Opinions of the United
1994 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


11-16-1994

Gemini v. State Farm Ins. Co.
Precedential or Non-Precedential:

Docket 94-1395




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Recommended Citation
"Gemini v. State Farm Ins. Co." (1994). 1994 Decisions. Paper 193.
http://digitalcommons.law.villanova.edu/thirdcircuit_1994/193


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                  UNITED STATES COURT OF APPEALS

                      FOR THE THIRD CIRCUIT

                             ____________

                            NO. 94-1395
                             ____________

        GEMINI PHYSICAL THERAPY AND REHABILITATION, INC.,
                                              Appellant

                                  v.

         STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
                          ____________

          Appeal from the United States District Court
            for the Eastern District of Pennsylvania
                      D.C. No. 91-cv-00013
                          ____________

                     Argued September 19, 1994
       Before:   SCIRICA, ROTH, and ROSENN, Circuit Judges
                      Opinion Filed November 16, l994
                            ____________

DAVID S. DESSEN, ESQUIRE (Argued)
Dessen, Moses & Sheinoff
1814 Chestnut Street
Philadelphia, PA 19103
  Attorneys for Appellant

EARL T. BRITT, ESQUIRE (Argued)
MARK P. HARBISON, ESQUIRE
Britt, Hankins, Schaible & Moughan
Two Penn Center, Suite 515
Philadelphia, PA 19102
  Attorneys for Appellee
                           ____________

                         OPINION OF THE COURT


ROSENN, Circuit Judge.

          Gemini Physical Therapy and Rehabilitation, Inc.

("Gemini") is a health care provider who treated various
individuals who were injured in automobile accidents and insured

by State Farm Mutual Automobile Insurance Company ("State Farm").

Gemini and other health care providers who are no longer parties

to this action ("the plaintiffs") filed a complaint in the United

States District Court for the Eastern District of Pennsylvania.1

The plaintiffs claimed to be the assignees of the insureds'

rights under their automobile insurance policies, and alleged

that State Farm unreasonably refused to pay the insureds' bills

in full in violation of the insureds' contracts and the

Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa.

C.S. § 1701 et seq. ("MVFRL").   The complaint sought payment in

full, compensatory and punitive damages for tortious interference

with contractual relations, and punitive damages pursuant to 42

Pa. C.S. § 8371.

          State Farm filed a motion to dismiss plaintiffs' claims

for punitive damages under 42 Pa. C.S.A § 8371 and for

intentional interference with contractual relations, which the

district court granted.   The plaintiffs subsequently filed a

first amended complaint which included new claims pursuant to the

Pennsylvania Unfair Trade Practices and Consumer Protection Law,

73 P.S. §§ 201-1, et seq. ("CPL").   The district court granted

State Farm's motion to dismiss the plaintiffs' CPL claims for

lack of standing.



1
 .   The district court dismissed the claims of certain
plaintiffs for lack of subject matter jurisdiction, and dismissed
the other claims without prejudice for misjoinder.
            Plaintiffs filed a second amended complaint.   State

Farm filed a motion for partial summary judgment seeking

dismissal of all breach of contract claims under the MVFRL for

reimbursement of medical bills submitted to State Farm after

April 15, 1990, because of plaintiffs' alleged failure to exhaust

their remedies under the MVFRL.    The district court denied the

motion.    State Farm renewed its motion for partial summary

judgment in light of a recent Pennsylvania Superior Court

decision in Terminato v. Pennsylvania Nat'l Ins. Co., 

(Pa. Super. 1993), rev'd and remanded 

(Pa.

1994).    The district court granted the motion and dismissed all

claims for reimbursement of medical bills submitted to State Farm

after April 15, 1990.

            In a bifurcated trial, the jury returned a verdict in

favor of State Farm, finding that none of the treatment rendered

by Gemini to the State Farm insureds was medically necessary.

The district court denied Gemini's motion for a new trial.

Gemini filed a timely appeal from those parts of the district

court's orders dismissing Gemini's claim for punitive damages and

intentional interference with contract claims, dismissing its

claim under the CPL, and granting partial summary judgment for

State Farm.    We affirm in part and reverse in part.

                                  I.

            As a preliminary matter, State Farm concedes that in

light of the Pennsylvania Supreme Court's recent decision in

Terminato v. Pennsylvania Nat'l. Ins. Co, 

(Pa.
1994), the order of the district court granting State Farm's
motion for partial summary judgement must be vacated.     In

Terminato, the court held that exhaustion of Peer Review

Organization procedures under the MVFRL is not a prerequisite of

bringing suit in a court of law for nonpayment of medical bills.

Therefore, we will remand this case for a trial on Gemini's

breach of contract claims under the MVFRL for reimbursement of

medical bills submitted to State Farm after April 15, 1990.

                                  II

          Gemini's challenges primarily involve legal

determinations by the district court, and therefore we exercise

plenary review.   See Louis W. Epstein Family Partnership v. KMart

Corp., 

, 766 (3d Cir. 1994).       Gemini first argues

that it has a valid claim under the Pennsylvania Unfair Trade

Practices and Consumer Protection Law, 73 P.S. §§ 201-1, et seq.

The CPL provides in pertinent part:
          Any person who purchases or leases goods or
          services primarily for personal, family or
          household purposes and thereby suffers any
          ascertainable loss of money or property, real
          or personal, as a result of the use or
          employment by any person of [unfair or
          deceptive acts or practices] may bring a
          private action, to recover [damages].


73 P.S. § 201-9.2(a).

          The district court dismissed Gemini's claims under the

CPL because it lacked standing.    The court reasoned that Gemini,

a provider of health care to purchasers of insurance policies, is

not a member of the class protected by the statute.    It rejected

Gemini's argument that it has standing by virtue of its status as

assignee under the insurance policies.    The court held that
Gemini is only an assignee of the limited right to receive

payment under the policies.

          The CPL contemplates as the protected class only those

who purchase goods or services, not those who may receive a

benefit from the purchase.    See Zerpol Corp. v. DMP Corp., 561 F.

Supp. 404, 415 (E.D.Pa. 1983) (dismissing corporate plaintiff's

claim because private cause of action under the CPL is limited to

purchasers or lessors of goods used primarily for personal,

family, or household purposes).    Accord Klitzner Industries Inc.

v. H.K. James & Co., 

, 1258 (E.D.Pa. 1982);

Permagrain Products, Inc. v. U.S. Mat & Rubber Co., 

, 111 (E.D.Pa. 1980).    Although Gemini may have been

indirectly injured, it is not a purchaser or consumer of goods or

services under the CPL and therefore has no private right of

action under the statute.

          Gemini relies on Hedlund Manufacturing Company v.

Weiser, Stapler & Spivak, 

(Pa. 1988) in support for

its argument that the insureds' CPL claims are assignable.    In

Hedlund, the Pennsylvania Supreme Court acknowledged

Pennsylvania's well-established policy of permitting causes of

actions to be assigned and held that a claim for damages based

upon legal malpractice is assignable.   This case is

distinguishable for two reasons.   First, Gemini has sued under a

specific statute intended to restrict fraud against consumers.

However, Gemini is a commercial purchaser of the insureds'

claims; its complaint does not allege that it is a purchaser or

consumer of goods or services from State Farm.   Second, in
Hedlund, the assignor expressly "assigned all rights and causes

of action" pursuant to a patent application.   

    Here,

the complaint alleges that the patients assigned only their

rights under their insurance contracts.   It does not follow

consequentially that the patients also assigned their rights to

bring suits under the CPL.   Because the CPL focuses narrowly on

the protection of consumers in the purchase of goods or services,

we predict that the Pennsylvania Supreme Court would not infer an

assignment of claims under the CPL.   Accordingly, we perceive no

error in the district court's holding that Gemini lacks standing

to bring an action against State Farm under the CPL.

                               III.

          Next, Gemini challenges the district court's dismissal

of its claim for intentional interference with contractual

relations brought pursuant to section 766A of the Restatement

(Second) of Torts.2   In contrast to section 766 of the

Restatement,3 which has been adopted by Pennsylvania, a party is

2
.         Section 766A provides:
          One who intentionally and improperly
          interferes with the performance of a contract
          . . . between another and a third person, by
          preventing the other from performing the
          contract or causing his performance to be
          more expensive or burdensome, is subject to
          liability to the other for the pecuniary loss
          resulting to him.
3
.         Section 766 provides:
          One who intentionally and improperly
          interferes with the performance of a contract
          . . . between another and a third person by
          inducing or otherwise causing the third
          person not to perform the contract, is
          subject to liability to the other for the
liable under section 766A for merely making a third party's

performance of his contract with another party more expensive or

burdensome.    As this court stated in its careful analysis of the

two sections in Windsor Secur., Inc. v. Hartford Life Insurance

Co., 

(3d Cir. 1993), "[s]ection 766 addresses

disruptions caused by an act directed not at the plaintiff, but

at a third person:    the defendant causes the promisor to breach

its contract with the plaintiff.    Section 766A addresses

disruptions caused by an act directed at the plaintiff:      the

defendant prevents or impedes the plaintiff's own performance."

   Not only are the targets of the two sections

different, but section 766A is much more difficult to apply and

conducive to disputes.

          In Price v. Sorrell, 

(Wyo. 1989), quoted

in 

, n.10, the Supreme Court of Wyoming

directly faced the application of section 766A of the

Restatement:   the defendant's interference made the plaintiff's

performance of a contract more costly.    Although the court had

previously adopted §§ 766 and 766B of the Restatement, it refused

to adopt § 766A.     It reasoned, and we agree, that causing

performance of a contract to be more costly "as an element of

proof is too speculative and subject to abuse to provide a

meaningful basis for a cause of 

.    Thus,

(..continued)
          pecuniary loss resulting to the other from
          the failure of the third person to perform
          the contract.
we are not persuaded that the Pennsylvania Supreme Court would

adopt section 766A, and we see no error in the district court's

dismissal of Gemini's section 766A claim.

                                IV.

            Gemini also contends that it has a valid claim for

punitive damages under 42 Pa. C.S. § 8371.    Section 8371

provides:
            In an action arising under an insurance
            policy, if the court finds that the insurer
            has acted in bad faith toward the insured,
            the court may take all of the following
            actions:

                 (1) Award interest on the amount of
                 the claim from the date the claim
                 was made . . . .

                 (2) Award punitive damages against the
                 insurer.

                 (3) Assess court costs and attorney fees
                 against the insurer.


42 Pa. C.S. § 8371.   The district court dismissed Gemini's

section 8371 claim, reasoning that the Pennsylvania legislature
intended the MVFRL, 75 Pa. C.S. § 1797, to provide the exclusive

first party remedy for bad faith denials by insurance companies

with respect to claims arising out of automobile accident

injuries.

            In Barnum v. State Farm Mutual Automobile Ins. Co., 

(Pa. Super. 1993), the court held that the provisions of

section 1797, and not section 8371, are to be applied to claims

for first party benefits under the MVFRL.    Relying on the

Pennsylvania statute controlling statutory construction, 1
Pa.C.S. § 1933, the court noted that the two statutory provisions

cannot be reconciled because the damages in the event of wanton

or bad faith conduct and the rates of interest specified by each

are different.    

.     Moreover, the

procedures and remedies under section 1797 are set forth with

specificity.     

concluded that because the two

provisions were enacted at the same time and cannot be

reconciled, the specific provisions of 75 Pa.C.S. § 1797 must be

deemed an exception to the general remedy for bad faith contained

in 42 Pa.C.S. § 8371.      

(citing supporting district

court cases).    We find this statutory construction to be

convincing and predict the Pennsylvania Supreme Court would

similarly rule on this matter.     Thus, the district court did not

err in dismissing Gemini's claim brought under 42 Pa. C.S. §

8371.

          Finally, Gemini raises several issues pertaining to the

evidentiary admission of expert testimony, settlement

discussions, and rebuttal witnesses.        We summarily reject these

arguments as lacking merit.

                                   V.

          The district court's grant of partial summary judgement

in favor of State Farm must be reversed in light of Terminato.
Accordingly, we will remand this matter for a new trial as to

Gemini's claims for reimbursement of medical bills submitted to

State Farm after April 15, 1990.        In all other respects, the

orders of the district court will be affirmed.        Three-fourths of

the costs to be taxed against Gemini.
_________________________