PA Supreme Court to review Northwest's $3.05 million verdict against First National

Northwest won suit that said First National Bank wrongfully raided Northwest's insurance group of employees in 2017. First National says $3.05 million jury verdict excessive under U.S. Constitution.

Ed Palattella
Erie Times-News
  • In 2018, jury in Warren County awarded $3.05 million to Warren-based Northwest Bank in its civil conspiracy case against First National Bank
  • State Superior Court affirmed verdict in 2-1 decision in May 2021
  • State Supreme Court has agreed to hear First National's appeal of Superior Court decision regarding size of jury award

The precedent-setting court fight over a plan called Operation Green Goblin has yet to go away, extending the litigation between two financial industry rivals in northwestern Pennsylvania: Northwest Bank and First National Bank.

The Pennsylvania Supreme Court has agreed to hear First National's appeal of a jury verdict in Warren County that found it engaged in a civil conspiracy by raiding Northwest's insurance division of top employees in 2017 to boost First National's competing insurance business — a plan First National called Operation Green Goblin, according to court records. The state Supreme Court is expected to set a hearing date later.

The jury verdict, issued in December 2018, awarded the Warren-based Northwest $3.05 million in damages — $2.8 million in punitive damages and $250,000 in compensatory damages. 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 the Erie-based Northwest Insurance Services, a subsidiary of Northwest Bank.

This is a diptych of a Northwest Bank location in Erie and a First National Bank location in Erie.

The state Supreme Court's focus will be on the size of the damages rather than the underlying verdict, according to an order issued Tuesday in which it granted First National's appeal request. The state Supreme Court in the order said it will consider whether the amount of the damages is unconstitutionally excessive.

Northwest vs. FNB:Bank feud leads to big verdict

The state Supreme Court is not required to hear an appeal in every case in which an appeal is sought. It typically hears appeals in cases of statewide importance or cases in which the lower courts issued conflicting decisions.

First National, based in Pittsburgh but with branches throughout northwestern Pennsylvania, is challenging a May 2021 state Superior Court ruling that affirmed the verdict and the $3.05 million award. In a 2-1 decision, a three-judge panel of the Superior Court found that the evidence was sufficient to support the trial outcome.

Superior Court ruling:'Total disregard for rule of law': $3.05M verdict for Northwest upheld against First National

The Superior Court labeled the decision as precedent-setting because it was the first in Pennsylvania to address how courts should calculate the ratio of damages when multiple defendants claim the punitive damages against them are unconstitutionally excessive. In the 73-page majority opinion, Superior Court Judge Debora A. Kunselman said the size of the award was proper based on the actions of First National and Turk, the employee at the center of the case.

Turk, an insurance broker and an Erie resident, had been a senior vice president at Northwest Insurance Services who went on to work for First National in 2017. At First National, he helped engineer First National's initiative to "lift out" Northwest employees under First National's Green Goblin plan, according to court records.

Northwest, which uses the color green in its logo, argued at trial that First National intended to cripple Northwest's insurance business in the region. First National unsuccessfully argued that Northwest failed to provide enough evidence to support the claims.

On appeal, Kunselman rejected the claims of First National and Turk that the $2.8 million in punitive damages was excessive because it was so much higher — 11.2 times higher — than the $250,000 in compensatory damages. Kunselman said that First National and Turk had failed to show that the size of the punitive damages violated their due process rights as found in the Fifth and 14th amendments to the U.S. Constitution.

Another decision:Northwest gets $361,000 in legal fees in FNB case

"Given the total disregard for the rule of law ... displayed, the punitive damages that the jury awarded are light years away from the outer limits of the Due Process Clause," Kunselman said in the majority opinion, placing the phrase "light years away" in bold.

"Considering the potential harm that Mr. Turk and the First National Family attempted to inflict, the punitive damages that the jury actually awarded in no way implicate a federal, constitutional violation," Kunselman said in the opinion. "Their claim that this award of punitive damages violated the Fourteenth Amendment is frivolous."

In its order in which it granted First National's appeal request, the state Supreme Court said it would consider three questions that First National raised on appeal. All three questions deal with the size of the jury award, according to the order. It lists the first question as, "Whether, in cases where the compensatory damage award is substantial, a punitive-to-compensatory damages ratio exceeding 9:1 is presumptively unconstitutional under U.S. Supreme Court precedent?"

Northwest Insurance Services had been based at 800 State St. in Erie. In 2012, it purchased the Bert Co., an Erie insurance business, whose owner, Douglas Bert, became president of Northwest Insurance Services. Northwest in May 2021 sold its insurance business to USI Insurance Services, based in Westchester County, New York.

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