McGuire, E. v. Russo, D. ( 2016 )

J. A19012/16
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
EILEEN MCGUIRE, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
v. :
:
DONALD RUSSO, D/B/A LAW OFFICES :
OF DONALD P. RUSSO, ESQUIRE, :
DEIRDRE KAMBER TODD, D/B/A :
FITZPATRICK LENTZ & BUBBA P.C. : No. 2603 EDA 2015
D/B/A KAMBER LAW GROUP, P.C., AND :
FITZPATRICK LENTZ & BUBBA P.C. :
Appeal from the Order Dated July 15, 2015,
in the Court of Common Pleas of Lehigh County
Civil Division at No. 2014-C-3564
BEFORE: FORD ELLIOTT, P.J.E., OTT AND FITZGERALD,* JJ.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED NOVEMBER 22, 2016
Eileen McGuire, plaintiff in the court below, appeals from the order of
July 15, 2015, sustaining defendants/appellees’ preliminary objections. We
affirm.
The trial court has summarized the history of this matter as follows:
According to her Second Amended Complaint,
Plaintiff is a skilled computerized tomography
technologist who was employed by Palmerton
Hospital in the fall of 2008 until July 2011. She
alleges the hospital terminated her employment
because she refused to engage in “multiple illegal
and unethical healthcare practices” and because of
her age. Second Amended Complaint, ¶ 6. She
* Former Justice specially assigned to the Superior Court.
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retained Defendants, Deidre [sic] Kamber Todd, Esq.
(“Attorney Todd”) and the law firm of Fitzpatrick,
Lentz & Bubba (“Fitzpatrick Firm”) “[a]round January
2012” in order to file an employment discrimination
complaint against the hospital and her former
supervisor, Louis Richards (“Richards”). Id. ¶ 12.
“Thereafter,” she (not Defendants) filed charges with
the Equal Employment Opportunity Commission
(“EEOC”) and the Pennsylvania Human Rights
Commission (“PHRC”) on the basis of age
discrimination. Id. ¶ 13.
On or about March 7, 2012, approximately
three months after filing her claim with the PHRC,
Attorney Todd filed an action against the hospital
and Richards in the Monroe County Court of Common
Pleas on March 7, 2012, for breach of contract and
wrongful termination. Id. ¶ 15-16. Although
Plaintiff seems to complain the complaint did not
contain a claim for age discrimination, she also
acknowledged her administrative remedies had not
been exhausted. Id. ¶ 16-17.
Attorney Todd left the Fitzpatrick Firm
“[a]round spring 2012, midway through the
litigation.” Id. ¶ 18. Plaintiff retained new counsel,
Attorney Donald Russo (“Attorney Russo”), on or
about July 3, 2012. The hospital and Richards
removed the case to federal court on or about
September 4, 2012.
At federal court, “[t]he case was dismissed
without prejudice and Plaintiff amended her
complaint several times . . . [and] [o]n or about
February 15, 2013, Plaintiff’s case was dismissed
with prejudice. . . .” Id. ¶ 24-25. After the
dismissal, Attorney Russo obtained a $7,000
settlement for Plaintiff.
In this action against Attorneys Russo and
Todd, and their law firms, including the Fitzpatrick
Firm, Plaintiff alleges “[b]ut for Defendants’ . . .
malpractice, Plaintiff would not have been in the
weakened position that forced her to accept a
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settlement amount significantly lower than what
Plaintiff would have received from meritorious
litigation.” Id. ¶ 29.
Order, 7/15/15 at 1-2 n.1.
Appellees’ preliminary objections in the nature of a demurrer were
sustained by order filed July 15, 2015. This timely appeal followed.
Appellant complied with Pa.R.A.P. 1925(b), and the trial court filed an
opinion.
The standard of review we apply when considering a trial court’s order
sustaining preliminary objections is well settled:
[O]ur standard of review of an order of the trial court
overruling or granting preliminary objections is to
determine whether the trial court committed an error
of law. When considering the appropriateness of a
ruling on preliminary objections, the appellate court
must apply the same standard as the trial court.
Preliminary objections in the nature of a demurrer
test the legal sufficiency of the complaint. When
considering preliminary objections, all material facts
set forth in the challenged pleadings are admitted as
true, as well as all inferences reasonably deducible
therefrom. Preliminary objections which seek the
dismissal of a cause of action should be sustained
only in cases in which it is clear and free from doubt
that the pleader will be unable to prove facts legally
sufficient to establish the right to relief. If any doubt
exists as to whether a demurrer should be sustained,
it should be resolved in favor of overruling the
preliminary objections.
HRANEC Sheet Metal, Inc. v. Metalico Pittsburgh, Inc., 107 A.3d 114,
118 (Pa.Super. 2014).
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The trial court dismissed appellant’s legal malpractice claims on the
basis of Muhammad v. Strassburger, McKenna, Messer, Shilobod &
Gutnick, 587 A.2d 1346 (Pa. 1991). In that seminal case, the Muhammads
brought a medical malpractice claim following the death of their infant son
during a surgical procedure. Id. at 1347. After the case settled for
$26,500, the Muhammads filed a legal malpractice action against the
attorneys who had represented them in the underlying medical malpractice
case. Id. at 1347-1348. The Pennsylvania Supreme Court in Muhammad
held that absent specific allegations of fraud, a client who agrees to settle a
case cannot subsequently bring a legal malpractice action against his
attorney:
Simply stated, we will not permit a suit to be filed by
a dissatisfied plaintiff against his attorney following a
settlement to which that plaintiff agreed, unless that
plaintiff can show he was fraudulently induced to
settle the original action. An action should not lie
against an attorney for malpractice based on
negligence and/or contract principles when that
client has agreed to a settlement. Rather, only cases
of fraud should be actionable.
Id. at 1348. The Muhammad court’s decision was based on the strong and
historical public policy of encouraging settlements:
The primary reason we decide today to disallow
negligence or breach of contract suits against
lawyers after a settlement has been negotiated by
the attorneys and accepted by the clients is that to
allow them will create chaos in our civil litigation
system. Lawyers would be reluctant to settle a case
for fear some enterprising attorney representing a
disgruntled client will find a way to sue them for
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something that “could have been done, but was not.”
We refuse to endorse a rule that will discourage
settlements and increase substantially the number of
legal malpractice cases. A long-standing principle of
our courts has been to encourage settlements; we
will not now act so as to discourage them.
Id. at 1349. The Muhammad court declared that, “henceforth we should
view ‘litigation concerning litigation’ cases with a jaundiced eye.” Id. at
1350. Absent a specific allegation of fraud, an agreement to settle
forecloses the ability of a dissatisfied litigant to file suit against his attorney:
We do believe, however, there must be redress for
the plaintiff who has been fraudulently induced
into agreeing to settle. It is not enough that the
lawyer who negotiated the original settlement may
have been negligent; rather, the party seeking to
pursue a case against his lawyer after a settlement
must plead, with specificity, fraud in the inducement.
“One may not . . . induce another to contract by
fraudulent misrepresentations.” College
Watercolor Group, Inc. v. William H. Newbauer,
Inc., 468 Pa. 103, 115, 360 A.2d 200, 206 (1976).
Id. at 1351 (emphasis in original).
In the event a litigant believes he has been
fraudulently induced into settling, he has the right to
file a suit, alleging with specificity the acts that he
claims are fraudulent. If his allegations meet the
standard of specificity required by Pa.R.C.P. 1019(b),
then he will be allowed to proceed. In the event
those allegations do not meet that standard of
specificity, then the case will be dismissed upon the
filing of preliminary objections.
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Id. at 1352 (emphasis in original).1
Appellant does not allege that she was fraudulently induced into
signing the settlement agreement. Accepting appellant’s allegations as true,
her attorneys failed to include a claim for age discrimination and also failed
to exhaust appellant’s administrative remedies and obtain a “right to sue”
letter from the EEOC. These allegations go to negligence and breach of
contract, not actual fraud. Even if appellees’ negligence resulted in appellant
accepting a “low-ball” offer, there is no allegation that appellees engaged in
fraudulent conduct. Therefore, Muhammad applies to bar the action.
Appellant relies on a series of cases distinguishing Muhammad on the
basis that the attorneys’ alleged negligence did not lie in their professional
judgment in negotiating a settlement, but rather in their failure to advise
their client of well-established principles of law and the consequences of
entering into a legal agreement. In McMahon v. Shea, 688 A.2d 1179 (Pa.
1997), for example, Robert McMahon and his wife Janet entered into a
written settlement agreement providing for weekly child support and alimony
payments. Id. at 1180. These payments were to continue until the
youngest living child reached age 21, was emancipated, or finished college,
1
Under Rule 1019, “[t]he material facts on which a cause of action or
defense is based shall be stated in a concise and summary form.”
Pa.R.C.P. 1019. “Pennsylvania is a fact-pleading state; a complaint must
not only give the defendant notice of what the plaintiff’s claim is and the
grounds upon which it rests, but the complaint must also formulate the
issues by summarizing those facts essential to support the claim.” Feingold
v. Hendrzak, 15 A.3d 937, 942 (Pa.Super. 2011).
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whichever occurred last. Id. Upon advice of counsel, the parties entered
into a stipulation wherein the written agreements would be incorporated but
not merged into the final divorce decree. Id. Two months after the divorce
decree was entered, Mrs. McMahon remarried. Id. Mr. McMahon filed a
petition to terminate alimony, which was denied on the grounds that the
parties’ agreement had survived the divorce decree.2 Id.Mr. McMahon filed a legal malpractice action against his attorneys,
alleging that they negligently failed to merge his alimony agreement with
the final divorce decree, resulting in damages including alimony payments to
his former wife after her remarriage. Id. at 1180-1181. Our supreme court
distinguished Muhammad on the basis that Mr. McMahon was not simply
dissatisfied with his settlement valuation; rather, he was alleging a failure to
administer accurate advice about well-established principles of law in settling
a case:
2
The Divorce Code provides that the payment of
alimony shall terminate upon the payee-spouse’s
remarriage. See 23 Pa.C.S.A. § 3701(e). Where,
however, the parties enter into an alimony
agreement that is not merged with a subsequent
divorce decree, then that agreement survives the
divorce decree, thus obligating the parties to the
agreement to honor the agreement after the divorce
decree has been entered. See McMahon v.
McMahon, 417 Pa.Super. 592, 612 A.2d 1360(1992) (en banc).
Banks v. Jerome Taylor & Assoc., 700 A.2d 1329, 1332 n.1 (Pa.Super.
1997), appeal denied, 723 A.2d 668 (1998).
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The laudable purpose of reducing litigation and
encouraging finality would not be served by
precluding the instant action. Mr. McMahon merely
seeks redress for his attorneys’ alleged negligence in
failing to advise him as to the controlling law
applicable to a contract.
Id. at 1182. The court in McMahon concluded that the longstanding public
policy favoring settlements had no application to the facts of that case,
where Mr. McMahon was not attacking the value that his attorneys placed on
his case:
Instead, Mr. McMahon is contending that his counsel
failed to advise him as to the possible consequences
of entering into a legal agreement. The fact that the
legal document at issue had the effect of settling a
case should not exempt his attorneys from liability.
Id. at 1182.3
In White v. Kreithen, 644 A.2d 1262 (Pa.Super. 1994), appeal
denied, 652 A.2d 1324 (Pa. 1994), the plaintiff in a medical malpractice
case discharged her attorneys, allegedly because of their negligence in
handling her case and because they were not prepared for trial. Id. at
1263. The plaintiff sought to retain other counsel but could not because her
attorneys refused to transfer the file and demanded unreasonable
“referral fees” from proposed new counsel. Id. The case was placed on the
trial list, and the plaintiff still had not obtained new counsel. At a conference
3
McMahon was decided by an evenly split six-member court.
Justice Cappy, joined by Justices Castille and Newman, filed a concurring
Opinion, rejecting the majority’s attempt to limit Muhammad to its facts
and emphasizing the continuing validity of Muhammad.
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before the Calendar Judge at which the plaintiff appeared pro se, the
Calendar Judge recommended settlement in the amount of $150,000 and
stipulated that if the plaintiff did not accept his recommendation, she would
be forced to immediate trial unless the defendants refused to agree. Id.
The plaintiff alleged that her medical expenses alone exceeded $150,000.
Id. The medical malpractice defendants agreed to pay the figure
recommended by the Calendar Judge, at which point the plaintiff had no
choice but to accept the figure. Id.
This court concluded that the subsequent legal malpractice suit was
not barred as a result of the plaintiff’s settlement of the medical malpractice
action, distinguishing Muhammad:
It is thus apparent that Muhammad does not
control the present case since the settlement in the
underlying action was not a settlement negotiated by
counsel for appellant. Rather, after appellant
discharged appellees, allegedly for failure to properly
investigate and prepare her case for trial, appellant
was forced, due to her inability to retain counsel, to
accept the settlement figure proposed by the judge.
Moreover and quite importantly, none of the
motivating reasons for the Supreme Court decision in
Muhammad, supra, would be achieved by finding
the instant malpractice action barred, since appellees
did not participate in the settlement, and appellant
was prevented-allegedly as a result of appellees’
conduct-from questioning “before settlement”
whether the terms of the settlement were
advantageous.
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Id. at 1265. Therefore, critical to this court’s decision in White was the fact
that the defendants in the legal malpractice action did not negotiate the
settlement in the underlying medical malpractice action.
Similarly, in the recent case of Kilmer v. Sposito, A.3d , 2016
WL 3612406 (Pa.Super. July 1, 2016), the plaintiff’s former attorney
represented her in matters related to settling the estate of her late husband.
Id. at *1. According to the complaint, he negligently advised the plaintiff to
file an election to take against her husband’s will under 20 Pa.C.S.A. § 2203,
which would entitle her to one-third of her husband’s estate. Id. In fact,
under 20 Pa.C.S.A. §§ 2507 and 2102, she was entitled to one-half of the
estate as a surviving spouse who had married the testator after he made his
will. Id. The plaintiff followed her attorney’s advice and filed an election to
take against the will, effectively reducing her share of the estate from one-
half to one-third. Id.
Subsequently, the plaintiff terminated her attorney’s services and
retained new counsel to challenge the validity of her election. Id.
Ultimately, she reached a settlement with the estate whereby she agreed to
accept a 41.5% share of her late husband’s estate. Id. The plaintiff then
filed a legal malpractice action against her former attorney, which was
dismissed on the basis of Muhammad. On appeal, this court reversed,
distinguishing Muhammad where the plaintiff was challenging her former
attorney’s failure to advise her correctly on the law pertaining to her interest
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in her late husband’s estate. Id. at *4. Following McMahon, in which all
six justices drew a distinction between challenging an attorney’s professional
judgment regarding settlement and challenging an attorney’s failure to
advise a client of well-established principles of law and the impact of a
written agreement, this court in Kilmer stated:
We apply the same rationale herein, for barring
Appellant from seeking to hold Appellee accountable
for allegedly flawed legal advice on an underlying
matter essential to her inheritance as a surviving
spouse would not advance the interests of finality in
settlements. Appellant alleged in her complaint that
Appellee’s negligence and breach of contract
consisted of his failure to advise her properly on the
consequences of exercising her right of election to
take against the will. Appellant relied upon
Appellee’s advice to her ostensible detriment when
she authorized Appellee to file her election with the
orphan’s court, a filing that would reduce Appellant’s
legal interest in her husband’s estate by 17 2/3 if
accepted by the court. She and new counsel
challenged the validity of her election in a
subsequent proceeding, but the prospects of
prevailing in that matter were uncertain at best,
driving them to the reasonable position of accepting
a settlement that allowed her to make what was,
indisputably, only a partial recovery of what she lost
by virtue of the advice rendered by Appellee.
Id. at *4 (footnote omitted). As in White, the defendant attorney in
Kilmer did not negotiate any settlement on his client’s behalf. Rather, he
administered plainly erroneous legal advice.
In the case sub judice, appellant agreed to settle her case for $7,000
after her third amended complaint was dismissed in federal court. Appellant
does not allege that she was fraudulently induced into accepting the
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settlement, or that appellees misrepresented the terms of the agreement.
Nor does appellant allege that appellees gave her wrong advice concerning
well-established principles of law, or failed to explain the impact of a legal
document. See Banks, 700 A.2d at 1332 (the Muhammad rule does not
bar a client from suing his counsel for negligence where the settlement
agreement is legally deficient or where counsel fails to explain the effect of a
legal document) (citations omitted). Here, appellant alleges, inter alia, that
appellees failed to include all pertinent facts in her first complaint when the
lawsuit was initiated, failed to properly amend the complaint, failed to
exhaust her administrative remedies, and failed to respond to her questions
regarding settlement of her case. (Second amended complaint, 4/10/15 at
¶ 31; RR Vol. I at 72.) Since appellant failed to specifically plead fraudulent
inducement or that the settlement agreement itself was somehow legally
deficient, the Muhammad rule applies, and appellant is barred from filing
suit for legal malpractice. It appears that appellant is dissatisfied with her
decision to settle and feels that more competent counsel would have been
able to get her a “better deal”; this is precisely the sort of inefficacious
litigation that the court in Muhammad was trying to foreclose. See
Muhammad, 587 A.2d at 1350 (“Particularly troublesome to the efficacy of
the courts are these ‘second bite’ cases; they require twice the resources as
a single case, yet resolve only a single litigant’s claims--thus denying access
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to the courts to litigants who have never had a single resolution of their
dispute.”).4
In her reply brief, appellant complains that Muhammad has been
heavily criticized and other jurisdictions, including New Jersey, have refused
to follow it. (Appellant’s reply brief at 4.) It is well established that this
court is bound by decisions of our supreme court unless they are overturned
by that court. See Marks v. Nationwide Ins. Co., 762 A.2d 1098, 1101
(Pa.Super. 2000) (this court continues to follow controlling precedent as long
as the decision has not been overturned by our supreme court), appeal
denied, 788 A.2d 381 (Pa. 2001). Appellant wrongly characterizes
McMahon as limiting Muhammad to the facts of that case. (Appellant’s
brief at 19.) As stated above, McMahon was the product of an equally
divided, six-member supreme court. In point of fact, the three-member
“minority” concurred in the result, but specifically objected to limiting
Muhammad to its facts. McMahon, 688 A.2d at 1182-1183.
Consequently, McMahon did not serve to limit Muhammad to its facts, and
Muhammad remains as controlling precedent until a true majority of the
supreme court rules otherwise. The trial court did not err in sustaining
4
At any rate, clearly appellant cannot maintain suit against the Todd and
Fitzpatrick defendants where they were replaced in 2012. Appellant hired
appellee Russo who filed several amended complaints on her behalf,
including an age discrimination claim. As the trial court observed, neither
Todd nor the Fitzpatrick firm represented appellant when she negotiated and
accepted the settlement agreement. (Trial court opinion, 10/9/15 at 5.)
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appellees’ preliminary objections and dismissing appellant’s complaint with
prejudice where she failed to allege that the settlement agreement was
legally deficient, that she was fraudulently induced to settle, and/or that the
consequences of the legal agreement were not fully explained to her.
For these reasons, it is unnecessary to address appellant’s other claim
raised on appeal, that she was entitled to attorneys’ fees.5 Furthermore,
“The settled law of this Commonwealth is that attorneys’ fees are
recoverable from an adverse party to a cause only when provided for by
statute, or when clearly agreed to by the parties.” J.C. Snavely & Sons,
Inc. v. Web M & E, Inc., 594 A.2d 333, 337 (Pa.Super. 1991), appeal
denied, 602 A.2d 860 (Pa. 1991), quoting Fidelity-Philadelphia Trust Co.
v. Philadelphia Trans. Co., 173 A.2d 109, 113 (Pa. 1961). Instantly,
appellant has cited no statute or agreement between the parties that would
entitle her to attorneys’ fees.
Order affirmed.
Ott, J. joins this Memorandum.
Fitzgerald, J. notes dissent.
5
Appellant has abandoned her claims for punitive damages and breach of a
fiduciary duty.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/22/2016
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