Dooner v. DiDonato

• Decision Date: 04 June 2009
• Docket Number: No. 10 EAP 2008.,10 EAP 2008.
• Citation: 971 A.2d 1187
• Parties: William DOONER and Maureen Dooner, h/w, Appellants v. Ralph DiDONATO and Philadelphia Stock Exchange, Appellees.
• Court: Pennsylvania Supreme Court

971 A.2d 1187

William DOONER and Maureen Dooner, h/w, Appellants v. Ralph DiDONATO and Philadelphia Stock Exchange, Appellees.

No. 10 EAP 2008.

Supreme Court of Pennsylvania.

Argued October 22, 2008.

Decided June 4, 2009.

Brian J. Grady, Grady & Falcione, L.L.P., Philadelphia, Richard T. Brown, for William Dooner and Maureen Dooner, appellants.

Angela Marie Heim, Thomas A. Kuzmick, Carl D. Buchholz, III, Rawle & Henderson, L.L.P., Philadelphia, for Philadelphia Stock Exchange, appellee.

W. Scott Magargee, IV, Cozen O'Connor, Philadelphia, for Ralph DiDonato, appellee.

BEFORE: CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY and GREENSPAN, JJ.

OPINION

Justice TODD.

In this appeal by allowance, we consider whether the federal Securities and Exchange Act of 1934 ("Securities Exchange Act" or "Act")¹ preempts Pennsylvania state-law tort claims arising from a stock trader's assault of another trader on the floor of the Philadelphia Stock Exchange ("PSX"). For the reasons stated below, we conclude the Securities Exchange Act does not preempt such state law claims against a national securities exchange such as PSX. Accordingly, we reverse the order of the Superior Court.

The facts underlying this appeal are straightforward. Appellee PSX is a national securities exchange and is registered with the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act. In 2002, Appellant William J. Dooner worked as a stock trader on the floor of PSX and was a member of that exchange. Appellee Ralph DiDonato was registered as an equity options trader, was also a member of PSX, and like Dooner, conducted business on the floor of PSX. Both Dooner and DiDonato traded on the Semiconductor Index of PSX.

On December 4, 2002, DiDonato reached the PSX trading floor prior to Dooner. DiDonato set up his computer, and left the immediate area. A few minutes later, Dooner arrived, moved DiDonato's computer, and proceeded to situate himself in the place where DiDonato had been located. Dooner evidently took these actions based on the practice in the work culture of PSX that if a spot was unattended, it was considered to be open.

Upon finding Dooner in his spot, DiDonato grabbed Dooner from behind, yanking him backwards and causing him to strike his head and his neck on the floor, which briefly rendered him unconscious. When Dooner regained consciousness, he complained of being disoriented, dizzy, and having a headache and pain in his back and neck. Robert Roth, Dooner's immediate supervisor, approached the men, and assessed Dooner's condition. Ultimately, Roth accompanied Dooner to the hospital where he was admitted and underwent a CAT scan and a MRI. Thereafter, Dooner left the hospital against medical advice when he received a telephone call from his distraught wife, Appellant Maureen Dooner, who had just learned that her father had been diagnosed with lung cancer and had six months to live.

Subsequently, Dooner was diagnosed with whiplash and a sprain. At the time of trial, Dooner was taking a muscle relaxant and prescription sleep medication. He also received epidural injections in his neck and a series of physical therapy sessions to relieve his pain. As a result of his injuries, Dooner was unable to return to his employment as a stock trader. He remained unemployed for a period of 10 months before he obtained a position as a roofing estimator for Home Depot at a significant reduction in income.

On June 1, 2004, Dooner and his wife brought a civil action against DiDonato, John Wallace (whom the Dooners mistakenly alleged was DiDonato's employer), and PSX, in the Court of Common Pleas of Philadelphia County. The Dooners' Second Amended Complaint ("Complaint") contained various counts alleging both negligent and intentional torts.² The trial court granted Wallace's motion for summary judgment and dismissed him from the case. Additionally, the trial court dismissed, inter alia, all claims for intentional torts and punitive damages against PSX.

Trial in this matter began on February 27, 2006; after a five day trial, on March 3, 2006, the jury found DiDonato, PSX, and Dooner all acted negligently. The jury assessed comparative negligence among the parties: DiDonato 30%, PSX 50%, and Dooner 20%. The jury awarded damages in the amount of $1,800,000 sustained by Dooner and $135,000 sustained by his wife. Thereafter, PSX filed a post-trial motion for judgment notwithstanding the verdict and/or for a new trial. Judge Nitza I. Quinones Alejandro denied the motion, rejecting PSX's contention that all state tort claims against it, as a national securities exchange, were preempted. Dooner v. DiDonato, 82 Pa. D. & C. 4th 492, 501-06 (2006).

PSX appealed, and, in an unpublished opinion, a three-judge panel of the Superior Court reversed. Dooner v. DiDonato, No. 1841 EDA 2006, 2007 WL 5019443, unpublished memorandum (Pa.Super. October 17, 2007). Contrary to the trial court, the Superior Court panel concluded that the Dooners' claims were preempted by federal securities law. Specifically, the Superior Court determined that the Securities Exchange Act evinced a congressional intent to regulate thoroughly the area of governance of national exchanges regarding the conduct of floor traders. The Superior Court pointed to PSX having floor officials and a disciplinary committee responsible for preventing, investigating, and sanctioning the conduct of traders who become hostile on the trading floor. According to the intermediate appellate court, Congress' delegation of authority to national exchanges such as PSX is so complete as to make reasonable the inference that Congress left no room for the states to supplement it. In making this determination, however, the Superior Court made clear that its holding was limited to floor traders and not members of the general public. The panel concluded that the Securities Exchange Act preempts "a floor trader's negligence causes of action against a national exchange where those causes of action implicate the exchange's statutory authority to govern itself." Id. at 14. Therefore, the Superior Court found that PSX was entitled to judgment as a matter of law and vacated the judgment in favor of the Dooners and remanded for further proceedings.

The Dooners filed a petition for allowance of appeal, and we granted allocatur, limited to the issue: "Does the Securities Exchange Act of 1934 preempt Pennsylvania state-law claims arising from personal injuries sustained on a stock exchange floor by a securities industry employee?" Dooner v. Philadelphia Stock Exch., 596 Pa. 502, 946 A.2d 640 (2008) (order).³

Initially, we note this appeal reaches our Court through the trial court's denial of PSX's post-trial motion for judgment notwithstanding the verdict ("JNOV"). An appellate court will reverse a trial court's grant or denial of a JNOV only when the appellate court finds an abuse of discretion or an error of law. Lockwood v. City of Pittsburgh, 561 Pa. 515, 519, 751 A.2d 1136, 1138 (2000). Here, the question of whether federal securities law preempts the Dooners' state law tort claims is a question of law. Therefore our standard of review is de novo and our scope of review is plenary. Stone Crushed P'ship v. Kassab Archbold Jackson & O'Brien, 589 Pa. 296, 303 n. 5, 908 A.2d 875, 880 n. 5 (2006).

To understand the legal issue raised in this appeal, it is useful to begin with a summary of the law of preemption. Simply stated, federal law is paramount. More specifically, Article VI, cl. 2, of the United States Constitution, the Supremacy Clause, provides that the laws of the United States "shall be the supreme Law of the Land; ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const, art. VI, cl. 2. Thus, according to the United States Supreme Court, laws that are in conflict with federal law are "without effect." Altria Group, Inc. v. Stephanie Good, ___ U.S. ___, ___, 129 S.Ct. 538, 543, 172 L.Ed.2d 398, ___ (2008) (quoting Maryland v. Louisiana, 451 U.S. 725, 746, 101 S.Ct. 2114, 68 L.Ed.2d 576 (1981)). Questions concerning the span of this constitutional matter of preemption, however, are not always easily answered. See Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941).

In determining the breadth of a federal statute's preemptive effect on state law, we are guided by the tenet that "the purpose of Congress is the ultimate touchstone in every pre-emption case." Wyeth v. Levine, ___ U.S. ___, ___, 129 S.Ct. 1187, 1194, 173 L.Ed.2d 51 (2009) (quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996)). Congress may demonstrate its intention in various ways. It may do so through express language in the statute (express preemption). Yet, even if a federal law contains an express preemption clause, the inquiry continues as to the substance and the scope of Congress' displacement of the state law. Altria Group, Inc., 129 S.Ct. at 543.

In the absence of express preemptive language, Congress' intent to preempt all state law in a particular area may be inferred. This is the case where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress left no room for supplementary state regulation. That is to say, Congress intended federal law to occupy the entire legislative field (field preemption), blocking state efforts to regulate within that field. English v. General Electric Co., 496 U.S. 72, 79, 110 S.Ct. 2270, 110 L.Ed.2d 65 (1990).

Finally, even where Congress has not completely displaced state regulation in a specific area, state law is nullified if there is a conflict between state and federal law (conflict preemption). Freightliner Corp. v. Myrick, 514 U.S. 280, 287, 115 S.Ct. 1483, 131 L.Ed.2d 385 (1995). Such a conflict may arise in two contexts. First, there may be conflict preemption where compliance with state and federal law is an...