GLORIA J. LAFLEUR V. SHONEY'S, INC., D/B/A FIFTH QUARTER
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RENDERED: MAY 16,2002
AS MODIFIED: MAY 30,2002
TO BE PUBLISHED
GLORIA J. LAFLEUR
V.
ON REVIEW FROM THE COURT OF APPEALS
1999-CA-0830-MR
JEFFERSON CIRCUIT COURT NO. 1996-Cl-2802
SHONEY’S, INC.,
D/B/A FIFTH QUARTER
APPELLEE
OPINION OF THE COURT BY JUSTICE JOHNSTONE
AFFIRMING
Appellant, Gloria J. LaFleur, appeals a decision from the Court of Appeals, which
reversed the trial court’s damage award and remanded for entry of a reduced judgment.
The Court of Appeals’ opinion turns on our interpretation of CR 8.01 in Fratzke v.
Murphv, Ky., 12 S.W.3d 269 (1999). We affirm.
LaFleur stepped off a sidewalk onto the parking lot of the Fifth Quarter
restaurant, fell and was injured. Subsequently, she filed suit against Fifth Quarter
seeking compensation for lost wages, past and future pain and suffering, and past and
future medical bills. During discovery, Fifth Quarter propounded written interrogatories
to LaFleur and, after more than thirty days had passed without response, moved the
trial court to compel LaFleur to answer. LaFleur filed her answers to these
interrogatories about four weeks later.
In her answers, LaFleur claimed $5,563.72 in medical expenses and $1,122.10
in lost wages. Additionally, she claimed no specific amount for either special damages
or unliquidated damages. Instead, she stated that any special damages were
“undetermined.” As to the unliquidated damages, she stated, “Plaintiff will supplement
this information prior to trial.”
The trial was set for February 16, 1999. The trial court ordered that all claims for
damages be exchanged with opposing counsel and filed in the record no later than ten
days before trial. On February 11, 1999, LaFleur’s counsel filed a compliance with the
trial courts order. The compliance listed medical expenses of $27,604.12 and lost
wages and lost ability to earn money at $633,440.00. As these dates reflect, the
compliance was not filed within the time period ordered by the trial court. The
compliance was sent to defense counsel by U.S. mail and did not arrive until Monday,
February 15, 1999, which was the day before the trial.
On the morning of trial, Fifth Quarter made a motion in limine to preclude any
evidence that might suggest to the jury that LaFleur’s damages exceeded the damages
claimed in her interrogatory responses. The trial court denied the motion. Fifth Quarter
then moved for a continuance on grounds that its preparation of the defense of this
case had been based on its assumption that its liability exposure was limited to
$6,685.82, which was the amount of damages claimed in LaFleur’s interrogatory
answers. The trial court denied this motion as well.
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The jury awarded LaFleur $75000.00 for past and future pain and suffering.
Additionally, the jury awarded LaFleur $14,823.00 for medical expenses incurred to
date, which award was not to exceed $27,604.12.
Fifth Quarter appealed on the issue
of damages. The Court of Appeals reversed and remanded. It concluded that LaFleur
failed to supplement her answers to Fifth Quarter’s interrogatories as required by CR
8.01(2), and reversed under Fratzke, supra. The Court of Appeals remanded the case
with instructions that the trial court enter a judgment for $5563.72 in medical expenses
and $1,122.10 in lost wages, which were the only amounts of damages claimed by
LaFleur in her answers to interrogatories. We granted discretionary review and affirm
for the reasons set forth below.
In Fratzke, the plaintiff was injured when she was hit by a car while walking a
picket line. Fratzke, 12 S.W.3d at 270. She sued the driver and claimed general
damages in the complaint for medical expenses, pain and suffering, and impairment to
earn money. j&. The defendant propounded interrogatories to the plaintiff requesting
that she identify and quantify each of her claims for damages. Id. In her response to
these interrogatories, Fratzke merely included an itemized list of medical expenses. (d.
The trial court entered an order that trial briefs be filed at least twenty days before trial
and that these briefs contain an itemized list of any special damages claimed by the
parties. Id. The plaintiff failed to comply with this order in that she did not include any
of her claims for unliquidated damages in her trial brief. Id.
After closing arguments, defense counsel objected to instructing the jury on
damages other than medical expenses. Id. The trial court overruled the objection and
instructed the jury on both the medical expenses and the unliquidated claims. !&. at
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271. The Court of Appeals affirmed the trial court. Id We reversed this decision and
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remanded the case to the Court of Appeals to reconsider its opinion in light of Burns v.
Level, Ky., 957 S.W.2d 218 (1997). Id. On remand, the Court of Appeals reversed the
trial court’s award of unliquidated damages. Id.
We took discretionary review of this latter Court of Appeals’ decision and
affirmed. Id at 273. We concluded that the plaintiff’s claims for unliquidated damages
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were effectively zero, because she utterly failed to disclose the amount of her claims for
unliquidated damages as was required by CR 8,01(2), i&, which states:
In any action for unliquidated damages the prayer for damages in any
pleading shall not recite any sum as alleged damages other than an
allegation that damages are in excess of any minimum dollar amount
necessary to establish the jurisdiction of the court; provided, however,
that all parties shall have the right to advise the trier of fact as to what
amounts are fair and reasonable as shown by the evidence. When a
claim is made against a party for unliquidated damages, that party may
obtain information as to the amount claimed by interrogatories; if this is
done, the amount claimed shall not exceed the last amount stated in
answer to interroqatories.
(Emphasis added).
In the case at bar, LaFleur attempts to distinguish Fratzke on two different
bases. First, LaFleur argues that, unlike the factual scenario in Fratzke, she did
answer the interrogatory as to unliquidated damages. She claims that her answer that
these claims were undetermined at the time, or would be supplemented later, put
defense on notice that claims would be litigated at trial. But as we noted in Fratzke, the
purpose of the rule is to notify the opposing party of the amount of unliquidated
damages at stake.
Next, LaFleur argues that her belated filing of the trial compliance did
supplement her answers. This is different, she claims, than in Fratzke where the
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plaintiff attempted to supplement her answers on the last day of trial. We disagree.
LaFleur’s attempt to supplement did not comply with the trial court’s trial compliance
order that all claims for damages be exchanged between the parties ten days before
trial. LaFleur did not move the trial court for leave to file her trial compliance late. Nor
did she move the trial court for leave to file supplemental answers to interrogatories.
LaFleur’s attempt at supplementing her answers five days before trial violated the trial
court’s order and was not seasonable. As we see little difference between providing
supplemental answers to interrogatories to the defense on the day before trial and
providing them to the defense on the last day of trial, we are compelled to hold that the
Court of Appeals reached the correct result under Fratzke.
We now turn to LaFleur’s argument that the result reached by the Court of
Appeals is a harsh miscarriage of justice flowing from the rigid construction of the rules
of civil procedure. This argument not only ignores the plain language of the rule, but
also seriously discounts the purpose of CR 8.01(2) and the discovery rules in general.
We begin our discussion with the purpose of the discovery rules. Pretrial
discovery simplifies and clarifies the issues in a case; eliminates or significantly
reduces the element of surprise; helps to achieve a balanced search for the truth,
which in turn helps to ensure that trials are fair; and it encourages the settlement of
cases. See, e.o., Elkins v. Svken, 672 So. 2d 517, 522 (Fla. 1996). And, of course, the
settlement of cases serves the dual and valuable purposes of reducing the strain on
scarce judicial resources and preventing the parties from incurring significant litigation
costs. The role of CR 8.01(2) in this process is to provide notice of the damages at
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stake. Circumvention of this rule reduces the likelihood of case settlement as can be
shown by economic analysis.
ECONOMIC THEORY OF SETTLEMENT
Under the economic theory of suit and settlement, litigants are economically
rational beings who make the decision whether to settle or go to trial based on which
course of action maximizes their welfare. Richard A. Posner, Economic Analvsis of
Law, 557 ( 4th ed. 1992). According to this theory, litigants compare the value of a
settlement with the value of going to trial and select whichever option appears to offer
the greater value. George L. Priest & Benjamin Klein, The Selection of Disputes for
Litiqation, 13 J. Legal Stud. 1, 4 (1984). Because the transaction costs of negotiating a
settlement generally are much lower than the costs of litigating a case to judgment, the
theory predicts that most cases will result in settlement because settlement is mutually
beneficial to both parties. A Settlement will not occur when the least the plaintiff is
Id
willing to accept in settlement (the plaintiff’s best settlement offer) exceeds the most the
defendant is willing to pay in settlement (the defendant’s best settlement offer).
Posner, supra, at 557. In other words, a settlement range between each of these
points is a necessary condition to reaching a settlement in a given case. @.
“Each party’s best settlement offer [depends] on how he expects to fare in
litigation.” Id. From a plaintiff’s point of view, the net expected gain from litigating a
case to judgment is: (1) the estimated value of a winning judgment discounted by (2)
the plaintiff’s probability of winning at trial minus (3) the plaintiffs litigation costs. Id.
From the defendant’s point of view, the net expected loss from litigating a case to
judgment is: (1) the estimated value of an adverse judgment discounted by (2) the
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defendant’s probability of losing at trial plus (3) the defendant’s litigation costs. id. For
example, if the plaintiff’s expected net gain from litigating a case to trial is $10,000, she
will not settle for any less. Id If the defendant’s net expected loss is $9,000, she will
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not settle for any more, and settlement will not occur. Id. But if those figures are
reversed, i.e., the plaintiff’s net expected gain is $9,000 and the defendant’s net
expected loss is $10,000, then there exists a $1,000 settlement range and settlement
should occur.
The settlement range represents the savings each party can obtain by
avoiding litigation and is referred to as the settlement surplus. Thus, the settlement
surplus constitutes the economic gain to be achieved through settlement and lies at the
heart of the economic theory of suit and settlement.
Granted, the above is a simplistic model of settlement that ignores many factors.
But this model is the building block for the more and increasingly complex models of
settlement put forth under the economic theory of suit and settlement. Accurate
information concerning the amount of money at stake in the litigation is critical to this
and subsequent models. This is because each party’s best settlement offer depends
directly on the net amount he or she expects to win or lose at trial. CR 8.01(2) provides
this information to the defense. Without accurate information, a defendant’s best
settlement offer almost always will be below the plaintiff’s best settlement offer and
settlement will not occur. Further, as a practical matter, a defendant will never offer
more in settlement than the plaintiff claims in damages. Thus, the chances for
settlement will be greatly reduced when the plaintiff distorts the relevant settlement
figures by failing to accurately disclose the amount of her claims for unliquidated
damages.
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There is an additional reason that demonstrates why accurate information
concerning the amount of damages at stake increases the likelihood of settlement.
Litigation costs include both a fixed and a variable component. Posner, supra, at 557.
The variable component rises as the amount at stake increases. !&. This is because
the more one stands to gain or lose, the more one is willing to invest to either achieve
the gain or prevent the loss. Id On the other hand, an increase in the stakes should
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have a much less-pronounced effect on settlement costs. Id. That is, it should not cost
much more to settle a large case than to settle a small case. Id. Thus, an increase in
the costs to litigate a case to judgment increases the defendant’s net expected loss at
trial and reduces the plaintiff’s net expected gain from trial. This results in a
corresponding increase in the available settlement surplus and each party has more to
gain from settlement. Consequently, settlement should be more likely. Therefore,
providing timely and accurate information to the defense concerning unliquidated
damages increases the possibility of settlement in a given case.
As a practical matter, any supplemental information disclosed to the defense
concerning the amount of unliquidated damages results in an increase in the
defendant’s perception of the stakes at issue in a given case. Further, timely or
seasonable disclosure provides this information to the defense at a time when the
defendant can make meaningful decisions concerning the allocation of resources specifically, how much resources to allocate in litigation costs. Thus, accurate and
timely disclosure of increased unliquidated damage claims increases the stakes, from
the defendants point of view, at a time when the defendant’s decision to litigate or
settle will have meaningful economic consequences. In other words, if the
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supplementary information is provided during trial or on the eve of trial, the defendant
will have already committed a great percentage of the total litigation costs, and the
defendant will have less to gain by settlement when disclosure is not made timely. On
the other hand, when disclosed timely, information that increases the total amount at
stake makes litigating the case much more costly relative to settlement, and settlement
is more likely to occur.
The above analysis demonstrates that CR 8.01(2)
serves an important role in the
discovery process and its proper application makes settlement more likely. While this
analysis does not address specifically our holding in Fratzke that the language of CR
8.01(2) is mandatory and that the trial court had no discretion to disregard application of
the rule, Fratzke, 12 S.W.3d at 273, further analysis shows why this was the correct
result.
The disagreement between the majority and dissent in Fratzke focused on
whether the plaintiff should bear the risk of failing to comply with the rule, or whether
the defendant should bear the risk of not taking affirmative action to ensure that the
plaintiff complied with the rule. CR 8.01(2)
squarely places this burden on the plaintiff
by providing that “the amount claimed shall not exceed the last amount stated in
answer to interrogatories.” Fratzke holds that this plain language places a duty on the
plaintiff to seasonably supplement her answers to interrogatories. Id. But the dissent
argued that the burden should be on the defendant to file a motion to compel answers
to interrogatories. Id. (Lambert, C.J. dissenting) and id at 275 n.1 (Keller, J.
dissenting). Of the two, requiring the defendant to move to compel the plaintiff to “fully
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answer the interrogatory before utilizing CR 8.01(2) offensively” is the more inefficient
rule.
Requiring the defendant to make a motion to compel is burdensome for a
number of reasons. It burdens both the court and counsel. It requires drafting the
motion, scheduling the motion, and both sides appearing in court to argue the motion.
On the other hand, the plaintiff can supplement an interrogatory response by delivering
any supplemental answers directly to the defendant. Thus, placing the burden on the
plaintiff to supplement her answers avoids the use of judicial resources and does not
require either party’s counsel to appear in court.
Next, when a plaintiff files a response to interrogatories that her claims for
unliquidated damages are X, the defendant cannot know if the plaintiff will make claims
for unliquidated damages greater than X at trial. This is because the plaintiff
possesses and assesses the information on the amount of her unliquidated damages
and reveals this information to the defendant through discovery. Thus, a rational and
prudent defendant, who has the burden to compel, will alwavs file a motion to compel
the plaintiff to file supplemental answers in order to avoid surprise at trial. In many
cases, filing such a motion will be an utter waste of time and resources, because the
plaintiff will have no additional claims for unliquidated damages. But if the plaintiff has
the burden to supplement her answers, supplementation will only occur when and if a
change or revision in damages occurs. Therefore, placing the burden on the defendant
to compel supplemental answers ensures that resources will be wasted. But placing
the burden on the plaintiff to comply with the rule helps to conserve resources.
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Finally, granting the trial court the discretion to allow the plaintiff to avoid the
application of the rules will not eliminate these inefficiencies. The rational defendant
will spend more in preparing for and trying a case in which she stands to lose hundreds
of thousands of dollars than she will for a case in which she stands to lose tens of
thousands of dollars. Thus, the rational defendant will not run the risk of relying on the
plaintiff’s answers to interrogatories in preparing for trial. Rather, the rational
defendant will still file a motion to compel supplemental answers in order to ascertain
the most accurate information possible. Construing the rule according to its plain
meaning is the more efficient rule.
As we noted in Fratzke, this does not leave the plaintiff who fails to seasonably
supplement her answers without any remedy. Fratzke, 12 S.W.3d at 273. The plaintiff
can move the trial court for leave to supplement her answers. This places the burden
on the plaintiff to show that the increase in the amount of unliquidated damages
claimed does not prejudice the defendant. Economics aside, this is more equitable
than placing the burden on the defendant to show that permitting the plaintiff to escape
application of the plain language of the rule, is prejudicial to the defense.
The purpose of the rule is to put a party on notice as to the amount of
unliquidated damages at stake to allow that party to make economically rational
decisions concerning trial preparation and trial strategy. Its purpose is not to put a
party on notice as to the type of damages at stake. Consequently, once Shoney’s was
finally apprised of the amount of unliquidated damages, it first moved to limit the
damages to those damages of which it had proper notice. After that motion was
denied, Shoney’s then moved for a continuance in order to properly prepare for trial in
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light of a substantial and material change in the amount of money it stood to lose. In
denying both of these motions, the trial court allowed LaFleur to circumvent the rules to
ambush the defense. Far from exploding a land mine with this decision, we are
upholding the principle and ideal that the legal playing field should be level; that the
very rules by which the trial is to be conducted must be applied impartially and equally
to both plaintiff and defendant, to both rich and poor.
For the reasons set forth above, we affirm the Court of Appeals.
Cooper, Stumbo, and Wintersheimer, JJ., concur. Lambert, C.J., dissents by
separate opinion, with Graves and Keller, JJ., joining that dissent. Keller, J., dissents
by separate opinion, with Lambert, C.J., and Graves, J., joining that dissent.
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COUNSEL FOR APPELLANT:
R. Dale Warren
Suite 200, Hart Block Building
730 West Main Street
Louisville, KY 40202
COUNSEL FOR APPELLEE:
Matthew J. Baker
Matthew P. Cook
Cole, Moore & Baker
921 College Street - Phoenix Place
P. 0. Box 10240
Bowling Green, KY 42102-7240
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RENDERED: MAY 16,2002
TO BE PUBLISHED
2000-SC-0456-DG
GLORIA J. LAFLEUR
APPELLANT
ON REVIEW FROM COURT OF APPEALS
1999-CA-0830-M R
JEFFERSON CIRCUIT COURT NO. 1996-Cl-2802
V.
SHONEY’S, INC.,
D/B/A FIFTH QUARTER
APPELLEE
DISSENTING OPINION BY CHIEF JUSTICE LAMBERT
One of the buried land mines I predicted in Fratzke v. Murphy’ exploded in
this case. As in Fratzke, plaintiff’s counsel did not timely supplement answers to
interrogatories disclosing the amount of pain and suffering damages claimed and
disclosing the amount of medical expense reimbursement sought. Opposing counsel
sought no relief nor otherwise brought the omission to the attention of plaintiff’s counsel
until the day of trial when an order was sought prohibiting submission of these damage
claims to the jury.
The trial court overruled the motion in /imine and likewise denied Shoney’s
motion for a continuance. The trial court discerned no prejudice to the defendant and
‘KY., 12 S.W.3d 269 (2000).
I
the case proceeded to trial and resulted in a verdict for $75,000 for pain and suffering
and $14,823.00 for medical expenses (to be reduced by 20%). The majority has now
held that the trial court abused its discretion.
While I disagreed with the result in Fratzke v. Murohv, at least the facts
there more nearly justified the result than do the facts in this case. In Fratzke, the
interrogatories were not supplemented until the last day of trial, while in this case the
supplemental answers to interrogatories were submitted prior to the commencement of
trial. I see no reason for this Court to usurp the discretion of the trial court in its
handling of this discovery motion. Our draconian application of CR 8.01 has resulted in
injustice, and harmed the judicial process by disturbing the relationship between
appellate courts and trial courts.
The majority has written at length on “economic theory of settlement.” Its
thesis is that a defendant cannot rationally determine whether to settle or go to trial
without knowing its maximum economic exposure. By that view, the burden would
logically fall on the defendant to move to obtain the information it needs to make its
settlement decision. In this case however, Defendant never made a motion to compel
the Plaintiff to supplement the interrogatories. In fact, the Defendant waited until the
day of trial to move to exclude evidence of the damage claims.
Burns v. Level* applied the abuse of discretion standard to a trial court’s
discovery ruling. In Burns, this Court held that the trial court had not abused its
discretion when it granted a directed verdict for the defendant, dismissing plaintiff’s
claims for damages not specified in the interrogatories as requested. In Fratzke, I
* Ky., 957 S.W.2d 218 (1998).
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expressed the view that “a far better approach would be to leave the remedy for failure
to answer interrogatories to the sound discretion of the trial judge. The perspective of
the trial judge with respect to analyzing prejudice, unfair surprise, and generally
allocating responsibility is far superior to that of any appellate co~rt.“~ On an issue such
as this, we should not substitute our judgment for that of the trial court. A trial judge is in
the best position to assess prejudice. If the trial judge finds that there is no harm to the
opposing party due to the omission, the trial judge should be allowed to admit the
evidence on the damage claim.
Graves and Keller, JJ., join this dissenting opinion.
3 Fratze, 12 S.W.3d at 274.
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RENDERED: MAY 16,2002
TO BE PUBLISHED
2000-SC-0456-DG
GLORIA J. LAFLEUR
V.
APPELLANT
ON REVIEW FROM THE COURT OF APPEALS
1999-CA-0830-MR
JEFFERSON CIRCUIT COURT NO. 1996-Cl-2802
SHONEY’S, INC.,
D/B/A FIFTH QUARTER
APPELLEE
DISSENTING OPINION BY JUSTICE KELLER
Without any hesitation, I join Chief Justice Lambert’s dissent. I write separately
merely to note my observation that the remedy the majority approves for Appellant’s
violation of CR 8.01 - reversal of the jury’s verdict and remand to the trial court for
entry of a judgment for only those items of damages included in earlier answers to
interrogatories - actually sanctions “trial by ambush” and creates significant
externalities likely to disrupt the “Economic Theory of Settlement.”
I cannot fathom
how an interpretation of our Rules of Civil Procedure that discourages proactive efforts
by defendants to seek information relating to damage exposure could possibly foster
settlements. After all, why would any defendant have an incentive to settle when he or
she can wait until the day of trial and then - without any previous complaint or showing
of prejudice - exploit opposing counsel’s oversights and invoke hypertechnical
constructions of the rules to keep a plaintiff from recovering his or her damages?
Here, after the trial court denied Appellee’s motion in limine to prohibit the
Appellant from introducing evidence showing damages in excess of the damages
claimed in the interrogatory responses, Appellee asked the trial court to continue the
trial in order to give it an opportunity to prepare for evidence concerning these
additional elements of damages.
While the majority chooses a remedy that leads to a
harsh result, it could easily remedy any prejudice it believes Appellee’s tardy notice may
have caused by holding that the trial court erred when it denied Appellee’s motion to
continue the trial, reversing the judgment, remanding the claim for a new trial, and
assessing the costs thereof against Appellant. Notwithstanding the majority’s notions of
economic theory, “there are no good economies in an unjust law,“’ and, above all else,
this Court is charged with the duty to do justice.* The majority has failed to do so in this
case.
Lambert, C.J. and Graves, J., join this dissenting opinion.
‘Hilen v. Hays, Ky., 673 S.W.2d 713, 718 (1984).
*1d. (“Above all else, court-made law must be just.“).
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e c!Dhotti af Ji!!hmlCk~
2000-SC-0456-DG
GLORIA J. LAFLEUR
V.
APPELLANT
ON REVIEW FROM THE COURT OF APPEALS
1999-CA-0830-MR
JEFFERSON CIRCUIT COURT NO. 1996-Cl-2802
SHONEY’S, INC.
D/B/A FIFTH QUARTER
APPELLEE
ORDER MODIFYING OPINION ON THE COURT’S OWN MOTION
On the Court’s own motion, the Opinion of the Court rendered herein on May 16,
2002, is modified by the substitution of new pages one and nine, hereto attached, in
lieu of pages one and nine of the Opinion as originally rendered. Said modification
does not affect the holding of the Opinion or the dissenting Opinions, but is made only
to correct a typographical error on page nine.
Entered: May 30, 2002.
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