In November 2023, Pennsylvania appellate courts made headlines with a potentially significant expansion of reimbursable medical costs for employers and the end of a high-profile lawsuit against the state’s largest university, while a California federal court gave a Delaware corporation another reason to think through the legal impact of out-of-state remote workers. Get the full details below.
Pennsylvania Court Rules Employee’s CBD Oil Qualifies as a Covered Medical Supply
A Pennsylvania state appeals court has ruled that the law firm Schmidt Kirifides and Rassias PC is obligated to cover the cost of cannabidiol (CBD) oil used by one of its attorneys, Mark Schmidt, to manage back pain resulting from a work injury. Despite CBD’s federal illegality, the court deemed it a “medical supply” under the state’s Workers’ Compensation Act, making it a reimbursable medical cost. Schmidt had been prescribed CBD oil by his doctor for pain management related to aggravated degenerative disc disease.
The Commonwealth Court of Pennsylvania majority, in their opinion earlier this month, emphasized that FDA approval is not a prerequisite for a substance to be considered a medical supply under state law. The decision overturned a workers’ compensation appeal board’s denial of Schmidt’s reimbursement, while a dissenting judge argued that without FDA approval, CBD oil couldn’t qualify as a reimbursable medical supply. The dispute arose when Schmidt’s law firm refused reimbursement, leading to a series of legal proceedings.
The majority criticized the appeal board’s dismissal of a Workers’ Compensation Judge’s findings and underscored that FDA approval is not mandatory under Pennsylvania law. The dissent, however, insisted on regulatory approval and questioned the adequacy of Schmidt’s medical documentation. This split underscores a broader debate on whether CBD oil qualifies as a medical supply, prompting the majority to assert that such determinations fall within legislative purview rather than the court’s jurisdiction.
The case is Schmidt, M. v. Schmidt, Kirifides & Rassias, case number 1039CD2021, in the Commonwealth Court of Pennsylvania.
Pennsylvania Court Declines to Resurrect Lawsuit Regarding Termination of Penn State Coach
The Pennsylvania Superior Court has upheld the dismissal of former Penn State University gymnastics coach Jeffrey Thompson’s claims of defamation and breach of contract against the university. The court adopted the September 2022 opinion of Judge Jonathan Grine, who found that Penn State had valid reasons for firing Thompson over allegations of creating a hostile environment for gymnasts. The court ruled that an athletic director’s statement about prior accusations against Thompson was not defamatory.
Thompson’s termination in 2017 led to a lawsuit alleging breach of contract, defamation, and false light portrayal. The court noted that Thompson’s high profile in collegiate sports made him a limited public figure, requiring a showing of “actual malice” for defamation claims. The court found that the athletic director’s statement did not meet this standard.
Additionally, the court affirmed that Thompson’s termination adhered to the “for cause” section of his 2015 contract, citing his consistent show of disrespect towards team members. The court emphasized Thompson’s crude and critical comments about athletes’ weight, personal lives, and mental health as contributing factors to the termination, concluding that no reasonable jury could find he complied with his contractual obligations.
The case is Thompson v. The Pennsylvania State University, case number 1460 MDA 2022, in the Superior Court of Pennsylvania.
Remote Work in California by Executives of Delaware Corporation Proves to be Undoing in Bid for Federal Court Diversity Jurisdiction
A federal judge has ruled against Cardlytics Inc., a Delaware-incorporated digital ad platform headquartered in Atlanta, in a compensation dispute with two former California employees. The judge, John W. Holcomb, rejected Cardlytics’ attempt to establish diversity jurisdiction in the case, stating that the company failed to prove its “principal place of business” given that most of its top executives, including the CEO and COO, work remotely from California.
Diversity jurisdiction requires that parties in a lawsuit be citizens of different states. Cardlytics had initially presented U.S. Securities and Exchange Commission filings listing Atlanta as its headquarters. However, the plaintiffs, Lee and Nicola Evans, demonstrated that a significant portion of Cardlytics’ leadership operated from California. The Evanses, former owners of Afin Technologies acquired by Cardlytics in 2022, allege that Cardlytics forced them out of the company through a manufactured scandal.
Despite complex corporate diagrams and unclear officer lists presented by both parties, Judge Holcomb found the Evanses’ evidence more compelling and granted their motion to remand the case back to California state court. The judge declined to award attorney fees, noting the closely contested legal issue and acknowledging the evolving landscape of corporate practices and remote workforces.
The case is Lee Evans and Nicola Evans v. Cardlytics Inc., case number 8:23-cv-00606, in the U.S. District Court for the Central District of California.
Jeff Burke is an attorney at MacElree Harvey, Ltd., working in the firm’s Employment and Litigation practice groups. Jeff counsels businesses and individuals on employment practices and policies, executive compensation, employee hiring and separation issues, non-competition and other restrictive covenants, wage and hour disputes, and other employment-related matters. Jeff represents businesses and individuals in employment litigation such as employment contract disputes, workforce classification audits, and discrimination claims based upon age, sex, race, religion, disability, sexual harassment, and hostile work environment. Jeff also practices in commercial litigation as well as counsels business on commercial contract matters.