Justices Take Up Case on Calculation of Future Income Damages (The Legal Intelligencer)

The Legal Intelligencer
By Gina Passarella

The state Supreme Court has agreed to take a look at how $4 million in damages was calculated for a former Penn professor who said the university failed to pay him future profits on a dental clinic he helped form and run.

The Superior Court in Helpin v. Trustees of the University of Pennsylvania didn't focus its 34-page opinion on the school's claim that any profits Mark Helpin was due from the business after he quit should be discounted to present value, but it was the main issue Penn raised on appeal to the high court.

The justices granted allocatur Tuesday limited to the question of whether damages for future income calculated as part of a business' profits should be discounted to present value.

The case will center on the state Supreme Court's 1980 opinion in Kaczkowski v. Bolubasz , which applied the "total offset method" of calculating damages in a wrongful death case and abandoned the practice of discounting future earnings to present value. The court said, however, that it would not apply the total offset method to every case but would allow for a case-by-case analysis of which method to use.

The total offset method, according to a footnote in the opinion, assumes that future increases in earnings due to inflation are offset by the interest rate so no reductions to present values are made. Penn argued the offset method "grossly inflates" Helpin's damages.

According to court papers, Helpin was hired at Penn Dental during the deanship of Raymond Fonseca. Fonseca's September 1989 offer letter to Helpin promised Helpin half of any profits generated by the joint Penn Dental/Children's Hospital of Philadelphia dental clinic, of which Helpin was to become director. Fonseca's letter also guaranteed that the bonus arrangement would continue even if Helpin were no longer head of the clinic or chairman of the school's pediatric dentistry department.

Fonseca stepped down as Penn Dental's dean in 2003. Helpin claimed in court papers that once he learned of that development, he spoke with Fonseca and was assured that Fonseca's 1989 letter would protect him against any problems with the new dean over his bonus arrangement.

But Helpin said that six months after Marjorie Jeffcoat replaced Fonseca as dean, Helpin was removed from his departmental position and banished to a suburban office where he could not treat the clinic's special-needs patients.

Helpin's department was then molded into a new, larger dental school department, and he was reassigned from his duties at the pediatric dental clinic, the university claimed. The university argued in court papers that Helpin had been told of shortcomings with respect to junior faculty recruitment and retention shortly before his pediatric dentistry department was subsumed into a new dental school department. He eventually left the school under what the court found to be constructive discharge.

Penn had argued to the Superior Court that Helpin's damages experts didn't base his opinion on facts, but on Helpin's "dreams" for what the CHOP clinic could produce, according to the opinion.

"In this case, the facts of record demonstrated that the CHOP clinic prospered under Dr. Helpin's direction for 13 years and offered no indication that such prosperity would not have continued had Dr. Helpin been allowed to continue in his former capacity as the clinic's director," Judge John T. Bender said for the Superior Court. "Penn's assertion to the contrary, based upon changes in clinic operations and decreased clinic revenues in the years after Helpin's departure offers no basis for calculation of Dr. Helpin's damages as it shows no correlation with Dr. Helpin's performance."

The question for the expert, Bender said, wasn't whether the clinic would continue to perform to Helpin's expectations after his departure, but what losses Helpin suffered by not being allowed to continue in his position.

Penn took issue on appeal to the Superior Court with the fact that its damages expert wasn't allowed to include a damages chart he prepared based on "present value" damages.

The trustees of the University of Pennsylvania were represented on appeal by a team of lawyers at Ballard Spahr.

"The university is pleased that the Supreme Court has agreed to review this important issue and we continue to believe that the jury's verdict in the case was not legally supportable," Lori Doyle, a university spokeswoman, said.

Helpin's attorney, Patricia Pierce of Willig Williams & Davidson, said the majority of Helpin's $4.04 million jury award was based on future damages. At trial, she said, Penn's damages expert sought to reduce future damages by 2.5 percent to bring it down to present value so that Helpin doesn't get the windfall benefit of being able to invest that lump sum and receive more than the damages are worth.

Pierce said federal courts have adopted the present-value approach in pure employment cases but said this is a breach of contract case. She said Pennsylvania law has used the total offset method in personal injury and certain contract cases.

The trial court in Helpin used the total offset method because it likened Helpin's losses to the loss of individual productivity rather than the loss of profits in a business, which Penn argued they were, Bender said in upholding the ruling.

A Philadelphia jury found in favor of the disgruntled pediatric dentist, awarding him $4.04 million in the summer of 2007. It found that Penn breached its employment contract with Helpin and breached the terms of a 1989 contract regarding the 50 percent profits Helpin was to receive from the dental clinic.