Court of a pre-judgment interest rule is founded upon both constitutional authority and an absolute duty to the public. In 1968, the Judiciary Article of the Pennsylvania Constitution was altered to grant the Supreme Court "the power to prescribe general rules governing practice, procedure, and the conduct of all courts." Art. V, § 10(c).*fn5 Further, this provision declared that "[a]ll laws shall be suspended to the extent that they are inconsistent with the rules prescribed under [this] provision."
We have held in the past that this constitutional grant of authority is complete. "[T]he power to make rules is that of the judiciary and the judiciary alone." In Re 42 Pa.C.S. § 1703, 482 Pa. 522, 532-33, 394 A.2d 444, 450 (1978). We found in In Re 42 Pa.C.S. § 1703, supra, that a statute making the Public Agency Open Meeting Law applicable to the Supreme Court while exercising its rule-making authority was unconstitutional as a violation of the separation of powers doctrine. In a letter addressed to the Governor, we observed that:
"'the Pennsylvania Constitution gives the state's Supreme court exclusive power to establish rules of procedure for state Courts' and that 'the legislature ...