Toole case sends Erie into court

WILKES-BARRE – Attorneys for Erie Insurance Exchange are seeking to overturn the $1.2 million arbitration award that was reportedly the basis of corruption charges that were filed against former Luzerne County judge Michael Toole.

In a petition to vacate filed Jan. 4 in Luzerne County Court, Erie contends the Dec. 18, 2007 award to Richard Gazenski of Wilkes-Barre was the product of “fraud, corruption and misconduct” that led to an “unconscionable” award.

The court petition is based upon Toole’s guilty plea on Dec. 29 to charges of honest services fraud in connection with his handling of an uninsured motorist arbitration case he presided over in 2006.

A criminal complaint filed by the U.S. Attorney’s Office says Toole, through an intermediary, improperly communicated with the plaintiff’s attorney to ascertain whom that attorney wished to have appointed as a neutral arbitrator. Toole, who had enjoyed free use of the attorney’s New Jersey beach house, then appointed that arbitrator.

Federal prosecutors have not identified the attorney involved or the case, but details contained in the criminal complaint led The Times Leader and other media outlets to identify the attorney as Harry V. Cardoni and the case as Gazenski’s.

Erie’s petition is based on those newspaper accounts – an issue Gazenski’s attorney, William Shehwen of West Chester, says will be a major stumbling block for Erie.

“I have enough faith in our judicial system to believe that the petitioner is going to require more proof than a newspaper article to succeed in vacating the award in Mr. Gazenski’s case,” Shehwen said. “The complete tragedy here is that my client is having to endure this negative attention to defend himself, yet no one has set forth any solid proof that this case is the matter referenced in the Toole criminal information.”

In court papers, Erie’s attorneys, Michael Blazick and David Laigaie, say Erie has long been suspicious of the Gazenski award, which it believed was excessive given that Gazenski suffered only soft tissue injuries. But it had little recourse to challenge the finding until the charges were filed against Toole.

“The December 2009 news of Judge Toole’s indictment and guilty plea left Erie dumbstruck, but it finally explained the Dec. 18th award. As more details surfaced, Erie’s shock quickly turned to anger,” the attorneys say in court papers. “Erie knows now that is has been the victim of fraud, corruption, misconduct and the evident partiality of the ‘neutral’ arbitrator.”

Uninsured motorist arbitration cases involve persons who seek to recover damages from their own insurance company for injuries caused by another driver who had little or no insurance. Disputes over the amount of money due are settled by a three-member arbitration panel.

Under civil court rules, an insurance company can only seek to overturn an arbitration award if there is evidence of fraud, misconduct or of partiality by an arbitrator.

Blazick and Laigaie say that evidence is clearly present in this case given the allegations contained in the criminal complaint against Toole.

“It is axiomatic that if corruption or misconduct guides the selection of a neutral arbitrator, the tainted selection process renders the neutral arbitrator corrupt. Regardless of the ultimate outcome of the arbitration, appointing an advocate as a neutral arbitrator deprives a party of an impartial, full and fair hearing,” the court papers say.

Gazenski, who is an Erie insurance agent, was injured in a car crash caused by an uninsured motorist on July 24, 2005. Erie agreed Gazenski had coverage, but it disputed the extent of his injuries justified the monetary award that was decided by the arbitration panel.

That panel consisted of attorney Gerard Martillotti, whom Gazenski chose, and attorney James A. Doherty Jr., who was selected by Erie. Toole appointed attorney Bruce Phillips as the neutral arbitrator.

The panel heard evidence and Martillotti and Phillips voted to award Gazenski $1.2 million, with Doherty dissenting. The award was later reduced to $1 million because that was the limit of Gazenski’s insurance.

In the petition to vacate, Erie notes Doherty said he felt “strongly” that the evidence presented did not support the award.

“I did not find that the expert testimony on behalf of Mr. Gazenski was sufficiently credible to support a finding of any significant permanent injuries,” Doherty wrote in the dissent. “He did not have to be hospitalized as an inpatient and had not undergone any surgeries . . . . I did not find any solid evidence to support any claim for long-term disability or for future loss of earning capacity, and clearly there was no objective evidence to support an award of $1.2 million.”

Contacted Friday, Phillips reiterated previous statements that the award was fair and just.

“I was not influenced by anything other than the facts that were before us,” Phillips said. “We spent a lot of time reviewing the evidence. The decision was based only on that.”

Shehwen said Gazenski was “shocked” when he read newspaper accounts that linked his case to the allegations against Toole.

“Before this, he had absolutely no knowledge of any alleged wrongdoing,” Shehwen said.

Luzerne County Judge Hugh Mundy issued an order, directing that a hearing on the petition be held within 30 days.