Bert Co. v. Turk

298 A.3d 44

The BERT COMPANY d/b/a Northwest Insurance Services

v.Matthew TURK, William Collins, Jamie Heynes, David McDonnell, First National Insurance Agency, LLC, First National Bank, and FNB Corporation

Appeal of: Matthew Turk, First National Insurance Agency, LLC, First National Bank, and FNB Corporation

The Bert Company d/b/a Northwest Insurance Services

v.Matthew Turk, William Collins, Jamie Heynes, David McDonnell, First National Insurance Agency, LLC, First National Bank and FNB Corporation

Matthew Turk

v.The Bert Company, Northwest Bank, and Northwest Bancshares, Inc.

Appeal of: Matthew Turk, First National Insurance Agency, LLC, First National Bank, and FNB Corporation

No. 13 WAP 2022

No. 14 WAP 2022

Supreme Court of Pennsylvania.

Argued: October 25, 2022

Decided: July 19, 2023

Scott Alan Bowan, Esq., Scott David Cessar, Esq., Casey Alan Coyle, Esq., Frank Timothy Grieco, Esq., Eckert Seamans Cherin & Mellott, LLC, for Appellants Matthew Turk, et. al.

Kenneth W. Africano, Esq., Timothy Ross Bevevino, Esq., Andmoragan Cody Thomas, Esq., Swanson, Bevevino & Sharp, P.C., Jonathan Richard Bruno, Esq., Stephen John Del Sole, Esq., Del Sole Cavanaugh Stroyd LLC, for Appellee The Bert Company d/b/a Northwest Insurance Services

James Michael Beck, Esq., Reed Smith LLP, for Amicus Curiae Product Liability Advisory Council, Inc.

Robert L. Byer, Esq., Duane Morris LLP, for Amicus Curiae Chamber of Commerce of the United States of America

Joseph Regis Froetschel, Esq., Phillips Froetschel LLC, for Amici Curiae Pennsylvania Association for Justice and American Association for Justice

John Mercer Masslon II, Esq., Washington Legal Foundation, for Amicus Curiae Washington Legal Foundation

Matthew Daniel Vodzak, Esq., Fowler Hirtzel McNulty & Spaulding, LLP, for Amicus Curiae Philadelphia Association of Defense Counsel

Corrie Allen Woods, Esq., Woods Law Offices PLLC, for Amici Curiae Pennsylvania Coalition for Civil Justice Reform, American Property Casualty Insurance Association, Pennsylvania Chamber of Business and Industry, Pennsylvania Manufacturers Association, Insurance Federation of Pennsylvania, and LeadingAge PA

TODD, C.J., DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, JJ.

OPINION

JUSTICE DONOHUE

In this appeal by permission, we consider the application of jurisprudence of the United State Supreme Court¹ addressing the constitutionality of an award of punitive damages² by a civil jury in this Commonwealth.³ We specifically address the ratio calculation first discussed in BMW of North America, Inc. v. Gore , 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), and developed in State Farm Mutual Automobile Ins. Co. v. Campbell , 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). Our grant of allowance of appeal narrowly encompasses the appropriate ratio calculation measuring the relationship between the amount of punitive damages awarded against multiple defendants who are joint tortfeasors and the compensatory damages awarded. The ratio is one of the considerations in assessing whether an award of punitive damages is unconstitutionally excessive.

The Superior Court calculated the punitive to compensatory damages ratio using a per-defendant approach, as calculated by the trial court, which resulted in ratios ranging from 1.81 to 1 to 6 to 1, rather than a per-judgment approach, which resulted in a ratio of 11.2 to 1. For the reasons discussed, we generally endorse the per-defendant approach as consistent with federal constitutional principles that require consideration of a defendant's due process rights. Further, we conclude that under the facts and circumstances of this case, it was appropriate to consider the potential harm that was likely to occur from the concerted conduct of the defendants in determining whether the measure of punishment was both reasonable and proportionate. Thus, we affirm the order of the Superior Court.

BACKGROUND

The Bert Company, dba Northwest Insurance Services ("Northwest"), is an insurance brokerage firm with clientele in northwestern Pennsylvania and western New York. In 2017, Northwest realized gross earnings of $9.4 million. Beginning in 2005, Matthew Turk ("Turk") was employed as an insurance broker with Northwest. In 2009, he became head of the property and casualty division, and then worked as senior vice president of that division from January 2013 until his departure in May 2017. First National Insurance Agency, LLC ("FNIA") is an insurance brokerage firm. FNB Corporation is the parent company of First National Bank ("FNB") and FNIA (collectively and with FNIA "First National").

In 2016, FNIA had only a minor market share in northwestern Pennsylvania. To grow its business in that region, First National developed a plan to takeover Northwest, initially by convincing key Northwest employees to leave Northwest for FNIA and to bring their clients with them. These employees were under non-solicitation agreements with Northwest. First National initiated this plan,⁴ which it referred to as a "lift out," beginning in the fall of 2016 by covertly meeting with Turk. The ultimate goal, however, was not only the acquisition of certain key employees and their books of business but the takeover of Northwest at a fire sale price.⁵

Through the fall and winter of 2016, Turk repeatedly met with First National about the plan with the hope that First National could gut Northwest by hiring the bulk of its highest producers, acquiring their clients, and ultimately forcing that company to sell its remaining book of clients to First National. This course of conduct included Turk providing First National with sensitive pieces of Northwest's data, such as his book of business and a list of profitable employees that Turk believed would be willing to leave Northwest to work for First National. Turk's interactions with First National included various correspondence with two Senior Vice Presidents of FNB regarding the plan to raid Northwest.

During this time, Turk and William Collins, a Northwest employee who Turk put in contact with First National, forwarded their non-solicitation/non-disclosure agreements to First National for review.⁶ Thereafter, Turk asked Northwest for a new agreement to reduce his restrictive period from three years to one year. Unaware of the takeover plan, Northwest provided a new agreement to Turk, which he signed on February 16, 2017 ("NSND Agreement").⁷

Correspondence and multiple meetings occurred among various representatives of First National and Northwest employees regarding the takeover of Northwest; all the while Turk attempted to undermine Northwest's operations. For example, in May 2017, Northwest held a staff retreat where Turk was charged with overseeing a session regarding a new software program. Rather than covering that topic, Turk "furthered [First National's] plan to create discontent among [Northwest's] employees by opening the floor for grievances." The Bert Co. v. Turk , 257 A.3d 93, 106 (Pa. Super. 2021). Two days after the retreat, Turk and Jamie Heynes ("Heynes"), another Northwest employee covertly participating in the plan, met with Linda Wallin ("Wallin"), an account manager at another agency who was planning to join Northwest where she would have reported to Turk. They informed Wallin that they were leaving Northwest for FNIA and encouraged her to join FNIA instead of Northwest. The efforts of Turk and Heynes were successful. Although Turk was directly responsible for Wallin's employment by FNIA, Wallin was instructed to advise him in writing of her decision to join FNIA in order to conceal Turk's involvement in her decision to forego employment with Northwest.

Toward the middle of May 2017, the plan began to come to fruition as several Northwest employees resigned and accepted offers from First National. Pursuant to the plan, Turk remained at Northwest to convince the company to sell its remaining business to First National. Northwest refused, choosing instead to fire Turk and initiate legal action.

Northwest initially sued several of its ex-employees, including Turk and William Collins, alleging breach of their NSND Agreements. The trial court issued an injunction barring the ex-employees from soliciting or servicing Northwest customers and from soliciting other Northwest employees to leave the company. Northwest then filed an amended complaint, adding First National as defendants and seeking compensatory and punitive damages. In addition, Northwest asserted: (1) breach of contract and fiduciary duties and theft of trade secrets against its ex-employees; (2) unfair competition against First National; and (3) misappropriation of trade secrets, tortious interference with contract, and civil conspiracy against Turk and First National.

The case proceeded to a jury trial on December 10, 2018, resulting in verdicts on December 21, 2018 against Turk, FNIA, FNB, and FNB Corporation (collectively the "Defendants"). The jury found Turk liable for breach of contract, breach of fiduciary duty, and civil conspiracy; it found First National liable for civil conspiracy and unfair competition. The jury awarded Northwest compensatory damages⁸ as follows:

[Editor's Note: The preceding image contains the reference for footnote⁹ ].

The trial court instructed the jury that Northwest would receive only the largest award of any compensatory damages and that Northwest could not recover on each theory separately. Trial Court Opinion on Post-Trial Motions for Relief ("PTM Opinion"), 4/29/2019, at 14 (citing N.T., 12/20/2018, at 180).¹⁰ The verdict slip also reflected this instruction.¹¹ The largest compensatory damages award for which Turk and First National were jointly and severally liable was $164,943 (civil conspiracy). The largest compensatory damages award for which First National was jointly and severally liable was $250,000 (unfair competition).¹² The jury also awarded a total of $2.8 million in punitive damages, imposed per-defendant as follows:

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Turk Breach of Contract & Fiduciary