Academic journal article Journal of Legal Economics

Helpin V. Trustees of U. Penn: Lost Profits Not Discounted to Present Value in Pennsylvania Breach of Contract Cases

Academic journal article Journal of Legal Economics

Helpin V. Trustees of U. Penn: Lost Profits Not Discounted to Present Value in Pennsylvania Breach of Contract Cases

Article excerpt

I. Introduction

A Pennsylvania case decided on December 21, 2010 has extended the reach of the personal injury and wrongful death damage calculation rules of Kaczkowski v. Bolubasz (Pa. 1980)1 to breach of contract cases involving the loss of business profit. In Mark L. Helpin v. Trustees of the University of Pennsylvania, et al. (Pa. 2010), there was no personal injury but rather the constructive discharge of a dentist with a contract allocating to him 50% of the net income of a dental clinic. The question decided by the Court was, ''Should a loss of future income based in part on business profits be discounted to present value?'' By a margin of 4-3, the court answered ''no'' to this question, applying the damage rules for personal injury cases promulgated in Kaczkowski. The opinion by Justice McCaffery and the dissent by Justice Saylor provide reasoning and arguments with which every economic expert preparing damage appraisals in Pennsylvania should be familiar. The arguments put forward in the dissent of Justice Saylor will likely be a part of any future challenge to the Court's rulings in Kaczkowski and Helpin.

II. Relevant Case Facts and the Trial Court Decision

The relevant facts of the Helpin case are as follows. Mark L. Helpin, D.M.D. (hereinafter ''Dr. Helpin'') accepted a position in 1989 at the School of Dental Medicine at the University of Pennsylvania (hereinafter, ''Penn''), with primary responsibilities as the Director of Pediatric Dentistry at the Children's Hospital of Philadelphia (hereinafter ''CHOP''). A letter to Dr. Helpin from Dean Raymond Fonseca dated 9/1/1989 offered a base salary of $60,000. The major part of Dr. Helpin's duties was to

''. . .lead a revival of the educational and clinical programs in Pediatric Dentistry at Penn and most especially to reestablish our relationship with [CHOP] and to resurrect our patient care and educational programs there. I know very well that initial and future commitments to CHOP may require you to spend 80% of your time performing patient care and administrative duties there.

Your start date will be October 1, 1989. Your base salary for this academic year, 1989-90, will be $60,000. In the future, patient care activities at CHOP will offer you the opportunity for bonuses and salary increments, with 50% of CHOP Dental's net operations available to you for such increases. I envision that a large portion of your future salary will, in fact, be derived from the net operations and success you will have at CHOP. I assure you that this financial and salary/bonus arrangement will continue even if you no longer serve as Director or Chairman.''

Dean Fonseca testified at the trial that the $60,000 salary was well below the market rate and failed to provide compensation commensurate with the challenges Dr. Helpin was being asked to undertake. Hence, the 50% component was intended to link Dr. Helpin's compensation to the financial performance he was able to achieve for the CHOP dental clinic.2

In 1996, Dr. Helpin was promoted to Associate Professor, in which capacity he could only be terminated for ''just cause,'' or in the event he was not able to generate sufficient income to offset his salary. The agreement outlined in the offer letter from Dean Fonseca continued through the end of Dean Forseca's time as dean, when his replacement, Majorie Jeffcoat, D.M.D., assumed the deanship on July 1, 2003. By this time, thirteen years after being hired, Dr. Helpin was earning about $350,000 per year, two-thirds of which was derived from 50% of the net operations from the CHOP dental clinic and one-third from the salary paid by his academic appointment as associate professor.

In November of 2003, Dean Jeffcoat removed Dr. Helpin as Chair of the Department of Pediatric Dentistry, combined that department with the Department of Restorative Dentistry, and appointed Peter Berthold as Chair. In December 2003, Dean Jeffcoat and Dr. Berthold told Dr. …

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