Friday, October 29, 2010
"The Wharton Brand": Eastern District Of Pennsylvania Finds Subsequent Remedial Measures Rule Applies To Breach Of Contract Actions In Action Against Penn
Federal Rule of Evidence 407 provides that
When, after an injury or harm allegedly caused by an event, measures are taken that, if taken previously, would have made the injury or harm less likely to occur, evidence of the subsequent measures is not admissible to prove negligence, culpable conduct, a defect in a product, a defect in a product's design, or a need for a warning or instruction. This rule does not require the exclusion of evidence of subsequent measures when offered for another purpose, such as proving ownership, control, or feasibility of precautionary measures, if controverted, or impeachment.
Back in September 2009, I posted an entry about the Court of Appeals of Wisconsin finding that Wisconsin's counterpart to Rule 407 did not apply to criminal cases. I disagreed with this conclusion, and I think that the recent opinion of the United States District Court for the Eastern District of Pennsylvania in Reynolds v. University of Pennsylvania, 2010 WL 4187935 (E.D.Pa. 2010), which found that Rule 407 applies to breach of contract actions, exposed the flaw in the reasoning of the Court of Appeals of Wisconsin.
In Reynolds, Frank Reynolds was a student in the Executive Masters in Management (EMTM) program at the University of Pennsylvania. Reynolds brought a breach of contract, unjust enrichment, and Unfair Trade Practices and Consumer Protection (UTPCPL) action against Penn, claiming that Penn officials failed to fulfill their promise to him that upon his completion of the EMTM program, he would in effect be considered a graduate of The Wharton School and benefit from "the Wharton Brand." In response to complaints by Reynolds and others regarding the issue of whether they would be entitled to these and other benefits, the
Penn administration scheduled a town hall meeting. The purpose of the meeting was to clarify the nature of the EMTM program's affiliation with the Wharton School....At that meeting Anjani Jain, Dean of the Wharton School, informed the audience that "you are students in the engineering school....The admissions are done [in] engineering. You go to commencement from Penn Engineering, and the degree you get is an engineering degree."...Jain also stated "I think for all intents and purposes your access to our alumni services is indistinguishable from those who have Wharton degrees."...Lyle Ungar, an EMTM co-director, acknowledged that "[there have] occasionally been mistakes made from within" with respect to the marketing of the program....He elaborated: "some of them to my horror only mention Wharton, which I think is, you know, unforgivable."...However, when asked later whether the EMTM program was "marketed as an exclusively Wharton program to any of you," unidentified audience members responded in the negative.
After the jury found for Penn on the UTPCPL claim, found for Reynolds on the breach of contract claim, and did not render a verdict of the unjust enrichment claim, the United States District Court for the Eastern District of Pennsylvania granted Penn's motion for a new trial.
Before the retrial, Reynolds claimed for the first time that he should be able to admit evidence concerning what happened at the town hall meeting despite the fact that it was evidence of subsequent remedial measures because "Rule 407 does not apply to breach of contract claims." The court rejected this argument and deemed the evidence admissible. This time, the jury found for Penn on the breach of contract claim but found for Reynolds on the unjust enrichment claim.
The parties then cross-appealed, and the court, inter alia, affirmed its ruling under Federal Rule of Evidence 407.
First, the court found that the plain language of the rule indicates that it applies to breach of contract actions, concluding that
Had the drafters of the Rule intended it to apply only to tortious conduct, they could have used the words "tortious conduct" in place of "culpable conduct." By choosing the broader of the two phrases, the drafters clearly demonstrated their intent not to confine the application of the Rule to tort cases. Because a breach of contract is culpable conduct...I find that the plain language of Rule 407 indicates that it applies to breach of contract cases.
Second, the court found that the public policy underlying the Rule indicates that it applies to breach of contract actions, citing a Seventh Circuit opinion for the proposition that
"to use at a trial a revision in a contract to argue the meaning of the original version would violate Rule 407 of the Federal Rules of Evidence, the subsequent-repairs rule, by discouraging efforts to clarify contractual obligations, thus perpetuating any confusion caused by unclarified language in the contract."
Third, the court found that the application of Rule 407 must be predictable and that
the application of the Rule cannot depend on whether a plaintiff chooses, potentially years later, to bring a lawsuit sounding in tort or one sounding in contract. In order for the Rule to accomplish its salutary purpose of incentivizing remedial action, its application at trial must be predictable. That is, a potential defendant must be confident that when he takes remedial action it will not later be admitted at trial as evidence of his liability.
Reynolds's suggested distinction would dramatically reduce the predictability of the Rule's application. Before taking remedial action, a potential defendant would need to assess the likelihood that a plaintiff will couch his claim in contract terms. The mere possibility, however remote, that the facts might support a contract claim would interpose a substantial practical obstacle to the remedial action.
I agree with all three of the points made by the court and think that all of these points also explain why Rule should apply to criminal actions. Criminal conduct is culpable conduct, the public policy underlying the Rule indicates that it applies to breach of conduct actions (we don't want to discourage efforts to, say, remedy criminal negligence), and application of the Rule cannot depend on whether, say, the government chooses to bring an action sounding in criminal negligence after a plaintiff has already sued for civil negligence.