Pa. Supreme Court affirms $3.05 million verdict in case of Northwest v. First National Bank

The plan was called Project Green Goblin.

It has ended up meaning lots of green for First National Bank, but not in a favorable way.

The Pennsylvania State Supreme Court has affirmed a $3.05 million jury verdict that went against First National Bank and for its rival, the Warren-based Northwest Bank, in the Warren County Court of Common Pleas in 2018.

The jury agreed with Northwest's claim that First National — in the plan known as Project Green Goblin — engaged in a civil conspiracy by raiding Northwest of top employees in 2017 to boost First National's competing insurance business. The jury awarded Northwest $250,000 in compensatory damages and $2.8 million in punitive damages.

The Pennsylvania Supreme Court on Wednesday sided with Northwest, upheld the verdict and clarified guidelines for determining when punitive damage awards are too high.

All six of the justices agreed with the affirmation of the verdict. Four of the justices joined in a majority opinion and four wrote concurring opinions, including two of the justices who joined in the majority opinion.

Court says $2.8 million in punitive damages not too high

The justices said the award of $2.8 million in punitive damages was appropriate in the case. They said the jury acted properly by imposing portions of the total punitive damages on each defendant, which included First National Bank, First National Bank Corp. and First National Insurance Agency.

First National Bank argued that the $2.8 million award for punitive damages was so excessive as to be unconstitutional, and that the ratio between punitive damages and compensatory damages in the case should be 1 to 1, or $250,000 for compensatory damages and $250,000 for punitive damages. The ratio in the Northwest case was more than 11 to 1.

The Supreme Court said the ratios were much lower when the $250,000 award for compensatory damages was compared with the amount of per-defendant punitive damages. The per-defendant punitive damages against First National Bank and First National Bank Corp. were $500,000 each, for example, though the amounts were part of the total punitive damages of $2.8 million.

"We generally endorse the per-defendant approach as consistent with federal constitutional principles that require consideration of a defendant's due process rights," Justice Christine Donohue said in the 64-page majority opinion.

"Punitive damages awards must be tailored to each defendant," the opinion also states. "Unlike responsibility for causing the harm ... reprehensibility is a determination that must be individualized as to each defendant.

"In this case, the jury deliberated and assessed the reprehensibility of the conduct of each of the Defendants and determined the punitive damages verdict necessary to punish and deter each of the Defendants. The per-defendant approach reflects this reality."

A spokeswoman for Northwest said the bank had no comment. First National Bank did not immediately respond to a request for comment.

First National denied the civil conspiracy claims in court. After the verdict in Common Pleas Court, the bank said "we believe that we have strong arguments for an aggressive appeal."

Northwest Bank's insurance subsidiary had been based in Erie

The case was connected to Erie. The plaintiff was Northwest Insurance Services, Northwest Bank's insurance subsidiary, that had been based at 800 State St. in Erie.

In 2012, Northwest Insurance Services purchased the Bert Co., an Erie insurance business, whose owner, Douglas Bert, became president of Northwest Insurance Services.

Five years later, in June 2017, Northwest Insurance Services sued First National, based in Pittsburgh but with branches throughout northwestern Pennsylvania. After a two-week trial, the jury in Warren County Common Pleas Court awarded the $3.05 million to Northwest in December 2018.

The trial court judge, Warren County President Judge Maureen A. Skerda, later ordered one of First National's employees, Matthew Turk, to pay $361,000 to cover the legal fees of Northwest. Turk, an Erie resident, was a defendant in the case.

First National appealed to state Superior Court. In May 2021, in a 2-1 ruling, a three-judge panel affirmed the verdict and the monetary award. First National displayed "a total disregard for the rule of law," according to Superior Court Judge Deborah A. Kunselman's 73-page majority opinion.

Also in May 2021, Northwest sold its insurance business to USI Insurance Services, based in Westchester County, New York. The litigation went on despite the sale.

First National appealed to state Supreme Court. The justices in March 2022 agreed to hear the case, focusing on the size of the damages rather than the underlying verdict. The justices also said they would consider whether the amount of the damages was unconstitutionally excessive.

The state Supreme Court heard oral arguments in the case in October.

Issue of potential harm also weighed on appeal

In its majority opinion issued on Wednesday, the justices evaluated another core issue in the case along with the use of the per-defendant approach to punitive damages. The justices looked at whether the potential harm to Northwest could also be considered in the calculation of punitive damages. The justices in the majority opinion said the use of that factor in the case was also proper.

"Under the facts and circumstances of this case," according to the majority opinion, "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."

Also according to the majority opinion: "Evidence of record supports the calculation of potential harm intended by the Defendants. The Defendants' scheme to gut Northwest of its personnel, capture the business of those employees and force a fire sale of the remaining business was thwarted by Northwest through resistance and prompt legal action.

"The jury's compensatory damages award did not and could not capture the harm that was the goal of the Defendants' conduct and that was likely to result from their conduct."

Contact Ed Palattella at epalattella@timesnews.com. Follow him on Twitter @ETNpalattella.

This article originally appeared on Erie Times-News: $3.05 million verdict upheld for Northwest in feud with First National