2005 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 8-2-2005 

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utl Ins v . Gold s tein P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 04-3186

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____________ NAT I ONAL GR ANGE M UT UAL I NS UR ANC E CO M P ANY, A p p e llan t, v. GOLDST EI N, HES LOP , S TE EL , CLAP P ER, OSWALT & S TOE HR; J O H N H E SL O P, E s q.

____________ O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e M id d le D istric t o f P e n n sy lv a n ia ( D . C . C i vi l N o. 02- cv- 01031) D istri ct Ju d g e: T h e H o n o rab le Jam es F . M cC lure, Jr.

A r gued J ul y14, 2005 B E F O R E : A L ITO , V A N A N T W E R P E N and A L D ISE R T , C i rcui tJudg es ( Fi l ed A ugus t2, 2005) St even E. A ngs tr ei ch ( A r gued) Le v y , An g s tr e i c h , F i n n e y , Ba l d a n t e , Ru b e n s t e i n & Co r e n , P . C. 1616 W al nutSt r eet , 5 Fl oor th Phi l adel phi a, PA 19103 A t t or ney f

orAppel lant J eff r eyB . M cC arr on ( A r gued) K athl een M . C ar s on Swa r t z Ca mpb e l l LLC2

1601 M arketSt r eet , 34 Fl oor th Phi l adel phi a, PA 19103 A t t or neys f

orAppel l ees OP I NI ON V A N A N T W E R PE N , C i r cui tJ udge A ppel l antN at i onal G r ange M utual I ns ur ance C o. ( “N at i onal G r ange” ) chal l enges the J ul y8, 2004, or derof the D i s tr i ctC our tgr ant i ng s um m aryj udgm enti n favorof A p p e llee s J o h n H e slo p , E sq . (“H e slo p ” ) a n d th e law f irm o f G o ld ste in , H e slo p , S tee l, C l apper , O s w al t& St oehr( “the Fi r m ”) . I n thi s di ver s i tycas e, the D i s tr i ctC our thel d that N at i on al G range’s l egal m al pract i ce act i on cou l d n ot l i e un der Pen nsy l van i a l aw becau se the pl ai nt i ff c oul d notes t abl i s h actual l os s due t o the appe l l ees ’ act i ons ori nact i on. For th e r e a s o n s s e tf

o r th b e l o w, we wi l l a f

f i r m. I . F ACTUAL AND PR OCEDURAL HI S TORY T hi s l egal m al pr act i ce a ct i on ar os e fr om H es l op’ s r epr es ent at i on of N at i onal G r ange i n a br eac h of contr actand bad f ai th act i on br oughtbyR al ph M art i n C oy l eri n t he C our tof C om m on Pl eas of C entr e C ounty , Penns y l vani a ( “C oy l erv. N at ’ l G r ange” ) . T he event s l eadi ng up t o t he C oy l erv. N at ’ l G r ange l i t i gat i on began on O ct ober2, 1996, w hen C oy l erfi l ed a pr oduct s l i abi l i tyand br eac h of contr actact i on agai ns tE bac Sy s t ems, I nc. ( “C oy l erv. E bac” ) . E bac ha d a comm er ci al gener al l i abi l i typol i cyw i th N at i onal G r ange and r eques t ed thatN at i onal G r ange pr ovi de l egal r epr es ent at i on i n the C oy l erv. E bac3

litig a tio n in a c c o rd a n c e w ith th a t p o lic y . T ra c yR o b in so n , the N a tio n a l G ra n g e e m p lo y e e a ss ig n e d to h a n d le E b a c ’s r e q u e st, deni ed cove r age t o E bac, and i tappea r s thats he di d s o w i thoutfi r s tfol l ow i ng company pol i cyof obt ai ni ng a form al cover age opi ni on fr om an att orney . B eca us e of thi s , E bac h ire d its o w n a tto rn e yto h a n d le th e C o y ler v . E b a c m a tter. C o y ler a n d E b a c e n ter e d in to a s ett l ementagr eements hor t l ybefor e tr i al , w her ebyE bac pa i d C oy l er$130, 000. 00 and a s s ig n e d its ri g h ts u n d e r t h e N a tio n a l G ra n g e in s u ra n c e p o lic yto C o y le r. O n M ar ch 8, 2000, C oy l er , as E bac’ s as s i gnee, fi l ed hi s act i on agai ns tN at i onal G ra n g e a lleg in g b re a c h o f c o n tra c t an d v io latio n o f th e P e n n sy lv a n ia b a d f a ith sta tu te bas ed on N at i onal G r ange’ s fai l ur e t o defe nd ori ndemni fyE bac. C oy l ers erved a c opyof the compl ai nton N at i onal G r ange’ s corpor at e couns el i n N ew H ampshi r e. T he N at i onal G r ange l egal depart m entr ece i ved the compl ai ntats om e t i m e i n M ar ch 2000, and forw ar ded i tt o T r acyR obi ns on i n N at i onal G r ange’ s R i chmond offi ce on M ar ch 20, 2000. N at i onal G r ange e ntrus t ed R obi ns on t o handl e the C oy l erv. N at ’ l G r ange l i t i gat i on o n b e h a l f

o f th e c o m p a n y. R obi ns on t ook no act i on i n r es pons e t o the compl ai nt , and C oy l ers erved a not i ce of i nt entt o t ake de faul ton N at i onal G r ange on A pr i l 6, 2000. N ordi d anyone el s e at N at i onal G r ange t ake a nyact i on, and C oy l erfi l ed a pr aec i pe forentryof def aul tj udgm ent i n the C our tof C om m on Pl eas on A pr i l 27, 2000. O n M ay2, 2000, W i l l am M cK enna, the hea d of N at i onal G r ange’ s l egal depart m ent , cal l ed R obi ns on r egar di ng the pr aec i peA lth o u g h R o b inso n w as th e e m p loy ee resp o n sible fo r ha n d li n g the C o y ler v. N at’l 1 G ran g e m att er, C o y ler serv ed all o f th e re leva n t pap ers o n N ati o n al G ran g e’s h e a d q u a rte rs in N e w H a m p sh ire in a d d iti o n to p ro v id in g p e rso n a l co p ies to R o b in so n in R i chmond. N at i on al G range clai m s that H esl op m ade thi s r ecom m end at i on w i tho ut fi rs t 2 r evi ew i ng al l of the r el evantcas e mat er i al s , s uch as E bac’ s i ns ur ance pol i cyw i th N at i onal G r ange. 4 to e n te r d e f

a u lt ju d g m e n t, a n d R o b in s o n re p re s e n te d th a t s h e w a s h a n d lin g th e m a tte r. A gain, ho w ever, R ob i nson t oo k n o acti on , and a def aultj ud gm ent w as ent ered against N a tio n a l G ra n g e o n M a y1 , 2 0 0 0 . N a tio n a l G ra n g e re c e iv e d a n o tic e o f th e e n tr yo f

d e f a u lt s o m e tim e in M a y2 0 0 0 . O n Ju n e 5 , 2 0 0 0 , C o y ler f iled a p ra e c ip e to sc h e d u le a n a ss e ss m e n t o f d a m a g e s h e a rin g in the C our tof C om m on Pl eas . T he hea r i ng w as s chedul ed forA ugus t14, 2000, and C oy l er s erved a not i ce t o att end the hea r i ng on D avi d R oy er , N at i onal G r ange’ s T r eas ur er . A s of J ul y5, 2000, w hen C oy l ers erved the not i ce t o att end, no one atN at i onal G r ange ha d y et t aken a nyact i on i n r es pons e t o C oy l er ’ s s ui tagai ns tthe company . Fi nal l y , on J ul y19, 1 2000, A ppel l ee H es l op and hi s Fi r m w er e r et ai ned t o r epr es entN at i onal G r ange i n the dam ages proceed i ng s. H es l op as s ert s thathe i ni t i al l ycons i der ed the pos s i bi l i tyof fi l i ng a pet i t i on t o open the def aul tj udgm ent . H ow ever , he ul t i m at el yadvi s ed N at i onal G r ange thats uch a p e tit io n “ w o u ld n o t h a v e b e e n a d v a n tag e o u s” a n d re c o m m e n d e d g o in g f o rw a rd o n lyw ith th e p r e s e n t a t i o n o f

a d e f e n s e a tth e d a ma g e s s t a g e . Br i e f f o rAp p e l l a n ta t6 - 7 . On 2 N ovember15, 2000, the C our tof C om m on Pl eas ent er ed i t s deci s i on on damages . T heT hi s al l eged f ai l ur e i s s i gni fi cantbeca us e V i r gi ni a l aw pl ace s a cap on puni t i ve 3 damages i n a bad f

ai th act i on at$350, 000. 00. 5 courtaw ar ded $130, 000. 00 i n compensa t orydamages , $3, 350, 000. 00 i n puni t i ve damages , $62, 245. 00 i n att orney ’ s fee s , and compounded i nt er es ti n the amountof $142. 763. 00. N at i onal G r ange then r et ai ned new couns el t o handl e pos t - tr i al l i t i gat i on. T hr ough di s cus s i ons w i th i t s new att orney , N at i onal G r ange c ame t o bel i eve thatH es l op w as negl i genti n fai l i ng t o fi l e a pe t i t i on t o open the def aul tj udgm entand i n fai l i ng t o ar gue thatdamages s houl d be as s es s ed underV i r gi ni a l aw . N at i onal G r ange r ai s ed i t s choi ce 3 of l aw ar gum enti n a mot i on forpos t - tr i al r el i ef i n the C our tof C om m on Pl eas , w hi ch w as deni ed on M ay4, 2001. T he Super i orC our tof Penns y l vani a af fi r m ed on A pr i l 24, 2002, fi ndi ng thatN at i onal G r ange w ai ved i t s abi l i tyt o i nvoke V i r gi ni a l aw on damages w hen i tal l ow ed the def aul tj udgm entt o be ent er ed pur s uantt o Penns y l vani a l aw . T he s t at e pr ocee di ngs w er e eve ntual l yt erm i nat ed w hen C oy l erand N at i onal G r ange e nt er ed in to a s e ttle m e n t a g re e m e n t, w h e re b yN a tio n a l G ra n g e p a id C o y le r $ 2 ,5 0 0 ,0 0 0 .0 0 . O n Jun e 14 , 20 02 , N at i on al G range co m m enced this diver si tyact i on against H es l op and the Fi r m i n t he U ni t ed St at es D i s tr i ctC our tforthe M i ddl e D i s tr i ctof P en n sy lvan ia. A p p ly ing P en n sy lvan ia’s l eg al m alpra cti ce stan d ard s, the D istri ct C o u rt con cl ud ed thatN at i on al G range w as unab l e t o sho w actual l oss due to the ap pell ees’ i nact i ons and ent er ed s um m aryj udgm enti n favorof A ppel l ees on J ul y8, 2004.

I I . J UR I SDI CTI ON AN D STA ND AR D O F REVI EW6

T he D i s tr i ctC our tpr oper l yexer ci s ed j ur i s di ct i on overthi s cas e pur s uantt o 28 U . S. C . § 1332, as ther e i s compl et e di ver s i tyof ci t i zens hi p betw een the part i es , and the a m o u n t in c o n tro v e rsy ex c e e d s $ 7 5 ,0 0 0 .0 0 . T h is C o u rt h a s ju risd ictio n o v e r th e tim e ly appea l of the D i s tr i ctC our t ’ s J ul y8, 2004, fi nal or derpur s uantt o 28 U . S. C . § 1291. T his C ou rt ’s revi ew of a low er courtgrantof sum m aryj ud gm ent i s de novo , and w e a p p lyth e sa m e sta n d a rd th a t th e D istric t C o u rt sh o u ld h a v e a p p lied . U n io n P a c if ic R. R. v . Gr e e n tr e e Tr a n s p . Tru c k i n g Co . , 2 9 3 F . 3 d 1 2 0 , 1 2 5 ( 3 d Ci r . 2 0 0 2 ) . Un d e rF e d . R. C i v. P . 56 (c) , sum m aryj ud gm ent s ho uld be granted w here the “p l eadings, dep osi t i on s, a n s w e r s t o i n t e r r o g a t o r i e s , a n d a d m i s s i o n s o n f i l e , t o g e th e rw i th th e a f f i d a v i t s , i f

a n y, sh o w th a t th e re is n o g e n u in e iss u e a s to a n ym a ter ial f a c t an d th a t th e m o v in g p a rtyis ent i t l ed t o a j udgm entas a mat t erof l aw . ” See Cel ot ex C orp. v. C atr ett , 477 U . S. 317, 325 ( 1986) . T he mat er i al fac t s of thi s cas e ar e noti n di s put e. O urr evi ew i s thus l i m i t ed t o the pur el yl egal ques t i on of w hetherN at i onal G r ange f ai l ed as a mat t erof l aw t o m ake outa ca us e of a ct i on forl egal m al pr act i ce. I I I . DI S CU S S I ON A s a f e d e ra l co u rt sitting in d iv e rsity , w e a p p lyP e n n sy lv a n ia s u b sta n tiv e law to N at i onal G r ange’ s l egal m al pr act i ce c l ai m s . See Eri e R . R . v. T om pki ns , 304 U . S. 64, 78 ( 1 9 3 8 ) ; Ba n k e rv . Ni g h s wan d e r , M a r t i n & M i t c h e l l , 3 7 F. 3 d 8 6 6 , 8 7 1 ( 2 d Ci r . 1 9 9 4 ) . To succeed on a l egal m al pract i ce act i on un der Pen nsy l van i a l aw , a plai nti ff m ustest abli sh the fol l ow i ng el ement s : “1) empl oym entof the att orneyorotherbas i s forduty ; 2) the7

fai l ur e of the att orneyt o exer ci s e or di narys ki l l and know l edge; and 3) thats uch negl i gence w as the pr oxi m at e ca us e of da m age t o the pl ai nt i ff. ” K i tus ki e v. C orbm an, 7 1 4 A .2 d 1 0 2 7 , 1 0 2 9 (P a . 1 9 9 8 ) ( q u o tin g R iz z o v . H a in e s , 5 5 5 A .2 d 5 8 , 6 5 (P a . 1 9 8 9 )) . “A n es s ent i al el ementt o t hi s caus e of a ct i on i s pr oof of a ctual l os s r atherthan a br eac h of pr ofes s i onal dutycaus i ng onl ynom i nal damages , s pecul at i ve harm orthe thr eat of futur e harm . ” K i tus ki e, 714 A . 2d at1030. T her efor e, as i de fr om s how i ng thatthe d e f e n d a n ts’ re p re se n tatio n w a s d e f icie n t, “a leg a l m a lp ra c tice a c tio n in P e n n sy lv a n ia r equi r es the pl ai nt i ff t o pr ove thathe had a vi abl e ca us e of a ct i on agai ns tthe partyhe w i shed to sue i n the und erl y i ng case. ” Id. In ot her w ords, “a plai nti ff m ustprove a case w i thi n a ca s e s i nce he m us ti ni t i al l yes t abl i s h bya pr eponder ance of the evi dence thathe w oul d have r ecove r ed a j udgm enti n the under l y i ng act i on, ” i d. , befor e r eac hi ng the att orney ’ s al l eged f

ai l ur e t o exer ci s e or di narys ki l l and know l edge. “I ti s onl yaft erthe pl ai nt i ff pr oves he w oul d have r ecove r ed a j udgm enti n the under l y i ng act i on thatthe pl ai nt i ff c an then pr ocee d w i th pr oof thatthe att orneyhe enga ged t o pr os ecut e ordefe nd th e u n d e rl y in g a c tio n w a s n e g lig e n t. . . .” Id . I n thi s cas e, N at i onal G r ange c l ai m s thatH es l op’ s r epr es ent at i on atthe as s es s m ent of damages s t age of

the C oy l erv. N at ’ l G r ange mat t erw as negl i genti n tw o r es pect s : ( 1) he fa i l ed t o fi l e a pe t i t i on t o open the def aul tj udgm ent , and ( 2) he fa i l ed t o ar gue that d am ag es sh o u ld b e c ap p ed p u rsua n t t o V ir g inia law . T h u s, in o rde r fo r N ati o n al G ran g e’s m a lp ra c tice c laim to su c c e e d , itm u st f irst e sta b lish a s a th re sh o ld m a tter th a t a p e tit io n to8

open ora choi ce of

l aw ar gum entw oul d have be en s ucce s s ful i f m ade. See i d. T he D i s tr i ctC our tgr ant ed s um m aryj udgm entbas ed on the det erm i nat i on thatnei theract i on w oul d have be en s ucce s s ful underPenns y l vani a l aw and ther efor e dec l i ned t o r eac h t he i s s ue of w hetherH es l op exer ci s ed or di narys ki l l and know l edge. A. P et i t i on t o O

pen In o rd e r to su c c e e d o n a p e tit io n to o p e n a d e f a u lt j u d g m e n t u n d e r P e n n sy lv a n ia l aw , “( 1) the pet i t i on t o open mustbe pr om pt l yfi l ed; ( 2) the fa i l ur e t o appea rorfi l e a t i m el yansw er m ustbe ex cused; and (3) the p artyseeki ng t o o pen the judgm ent m ust s how a mer i t or i ous defe ns e. ” M cC oyv. Pub. A cce pt ance C orp. , 305 A . 2d 698, 700 ( Pa. 19 73 ); see al so B al k v . F ord M otorC o. , 28 5 A . 2d 12 8, 13 0-31 (Pa . 19 71 ); S eeger v. F i rs t U n ion N at’l B an k , 8 3 6 A . 2 d 1 6 3 , 1 6 5 (P a. S u p er. C t. 2 0 0 3 ). T h e D istri ct C o u rt c o n c lu d e d th a t a p e tit io n to o p e n th e d e f a u lt j u d g m e n t in C o y ler v . N a t’l G ra n g e w o u ld h a v e f a ile d u n d e r t h e f

ir s t tw o p ro n g s o f

th is s ta n d a rd . R egar di ng pr om ptnes s , the l ength of del ayi n fi l i ng a pet i t i on t o open i s m eas ur ed fr om the dat e the def

endantr ece i ves the entryof def aul tj udgm ent . R uczyns ki v. J es r ay C ons tr . C orp. , 326 A . 2d 326, 328 ( Pa. 1974) . I n thi s cas e, N at i onal G r ange r ece i ved n o tice o f th e e n tryo f

d e f a u lt ea rlyin M a y2 0 0 0 . E v e n if H e slo p h a d f

iled a p e tit io n to open on the dayhe w as r et ai ned ( J ul y19, 2000) , fi l i ng w oul d have be en del ay ed appr oxi m at el ytw o and one- hal f m onths . A s the D i s tr i ctC our tnot ed, w e ca nnots ayt hat a tw o an d o n e-h alf-m o n th d elayis un ti m elyas a m att er o f P en n sy lvan ia l aw . C o m p are9

M cC oy , 305 A . 2d at699- 700 ( fi l i ng aft ertw o and one- hal f w eeks notpr om pt ) ; A l l egheny H y dr o N o. 1 v. A . L i ne B l dr s . , 722 A . 2d 189, 194 ( Pa. Super . C t . 1998) ( fi l i ng aft er41 day s notpr om pt ) ; w i th L i bertyN at ’ l B ank & T rus tC o. v. Y ackovi ch, 99 F. R . D . 518, 520 ( W . D . Pa. 1982) ( fi l i ng aft eral m os ts i x m onths ’ del ays t i l l pr om pt ) ; Q ueen Ci tyE l ec. Suppl yC o. v. Sol t i s E l ec. C o. , 421 A . 2d 174, 175 ( Pa. 1980) ( fi l i ng aft er21- m onth del ay pr om ptunderthe ci r cumst ance s ) . T hats ai d, the D i s tr i ctC our tconcl uded thatthe del ay w ou l d h ave rend ered a peti t i on un t i m el yun der the cir cum st ances i n thi s case because N a t i o n a l G r a n g e c o u l d n o tp r o v i d e a r e a s o n a b l e e x c u s e f o rth e d e l a y. T he D i s tr i ctC our ts i m i l ar l ydet erm i ned thatN at i onal G r ange c oul d notpr ovi de a su f f icie n t ex c u se u n d e r th e se c o n d p ro n g f o r its f a ilu re to a n sw e r C o y ler ’s c o m p lain t in the fi r s tpl ace . N at i onal G r ange a s s ert s the s ame excus e forboth i t s fai l ur e t o ans w ert he compl ai ntand i t s del ayi n fi l i ng a pet i t i on t o open: the companyr el i ed on the m i s r epr es ent at i ons of i t s “r ogue empl oy ee, ” Tra cyR obi ns on, thats he w as handl i ng the m att er . N at i onal G r ange a r gues thati tr eas onabl yentrus t ed R obi ns on t o handl e the C o y ler l it igation an d w as u n d er a “jus ti fiab le be li ef ” tha t th e c o m p an y ’s i n terests w ere b e in g p ro te c te d . W e not e fi r s tthat , even i f R obi ns on’ s act i ons coul d j us t i fythe company ’ s i ni t i al fai l ur e t o ans w erC oy l er ’ s compl ai nt , theydo notacc ountforthe del ayi n fi l i ng a pet i t i on t o open. C oy l ers erved al l r el evantpaper s on N at i onal G r ange’ s headqua r t er s i n N ew H ampshi r e i n addi t i on t o s endi ng s epar at e copi es t o R obi ns on. I ti s undi s put ed that10

N a tio n a l G ra n g e ’s le g a l d e p a rt m e n t r e c e iv e d n o tic e o f th e d e f a u lt in e a rl yM a y2 0 0 0 . T h u s, ev en if m an ag em en t had b eli ev ed that R o b inso n w as p rotec ti n g the c o m p an y ’s i nt er es t s pr i ort o t he entr yof def aul t , theyw er e on not i ce thatR obi ns on had fa i l ed i n her dut i es i n M ay2000. St i l l , N at i onal G r ange de l ay ed anothertw o and one- hal f m onths befor e hi r i ng H es l op and the Fi r m . A nydel aythatoccurr ed af t erthe l egal depart m ent r ece i ved not i ce of

the def aul tj udgm entcannotbe j us t i fi ed bycl ai m s thatN at i onal G r ange r eas onabl ybel i eved Robi ns on w as handl i ng the l i t i gat i on. A side fro m the p rom p tnes s issue , the D istri ct C o u rtfo u n d that N ati o n al G ran g e’s reli an ce o n it s “ro g u e e m p loy ee ” w o u ld n o t be s u ff ici en t j u sti fica ti o n fo r th e c o m p an y ’s f a ilu re to a p p e a r a n d a n s w e r C o y le r’ s c o m p la in t. U n d e r P e n n s y lv a n ia c a s e la w , a pet i t i onerm ayes t abl i s h s uffi ci entj us t i fi cat i on bas ed on over s i ght , i nadvert ence , or cl er i cal err orbyan empl oy ee. See, e. g. , B al k, 285 A . 2d at132 ( s uffi ci entj us t i fi cat i on w her e def

endant ’ s i ns ur ance companynegl i gent l yl os tthe compl ai nt ) ; Fox v. M el l on, 264 A . 2d 623, 625 ( Pa. 1970) ( excus abl e negl ectw her e def endant ’ s i ns ur ance company m i s t akenl ybel i eved i thad more t i m e t o r es pond and the def endanthi m s el f w as not s o p h is tic a te d e n o u g h to n o tic e a p ro b le m ); s e e a ls o C a m p b e ll v . H e ilm a n H o m e s , In c ., 335 A . 2d 371, 373 ( Pa. Super . C t . 1975) ( “w her e fa i l ur e t o ans w erw as due t o an over s i ght , an uni nt ent i onal om i s s i on t o act , ora mi s t ake of the r i ght s and dut i es of the ap p ell an t, the d ef

au ltjud g m en t m ayb e o p en ed . ”). W e agr ee w i th t he D i s tr i ctC our tthatR obi ns on’ s act i ons on behal f of N at i onal11

G r ange a m ount ed t o m or e than mer e i nadvert ence orover s i ght . T he Super i orC our tof Penns y l vani a’ s deci s i on i n C ampbel l pr ovi des an exa m pl e of e xcus abl e negl ecton the partof a c om panybas ed on the i natt ent i venes s of an e m pl oy ee. I n thatcas e, a compl ai nt agai ns tH ei l m an H om es , a s el l erof m obi l e homes, w as s erved on the managerof one of i t s sal es l ots . T he lotm anag er di d n ot forw ard the co m plai nt t o H ei l m an’s hom e off i ces, th e re b yf a ili n g to f

o llo w c o m p a n yp ro c e d u re . In d e c lin in g to “ sa d d le” th e c o m p a n yw ith a def aul tj udgm entdue t o i t s empl oy ee’ s i nadvert ence , the Super i orC our tnot ed thatt he c o m p a n y ’s m is ta k e w a s “ n o t u n lik e a c le ri c a l e rr o r.” Id . a t 3 7 3 . U nl i ke the def

endanti n C ampbel l , N at i onal G r ange w as aw ar e of Coy l er ’ s act i on agai ns tthe companyand s peci fi cal l ydel egat ed the r es pons i bi l i tyforhandl i ng the mat t er to its e m p lo y e e , R o b in so n . T h e D istric t C o u rt th u s d e ter m in e d th a t C a m p b e ll i s i nappos i t e and i ns t ead r el i ed on the Super i orC our t ’ s deci s i on i n A ut ol ogi c, I nc. v. C ristin z io M o v e rs, 4 8 1 A .2 d 1 3 6 2 (P a . S u p e r. C t. 19 8 5 ). L ik e th is c a se , A u to lo g ic i nvol ved the fa i l ur es of an e m pl oy ee w ho w as entrus t ed t o handl e cl ai m s agai ns tthe defe ndantcompany . See i d. at1363. T he Super i orC our texpr es s l ydi s t i ngui s hed C am p b ell an d o ther c ase s inv o lving m ere inad v erten ce an d clerical error: T h e f a c t re m a in s th a t itw a s th is typ e o f e m p lo y e e th a t ap p e llan t ch o se to g ive re sp o n sibil ityto f

o r ha n d li n g d am ag e c lai m s. . . . T h u s, ap p ell an t’ s fai l ure t o respon d to the co m plai nt w as not due to si m plythe inat t enti ven ess of i t s empl oy ee, butt o hercons ci ous deci s i on w hi ch i thad empow er ed her to m a k e . I d. at1364. W e agr ee w i th t he D i s tr i ctC our tthatN at i onal G r ange’ s as s ert ed j us t i fi cat i onW e not e thatthe not i on thatR obi ns on had al w ay s been a s t el l arempl oy ee w ho had 4 an unexpe ct ed l aps e i n char act erappea r s t o be bel i ed byherpr i orfai l ur e t o fol l ow companypol i cyw i th r es pectt o t he C oy l erv. E bac mat t er . See Sect i on I , s upr a. 12 fori t s fai l ur e t o ans w erC oy l er ’ s compl ai nti s no cl os ert o m er e i nadvert ence than the excus e r ej ect ed bythe Super i orC our ti n A ut ol ogi c. N at i onal G r ange a t t empt s t o di s t i ngui s h i t s excus e fr om the one a s s ert ed bythe d e f e n d a n t in A u to lo g ic b ylab e lin g R o b in so n a “ ro g u e e m p lo y e e .” A s w e u n d e rsta n d it, the di s t i nct i on thatN at i onal G r ange dr aw s betw een thi s cas e and A ut ol ogi c i s that N at i onal G r ange r eas onabl yr el i ed on R obi ns on, w ho had demonstr at ed r el i abi l i tyi n t he pas t , w her eas the def

endanti n A ut ol ogi c unr eas onabl yr el i ed on an unqua l i fi ed 4 e m p lo y e e . In o th e r w o rd s, N a tio n a l G ra n g e d id n o t m a k e th e d e lib e ra te d e c isio n n o t to defe nd butr atherr eas onabl ybel i eved thati t s i nt er es t s w oul d be pr ot ect ed bygi vi ng t he c a s e to R o b in s o n , w h o u n f o re s e e a b ly m is le d th e c o m p a n ya n d f a ile d in h e r d u tie s . T h is d istin c tio n is n e ith e r re a l n o r m e a n in g f u l. T h e re w a s n o su g g e stio n in A u to lo g ic th a t th e d e f

e n d a n t’s e n tru ste d e m p lo y e e w a s g e n e ra llyu n q u a lifie d to h a n d le h e r re sp o n sib ili ties . M o re o v e r, li k e N a tio n a l G ra n g e , the d e f e n d a n t co m p a n yin A ut ol ogi c appa r ent l yi nt ended t o defe nd the under l y i ng l i t i gat i on butw as pr event ed fr om doi ng s o bythe mi s t akes of i t s empl oy ee. See i d. at1363. T hus , i ns ofaras N at i onal G r ange w as pr event ed fr om defe ndi ng the C oy l erm att erbeca us e i tdel egat ed r es pons i bi l i tyt o an empl oy ee w ho chos e nott o per form herdut i es byans w er i ng the compl ai nt , thi s cas e i s di r ect l yanal ogous t o A ut ol ogi c.13

H o w e v e r, N a tio n a l G ra n g e c laim s th a t th e D istric t C o u rt f a iled in its o b lig a tio n to pr edi cthow the Supr eme C our tof Penns y l vani a w oul d have rul ed on thi s cas e byr el y i ng o n sta te in ter m e d iate a p p e llate c o u rt d e c isio n s. B rie f f o r A p p e llan t at 1 4 (“ [ B ]ysim p ly d e ter m in in g th a t A u to lo g ic c o n tro lled , the D istric t C o u rt f a iled in its f

u n c tio n to ‘p re d ict’ the l aw of the hi ghes tcourtof the j ur i s di ct i on. ”) . N at i onal G r ange a r gues thatthe Supr eme C our tof Penns y l vani a has notaddr es s ed the s peci fi c i s s ue of w hetherr el i ance on a “r ogue empl oy ee” can c ons t i tut e a s uffi ci entexcus e forfai l i ng t o ans w era compl ai nt u n d e r t h e s ta n d a rd s f

o r r e v ie w in g a p e titio n to o p e n . Feder al court s s i t t i ng i n di ver s i ty“ar e t o appl ys t at e l aw as i nt erpr et ed bythe s ta te ’s h ig h e s t c o u rt . In th e a b se n c e o f g u ida n c e fro m th a t co u rt w e a re to re ferto decis i ons of

the s tat e’s i nt er m edi at e appel lat e cour t s f oras s is tance i n det erm i ni ng how the h igh est co u rtw o u ld ru le. ” M cK en n a v . P ac ifi c R ail S erv . , 3 2 F . 3 d 8 2 0 , 8 2 5 (3d C ir . 1 9 9 4 ) (c itatio n s o m itt e d ) (e m p h a sis a d d e d ). In th is c a se , the D istric t C o u rt a p p lied w e lls ett l ed l aw fr om the hi ghes tcourti n Penns y l vani a r egar di ng w hatfac t or s m us tbe co n side red in rev iew ing a p eti ti o n to o p en a d ef au ltjud g m en t. A lth o u g h the s tat e’s hi ghes tcourthas notdeci ded a c as e w i th the pr eci s e fa ctual backgr ound pr es ent ed her e, th e D istric t C o u rt c o rre c tlylo o k e d to d e c isio n s f ro m th e sta te’ s in ter m e d iate a p p e llate c o u rt s f o r g u id a n c e in a p p lyin g th e w e ll- s e ttle d la w to th e u n d is p u te d f a c ts o f th is c a s e . S p e c if ica lly , P e n n sy lv a n ia la w c lea rlyre q u ire s th a t a p a rtyp e tit io n in g to o p e n a d e f a u lt j udgm entm us tes t abl i s h a s uffi ci entexcus e forfai l i ng t o ans w erthe under l y i ng compl ai ntI n both cas es , the Super i orC our tr ecogni zed thatPenns y l vani a l aw pr ovi des that 5 cl er i cal err ororm er e over s i ghtbyan empl oy ee maycons t i tut e a s uffi ci entl egal ju stif ica tio n f o r f a ili n g to a n sw e r a c o m p lain t. A u to lo g ic, 4 8 1 A .2 d a t 1 3 6 4 ; C a m p b e ll, 3 3 5 A . 2 d at 37 3 . W h il e the co u rtin C am p b ell h eld th at an inattentive e m p loy ee ’s over s i ghti n forw ar di ng paper s t o hi s s uper i or s “i s notunl i ke a c l er i cal err or , ” 335 A . 2d at 373, the courti n A ut ol ogi c expr es s l ydi s t i ngui s hed s i tuat i ons i n w hi ch an e m pl oy ee m a k e s a “ c o n sc io u s d e c isio n w h ich [ th e c o m p a n y ] e n tru ste d h e r to m a k e ” f ro m sim p le in a tte n tiv e n e s s , 4 8 1 A .2 d a t 1 3 6 4 . 14 and pr ovi des thati nadvert ence orover s i ghtm aycons t i tut e a s uffi ci entexcus e. See B al k, 2 8 5 A .2 d a t 1 3 2 ; F o x , 2 6 4 A .2 d a t 6 2 5 . T h e D istric t C o u rt p ro p e rlylo o k e d to f a c tu a lly anal ogous deci s i ons fr om the Super i orC our tof Penns y l vani a t o det erm i ne thatthe i nact i on of N at i onal G r ange, thr ough i t s empl oy ee, w entbey ond m er e i nadvert ence . C ontr aryt o N at i onal G r ange’ s as s ert i ons , A ut ol ogi c and Cam pbel l do noti nvol ve confl i ct i ng i nt erpr et at i ons of s t at e l aw . R atherthes e ca s es i nvol ve the appl i cat i on of the s ame l egal pr i nci pl e t o di ffe r i ng s et s of fa ct s . O urr evi ew of the D i s tr i ctC our t ’ s opi ni on 5 re v e a ls th a t th e c o u rt p ro p e rlyre v iew e d b o th c a se s a n d w a s p e rsu a d e d b yth e re a so n in g in A u tolog ic, w h ich w as f ac tuallym o re sim il ar to the ca se a t han d . T h e D istri ct C o u rt demonstr at ed an a w ar enes s of the pr operappr oach t o s t at e l aw , and w e w i l l notfi nd err or m er el ybeca us e the D i s tr i ctC our tdi d notexpr es s l y“pr edi ct ” thatthe Supr eme C our tof Penns y l vani a w oul d appl ys t at e l aw t o the fa ct s of thi s cas e i n the s ame w ay . W e w i l l not e le v a te f o rm o v e r s u b s ta n c e a n d f in d re v e rs ib le e rr o r. B. C hoi ce of

Law W e al s o agr ee w i th t he D i s tr i ctC our tthatN at i onal G r ange c oul d nots us t ai n a l egal m al pr act i ce c l ai m bas ed on i t s choi ce of l aw ar gum entbeca us e N at i onal G r ange ha dN at i onal G r ange now as s ert s thatan att empt t o ar gue thatV i r gi ni a l aw appl i ed af t er 6 th e d e f a u lt j u d g m e n t h a d a lre a d yb e e n e n ter e d c o u ld h a v e b e e n c o n stru e d a s a m o tio n to amend t he pl eadi ngs underPa. R . C . P. N o. 1033, 42 Pa. C . S. A . A l though a mot i on under R ul e 1033 maybe made atanyt i m e, even a ft ertr i al , s ee W i nt erhal t erv. W es tPenn Pow er C o. , 512 A . 2d 1187, 1189 ( Pa. Super . C t . 1986) , N at i onal G r ange di d nots ubm i tany re s p o n s iv e p le a d in g s in th is c a s e th a t m ig h t b e “ a m e n d e d ” p u rs u a n t to th is ru le . 15 al r eadyw ai ved i t s abi l i tyt o i nvoke V i r gi ni a l aw bythe t i m e i tr et ai ned H el s op. U nder Penns y l vani a l aw , i s s ues i nvol vi ng choi ce of l aw ar e notj ur i s di ct i onal and maybe w ai ved i f notr ai s ed. See 42 Pa. C . S. A . § 5327( a) ( “A partyw ho i nt ends t o r ai s e an i s s ue conce rni ng the l aw of anyj ur i s di ct i on . . . out s i de the C om m onw eal th s hal lgi ve not i ce in hi s pl e a di ng s orothe rr e a s on a bl e w r i t t e n n ot i c e . ” ( e mpha s i s a dd e d) ) ; s e e a l s o Pa . R. C. P. N o. 1030( a) , 42 Pa. C . S. A . ( r equi r i ng part i es t o pl ead non- j ur i s di ct i onal defe ns es i n a r es pons i ve pl eadi ng) . T her efor e, byfai l i ng t o fi l e a r es pons i ve pl eadi ng w hi ch r ai s ed the choi ce of l aw i s s ue, N at i onal G r ange w ai ved i t s abi l i tyt o i nvoke V i r gi ni a l aw . See Pa. R . C . P. N o. 1032( a) , 42 Pa. C . S. A . ( “A partyw ai ves al l defe ns es and obj ect i ons w hi ch are n o t prese n ted e ith er b yp reli m inaryo b jecti o n , an sw er o r rep ly . . . . ”). 6 Forthes e r eas ons , had H es l op ar gued af t erthe def

aul tj udgm enthad al r eadybeen ent er ed and the t i m e t o fi l e r es pons i ve pl eadi ngs had pas s ed, thatV i r gi ni a’ s l aw on d a m a g e s w a s a p p lic a b le , s u c h a n a rg u m e n t w o u ld h a v e f a ile d . I V. CO NC L US I ON B eca us e a pe t i t i on t o open the def aul tj udgm entand a c hoi ce of l aw ar gum entat the as s es s m entof damages s t age w oul d have be en r ej ect ed i f m ade, N at i onal G r ange cannotes t abl i s h t hati tw oul d have s ucce eded i n the under l y i ng C oy l erv. N at ’ l G r ange16

li ti g ati o n b u t fo r th e o m issi o n s o f H eslo p an d the F irm . T h ere fo re, un d er P en n sy lvan ia’s law o n lega l m alpra cti ce , w h ethe r th ese o m issi o n s co n sti tute a f ail u re to e x erc ise o rdin ary sk il l and k n o w ledg e is i rreleva n t. S ee K itu sk ie, 7 1 4 A . 2 d at 10 3 0 . W e w il l th ere fo re a f f irm th e Ju ly8 , 2 0 0 4 , O rd e r a n d M e m o ra n d u m O p in io n o f th e D istric t C o u rt.