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Haviland v. Kline & Specter, P.C.

Superior Court of Pennsylvania

March 22, 2018

DONALD E. HAVILAND, JR. Appellant
v.
KLINE & SPECTER, P.C.

          Appeal from the Order Entered May 12, 2017 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): 080900336

          BEFORE: MURRAY, J., McLAUGHLIN, J., and STEVENS [*], P.J.E.

          OPINION

          MURRAY, J.

         Appellant, Donald E. Haviland, Jr. (Haviland), appeals from the order denying his petition for a preliminary or special injunction to disqualify retired Judge Mark Bernstein (Bernstein) as the court-appointed neutral arbitrator in this matter. For the reasons that follow, we quash this appeal.

         Haviland and the law firm Kline & Specter (K&S) have been involved in a long and acrimonious series of disputes. In November 2001, K&S hired Haviland, who is an attorney, to manage its newly-formed Class Action Department. The employment agreement between Haviland and K&S (Employment Agreement) set forth the terms that would control the allocation of client fees and costs in the event Haviland were to leave K&S. Specifically, Paragraph 5 of the Employment Agreement stated that Haviland would have to pay K&S a "referral fee" in the amount of one-third of the total fees he received for any non-class action matter in which he continued to act as counsel after leaving K&S. Employment Agreement, ¶ 5. During his employment with K&S, Haviland represented the Commonwealth of Pennsylvania (Commonwealth) in several lawsuits involving major brand-name prescription drug companies known as the PA-AWP and Lupron Blues litigation.

         In September 2006, Haviland left K&S because the law firm had decided to close its Class Action Department. Upon leaving, Haviland continued to act as counsel for the Commonwealth in the PA-AWP and Lupron Blues litigation. Approximately six months later, Haviland obtained the Commonwealth's first favorable settlement with a defendant in those cases.

         On July 13, 2007, K&S filed a Petition for the Appointment of an Arbitrator to adjudicate its dispute with Haviland regarding the apportionment of costs and fees that Haviland and K&S would receive under the Employment Agreement stemming from the PA-AWP and Lupron Blues litigation. K&S contended that Paragraph 5 of the Employment Agreement required Haviland to pay K&S one-third of the total fees he received from the settlements in the PA-AWP and Lupron Blues cases. This petition was the genesis of the series lawsuits and arbitration proceedings and awards that Haviland and K&S continue to litigate to this day.[1]

         On September 3, 2008, Haviland commenced this action by filing a praecipe to issue a writ of summons. On November 13, 2008, the trial court stayed the action pending the outcome of the arbitration proceedings in the aforementioned related dispute between the parties. On January 22, 2016, following the arbitration award in the related dispute, Haviland filed a complaint in the instant action in which he alleged that K&S breached Paragraph 6 of the Employment Agreement, which governs the allocation of costs and fees in class-action lawsuits in which Haviland continued to act as counsel after leaving K&S. Haviland alleged that he was entitled to fees stemming from several class-action lawsuits (unrelated to the PA-AWP and Lupron Blues cases) that he handled while working for K&S that he never received.

         On February 2, 2016, K&S filed preliminary objections in which it asked the trial court to compel Haviland to submit his claims to arbitration pursuant to Paragraph 10 of Employment Agreement. Paragraph 10 of the Employment Agreement provides that the parties agreed to enforce the Employment Agreement "by either binding arbitration under [Pennsylvania's] Arbitration Act of 1927 or through court action, at the option of K&S[.]" Employment Agreement, ¶ 10. On March 17, 2016, the trial court sustained in part and overruled in part the preliminary objections, remanding the matter to arbitration pursuant to Paragraph 10 of the Employment Agreement.

         Importantly, the trial court's March 17, 2016 order required Haviland and K&S to each appoint an arbitrator and provide notice to all parties of the individual selected within 20 days of the date of the order. The order further provided that the named arbitrators for each party were to confer and select a third, neutral arbitrator within 45 days of the date of the order. The order stated that if the named arbitrators were unable to agree upon a neutral arbitrator, the trial court would appoint one.

         After both parties selected their arbitrators, the arbitrators convened, but were unable to agree on a third, neutral arbitrator. Over the course of the next several months, the trial court successively appointed three neutral arbitrators, each of whom recused themselves from the case. Two of the arbitrators left the case after Haviland sought their recusal, and the other arbitrator recused on his own accord. Thereafter, the trial court appointed Bernstein.

         On January 13 and 19, 2017, in response to Bernstein's request for information relating to the dispute, Haviland asked Bernstein to disclose any conflicts of interest prior to taking any action in this matter. On January 20, 2017, Bernstein responded by email that he was a retired judge from the Court of Common Pleas of Philadelphia County, that he had presided over cases involving Haviland's counsel and other cases involving K&S, and that since his retirement he had not arbitrated any disputes involving either of the parties. Haviland's Petition to Disqualify/Enjoin Bernstein, 4/20/17, Exhibit 5 (Bernstein Email, 1/20/17). Thus, Bernstein stated that he did not believe that any conflict existed that would preclude him from serving as a neutral arbitrator in this case. Id.

         On February 18, 2017, however, Bernstein sent Haviland another email in which he discussed a potential conflict relating to his employment as an adjunct professor at the Thomas R. Kline School of Law at Drexel University. Thomas Kline (Kline), one of the named partners at K&S, made a large donation to the law school, which was renamed in his honor. In the February 18, 2017 email to Haviland's counsel, Bernstein stated:

By email dated January 20, 2017, a copy of which is below, I advised that there are no conflicts that would prohibit my participation in this matter. I can only imagine that your client is concerned because I am [sic] adjunct professor at the Thomas R. Kline [S]chool of [L]aw. I believe that fact is commonly known and is contained on my C.V. which can be publicly found on my website www. judgebernstein.org. What may not be common knowledge is I have been teaching at Drexel [S]chool of Law before its name was changed and when it was known as the Earle Mack [S]chool of [L]aw. Please advise your clients that there are no conflicts that would prohibit my participation as an arbitrator in this matter.

Id. at Exhibit 6 (Bernstein Email, 2/18/2017).

         On March 9, 2017, in a letter to Bernstein, Haviland formally motioned for Bernstein's recusal based on his employment at the Thomas R. Kline School of Law at Drexel University. Id. at Exhibit 7 (Letter, 3/9/17). Haviland asserted that Bernstein was "consciously or subconsciously" predisposed to ruling against him because Kline had made a substantial gift to Bernstein's employer, was the Chairman of the Board of the law school, and because Bernstein was under the supervision of Gwen Roseman Stern, the Director of Trial Advocacy at the law school and the wife of an attorney at K&S. Id.

         On April 3, 2017, by email, Bernstein denied Haviland's motion for disqualification and recusal. Bernstein explained: "I have no doubt of my ability to participate as a neutral arbitrator on this panel of arbitrators to decide the issues presented solely on the basis of the law and evidence." Id. at Exhibit 9 (Bernstein Email, 4/3/17). Bernstein maintained that he has taught at the law school since long before it was renamed the Thomas R. Kline School of Law and that Kline has no involvement with his teaching at the school.

         On April 20, 2017, Haviland filed with the trial court a petition for a preliminary or special injunction to enjoin and disqualify Bernstein from acting as the neutral arbitrator. In addition to the aforementioned alleged potential conflicts, Haviland argued that Bernstein must recuse for failing to make complete and timely disclosures of the alleged disqualifying conflicts of interest. On May 12, 2017, the trial court denied Haviland's petition to disqualify Bernstein. The trial court concluded that "a ...


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