HomeMy WebLinkAbout99-03542LOUIS L. CAPOZZI, JR.,
PLAINTIFF
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and
DOUGLAS C. YOHE,
DEFENDANTS
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
: 99-3981 CIVIL TERM
:3542 CIVIL TERM
: 97-5584 CIVIL TERM
VERDICT (BIFURCATED DAMAGE PHASE)
AND NOW, this t ° day of December, 2000, the following verdict is
entered:
(1) Louis J. Capozzi, Jr., is awarded principal in the amount of $38,071.50 plus
interest totaling $8,668.48 through December 18, 2000, for a total of
$46,683.98, against Latsha & Capozzi, P.C., Kimber L. Latsha, Glenn R.
Davis and Douglas C. Yohe, on the demand note as found by the jury in
Question Number 1.
(2) Latsha and Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C.
Yohe are awarded damages, and as a setoff, from Louis J. Capozzi, Jr., of
$14,140.78 for client refunds representing his proportional share of the
money the law firm returned to clients who were overbilled by him, and
auditing expenses of $5,679.02 representing the total cost of identifying the
clients and determining the amounts of the overbillings, for a total of
$19,819,80 as found by the jury in Question Number 2.
(3) Louis J. Capozzi, Jr., is awarded $5,000 against Latsha and Capozzi, P.C.,
Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe, with legal interest
from June 6, 1997, for the value of his stock at his capital contribution as
found by the jury in Question Number 3.
By the
Edgar B.
John McN. Cramer, Esquire
For Louis J. Capozzi, Jr.
Richard H. Wix, Esquire
For Latsha and Capozzi, P.C.
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
:sea
??1V THE UNITED STATES DISTRICT COURT
G MIDDLE DISTRICT OF PENNSYLVANIA
LATSHA, DAVIS & YOHE, P.C.,
KIMBER L. LATSHA, GLENN R. DAVIS,
and DOUGLAS C. YOHE,
Plaintiffs,
V.
LOUIS J. CAPOZZI, JR.,
Defendant.
CIVIL ACTION NO.
JURY TRIAL DEMANDED
Hdgglc?
COMPLAINT
The Parties
? EC 1
PA
erRYEt) 1 -r,.
H ??FRK
Plaintiff Latsha, Davis & Yohe, P.C. ("LD&Y"), is a professional corporation
organized under the laws of the Commonwealth of Pennsylvania with a principal place of
business at Executive Park West II, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg,
Pennsylvania 17055.
2. Plaintiff Kimber L. Latsha ("Latsha") is an individual with a business address of
Executive Park West II, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg, Pennsylvania
17055. Latsha is a shareholder in LD&Y.
3. Plaintiff Glenn R. Davis ("Davis") is an individual with a usual place of business
at Executive Park West H, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg, Pennsylvania
17055. Davis is a shareholder in LD&Y.
4. Plaintiff Douglas C. Yohe ("Yohe") is an individual with a usual place of
business at Executive Park West II, Suite 101, 4720 Old Gettysburg Road. Mechanicsburg,
Pennsylvania 17055. Yohe is a shareholder in LD&Y.
5. Defendant Louis J. Capozzi, Jr. ("Capozzi") is an individual with a principal
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Certified fro the record
Date =aZgecrk
Pct
Depuly Clerk
I
place of residence at 405 Herr Street, Harrisburg, Pennsylvania.
Jurisdiction and Venu
6• This Court has subject matter jurisdiction over certain claims herein pursuant to
18 U.S.C.§ 1964, 15 U.S.C.§ 1125(a), and 28 U.S.C.§ 1331 because they arise under the laws of
the United States and over other state law claims pursuant to supplemental jurisdiction, 28
U.S.C.§ 1367.
7. Venue is proper in this judicial district pursuant to 28 U.S.C.§ 1391, 18
U.S.C.§1965, and 15 U.S.C.§1121.
Bacheround of Latsha & Capozzi P.C.
8. Latsha and Capozzi worked together as attorneys at the law firm of Shumaker,
Williams F.C. in Harrisburg, Pennsylvania.
9. In early 1994, Capozzi decided that he was going to leave Shumaker Williams
because he was not granted status as a class "A" shareholder within the time frame that he
expected.
10. Latsha had an ongoing professional relationship with Capozzi at Shumaker
Williams. Upon learning that Capozzi was going to leave the firm, Latsha was confronted with
the decision whether to remain at Shumaker Williams or to leave and build a law practice with
Capozzi.
11. In weighing the consequences of his decision, Latsha made clear to Capozzi that,
should he decide to go into business with Capozzi, it would not be for financial purposes, but
rather for the opportunity to build a law firm. Latsha stressed to Capozzi that money was not the
most important thing to him, and that Capozzi needed to understand that. Latsha further advised
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Capozzi that he would only enter into business with Capozzi if Capozzi would not personally
engage in any activity that would in any way tarnish Latsha's reputation.
12. Integrity was particularly important to Latsha. Additionally, any activity which
would reflect adversely on Latsha's character or reputation could potentially have a severe
impact on relationships with Latsha's clients and Latsha's ability to obtain additional non-profit,
church-sponsored health care providers. Latsha felt that his personal reputation and integrity
were essential for maintaining client trust.
13. Capozzi represented and promised that he would do nothing to tamish Latsha's
reputation or doing anything to erode the client trust which Latsha had developed.
14. Based upon Capozzi's assurances, on May 24, 1994, Latsha and Capozzi formed
the law firm of Latsha & Capozzi, P.C. ("L&C").
15. Yohe joined L&C as a principal in July, 1994.
16. Davis joined L&C as a principal in March, 1995.
17. By the time that Davis joined L&C, the principals had agreed to the essential
terms of a shareholders' agreement. The addition of Davis only changed the ownership interest
of each principal in the firm.
18. The compensation formula for the principals of L&C was based on the percentage
ownership of each principal and the actual individual collections of each principal. At the time
that Davis joined the firm in 1995, it was agreed that ownership in the firm would be as follows:
Latsha owned 37%2%; Capozzi owned 371/2 %; Yohe owned 15%; and Davis owned 10%.
19. At the end of the year, or at other times during the course of the year when the
firm deemed it appropriate to pay additional compensation when operating reserves were
sufficient, L&C would pay from one-half of the net profits additional compensation in
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accordance with the percentage which each principal had in the firm. The second half of the net
profits was distributed based on a ratio of individual collections to the aggregate collections of
the four principals.
20. Although the principals agreed to the essential terms of the shareholders'
agreement and a draft document was eventually prepared for the principals' review, it was never
executed by the principals. At a strategic planning retreat among the principals in 1996, the
principals reviewed the draft and reaffirmed their agreement to all of its essential terms.
Although Capozzi agreed to those terms, he asked that the other principals not sign the
shareholders' agreement at that time, as he intended to separate from his wife and possibly
divorce her.
Capozzi's Efforts to Initiate "Value Billing" With Firm Clients
21. L&C billed its clients in accordance with written fee agreements which set forth
the terms and conditions of the attorney client relationship. Except for contingency fee cases,
the written fee agreement required L&C to bill each client for actual time spent on each file,
which was recorded in increments of I/ 10 of an hour. For instance, a 6 minute letter to a client
was billed as a ".I ", a 12 minute letter would be billed as a ".2", and so on.
22. In virtually all instances, L&C provided in their written fee agreement that there
would be a minimum billable amount for each billable phone call. In the written fee agreements
the clients agreed that any substantive telephone call of 18 minutes or less would be billed as a
".3". This minimum billable amount took into consideration the disruptions created by
unanticipated telephone calls during the course of the day.
23. Capozzi expressed to Latsha, and subsequently Davis and Yohe, his belief that the
firm should start to "value bill" its clients. Under this system, the billing attorney would
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determine whether the bill should be adjusted to take into account the fact that, given their
particular expertise in a field of practice or firm efficiencies, the bill should be adjusted upward
above the usual hourly billing arrangement. In other words, the client would be billed for the
"value" of the work performed as subjectively determined by the principals.
24. The value billing system as discussed would require L&C to set forth the terms of
the "value billing" in the fir's fee letters with its clients.
25. Although the proposal of "value billing" was presented to the other principals by
Capozzi, it was rejected. "Value billing" fee letters were never sent to L&C clients.
26. At no time did Capozzi indicate to the other principals that he was "value billing"
clients or billing them in a manner inconsistent with their written fee agreements.
Ca pozzi's Practice of Defrauding -Clients - The Pattern of Racketeering Activity
27. It is believed, and therefore averred, that commencing some time after the
inception of L&C, and continuing thereafter until the remaining principals found out and ended
the practice near the end of April, 1997, Capozzi engaged in a pattern of conduct designed to
defraud L&C clients of professional fees.
28. Each principals in the firm was assigned as the "billing attorney" for certain
clients. The "billing attorney" was usually the principal who was the primary client contact or
who was primarily responsible for bringing the client into the fir.
29. One of the functions of the billing attorney was to review the "pre-bills" which
were provided to the billing attorneys for their review prior to preparation of the final bill.
Included on these "pre-bills" were the names of all the attorneys and paralegals who performed
work on a particular file, the work that was performed by that particular attorney or paralegal,
and the time that each attorney or paralegal spent working on the file. Thus, if an associate spent
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12 minutes working on a file, the "pre-bill" would reflect the name of that associate, a ".2"
(representing 12 minutes of an attorney's time), and a description of the services that the
associate provided.
30. The information which appeared on the "pre-bills" was taken from time sheets or
time slips that were manually prepared by the attomeys or paralegals who were working on the
file. Each attorney and paralegal was responsible for the preparation of his or her own time
sheets or time slips.
31. The purpose of the "pre-bill" was to provide the billing attorney an opportunity to
review the time spent on the file by the various attorneys in the office, to ensure that it
comported with the client's expectations as set forth in the written fee agreement between the
parties, and to ensure that the time spent on the file by the attorneys and paralegals was not
excessive.
32. Capozzi was a "billing attorney" and, as such, reviewed the "pre-bills" for the
clients for whom he had billing responsibility.
33. Near the end of April, 1997, Latsha reviewed the pre-bills for a client for whom
both Latsha and Capozzi had responsibility. Latsha was the billing attorney for some of the
client's files, and Capozzi was the billing attorney for other files for the same client. Latsha
discovered that some of the time that Capozzi had spent on matters for which he was responsible
had inadvertently been included in the pre-bill for the files for which Latsha had billing
responsibility. Latsha thereafter asked the billing clerk for the pre-bills that Capozzi had
reviewed to see if any of Latsha's time appeared on those bills.
34. In reviewing the pre-bills for the files for which Capozzi had billing
responsibility, Latsha found that Capozzi had lined through the time of one of the associates and
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had "written it up," meaning that Capozzi had substituted a higher amount of time for the time
that was actually spent by the associate. He then wrote the symbol 'T' at the top of the pre-bill
to indicate to the billing clerk to finalize the bill. When Latsha discovered this, he immediately
made inquiry of the billing clerk whether there were other examples of "write-ups" on the bills.
The billing clerk confirmed that this was the case. Latsha immediately directed the billing clerk
to review pre-bills on all of the matters on which Capozzi was the billing attorney to uncover
whether any other associate or paralegal time had been "marked up".
35. A review then was undertaken with respect to Capozzi's billing practices revealed
that Capozzi improperly marked up associate and paralegal time as a regular practice and
procedure. A review of Capozzi's pre-bills over a three month period revealed that Capozzi had
written up associate and paralegal time throughout this entire time period. In addition, upon
information provided by the billing clerk and other information now available to plaintiffs, it is
believed that Capozzi's pattern and practice of marking up associate and paralegal time dated
back to the inception of the firm.
36. As a result of the review of Capozzi's pre-bills, and as a result of confronting
Capozzi with what was uncovered, the principals learned that final bills with fraudulently
inflated time were sent through the United States Mails to clients both inside and outside the
Commonwealth of Pennsylvania.
37. The actions undertaken by Capozzi in artificially and improperly inflating
associate and paralegal time on the pre-bills and in directing improper and fraudulent bills to be
conveyed to L&C clients, constituted fraud perpetrated through the mails of the United States
within the meaning of the mail fraud statute, 18 U.S.C.§ 1341. Each of these bills which Capozzi
directed to be sent included intentional misrepresentations designed to defraud L&C clients of
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professional fees.
38. It is believed, and therefore averred, that there are hundreds of predicate acts of
mail fraud relating to the Capozzi's scheme to defraud L&C clients. These predicate acts, which
comprise a pattern of racketeering activity within the meaning of 18 U.S.C. §1964, include, but
are not limited to, the following bills which were sent to L&C clients through the United States
mails:
(a) two bills dated February 14, 1997 mailed to a client' located in Brookville,
Pennsylvania, which included fraudulently "marked up" time;
(b) a bill dated February 14, 1997 mailed to a client located in Milwaukee,
Wisconsin, which included fraudulently "marked up" time;
(c) two bills dated February 14, 1997 mailed to a client located in New
Castle, Pennsylvania, which included fraudulently "marked up" time;
(d) a bill dated February 14, 1997 mailed to a client located in Lock Haven,
Pennsylvania, which included fraudulently "marked up" time;
(e) numerous bills dated February 14, 1997 mailed to a client in Allentown,
Pennsylvania, which included fraudulently "marked up" time;
(f) a bill dated February 14, 1997 mailed to a client in Pittsburgh,
Pennsylvania, which included fraudulently "marked up" time;
(g) two bills dated March 12, 1997, mailed to a client located in Hackensack,
New Jersey, which included fraudulently "marked up" time;
(h) a bill dated February 14, 1997 mailed to a client located in York,
Pennsylvania, which included fraudulently "marked up" time;
G) a bill dated February 14, 1997 mailed to a client located in Washington,
Pennsylvania, which included fraudulently "marked up" time;
(j) a bill dated February 14, 1997 mailed to another client located in
'The identity of the clients to whom Capozzi sent these bills is not being divulged in this
Complaint in order to preserve the confidentiality of this information. This information will be
disclosed to Capozzi as part of the discovery in this matter in a manner which preserves this
confidentiality.
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Allentown, Pennsylvania, which included fraudulently "marked up" time;
(k) a bill dated February 14, 1997 mailed to a client located in Curwensville,
Pennsylvania, which included fraudulently "marked up" time;
(1) a bill dated March 12, 1997 mailed to a client located in Scranton,
Pennsylvania, which included fraudulently "marked up" time;
(m) bills dated February 14, 1997 and March 12, 1997 mailed to a client
located in Bloomsburg, Pennsylvania, which included fraudulently
"marked up" time;
(n) a bill dated February 14, 1997 mailed to a client located in Nanticoke,
Pennsylvania, which included fraudulently "marked up" time;
(o) a bill dated February 14, 1997 mailed to a client located in North
Huntington, Pennsylvania, which included fraudulently "marked up" time;
and
(p) numerous bills dated February 14,1997 mailed to a client located in
Owings Mills, Maryland, which included fraudulently "marked up" time;
(q) a bill dated February 14, 1997, mailed to a client in DuBois, Pennsylvania
which included fraudulently "marked up" time.
39. In reasonable reliance upon the accuracy of the foregoing bills, the respective
clients who received same made payment to L&C.
40. As a 37.5% principal in L&C, Capozzi directly received profits as a result of the
foregoing fraud, which profits were distributed to him in accordance with the principal
agreement.
41. An audit was subsequently undertaken with respect to Capozzi's scheme. Latsha,
Davis, and Yohe have contacted the clients whom they know were defrauded, and have
reimbursed the clients (the "Defrauded Clients") for all amounts determined to be over billed.
As of the date of the filing of this Complaint, the amount that has been reimbursed to the
Defrauded Clients is $37,708.76. Capozzi has not contributed to this reimbursement even
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though he personally profited from same and received the benefits of his fraudulent activity.
42. Latsha, Davis and Yohe were morally and legally obligated to return the ill-gotten
funds from the Defrauded Clients and to notify them of what had transpired. This
reimbursement was accomplished through LD&Y. As such, LD&Y and Latsha, Davis, and
Yohe, its shareholders, are equitably subrogated to the rights of the Defrauded Clients against
Capozzi, the individual responsible for the fraud.
43. The process of notification and reimbursement caused severe damage to the
reputation of Latsha, Davis and Yohe and LD&Y, and substantially undermined the ongoing
attorney-client relationships which the firm maintained with the Defrauded Clients.
44. In addition to the funds which the shareholders have lost in reimbursing the
Defrauded Clients, LD&Y has been damaged in its business and property in that it has been
forced to expend resources to investigate the extent of Capozzi's fraud, to retain legal counsel to
advise with respect to its obligations pursuant to the Rules of Professional Conduct governing
the conduct of attorneys, and to otherwise expend funds in order to insure that the firm fully
complies with all applicable laws.
Capozzi's Breach of Trust and Events Leading
to Capozzi's Interference With LD&Y Clients
45. In the first week of January, 1997, prior to the discovery of the pattern of illegal
activity described above, one of L&C's 15 attorneys announced his decision to resign from the
firm and join another law firm. Shortly thereafter, another two associates announced their
decision to resign from the firm. Latsha met individually with these three associates and learned
that Capozzi's interaction with those associates made a significant impact on their decision to
leave the firm. In particular, one of the associates informed Latsha that he considered Capozzi
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"sneaky" and, in essence, untrustworthy.
46. In learning that one of the associates with L&C considered Capozzi
untrustworthy, Latsha became very concerned about the reasons that he had entered into practice
with Capozzi and the importance of maintaining his reputation. Latsha found it extremely
difficult to believe that he had an associate who felt that he was part of an untrustworthy or
"sneaky" organization.
47. In the course of the next several days, Latsha decided that he could no longer
continue to practice with Capozzi. Latsha had come to the conclusion that he could no longer
trust Capozzi, and that if he could not trust him, he could not practice law with him.
48. The information that Latsha had received from the departing associate was not the
only basis for his mistrust of Capozzi. There were other issues as well. This included, but was
not limited to the following:
(a) information that he had received that Capozzi had billed more than 24
billable hours in one day prior to joining L&C;
(b) information that Capozzi had improperly solicited clients prior to his
actual departure from Shumaker Williams;
(c) Capozzi's ongoing personal financial problems;
(d) information that Capozzi left previous places of employment under
adverse circumstances;
(e) Capozzi's inability to control his temper and his practice of berating staff
and associate attorneys publicly;
(f) substantial irregularities in Capozzi's expense account reports and his
utilization of firm resources primarily for personal use;
(g) Capozzi's inability to control his use of alcohol;
(h) misrepresentations to clients regarding the merits of their case;
(I) Capozzi's maintaining unreasonable positions with opposing counsel in a
manner which adversely affected L&C's ability to represent other clients
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with the same adversary counsel; and
0) information that lead Latsha to believe that Capozzi was having sexual
relations with L&C clients and staff.
49. At a board meeting in early 1997, Latsha announced that he wanted to dissolve
the firm by mutual agreement, or if necessary, to voluntarily leave. Capozzi asked Latsha to
defer any decision on the matter until he had time to consider it. Capozzi later met with Latsha,
at which time Latsha advised him privately of his reasons for wanting to dissolve the firm or to
leave it. The central reason for these decisions was that Latsha was unwilling to practice law
with someone that he considered to be a dishonest individual. At this time, however, Latsha had
no idea of Capozzi's fraudulent billing practices, as described more fully above.
50. Shortly thereafter, Latsha was informed by Capozzi's wife that she believed he
suffered from alcoholism or some other addiction. Capozzi's wife attributed Capozzi's deceitful
nature to this addiction. Latsha agreed to work with Capozzi's wife to help Capozzi address this
issue.
51. Latsha conveyed the information regarding Capozzi's alleged addiction to Davis
and Yohe, all of whom agreed to meet with Capozzi's wife and her psychologist to discuss an
appropriate course of conduct designed to help Capozzi. The principals hoped that if they were
able to help Capozzi conquer his addiction, he could be trusted again and there would be no need
for Latsha to leave the firm and/or reach an agreement to dissolve it. ,
52. After meeting with the psychologist, it was agreed by all concerned that they
would pursue a course of action which was geared to "intervention". The principals (excluding
Capozzi) embarked on a series of weekly or bi-weekly educational sessions regarding the
intervention process and their particular roles in the process. Latsha informed Davis and Yohe
that he was willing to defer attempting to reach an agreement on the dissolution of the firm or his
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departure from it pending the outcome of the intervention.
53. The intervention was eventually held in the last week of April, 1997, shortly after
Latsha uncovered the first signs of Capozzi's fraudulent billing practices.
54. As a result of the intervention Capozzi agreed to be admitted to a recovery center
outside of Reading, Pennsylvania called the "Caron Foundation."
55. After arriving at the Caron Foundation, Capozzi telephoned Latsha and explained
that he did not want to stay there and that he was going to leave. On the telephone he offered
numerous explanations with respect to his writing-up of attorney and paralegal time, none of
which were credible to Latsha or the other principals.
56. One of the reasons that Capozzi did not want to stay at the Caron Foundation was
that an important meeting was scheduled with a client that Capozzi wanted to attend. Although
the meeting involved a significant case for L&C, the principals were willing to risk the
possibility of losing the client rather than have Capozzi leave the Caron Foundation. After
lengthy discussion and debate, Latsha, Davis, and Yohe agreed to permit Capozzi to attend the
meeting, upon the condition that he immediately return to the Foundation Center after the
meeting was over.
57. Capozzi agreed to follow the advice and consultation provided by the Caron
Foundation, which anticipated that he would need to stay at the center for recovery and treatment
for 4 weeks.
58. Unbeknownst to the other principals, Capozzi had begun plans to leave the Caron
Foundation.
59. During the time that Capozzi had agreed to undergo treatment he was given a paid
leave of absence from the firm.
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60. The principals thereafter prepared a letter which would define the terms and
conditions for Capozzi's return to the practice of law and L&C. This letter was prepared in
consultation with Capozzi's counselor at the Caron Foundation and with the advice of an
attorney retained by the principals to deal with the ethical issues brought about by Capozzi's
conduct.
61. The letter essentially set forth the terms of a probationary period that Capozzi
would have with the firm moving forward. If Capozzi was successful in proving that he could be
a trustworthy principal and attorney, he would be welcomed to continue the practice of law with
the other principals. However, Capozzi's past and raised serious ethical and criminal
implications. Irrespective of their desire to assist Capozzi, the principals needed to insure that no
overbilling could possibly occur again, especially given their knowledge of his past conduct.
The letter therefore made clear that the other principals needed to be able to exercise some
control over Capozzi's communications with clients and the billing process in order to protect
themselves and L&C.
62. With the advice of counsel, Latsha, Davis, and Yohe undertook a thorough audit
of all of Capozzi's pre-bills to uncover the extent of Capozzi's fraudulent activity. The firm also
hired an auditor to address the problems as expeditiously as possible. One of the individuals
within the firm who was working on the problem was the office administrator, Marlene Moyer
("Moyer"). Unbeknownst to Latsha, Davis, and Yohe, during this time period Moyer began to
work secretly for Capozzi in an effort to assist Capozzi in soliciting firm clients and undermining
associate and staff confidence in the continued viability of L&C.
63. With the advice of counsel, the firm changed the locks at the offices out of
concern that Capozzi would attempt to destroy or remove the pre-bills and other documentation
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14
of his fraud. The firm did not want Capozzi tampering with evidence in any way that could
suggest that the other principals were in any way involved in Capozzi's fraudulent billing
activity or in any way participated in any form of cover-up,
64. Capozzi left the Caron Foundation after only two weeks. In light of the problems
that had been uncovered, the fine decided to continue his leave of absence for the period of time
that they originally contemplated, which was four weeks. The firm requested Capozzi to utilize
the time for outpatient therapy in accordance with the recommendations provided by Capozzi's
counselor at the Caron Foundation.
65. As the time approached for Capozzi to return to work, the principals heard rumors
that he had no intention of returning, absent some changes to the letter outlining the terms of the
probation.
Capozzi's Improper Solicitation And Interference With Clients
66. Capozzi was scheduled to return to work on June 2, 1997. It was also about this
time that the firm received its first written notice of Capozzi's solicitation of the firm clients, at a
time where Capozzi was still receiving pay, and indicating through his counsel or through
himself that he intended to remain part of the firm. In fact, the firm had received written
requests to release files relating to three clients,
67. A meeting had been planned for Friday, June 6, 1997 to discuss Capozzi's return
to the firm.
68. It is believed, and therefore averred, that during this time period, Capozzi was
soliciting L&C clients and was misrepresenting the facts to those clients in an effort to draw
them away from the firm.
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69. Following the meeting on June 6, 1997, the ftnn agreed to make some very
modest modifications to the terms of Capozzi's return to the firm. Capozzi was to get back to
the firm by Saturday with respect to his acceptance of the modified terms. The firm did not hear
from Capozzi until they received a letter of resignation from him dated June 10, 1997.
70. Prior to receiving the letter of resignation, Capozzi continued to solicit L&C
clients and the firm began to receive additional client elections to transfer files. Upon receipt of
the written requests to transfer files, the firm contacted those clients to determine why they had
elected to leave L&C. The firm learned that Capozzi was telling clients that the firm was
dissolving and that associates from the firm were leaving to join Capozzi's practice.
71. The remaining principals confirmed with the associates at issue that, in fact, they
were not leaving the firm. When clients learned that the firm was not disintegrating as Capozzi
alleged, or that associates were not leaving, a number of clients changed their decision and
decided to stay with the firm.
72. In or about the second week in June, 1997, Capozzi contacted Latsha and asked to
return to the firm. By this time, however, it was too late. Upon receipt of Capozzi's resignation
letter, the remaining principals had sent out a mailing to all of the firm's clients announcing the
change of the firm's name to LD&Y
73. Shortly thereafter, Moyer resigned from the firm. Moyer and a former employee
had gone through the office and removed a number of items from the office with Moyer's key
and pass. The police were thereafter summoned so that an analysis could be done of what was
taken from the office.
74. Latsha and the other principals thereafter teamed that Moyer had been working
for Capozzi, for a number of weeks while still employed by the firm, and had been undermining
62887.1 16
the confidence of the secretaries and associates in an attempt to influence them to leave the firm
to join Capozzi. Moyer attempted to create the impression that the firm would fall apart in
Capozzi's absence.
75. After Capozzi found out that associates at LD&Y would not leave the firm to join
him, he began to represent to the firm's clients that the associates at LD&Y lacked any real
experience, that Capozzi had supervised all of their work, that Capozzi was the one who had
been responsible for all of their work, and that they had no advocacy experience that was
necessary for adequate representation. In addition, he also represented that Latsha had little or
no knowledge of reimbursement, an area of practice for Latsha, and insinuated that the firm had
little or no advocacy experience. All of these statements were false, defamatory, and were made
maliciously with the intent of dissuading clients from continuing to do business with LD&Y.
76. The foregoing misrepresentations caused damage to the firm in that several of
LD&Y's clients elected to leave LD&Y.
CountI
Breach of Fiduciary Dutv
77. Plaintiffs incorporate the foregoing paragraphs as if set forth in full herein.
78. Capozzi, as a principal and officer of L&C, breached the fiduciary duties which
he owed to L&C, his fellow principals and L&C clients through the conduct which is described
above.
79. Plaintiffs have been harmed as a result of Capozzi's breach of fiduciary duty.
80. Capozzi's conduct in breaching said fiduciary duties is so outrageous that it
justifies the imposition of punitive damages.
WHEREFORE, Latsha, Davis & Yohe, P.C., Kimber L. Latsha, Glenn R. Davis, and
62887.1 17
Douglas C. Yohe, request this Court to direct the appointment of a receiver, require Louis J.
Capozzi, Jr. and his law firm to provide a full accounting, to enter judgment against Louis J.
Capozzi, Jr. in an amount determined at trial, plus punitive damages, costs, interest, and such
other relief as the Court deems appropriate.
Count It
Tortious Interference With Existing Contractual Relations
81. Plaintiffs incorporate the foregoing paragraphs as if set forth in full herein.
82. Capozzi intentionally and maliciously interfered with L&C's existing contractual
relations with its clients through his improper and unlawful solicitations as set forth more fully
above.
83. Plaintiffs have suffered damages as a result of said tortious interference as set
forth more fully above.
84. Capozzi's conduct is so outrageous that it justifies the imposition of punitive
damages.
WHEREFORE, Latsha, Davis & Yohe, P.C., Kimber L. Latsha, Glenn R. Davis, and
Douglas C. Yohe, request this Court to direct the appointment of a receiver, require Louis J.
Capozzi, Jr. and his law firm to provide a full accounting, to enter judgment against Louis J.
Capozzi, Jr. in an amount determined at trial, plus punitive damages, costs, interest, and such
other relief as the Court deems appropriate.
62887.1 18
Count III - Violation of the Lanham Act,
Trade Libel, Commercial Disparagement and Unfair Competition
85. Plaintiffs incorporate their foregoing paragraphs as if set forth in full herein.
86. Capozzi, as set forth more fully above, in connection with the legal services he
was providing or intended to provide to clients, used false and misleading representations of fact
which misrepresented the nature, characteristics, and qualities of the services provided by
plaintiffs.
87. These misrepresentations were made in the context of Capozzi's promotion and
advertising of his own legal practice. In the context of the practice of law, legal services are
often "promoted" or "advertised" by word of mouth and information is spread quickly by
telephone and personal contacts with existing and/or prospective clients. This method of
attorney promotion can be so overreaching - and effective - that it is regulated by the Rules of
Professional Conduct.
88. The false statements and commercial disparaging statements made by Capozzi
regarding plaintiffs' services were made with the malicious intent to harm plaintiffs and to obtain
plaintiffs' clients.
89. Capozzi's conduct is in violation of 15 U.S.C. § 1125(a) and give rise to state law
claims for unfair competition, trade libel, and commercial disparagement.
90. Plaintiffs have suffered damages as described more fully above.
91. The statements and misrepresentations made by Capozzi were made intentionally
and maliciously with the specific intent of harming plaintiffs. Capozzi's conduct is so
outrageous that it justifies the imposition of punitive damages.
WHEREFORE, Latsha, Davis & Yohe, P.C., Kimber L. Latsha, Glenn R. Davis, and
Douglas C. Yohe, request this Court to enter judgment against Louis J. Capozzi, Jr. in an amount
62887.1 19
to be determined at trial, plus all damages awardable under 15 U.S.C. § 1117, including
defendant's profits, plus treble damages and reasonable attorney's fees as permitted under the
Lanham Act, punitive damages, and an Order prohibiting all false statements and
misrepresentations respecting the plaintiffs and Louis J. Capozzi and his law fine and grant
plaintiffs such other relief as the Court deems appropriate.
Count IV
Defamation
92. Plaintiffs incorporate the foregoing paragraphs as if set forth in full herein.
93. At all times prior to Capozzi's conduct as described above, Latsha, Davis and
Yohe enjoyed an excellent reputation and enjoyed the confidence of their clients.
94. Capozzi, with the malicious intent to undermine this reputation and confidence,
made false, defamatory, and misleading statements to plaintiffs' clients as set forth more fully
above. At the time that Capozzi made the statements he knew that the statements were false, or
acted with reckless disregard for their truth or falsity.
95. As a result of Capozzi's action, Latsha, Davis, and Yohe have been greatly
injured in their good name, credit and reputation, all of which has resulted in financial loss and
damage.
96. Capozzi's actions are so outrageous that they warrant the imposition of punitive
damages.
WHEREFORE, Kimber L. Latsha, Glenn R. Davis, and Douglas C. Yohe, request this
Court to enter judgment in an amount to be determined at trial, plus punitive damages, costs, and
such other relief as the Court deems appropriate.
62887.1 20
Count V
Vi4latio- n Q
97. Plaintiffs incorporate the foregoing paragraphs as if set forth in full herein.
98. At all times relevant to this Complaint, L&C was an "enterprise" as defined by 18
U.S.C. § 1961(4) that was engaged in, and its activities affected, interstate commerce.
99. Capozzi knowingly and willfully associated with the enterprise, L&C, and
conducted and participated in the conduct of the enterprise's affairs, directly and indirectly,
through a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c). The racketeering
activity includes Capozzi's mail fraud in violation of 18 U.S.C. § 1341, as described with greater
particularity above, all of which is "racketeering activity" as defined in 18 U.S.C. § 1961(1)(B).
62887.1 21
100. As a result of the pattern of racketeering activity, plaintiffs suffered damage to
business and property as described more fully above.
WHEREFORE, Latsha, Davis & Yohe, P.C., Kimber L. Latsha, Glenn R. Davis, and
Douglas C. Yohe, request this Court to enter judgment in an amount to be determined at trial,
trebling of such damages pursuant to 18 U.S.C. § 1964, reasonable attorney's fees, interest, costs,
and such other relief as the Court deems appropriate.
POWELL, TRACHTMAN, LOGAN, CARRLE,
BOWMAN & LOOMMBARDO, P.C.
By:
Paul A. Logan 1
Attorney Identification No. 30119
C. Grainger Bowman
Attorney Identification No. 15706
David W. Francis
Attorney Identification No. 53718
Ethan N. Halberstadt
Attorney Identification No. 57544
367 South Gulph Road
King of Prussia, PA 19406
Tel.:(610) 354-9700
Fax:(610)354-9469
Dated:z-i-<??- 12
62887.1
1487
22
Attorneys for Plaintiffs,
Latsha, Davis &Yohe, P.C.
Kimber L. Latsha, Glenn R. Davis,
and Douglas C. Yohe
FILED UNDER SEAL PURSUANT TO COURT ORDER
IN THE UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
LATSHA, DAVIS & YOHE, P.C.,
KIMBER L. LATSHA, GLENN R. DAVIS,
and DOUGLAS C. YOHE,
Plaintiffs, CIVIL ACTION NO. I:CV-97-1881
V.
JURY TRIAL DEMANDED FILED
LOUIS J. CAPOZZI, JR., HARRISBUR T -
AMENDED Defendant. ?• C o.??t. i --- . . - - --
AMENDED COMPLAINT
The Parties
, CLERK
MARY E.%P?tAq{IEA
Por 1' /'
Deputy Clerk
Plaintiff Latsha, Davis & Yohe, P.C. ("LD&Y"), is a professional corporation
organized under the laws of the Commonwealth of Pennsylvania with a principal place of
business at Executive Park West II, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg,
Pennsylvania 17055.
2. Plaintiff Kimber L. Latsha ("Latsha") is an individual with a business address of
Executive Park West II, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg, Pennsylvania
17055. Latsha is a shareholder in LD&Y.
3. Plaintiff Glenn R. Davis ("Davis") is an individual with a usual place of business
at Executive Park West 11, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg, Pennsylvania
17055. Davis is a shareholder in LD&Y.
4. Plaintiff Douglas C. Yohe ("Yohe") is an individual with a usual place of
business at Executive Park West II, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg,
Certified fr
34195.1 Daic
Deputy
Pennsylvania 17055. Yohe is a shareholder in LD&Y.
5. Defendant Louis J. Capozzi, Jr. ("Capozzi") is an individual with a principal
place of residence at 405 Herr Street, Harrisburg, Pennsylvania.
Jurisdiction a_ n_ Am
6. This Court has subject matter jurisdiction over certain claims herein pursuant to
18 U.S.C. § 1964, 15 U.S.C. § I I25(a), and 28 U.S.C. § 1331 because they arise under the laws
of the United States and over other state law claims pursuant to supplemental jurisdiction, 28
U.S.C. § 1367.
7. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391, 18 U.S.C. §
1965, and 15 U.S.C. § 1121.
Background of Latsha & aooZZi n ?`
8. Latsha and Capozzi worked together as attorneys at the law firm of Shumaker
Williams P.C. in Harrisburg, Pennsylvania.
9. In early 1994, Capozzi decided that he was going to leave Shumaker Williams
because he was not granted status as a class "A" shareholder within the time frame that he
expected.
10. Latsha had an ongoing professional relationship with Capozzi at Shumaker
Williams. Upon learning that Capozzi was going to leave the firm, Latsha was confronted with
the decision whether to remain at Shumaker Williams or to leave and build a law practice with
Capozzi.
11. In weighing the consequences of his decision, Latsha made clear to Capozzi that,
should he decide to go into business with Capozzi, it would not be for financial purposes, but
rather for the opportunity to build a law firm.
Latsha stressed to Capozzi that money was not the
34195.1
most important thing to him, and that Capozzi needed to understand that. Latsha further advised
Capozzi that he would only enter into business with Capozzi if Capozzi would not personally
engage in any activity that would in any way tamish Latsha's reputation.
12. Integrity was particularly important to Latsha. Additionally, any activity which
would reflect adversely on Latsha's character or reputation could potentially have a severe
impact on relationships with Latsha's clients and Latsha's ability to obtain additional non-profit,
church-sponsored health care providers. Latsha felt that his personal reputation and integrity
were essential for maintaining client trust.
13. Capozzi represented and promised that he would do nothing to tarnish Latsha's
reputation or do anything to erode the client trust which Latsha had developed.
14. Based on Capozzi's assurances, on Mary 24, 1994, Latsha and Capozzi formed
the law firm of Latsha & Capozzi, P.C. ("L&C").
15. Yohe joined L&C as a principal in July, 1994.
16. David joined L&C as a principal in march, 1995.
IT By the time Davis joined L&C, the principals had agreed to the essential terms of
a shareholders' agreement. The addition of Davis only changed the ownership interest of each
principal in the firm.
18. The compensation formula for the principals of L&C was based on the percentage
ownership of each principal and the actual individual collections of each principal. At the time
that Davis joined the firm in 1995, it was agreed that ownership in the firm would be as follows:
Latsha owned 37'/2 %; Capozzi owned 37%2 %; Yohe owned 15%; and Davis owned 10%.
19. At the end of the year, or at other times during the course of the year when the
firm deemed it appropriate to pay additional compensation when operating reserves were
34195.1
sufficient, L&C would pay from one-half of the net profits additional compensation in
accordance with the percentage which each principal had in the firm. The second half of the net
profits was distributed based on a ratio of individual collections to the aggregate collections of
the four principals.
20. Although the principals agreed to the essential terms of the shareholders'
agreement and a draft document was eventually prepared for the principals' review, it was never
executed by the principals. At a strategic planning retreat among the principals in 1996, the
principals reviewed the draft and reaffirmed their agreement to all of its essential terms.
Although Capozzi agreed to those terms, he asked that the other principals not sign the
shareholders' agreement at that time, as he intended to separate from his wife and possibly
divorce her.
Capozzi's Efforts to Initiate "Value Billing" With Firm Clients
21. L&C billed its clients in accordance with written fee agreements which set forth
the terms and conditions of the attorney client relationship. Except for contingency fee cases,
the written fee agreement required L&C to bill each client for actual time spent on each file,
which was recorded in increments of 1/10 of an hour. For instance, a 6 minute letter to a client
was billed as a "T', a 12 minute letter would be billed as a ".2", and so on.
22. In virtually all instances, L&C provided in their written fee agreement that there
would be a minimum billable amount for each billable phone call. In the written fee agreements
the clients agreed that any substantive telephone call of 18 minutes or less would be billed as a
".3". This minimum billable amount took into consideration the disruptions created by
unanticipated telephone calls during the course of the day.
23. Capozzi expressed to Latsha, and subsequently to Davis and Yohe, his belief that
34195.1
the firm should start to "value bill" its clients. Under this system, the billing attorney would
determine whether the bill should be adjusted to take into account the fact that, given their
particular expertise in a field of practice or firm efficiencies, the bill should be adjusted upward
f
above the usual hourly billing arrangement. In other words, the client would be billed for the
"value" of the work performed as subjectively determined by the principals.
24. The value billing system as discussed would require L&C to set froth the terms of
I
the "value billing" in the firm's fee letters with its clients.
25. Although the proposal of "value billing" was presented to the other principals by
Capozzi, it was rejected. "Value billing" fee letters were never sent to L&C clients.
26. At no time did Capozzi indicate to the other principals that he was "value billing"
clients or billing them in a manner inconsistent with their written fee agreements.
"ozzi's Pattern of Fraud
27. It is believed, and therefore averred, that commencing some time after the
inception of L&C, and continuing thereafter until the remaining principals found out and ended
the practice near the end of April, 1997, Capozzi engaged in a pattern of conduct designed to
defraud L&C clients of professional fees.
28. Each principal in the firm was assigned as the "billing attorney" for certain
clients. The "billing attorney" was usually the principal who was the primary client contact or
who was primarily responsible for bringing the client into the firm.
29. One of the functions of die billing attorney was to review the "pre-bills" which
were provided to the billing attorneys for their review prior to preparation of the final bill.
Included on these "pre-bills" were the names of all the attorneys and paralegals who performed
work on a particular file, the work that was performed by that particular attorney or paralegal,
34193.1
and the time that each attorney or paralegal spent working on the file. Thus, if an associate spent
12 minutes working on a file, the "pre-bill" would reflect the name of that associate, a ".2"
(representing 12 minutes of an attorney's time), and a description of the services that the
associate provided.
30. The information which appeared on the "pre-bills" was taken from time sheets or
time slips that were manually prepared by the attorneys or paralegals who were working on the
file. Each attorney and paralegal was responsible for the preparation of his or her own time
sheets or time slips.
31. The purpose of the "pre-bill" was to provide the billing attorney an opportunity to
review the time spent on the file by the various attorneys in the office, to ensure that it
comported with the client's expectations as set forth in the written fee agreement between the
parties, and to ensure that the time spent on the file by the attorneys and paralegals was not
excessive.
32. Capozzi was a "billing attorney" and, as such, reviewed the "pre-bills" for the
clients for whom he had billing responsibility.
33. Near the end of April, 1997, Latsha reviewed the pre-bills for a client for whom
both Latsha and Capozzi had responsibility. Latsha was the billing attorney for some of the
client's files, and Capozzi was the billing attorney for other files for the same client. Latsha
discovered that some of the time that Capozzi had spent on matters for which he was responsible
had inadvertently been included in the pre-bill for the files for which Latsha had billing
responsibility. Latsha thereafter asked the billing clerk for the pre-bills that Capozzi had
reviewed to see if any of Latsha' time appeared on these bills.
34. In reviewing the pre-bills for the files for which Capozzi had billing
34193.1
responsibility, Latsha found that Capozzi had lined through the time of one of the associates and
had "written it up," meaning that Capozzi had substituted a higher amount of time for the time
that was actually spent by the associate. He then wrote the symbol 'T' at the top of the pre-bill
to indicate to the billing clerk to finalize the bill. When Latsha discovered this, he immediately
made inquiry of the billing clerk whether there were other examples of "write-ups" on the bills.
The billing clerk confirmed that this was the case. Latsha immediately directed the billing clerk
to review pre-bills on all of the matters on which Capozzi was the billing attorney to uncover
whether any other associate or paralegal time had been "marked up."
35. A review then was undertaken with respect to Capozzi's billing practices revealed
that Capozzi improperly marked up associate and paralegals time as a regular practice and
procedure. A review of Capozzi's pre-bills over a three month period revealed that Capozzi had
written up associate and paralegal time throughout this entire time period. In addition, upon
information provided by the billing clerk and other information now available to plaintiffs, it is
believed that Capozzi's pattern and practice of marking up associate and paralegal time dated
back to the inception of the firm.
36. As a result of the review of Capozzi's pre-bills, and as a result of confronting
Capozzi with what was uncovered, the principals learned that final bills with fraudulently
inflated time were sent through the United States Mail to clients both inside and outside the
Commonwealth of Pennsylvania.
37. The actions undertaken by Capozzi in artificially and improperly inflating
associate and paralegal time on the pre-bills and in directing improper and fraudulent bills to be
conveyed to L&C clients, constituted fraud perpetrated through the mails of the United States
within the meaning of the mail fraud statute, 18 U.S.C. § 1341. Each of these bills which
34195.1
Capozzi directed to be sent included intentional misrepresentations designed to defraud L&C
clients of professional fees.
38. It is believed, and therefore averred, that there are hundreds of acts of mail fraud
relating to Capozzi's scheme to defraud L&C clients. These acts, which comprise a pattern of
fraudulent behavior, which adversely affected the clients of the firm, as well as the law firm
itself, include, but are not limited to, the following bills which were sent to L&C clients through
the United States mails:
(a) two bills dated February 14, 1997 mailed to a client 1 located in Brookville,
Pennsylvania which included fraudulently "marked up" time;
(b) a bill dated February 14, 1997 mailed to a client located in Milwaukee,
Wisconsin, which included fraudulently "marked up" time;
(c) two bills dated February 14, 1997 mailed to a client located in New Castle, PA,
which included fraudulently "marked up" time;
(d) a bill dated February 14, 1997 mailed to a client located in Lock Haven, PA,
which included fraudulently "marked up" time;
(e) numerous bills dated February 14, 1997 mailed to a client in Allentown, PA,
which included fraudulently "marked up" time;
(f) a bill dated February 14, 1997 mailed to a client in Pittsburgh, PA, which
included fraudulently "marked up" time;
(g) two bills dated March 12, 1997 mailed to a client located in Hackensack, New
'The identity of the clients to whom Capozzi sent these bills is not being divulged in this
Complaint in order to preserve the confidentiality of this information. This information will be
disclosed to Capozzi as part of the discovery in this matter in a manner which preserves this
confidentiality.
34195.1
Jersey, which included fraudulently "marked up" time;
(h) a bill dated February 14, 1997 mailed to a client located in York, PA, which
included fraudulently "marked up" time;
(1) a bill dated February 14, 1997 mailed to a client located in Washington, PA,
which included fraudulently "marked up" time;
0) a bill dated February 14, 1997 mailed to another client located in Allentown, PA,
which included fraudulently "marked up" time;
(k) a bill dated February 14, 1997 mailed to a client located in Curwensville, PA,
which included fraudulently "marked up" time;
(1) a bill dated March 12, 1997 mailed to a client located in Scranton, PA, which
included fraudulently "marked up" time;
(m) bills dated February 14, 1997 and March 12, 1997 mailed to a client located in
Bloomsburg, PA, which included fraudulently "marked up" time;
(n) a bill dated February 14, 1997 mailed to a client located in Nanticoke, PA, which
included fraudulently "marked up" time;
(o) a bill dated February 14, 1997 mailed to a client located in North Huntington, PA,
which included fraudulently "marked up" time;
(p) numerous bills dated February 14, 1997 mailed to a client located in Owings
Mills, Maryland, which included fraudulently "marked up" time;
(t) a bill dated February 14, 1997 mailed to a client in DuBois, PA, which included
fraudulently "marked up" time.
39. In reasonable reliance upon the accuracy of the foregoing bills, the respective
clients who received same made payment to L&C.
34195.1 9
40. As a 37.5% principal in L&C, Capozzi directly received profits as a result of the
foregoing fraud, which profits were distributed to him in accordance with the principal
agreement.
41. An audit was subsequently undertaken with respect to Capozzi's scheme. Latsha,
Davis and Yohe have contacted the clients whom they know were defrauded, and have
reimbursed the clients (the "Defrauded Clients") for all amounts determined to be over billed.
As of the date of the filing of this Complaint, the amount that has been reimbursed to the
Defrauded Clients is $37,708.76. Capozzi has not contributed to this reimbursement even
though he personally profited from same and received the benefits of his fraudulent activity.
42. Latsha, Davis and Yohe were morally and legally obligated to return the ill-gotten
funds from the Defrauded Clients and to notify them of what had transpired. This
reimbursement was accomplished through LD&Y. As such, LD&Y and Latsha, Davis, and
Yohe, its shareholders, are equitably subrogated to the rights of the Defrauded Clients against
Capozzi, the individual responsible for the fraud.
43. The process of notification and reimbursement caused severe damage to the
reputation of Latsha, Davis and Yohe and LD&Y, and substantially undermined the ongoing
attorney-client relationships which the firm maintained with the Defrauded Clients.
44. In addition to the funds which the shareholders have lost in reimbursing the
Defrauded Clients, LD&Y has been damaged in its business and property in that it has been
forced to expend resources to investigate the extent of Capozzi's fraud, to retain legal counsel to
advise with respect to its obligations pursuant to the Rules of Professional Conduct governing
the conduct of attorneys, and to otherwise expend funds in order to insure that the firm fully
complies with all applicable laws.
34195.1 10
Capozzi's Breach of Trust and Events Leading to Capozzi's
Interference with LD&Y Clients
45. In the first week of January, 1997, prior to the discovery of the pattern of illegal
activity described above, one of L&C's 15 attorneys amtounced his decision to resign from the
firm and join another law firm. Shortly thereafter, another two associates announced their
decision to resign from the firm. Latsha met individually with these three associates and learned
that Capozzi's interaction with these associates made a significant impact on their decision to
leave the firm. In particular, one of the associates informed Latsha that he considered Capozzi
"sneaky" and, in essence, untrustworthy.
46. In teaming that one of the associates with L&C considered Capozzi
untrustworthy, Latsha became very concerned about the reasons that he had entered into practice
with Capozzi and the importance of maintaining his reputation. Latsha found it extremely
difficult to believe that he had an associate who felt that he was part of an untrustworthy or
"sneaky" organization.
47. In the course of the next several days, Latsha decided that he could no longer
continue to practice with Capozzi. Latsha had come to the conclusion that he could not longer
trust Capozzi, and that if he could not trust him, he could not practice law with him.
48. The information that Latsha had received from the departing associate was not the
only basis for his mistrust of Capozzi. There were other issues as well. These included, but
were not limited to the following:
(a) information that he had received that Capozzi had billed more than 24 billable
hours in one day prior to joining L&C;
(b) information that Capozzi had improperly solicited clients prior to his actual
departure from Shumaker Williams;
34195.1
(c) Capozzi's ongoing personal financial problems;
(d) information that Capozzi left previous places of employment under adverse
circumstances;
(e) Capozzi's inability to control his temper and his practice of berating staff and
associate attorneys publicly;
(f) substantial irregularities in Capozzi's expense account reports and his utilization
of firm resources primarily for personal use;
(g) Capozzi's inability to control his use of alcohol;
(h) misrepresentations to clients regarding the merits of their case;
(1) Capozzi's maintaining unreasonable positions with opposing counsel in a manner
which adversely affected L&C's ability to represent other clients with the same
adversary counsel; and
0) information that led Latsha to believe that Capozzi was having sexual relations
with L&C clients and staff.
49. At a board meeting in early 1997, Latsha announced that he wanted to dissolve
the firm by mutual agreement, or if necessary, to voluntarily leave. Capozzi asked Latsha to
defer any decision on the matter until he had time to consider it. Capozzi later met with Latsha,
at which time Latsha advised him privately of his reasons for wanting to dissolve the firm or to
leave it. The central reason for these decisions was that Latsha was unwilling to practice law
with someone that he considered to be a dishonest individual. At this time, however, Latsha had
no idea of Capozzi's fraudulent billing practices, as described more fully above.
50. Shortly thereafter, Latsha was informed by Capozzi's wife that she believed he
suffered from alcoholism or some other addiction. Capozzi's wife attributed Capozzi's deceitful
34195.1 12
nature to this addiction. Latsha agreed to work with Capozzi's wife to help Capozzi address this
issue.
51. Latsha conveyed the information regarding Capozzi's alleged addiction to Davis
and Yohe, all of whom agreed to meet with Capozzi's wife and her psychologist to discuss an
appropriate course of conduct designed to help Capozzi. The principals hoped that if they were
able to help Capozzi conquer his addiction, he could be trusted again and there would be no need
for Latsha to leave the firm and/or reach an agreement to dissolve it.
52. After meeting with the psychologist, it was agreed by all concerned that they
would pursue a course of action which was geared to "intervention". The principals (excluding
Capozzi) embarked on a series of weekly or bi-weekly educational sessions regarding the
intervention process and their particular roles in the process. Latsha informed Davis and Yohe
that he was willing to defer attempting to reach an agreement on the dissolution of the firm or his
departure from it pending the outcome of the intervention.
53. The intervention was eventually held in the last week of April, 1997, shortly after
Latsha uncovered the first signs of Capozzi's fraudulent billing practices.
54. As a result of the intervention, Capozzi agreed to be admitted to a recovery center
outside of Reading, Pennsylvania called the "Caron Foundation."
55. After arriving at the Caron Foundation, Capozzi telephoned Latsha and explained
that he did not want to stay there and that he was going to leave. On the telephone he offered
numerous explanations with respect to his writing-up of attorney and paralegal time, none of
which was credible to Latsha or the other principals.
56. One of the reasons that Capozzi did not want to stay at the Caron Foundation was
that an important meeting was scheduled with a client that Capozzi wanted to attend. Although
34195.1 13
the meeting involved a significate case for L&C, the principals were willing to risk the
possibility of losing the client rather then have Capozzi leave the Caron Foundation. After
lengthy discussion and debate, Latsha, Davis, and Yohe agreed to permit Capozzi to attend the
meeting, upon the condition that he immediately return to the Foundation Center after the
meeting was over,
57. Capozzi agreed to follow the advice and consultation provided by the Caron
Foundation, which anticipated that he would need to stay at the center for recovery and treatment
for 4 weeks.
58. Unbeknownst to the other principals, Capozzi had begun plans to leave the Caron
Foundation.
59. During the time that Capozzi had agreed to undergo treatment he was given a paid
leave of absence from the firm.
60. The principals thereafter prepared a letter which would define the terms and
conditions for Capozzi's return to the practice of law and L&C. This letter was prepared in
consultation with Capozzi's counselor at the Caron Foundation and with the advice of an
attorney retained by the principals to deal with the ethical issues brought about by Capozzi's
conduct.
61. The letter essentially set forth the terms of a probationary period that Capozzi
would have with the firm moving forward. If Capozzi was successful in proving that he could be
a trustworthy principal and attorney, he would be welcomed to continue the practice of law with
the other principals. However, Capozzi's past raised ethical and criminal implications.
Irrespective of their desire to assist Capozzi, the principals needed to insure that no overbilling
could possibly occur again, especially given their knowledge of his past conduct. The letter
34195.1 14
therefore made clear that the other principals needed to be able to exercise some control over
Capozzi's communications with clients and the billing process in order to protect themselves and
L&C.
62. With the advice of counsel, Latsha, Davis and Yohe undertook a thorough audit
of all of Capozzi's pre-bills to uncover the extent of Capozzi's fraudulent activity. The firm also
hired an auditor to address the problems as expeditiously as possible. One of the individuals
within the firm who was working on the problem was the office administrator, Marlene Moyer
("Moyer"). Unbeknownst to Latsha, David and Yohe, during this time period Moyer began to
work secretly for Capozzi in an effort to assist Capozzi in soliciting firm clients and undermining
associate and staff confidence in the continued viability of L&C.
63. With the advice of counsel, the firm changed the locks at the offices out of
concern that Capozzi would attempt to destroy or remove the pre-bills and other documentation
of his fraud. The firm did not want Capozzi tampering with evidence in any way that could
suggest that the other principals were in any way involved in Capozzi's fraudulent billing
activity or in any way participated in any form of cover-up.
64. Capozzi left the Caron Foundation after only two weeks. In light of the problems
that had been uncovered, the firm decided to continue his leave of absence for the period of time
that they originally contemplated, which was four weeks. The firm requested Capozzi to utilize
the time for outpatient therapy in accordance with the recommendations provided by Capozzi's
counselor at the Caron Foundation.
65. As the time approached for Capozzi to return to work, the principals heard rumors
that he had no intention of returning, absent some changes to the letter outlining the terms of the
probation,
34195.1 15
Capozzi's Improper Solicitation and Interference with- lienta
66. Capozzi was scheduled to return to work on June 2, 1997. It was also about this
time that the firm received its first written notice of Capozzi's solicitation of the firm clients, at a
time when Capozzi was still receiving pay, and indicating through his counsel or through himself
that he intended to remain part of the firm. In fact, the firm had received written requests to
release files relating to three clients.
67. A meeting had been planned for Friday, June 6, 1997, to discuss Capozzi's return
to the firm.
68. It is believed, and therefore averred, that during this time period, Capozzi was
soliciting L&C clients and was misrepresenting the facts to those clients in an effort to draw
them away from the firm.
69. Following the meeting on June 6, 1997, the firm agreed to make some very
modest modifications to the terms of Capozzi's return to the firm. Capozzi was to get back to
the firm by Saturday with respect to his acceptance of the modified terms. The firm did not hear
from Capozzi until they received a letter of resignation from him dated June 10, 1997.
70. Prior to receiving the letter of resignation, Capozzi continued to solicit L&C
clients and the firm began to receive additional client elections to transfer files. Upon receipt of
the written requests to transfer files, the firm contacted those clients to determine why they had
elected to leave L&C. The firm learned that Capozzi was telling clients that the firm was
dissolving and that associates from the firm were leaving to join Capozzi's practice.
71. The remaining principal confirmed with the associates at issue that, in fact, they
were not leaving the firm. When clients learned that the firm was not disintegrating as Capozzi
alleged, or that associates were not leaving, a number of clients changed their decision and
34195.1 16
decided to stay with the firm,
72. In or about the second week of June, 1997, Capozzi contacted Latsha and asked to
return to the firm. By this time, however, it was too late. Upon receipt of Capozzi's resignation
letter, the remaining principals had sent out a mailing to all of the firm's clients announcing the
change of the firm's name to LD&Y.
73. Shortly thereafter, Moyer resigned from the firm. Moyer and a former employee
had gone through the office and removed a number of items from the office with Moyer's key
and pass. The police were thereafter summoned so that an analysis could be done of what was
taken from the office.
74. Latsha and the other principals thereafter learned that Moyer had been working
for Capozzi, for a number of weeks while still employed by the firm, and had been undermining
the confidence of the secretaries and associates in an attempt to influence them to leave the firm
to join Capozzi. Moyer attempted to create the impression that the firm would fall apart in
Capozzi's absence.
75. After Capozzi found out that the associates at LD&Y would not leave the firm to
join him, he began to represent to the firm's clients that the associates at L&CY lacked any real
experience, that Capozzi had supervised all of their work, that Capozzi was the one who had
been responsible for all of their work, and that they had no advocacy experience that was
necessary for adequate representation. In addition, he also represented that Latsha had little or
no knowledge of reimbursement, as area of practice for Latsha, and insinuated that the firm had
little or no advocacy experience. All of these statements were false, defamatory, and were made
maliciously with the intent of dissuading clients from continuing to do business with LD&Y.
76. The foregoing misrepresentations caused damage to the firm in the following
34195.1 17
particulars.
(a) Background. LD&Y is a firm of attorneys which collectively are
licensed to practice in the states of Pennsylvania, Maryland, New Jersey, and
the District of Columbia. The LD&Y firm is also licensed to address federal
law questions in the United States District Courts and other appropriate forums
on behalf of their clients. Therefore, LD&Y has positioned itself in the legal
marketplace within its attorneys' areas of practice to address both state law
questions and federal law questions for their clients.
(b) As a result of Capozzi's misrepresentations referenced in this Amended
Complaint, several of LD&Y's clients elected to discontinue having LD&Y
represent them as set forth more particularly below.
(c) Manor Care.
(1) Manor Care is headquartered in Silver Spring, Maryland, and is
a large business entity with facilities in Pennsylvania and in several states
neighboring Pennsylvania.
(2) Decision-making regarding the retention of attorneys for Manor
Care rests with certain staff at Manor Care, Prior to Capozzi's departure from
L&C, Manor Care had an ongoing relationship with L&C through relationships
established between Latsha and various Manor Care representatives, as well as
relationships established between Capozzi and various Manor Care
representatives. Prior to Capozzi's departure from L&C, the firm had been
representing Manor Care in an area of practice generally referred to as
Medicaid reimbursement. Latsha and his associates were accomplished
34193.1 18
practitioners in this area.
(3) At or about the time of Capozzi's departure from L&C, Capozzi
communicated with various decision-makers at Manor Care, and made false and
misleading misrepresentations to those representatives of Manor Care about the
capabilities of Latsha and his associates at LD&Y, including the
misrepresentations referred to in Paragraph 75 above. These misrepresentations
were made utilizing interstate commerce through the use of the United States
mails, telephone calls and/or personal visits with the decision-makers at Manor
Care using the interstate highways of the United States.
(4) As a direct result of Capozzi's misrepresentations, Latsha and his
associates were disparaged and defamed.
(5) As a direct result of Capozzi's misrepresentations, Latsha was
informed by Maryland personnel of Manor Care that the Medicaid
reimbursement work would be transferred from Latsha's firm to Capozzi. This
was a direct loss to LD&Y's interstate professional service business.
(d) Integrated Health Services. Inc.
(1) Integrated Health Services, Inc. is headquartered in Owings
Mills, Maryland ("IHS"), and is a large business entity with facilities in
Pennsylvania and in several states surrounding Pennsylvania.
(2) Decision-making regarding the retention of attorneys for IHS
rests with certain staff at IHS. Prior to Capozzi's departure from L&C, IHS
had an ongoing relationship with L&C. Prior to Capozzi's departure from
L&C, the firm had been representing IHS in an area of practice generally
34195.1 19
referred to as Medicaid reimbursement. Latsha and his associates were
accomplished practitioners in this area.
(3) At or about the time of Capozzi's departure from L&C, Capozzi
communicated with various decision-makers at IHS, and made false and
misleading misrepresentations to those representatives of IHS about the
capabilities of Latsha and his associates at LD&Y, including the
misrepresentations referred to in Paragraph 75 above. These misrepresentations
were made utilizing interstate commerce through the use of the United States
mails, telephone calls and/or personal visits with the decision-makers at IHS
using the interstate highways of the United States.
(4) As a direct result of Capozzi's misrepresentations, Latsha and his
associates were disparaged and defamed.
(5) As a direct result of Capozzi's misrepresentations, Latsha was
informed by Maryland personnel of IHS that the Medicaid reimbursement work
would be transferred from Latsha's firm to Capozzi. This was a direct loss to
LD&Y's interstate professional service business.
COUNTI
Breach of Fiduciary Duty
77. Plaintiffs incorporate the foregoing paragraphs as if set forth in full herein.
78. Capozzi, as a principal and officer of L&C, breached the fiduciary duties which
he owed to L&C, his fellow principals and L&C clients through the conduct which is described
above.
34195.1 20
79. Plaintiffs have been harmed as a result of Capozzi's breach of fiduciary duty.
80. Capozzi's conduct in breaching said fiduciary duties is so outrageous that it
justifies the imposition of punitive damages.
WHEREFORE, Latsha, Davis & Yohe, P.C., Kimber L. Latsha, Glenn R. Davis, and
Douglas C. Yohe, request this Court to direct the appointment of a receiver, require Louis J.
Capozzi, Jr. and his law firm to provide a full accounting, to enter judgment against Louis J.
Capozzi, Jr., in an amount determined at trial, plus punitive damages, costs, interest, and such
other relief as the Court deems appropriate.
COUNT II
Tortious Interference With Existing Contractual Relations
81. Plaintiffs incorporate the foregoing paragraphs as if set forth in full herein.
82. Capozzi intentionally and maliciously interfered with L&C's existing contractual
relations with its clients through his improper and unlawful solicitations as set forth more fully
above.
83. Plaintiffs have suffered damages as a result of said tortious interference as set
forth more fully above.
84. Capozzi's conduct is so outrageous that it justifies the imposition of punitive
damages.
WHEREFORE, Latsha, Davis & Yohe, P.C., Kimber L. Latsha, Glenn R. Davis, and
Douglas C. Yohe, request this Court to direct the appointment of a receiver, require Louis J.
Capozzi, Jr. and his law fine to provide a full accounting, to enter judgment against Louis J.
Capozzi, Jr., in an amount determined at trial, plus punitive damages, costs, interest, and such
34195.1 ?I
other relief as the Court deems appropriate.
COUNT III
Trade Libel C"mmercral Dlannrnoa t and nfair Comnehhon
85. Plaintiffs incorporate their foregoing paragraphs as if set forth in full herein.
86. Capozzi, as set forth more fully above, in connection with the legal services he
was providing or intended to provide to clients, used false and misleading representations of fact
which misrepresented the nature, characteristics and qualities of the services provided by
plaintiffs.
87. These misrepresentations were made in the context of Capozzi's promotion and
advertising of his own legal practice. In the context of the practice of law, legal services are
often "promoted" or "advertised" by work of mouth and information is spread quickly by
telephone and personal contacts with existing and/or prospective clients. This method of
attorney promotion can be so overreaching - and effective - that it is regulated by the Rules of
Professional Conduct.
88. The false statements and commercial disparaging statements made by Capozzi
regarding plaintiffs' services were made with the malicious intent to harm plaintiffs and to obtain
plaintiffs' clients.
89. Capozzi's conduct is in violation of 15 U.S.C. § 1125(a) and give rise to state law
claims for unfair competition, trade libel, and commercial disparagement.
90. Plaintiffs have suffered damages as described more fully above.
91. The statements and misrepresentations made by Capozzi were made intentionally
and maliciously with the specific intent of harming plaintiffs. Capozzi's conduct is so
34193.1 22
outrageous that it justifies the imposition of punitive damages.
WHEREFORE, Latsha, Davis & Yohe, P.C., Kimber L. Latsha, Glenn R. Davis, and
Douglas C. Yohe, request this Court to enter judgment against Louis J. Capozzi, Jr. in an amount
to be determined at trial, plus all damages awardable under 15 U.S.C. § 1117, including
defendant's profits, plus treble damages and reasonable attorney's fees as permitted under the
Lanham Act, punitive damages, and an Order prohibiting all false statements and
misrepresentations respecting the plaintiffs and Louis J. Capozzi and his law firm and grant
plaintiffs such other relief as the Court deems appropriate.
COUNT IV
Defamation
92. Plaintiffs incorporate the foregoing paragraphs as if set forth in full herein.
93. At all times prior to Capozzi's conduct as described above, Latsha, Davis and
Yohe enjoyed an excellent reputation and enjoyed the confidence of their clients.
94. Capozzi, with the malicious intent to undermine this reputation and confidence,
made false, defamatory, and misleading statements to plaintiffs' clients as set forth more fully
above. At the time that Capozzi made the statements he knew that the statements were false, or
acted with reckless disregard for their truth of falsity.
95. As a result of Capozzi's actions, Latsha, Davis and Yohe have been greatly
injured in their good name, credit and reputation, all of which has resulted in financial loss and
damage.
96. Capozzi's actions are so outrageous that they warrant the imposition of punitive
damages.
34195.1 23
I ,
WHEREFORE, Kimber L. Latsha, Glenn R. Davis, and Douglas C. Yohe, request this
Court to enter judgment in an amount to be determined at trial, plus punitive damages, costs, and
such other relief as the Court deems appropriate.
COUNT V
Fraud
97. Plaintiffs incorporate the foregoing paragraphs as if set forth in full herein.
98. Capozzi knowingly, intentionally and willfully defrauded the Plaintiffs and the
Defrauded Clients by each and every of the acts pleaded in the foregoing paragraphs of this
Amended Complaint, and by the following acts: in Capozzi's billing, Capozzi fraudulently
and improperly increased the recorded time (and therefore, the time value of the recorded
time) of certain record-keeping personnel at the firm of L&C; Capozzi set into motion the
billing process with his alterations of recorded time (all of which is more particularly
described above); Capozzi sent the fraudulent bills through the U.S. mails; Capozzi caused the
Defrauded Clients to pay more money for legal services than should have been paid to L&C;
Capozzi committed the foregoing acts which caused the Plaintiffs to audit and to correct the
fraudulent bills (when Plaintiffs became aware of the fraud) and to reimburse the Defrauded
Clients for sums of money which those clients should not have paid, and Capozzi knowingly
caused all of these fraudulent actions to the detriment of the Plaintiffs and the Defrauded
Clients. All of these fraudulent acts and behaviors were done by Capozzi without the
Plaintiffs' knowledge (1) that Capozzi was abusing the billing process described above and (2)
that Capozzi was abusing the Defrauded Clients and the Plaintiffs and (3) that Capozzi was
abusing the trust which the Plaintiffs had placed upon Capozzi to refrain from such fraudulent
34195.1 24
acts. The Plaintiffs had justifiably relied on their reasonable expectations that Capozzi was
using the billing process in the proper manner for which it was established, that is, to issue
proper bills to clients of the firm.
99. An additional result of Capozzi's fraud is as follows. Capozzi's knowing and
intentional creation of false billing records created a false impression upon the Plaintiffs
regarding the financial health of the law firm in which they were practicing. Plaintiffs made
business decisions in the normal and ordinary course of business, based upon the financial
health of the law firm as they perceived it from, among other things, a correct record of
billings issued to the firm's clients. The fraudulent billing practices of Capozzi (as described
above) was a distortion of the correct state of the firm's records and accounts. Business
decisions made by the Plaintiffs included the payment of sums of money to firm personnel,
the evaluations of successful and profitable relationships with clients, the need and ability of
the firm to make purchases for the good of the firm, and similar financial decisions. Because
Capozzi's improper bills created false impressions upon the financial health of the firm,
Plaintiffs made business decisions based on false information to the Plaintiffs detriment.
100. As a direct result of the above-described fraudulent behavior, the Plaintiffs and
the Defrauded Clients have been grievously and adversely affected and have suffered damages
thereby to their business and property as more fully described above.
34195.1 25
.,.,
WHEREFORE, Latsha, Davis & Yohe, Kimber L. Latsha, Glenn R. Davis, and Douglas
C. Yohe, request this Court to enterjudgment in their favor and against Capozzi to provide a
full accounting and to enter a judgment against Capozzi in an amount determined at trial, plus
punitive damages, costs, interest and such other relief as the Court deems appropriate.
POWELL, TRACHTMAN, LOGAN, CARRLE,
BOWMAN & LOMBARDO, P.C.
By C
Paul A. Logan
I.D. #30119
C. Grainger Bowman
I.D. #15706
David W. Francis
I.D. #53718
Ethan N. Halberstadt
I.D. #57544
367 South Gulph Road
King of Prussia, PA 19406
Tel: (610) 354-9700
Fax: (610) 354-9760
Date: May 18, 1998
34195.1
Attorneys for Plaintiffs, Latsha, Davis &
Yohe, P.C., Kimber L. Latsha, Glenn R. Davis,
and Douglas C. Yohe
26
CERTIFICATE OF SERVICE
I, C. Grainger Bowman certify that on May 18, 1998, I caused to be served Plaintiffs'
Amended Complaint on the person(s) at the address(es) listed below by first class U.S. Mail,
postage prepaid:
John McN. Cramer, Esq.
Reed Smith Shaw & McClay, LLP
213 Market Street
P.O. Box 11844
Harrisburg, PA 17108-1844
C. Grainger Bovmian
FILED UNDER SEAL PURSUANT TO COURT ORDER
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
Latsha & Capozzi,
Kimber L. Latsha,
Davis and Douglas
V.
Louis J. Capozzi,
P.C.,
Glenn R.
C. Yohe,
Plaintiffs
Jr.,
Defendant
Case No. 1:CV-97-1881
FILED
W6001SBURr;. PA
rni J. 1998
MARY E. o' P 1, CLERK
Per eputy? c
Judge William W. Caldwell
ANSWER AND COUNTERCLAIMS
Defendant, Louis J. Capozzi, Jr., by his counsel, John
McN. Cramer, Reed Smith Shaw & McC1ay LLP, answers the amended
complaint in the above captioned matter and counterclaims as
follows:
FIRST DEFENSE
1. Admitted.
2. Admitted.
3. Admitted.
4. Admitted.
5. Admitted.
6. Denied.
7. Admitted.
8. Admitted.
9. Denied.
Certified
Datc _-
M:
record
Deputy
10. It is admitted that Latsha and Capozzi worked
together as attorneys at Shoemaker Williams. The remaining
averments of paragraph 10 of the amended complaint are denied.
11. Denied.
12. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 12 of the amended complaint concerning
Latsha's state of mind.
13. Denied.
14. It is admitted that on May 24, 1994 Latsha and
Capozzi formed the law firm of Latsha & Capozzi, P.C. ("L & C").
The remaining averments of Paragraph 14 of the amended complaint
are denied.
15. Admitted.
16. Admitted.
17. Denied.
18. Admitted.
19. Admitted.
20. It is admitted that a shareholder's agreement was
never executed by the shareholders of L & C. The remaining
averments of paragraph 20 of the complaint are denied.
21. It is admitted that L & C billed some of its
clients for certain engagements pursuant to written fee
agreements. Those individual fee agreements, being in writing,
speak for themselves with regard to their terms.
22. The individual fee agreements, being in writing,
speak for themselves with regard to their terms.
2
23. Denied.
24. The averments of paragraph 24 of the complaint are
conclusions of law to which no reply is required.
25. It is admitted that the principals of the
professional corporation never voted to adopt a value billing
procedure as described in paragraph 23 of the amended complaint.
Capozzi is without knowledge or information sufficient to form a
belief with regard to the truth of the averment that letters
describing such a billing arrangement were not sent to any L & C
clients. The remaining averments of paragraph 25 of the amended
complaint are denied.
26. It is denied that Capozzi engaged in value billing
of clients as described in Paragraph 23 of the amended complaint
or in billing clients in a matter inconsistent with written fee
agreements.
27. Denied.
28. Admitted.
29. It is admitted that one of the functions of the
billing attorney was to review prebills. The remaining averments
of paragraph 29 of the amended complaint are denied.
30. Admitted.
31. Denied as stated. In addition to the purposes
alleged in paragraph 31, the purpose of the prebill was also an
opportunity for the billing attorney to review the accuracy of the
charges.
32. Admitted.
3
33. Capozzi is without knowledge or information
sufficient to form a belief as to the truth of the averments of
paragraph 33 of the amended complaint.
34. It is denied that Capozzi substituted a higher
amount of time for time that was actually spent by an associate.
Capozzi is without knowledge or information sufficient to form a
belief as to the truth of the remaining averments of paragraph 34
of the amended complaint.
35. It is denied that Capozzi made improper adjustments
to associate or paralegal time charges. Capozzi is without
knowledge or information sufficient to form a belief as to the
truth of the remaining averments of paragraph 35 of the complaint.
36. Denied.
37. Denied.
38. Denied.
39. Capozzi is without knowledge or information
sufficient to form a belief as to the truth of the averments of
Paragraph 39 of the amended complaint.
40. Denied.
41. Capozzi is without knowledge or information
sufficient to form a belief as to the allegations of paragraph 41
of the amended complaint concerning an audit. The remaining
averments of paragraph 41 of the amended complaint are denied.
42. Denied.
43. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 43 of the amended complaint.
4
44. Denied.
45. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 45 of the amended complaint.
46. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 46 of the amended complaint.
47. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 47 of the amended complaint.
48. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 48 of the amended complaint concerning
Latsha's state of mind.
49. It is admitted that at a Board meeting in early
1997, Latsha announced that he wanted to dissolve the fitil, by
mutual agreement. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments concerning Latsha's state of mind. The remaining
averments of paragraph 49 of the amended complaint are denied.
50. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 50 of the amended complaint.
51. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 51 of the amended complaint.
5
52. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 52 of the amended complaint.
53. It is denied that Capozzi engaged in fraudulent
billing practices. It is admitted that on May 2, 1997,
plaintiffs, among others, claiming to be "intervening" locked
Capozzi out of his office.
54. Denied.
55. It is admitted that defendant dial not wish to stay
at the Caron Foundation. Defendant Capozzi is without knowledge
or information sufficient to form a belief with regard to the
averments concerning the state of mind of plaintiffs.
56. It is admitted that Capozzi wanted to and did
attend the important client meeting referred to in paragraph 56 of
the amended complaint. Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
remaining averments of paragraph 56 of the amended complaint
concerning plaintiff's state of mind.
57. Denied.
58. It is admitted that Capozzi planned to leave the
Caron Foundation. Capozzi is without knowledge or information
sufficient to form a belief as to the truth of the averments of
paragraph 58 of the amended complaint concerning the state of mind
of plaintiffs.
59. Denied.
6
60. It is admitted that plaintiffs attempted to set
terms and conditions for defendant's return to the practice of law
with the firm of which he was a part owner. To the extent that
those terms and conditions are in writing, they speak for
themselves. Defendant Capozzi is without knowledge or information
sufficient to form a belief as to the truth of the remaining
averments of paragraph 60 of the amended complaint.
61. The letter referred to in paragraph 61 of the
amended complaint, being in writing, speaks for itself with regard
to its terms. The remaining averments of paragraph 61 of the
amended complaint are denied.
62. It is admitted that Marlene Moyer was the office
administrator. It is denied that defendant engaged in any
fraudulent activity. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
remaining averments of paragraph 62 of the amended complaint.
63. It is admitted that plaintiffs changed the locks at
the offices of Latsha & Capozzi, P.C. in order to deny Capozzi
access to the premises. It is denied that Capozzi engaged in
fraudulent billing activity. Defendant Capozzi is without
knowledge or information sufficient to form a belief as to the
truth of the remaining averments of paragraph 63 of the amended
complaint.
64. It is admitted that Capozzi was discharged from the
Caron Foundation after approximately two weeks and that plaintiffs
refused to allow Capozzi to resume the practice of law with the
firm.
7
65. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 65 of the amended complaint.
66. It is denied that Capozzi solicited clients of the
firm at that time. Capozzi is without knowledge or information
sufficient to form a belief as to the truth of the remaining
averments of paragraph 66 of the amended complaint.
67. It is admitted that a meeting was scheduled for
Friday, June 6, to address the conditions plaintiffs were
attempting to impose upon Capozzi's practice of law with Latsha &
Capozzi, P.C..
68. Denied.
69. It is denied that the firm was willing to make even
modest modifications of any materiality to the terms they were
attempting to impose on Capozzi. It is admitted that plaintiffs
insisted that Capozzi indicate his acceptance of their terms by
the following day. It is admitted that Capozzi did not accept the
terms plaintiffs attempted to impose upon him.
70. It is admitted that having been forced out of the
premises of the firm of Latsha & Capozzi, P.C. and having been
advised that access to the premises required acquiescence in
plaintiffs' onerous financial and personal terms, Capozzi
contacted certain clients whom he had served to determine whether
they were prepared to continue to use his services if he were
unable to practice law with Latsha & Capozzi, P.C. Defendant
Capozzi is without knowledge or information sufficient to form a
8
belief as to the truth of the remaining averments of paragraph 70
of the amended complaint.
I
71. Defendant Capozzi is without knowledge or
information sufficient to form a belief as to the truth of the
a
averments of
paragraph 71 of the amended complaint.
72. It is admitted that Capozzi spoke with Latsha to
explore whether the differences between them could be resolved.
The effort to resolve the differences was rejected by Latsha. It
i is denied that Capozzi sent a "resignation letter". Defendant
Capozzi is without knowledge or information sufficient to form a
belief as to the truth of the remaining averments of paragraph 72
I
of the amended complaint.
I
73. It is admitted that Moyer resigned from the firm.
i
Defendant Capozzi is without knowledge or information sufficient
to form a belief as to the truth of the remaining averments of
I
paragraph 73 of the amended complaint.
74. It is denied that Moyer had been working for
Capozzi for a number of weeks. Defendant Capozzi is without
knowledge or information sufficient to form a belief as to the
truth of the remaining averments of paragraph 74 of the amended
complaint.
75. It is admitted that Capozzi made truthful
statements concerning the experience of individuals employed by
L & C. The remaining averments of paragraph 75 of the amended
complaint are denied.
76. Denied.
9
i
77. Defendant's responses to the foregoing paragraphs
are incorporated by reference.
it
78. Denied.
79. Denied.
80. Denied.
81. Defendant's responses to the foregoing paragraphs
are incorporated by reference.
82. Denied.
83. Denied.
84. Denied.
85. Defendant's responses to the foregoing paragraphs
J are incorporated by reference.
?? I 86. Denied.
87. Denied.
88. Denied.
89. Denied.
90. Denied.
I 91. Denied.
-I 92. Defendant's responses to the `I foregoing paragraphs
are incorporated by reference.
93. Defendant Capozzi is without knowledge or
j information sufficient to form a belief as to the truth of the
7
averments of paragraph 93 of the amended complaint.
'i
( 94. Denied.
J
95. Denied.
i
96. Denied.
10
97. Defendant incorporates by reference his responses
-'' to the foregoing paragraphs of the amended complaint.
98. Denied.
99. Denied.
t
100. Denied.
101. All averments of the amended complaint not
expressly admitted are denied.
WHEREFORE, defendant requests the court to dismiss the
amended complaint with costs in his favor.
SECOND DEFENSE
The amended complaint fails to state a claim on which
relief can be granted.
THIRD_ DENSE
Some or all of the claims alleged in the amended
complaint are barred by the unclean hands of plaintiffs.
FOURTH DEFENSE
Some or all of the claims alleged in the amended
complaint are barred by estoppel.
FIFTH DEFENSE
Some or all of the claims alleged in the amended
complaint are barred because defendant's conduct was privileged.
11
COUNTERCLAIM
1. Louis J. Capozzi, Jr., ("Capozzi") is an individual
residing at 405 Herr Street, City of Harrisburg, Dauphin County,
Pennsylvania.
2. Latsha & Capozzi, P.C. is a Pennsylvania
corporation with a place of business at Executive Park West II,
Suite 101, 4720 Old Gettysburg Road, Mechanicsburg, Cumberland
County, Pennsylvania. Latsha & Capozzi, P.C. is sometimes
referred to herein as "the corporation".
3. Kimber L. Latsha, is an individual residing at 349
Hivner Road, Harrisburg, Dauphin County, Pennsylvania.
4. Glenn R. Davis, is an individual residing at 310
East Meadow Drive, Mechanicsburg, Cumberland County, Pennsylvania.
5. Douglas C. Yohe, is an individual residing in
Dauphin County, Pennsylvania.
6. Kimber L. Latsha, Glenn R. Davis and Douglas C.
Yohe are sometimes referred to collectively hereinafter as
"individual counterclaim defendants"
THE HISTORY OF LATSHA & CAPOZZI, P.C.
7. On or about May 23, 1994, the professional
corporation of Latsha & Capozzi, P.C. was incorporated by
Kimber L. Latsha and Capozzi.
8. As of December 31, 1996, Capozzi was the owner of a
37.5 percent interest in Latsha & Capozzi, P.C.
12
9. As of December 31, 1996, 37.5 percent of the net
income of Latsha & Capozzi, P.C. was distributed to Capozzi as
compensation for his ownership and activities on behalf of the
corporation in accordance with the practice of the owners of
Latsha & Capozzi, P.C.
10. From its founding until December 31, 1996, Latsha &
Capozzi, P.C. was a highly successful firm which experienced
significant earnings growth.
11. The majority of the growth of the earnings of
Latsha & Capozzi, P.C. was attributable to clients secured for the
firm by Capozzi.
EVENTS GIVING RISE TO THE CAUSES OF ACTION
12. As of May 2, 1997, Latsha was the owner of a 37.5
percent interest in Latsha & Capozzi, P.C., Yohe was the owner of
a 15 percent interest in Latsha & Capozzi, P.C., and Davis was the
owner of a 10 percent interest in Latsha & Capozzi, P.C.
13. On or about May 2, 1997, individual counterclaim
defendants locked Capozzi out of the premises of Latsha & Capozzi,
P. C.
14. Individual counterclaim defendants arranged to
change the locks on the doors and posted a security guard at the
entrance of the law firm of Latsha & Capozzi, P.C., to prevent
Capozzi from entering the premises.
13
15. Thereafter and continuing to the present time,
Capozzi has not been permitted access to the premises of Latsha &
Capozzi, P.C. for any purpose whatsoever, including the
examination and retrieval of his personal property.
16. Individual counterclaim defendants arranged for the
cancellation of the credit card Capozzi had been issued on behalf
of Latsha & Capozzi, P.C.
17. Between May 2 and June 6, 1997, individual
counterclaim defendants attempted to impose conditions upon
Capozzi in exchange for allowing him to return to the practice of
law at Latsha & Capozzi, P.C. including (a) reducing his salary
and (b) eliminating his automobile allowance.
18. Individual counterclaim defendants advised Capozzi
that he must "agree to and comply with all conditions of probation
without deviation or negotiation. The decision as to whether or
not you have complied with the conditions of probation shall be
made collectively by myself (Latsha), Glenn and Doug in our sole
and absolute discretion. If you fail to agree and comply with the
terms and conditions of your probation, you will be suspended
immediately without pay and face possible termination."
19. Individual counterclaim defendants advised Capozzi
that as a condition of being allowed to return to the premises of
Latsha & Capozzi, P.C. and practice law with Latsha & Capozzi,
P.C., he must agree that if his employment were terminated for any
reason, he would forfeit the value of his ownership interest in
the corporation and would be entitled to receive a payment of only
$5,000, representing his initial capital contribution.
14
20. When Capozzi refused to accept the onerous
conditions, the remaining shareholders of Latsha & Capozzi, P.C.
refused to allow him to return to the premises of the corporation
or to practice law with Latsha & Capozzi, P.C.
21. As a result, thereafter, Capozzi was forced to
establish his own law firm, Capozzi and Associates, P.C.
22. Since May 31, 1997, Latsha & Capozzi, P.C. has paid
no compensation in any form to Capozzi.
23. Since May 2, 1997 and continuing to the present
time, individual counterclaim defendants have utilized the assets
of Latsha & Capozzi, P.C. for their own benefit to the exclusion
of Capozzi.
24. The assets of Latsha & Capozzi, P.C. which
individual counterclaim defendants have appropriated for their own
benefit were generated in significant part through the efforts of
Capozzi.
25. As of December 31, 1996, Latsha & Capozzi, P.C.
owed Capozzi at least a sum of $32,017.50, representing
compensation paid to him in December 1996 which he allowed the
corporation to use as working capital. Said sum is payable to
Capozzi on demand.
26. Because Capozzi has been denied access to the books
and records of Latsha & Capozzi, P.C., he is unable to state the
amount of any additional sums representing compensation payable to
him for 1996 and prior thereto which is being wrongfully withheld
by Latsha & Capozzi, P.C.
15
27. Commencing at a time unknown to Capozzi but at
least as early as June 12, 1997, the individual counterclaim
defendants acting on behalf of the professional corporation
engaged in a systematic effort to cause clients who had elected to
use Capozzi's services to terminate the relationship and to
prevent other persons from entering into lawyer-client
relationships with Capozzi.
28. To this end, individual defendants misrepresented
and disparaged Capozzi's personal and professional qualifications.
29. To this end, individual defendants refused to
transfer files promptly at the request of clients.
30. Individual defendants stated to various persons
including clients and potential clients that Capozzi is or was an
alcoholic and had engaged in fraudulent billing or other
misconduct.
COUNT I
REPAYMENT OF LOAN
31. The allegations of Paragraphs 1 through 30 of the
counterclaim are incorporated by reference.
32. Latsha & Capozzi, P.C. presently owes Capozzi at
least a sum of $32,017.50, representing compensation paid to
Capozzi in December 1996 retained by the corporation.
WHEREFORE, Capozzi requests the court to enter an order
directing Latsha & Capozzi, P.C. to pay to Capozzi all sums owed
to him as compensation for 1996 and to repay all loans made by
Capozzi to Latsha & Capozzi, P.C. with interest and costs.
16
CORRECTION
Previous Image
Refilmed to Correct
Possible Error
20. When Capozzi refused to accept the onerous
conditions, the remaining shareholders of Latsha & Capozzi, P.C.
refused to allow him to return to the premises of the corporation
or to practice law with Latsha & Capozzi, P.C.
21. As a result, thereafter, Capozzi was forced to
establish his own law firm, Capozzi and Associates, P.C.
22. Since May 31, 1997, Latsha & Capozzi, P.C. has paid
no compensation in any form to Capozzi.
23. Since May 2, 1997 and continuing to the present
time, individual counterclaim defendants have utilized the assets
of Latsha & Capozzi, P.C. for their own benefit to the exclusion
of Capozzi.
24. The assets of Latsha & Capozzi, P.C. which
individual counterclaim defendants have appropriated for their own
benefit were generated in significant part through the efforts of
Capozzi.
25. As of December 31, 1996, Latsha & Capozzi, P.C.
owed Capozzi at least a sum of $32,017.50, representing
compensation paid to him in December 1996 which he allowed the
corporation to use as working capital. Said sum is payable to
Capozzi on demand.
26. Because Capozzi has been denied access to the books
and records of Latsha & Capozzi, P.C., he is unable to state the
amount of any additional sums representing compensation payable to
him for 1996 and prior thereto which is being wrongfully withheld
by Latsha & Capozzi, P.C.
15
27. Commencing at a time unknown to Capozzi but at
least as early as June 12, 1997, the individual counterclaim
defendants acting on behalf of the professional corporation
engaged in a systematic effort to cause clients who had elected to
use Capozzi's services to terminate the relationship and to
prevent other persons from entering into lawyer-client
relationships with Capozzi.
28. To this end, individual defendants misrepresented
and disparaged Capozzi's personal and professional qualifications.
29. To this end, individual defendants refused to
transfer files promptly at the request of clients.
30. Individual defendants stated to various persons
including clients and potential clients that Capozzi is or was an
alcoholic and had engaged in fraudulent billing or other
misconduct.
COUNT I
REPAYMENT OF LOAN
31. The allegations of Paragraphs 1 through 30 of the
counterclaim are incorporated by reference.
32. Latsha & Capozzi, P.C. presently owes Capozzi at
least a sum of $32,017.50, representing compensation paid to
Capozzi in December 1996 retained by the corporation.
, Capozzi requests the court to enter an order
directing Latsha & Capozzi, P.C. to pay to Capozzi all sums owed
to him as compensation for 1996 and to repay all loans made by
Capozzi to Latsha & Capozzi, P.C. with interest and costs.
16
COUNT II
APPOINTMENT OF CUSTODIAN
33. The allegations of Paragraphs 1 through 30 of the
counterclaim are incorporated by reference.
34. Individual counterclaim defendants have exercised
their control of Latsha & Capozzi, P.C. to oppress Capozzi and
deny him his share of the assets of Latsha & Capozzi, P.C. which
he helped create and in which he is entitled to share in
accordance with his ownership interest in Latsha & Capozzi, P.C.
35. Pursuant to 15 Pa. C.S.A. §1767, Capozzi is
entitled to the appointment of a custodian for Latsha & Capozzi,
P.C. for the purpose of distributing its assets in a manner which
is fair and equitable to Capozzi and consistent with the past
practice of the corporation.
WHEREFORE, Capozzi requests the court to appoint a
custodian to administer the affairs of Latsha & Capozzi, P.C. and
to deal with him in a fair and equitable manner with regard to the
assets of the corporation and his ownership interest in the
corporation and award him such other and further relief as the
court deems just.
COUNT III
BREACH OF FIDUCIARY DUTY
36. The allegations of Paragraphs 1 through 30 of the
counterclaim are incorporated by reference.
37. As majority shareholders of Latsha & Capozzi, P.C.
and as its officers and directors, individual counterclaim
17
defendants owe a fiduciary duty to Capozzi to treat him in a fair
and equitable manner.
38. If not ordered otherwise by this court, individual
counterclaim defendants have used and plan to use for their own
benefit and to the exclusion of Capozzi all of the assets of
Latsha & Capozzi, P.C. existing as of June 10, 1997, including
tangible assets, accounts receivable, unbilled time and contingent
fees.
39. The appropriation of Capozzi-s share of the assets
of Latsha & Capozzi, P.C. constitutes a breach of the fiduciary
duty which individual counterclaim defendants owe to Capozzi.
WHEREFORE, Capozzi requests the court to order Latsha &
Capozzi, P.C. and the individual counterclaim defendants to pay to
Capozzi 37.5 percent of the value of the assets of Latsha &
Capozzi, P.C. as of June 10, 1997 with interest and costs and
award Capozzi such other and further relief as the court deems
just.
COUNTY IV
REFUSAL TO PROVIDE CORPORATE RECORDS TO SHAREHOLDER
40. The averments of Paragraphs 1 through 30 of the
counterclaim are incorporated by reference.
41. On June 10, 1997, Capozzi served a request for
inspection of corporate books and records on Latsha & Capozzi,
P. C.
18
42. On June 23, 1997, Latsha & Capozzi, P.C. responded
providing limited corporate information but refusing to provide
corporate financial records.
43. Capozzi seeks to inspect and copy the corporate
financial records of Latsha & Capozzi, P.C. as authorized by
15 Pa. C.S.A. §1508 for the purpose of determining the value of
his 37.5 percent interest in Latsha & Capozzi, P.C.
44. Determining the value of Capozzi's interest in
Latsha & Capozzi, P.C. is a proper purpose for inspecting and
copying its corporate financial records.
WHEREFORE, Capozzi requests the court to enter an order
directing that the corporate financial records of Latsha &
Capozzi, P.C. be made available to him for inspection and copying
and granting such other and further relief as the court deems
just.
COUNTY V
INTERFERENCE WITH EXISTING AND
PROSPECTIVE CONTRACTUAL RELATIONSHIPS
45. The averments of Paragraphs 1 through 30 of the
counterclaim are incorporated by reference.
46. As a result of the actions of the individual
counterclaim defendants, clients who had elected to use the
services of Capozzi terminated their relationship with Capozzi.
47. As a result of the actions of the individual
counterclaim defendants, clients who otherwise were prepared to
use the services of Capozzi elected not to.
19
48. The conduct of individual counterclaim defendants
which interfered with the existing and prospective relationships
of clients with Capozzi was without justification or privilege and
was done with the intention of causing harm to Capozzi.
49. Capozzi has been damaged as a result of the actions
of individual counterclaim defendants.
50. The conduct of individual counterclaim defendants,
as described above, constitutes willful and outrageous conduct
which under Pennsylvania law entitles Capozzi to punitive damages
and claim is made therefore.
WHEREFORE, Capozzi requests the court to order Latsha &
Capozzi, P.C. and the individual counterclaim defendants to
compensate him for the damages he has suffered with interest and
costs and award Capozzi such other and further relief as the court
deems just.
COUNTY VI
DEFAMATION
51. The averments of Paragraphs 1 through 30 of the
counterclaim are incorporated by reference.
52. Individual counterclaim defendants defamed Capozzi
by stating that he is or was an alcoholic or engaged in fraudulent
billing or other misconduct.
53. Capozzi has suffered damage to his reputation both
professional and personal as a result of the defamation by
individual counterclaim defendants.
20
54. The conduct of individual counterclaim defendants,
as described above, constitutes willful and outrageous conduct
which under Pennsylvania law entitles Capozzi to punitive damages
and claim is made therefore.
WHEREFORE, Capozzi requests an award of damages with
interest and costs and such other and further relief as the court
deems just.
P3' "Gutter
ey ID. No. 00478
D SMITH SHAW & MCCLAY LLP
Market Street, 9th Floor
. Box 11844
Harrisburg, pA 17108-1844
(717) 257-3040
Attorneys for Defendant,
Louis J. Capozzi, Jr.
21
CERTIFICATE OF SERVICE
I hereby certify that on this 12th day of June, 1998, a
true and correct copy of the Answer and Counterclaim has been
served by United States Mail, first-class, postage prepaid, on
the following person:
C. Grainger Bowman, Esquire
Powell, Trachtman, Logan, Carrle,
Bowman & Lombardo, P.C.
114 North Second Street
Harrisburg, P?L_ 17101
/ I
?-? 7 99?
l
FILED UNDER SEAL PURSUANT TO COURT ORDER
IN THE UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
LATSHA, DAVIS & YORE, P.C.,
KIMBER L. LATSHA, GLENN R. DAVIS,
and DOUGLAS C. YORE,
Plaintiffs, CIVILACTIONNO. 1:CV-97-1881
V.
JURY TRIAL DEMANDED FILE
LOUIS J. CAPOZZI, JR., r _
Defendant. IiARRISBUR
PA
PLAINTIFFS' MOTION UNDER RULE 12(e) FOR JUL 0 6 1998
MORE DEFINITE STATEMENT OF COUNTERCLAIMARV E. D-A LERK
Per
Plaintiffs Latsha, Dave & Yohe, P.C., et al by their counsel, Powell, Trachtman, Logan,
Carrle, Bowman & Lombardo, P.C. moves this Court under Rule 12(e) for a more definite
statement of its counterclaim before interposing a responsive pleading. Plaintiffs point out the
defects complained of and the details desired, as follows:
Defendant Capozzi (hereinafter "Capozzi") served its "Answer and
Counterclaim" on June 12, 1998 by United States mail. Plaintiffs' 12(e) Motion is in response
to Capozzi's Counterclaim.
2. Capozzi's Counterclaim contains six counts: Count I (Repayment of Loan),
Count II (Appointment of Custodian), Count III (Fiduciary Duty), Count IV (Provide Corporate
Records), Count V (Interference with Existing and Prospective Contractual Relations) and Count
VI (Defamation).
3. Count I, II, III and IV have already been alleged in Capozzi's action (as plaintiff)
against Messrs. Latsha, Davis and Yohe before the Cumberland County Court of Common Pleas,
Docket No. 97-5584 (Civil Tenn (the "Cumberland Co. action"). The
34521.1
Cumberland County action are identical. Messrs. Latsha, Davis and Yohe have answered those
averments in the Cumberland County action.
4. Capozzi's Counterclaim paragraphs 27, 28, 29 and 30, and Capozzi's
Counterclaim Counts V (Interference with Contract) and Count VI (Defamation) are new to
Plaintiffs Latsha, Davis and Yohe.
5. Counterclaim paragraph 27 alleges that the individual plaintiffs (i.e. Messrs.
Latsha, Davis and Yohe) "engaged in a systematic effort to cause clients who had elected to use
Capozzi's services to terminate the relationship and to prevent other persons from entering into
lawyer/client relationships with Capozzi".
6. The individual plaintiffs are unable to understand from the Counterclaim (either
from paragraphs 27-30 or any other paragraph) what "systematic efforts" were undertaken by
Messrs. Latsha, Davis and Yohe to cause clients to terminate relationships with Capozzi or to
prevent the establishment of other lawyer/client relationships. Capozzi alleges a "systematic
effort" without facts. Capozzi should be required to plead such facts which will identify what
kind of "systematic effort" has been engaged in by Plaintiffs Latsha, Davis and Yohe, including:
(i) The name(s) of those clients who had elected to use Capozzi's services but
had terminated their relationship with Capozzi because of the "ststematic efforts";
(ii) A definition of the "systematic effort";
(iii) The defamatory publication that is alleged to be disruptive of the
relationship between "clients" and Capozzi;
(iv) The words, actions, or behavior which were undertaken to "prevent"other
lawyer/client relationships with Capozzi;
(v) The time of the "systematic efforts".
34521.1
7. In the absence of this detail, Capozzi is not even giving notice of his claim.
Plaintiffs Latsha, Davis and Yolte have no way of determining what is meant by a "systematic
effort", what words, action, or behavior Capozzi is complaining about, what publications were
made in furtherance of the "systematic effort", when the "systematic efforts" occurred, how to
raise the defenses ofjustification, truth, privilege, and/or whether other defenses may be
available that must be raised.
8. Counterclaim paragraph 28 alleges that the individual plaintiffs (Messrs. Latsha,
Davis & Yohe) have misrepresented and disparaged Capozzi's personal and professional
qualifications. Plaintiffs Latsha, Davis and Yohe cannot reasonably be required to frame an
answer to the alleged misrepresentation or the alleged disparagement, because the
misrepresentations and disparagements cannot be known from the Counterclaim. Capozzi
should be required to identify the date and the particulars of the misrepresentations and
disparagements, so that individual plaintiffs Latsha, Davis and Yohe are able to frame an answer
or other responsive pleading.
9. Counterclaim paragraph 29 alleges that Messrs. Latsha, Davis and Yohe refused
to transfer files promptly at the request ot'clients. The individual plaintiffs Latsha, Davis and
Yohe cannot reasonably be required to frame an answer to this pleading without knowing what
specific files were not transferred promptly at the request of which clients. If Capozzi has this
knowledge he should be required to plead it. Plaintiffs should not be made to guess what is
meant by "refused to transfer" and "promptly".
10. Counterclaim paragraph 30 states that Messrs. Latsha, Davis and Yohe made
statements about Capozzi's fraudulent billing, misconduct and alcoholism to "various persons
including clients and potential clients". The individual plaintiffs cannot reasonably be required
34321.1
to flame an answer where they do not know who is the person to whom an alleged defamatory
publication is being made. Capozzi must be required to state with specificity to whom the
publication is being made, when the publication is being made, and what specifically the
publication is. If the complained-of statements have been made to an unprivileged person, then
the name of the relevant persons (communicating and receiving), the defamatory statement, and
when it occurred are all necessary in order to permit plaintiffs to reasonably frame an answer to
the allegation.
11. Counterclaim Count V (Interference with Contractual Relationships)appears to be
based on Counterclaim paragraphs 27 through 30, but Count V is devoid of allegations about
what specific actions Messrs. Davis, Latsha and Yohe had undertaken with specific "clients" or
specific "prospective clients". It is unreasonable to frame an answer or other responsive
pleading to the counterclaim when Count V is vague and ambiguous.
12. Capozzi pleads that the individual plaintiffs Latsha, Davis and Yohe had no
justification or no privilege to act in the manner in which they acted. Messrs. Latsha, Davis and
Yohe have no frame of reference to respond, because Capozzi has made no concrete allegation.
13. Count V also seeks the sanction of punitive damages, but Messrs. Latsha, Davis
and Yohe are unable to frame an answer or other responsive pleading to defend against this
sanction because of the Counterclaim's ambiguity.
14. Counterclaim Count VI (Defamation) alleges that Messrs. Latsha, Davis and
Yohe made defamatory remarks that Capozzi "is or was an alcoholic or engaged in fraudulent
billing or other misconduct". The lack of specificity as to whom these remarks were made and
when they were made disables the individual plaintiffs from framing an answer or other response
to this counterclaim of defamation.
34321.1
15. Count VI also seeks the sanction of punitive damages, but Messrs. Latsha, Davis
and Yohe are unable to respond because no specific defamation is pleaded and no person to
whom the defamation is published is alleged, and the Counterclaim is ambiguous.
16. It is probable that the statute of limitations has expired on these Count VI claims,
and the individual plaintiffs Latsha, Davis and Yohe are entitled to know the availability of that
defense, as well as the defenses ofjustification or privilege or any other defense.
17, In the Cumberland County action, none of these Count V and Count VI
allegations were made. These issues are newly raised in this federal lawsuit.
18. Federal Rule 9(b) states that in all averments of fraud or mistake, the
circumstances constituting fraud or mistake shall be stated with particularity. The allegations in
Count V and Count VI are in the nature of misrepresentation and fraud, and must be stated with
particularity.
19. Federal Rule 8(a) states that a pleading [counterclaim] shall contain a short and
plain statement of the claim showing that the pleader is entitled to relief. The Counterclaim
paragraphs have failed to state the averments of time and place, the averments of fraud, the
averments of who published the defamatory statements, and the averments of to whom the
defamatory statements were published. All of this information is presumably within the
knowledge of Capozzi. He can plead with the definiteness required by the Rules to permit the
individual plaintiffs the ability to frame an answer or other responsive pleading. Plaintiffs
should not be compelled to use its limited interrogatories to team the basic fundamentals of the
Counterclaim.
20, The individual plaintiffs Latsha, Davis and Yohe are capable and have already
prepared a response to all of the other paragraphs in the counterclaim with the sole exception of
74521.1
paragraphs 27 through 30 and Count V paragraphs and Count VI paragraphs. The individual
plaintiffs Latsha, Davis and Yohe will follow the Court's direction, but cannot reply to the
objected to paragraphs and Counts. The individual plaintiffs need a more definite statement of
the Counterclaim at the referenced paragraphs and at Counts V & VI.
WHEREFORE, Plaintiffs Latsha, Davis and Yohe et al. request this Court to grant its
12(e) Motion for a More Definite Statement.
Date: July 6, 1998
Respectfully submitted,
POWELL, TRACHTMAN, LOGAN,
CARRL O N AND LOMARDO, P.C.
1
V
By:
Paul A. Logan, $s ire
I.D. #30119
C. Grainger Bowman, Esquire
I.D.#15706
114 N. Second Street
Harrisburg, PA 17101
(717) 238-9300
Attorneys for Plaintiffs Latsha Davis
& Yohe, P.C., et al.
34521.1 6
FILED UNDER SEAL PURSUANT TO COURT ORDER
IN THE UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
LATSHA, DAVIS & YORE, P.C.,
KIMBERL. LATSHA, GLENN R. DAVIS,
and DOUGLAS C. YOHE,
Plaintiffs, CIVIL ACTION NO. I:CV-97-1881
V.
LOUIS J. CAPOZZI, JR.,
Defendant.
JURY TRIAL DEMANDED
CERTIFICATED! NON-CONCURRENCE
I have contacted John Cramer, attorney for Louis J. Capozzi, Jr., and he non-concurs
under this Motion under Rule 12(e).
Respectfully submitted,
POWELL, TRACHTMAN, LOGAN,
CARRLE, BOWMAN AN LOMBARDO, P.C.
(' 4
Paul A. Logo Esquire
I.D.#30119
C. Grainger Bowman, Esquire
I.D.#15706
114 N. Second Street
Harrisburg, PA 17101
(717) 238-9300
Attorneys for Plaintiffs Latsha Davis
& Yohe, P.C., et al.
34523.1
CERTIFICATE OF SERVICE
I, C. Grainger Bowman, certify that on July 6, 1998, I caused to be served Plaints'
Motion Under Rule 12(e) for More Definite Statement of Counterclaim on the person(s) at the
address(es) listed below by hand delivery:
John McN. Cramer, Esq.
Reed Smith Shaw & McClay, LLP
213 Market Street
P.O. Box 11844
Harrisburg, PA 17108-1844
0? .
C. Grainger BowniaA
34489.1
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
LATSHA, DAVIS & YOHE, P.C.,
KIMBER L. LATSHP-, GLENN R. DAVIS,
and DOUGLAS C. YORE,
Plaintiffs
Vs. CIVIL ACTION NO. 1:CV-97-1881
AO 72A
(Rev.B/82)
LOUIS J. CAPOZZI, JR., FILED
Defendant
HARRISBURG, PA
APR 2 8'1998
M_E M O R A N D U M
MARY
Per- 4 'CLERK
Per
I. Introduction. Deputy erk
The plaintiffs are Latsha, Davis & Yohe, P.C., a law
firm organized as a professional corporation (hereinafter the
"firm"), and Kimber L. Latsha, Glen R. Davis, and Douglas C. Yohe,
shareholders in the firm. The plaintiffs are suing defendant,
Louis J. Capozzi, Jr., formerly a shareholder as well, under
federal and state law for injuries allegedly suffered from his
improper billing of clients and his furtive attempt to begin his
own law firm by telling clients falsehoods about the firm.
The complaint sets forth two federal causes of action.
Count III makes a disparagement claim under the Lanham Act, 15
U.S.C. § 1125(a), based on the alleged falsehoods, and count V
makes a claim under section 1962(c) of the Racketeer Influenced
and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968,
based on the plaintiffs' theory that the defendant had used the
Certified fr t record
D:ttc - -
Nt ?D'And Cler•
Pcr
Depety Clerk
firm as an enterprise by which he conducted a pattern of
racketeering activity defrauding clients by his false billings.
We are considering the defendant's motion under Fed. R.
Civ. P. 12(b) (6) to dismiss these federal claims, and in turn, the
rest of the case on the theory that, in the absence of federal
claims, we have no supplemental jurisdiction over the state law
claims. 9= 28 U.S.C. § 1367(c).
In deciding the defendant's motion to dismiss, we must
accept as true the factual allegations in the complaint and
construe any inferences to be drawn from them in the plaintiffs'
favor. 3= Kost v. Kozakie!M , 1 F.3d 176 (3d Cir. 1993). With
this standard in mind, we briefly set forth the background to this
litigation, as the plaintiffs allege it.
II. Background.
In May 1994, Latsha formed the law firm with Capozzi.
(Complaint, ¶ 14). Except for contingency-fee arrangements, the
firm billed its clients under written fee agreements at an hourly
rate for the actual time spent on the file. (1-d., ¶ 21). The
firm rejected Capozzi's suggestion that it adopt so-called value
billing, billing based on the subjective assessment of the billing
attorney of the value of the work to the client rather than the
time actually spent. (., ¶¶ 23-25).
Shortly after the firm was formed, and contrary to the
decision to reject value billing, defendant began to inflate the
2
AO 72A
(Rev.SM)
bills for clients for whom he was the billing attorney. Latsha
discovered this sometime in April 1997. (1d., ¶¶ 33-34). As a
result, the firm conducted an audit of Capozzi's bills. (., 9
35). The plaintiffs discovered that the defendant had
fraudulently increased the bills for clients inside and outside
Pennsylvania by inflating the hours associates had actually spent
on the files and had used the mails to perpetrate this fraud.
(1d., 99 36-37). The plaintiffs contacted clients, explained what
had happened, and reimbursed them $37,708.76 as of the date of the
complaint.
Based on the forgoing, in count V of the complaint,
plaintiffs have made a RICO claim under section 1962(c). They
allege that defendant associated with an enterprise, the law firm,
whose activities were in and affected interstate commerce. He
conducted its affairs through a pattern of racketeering activity,
use of the mails to send out fraudulent bills. They seek as
damages the amount they had to reimburse clients, the injury to
the reputations of the law firm and its principals as a result of
the disclosure of Capozzils fraud, and the costs of investigating
the extent of the fraud, including the hiring of a lawyer to
handle the issues they had to confront over professional
responsibility. They also seek to treble these damages under 18
U.S.C. § 1964.
Even before Capozzi's fraud was discovered, Latsha had
decided that he no longer wanted to practice law with him.
3
A0 M
(ReM82)
(Complaint,
9 49). Nonetheless, at the urging of Capozzi+s wife
the firm was willing to retain Capozzi, subject to certain
conditions. (Id„ 99 50 and 51). Defendant indicated he wished
to remain with the firm.
However, Capozzi disparaged the firm to clients in an
attempt to lure them away while he was secretly forming his own
law firm. Sometime in the spring of 1997 through June 1997,
Capozzi was contacting firm clients and falsely telling them that:
(1) the firm was dissolving and Capozzi was hiring the associates;
(2) the firm+s associates had no real experience; (3) neither the
principals nor the associates had advocacy experience necessary to
represent clients; and (4) Latsha had no knowledge of
"reimbursement,,, one of Latsha's areas of practice. I
and 75). (A• , 94 70
Based on the forgoing, in count III of the complaint,
the plaintiffs have made a claim under section 1125(a) for false
statements made about a competitor. They also seek to treble
these damages under 15 U.S.C. 5 1117.
III. Dis + ;on.
A. The RTgq C _;m
The defendant has moved to dismiss the RICO claim,
arguing that the plaintiffs cannot show proximate cause for the
claimed injuries as a result of the RICO scheme. As noted above,
4
AO 72A
(Rev-8/82)
the damages claimed are the amount the plaintiffs had to reimburse
clients for the inflated bills, the injury to the reputations of
the law firm and its principals as a result of the disclosure of
Capozzi,s fraud, and the costs of investigating the extent of the
fraud. All of these damages allegedly flowed from the scheme to
defraud clients.
Capozzi relies on
MendC2ovitz v oa; L 40 F.3d 182
(7th Cir. 1994); Szeneral F?QCtr o
y RnWP, 1992 WL 277997
(E.D. Pa.); and 2n r-- P? a De_fens?C *,
Utiaat;on, 849 F. Supp. 1369 (C.D. Cal. 1993). In these cases,
the courts held that shareholders could not file derivative suits
on behalf of corporations seeking damages consisting of injury to
the corporations, good will, reputation, or costs the corporations
incurred (such as legal fees or investigative expenses), as a
result of the disclosure of RICO violations committed by the
boards of directors or officers directed at third parties. The
courts concluded there was no proximate cause because the injuries
could not be directly traced to the RICO violations, which were
not aimed at the corporation but at third parties.
Further, relying on M=LJCJ QvjtZ, 40 F.3d at 187 n.7,
defendant argues that, if the firm has no cause of action, then
the individuals would also not have one for injuries they claim to
have suffered personally.
These cases relied to a significant extent on FiolMs v
.$gCllritiea rnveator Prnl'Pnl';
on Corn 503 U.S. 258, 112 S.Ct.
5
AO 72A
(ReM82)
1311, 117 L.Ed.2d 532 (1992), the leading Supreme Court decision
dealing with proximate cause for a RICO claim. In Holmes, the
Court held that "but for" causation is not enough for a RICO claim
and that a plaintiff has to show proximate cause. In establishing
proximate cause, a central element is "a direct relation between
the injury asserted and the injurious conduct alleged." Id. at
268, 112 S.Ct. at 1318, 117 L.Ed.2d at 544. The need for a direct
relationship was supported by three factors: (1) the difficulty of
ascertaining the amount of the plaintiff's damages attributable to
the defendant's actions as distinct from other independent causes
when the injury is less direct; (2) the necessity of establishing
complicated rules to prevent multiple recoveries at different
levels if the claims of entities indirectly injured are
recognized; and (3) the lack of necessity to engage in the first
two inquiries when deterrence against wrongdoing can be provided
by lawsuits filed by those directly injured. 3d, at 269, 112
S.Ct. at 1318, 117 L.Ed.2d at 544-45.
In opposing the defendant's motion, the plaintiffs
analyze their claims under these three factors and contend that
the cited cases, especially Mendelovitz, are distinguishable.
First, as to the plaintiff's expense in investigating Capozzi's
fraud, they contend this injury follows directly from the RICO
violation since the plaintiffs were obligated, when they
discovered the fraud, to determine the extent of their clients'
overbilling and to reimburse them. Second, as to the damages to
6
AO 72A
(fiev.8M)
the reputations of the firm and its shareholders, these followed
directly from the RICO violation because the process of explaining
Capozzi's scheme to their clients, which damaged the plaintiffs in
their clients eyes, was necessitated by the violation.
Finally, as to the claim based on the overbilling of the
clients, the plaintiffs assert that they can make this claim
because, having reimbursed the clients for the excess billing,
they are equitably subrogated to the clients' RICO claims against
Capozzi. They also rely on cases in which courts have recognized
the validity of the assignment of RICO claims. ,fig, e.g., Federa
Insurance Co. v. Ayers, 760 F. Supp. 1118 (E.D. Pa. 1990).
In deciding the defendant's motion, we will treat each
item of damages separately. See Khurana v. Innovative Health Carp
Systems. Inc., 130 F.3d 143, 147 (5th Cir. 1997) (refusing to treat
the alleged RICO injuries as an "homogeneous group" because
"standing for each turns on a proximate causation inquiry"),
petition for cert. filed, No. 97-1507 (U.S. Mar. 12, 1998).
We deal with the last claim first. We can accept the
notion that the plaintiffs are subrogated to the rights of their
clients against Capozzi, but only to the extent of the
reimbursement. We do not believe that equitable subrogation give
the plaintiffs the right to assert their clients' RICO claims as
well. Additionally, since the plaintiffs do not allege that thei
clients assigned their RICO claims to them, cases that accept the
validity of such assignments do not assist them
7
We therefore
AO 72A
(Rev.8182)
conclude that the plaintiffs have no standing to assert a RICO
claim based on the overbilling to their clients, an injury their
clients alone suffered.
As to the remaining two categories of damages, we see no
need to follow the three-factor analysis the plaintiffs employ.
In Holmes, the Supreme Court did not use the factors when deciding
the causation issue in that case. Instead, it looked to the
directness of the injury, a central element for proximate cause.
S= 503 U.S. at 271, 112 S.Ct. at 1319, 117 L.Ed.2d at 546 ("the
link is too remote between the stock manipulation alleged and the
customers, harm, being purely contingent on the harm suffered by
the broker-dealers"). Further, recognizing that each case was
different, the Court specifically disclaimed any intention of
creating a black letter rule on proximate cause. 503 U.S. at 274
n.20, 112 S.Ct. at 1321 n.20, 117 L.Ed.2d at 547 n.20. Jp& Al=
Brokerage Concepts. Inc. v. U.S. Healthcare. Inc., _ F.3d _,
1998 WL 151237, at *22 (3d Cir. April 2, 1998) (in Holmes, the
"Court looked to the common law for guidance in defining the
proximate cause requirement. In so doing, it focused primarily on
one element of proximate cause: the directness of the relationship
,between the injury asserted and the injurious conduct
alleged. "')(quoting Holmes, 503 U.S. at 268, 112 S.Ct. at 1318,
117 L.Ed.2d at 544).
With this standard of direct injury in mind, we conclude
that the plaintiffs have no RICO claim for the expenses incurred
8
AO 72A
(Rsv.B/B2)
in investigating Capozzi's billings. These expenses were not
directly caused by the alleged RICO violation but by the
plaintiffs' response to it. In reaching this conclusion, we do
not rely on the cases the defendant cites. They are
distinguishable because the expenses sought there were the
expenses of the corporation in defending charges brought against
it. Instead, we rely on the general rule that, absent some
statutory authorization, expenses incurred in investigating and
establishing rights in a legal action (the type of damages at
issue here) are not recoverable as damages, sometimes based on the
rationale that there is no proximate cause. See 11 P.L.E.,
Damages S 33 at p. 132 (1970) (citing Becker v. Rorough of
Schuylkill Haven, 200 Pa. Super. 305, 189 A.2d 764 (1963)22 Am.
Jur. 2d, Damages 5 612 (1988).
We also conclude that the plaintiffs have no RICO claim
for injury to their reputations. As noted in Mendelovitz, jaygra,
and General Electric Co., supra, these injuries, whether to the
firm or to the individuals, stem not from the RICO violation but
from third-party reaction. a= also Willis v. Linton, 947 F.2d
998 (1st Cir. 1991) . = PPP Khurana, supra.
Since the plaintiffs cannot establish a legally
cognizable connection between their injuries and the alleged RICO
violation, we will dismiss the RICO claim.
9
AO 72A
(ReVAM)
B. The Lanham Act Claim.
Contending that the plaintiffs are attempting to make a
federal case out of a state-law cause of action, the defendant has
moved to dismiss the Lanham Act claim for commercial disparagement
on the following grounds. First, the plaintiffs do not allege
that the false statements were made to clients outside
Pennsylvania, a supposed requirement since the Lanham Act applies
to interstate commerce alone. Second, the statements were made in
private, not in commerce, as required by section 1125(a) and were
only statements of opinion, not fact. Third, the complaint does
not establish a right to damages because it fails to allege that
the buying public was deceived, only that "several clients"
decided to leave the firm after the statements were made.
The second and third arguments must fail. The
statements were made in commerce (or as part of commercial
advertising or promotion) because they were made in a commercially
appropriate setting for a law practice. ,=, e.g., .Seven-Qg Co.
v. Coca-Cola Co., 86 F.3d 1379 (5th Cir. 1996); National Artists
Management Co. v. Weaving, 769 F. Supp. 1224 (S.D.N.Y. 1991).
They were also not statements of opinion but statements of fact;
the defendant allegedly made factual assertions about the
experience of the firm's associates and of Latsha himself. Also,
the complaint sufficiently avers that the departure of the clients
was causally related to the statements. (Complaint, ¶¶ 75-76).
10
AO 72A
(Rev.&82)
Our only concern is with the interstate commerce
requirement of the Lanham Act. The plaintiffs argue in opposition
that their averments on interstate commerce are sufficient because
they allege they have clients outside Pennsylvania in such places
as Wisconsin, New Jersey, and Maryland, which, combined with their
allegation that Capozzi made false statements to their clients, is
sufficient to establish jurisdiction over the Lanham Act claim.
it appears that "a Lanham Act claim may be brought with
regard to any statement used in such a way as to 'substantially
affect interstate commerce."' Summit Technology. Inc v H+ah-
Line Medical Instruments, o., 933 F. Supp. 918, 935 n.10 (C.D.
Cal. 1996)(citations omitted). Under this standard, the
plaintiffs have not sufficiently pled an interstate-commerce
connection. It is not enough that they have clients outside
Pennsylvania; they must allege that, as a result of the
defendant's statements, this interstate business was affected
negatively.
We must therefore dismiss the Lanham Act claim as well.
However, before dismissing the state-law claims for lack of
jurisdiction, we will grant leave to the plaintiffs to amend their
Lanham Act claim to supply the necessary allegations, if they can.
11
AO 72A
(Rev &W)
we will issue an appropriate order.
William W. Caldwell e
United States District Judge
Date: April 28, 1998
12
AO 72A
(RSv.8/82)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
LATSHA, DAVIS & YOHE, P.C.,
KIMBER L. LATSHA, GLENN R. DAVIS,
and DOUGLAS C. YOHE,
Plaintiffs
Vs. CIVIL ACTION NO. 1:CV-97-1881
FILED
LOUIS J. CAPOZZI, JR., HARRISBURG, PA
Defendant
APR 2 81998
MARY E. MA, CLERK
O R D E R Per
eputy Jerk
AND NOW, this 28th day of April, 1998, it is ordered
that:
1. The defendant's motion to dismiss the
Lanham Act claim under 15 U.S.C. S 1125(a) and
the RICO claim under 18 U.S.C. S 1962(c) is
granted.
2. The claims under 15 U.S.C. S 1125(a)
and 18 U.S.C. S 1962(c) are hereby dismissed.
3. The plaintiffs are granted twenty days
from the date of this order to file an amended
complaint setting forth the necessary
interstate-commerce allegations for the Lanham
Act claim. If they fail to do so, this action
will be dismissed without prejudice to filing
an action in state court on the state-law
claims.
William W. Caldwell
United States District Judge
AO 72A
(Rev.8r82)
LA.TSHA, DAVIS & YORE, P.C., Wa
LATSHA & CAPOZZI, P.C., KIMBER L.
LATSHA, GLENN R. DAVIS, AND
DOUGLAS C. YOHE,
Plaintiffs
V.
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
PENNSYLVANIA
Docket No.,'• Civil Term
CAPOZZI & ASSOCIATES, P.C.
Defendant
PRAECIPE FOR WRIT OF SUMMONS
TO THE PROTHONOTARY:
Please issue a Writ of Summons in the above-captioned action.
One (1) Writ of Summon shall be issued and forwarded to Sheriff for service upon Capozzi & Associates,
P.C., 1711 N. Front Street, Harrisburg, PA, 17102.
Att me
C. Grainger Bowman, Esq.
Ron S. Chima, Esq.
114 North Second Street
Harrisburg, PA 17101
(717) 238-9300
Signature of Attorney
Supreme Court I.D. No. 81916
Date: June 10, 1999
WRIT OF SUMMONS
TO THE ABOVE NAMED DEFENDANT: Capozzi & Associates, P.C., 1711 N. Front Street,
Harrisburg, PA, 17102
You are hereby notified that Plaintiffs, Latsha, Davis & Yohe, P.C., f/k/a Latsha & Capozzi, P.C.,
Kimber L. Latsha, Glenn R. Davis, and Douglas C. Yohe, have commenced an action against you.
Date: iv"tz /p 191"4
Prothonotary
BY?l t'• ro.?i'?
' Deputy
37201.1
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LATSHA, DAVIS & YOHE, P.C., f/k/a
LATSHA & CAPOZZI, P.C., KIMBER L.
LATSHA, GLENN R. DAVIS, AND
DOUGLAS C. YOHE,
Plaintiffs
V.
CAPOZZI & ASSOCIATES, P.C.
Defendant
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
PENNSYLVANIA
Docket No. Al- 35sa Civil Tenn
ENTRY OF APPEARANCE
Please enter Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C.'s appearance
as attorneys for Latsha, Davis & Yohe, P.C., f/k/a Latsha & Capozzi, P.C., Kimber L. Latsha,
Glenn R. Davis, and Douglas C. Yohe in the above-captioned matter.
Date: June 10, 1999
POWELL, TRACHTMAN, LOGAN, CARRLE,
BOWMAN & LOMBARDO, P.C.
By Grain g r Bowman
I.D.#15706
Ron S. Chima
I.D.#81916
114 N. Second Street
Harrisburg, PA 17101
(717) 238-9300
37197.1
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LATSHA, DAVIS & YOHE, P.C., f/k/a
LATSHA & CAPOZZI, P.C., KIMBER L.
LATSHA, GLENN R. DAVIS, AND
DOUGLAS C. YOHE,
Plaintiffs
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
PENNSYLVANIA
Docket No. • 35502 Civil Tenn
V.
CAPOZZI & ASSOCIATES, P.C.
Defendant
ENTRY OF APPEARANCE
Please enter Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C.'s appearance
as attorneys for Latsha, Davis & Yohe, P.C., f/k/a Latsha & Capozzi, P.C., Kimber L. Latsha,
Glenn R. Davis, and Douglas C. Yohe in the above-captioned matter.
Date: June 10, 1999
POWELL, TRACHTMAN, LOGAN, CARRLE,
BOWMAN & LOMBARDO, P.C.
By )a 9/-.- SC
CC. Grainger Bowman
I.D. P15706
Ron S. Chima
I.D. #81916
114 N. Second Street
Harrisburg, PA 17101
(717) 238-9300
37197.1
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LATSHA, DAVIS & YOHE, P.C., fWa
LATSHA & CAPOZZI, P.C., KIMBER L.
LATSHA, GLENN R. DAVIS, AND
DOUGLAS C. YOHE,
Plaintiffs
V.
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
PENNSYLVANIA
Docket No. 99-3542 Civil Term
CAPOZZI & ASSOCIATES, P.C.
Defendant
NOTICE TO DEFEND
YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims set forth
in the following pages, you must take action within twenty (20) days after this complaint and notice
are served by entering a written appearance personally, or by an attorney, and filing in writing with
the court your defenses or objections to the claims set forth against you. You are warned that ifyou
fail to do so, the case may proceed without you and a judgment may be entered against you by the
court without further notice for any money claimed in the complaint or for any claim or relief
requested by the defendant. You may lose money or property or other rights important to you.
YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT
HAVE OR KNOW A LAWYER, THEN YOU SHOULD GO TO OR TELEPHONE THE OFFICE
SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP.
CUMBERLAND COUNTY LAWYER REFERRAL SERVICE
Court Administrator
4th Floor, Cumberland County Courthouse
Carlisle, PA 17013
(717) 240-6200
AVISO
USTED HA SIDO DEMANDADO/A EN CORTE. Si ustcd desea defenderse de las
demandas que se presentan mas adelante en Ins siguientes paginas, debe tomar accion dentro de los
proximos veinte (20) dias despues de la notificacion de esta Demands y Aviso radicando
personalmente o por medic, de un abogado una comparecencia escrita y radicando en la Corte por
escritc, sus defensas de, y objecciones a,las demandas presentadas aqui en contra suya. Se le
advierte de que si usted falla de tomar accion como se describe anterionnente, el caso puede proceder
sin usted y un fallo por cualquier suma de dinero reciamada en la demanda o cualquier otra
reclamacion o remedio solicitado por el demandante puede ser dictado en contra suya por Is Corte
sin mas aviso adicional. Usted puede perder dinero o propiedad u otros derechos importantes para
usted.
USTED DEME LLEVAR ESTE DOCUMENTO A SU ABOGADO IMMEDIATAMENTE.
SI USTED NO TIENE UN ABOGADO O NO PUEDE PAGARLE A UNO, LLAME 0 VAYA A
LA SIGUIENTE OFICINA PARA AVERIGUAR DONDE PUEDE ENCONTRAR ASISTENCIA
LEGAL.
CUMBERLAND COUNTY LAWYER REFERRAL SERVICE
Court Administrator
4th Floor, Cumberland County Courthouse
Carlisle, PA 17013
(717) 240-6200
POWELL, TRACHTMAN, LOGAN, CARRLE,
BOWMAN & LOMBARDO, P.C.
By
C. Grainger Bow n
I.D. #15706
114 North Second Street
Harrisburg, PA 17101
(717) 238-9300
Attorneys for Plaintiffs, Latsha, Davis & Yohe, P.C.,
et al.
Date: June 6, 2000
LATSHA, DAVIS & YORE, P.C., f/k/a
LATSHA & CAPOZZI, P.C., KIMBER L.
LATSHA, GLENN R. DAVIS, AND
DOUGLAS C. YOHE,
Plaintiffs
V.
CAPOZZI & ASSOCIATES, P.C.
Defendant
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
PENNSYLVANIA
Docket No. 99-3542 Civil Term
COMPLAINT
Plaintiff Latsha, Davis & Yohe, P.C. ("LD&Y"), is a professional corporation
organized under the laws of the Commonwealth of Pennsylvania with a principal place of
business at Executive Park West II, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg,
Pennsylvania 17055. The professional corporation, now known as LD&Y, was formerly known
as Latsha & Capozzi, P.C. ("L&C"), all as more particularly set forth herein.
2. Plaintiff Kimber L. Latsha ("Latsha") is an individual with a usual place of
business at Executive Park West II, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg,
Pennsylvania 17055. Latsha is a shareholder in LD&Y.
3. Plaintiff Glenn R. Davis ("Davis") is an individual with a usual place of business
at Executive Park West II, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg, Pennsylvania
17055. Davis is a shareholder in LD&Y.
4. Plaintiff Douglas C. Yohe ("Yohe") is an individual with a usual place of business
at Executive Park West II, Suite 101, 4720 Old Gettysburg Road, Mechanicsburg, Pennsylvania
17055. Yohe is a shareholder in LD&Y.
37314.1
5. Defendant Capozzi & Associates, P. C. ("C&A") is a professional corporation
with a principal place at 1711 North Front Street, Harrisburg, Pennsylvania. Louis J. Capozzi, Jr.
("Capozzi") is a principal shareholder in C&A.
6. For some time prior to 1994, Latsha and Capozzi worked together as attorneys at
the law firm of Shumaker Williams P.C. in Harrisburg, Pennsylvania.
In April 1994, Latsha and Capozzi each decided that he was going to leave his
professional association with the law firm of Shumaker Williams P.C.
8. On May 24, 1994, Latsha and Capozzi formed a professional corporation for the
practice of law known as Latsha & Capozzi, P.C. ("L&C"). Latsha was a principal in L&C.
Capozzi was a principal in L&C.
9. Yohe joined L&C as a principal in July, 1994.
10. Davis joined L&C as a principal in March, 1995.
11. As Messrs. Latsha and Capozzi practiced law together, Latsha gradually observed
that the business practices of Capozzi affected Capozzi's ability to practice law in a manner
acceptable to Latsha. Specifically, Latsha observed that Capozzi had been untrustworthy and
was behaving in an unprofessional manner from time to time. This became intolerable to Latsha.
12. In the spring of 1997, the untrustworthy and unprofessional business practices of
Capozzi reached a point where Latsha began to seriously consider Latsha's withdrawal from
L&C, or alternatively, to agree with the other shareholders to the dissolution of L&C.
13. Capozzi took a leave of absence from the law firm of L&C during the month of
May of 1997.
14. At or about June of 1997, the law firm of L&C received its first indication of
37314.1
Capozzi's solicitation of the firm clients away from the firm and to Capozzi as an individual
practitioner. At this time, Capozzi was still receiving paychecks from L&C, and was indicating
by his own words that he intended to remain part of L&C. Notwithstanding Capozzi's
statements, the law firm of L&C had received written requests to release client professional files
directly to Capozzi.
15. After he failed or refused to return to his employment, a meeting had been
planned for the shareholders for Friday, June 6, 1997, to discuss Capozzi's return to work at the
firm.
16. It is believed, and therefore averred, that, prior to June 6, 1997, Capozzi was
soliciting L&C clients on his own behalf, and was misrepresenting facts about the lawyers at
L&C to those clients in an effort to draw them away from the L&C firm.
17. It is believed, and therefore averred, that prior to June 6, 1997, Capozzi intended
to establish a new professional corporation for the practice of law, which would serve Capozzi's
individual interests, and not the interests of L&C. It is further believed, and therefore averred,
that Louis J. Capozzi Jr. was engaging in a plan to enter into attomey-client relationships with
L&C clients under a new professional corporation for the practice of law.
18. The firm of L&C received a letter of resignation from Capozzi dated June 10,
1997.
19. On June 11, 1997, Capozzi incorporated his own professional corporation for the
practice of law under the name Capozzi & Associates, P.C. ("C&A").
20. After June 11, 1997, upon learning of Capozzi's resignation, L&C changed its
professional corporation name from Latsha & Capozzi, P.C. to Latsha, Davis & Yohe, P.C.
37314.1
("LD&Y" ).
21. Prior to the firm of L&C receiving the letter of resignation from Capozzi, Capozzi
continued to improperly solicit L&C clients and the firm received additional client requests to
transfer client files to Capozzi at the offices of Capozzi & Associates, P.C.
22. It is believed, and therefore averred, that the firm of Capozzi & Associates, P.C.
was the recipient of revenues for professional services arising from the improper solicitation and
engagement by Capozzi of former L&C clients, to the detriment of the firm of L&C.
COUNT
Tortious Interference with Existing Contractual Relations
23. Plaintiffs incorporate the foregoing paragraphs as if set forth in full herein.
24. Capozzi, acting on behalf of himself and as a principal of C&A, intentionally and
maliciously interfered with L&C's existing contractual relations with L&C's clients and with
L&C's client base through his improper and unlawful solicitations as set forth above, and as
more comprehensively set forth in a companion action docketed to this court's term and number:
Latsha Davis & Yohe, P.C. et al. vs. Louis J. Capozzi Jr., No. 99-3981 (Cumberland County
C.P.). The pleadings of that action are incorporated herein by reference.
25. Capozzi & Associates, P.C. was the business entity, incorporated by Capozzi
immediately following his departure from L&C, for the express purpose of receiving the
revenues for professional services performed by Capozzi, and was therefore the alter ego of
Capozzi for the improper purposes alleged herein.
26. Capozzi & Associates, P.C. should be required to disgorge any revenues received
from clients as a result of the improper solicitation by Capozzi of L&C clients into Capozzi's
37314.1
client base.
27. Plaintiffs have suffered business losses as a result of said tortious interference as
set forth more fully above, and C&A has received the benefits of Capozzi's improper conduct at
the expense of Plaintiffs.
28. Capozzi's conduct is so outrageous that it justifies the imposition of punitive
damages.
37314.1
WHEREFORE, Latsha, Davis & Yohe, P.C., Kimber L. Latsha, Glenn R. Davis, and
Douglas C. Yohe, request this Court to direct the appointment of a receiver, require Louis J.
Capozzi, Jr. and Capozzi & Associates, P.C., to provide a full accounting, to enter judgment
against Louis J. Capozzi, Jr., in an amount to be determined at trial, plus punitive damages, costs,
interest, and such other relief as the Court deems appropriate.
POWELL, TRACHTMAN, LOGAN, CARRLE,
BOWMAN & LOMBARDO, P.C.
By OA?=9-'
C. Grainger BowrAA
I.D.#15706
114 North Second Street
Harrisburg, PA 17101
(717) 238-9300
Attorneys for Plaintiffs, Latsha, Davis &
Yohe, P.C., Kimber L. Latsha, Glenn R. Davis,
and Douglas C. Yohe
37314.1
VERIFICATION
I verify that the statements made in this Complaint are true and correct to the best of my
knowledge, information and belief. I understand that any false statements made are subject to
the penalties of 18 Pa.C.S. §4904 relating to unswom falsification to authorities.
??,20
Glenn R. Davis
Date: ads `I 0-3 o
CERTIFICATE OF SERVICE
AND NOW, on June 6, 2000, I hereby certify that I have served a true and correct copy
of the within Plaintiffs' Complaint upon the following person(s) by first class U.S. mail.
John McN. Cramer, Esq.
Reed Smith Shaw & McClay, LLP
213 Market Street, Ninth Floor
P.O. Box 11844
Harrisburg, PA 17107
C. Grainger Bo
37314.1
R r? ?-
?tw
G.i:-. 1 it
U C-) U
SHERIFF'S RETURN - OUT OF COUNTY
CASE NO: 1999-03542 P
COMMONWEALTH OF PENNSYLVANIA:
COUNTY OF CUMBERLAND
LATSHA DAVIS & YOHE P C ET AL
VS.
CAPOZZI & ASSOC PC
R. Thomas Kline Sheriff, who being duly sworn according
to law, says, that he made a diligent search and inquiry for the within
named defendant, to wit: CAPOZZI & ASSOCIATES PC
but was unable to locate Them in his bailiwick. He therefore
deputized the sheriff of DAUPHIN County, Pennsylvania.
to serve the within WRIT OF SUMMONS
On July 2nd, 1999 , this office was in receipt of
the attached return from DAUPHIN County, Pennsylvania.
Sheriff's Costs: So answers:
Docketing 1.00 ??
Out of County 9.00
Surcharge 8.00 R. omas ine, SfierIff-
Dep. Dauphin Co 25.50
$bUI?
? 00O EL2 99RACHTMAN, LOGAN
Sworn and subscribed to before me
this ?1,„,,,k day of
19_qq A. D.
f f t>ce of t4e o$hPri f f
Marv Jane Snyder
Real Estate Deputv ;y;y;
William T. Tully
Solicitor Dauphin County
Harrisburg, Pennsylvania 17101
ph:(717)255.2660 Ihx:(717)255-2889
Jack Lotwick
Sheriff
Commonwealth of Pennsylvania LATSHA DAVIS & YOHE
vs
County of Dauphin CAPOZZI & ASSOCIATES PC
Sheriff's Return
No. 1170-T - - -1999
OTHER COUNTY NO. 99-3542
AND NOW: June 18, 1999
SUMMONS IN CIVIL ACTION
CAPOZZI & ASSOCIATES PC
Ralph G. McAllister
Chief Deputy
Michael W. Rinehart
Assistant Chief Deputy
at 10:20AM served the within
upon
by personally handing
to RONNA LUTZ, ADMIN ASSIST 1 true attested copy(ies)
of the original SUMMONS IN CIVIL ACTIui,' and making known
to him/her the contents thereof at 1711 NORTH FRONT ST
HARRISBURG, PA 17101-0000
Sworn and subscribed to
before me this 24TH day of JUNE, 1999
?3&p" e-. pav?
PROTHONOTARY
So Answers,
Sheriff of Dauphin County, Pa.
By
Deputy Sheriff
Sheriff's Costs: $25.50 PD 06/14/1999
RCPT NO 124919
RH
In The Court of Common Pleas of Cumberland County,
' Latsha, Davis & Yohe, et. al.
VS.
Capozzi & Associates, P.C.
No. 99-3592 Civil. 19
Now, F# 1 1 4 a a 19_,1 SHF,RIFF OF CUMBERLAND COUNTY, PA do hereby deputize the Sheriff of
Dauphin County to execute this Writ, this deputation being made at the request and risk of the Plaintiff.
Sheriff of Cumberland County, Pa.
Affidavit of Service
19 , at o'clock M, served the
at
by handing to
attested copy of the original
the contents thereof.
So answers,
Sheriff of County, Pa.
COSTS
Sworn and subscribed before SERVICE S
me this day of 19 MILEAGE
AFFIDAVIT
a true and
and made known to
S
_ ,\
JUN 12 2000V6
FILED UNDER SEAL BY COURT ORDER
IS J. CAPOZZI, JR., IN THE COURT OF COMMON PLEAS OF
Plaintiff, CUMBERLAND COUNTY,
[ PENNSYLVANIA
V.
LATSHA
& CAPOZZI, P.C. NO. 97-5584 Civil Term
KIMBER L. LATSHA, GLENN R.
DAVIS and DOUGLAS C. YOHE,
Defendants.
LATSHA, DAVIS & YORE, P.C., IN THE COURT OF COMMON PLEAS OF
KIMBER L. LATSHA, GLENN R. DAVIS, CUMBERLAND COUNTY
and DOUGLAS C. YOHE, ,
PENNSYLVANIA
Plaintiffs,
NO. 99-3981
V.
LOUIS J. CAPOZZI
JR (On transfer from the U.S. District Court,
,
., M.D. PA, per order of Judge Caldwell)
Defendant.
& YORE, P.C., f a IN THE COURT OF COMMON PLEAS
ZZI, P.C., KIMBER L. OF CUMBERLAND COUNTY
R. DAVIS, AND
7 ,
PENNSYLVANIA
DOUGLAS
HE,
Plaintiffs
v. Docket No. 99-3542 Civil Term x
I -
C APOZZI & ASSOCIATES, P.C.
Defendant
RULE
AND NOW, this I?' day of Tip,., (_ , 2000, upon consideration of the foregoing
Petition of Counsel for Latsha, Davis & Yohe, P.C. (formerly known as Latsha & Capozzi, P.C.),
Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe for Leave to Withdraw As Counsel, the
Court grants a rule to show cause why the appearance of Powell, Trachtman, Logan, Carrle,
HB:39409.13440.01
Bowman & Lombardo, P.C. and C. Grainger Bowman, Esq. and Paul A. Logan, Esq. should not
be allowed to be withdrawn.
RULE RETURNABLE ,. , , L4' Ie'5 7?
Tfiepreeeedi+tgcu?sfay?ueaax?}?
This Court directs C. Grainger Bowman, Esq. to hand deliver a true copy of this Rule to
the offices of the following individuals: (1) John McN. Cramer, Esq., and (2) Kimber L. Latsha,
Esq., Glenn R. Davis, Esq.and Douglas C. Yohe, Esq.
J.
Cptic pewzsc-?&lfy
xb,rcF- m.-7-r tic(
&/ia/c>d
Frbr#o
C n
o
-G f J ?
HB:39409.13440.01
JUN 12 2000 V'
FILED UNDER SEAL BY COURT ORDER
LOUIS J. CAPOZZI, JR.,
Plaintiff,
V.
LATSHA & CAPOZZI, P.C.
KIMBER L. LATSHA, GLENN R.
DAVIS and DOUGLAS C. YORE,
Defendants, IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY,
PENNSYLVANIA
NO. 97-5584 Civil Term
LATSHA, DAVIS & YORE, P,C., IN THE COURT OF COMMON PLEAS OF
KIMBER L. LATSHA, GLENN R. DAVIS, CUMBERLAND COUNTY,
and DOUGLAS C. YOHE, PENNSYLVANIA
Plaintiffs,
NO. 99-3981
V.
(On transfer from the U.S. District Court
LOUIS J. CAPOZZI, JR., ,
M.D. PA, per order of Judge Caldwell)
Defendant.
LATSHA, DAVIS & YOHE, P.C., Vida IN THE COURT OF COMMON PLEAS
LATSHA & CAPOZZI, P.C., KIMBER L. OF CUMBERLAND COUNTY,
LATSHA, GLENN R. DAVIS, AND PENNSYLVANIA
DOUGLAS C. YOHE,
Plaintiffs c c
Docket No. 99-3542 Civil Term
V.
CAPQ
ZI 8ti ASSOCIATES
P
C ri
.
,
.
.
r Defendant
ETITIClt, I OF COUNSEL FOR LATSHA, DAVIS & YORE, P.C. (FORMERLY
fWPI'AS LATSHA & CAPOZZI, P.C.), IMBER L. LATSHA, GLENN R. DAVIS
NOW COMES, Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C. (per
HB:39407.13440.01
C. Grainger Bowman, Esq, and Paul A. Logan, Esq.), counsel to the above parties, and
respectfully represents as follows:
Pa.R.C.P. No, 1012(b) governs an attorney's request for leave to withdraw as
counsel in matters before the Court.
2. The above actions are all lawsuits arising out of the same facts, namely, the
consequences arising from the departure of Louis J. Capozzi, Jr. ("Capozzi") from the law firm
formerly known as Latsha & Capozzi, P.C. That firm is now known as Latsha, Davis & Yohe,
P.C., which firm is located in Mechanicsburg, PA ("the Law Firm"). The principal members who
remained with the Law Firm ("Remaining Members") following the departure of Capozzi were
Kimber L. Latsha, Glenn R. Davis, and Douglas C. Yohe.
The suit docketed to No. 97-5884 was filed by Capozzi against the Law Firm and
the Remaining Members in the Court of Common Pleas of Cumberland County.
4. The suit docketed to No. 99-3981 was initially filed by the Law Firm and the
Remaining Members against Capozzi in the U.S. District Court for the Middle District of
Pennsylvania, and thereafter transferred to the Court of Common Pleas of Cumberland County
and assigned this number.
5. The suit docketed to No. 99-3542 was filed by the Law Firm and the Remaining
Members against Capozzi & Associates, P.C. in the Court of Common Pleas of Cumberland
County.
6. The undersigned lawyers, Powell, Trachtman, Logan, Carrle, Bowman &
Lombardo, P.C., were counsel to the Law Firm and the Remaining Members at the
commencement of the initial litigation.
HB:39407.13440-01
Discovery has taken place in No. 97-5884 and No. 99-3981. Discovery has not yet
been completed in these two matters, in that the discovery deposition of Louis J. Capozzi, Jr. has
not been completed, the discovery depositions of Glenn R. Davis and Marlene Moyer have not
been taken, expert reports have not been exchanged, a discovery dispute is outstanding relating to
production of documents, and a motion for partial summaryjudgment is outstanding.
8. The case docketed to No. 97-5884 has been listed for trial by counsel for Capozzi.
The undersigned has filed of record Objections to Trial Listing for the reason that the case is not
yet ready for trial. Under Cumberland County Rule 213-2 an objection will be entered at the June
13, 2000 call of the list by a representative of the Law Firm and Remaining Members, in order to
have the case stricken, and to make the case ready for a future trial list if necessary.
9. The undersigned counsel's continued representation of the Law Finn and the
Remaining Members has been rendered unreasonably difficult because of irreconcilable
differences regarding the defense of claims and prosecution of claims on behalf of the Law Firm
and the Remaining Members. Your undersigned counsel is prepared to inform the Court in
camera regarding the nature of the irreconcilable differences if, in the Court's discretion, it is
warranted. Your undersigned counsel refrains from further averments herein in the interest of
preserving attorney-client privileges and confidences.
10. The undersigned counsel has serious disagreements with the Law Firm and the
Remaining Members, which disagreements are within the scope of Rule 1.16 of the Rules of
Professional Conduct, which disagreements have resulted in and will further result in an
unreasonable burden upon the undersigned counsel. Your undersigned counsel is prepared to
inform the Court in camera regarding the nature of the serious disagreements if, in the Court's
HB:39407.13440.01
discretion, it is warranted. Good cause exists under the rules for your undersigned counsel's
withdrawal. Your undersigned counsel refrains from further averments herein in the interest of
preserving attomey-client privileges and confidences.
WHEREFORE, your petitioners request that this Court grant petitioners leave to withdraw
its and their appearance for Latsha, Davis & Yohe, P.C. (formerly known as Latsha & Capozzi,
P.C.), Kimber L. Latsha, Glenn R. Davis, and Douglas C. Yohe in the above-captioned cases.
POWELL, TRACHTMAN, LOGAN, CARRLE,
BOWMAN & LOMBARDO, P.C.
By
C. Grainger Bo an
I.D. #15706
Paul A. Logan
I.D. #30119
114 N. Second Street
Harrisburg, PA 17101
Date: June 9, 2000 (717) 238-9300
HB:39407.13440-01
VERIFICATION
I, C. Grainger Bowman, verify that the facts set forth in the foregoing Petition of Counsel
for Latsha, Davis & Yohe, P. C. (formerly known as Latsha & Capozzi, P. C), Kimber L. Latsha,
Glenn R. Davis and Douglas C Yohe for Leave to Withdraw As Counsel are true and correct to
the best of my knowledge, information and belief. I understand that any false statements made
are subject to the penalties of 18 Pa.C.S. §4904 relating to unswom falsification to authorities.
C. Grainger B an
HB:39414.13440.01
CERTIFICAT OFf itVl
AND NOW, I hereby certify that I have served a true and correct copy of the within
Petition of Counsel for Latsha, David & Yohe, P. C. Ormerly known as Latsha & Capozzi, P. c),
Kimber L, Latsha, Glenn R. Davis and Douglas C. Yohe for Leave to Withdraw as Counsel upon
the following person(s) on the date(s) and in the manner(s) indicated:
On June 8. 2000, by hand delivery to-
Kimber L. Latsha, Esq.
Glenn R. Davis, Esq.
Douglas C. Yohe, Esq.
Latsha, Davis & Yohe, P.C.
4720 Old Gettysburg Road
Mechanicsburg PA 17055
Qn June 9. 2000, by first class U S Mail postage prepaid to
John MeN. Cramer, Esq.
Reed Smith Shaw & McClay, UP
213 Market Street, Ninth Floor
P.O. Box 11844
Harrisburg, PA 17107
CG. ?
C. Grainger Bo an
HB:33104.13440.01
FILED UNDER SEAL PURSUANT TO COURT ORDER
IN THE COURT OF COMMON PLEAS
CUMBERLAND COUNTY, PENNSYLVANIA
LOUIS J. CAPOZZI, JR.,
Plaintiff
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA, GLENN R.
DAVIS and DOUGLAS C. YORE,
Defendants
No. 1997-5584
CIVIL ACTION - LAW
LATSHA, DAVIS & YOHE, P.C.,
KIMBER L. LATSHA, GLENN R.
DAVIS, and DOUGLAS C. YOHE,
Plaintiffs
V.
LOUIS, J. CAPOZZI, JR.
Defendant
No. 99-3981
(On transfer from the U. S. District
Court, M.D. Pa., per order of Judge
Caldwell)
LATSHA, DAVIS & YORE, -PC, f/k/a
LATSHA & CAPOZZI, P.C., KIMBER
L. LATSHA, GLENN R. DAVIS and
DOUGLAS C. YOHE,
Plaintiffs
V.
CAPOZZI & ASSOCIATES, P.C.,
Defendant
No. 99-3542 V
CIVIL ACTION - LAW
RESPONSE TO RULE TO SHOW CAUSE
TO THE PETITION OF COUNSEL FOR
LATSHA DAVIS & YOHE P.C. FOR LEAVE TO WITHDRAW
AND NOW, COMES, Defendants, Latsha Davis & Yohc, P.C., f/k/a Latsha &
Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe (hereinafter
"Defendants") and files the within response.
1 - 8. Admitted.
9. Admitted in part. By way of further answer, irreconcilable differences
have arisen regarding representation, primarily related to communication and inaction.
The undersigned is prepared to inform the Court in camera regarding the nature of the
irreconcilable differences if in the Court's discretion, it is warranted.
10. Admitted in part. It is acknowledged that disagreements have arisen
which would give rise to the withdrawal of counsel. The withdrawal, however, should
not be permitted until an orderly transition to replacement counsel can be made, or
unless the withdrawal can be done without prejudice to the defense of this matter.
ADDITIONAL MATTER
11. There are a number of outstanding issues, including a Rule to Show Cause
related to a Motion for Sanctions, with deadlines to which counsel has not yet
responded prior to having filed this Motion to Withdraw.
12. Defendants are in the process of preparing responses, pro se, pending our
effort to retain replacement counsel.
13. If Defendants responses are accepted, pro se, pending withdrawal of
counsel and the deadlines previously known or established by petitioning counsel can
be completed, without preiddice to our case, then we would agree to withdraw.
57733.1
WHEREFORE, Defendants, Latsha Davis & Yohe, P.C., f/k/a Latsha & Capozzi,
P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe, request that this
Honorable Court compel counsel to comply with those deadlines previously known or
established by counsel prior to their petition to withdraw, or in the alternative, provide
Defendants sufficient time to respond without prejudice. Then, and only then, should
counsel be permitted to withdraw.
Respectfully submitted,
LATSHA DAVIS & YORE, P.C.
BY Qj&?Qao
Kimber L. Latsha
Attorney 1. D. No. 32934
Glenn R. Davis
Attorney 1. D. No. 31040
Douglas C. Yohe
Attorney I. D. No. 42982
P. O. Box 825
Harrisburg, PA 17108-0825
(717) 761-1880
Attorneys Pro Se
57733.1
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on this date a true and correct copy of the
foregoing Response to Rule to Show Cause to the Petition of Counsel for Latsha Davis &
Yohe, P.C., for Leave to Withdraw was served by first-class United States mail, postage
prepaid, upon the following:
John McN. Cramer, Esq.
Reed Smith Shaw & McClay, LLP
213 Market Street, 9th Floor
Harrisburg, PA 17101
C. Grainger Bowman, Esq.
Powell, Trachtman, Logan, Carrle,
Bowman & Lombardo
114 North Second Street
Harrisburg, PA 17101
Paul A. Logan, Esq.
Powell, Trachtman, Logan, Carrle,
Bowman & Lombardo
475 Allendale Road
King of Prussia, PA 19406
Dated: W AI cO Ga ?`Na. o
Glenn R. Davis
LOUIS J. CAPOZZI, JR.,
Plaintiff
V.
LATSHA & CAPOZZI,
P.C., KIMBER L.
LATSHA, GLENN R.
DAVIS and DOUGLAS
C. YORE,
Defendants
LATSHA, DAVIS &
YORE, P.C., KIMBER
L. LATSHA, GLENN R.
DAVIS, and DOUGLAS
C. YOHE,
Plaintiffs
V.
LOUIS J. CAPOZZI, JR.,
Defendant
LATSHA, DAVIS &
YOHE, P.C., f/k/a
LATSHA & CAPOZZI,
P.C., KIMBER L.
LATSHA, GLENN R.
DAVIS, and DOUGLAS
C. YOHE,
Plaintiffs
V.
CAPOZZI &
ASSOCIATES, P.C.,
Defendants
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW
NO. 97-5584 CIVIL TERM
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW
NO. 99-3981 CIVIL TERM
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW
NO. 99-3542 CIVIL TERM /
AMENDED ORDER OF CO R7'
AND NOW, this 120' day of September, 2000, the Order of Court dated September
6, 2000, filed in the above matter, is amended to reflect that John McN. Cramer, Esq., is
counsel for Louis J. Capozzi, Jr., and Richard H. Wix, Esq., is counsel for Latsha, Davis
& Yohe, f/k/a Latsha & Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C.
Yohe. In all other respects, the order shall remain the same.
BY THE COURT,
John McN. Cramer, Esq.
REED, SMITH, SHAW &
McCLAY, LLP
213 Market Street, 9a' Fl.
P.O. Box 11844
Harrisburg, PA 17108-1844
Attorney for Louis J. Capozzi, Jr.
J esley Oler, J.
tN
Richard H. Wix, Esq.
WIX, WENGER & WEIDNER
4705 Duke Street
Harrisburg, PA 17109-3099
Attorney for Latsha, Davis & Yohe,
P.C., Mda Latsha & Capozzi, P.C.,
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
:rc
LOUIS J. CAPOZZI, JR., IN THE COURT OF COMMON PLEAS OF
Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA
V. CIVIL ACTION - LAW
LATSHA & CAPOZZI,
P.C., KIMBER L.
LATSHA, GLENN R.
DAVIS and DOUGLAS
C. YOHE,
Defendants NO. 97-5584 CIVIL TERM
LATSHA, DAVIS & IN THE COURT OF COMMON PLEAS OF
YOHE, P.C., KIMBER CUMBERLAND COUNTY, PENNSYLVANIA
L. LATSHA, GLENN R.
DAVIS, and DOUGLAS
C. YOHE,
Plaintiffs
V. CIVIL ACTION - LAW
LOUIS J. CAPOZZI, JR., :
Defendant NO. 99-3981 CIVIL TERM
LATSHA, DAVIS & IN THE COURT OF COMMON PLEAS OF
YOHE, P.C., UlUa CUMBERLAND COUNTY, PENNSYLVANIA
LATSHA & CAPOZZI,
P.C., KIMBER L.
LATSHA, GLENN R.
DAVIS, and DOUGLAS
C. YOHE,
Plaintiffs
V. CIVIL ACTION - LAW
CAPOZZI &
ASSOCIATES, P.C.,
Defendants NO. 99-3542 CIVIL TERM
AND NOW, this 12`h day of September, 2000, the Order of Court dated September
6, 2000, filed in the above matter, is amended to reflect that John McN. Cramer, Esq., is
counsel for Louis J. Capozzi, Jr., and Richard H. Wix, Esq., is counsel for Latsha, Davis
& Yohe, f/k/a Latsha & Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C.
Yohe. In all other respects, the order shall remain the same.
BY THE COURT,
John MeN. Cramer, Esq.
REED, SMITH, SHAW &
McCLAY, LLP
213 Market Street, 9u' Fl.
P.O. Box 11844
Harrisburg, PA 17108-1844
Attorney for Louis J. Capozzi, Jr.
J esley Oler, , J.
Richard H. Wix, Esq.
WIX, WENGER & WEIDNER
4705 Duke Street
Harrisburg, PA 17109-3099
Attorney for Latsha, Davis & Yohe,
P.C., f/k/a Latsha & Capozzi, P.C.,
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
:rc
LOUIS L. CAPOZZI, JR.,
PLAINTIFF
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and
DOUGLAS C. YOHE,
DEFENDANTS
99-3981 CIVIL TERM'
99-3542 CIVIL TERM
97-5584 CIVIL TERM
AND NOW, this _ j day of December, 2000, the argument current
scheduled for January 8, 2001, is cancelled and rescheduled for Courtroom Number 2,
at 9:30 a.m., Wednesday, February 7, 2001. Plaintiff shall file a brief in chambers not
later than Friday, January 12, 2001, and defendants shall file a brief in chambers not
later than Wednesday, January 31, 2001.
By tl?e Court,
Edgar B.
John McN. Cramer, Esquire
For Louis J. Capozzi, Jr.
Richard H. Wix, Esquire
For Latsha and Capozzi, P.C.
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
Court Administrator
:saa
LOUIS L. CAPOZZI, JR.,
PLAINTIFF
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and
DOUGLAS C. YORE,
DEFENDANTS
99-3981 CIVIL TERM
99-3542 CIVIL TERM
97-5584 CIVIL TERM
AND NOW, this '-? '1 day of December, 2000, the case is removed from the
list for argument on January 3, 2001. Counsel shall abide by the argument briefing
schedule and the case shall be argued before this judge in Courtroom Number 2, at
1:30 p.m., Monday, January 8, 2001.
By the.Court,
Edgar B. Bayley, J.
John McN. Cramer, Esquire
For Louis J. Capozzi, Jr.
Richard H. Wix, Esquire
For Latsha and Capozzi, P.C.
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
Court Administrator
:saa
LOUIS L. CAPOZZI, JR.,
PLAINTIFF
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and
DOUGLAS C. YOHE,
DEFENDANTS
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
: 99-3981 CIVIL TERM
X953542 CIVIL TERM
: 97-5584 CIVIL TERM
AND NOW, this Q4k- day of November, 2000, the damage phase of
this bifurcated trial shall be conducted in Courtroom Number 2, at 11:00 a.m., Monday,
December 18, 2000.
By the Court,
Edgar
John McN. Cramer, Esquire
For Plaintiff
Richard H. Wix, Esquire
For Defendants
:saa
PRAECIPE FOR LISTING CASE FOR ARGUMENT
(Must be typewritten and submitted in duplicate)
TO THE PROTHONOTARY OF CUMBERLAND COUNTY:
Please list the within matter for the next Argument Court.
CAPTION OF CASE
(entire caption must be stated in full)
LOUIS J. CAPOZZI, JR.,
c c,
n'ii:
z.;
(Plaintiff)
--
V5.
LATSHA & CAPOZZI, P.C., KIMBER L. LATSHA,;C .
GLENN R. DAVIS, and DOUGLAS C. YORE, %'
(Defendant)
5584 Civil Term 1997
No. 3542 Civil Term 1999
3981 Civil Term 1999
1. State matter to be argued (i.e., plaintiff's notion for new trial, defendant's
demurrer to complaint, etc.):
Plaintiff's motion for post-trial relief. (judgment notwithstanding the verdict or,
in the alternative, new trial) and defendants' motion for post-trial relief.
2. Identify counsel who will argue case:
(a) for plaintiff:
Address:
John McN. Cramer
Reed Smith LLP
213 Market Street, 9th fl
Harrisburg, PA 17101
(b) for defendant:
Address:
Richard H. Wix
Wix, Wenger & Weidner
4705 Duke Street
Harrisburg, PA 17109-3099
3. I will notify all parties in writing within two days that this case has
been listed for argument.
4. Argument Court Date: January 3, 2001
Dated: December 13, 2000 torn for Plaintiff
LOUIS J. CAPOZZI, JR.
PLAINTIFF
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and
DOUGLAS C. YOHE,
DEFENDANTS
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION-LAW
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VERDICT
Are Latsha & Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C.
Yohe liable to Louis J. Capozzi, Jr. for payment of the demand note the lawfirm gave to
Capozzi?
YES
Is Louis J. Capozzi, Jr., liable to Latsha & Capozzi, P.C., Kimber L. Latsha,
Glenn R. Davis and Douglas C. Yohe, as a shareholder for his proportional share of the
money the lawfirm returned to clients who were overbilled by him, and for the cost of
identifying the clients and determining the amounts of the overbillings?
YES
Did the shareholders of Latsha & Capozzi, p.C. have an oral agreement with
Louis J. Capozzi, Jr., that if a shareholder left the lawfirm, and competed with the firm,
that shareholder's stock would be valued at his capital contribution?
YES
NO
/Vu?, / ? Z.vao
(Date)
Foreman
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LOUIS J. CAPOZZI, JR.,
PLAINTIFF
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and
DOUGLAS C. YOHE,
DEFENDANTS
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
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AND NOW, this 0146 day of February, 2001, IT IS ORDERED:
(1) The motion of plaintiff for a judgment notwithstanding the verdict on liability as to
the value of his stock in Latsha & Capozzi, P.C., IS GRANTED. Plaintiff is awarded a new trial
on damages.
(2) The motion of the defendants, Kimber L. Latsha, Glenn R. Davis and Douglas C.
Yohe, for a judgment notwithstanding the verdict on their individual liability on a demand
promissory note, IS GRANTED.
(3) The verdict in favor of defendants against plaintiff in the amount of $19,819.80, IS
MOLDED to add legal interest at the rate of six percent per annum from August 1, 1997.
By th ourt,
Edgar B. Bayley, J.
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John McN. Cramer, Esquire
For Louis J. Capozzi, Jr.
Richard H. Wix, Esquire
For Latsha and Capozzi, P.C.
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
:saa
LOUIS J. CAPOZZI, JR.,
PLAINTIFF
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and
DOUGLAS C. YOHE,
DEFENDANTS
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OPINION AND ORDER OF COURT
BAYLEY, J., February 27, 2001:--
Louis J. Capozzi, Jr., is a shareholder in the law firm of Latsha & Capozzi, P.C.
His employment as an attorney with the firm ended on June 6, 1997. He instituted suit
against the professional corporation and its other shareholders, Kimber L. Latsha,
Glenn R. Davis and Douglas C. Yohe, to recover the actual value of his stock in Latsha
& Capozzi, P.C. as of June 6, 1997. He further sought to recover principal and interest
on a demand promissory note that defendants gave to him. Defendants countered with
a claim against Capozzi for his proportional share of legal fees the law firm returned to
Capozzi's clients that defendants maintained were overbilled by him, plus the firm's
costs to identify and determine the amount of the overbillings. On Capozzi's claim for
the actual value of his stock in Latsha & Capozzi, P.C., as of June 6, 1997, defendants
maintained that all of the shareholders had an oral agreement that if any shareholder
left his employment with the firm, and then competed with the firm, that shareholder
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would receive for his stock the amount of his capital contribution, not the actual value
on the date of termination. The capital contribution of each shareholder in the firm was
$5,000.'
The parties agreed to a bifurcation of the liability and damage phases of the trial,
with a jury determining any liability and the trial judge determining any damages. On
November 1, 2000, a jury returned a verdict on liability answering "Yes" to the following
three questions:
QUESTION 1:
Are Latsha & Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe liable to Louis J. Capozzi, Jr. for payment of the demand
note the law firm gave to Capozzi?
QUESTION 2-,
Is Louis J. Capozzi, Jr., liable to Latsha & Capozzi, P.C., Kimber L.
Latsha, Glenn R. Davis and Douglas C. Yohe, as a shareholder for his
proportional share of the money the law firm returned to clients who were
overbilled by him, and for the cost of identifying the clients and
determining the amounts of the overbillings?
QUESTION 3:
Did the shareholders of Latsha & Capozzi, P.C. have an oral
agreement with Louis J. Capozzi, Jr., that if a shareholder left the law firm,
and competed with the firm, that shareholder's stock would be valued at
his capital contribution?
On December 18, 2000, this trial judge, after taking additional evidence on
damages, entered the following verdict:
' Multiple lawsuits were filed at the three captions to this opinion in which these claims
were interdisbursed.
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(1) Louis J. Capozzi, Jr., is awarded principal in the amount of
$38,071.50 plus interest totaling $8,668.48 through December 18, 2000,
for a total of $46,683.98, against Latsha & Capozzi, P.C., Kimber L.
Latsha, Glenn R. Davis and Douglas C. Yohe, on the demand note as
found by the jury in Question Number 1?
(2) Latsha and Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe are awarded damages, and as a setoff, from Louis J.
Capozzi, Jr., of $14,140.78 for client refunds representing his proportional
share of the money the law firm returned to clients who were overbilled by
him, and auditing expenses of $5,679.02 representing the total cost of
identifying the clients and determining the amounts of the overbillings, for
a total of $19,819.80 as found by the jury in Question Number 2.
(3) Louis J. Capozzi, Jr., is awarded $5,000 against Latsha and Capozzi,
P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe, with legal
interest from June 6, 1997, for the value of his stock at his capital
contribution as found by the jury in Question Number 3.
Plaintiff and defendants filed motions for post-trial relief which were briefed and
argued on February 7, 2001. Plaintiff claims that he is entitled to judgment
notwithstanding the verdict on liability for the actual value of his stock in Latsha &
Capozzi, P.C., as of June 6, 1997, "because an agreement forfeiting an attorney's right
to compensation in the event he competes with his former law firm is unenforceable."
On this issue, defendants were the verdict winners. The evidence in a light most
2 The figures used in the verdict are as set forth in plaintiffs Exhibit Number 1 at the
hearing on damages. Two are incorrect. The principal amount of the note as shown on
plaintiffs Exhibit Number 2, in the jury trial, was $38,017.50. When this figure is added
to the interest of $8,668.48, it totals $46,685.98.
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favorable to defendants is as follows?
In 1994, Louis Capozzi and Kimber Latsha worked as attorneys for the
Cumberland County law firm of Shumaker & Williams. They left Shumaker & Williams,
and on May 23, 1994, incorporated Latsha & Capozzi, a professional corporation for the
practice of law. Capozzi and Latsha took a number of Shumaker &
Williams' clients with them. In July, 1994, Douglas Yohe left Shumaker & Williams to
become a shareholder in Latsha & Capozzi. He brought some of Shoemaker &
Williams' clients with him. In 1994, Latsha & Capozzi, P.C., had gross revenues of
approximately $300,000. In March, 1995, Glenn Davis left Shumaker & Williams to
become a shareholder in Latsha & Capozzi. He also brought some of Shoemaker &
Williams' clients with him. Once Davis became a shareholder, Latsha and Capozzi
each owned thirty-seven and one-half percent of the stock in Latsha & Capozzi, P.C.,
with Yohe owning fifteen percent and Davis owning ten percent. By the end of 1996,
Latsha & Capozzi, P.C., had fifteen attorneys and gross revenue for the year of 2.6
million dollars.
In January, 1997, Latsha, Yohe, and Davis became concerned about the
conduct of Capozzi, which they felt was injurious to the reputation of the law firm. They
attributed Capozzi's conduct to the abuse of alcohol. On May 2, 1997, the three
shareholders of the firm and others conducted an intervention in an effort to have
Wilkinson v. Reitnaver, 421 Pa. Super. 345 (1992).
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Capozzi enter the Caron Foundation for treatment. On the same date, the board of
directors reduced Capozzi's $175,000 annual salary to $100,000 a year., On May 5m,
Capozzi undertook inpatient treatment at the Caron Foundation. He completed that
treatment on May 191h. On June 2nd, the board of directors suspended Capozzi's
employment without pay. On June 6 h, Capozzi was notified in writing that he could
return to employment with the firm for an open probationary period subject to thirteen
conditions. Capozzi did not accept the conditions and his employment with the firm
terminated. On June 11th, Capozzi started his own law firm, Capozzi Associates, in
Harrisburg, Dauphin County.
Capozzi's legal specialty is representing medical care providers, who seek
higher reimbursements than have been paid by government and other entities to the
providers for services rendered to patients. Latsha & Capozzi, P.C., billed clients based
on written fee agreements of hourly rates for the shareholders and associates in the
firm. In 1996, having become more adept at representing the firm's medical providers,
Capozzi sought to switch to value billing. The board of directors rejected the proposal.
Notwithstanding, Capozzi arbitrarily increased the time billed to sixty-six clients from the
actual time that associates had worked on behalf of those clients. The law firm
Each attorney drew an annual salary. At the end of each year, any money that was
left over after the payment of expenses was distributed to the shareholders, one-half of
it in proportion to their ownership interest in the firm, and the other half in proportion to
the amount of each shareholder's individual billings during that year.
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discovered these overbillings, which were in violation of the firm's written fee agreement
with those clients, shortly before Capozzi's employment ended on June 6, 1997. The
firm had an audit conducted and determined that the sixty-six clients had been
overbilled by Capozzi. In July and August, 1997, Latsha & Capozzi, P.C., returned to
each of the sixty-six clients the amount of money that Capozzi had overbilled that client.
When the money was returned, the firm informed each client that it had determined that
there was an overbilling, but it did not advise the clients of the reason why.
In May, 1997, Capozzi generated a complete client list from the firm's computer
base. When he started Capozzi Associates on June 11, 1997, he took many of the
clients of Latsha & Capozzi, P.C. with him, some of which were among the sixty-six
clients the firm returned money to because of his overbillings. Capozzi solicited some
of these clients before his employment ended on June 6, 1997, and sent them release
forms. Capozzi Associates now has nine attorneys.
When Latsha and Capozzi incorporated their law firm, they had an oral
agreement that if either of them left the firm, and competed with the firm, that
shareholder would receive for his stock the amount of his capital contribution in the
professional corporation. When Yohe became a shareholder, he entered into a similar
oral agreement with Latsha and Capozzi. When Davis became a shareholder, he too
entered into a similar oral agreement with Latsha, Capozzi, and Yohe. Latsha &
Capozzi, P.C., never had a written shareholders' agreement. The shareholders at
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times talked about entering into a written agreement, and numerous drafts were
circulated, but they were never acted upon.5
Plaintiff maintains that the oral agreement that the jury found existed between
the shareholders of Latsha & Capozzi, P.C., that if a shareholder left the law firm, and
competed with the firm, that shareholder's stock would be valued at his capital
contribution, restricts his right as a lawyer to practice law after his termination as an
employee of Latsha & Capozzi, P.C., and therefore is unenforceable as a violation of
public policy. In support of that argument plaintiff cites Rule 5.6 of the Rules of
Professional Conduct adopted by the Supreme Court of Pennsylvania. The Rules are
derived from, although not in their entirety, the Model Rules of Professional Conduct
adopted by the American Bar Association. Rule 5.6 provides:
A lawyer shall not participate in offering or making:
(a) a partnership, shareholders, operating, employment or other similar
type of agreement that restricts the rights of a lawyer to practice after
termination of the relationship, except an agreement concerning
benefits upon retirement ... (Emphasis added.)
5 Louis Capozzi testified that there were never any oral agreements among the
shareholders to govern dissolution.
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The Comment to the Rule provides:°
An agreement restricting the right of partners or associates to
practice after leaving a firm not only limits their professional autonomy but
also limits the freedom of clients to choose a lawyer. Paragraph (a)
prohibits such agreement except for restrictions incident to provisions
concerning retirement benefits for service with the firm.
Besides denying that the oral agreement between the shareholders restricted
plaintiffs right to practice law, defendants maintain that plaintiff derives no substantive
rights from Rule 5.6 even if the Rule was violated. The Note on the Scope of the Rules
states:
Failure to comply with an obligation or prohibition imposed by a
Rule is a basis for invoking the disciplinary process....
Violation of a Rule should not give rise to a cause of action
nor should it create any presumption that a legal duty has been
breached. The Rules are designed to provide guidance to lawyers and to
provide a structure for regulating conduct through disciplinary agencies.
They are not designed to be a basis for civil liability. Furthermore, the
purpose of the Rules can be subverted when they are invoked by
opposing parties as procedural weapons. The fact that a Rule is a just
basis for a lawyer's self-assessment, or for sanctioning a lawyer under
the administration of a disciplinary authority, does not imply that an
antagonist in a collateral proceeding or transaction has standing to
seek enforcement of the Rule. Accordingly, nothing in the Rules
should be deemed to augment any substantive legal duty of lawyers
or the extra-disciplinary consequences of violating such a duty.
6 A Note on the scope of the Rules of Professional Conduct states that "The Comment
accompanying each Rule explains and illustrates the meaning and purpose of the
Rule." When it accepted the Rules, the Supreme Court stated, "Any Comments or
Comparisons to the Code of Professional Responsibility shall not be part of the Rules of
Professional Conduct."
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(Emphasis added.)'
Notwithstanding, plaintiff cites Maritrans v. Pepper, Hamilton & Scheetz, 529
Pa. 241 (1992). In Maritrans, the plaintiff brought an action for preliminary and
permanent injunctive relief, and damages, against a law firm that had represented him
for more than ten years. The case arose out of the law firms representation of plaintiffs
competitors, entities whose interest were found to be adverse to the interest of plaintiff,
in matters substantially related to matters in which the firm had represented plaintiff.
The Supreme Court of Pennsylvania reversed an order of the Superior Court of
Pennsylvania that had reversed a preliminary injunction issued by a trial court. The
Court stated:
While we agree that violations of the Code [of Professional Responsibility]
do not perse give rise to legal actions that may be brought by clients or
other private parties, we, nevertheless, conclude that the record supports
a finding that Appellees' conduct here constituted a breach of common
law fiduciary duty owed to Appellant-client and that, contrary to Appellees'
argument that they cannot be prevented from representing a former
client's competitors, the injunction issued by the trial court against
Appellees should have been sustained by the Superior Court.
• k
Long before the Code of Professional Responsibility was adopted, and
' The Associations Code of Pennsylvania at 15 Pa.C.S. Section 2925(e), provides:
Disciplinary jurisdiction unaffected.-A professional corporation
shall be subject to the applicable rules and regulations adopted by, and all
the disciplinary powers of, the court, department, board, commission or
other government unit regulating the profession in which the corporation is
engaged.
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before the Rules of Professional Conduct were adopted, the common law
recognized that a lawyer could not undertake a representation adverse to
a former client in a matter "substantially related" to that in which the
lawyer previously had served a client.
The Superior Court seems to have the idea that because conduct
is not a tort simply because it is a disciplinary violation, then conduct
ceases to be a tort when it is at the same time of a disciplinary violation.
This is an invasion of logic and legal policy and misunderstands the
history of the disciplinary rules.
Citing Bilec v. Auburn & Associates, Inc., Pension Trust, 403 Pa. Super. 176
(1991), plaintiff maintains that the oral agreement found by the jury that prevalued a
shareholder's stock at the capital contribution of $5,000 in the event the shareholder left
the firm, and competed with the firm, violates the common law policy against forfeitures.
The issue in Bilec, was whether a noncompete clause in an insurance pension plan
contract, which provided for a forfeiture of vested pension benefits of an employee who
undertook subsequent employment that competed with an employer, was contrary to
public policy of the Commonwealth, and therefore unenforceable. The Superior Court
noted:
While we are not in agreement with appellants' blanket contention
that all pre-ERISA forfeiture clauses are violative of the public policy of
this Commonwealth, we do find that this particular forfeiture violates public
policy of Pennsylvania in regards to the enforcement of covenants not to
compete.
The Superior Court stated:
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The standard by which the validity of a restrictive covenant in an
employment contract is judged in Pennsylvania is set forth in Piercing
Pagoda, Inc. v. Hoffner, 265 Pa. 500, 351 A.2d 207 (1976). These three
requirements are: (1) the covenant must relate to a contract for
employment, (2) the covenant must be supported by adequate
consideration; (3) the application of the covenant must be reasonably
limited in both time and territory.
In Bilec, the Court concluded that the forfeiture of an employee's vested pension
benefit upon the employee's leaving employment and competing with the employer,
was unenforceable because (1) it was not part of a contract between the employer and
employee; rather it was part of the employer's contract with the employer's insurer, (2)
the record did not reflect that the employer granted its employees any additional
consideration in exchange for the imposition of the forfeiture clause, and (3) the
forfeiture clause did not include any time or geographical restrictions, rather it was a
blanket prohibition against any former employee from working in any capacity for any
company deemed by the employer to be a competitor.
In Cohen v. Lord, Day & Lord, 550 N.E.2d 410 (New York, 1989), the law firm
of Lord, Day & Lord had a written partnership agreement providing that a partner
leaving the firm would receive a departure payment over a three year period. Appellant
Cohen withdrew from the firm. He then practiced law in competition with the firm. The
firm refused to pay Cohen any departure compensation pursuant to the following clause
in the partnership agreement:
Notwithstanding anything in this Article to the contrary, if a Partner
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withdraws from the Partnership and without the prior written consent of
the Executive Committee continues to practice law in any state or other
jurisdiction in which the Partnership maintains an office or any contiguous
jurisdiction, either as a lawyer in private practice or as a counsel
employed by a business firm, he shall have no further interest in and there
shall be paid to him no proportion of the net profits of the Partnership
collected thereafter, whether for services rendered before or after his
withdrawal. There shall be paid to him only his withdrawable credit
balance on the books of the Partnership at the date of his withdrawal,
together with the amount of his capital account, and the Partnership shall
have no further obligation to him.
Cohen sued the firm seeking departure compensation. New York's Disciplinary
Rule 2-108(A) is substantially the same as Rule 5.6 of the Pennsylvania Rules of
Professional Conduct. Relying on the Rule the Court of Appeals of New York held:
[w]hile the provision in question does not expressly or completely prohibit
a withdrawing partner from engaging in the practice of law, the significant
monetary penalty it exacts, if the withdrawing partner practices
competitively with the former firm, constitutes an impermissible restriction
on the practice of law. The forfeiture-for-competition provision would
functionally and realistically discourage and foreclose a withdrawing
partner from serving clients who might wish to continue to be represented
by the withdrawing lawyer and would thus interfere with the client's choice
of counsel.
The Court rejected the firm's policy argument that the forfeiture of departure
compensation was justified because of the economic hardship suffered by a firm when
a partner leaves and competes with the firm, stating:
While a law firm has a legitimate interest in its own survival and economic
well-being and in maintaining its clients, it cannot protect those interests
by contracting for the forfeiture of earned revenues during the withdrawing
partner's active tenure and participation and by, in effect, restricting the .
choices of the clients to retain and continue the withdrawing member as
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counsel. (Citations omitted.)
In contrast, the Supreme Court of California stated in Howard v. Babock, 863
P.2d 150 (California 1994):
We granted review to decide whether an agreement between law partners
is enforceable if it requires the withdrawing partners to forego certain
contractual withdrawal benefits if they compete with their former law firm.
We conclude that an agreement among law partners imposing a
reasonable toll on departing partners who compete with the firm is
enforceable.
The partners of Parker, Stanbury, McGee, Babcock & Combs entered into a
partnership agreement which contained the following:
Article X of the agreement provided in pertinent part that: "Should more
than one partner, associate or individual withdraw from the firm prior to
age sixty-five (65) and thereafter within a period of one year practice law
... together or in combination with others, including former partners or
associates of this firm, in a practice engaged in the handling of liability
insurance defense work as aforesaid within the Los Angeles or Orange
County Court system, said partner or partners shall be subject, at the sole
discretion of the remaining non-withdrawing partners to forfeiture of all
their rights to withdrawal benefits other than capital as provided for in
Article V herein."
FN1. Article X also provided that if only one partner withdraws, he
or she is subject to forfeiture of 75 percent of withdrawal benefits
for competition in Orange County or Los Angeles County, and 25
percent of withdrawal benefits if her or she competes in specified
other counties.
Article V provided that a general partner who withdraws from the
partnership shall be paid his or her capital interest, and a sum "equal to
the share in the net profit of the firm that the withdrawn ... partner would
have received during the first twelve month period."
Plaintiffs left the firm and took about two hundred cases with them. Defendants
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tendered payment to plaintiffs for their share of the capital of the firm, but refused to
compensate them for the accounts receivable or to acknowledge that they had any
interest in the work in progress or unfinished business of the firm. A Rule of
Professional Conduct in California is substantially the same as Rule 5.6 of the
Pennsylvania Rules of Professional Conduct. The Supreme Court of California
concluded:
We are not persuaded that this rule was intended to or should
prohibit the type of agreement that is at issue here. An agreement that
assesses a reasonable cost against a partner who chooses to compete
with his or her former partners does not restrict the practice of law.
Rather, it attaches an economic consequence to a departing partner's
unrestricted choice to pursue a particular kind of practice.
w w w
[o]ur interpretation of the rule must be illuminated by our recognition that a
revolution in the practice of law has occurred requiring economic interests
of the law firm to be protected as they are in other business enterprises.
We are confident that our recognition of a new reality in the practice of law
will have no deleterious effect on the current ability of clients to retain
loyal, competent counsel of their choice.
"The traditional view of the law firm as a stable institution with an assured
future is now challenged by an awareness that even the largest and most
prestigious firms are fragile economic units...." (Hillman, Law Firm
Breakups (1990) § 1.1, at p. 1.) Not the least of the changes rocking the
legal profession is the propensity to withdrawing partners in law firms to
"grab" clients from the firm and set up a competing practice. (Penasack,
Abandoning the Per Se Rule Against Law Firm Agreements Anticipating
Competition: Comment on Haight, Brown & Bonesteel v. Superior Court
of Los Angeles County (1992) 5 Geo.J. Legal Ethics 889, 890 [hereafter
Abandoning the Per Se Rule]; see also Terry, Ethical Pitfalls and
Malpractice Consequences of Law Firm Breakups (1988) 61 Temple
L.Rev. 1055, 1056-1060 [hereafter Ethical Pitfalls].) In response, many
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firms have inserted noncompetition clauses into their partnership
agreements. (Abandoning the Per Se Rule, supra, 5 Geo.J. Legal Ethics
at p. 890.) These noncompetition clauses have grown and flourished,
despite, or in defiance of, the consistent holding of many courts across the
nation that a noncompetition clause violates the rules of professional
conduct of the legal profession. It is evident that these agreements
address important business interests of law firms that can no longer be
ignored.
The firm has a financial interest in the continued patronage of its clientele.
(See Kalish, Covenants Not to Compete and the Legal Profession (1985)
29 St. Louis U.L.J. 423, 438.) The firm's capital finances the development
of a clientele and the support services and training necessary to
satisfactorily represent the clientele. (Ibid.) In earlier times, this
investment was fairly secure, because the continued loyalty of partners
and associates to the firm was assumed. (Abandoning the Per Se Rule,
supra, 5 Geo.J. Legal Ethics, at p. 889; Ethical Pitfalls, supra, fit Temple
L.Rev, at p. 1059.) But more recently, lateral hiring of associates and
partners, and the secession of partners from their firms has undermined
this assumption. (Abandoning the Per Se Rule, supra, 5 Geo.J. Legal
Ethics, supra, at p. 890.) Withdrawing partners are able to announce their
departure to clients of the firm, and many clients defect along with the
attorneys with whom they have developed good working relationship. The
practical fact is that when partners with a lucrative practice leave a law
firm along with their clients, their departure from and competition with the
firm can place a tremendous financial strain on the firm. (See Kalish,
Covenants Not to Compete, supra, 29 St. Louis U.L.J. at p. 438.)
We are aware that many courts have interpreted the rules of professional
conduct of their states, often stated in identical or very similar terms with
the language of our rule 1-500, as prohibiting all agreements restricting
competition among lawyers, including those that merely assess a cost for
competition. (Citing cases.)
However, we disagree with the analysis proffered by these courts to justify
such an interpretation. Some courts, including the Court of Appeal in this
case, reason that an attorney should have freedom to choose when,
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where and for whom to practice law; an anticompetitive covenant restricts
that freedom. (See, e.g., Cohen v. Lord, Day & Lord, supra, 551 N.Y.S.2d
at p. 158, 550 N.E.2d at p. 411.) Second, many courts reiterate that the
practice of law is not a business, and clients are not commodities. These
courts assert as an absolute rule that clients must have free choice of
attorneys; to the extent that a restriction or toll on competition between
lawyers is effective, it limits the ability of clients to have access to the
attorney of their choice and is therefore improper. (See, e.g., Jacob v.
Norris, McLaughlin & Marcus, supra, 607 A.2d at p. 147.)
Upon reflection, we have determined that these courts' steadfast concern
to assure the theoretical freedom of each lawyer to choose whom to
represent and what kind of work to undertake, and the theoretical freedom
of any client to select his or her attorney of choice is inconsistent with the
reality that both freedoms are actually circumscribed. Putting aside lofty
assertions about the uniqueness of the legal profession, the reality is that
the attorney, like any other professional, has no right to enter into
employment or partnership in any particular firm, and sometimes may be
discharged or forced out by his or her partners even if the client wishes
otherwise. Nor does the attorney have the duty to take any client who
proffers employment, and there are many grounds justifying an attorney's
decision to terminate the attorney-client relationship over the client's
objection. (See Rules Prof. Conduct, rule 3-700; 1 Witkin Cal. Procedure,
supra, Attorneys, §§ 73-80, pp. 94-100.) Further, an attorney may be
required to decline a potential client's offer of employment despite the
client's desire to employ the attorney. For example, the attorney may
have a technical conflict of interest because another attorney in the firm
previously represented an adverse party. (Rules Prof. Conduct, rules 3-
300, 3-310.) Finally, the client in the civil context, of course, ordinarily has
no "right" to any attorney's services, and only receives those services he
or she can afford.
Moreover, the contemporary changes in the legal profession to which we
have already alluded make the assertion that the practice of law is not
comparable to a business unpersuasive and unreflective of reality.
Commercial concerns are now openly recognized as important in the
practice of law. Indeed, we question whether any but the wealthy could
enter the profession if it were to be practiced without attention to
commercial success. In any event, no longer can it be said that law is a
profession apart, untouched by the marketplace. Not only has law firm
culture changed but, as in other businesses, lawyers now may advertise
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their services and may even communicate by letter with persons unknown
to them, suggesting the possibility of employment. (Shapero v. Kentucky
Bar Assn. (1988) 486 U.S. 466, 108 S.Ct. 1916, 100 L.Ed.2d 475; Bates
v. State Bar of Arizona (1977) 433 U.S. 350, 97 S.Ct. 2691, 53 L.Ed.2d
810). Thus the general rules and habits of commerce have permeated
the legal profession.
w?:
Further, we question the premise that an agreement such as is at issue
here would necessarily discourage withdrawing partners from continuing
to represent clients who choose to employ them. Unless the penalty were
unreasonable, it is more likely that the agreement would operate in the
nature of a tax on taking the former firm's clients-a tax that is not
unreasonable, considering the financial burden the partners' competitive
departure may impose on the former firm. The sum to be forfeited by the
withdrawing partners may be seen as comparable with a liquidated
damage clause, an accepted fixture in other commercial contexts....
In Howard, the Supreme Court of California reversed an order of an intermediate
appellant court that had ruled in favor of the remaining partners in the law firm, and
remanded the case to the trial court for a determination of whether the terms of Article
X were reasonable, and for any further award on the accounting causes of action made
necessary by its determination.
We have quoted extensively from Howard because we agree with the reasoning
of the Supreme Court of California. We disagree with the reasoning of the Court of
Appeals of New York in Cohen v. Lord, Day & Lord, supra. In Cohen, the Court of
Appeals relied on a disciplinary rule in holding that the departing attorney was entitled
to departure compensation. In the present case, it does not appear that plaintiff can
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rely on Rule 5.6 of the Pennsylvania Rules of Professional Conduct for substantive
relief. Maritrans v. Pepper, Hamilton & Scheetz, supra. Notwithstanding, we
conclude as a matter of public policy that in Pennsylvania, attorneys who are
shareholders of a professional corporation may enter into an enforceable agreement
that reasonably prevalues the stock of a departing shareholder who then competes with
the law firm. This is a form of a restrictive non-compete covenant. Therefore, to be
enforceable such an agreement must meet the standards set forth by the Supreme
Court of Pennsylvania in Piercing Pagoda, Inc. v. Hoffner, 265 Pa. 500 (1976), which
are, (1) the agreement must relate to a contract for employment, (2) it must be
supported by adequate consideration, and (3) the application of the agreement must be
reasonably limited in both time and territory.
In the case sub judice, the oral agreement of all of the shareholders of Latsha &
Capozzi, P.C., upon each of them undertaking employment as an attorney with the
professional corporation, was that if any shareholder left the firm, and competed with
the firm, that shareholder would receive for his stock the amount of his capital
contribution. Implicit in the agreement was that if a shareholder left the firm he would
be paid for his stock. While the first two prongs of Piercing Pagoda have been met,
the third is not. The application of the oral agreement of each shareholder not only was
not reasonably limited in both time and territory, it was not limited at all. Accordingly,
the oral agreement between the shareholders is unenforceable to the extent that it
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limits plaintiff to receiving $5,000 for the value of his stock in Latsha & Capozzi, P.C.
Notwithstanding, defendants maintain that even if the oral agreement limiting the
value of plaintiffs stock at $5,000 is unenforceable, plaintiff still is not entitled to a
judgment notwithstanding the verdict on liability for the actual value of his stock
because (1) he is not precluded from continuing to own his stock in Latsha & Capozzi,
P.C., and, (2) the corporation is not required to repurchase his shares under the
provisions in the Associations Code, 15 Pa.C.S. Section 101 gt M., that are applicable
to professional corporations. 15 Pa.C.S. § 2901-2925. To be entitled to a judgment
notwithstanding the verdict, plaintiff must be entitled to a judgment as a matter of law
even with all factual inferences decided adverse to him. Moure v. Raeuchle, 529 Pa.
394 (1992). Defendants argue that the Association Code affords only two statutory
remedies analogous to the relief sought by plaintiff: first, the reacquisition and valuation
of shares of a disqualified shareholder (defined at 15 Pa.C.S. Section 2902), and
second, the valuation of shares of a deceased shareholder (15 Pa.C.S. Section
2907(a)). Defendants maintain that plaintiff is not disqualified as the word is defined,
nor is he deceased; therefore, he simply continues to own his stock in the professional
corporation. See Barrett v. Purser & Edwards, 876 P.2d 367 (Utah 1994). Given the
facts of the present case, we need not analyze whether defendant's interpretation of
these statutory provisions is correct. Implicit in the oral agreement of all of the
shareholders of Latsha & Capozzi, P.C., was that if a shareholder left the law firm, he
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would be paid for his stock. The issue is what that shareholder would be paid, not
whether he would be paid. The jury found that there was an oral agreement. It is that
part of the oral agreement that would limit the value of the stock to $5,000, that is
unenforceable.
Defendants further maintain that even if the oral agreement limiting the value of
plaintiffs stock at $5,000 is unenforceable, the remedy should be a new trial on the
issue of liability, and not a judgment notwithstanding the verdict. Defendants maintain
that the value of plaintiffs stock would be less than the actual value if a jury determined
that his employment with Latsha & Capozzi, P.C., terminated because of his wrongful
conduct. Stated another way, defendants maintain that they imposed reasonable
conditions upon plaintiff for his continued employment at Latsha & Capozzi, P.C., and
that the jury should have been allowed to consider whether, under those
circumstances, plaintiffs termination of employment was voluntary.' The shareholders
of Latsha & Capozzi, P.C., never had an agreement that wrongful conduct by a
shareholder would result in a reduction in the value of his stock. The agreement the
shareholders had was that if an attorney left the law firm and competed with the firm,
that shareholder would receive for his stock the amount of his capital contribution in the
professional corporation. That provision is unenforceable. Plaintiffs conduct is not
At trial, defendant sought a charge to this effect which was rejected.
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determinative as to the value of his stock .9 Therefore, defendants are not entitled to a
new trial on liability, and plaintiff is entitled to a judgment notwithstanding the verdict on
liability. This will, however, require a new trial on the issue of plaintiffs damages,10
In the interest of judicial economy we will address plaintiffs alternative post-trial
motion for a new trial. Plaintiff maintains that a draft of a proposed shareholder
agreement that was never executed by the shareholders warranted submitting to the
jury a question of whether the $5,000 limitation on the value of the departing
shareholder's stock applied only to a shareholder who voluntarily terminated his
employment with Latsha & Capozzi, P.C. The unexecuted draft set forth that, "in the
event a shareholder terminates his employment with the corporation and continues in
the private practice of law in jurisdictions where the corporation has attorneys licensed
to practice, the price for the selling shareholder's stock shall be his capital contribution."
Latsha, Davis and Yohe each testified that this proposal essentially corresponded to
their oral agreement that if either of them left the firm, and competed with the firm, that
shareholder would receive for his stock the amount of his capital contribution In the
9 Defendants are recovering $19,819.80 from plaintiff based on his proportional share of
client refunds, and the total auditing expenses of identifying the clients and determining
the amount of the overbillings that resulted in the refunds, based on plaintiffs wrongful
conduct.
10 Plaintiff alleges that the value of his stock at the time his employment terminated with
Latsha & Capozzi, P.C., constituting the firm's cash, accounts receivable, unbilled time
and tangible assets, net of associated liabilities, is approximately $411,000.
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professional corporation. Plaintiff denied that there was any agreement to prevalue
stock. No shareholder testified that the prevaluation of a departing shareholder's stock
at $5,000 was dependent on whether a shareholder voluntarily left the firm. The
unexecuted draft cannot change the actual agreement of the shareholders.
Defendants filed a motion for post-trial relief claiming the court erred in failing to
award them damages for their individual hourly rate as lawyers for the time each of
them spent working on the overbilling issue, and for the fee they incurred from an
attorney, who specialized in legal ethics, who they hired to advise them on the issues
involving plaintiff. Defendants have cited no authority in support of their position. Their
position is no different than a plumber wanting to charge his hourly rate for the time
taken to resolve an issue involving a dishonest employee, and to recover attorney fees
incurred in such a matter. There is no statutory, contractual or other basis to support
defendants' claim. In Merlino v. Delaware County, 728 A.2d 949 (Pa. 1999), the
Supreme Court of Pennsylvania stated that, "This Court has consistently followed the
general, American rule that there can be no recovery of attorneys' fees from an adverse
party, absent an express statutory authorization, a clear agreement by the parties or
some other established exception."
Defendants further maintain that the court erred in charging the jury that the
individual defendants, in addition to Latsha & Capozzi, P.C., could be held liable on the
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demand promissory note given to plaintiff. Defendants' objected to the charge, claiming
that the note dated December 31, 1996, bound only the corporation to pay plaintiff
$38,017.50 with interest at a rate of 5.75 percent, Defendants again raised this issue in
their post-trial motion. They are correct, The note requires "Latsha & Capozzi, P.C." to
pay on demand the $38,017.50 with Interest. It Is signed by Kimber L, Latsha, as
president of Latsha & Capozzi, P.C., and attested to by Douglas C. Yohe, the secretary
of the corporation. We will grant defendants' relief by limiting plaintiff to a recovery on
the note against Latsha & Capozzl, P.C., and not the individual defendants.
Lastly, defendants maintain that we should mold the verdict by awarding legal
interest on the verdict against plaintiff for $19,819.80 for his proportional share of the
money the law firm returned to clients who were overbilled by him, and the auditing
expenses of $5,679.02 representing the total cost of identifying the clients and
determining the amounts of the overblllings, We agree and will mold the verdict to
award legal interest from August 1, 1997, which represents the middle of the period in
which the refunds were paid to the clients.
For the foregoing reasons, the following order is entered.
AND NOW, this 21(44' day of February, 2001, IT IS ORDERED:
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(1) The motion of plaintiff for a judgment notwithstanding the verdict on liability as to
the value of his stock in Latsha & Capozzi, P.C., IS GRANTED. Plaintiff is awarded a new trial
on damages.
(2) The motion of the defendants, Kimber L. Latsha, Glenn R. Davis and Douglas C.
Yohe, for a judgment notwithstanding the verdict on their individual liability on a demand
promissory note, IS GRANTED.
(3) The verdict in favor of defendants against plaintiff in the amount of $19,819.80, IS
MOLDED to add legal interest at the rate of six percent per annum from August 1, 1997.
By
John McN. Cramer, Esquire
For Louis J. Capozzi, Jr.
Richard H. Wix, Esquire
For Latsha and Capozzi, P.C.
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
:saa
-24-
Edgar B. Bayley, J.
¦'
JUN 2 7
FILED UNDER SEAL BY COURT ORDER
LOUIS J. CAPOZZI, JR.,
Plaintiff,
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY,
PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C.
KIMBER L. LATSHA, GLENN R.
DAVIS and DOUGLAS C. YOHE,
Defendants.
LATSHA, DAVIS & YOHE, P.C.,
KIMBER L. LATSHA, GLENN R. DAVIS,
and DOUGLAS C. YOHE,
Plaintiffs,
V.
LOUIS J. CAPOZZI, JR.,
Defendant.
LATSHA, DAVIS & YOHE, P.C., f/k/a
LATSHA & CAPOZZI, P.C., KIMBER L.
LATSHA, GLENN R. DAVIS, AND
DOUGLAS C. YORE,
Plaintiffs
V.
CAPOZZI & ASSOCIATES, P.C.
Defendant
NO. 97-5584 Civil Tenn
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY,
PENNSYLVANIA
NO. 99-3981
(On transfer from the U.S. District Court,
M.D. PA, per order of Judge Caldwell)
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
PENNSYLVANIA
Docket No. 99-3542 Civil Term
ORDER
AND NOW, this _ day of , 2000, upon consideration of the verified
Petition of Counsel for Latsha, Davis & Yohe, P.C. (formerly known as Latsha & Capozzi, P.C.),
Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe ("the Latsha parties") for Leave to
Withdraw As Counsel, and the Latsha parties' Response to Rule to Rule to Show Cause to the
Petition of Counsel for Latsha Davis & Yohe, P.C. for Leave to Withdraw, and the Answer of
20Qp
Louis J. Capozzi, Jr. and Capozzi & Associates, P.C., to Rule to Show Cause, and the Request
under Pa. R.C.P. No. 206.7(b) of Counsel for Latsha Davis & Yohe, P.C. et al for Decision
Granting Leave to Withdraw as Counsel, and being of the opinion that no disputed issues of
material fact are presented, it is hereby ORDERED and DECREED as follows:
I. The Petition and the 206.7(b) Request is GRANTED, and Powell, Trachtman,
Logan, Carrle, Bowman & Lombardo, P.C. and C. Grainger Bowman, Esq. and Paul A. Logan,
Esq. are permitted to withdraw their appearances of record for Latsha, Davis & Yohe, P.C.
(formerly known as Latsha & Capozzi, P.C.), Kimber L. Latsha, Glenn R. Davis and Douglas C.
Yohe without conditions.
2. Latsha, Davis & Yohe, P.C. (formerly known as Latsha & Capozzi, P.C.), Kimber
L. Latsha, Glenn R. Davis and Douglas C. Yohe shall seek substitute counsel and have the
appearance of substitute counsel entered of record by , 2000, or inform the Court
of the status of substitution of counsel by that date.
3. Discovery shall be stayed without prejudice to any party until
Representatives of the following parties are instructed to inform the Court of their availability to
meet in judicial status conference, which shall thereafter be convened by this Court:
4. At the judicial status conference, the parties shall discuss the status of discovery,
dispositive motions, expert reports, the need to consolidate the above-captioned cases, and
anticipated trial dates.
J.
FILED UNDER SEAL BY COURT ORDER
C. Grainger Bowman, Esq.
Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C.
114 N. Second Street
Harrisburg PA 17101
LOUIS J. CAPOZZI, JR.,
Plaintiff,
V.
LATSHA & CAPOZZI, P.C.
KIMBER L. LATSHA, GLENN R.
DAVIS and DOUGLAS C. YOHE,
Defendants. IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY,
PENNSYLVANIA
NO. 97-5584 Civil Term
LATSHA, DAVIS & YOHE, P.C., IN THE COURT OF COMMON PLEAS OF
KIMBER L. LATSHA, GLENN R. DAVIS, CUMBERLAND COUNTY,
and DOUGLAS C. YOHE, PENNSYLVANIA
Plaintiffs,
NO. 99-3981
V.
(On transfer from the U.S. District Court
LOUIS J. CAPOZZI, JR., ,
M.D. PA, per order of Judge Caldwell)
Defendant.
LATSHA, DAVIS & YOHE, P.C., fWa IN THE COURT OF COMMON PLEAS
LATSHA & CAPOZZI, P.C., KIMBER L. OF CUMBERLAND COUNTY
LATSHA, GLENN R. DAVIS, AND ,
PENNSYLVANIA
DOUGLAS C. YORE,
Plaintiffs
Docket No. 99-3542 Civil Term
V.
CAPOZZI & ASSOCIATES, P.C.
Defendant
REQUEST UNDER PA. R. C. P. NO. 206.7 (b) OF COUNSEL FOR LATSHA, DAVIS &
YORE, P.C. (FORMERLY KNOWN AS LATSHA & CAPOZZI, P.C.), KIMBER L.
LATSHA, GLENN R. DAVISON DOUGLAS C. YOHE FOR DECISION GRANTING
LEAVE TO WITHDRAW AS COUNSEL
NOW COMES, Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C. (per
C. Grainger Bowman, Esq. and Paul A. Logan, Esq.), counsel to the above parties, and
respectfully represents as follows:
On June 9, 2000, your Requesting Counsel filed with the Prothonotary of
Cumberland County the Petition of your Requesting Counsel for Leave to Withdraw as Counsel.
Service of said Petition was made upon Latsha, Davis & Yohe by hand delivery on June 8, and
upon John McN. Cramer, Esq., attorney for Louis J. Capozzi, Jr., by first class U. S. mail on June
9, 2000 (copy attached).
2. On June 12, 2000, this Court (per OLER, J.) issued a Rule to Show Cause why the
appearance of Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C. and C. Grainger
Bowman, Esq. and Paul A. Logan, Esq. should not be granted. The Rule directed C. Grainger
Bowman, Esq. to hand deliver a true copy of this Rule to Messrs. Latsha, Davis, and Yohe and to
Mr. Cramer, and made the Rule returnable within 10 days of service. A copy of the Rule is
attached hereto.
3. Mr. Bowman made hand delivery service to the specified individuals on June 12,
2000.
4. Latsha, Davis & Yohe, P.C., Kimber L. Latsha, Glenn R. Davis, and Douglas C.
Yohe ("the Latsha parties") filed a Response to the Rule on or about June 21, 2000, a copy of
which is attached hereto.
5. The Latsha parties request that this Court, as a condition of leave to withdraw,
compel counsel to comply with deadlines previously known or established by counsel prior to
their petition to withdraw, or in the alternative to provide the Latsha parties sufficient time to
respond without prejudice.
6. Louis J. Capozzi, Jr. and Capozzi & Associates, P.C. ("Capozzi"), through their
counsel, filed an Answer to the Rule on or about June 20, 2000, a copy of which is attached
hereto.
7. Capozzi requests that any order permitting withdrawal of counsel be conditioned
upon the previous entry of an appearance by substitute counsel to prevent the delay of trial beyond
the September trial term.
8. Your Requesting Counsel respectfully request that this Court enter an Order stating
a reasonable time within which substitute counsel for the Latsha parties shall enter an appearance,
and suggests that the Latsha parties be given 30 days to do so. This will satisfy one condition
sought by the Latsha parties.
9. Further, your Requesting Counsel respectfully request that discovery deadlines and
expert report dates be stayed without prejudice to the Latsha parties, and that a judicial conference
be scheduled to discuss current discovery disputes, remaining depositions, and trial dates. This
will satisfy the other condition sought by the Latsha parties.
10. The substitution of counsel for the Latsha parties within a reasonably prompt time
frame should satisfy the condition sought by Capozzi. Whether the case will be ready for trial at
the September trial term, as requested by Capozzi, will be wholly dependent upon the remaining
discovery of the parties, and the remaining parties and counsel in the case will be able to act and
prepare as their schedules require. The Court can be informed of the readiness of the case for trial
at the next call of the civil trial list, as the Cumberland County Rule 213-2 provides. The next
succeeding Cumberland County civil trial weeks are the week of September 11, 2000 (pre-trial
conferences August 23), and the week of October 30, 2000 (pre-trial conferences October 18).
11. This case has been stricken from the July civil trial term, as a result of your
Requesting Counsel's objections at the last call of the civil trial list, by Order dated June 16, 2000
(per HESS, J.), copy attached.
12. The case docketed to No. 1997-5584 is before this Court on the Latsha parties'
motion for partial summary judgment, filed on June 2, 2000, and is subject to listing for argument
at this Court's July 26, 2000 Argument Court. The motion has not yet been listed for argument by
the filing of a praecipe.
13. There exists no substantive reason for your Requesting Counsel to remain as
counsel while the Latsha parties seek substitute counsel, for all of the concerns raised by the
Latsha parties and by Capozzi can be resolved at a judicial management conference. To the extent
the Court desires your Requesting Counsel to participate in a judicial management conference to
.chieve this end, your Requesting Counsel represent that they will do so as officers of the Court.
14. Your Requesting Counsel do not believe that the Response of the Latsha parties
and the Answer of Capozzi raise any disputed issues of material fact requiring the taking of
depositions. Your Requesting Counsel submit that this matter may be decided by the Court on the
Petition of Requesting Counsel and the Response of the Latsha parties and the Answer of
Capozzi, and that an appropriate Order may be entered.
15. In the meantime, your Requesting Counsel respectfully request that leave for
withdrawal as counsel be granted without conditions.
4
WHEREFORE, your Requesting Counsel request permission to withdraw without
conditions, and without prejudice to the interests of the Latsha parties and with direction to
Latsha, Davis & Yohe, P.C. (formerly known as Latsha & Capozzi, P.C.), Kimber L. Latsha,
Glenn R. Davis, and Douglas C. Yohe to select successor counsel in a timely fashion.
POWELL, TRACHTMAN, LOGAN, CARRLE,
BOWMA & LOMBARDO, P.C.
By C l+/1
C. Grainger B an
Y.D.#15706
Date: June 23, 2000
Paul A. Logan
I.D. #30119
114 N. Second Street
Harrisburg, PA 17101
(717) 238-9300
AN 12 2000
FILED UNDER SEAL BY COURT ORDER
LOUIS J. CAPOZZI, JR., IN THE COURT OF COMMON PLEAS OF
Plaintiff, CUMBERLAND COUNTY,
PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C. NO. 97-5584 Civil Term
K VIBER L. LATSHA, GLENN R.
DAVIS and DOUGLAS C. YOHE,
Defendants.
LATSHA, DAVIS & YOHE, P.C., IN THE COURT OF COMMON PLEAS OF
KIMBER L. LATSHA, GLENN R. DAVIS, CUMBERLAND COUNTY
and DOUGLAS C. YOHE, ,
PENNSYLVANIA
Plaintiffs,
NO. 99-3981
V.
LOUIS J. CAPOZZI
JR (On transfer from the U.S. District Court,
,
., M.D. PA, per order of Judge Caldwell)
Defendant.
LATSHA, DAVIS & YOHE, P.C., f/k/a IN THE COURT OF COMMON PLEAS
LATSHA & CAPOZZI, P.C., KIMBER L. OF CUMBERLAND COUNTY
LATSHA, GLENN R. DAVIS, AND ,
PENNSYLVANIA
DOUGLAS C. YOHE,
Plaintiffs ;j
Docket No. 99-3542 Civil Term
v.
EAPOZZI $ ASSOCIATES, P.C. _
yr
Defendant t
;:
PETITIGIiR,I OF COUNSEL FOR LATSHA, DAVIS & YORE, P.C. (FORMERLY
KN0W ,! LATSHA & CAPOZZI
, P.C.), KIMBER L. LATSHA, GLENN R. DAVIS
NOW COMES, Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C. (per
HB:39407.13440-01
C. Grainger Bowman, Esq. and Paul A. Logan, Esq.), counsel to the above parties, and
respectfully represents as follows:
Pa.R.C.P. No. 1012(b) governs an attorney's request for leave to withdraw as
counsel in matters before the Court.
2. The above actions are all lawsuits arising out of the same facts, namely, the
consequences arising from the departure of Louis J. Capozzi, Jr. ("Capozzi") from the law firm
formerly known as Latsha & Capozzi, P.C. That firm is now known as Latsha, Davis & Yohe,
P.C., which firm is located in Mechanicsburg, PA ("the Law Firm"). The principal members who
remained with the Law Firm ("Remaining Members") following the departure of Capozzi were
Kimber L. Latsha, Glenn R. Davis, and Douglas C. Yohe.
3. The suit docketed to No. 97-5884 was filed by Capozzi against the Law Firm and
the Remaining Members in the Court of Common Pleas of Cumberland County.
4. The suit docketed to No. 99-3981 was initially filed by the Law Finn and the
Remaining Members against Capozzi in the U.S. District Court for the Middle District of
Pennsylvania, and thereafter transferred to the Court of Common Pleas of Cumberland County
and assigned this number.
5. The suit docketed to No. 99-3542 was filed by the Law Firm and the Remaining
Members against Capozzi & Associates, P.C. in the Court of Common Pleas of Cumberland
County.
6. The undersigned lawyers, Powell, Trachtman, Logan, Carrle, Bowman &
Lombardo, P.C., were counsel to the Law Finn and the Remaining Members at the
commencement of the initial litigation.
HB:39407,13440.01
7. Discovery has taken place in No. 97-5884 and No. 99-3981. Discovery has not yet
been completed in these two matters, in that the discovery deposition of Louis J. Capozzi, Jr. has
not been completed, the discovery depositions of Glenn R. Davis and Marlene Moyer have not
been taken, expert reports have not been exchanged, a discovery dispute is outstanding relating to
production of documents, and a motion for partial summary judgment is outstanding.
8. The case docketed to No. 97-5884 has been listed for trial by counsel for Capozzi.
The undersigned has filed of record Objections to Trial Listing for the reason that the case is not
yet ready for trial. Under Cumberland County Rule 213-2 an objection will be entered at the June
13, 2000 call of the list by a representative of the Law Firm and Remaining Members, in order to
have the case stricken, and to make the case ready for a future trial list if necessary.
9. The undersigned counsel's continued representation of the Law Firm and the
Remaining Members has been rendered unreasonably difficult because of irreconcilable
differences regarding the defense of claims and prosecution of claims on behalf of the Law Finn
and the Remaining Members. Your undersigned counsel is prepared to inforn the Court in
camera regarding the nature of the irreconcilable differences if, in the Court's discretion, it is
warranted. Your undersigned counsel refrains from further averments herein in the interest of
preserving attomey-client privileges and confidences.
10. The undersigned counsel has serious disagreements with the Law Firm and the
Remaining Members, which disagreements are within the scope of Rule 1.16 of the Rules of
Professional Conduct, which disagreements have resulted in and will further result in an
unreasonable burden upon the undersigned counsel. Your undersigned counsel is prepared to
inform the Court in camera regarding the nature of the serious disagreements if, in the Court's
HB:39407.13440.01
discretion, it is warranted. Good cause exists under the rules for your undersigned counsel's
withdrawal. Your undersigned counsel refrains from further averments herein in the interest of
preserving attomey-client privileges and confidences.
WHEREFORE, your petitioners request that this Court grant petitioners leave to withdraw
its and their appearance for Latsha, Davis & Yohe, P.C. (formerly known as Latsha & Capozzi,
P.C.), Kimber L. Latsha, Glenn R. Davis, and Douglas C. Yohe in the above-captioned cases.
POWELL, TRACHTMAN, LOGAN, CARRLE,
BOWMAN & LOMBARDO, P.C.
By
C. Grainger Bo an
I.D. #15706
Paul A. Logan
I.D. #30119
114 N. Second Street
Harrisburg, PA 17101
Date: June 9, 2000 (717) 238-9300
HB:39407.13440-01
VERIFICATION
I, C. Grainger Bowman, verify that the facts set forth in the foregoing Petition of Counsel
for Latsha, Davis & Yohe, P.C. (formerly /mown as Latsha & Capozzi, P. C), Kimher L. Latsha,
Glenn R. Davis and Douglas C. Yohe for Leave to Withdraw As Counsel are true and correct to
the best of my knowledge, information and belief. I understand that any false statements made
are subject to the penalties of 18 Pa.C.S. §4904 relating to unswom falsification to authorities.
C. Grainger B Kan
HB:39414.13440.01
CERTIFICATE OF SERVICE
AND NOW, I hereby certify that I have served a true and correct copy of the within
Petition of Counsel for Latsha, David & Yohe, P.C. (formerly known as Latsha & Capozzi, P.C.),
Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe for Leave to Withdraw as Counsel upon
the following person(s) on the date(s) and in the manner(s) indicated:
On June 8- 2000, by hand delivery to.
Kimber L. Latsha, Esq.
Glenn R. Davis, Esq.
Douglas C. Yohe, Esq.
Latsha, Davis & Yohe, P.C.
4720 Old Gettysburg Road
Mechanicsburg PA 17055
On June 9. 2000, by first class U.S Mail postage prepaid to.
John McN. Cramer, Esq.
Reed Smith Shaw & McClay, LLP
213 Market Street, Ninth Floor
P.O. Box 11844
Harrisburg, PA 17107
0A
C. Grainger Bo an
H13:33104.13440-01
01
FILED UNDER SEAL BY COURT ORDER AN 12 200!I"
LOUIS J. CAPOZZI, JR.,
Plaintiff,
V.
LATSHA & CAPOZZI, P.C.
KIMBER L. LATSHA, GLENN R.
DAVIS and DOUGLAS C. YOHE,
Defendants. IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY,
PENNSYLVANIA
NO. 97-5584 Civil Term
LATSHA, DAVIS & YOHE, P.C., IN THE COURT OF COMMON PLEAS OF
KIMBER L. LATSHA, GLENN R. DAVIS, CUMBERLAND COUNTY,
and DOUGLAS C. YOHE, PENNSYLVANIA
Plaintiffs,
NO. 99-3981
V.
(On transfer from the U.S. District Court,
LOUIS J. CAPOZZI, JR., M.D. PA, per order of Judge Caldwell)
Defendant.
LATSHA, DAVIS & YOHE, P.C., fiWa IN THE COURT OF COMMON PLEAS
LATSHA & CAPOZZI, P.C., KIMBER L. OF CUMBERLAND COUNTY,
LATSHA, GLENN R. DAVIS, AND PENNSYLVANIA
DOUGLAS C. YORE,
Plaintiffs
Docket No. 99-3542 Civil Term
V.
CAPOZZI & ASSOCIATES, P.C.
Defendant
RULE
1r
AND NOW, this day of Ulih? , 2000, upon consideration of the foregoing
Petition of Counsel for Latsha, Davis & Yohe, P.C. (formerly known as Latsha & Capozzi, P.C.),
Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe for Leave to Withdraw As Counsel, the
Court grants a rule to show cause why the appearance of Powell, Trachtman, Logan, Carrie,
HB:39409.13440-01
Bowman & Lombardo, P.C. and C. Grainger Bowman, Esq. and Paul A. Logan, Esq. should not
be allowed to be withdrawn.
RULE RETURNABLE "` O ?l?L? 6??Q d,t R ?y
-' 'le?
This Court directs C. Grainger Bowman, Esq. to hand deliver a true copy of this Rule to
the offices of the following individuals: (1) John McN. Cramer, Esq., and (2) Kimber L. Latsha,
Esq., Glenn R. Davis, Esq.and Douglas C. Yohe, Esq.
HB:39409.13440-01
j'-,fir-?,'?.OLJ-
TRUE COPY FROM RECORD
In Testimony whereof, I here unto sot my hand
and the seal 9qtt Bald Cow at Carlisle, Pa.
Ms..1 ?'?day ??
hOnotary
FILED UNDER SEAL PURSUANT TO COURT ORDER
IN THE COURT OF COMMON PLEAS
CUMBERLAND COUNTY, PENNSYLVANIA
LOUIS J. CAPOZZI, JR.,
Plaintiff
v.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA, GLENN R.
DAVIS and DOUGLAS C. YOHE,
Defendants
No. 1997-5584
CIVIL ACTION - LAW
LATSHA, DAVIS & YORE, P.C.,
KIMBER L. LATSHA, GLENN R.
DAVIS, and DOUGLAS C. YOHE,
Plaintiffs
V.
LOUIS, J. CAPOZZI, JR.
Defendant
No. 99-3981
(On transfer from the U. S. District
Court, M.D. Pa., per order of Judge
Caldwell)
LATSHA, DAVIS & YORE, P.C, f/k/a
LATSHA & CAPOZZI, P.C., KIMBER
L. LATSHA, GLENN R. DAVIS and
DOUGLAS C. YORE,
Plaintiffs
V.
CAPOZZI & ASSOCIATES, P.C.,
Defendant
No. 99-3542
CIVIL ACTION - LAW
RESPONSE TO RULE TO SHOW CAUSE
TO THE PETITION OF COUNSEL FOR
LATSHA DAVIS & YOHE, P.C., FOR LEAVE TO WITHDRAW
AND NOW, COMES, Defendants, Latsha Davis & Yohe, P.C., f/k/a Latsha &
Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe (hereinafter
"Defendants") and files the within response.
1- 8. Admitted.
9. Admitted in part. By way of further answer, irreconcilable differences
have arisen regarding representation, primarily related to communication and inaction.
The undersigned is prepared to inform the Court in camera regarding the nature of the
irreconcilable differences if in the Court's discretion, it is warranted.
10. Admitted in part. It is acknowledged that disagreements have arisen
which would give rise to the withdrawal of counsel. The withdrawal, however, should
not be permitted until an orderly transition to replacement counsel can be made, or
unless the withdrawal can be done without prejudice to the defense of this matter.
ADDITIONAL MATTER
11. There are a number of outstanding issues, including a Rule to Show Cause
related to a Motion for Sanctions, with deadlines to which counsel has not yet
responded prior to having filed this Motion to Withdraw.
12. Defendants are in the process of preparing responses, pro se, pending our
effort to retain replacement counsel.
13. If Defendants' responses are accepted, pro se, pending withdrawal of
counsel and the deadlines previously known or established by petitioning counsel can
be completed, without prejudice to our case, then we would agree to withdraw.
57733.1
WHEREFORE, Defendants, Latsha Davis & Yohe, P.C., f/k/a Latsha & Capozzi,
P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe, request that this
Honorable Court compel counsel to comply with those deadlines previously known or
established by counsel prior to their petition to withdraw, or in the alternative, provide
Defendants sufficient time to respond without prejudice. Then, and only then, should
counsel be permitted to withdraw.
Respectfully submitted,
LATSHA DAVIS & YOHE, P.C.
By C&.,.4aQ2aQ
Kimber L. Latsha
Attomey I. D. No. 32934
Glenn R. Davis
Attorney I. D. No. 31040
Douglas C. Yohe
Attorney I. D. No. 42982
P. O. Box 825
Harrisburg, PA 17108-0825
(717) 761-1880
Attorneys Pro Se
i7M3.1 3
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on this date a true and correct copy of the
foregoing Response to Rule to Shore Cause to the Petition of Counsel for Latsha Davis &
Yohe, P.C., for Leave to Withdraw was served by first-class United States mail, postage
prepaid, upon the following:
John McN. Cramer, Esq.
Reed Smith Shaw & McClay, LLP
213 Market Street, 9th Floor
Harrisburg, PA 17101
C. Grainger Bowman, Esq.
Powell, Trachtman, Logan, Carrle,
Bowman & Lombardo
114 North Second Street
Harrisburg, PA 17101
Paul A. Logan, Esq.
Powell, Trachtman, Logan, Carrie,
Bowman & Lombardo
475 Allendale Road
King of Prussia, PA 19406
Dated: (a?at ?CSJ Ga)?`ZQaJo
Glenn R. Davis
FILED UNDER SEAL BY COURT ORDER
LOUIS J. CAPOZZI, JR., IN THE COURT OF COMMON PLEAS OF
Plaintiff PEUNMNB'SEyRLLAND
VANIA COUNTY,
V.
LATSHA & CAPOZZI, P.C., KIMBER L No. 97-5584 Civil Term
.
LATSHA, GLENN R. DAVIS and
DOUGLAS C. YOHE,
Defendants
LATSHA, DAVIS & YOHE, P.C.,
KIMBER L. LATSHA
GLENN R
DAVIS IN THE COURT OF COMMON PLEAS OF
,
.
and DOUGLAS C. YOHE, CUMBERLAND COUNTY,
PENNSYLVANIA
Plaintiffs No. 99-3981
V.
LOUIS J. CAPOZZI, JR., (On transfer from the U.S. District Court,
M.D. PA, per order of Judge Caldwell)
Defendant
LATSHA, DAVIS & YOHE, P.C., f/k/a
LATSHA & CAPOZZI
P
C
KIMBER L IN THE COURT OF COMMON PLEAS OF
,
.
.,
.
LATSHA, GLENN R. DAVIS and CUMBERLAND COUNTY,
PENNSYLVANIA
DOUGLAS C. YOHE,
Plaintiffs No. 99-3542 Civil Term
V.
CAPOZZI & ASSOCIATES, P.C.,
Defendant
ANSWER OF W= -I CAPO 71 IR AND
CAPOZZI & AS O IATES P TOR LE Tn s9tjO Ai CAUSE
Louis J. Capozzi, Jr. ("Capozzi") and Capozzi & Associates, P.C., by their
counsel, John McN. Cramer, Reed Smith Shaw & McClay LLP, answer the rule to show
cause why the appearances of Powell, Trachtman, Logan, Carrie, Bowman & Lombardo,
P.C. ("Powell Trachtman") and C. Grainger Bowman, Esquire and Paul A. Logan,
Esquire in the above captioned matters should not be allowed to be withdrawn as
follows:
Capozzi's suit at no. 97-5584 was filed on or about October 10, 1997.
2. The matter at no. 99-3981 was originally filed in the United States
District Court for the Middle District of Pennsylvania on or about December 12, 1997.
3. Capozzi has filed three motions to compel discovery in an effort to
prepare Capozzi's suit for trial.
4. There is pending in the United States District Court for the Middle
District of Pennsylvania a case captioned HCF, Inc. v. Latsha, Davis & Yohe, P.C. and
Louis J. Capozzi, Jr., Esquire, C.A. No. 1:99 CV 1186, which has been stayed pending
the resolution of Capozzi's suit.
5. On or about May 18, 2000, Capozzi listed Capozzi's suit for trial in the
July trial term of this Court.
6. Subsequent to the listing of Capozzi's suit for trial, defendants filed a
motion for summary judgment and moved to have the case stricken from the trial list for
the July term.
7. Capozzi's suit was stricken from the trial list for the July term at the
request of defendants.
8. Any order allowing the firm of Powell Trachtman, and Grainger C.
Bowman and Paul A. Logan to withdraw as counsel should require the defendants in
Capozzi's suit to previously cause the entry of an appearance by substitute counsel to
prevent delay of the trial of Capozzi's suit beyond the September trial term.
WHEREFORE, Louis J. Capozzi, Jr. and Capozzi & Associates, P.C.
request the court to condition any order permitting withdrawal of counsel upon the
previous entry of an appearance by substitute counsel in order to prevent delay of the
trial of Capozzi's suit beyond the September 2000 trial term.
Ily Submitted,
Attrney I.D. No. 00478
ED SMITH SHAW & McCLAY LLP
213 Market Street, 9th Floor
P.O. Box 11844
Harrisburg, PA 17108-1844
(717) 257-3040
I hereby certify that on this 20th day of June, 2000, a true and correct
copy of the answer of Louis J. Capozzi, Jr. and Capozzi & Associates, P.C. to rule to
show cause has been served by U.S. first class mail, postage prepaid, on the following
person:
C. Grainger Bowman, Esquire
Powell, Trachtman, Logan, Carrie,
Bowman & Lombardo, P.C.
114 North Second Street
Harrisburg, PA 17101
30.
LOUIS J. CAPOZZI, JR.
V
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
LATSHA & CAPOZZI, P.C., KIMBER L.
LATSHA, GLENN R. DAVIS AND DOUGLAS C. NO. 97-5584 CIVIL TERM
YOHE
ORDER OF COURT
AND NOW, June 16, 2000, the court having been notified that the above-
captioned case is currently not at issue, the case is hereby stricken from the JULY trial list.
Counsel is directed to relist the case when ready.
John Cramer, Esquire
For the Plaintiff
C. Grainger Bowman, Esquire
For the Defendant
Court Administrator
By the Court,
-/z
Kevi A. Hess, J.
:bb
CERTIFICATE OF SERVICE
AND NOW, I hereby certify that I have served a true and correct copy of the within
Request of Counsel for Latsha, David & Yohe, P. C. (formerly known as Latsha & Capozzi, P.C.),
Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe for Decision Granting Leave to
Withdraw as Counsel upon the following person(s) on the date(s) and in the manner(s) indicated:
On June 23, 2000, by first class U.S. mail, postage prepaid to:
Kimber L. Latsha, Esq.
Glenn R. Davis, Esq.
Douglas C. Yohe, Esq.
Latsha, Davis & Yohe, P.C.
4720 Old Gettysburg Road
Mechanicsburg PA 17055
On June 23. 2000, first class U.S. Mail, postage prepaid to:
John McN. Cramer, Esq.
Reed Smith Shaw & McClay, LLP
213 Market Street, Ninth Floor
P.O. Box 11844
Harrisburg, PA 17107
0" 9._.
C. Grainger Bowina
- cv _?g
c
?= <'JS
-
?
ru"i v ?-?-
ti.
U u U
FILED UNDER SEAL PURSUANT TO COURT ORDER
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
Latsha, Davis & Yohe, P.C., f/k/a Civil Action No. 99-3542
Latsha & Capozzi, P.C., Kimber L.
Latsha, Glenn R. Davis, and
Douglas C. Yohe, To. Plaintiffs
Plaintiffs You M NdIld A Md To The
WIIM New Matter Wft2D
V. Da Of Mft 01 It UM VA Or
Capozzi & Associates, P.C., 77 ?//AA - You
Defendant
ANSWER AND NEW MATTER
Defendant, Capozzi & Associates, P.C., by its counsel, John McN. Cramer,
Reed Smith Shaw & McClay LLP, answers the complaint of plaintiffs as follows:
1. Admitted that Latsha, Davis & Yohe, P.C. ("LD&Y") is a professional
corporation organized under the laws of the Pennsylvania with a principal place of
business at Executive Park West II, Suite 101, 4720 Old Gettysburg Road,
Mechanicsburg, Pennsylvania, 17955. The professional corporation, now known as
LD&Y, was formerly known as Latsha & Capozzi, P.C. ("L&C"). With regard to the
averment "as more particularly set forth herein", Capozzi & Associates incorporates its
answers to the following paragraphs of the complaint by reference.
2. Admitted.
3. Admitted.
4. Admitted.
5. Admitted.
6. Admitted.
7. Admitted.
8. Admitted.
9. Admitted.
10. Admitted.
11. After reasonable investigation, defendant is without knowledge or
information sufficient to perform a belief as to the truth of the averments containing
Latsha's state of mind. It is denied that Capozzi was untrustworthy or behaved in an
unprofessional manner. On the contrary, Capozzi was worthy of trust and behaved in a
professional manner.
12. After reasonable investigation, defendant is without knowledge or
information sufficient to form a belief as to the truth of the averments concerning Latsha's
state of mind. It is denied that Capozzi engaged in untrustworthy and unprofessional
business practices. On the contrary, Capozzi was worthy of trust and did not engage in
unprofessional business practices.
13. It is denied that Capozzi took a leave of absence from the firm of
Latsha & Capozzi during the month of May 1997. On the contrary, Latsha, Davis and
Yohe unilaterally determined to place Capozzi on what they referred to as "leave of
absence" status and denied him access to the premises and facilities of the firm.
14. It is admitted that the firm received written requests to release client
professional files to Capozzi because clients whom he served wanted him to work on
their matters at the time that Capozzi was being denied access to the premises and
facilities of the firm. It is denied that these requests represented an attempt on Capozzi's
part to solicit firm clients away from the firm. On the contrary, he desired and expected
to serve these clients on behalf of the firm. It is denied that in June 1997 Capozzi was
still receiving salary (pay checks) from Latsha & Capozzi. On the contrary, after having
drastically reduced Capozzi's salary for May 1997, plaintiffs did not compensate him at
all for any part of June 1997.
15. It is admitted that a meeting was scheduled for shareholders for
Friday, June 6, 1997 to discuss the termination of Latsha, Davis and Yohe's actions
denying Capozzi the ability to work at the firm. It is denied that Capozzi failed or refused
to return to employment with the firm. On the contrary, plaintiffs attempted to impose
such onerous terms upon Capozzi as conditions of allowing him to perform legal services
at the firm as to amount to a discharge from employment.
16. It is denied that prior to June 6, 1997, Capozzi solicited Latsha &
Capozzi clients on his own behalf. On the contrary, he made no such solicitations prior
to that time. It is denied that Capozzi misrepresented facts about lawyers at Latsha &
Capozzi to clients in an effort to draw them away from the Latsha & Capozzi firm. On the
contrary, Capozzi did not misrepresent facts.
17. It is denied that prior to June 6, 1997, Capozzi intended to establish
a new professional corporation for the practice of law which would serve Capozzi's
individual interest and not the interest of Latsha & Capozzi. On the contrary, prior to
June 6, 1997, Capozzi hoped to return to the practice of law with Latsha & Capozzi. It is
denied that Capozzi was engaging in a plan to enter into attorney-client relationships with
Latsha & Capozzi clients under a new professional corporation for the practice of law.
On the contrary, Capozzi expected to continue his client relationships at Latsha &
Capozzi.
18. It is denied that the firm of Latsha & Capozzi received a letter of
resignation from Capozzi dated June 10, 1997. On the contrary, Capozzi never
submitted a "letter of resignation" to the firm.
19. Admitted.
20. It is denied that Capozzi resigned from Latsha & Capozzi. CapozZi's
response to paragraph 18 of the complaint is incorporated by reference. It is admitted
that Latsha & Capozzi changed its name to Latsha, Davis & Yohe, P.C. After reasonable
investigation, Capozzi is without knowledge or information sufficient to form a belief as to
the truth of the averments containing plaintiffs' state of mind.
21. It is denied that Capozzi resigned from the firm of Latsha & Capozzi.
Capozzi's answer to paragraph 18 of the complaint is incorporated by reference. It is
denied that Capozzi continued to improperly solicit Latsha & Capozzi clients. On the
contrary, Capozzi did not improperly solicit Latsha & Capozzi clients. It is admitted that
after June 11, 1997, the firm received requests to transfer client files to Capozzi at the
offices of Capozzi & Associates, P.C.
22. It is denied that Capozzi & Associates received revenues for
professional services arising from improper solicitation and engagement by Capozzi of
former Latsha & Capozzi clients. On the contrary, there was no improper solicitation and
any engagement of Capozzi by former Latsha & Capozzi clients was proper.
23. Defendant's responses to paragraphs 1 through 22 are incorporated
by reference.
24. The averments of paragraph 24 of the complaint that Capozzi
intentionally and maliciously interfered with Latsha & Capozzi's existing contractual
relations with Latsha & Capozzi clients are denied. On the contrary, Capozzi did not
interfere with those relationships. All contact between Capozzi and clients of Latsha &
Capozzi, P.C. was privileged. Capozzi's responses to the complaint no. 99-3981 are
incorporated by reference.
25. It is admitted that Capozzi & Associates, P.C. was the business
entity incorporated by Capozzi for the purpose of engaging in the practice of law after
Latsha, Davis and Yohe had placed intolerable conditions on his ability to practice law on
behalf of Latsha & Capozzi. The allegation that Capozzi & Associates, P.C. was the alter
ego of Capozzi is a conclusion of law to which no reply is required.
26. The averments of paragraph 26 of the complaint that Capozzi &
Associates, P.C. should be required to disgorge revenues received from clients as a
result of the improper solicitation by Capozzi of Latsha & Capozzi clients are denied. On
the contrary, there was no such improper solicitation and no such revenues.
27. The averments of paragraph 27 of the complaint that plaintiffs have
suffered business losses as a result of tortious interference are denied. On the contrary,
there has been no such tortious interference and plaintiff has suffered no such business
losses.
28. The averments of paragraph 28 of the complaint are conclusions of
law to which no reply is required. To the extent a reply is deemed necessary, it is denied
that Capozzi's conduct was outrageous. On the contrary, his conduct was lawful and
appropriate.
NEW MATTER
29. All of Capozzi's actions with regard to former Latsha & Capozzi
clients were privileged.
30. Plaintiffs have released all claims for alleged tortious interference
which accrued on or after June 10, 1997.
31. All claims for alleged tortious interference which accrued before
June 10, 1997 are barred by the applicable statute of limitations.
32. Plaintiffs' claims are barred by estoppel.
33. Plaintiffs' claims are barred by waiver.
34. Plaintiffs' claims are barred by plaintiffs' failure to act in good faith
with regard to Capozzi's employment by Latsha & Capozzi, P.C.
35. Plaintiffs' claims are barred by plaintiffs' failure to act in good faith
toward Capozzi as a minority shareholder in Latsha & Capozzi, P.C.
s
WHEREFORE, defendant requests the court to dismiss the complaint with
costs in its favor.
Attorn y I.D. No. 00478
REE SMITH SHAW & McCLAY LLP
1 arket Street, 9th Floor
P: O. Box 11844
Harrisburg, PA 17108-1844
(717) 257-3040
Attorneys for Defendant,
Capozzi & Associates, P.C.
I, Louis J. Capozzi, Jr., on behalf of Capozzf & Associates, P.C., verify that
the statements of fact In the foregoing answer to plaintiffs, complaint are true and correct
to the best of my knowledge, information and belief, subject to the penalties of
18 Pa.C.S. §4804 relating to unswom falsiticatfc
Dated 6 Z' 7-0z>
I hereby certify that on this 27'h day of June, 2000, a true and correct copy
of the answer to plaintiffs' complaint has been served by U.S. first class mail, postage
prepaid, on the following person:
C. Grainger Bowman, Esquire
Powell, Trachtman, Logan, Carrie,
Bowman & Lombardo, P.C.
114 North Second Street
Harrisburg, PA 17101
C.]
O U
v R
LOUIS J. CAPOZZI, JR.,
Plaintiff
V.
LATSHA & CAPOZZI,
P.C., KIMBER L.
LATSHA, GLENN R.
DAVIS and DOUGLAS
C. YOHE,
Defendants
LATSHA, DAVIS &
YOHE, P.C., KIMBER
L. LATSHA, GLENN R.
DAVIS, and DOUGLAS
C. YOHE,
Plaintiffs
V.
LOUIS J. CAPOZZI, JR.,
Defendant
LATSHA, DAVIS &
YOHE, P.C., f/k/a
LATSHA & CAPOZZI,
P.C., KIMBER L.
LATSHA, GLENN R.
DAVIS, and DOUGLAS
C. YOHE,
Plaintiffs
v.
CAPOZZI &
ASSOCIATES, P.C.,
Defendants
C) r01 G N ,+ /-
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW
NO. 97-5584 CIVIL TERM
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW
NO. 99-3981 CIVIL TERM
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW
v NO. 99-3542 CIVIL TERM
P• I
L?r
l\ ..Ar
AND NOW, this 6`s day of September, 2000, upon consideration of the attached
letter dated August 31, 2000, from counsel for Latsha, Davis & Yohe, P.C., Mda Latsha
& Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe, the record in
the above-captioned matters, which have been consolidated at No. 97-5584 Civil Term, is
unsealed.
John McN. Cramer, Esq.
REED, SMITH, SHAW &
McCLAY, LLP
213 Market Street, 9`s Fl.
P.O. Box 11844
Harrisburg, PA 17108-1844
Attorney for Latsha, Davis & Yohe,
P.C., MJ- a Latsha & Capozzi, P.C.,
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
Richard H. Wix, Esq.
WIX, WENGER & WEIDNER
4705 Duke Street
Harrisburg, PA 17109-3099
Attorney for Louis J. Capozzi, Jr.
o+?
C? p0
:rc
BY THE COURT,
l
RICHARD H.\WIX
THOMAS L.WENGER
DEAN A. WEIDNER
STEVEN C.WILDS
THERESA L. SHADE WIX•
DAVID R. GETZ
STEPHEN J. DZURANIN
GIRARD E. RICKARDS'
STEVEN R.WILLIAMS
KEVIN S. BLANTON
-.LSD MCM09N 14.85AC1019TTB bV.
. UNTIFIW CIVIL TRIAL A0 T[
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WIX, WENGER 8 WEIDNER
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
4705 DUKE STREET
HARRISBURG, PENNSYLVANIA 17109.3099
(717) 852.8455
TELECOPIER(717) 652-6290
August 31, 2000
P. O. BOX US
SOB NORTH SECOND STREET
HARRISBURG, PA. 17106.0545
17171 234.4182
TELECOPIER (7171234-4224
PLEASE REPLY TO
N. SECOND STREET OFFICE 1 1
The Honorable J. Wesley Oler, Jr.
Cumberland County Court of Common Pleas
Cumberland County Courthouse
1 Courthouse Square
Carlisle, PA 17013-3387
Dear Judge oler:
Re: Capozzi, Jr. v. Latsha & Capozzi, et al.
No. 1997-5584
At the recent discovery conference that you held, you inquired as
to whether it was necessary that this case remain "under seal". I
have conferred with my clients, and they have indicated that it is
no longer necessary for this matter to be placed under seal. Mr.
Cramer had previously indicated that he was in agreement.
very truly yours,
U. w9d5l
Richard H. Wix
RHW/gc
cc: John McN. Cramer, Esquire
Kimber Latsha, Esquire
Sip
` / 2000
LATSHA, DAVIS & YORE, P.C.,f/k/a
LATSHA & CAPOZZI, P.C., KIMBER
L. LATSHA, GLENN R. DAVIS and
DOUGLAS C. YORE,
Plaintiffs
V.
CAPOZZI & ASSOCIATES, P.C.,
Defendant
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
NO. 99-3542 CIVIL TERM
CIVIL ACTION - LAW
PRAECIPE FOR APPEARANCE
TO THE PROTHONOTARY:
Please enter the appearance of Richard H. Wix, Esquire of the
firm of Wix, Wenger & Weidner, on behalf of Plaintiffs Latsha,
Davis & Yohe, Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe
in the above-captioned matter.
Respectfully submitted,
WIX, WENGER &WEIDN?ERD
Byt-c? Ri
chard H. Wix, I.D. No. 07274
4705 Duke Street
Harrisburg, PA 17109-3099
(717) 652-8455
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IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
Latsha, Davis & Yohe, P.C., f/k/a Latsha &
Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis,
and Douglas C. Yohe,
Plaintiffs,
Capozzi & Associates, P.C.
V.
Defendant
Civil Action Nos. 99-3542
WITHDRAWAL AND ENTRY OF APPEARANCE
TO THE PROTHONOTARY:
Please withdraw my appearance as counsel for defendant.
Jo McN. Cramer
Attorney I.D. No. 00478
REED SMITH LLP
213 Market Street, 9th Floor
Harrisburg, PA 17101
Please enter my appearance as counsel for defendant Louis J. Capozzi and send all
Orders and Notices to me at the address noted below.
REED SMITH, LLP
By
PA 23846
213 Market Street, Nin
P. O. Box 11844
Harrisburg, PA 17108
(717) 257-3042
KWLI 57".a ROr FFW
"n.= M"M
CERTIFICATE OF SERVICE.
I hereby certify that on May 22, 2003, 1 caused a true and correct copy of the
foregoing Withdrawal and Entry of Appearance to be served by first class mail, postage prepaid,
upon the following:
Richard H. Wix, Esquire
Wix, Wenger& Weidner
705 Duke Street
Harrisburg, PA 17109-3099
By
REED SMITH, LLP
Robert B. Hoffman I
PA 23846
213 Market Street, Ninth I
P. O. Box 11844
Harrisburg, PA 17108
rhoffman@reedsmith.com
(717) 257-3042
HMLIe 57"W-"HOFFI
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IN TI4E COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
Latsha & Capozzi, P.C., Kimber L.
Latshaw, Glenn R. David and Douglas C. Yohe
Plaintifl's,
Louis J. Capozzi, Jr..
V.
Defendant
Civil Action Nos. 99-3981
WITHDRAWAL AND ENTRY OF APPEARANCE
TO THE PROTHONOTARY:
Please withdraw my appearance as counsel for defendant.
Joh cN. Cramer
Attorney I.D. No. 00478
REED SMITH LLP
213 Market Street, 9th Floor
Harrisburg, PA 17101
Please enter my appearance as counsel for defendant Louis J. Capozzi and send all
Orders and Notices to me at the address noted below.
REED SMITH, LLP
By
PA 23846
213 Market Street, Ninth
P. O. Box 11844
Harrisburg, PA 17108
(717) 257-3042
HI LI1 57MWB? ff"
?M= 11:25W
CERTIFICATE OF SERVICE
I hereby certify that on May 22, 2003,1 caused a true and correct copy of the
foregoing Withdrawal and Entry of Appearance to be served by first class mail, postage prepaid,
upon the following:
Richard H. Wix, Esquire
Wix, Wenger& Weidner
705 Duke Street
Harrisburg, PA 17109-3099
REED SMITH, LLP /
By 1 7
Robert B. Hof&nan
PA 23846
213 Market Street, Ninth Floor
P. O. Box 11844
Harrisburg, PA 17108
rhoffman@reedsmith.com
(717) 257-3042
HMUWM V"nOBM fFW
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IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
Louis J. Capozzi, Jr.,
Plaintiff,
Civil Action Nos. 97-5584,
v. 99-3981 and 99-3542
Latsha & Capozzi, P.C., Kintber L.
Latsha, Glenn R. Davis and Douglas C. Yohe
Defendants
PRAECIPE FOR NON-JURY HEARING
TO: Hon. Edgar B. Bayley, Judge
Hon. Curtis Long, Prothonotary
By Opinion and Order of February 27, 2001, this Court granted, per Judge Bayley,
granted plaintiff Louis J. Capozzi's post trial Motion and awarded him a new trial on damages.
By Opinion and Order of April 9, 2003, the Superior Court affirmed that Order. By Order of
April 28, 2003, the Supreme Court denied the Petition for Allowance of Appeal filed by Latsha,
Davis, and Yohe. Accordingly, the matter is ripe for hearing before the Court on the matter of
damages. Plaintiff Louis J. Capozzi respectfully requests that the Court set a hearing date.
REED SMITH, LLP
By
PA 23846
213 Market Street, Ninth
P. O. Box 11844
Harrisburg, PA 17108
rhoffman@reedsmith.com
(717) 257-3042
HBGWG m6569 a 1-RDB Ff.
h .26.=9.51696
CERTIFICATE OF SERVICE
I hereby certify that on June 24, 2003,1 caused a true and correct copy of the
foregoing Praecipe for Non-Jury Trial to be served by first class mail, postage prepaid, upon the
following:
Richard H. Wix, Esquire
Wix, Wenger& Weidner
705 Duke Street
Harrisburg, PA 17109-3099
REED SMITH, LLP
PA 23846
213 Market Street, Nint Floor
P. O. Box 11844
Harrisburg, PA 17108
rhoffman@reedsmith.com
(717) 257-3042
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LOUIS J. CAPOZZI, JR.,
PLAINTIFF
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C., KIMBER L. :
LATSHA, GLENN R. DAVIS AND : 97-5584 CIVIL TERM
DOUGLAS C. YOHE, : 99-3981 CIVIL TERM
DEFENDANTS :,9&1542 CIVIL TERM
ORDER OF COURT
AND NOW, this Ct-K day of July, 2003, pursuant to an order of
February 27, 2001, that has been affirmed by the Superior Court of Pennsylvania with
the Supreme Court of Pennsylvania denying review, a non jury trial shall be conducted
in Courtroom Number 2, at 8:45 a.m., Thursday, August 7, 2003.
By
Edgar B. Bayley,
Robert B. Hoffman, Esquire
For Plaintiff
Richard Wix, Esquire
For Defendants
:sal
LOUIS J. CAPOZZI, JR., IN THE COURT OF COMMON PLEAS OF
PLAINTIFF CUMBERLAND COUNTY, PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C., KIMBER L. :
LATSHA, GLENN R. DAVIS AND : 97-5584 CIVIL TERM
DOUGLAS C. YOHE, : 99-3981 CIVIL TERM
DEFENDANTS : 99-3542 CIVIL TERM ?
ORDER OF COURT
AND NOW, this 5 day of July, 2003, upon agreement of counsel,
the non jury trial currently scheduled for August 7, 2003, IS CANCELLED. The non jury
trial shall now be conducted in Courtroom Number 2, at 8:45 a.m., Wednesday,
September 17, 2003.
Robert B. Hoffman, Esquire
For Plaintiff
Richard Wix, Esquire
For Defendants
:sal
LOUIS J. CAPOZZI, JR.,
PLAINTIFF
V.
71NCOURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
LATSHA & CAPOZZI, P.C., KIMBER L. :
LATSHA, GLENN R. DAVIS AND 97-5584 CIVIL TERM
DOUGLAS C. YOHE, 99-3981 CIVIL TERM
DEFENDANTS 99-3542 CIVIL TERM
ORDER OF COURT
AND NOW, this .10 day of November, 2003, a Rule is entered
against plaintiff to show cause why the relief requested herein should not be granted.
Rule returnable seven (7) days after service. Any answer filed shall be forwarded by
the Prothonotary to chambers.
FFo Hoffman, Esquire
or Plaintiff
J
Xichard Wix, Esquire
For Defendants IV
R•1 S
:sal 11-14 U e-D
LOUIS J. CAPOZZI, JR., : IN THE COURT OF COMMON PLEAS OF
PLAINTIFF : CUMBERLAND COUNTY, PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C., KIMBER L. :
LATSHA, GLENN R. DAVIS AND : 97-5584 CIVIL TERM
DOUGLAS C. YOHE, : 99-3981 CIVIL TERM
DEFENDANTS :,o99-3542 CIVIL TERM
ORDER OF COURT
AND NOW, this 22nd day of December, 2003, the petition of defendants to
reopen the record, IS DENIED.
Robert B. Hoffman, Esquire
For Plaintiff
Richard H. Wix, Esquire
For Defendants
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LOUIS J. CAPOZZI, JR., IN THE COURT OF COMMON PLEAS OF
PLAINTIFF CUMBERLAND COUNTY, PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and : 99-3981 CIVIL TERM
DOUGLAS C. YOHE, : 99-3542 CIVIL TERM
DEFENDANTS : 97-5584 CIVIL TERM
IN RE: DAMAGES
AMENDED VERDICT
AND NOW, this ? day of December, 2003, for purposes of docketing at the
above three captions, the verdict entered on December 22, 2003, is amended to provide:
Louis J. Capozzi, Jr., is awarded $425,328, with legal interest at six percent per annum from
June 6, 1997, against Latsha & Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas
C. Yohe.
By the
Edgar B.
Robert B. Hoffman, Esquire
For Louis J. Capozzi, Jr.
Richard H. Wix, Esquire
For Latsha and Capozzi, P.C.
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
sal
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LOUIS J. CAPOZZI, JR., : IN THE COURT OF COMMON PLEAS OF
PLAINTIFF : CUMBERLAND COUNTY, PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and : 99-3981 CIVIL TERM
DOUGLAS C. YOHE, :•99-3542 CIVIL TERM
DEFENDANTS : 97-5584 CIVIL TERM
IN RE: DAMAGES
VERDICT
AND NOW, this -2 day of December, 2003, plaintiff, Louis J. Capozzi, Jr., is
awarded $425,328, with legal interest at six percent per annum from June 6, 1997, against
Latsha & Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe.
Robert B. Hoffman, Esquire
For Louis J. Capozzi, Jr.
Richard H. Wix, Esquire
/?Q,„? j2.aa-cam
For Latsha and Capozzi, P.C. -J
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
:sal
LOUIS J. CAPOZZI, JR.,
PLAINTIFF
V.
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS and
DOUGLAS C. YOHE,
DEFENDANTS
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
99-3981 CIVIL TERM
99-3542 CIVIL TERM
97-5584 CIVIL TERM
IN RE: DAMAGES
OPINION AND VERDICT
Bayley, J., December 22, 2003:--
Plaintiff, Louis J. Capozzi, Jr., an attorney, was a shareholder and employee of
the Cumberland County law firm of defendant, Latsha & Capozzi, P.C. Attorneys
.Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe, were the other shareholders in
the firm. On June 6, 1997, after plaintiff overbilled clients of the firm and following a
period of other contentious disagreements, the firm notified him that his employment
would only be continued for an open probationary period subject to thirteen conditions.
Plaintiff did not accept the conditions and his employment terminated. On June 11,
1997, plaintiff started his own law firm, Capozzi Associates, in Harrisburg, Dauphin
County. Many of the clients of Latsha & Capozzi employed plaintiffs new firm.
Plaintiff instituted litigation to recover (1) the value of his stock in Latsha &
Capozzi as of June 6, 1997, and (2) money owed on a demand note the law firm gave
to him. Defendants filed a counterclaim seeking damages against plaintiff for his
99-3981 CIVIL TERM
99-3542 CIVIL TERM
97-5584 CIVIL TERM
overbilling clients of the law firm.' In response to plaintiffs claim to recover the value of
his stock in the law firm, defendants maintained that all of the shareholders of Latsha &
Capozzi had an oral agreement that if any shareholder left his employment, and then
competed with the firm, that shareholder would receive the amount of his capital
contribution for his stock, which was $5,000. Defendants counterclaim for recovery
from plaintiff for his proportional share of the money the firm returned to clients, for the
cost of identifying those clients, and for determining the amount of the overbillings. The
parties agreed to bifurcate the trial with respect to plaintiffs stock, with a jury
determining liability and the trial judge determining damages as to value if in excess of
$5,000. On November 1, 2000, a jury returned a verdict on liability answering "Yes" to
the following three questions:
(1) Are Latsha & Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe liable to Louis J. Capozzi, Jr. for payment of the demand
note the law firm gave to Capozzi?
(2) Is Louis J. Capozzi, Jr., liable to Latsha & Capozzi, P.C., Kimber L.
Latsha, Glenn R. Davis and Douglas C. Yohe, as a shareholder for his
' There are lawsuits at three captions in which the various claims of the parties are
interdispursed. On October 10, 1997, Louis Capozzi instituted a suit in this court at 97-
5584. On December 12, 1997, Kimber Latsha, Glenn Davis and Douglas Yohe
instituted a multiple count complaint against Louis Capozzi in the United States District
Court for the Middle District of Pennsylvania. Capozzi filed a multiple count
counterclaim. Some of plaintiffs counts and some of the counts of the counterclaim
were transferred by the District Court to this court and are docketed at 99-3981. Other
counts by both parties were dismissed with prejudice. On June 10, 1999, Latsha,
Davis and Yohe instituted a suit in this court at 99-3542.
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99-3542 CIVIL TERM
97-5584 CIVIL TERM
proportional share of the money the law firm returned to clients who were
overbilled by him, and for the cost of identifying the clients and
determining the amounts of the overbillings?
(3) Did the shareholders of Latsha & Capozzi, P.C. have an oral
agreement with Louis J. Capozzi, Jr., that if a shareholder left the law firm,
and competed with the firm, that shareholder's stock would be valued at
his capital contribution?
On December 18, 2000, the court, after taking additional evidence on damages,
entered the following verdict:
(1) Louis J. Capozzi, Jr., is awarded principal in the amount of
$38,071.50 plus interest totaling $8,668.48 through December 18, 2000,
for a total of $46,683.98, against Latsha & Capozzi, P.C., Kimber L.
Latsha, Glenn R. Davis and Douglas C. Yohe, on the demand note as
found by the jury in Question Number 1.2
(2) Latsha and Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe are awarded damages, and as a setoff, from Louis J.
Capozzi, Jr., of $14,140.78 for client refunds representing his proportional
share of the money the law firm returned to clients who were overbilled by
him, and auditing expenses of $5,679.02 representing the total cost of
identifying the clients and determining the amounts of the overbillings, for
a total of $19,819.80 as found by the jury in Question Number 2.
(3) Louis J. Capozzi, Jr., is awarded $5,000 against Latsha and Capozzi,
P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe, with legal
interest from June 6, 1997, for the value of his stock at his capital
contribution as found by the jury in Question Number 3.
The figures used in the verdict are as set forth in plaintiffs Exhibit
Number 1 at the hearing on damages. Two are incorrect. The principal
amount of the note as shown on plaintiffs Exhibit Number 2, in the jury
trial, was $38,017.50. When this figure is added to the interest of
$8,668:48, it totals $46,685.98.
Plaintiff and defendants filed motions for post-trial relief. Plaintiff maintained,
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99-3981 CIVIL TERM
99-3542 CIVIL TERM
97-5584 CIVIL TERM
inter alia, that the oral agreement found by the jury to have existed between the
shareholders of the law firm was unenforceable. In a written opinion in support of an
order of February 27, 2001,= we stated:
Implicit in the oral agreement of all of the shareholders of Latsha &
Capozzi, P.C., was that if a shareholder left the law firm, he would be paid
for his stock. The issue is what that shareholder would be paid, not
whether he would be paid.
Concluding that "the oral agreement between the shareholders is unenforceable to the
extent that it limits plaintiff to receiving $5,000 for the value of his stock in Latsha &
Capozzi, P.C.," the following order was entered:
(1) The motion of plaintiff for a judgment notwithstanding the verdict on
liability as to the value of his stock in Latsha & Capozzi, P.C., IS GRANTED.
Plaintiff is awarded a new trial on damages.
(2) The motion of the defendants, Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe, for a judgment notwithstanding the verdict on their individual
liability on a demand promissory note, IS GRANTED.
(3) The verdict in favor of defendants against plaintiff in the
amount of $19,819.80, IS MOLDED to add legal interest at the rate of six
percent per annum from August 1, 1997.
On April 19, 2002, the order was affirmed by the Superior Court of
Pennsylvania. 797 A.2d 314 (Pa. Super. 2002). The court stated:
We ... affirm the trial court's finding that Latsha & Capozzi's forfeiture for
competition clause is an unreasonable restraint on competition. Appellee
is entitled to a trial to determine the value of his stock in Latsha &
Capozzi, P.C. as of the date of his departure. (Emphasis added.)
On April 28, 2003, the Supreme Court of Pennsylvania denied a petition for
z 50 Cumberland L.J. 119 (2001).
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99-3981 CIVIL TERM
99-3542 CIVIL TERM
97-5584 CIVIL TERM
review. 821 A.2d 586 (Pa. 2003). On September 17, 2003, a non-jury trial was
conducted on the issue of damages. Post-trial briefs were filed on October 17, 2003.
Both sides presented the testimony of a certified public accountant: Robert Murphy for
plaintiff and James Smeltzer for defendants.
Latsha & Capozzi was incorporated on May 23, 1994. By the end of 1996, the
law firm had fifteen attorneys and gross revenue for that year of 2.6 million dollars.
Plaintiff drew an annual salary of $175,000. At the end of each year, any money
remaining after the payment of expenses was distributed to the shareholders, one-half
in proportion to their ownership interest and the other half in proportion to the amount of
each shareholder's individual billings during that year. When plaintiffs employment
with Latsha & Capozzi ended, he and Kimber Latsha each owned thirty-seven and one-
half percent of the stock, Douglas Yohe owned fifteen percent and Glenn Davis owned
ten percent. To value plaintiffs stock when he left the law firm, Robert Murphy
converted the financial data from its modified cash basis of accounting to an accrual
basis of accounting which is consistent with general accepted accounting principles 3
Adjusting the law firm's data to an accrual basis required:
' During a single accounting period the accrual basis achieves a better matching of
revenue and related costs and provides a more comprehensive inclusion of all assets
and liabilities relevant to determining shareholder equity. Revenue is recognized when
the services are provided and expenses are recognized when incurred. In modified
cash basis accounting, revenue is recognized when cash is received for services
rendered and expenses are recognized when paid.
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99-3981 CIVIL TERM
99-3542 CIVIL TERM
97-5584 CIVIL TERM
(1) Establishing the equity under the modified cash basis as of May 31, 1997.`
(2) Adding to assets revenue earned but not yet received, primarily in the form
of accounts receivable and work performed but not billed (work in progress).
(3) Removing from liabilities prepaid expenses to the extent they related to
future periods.
(4) Adding to liabilities accounts payable and other expenses incurred but not
yet recorded.
Plaintiff, through the testimony of Robert Murphy, seeks damages of $425,328.
Defendants, through the testimony of James Smeltzer, maintain that the damages are
$75,304 5 In offering his opinion as to the value of plaintiffs stock, Smeltzer deducted
$128,459 based on his assessment of the economic consequences caused by
plaintiffs departure from and direct competition with Latsha & Capozzi. In support of
this calculation, defendants cite Howard v. Babcock, 863 P.2d 150 (California 1993),
the reasoning of which both this court and the Superior Court accepted in the liability
part of this case. In Howard, the Supreme Court of California concluded that an
agreement among lawyers that imposed a reasonable toll on departing partners who
Although plaintiffs employment terminated at the end of the first week in June, 1997,
May 311 was the closest date for which financial records were available. Any change in
financial condition as to the value of the stock approximately a week later was nominal.
s Smeltzer prepared a supplemental report, which was not produced until the day he
testified, that set the damages at $66,182. His original report set the damages at
$51,052.
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99-3981 CIVIL TERM
99-3542 CIVIL TERM
97-5584 CIVIL TERM
then competed with the firm was enforceable. In the present case, we concluded, and
the Superior Court agreed, that restrictive covenants between attorneys that contain
reasonable provisions may be enforced if., (1) the agreement relates to a contract of
employment, (2) is reasonably necessary, (3) is supported by adequate consideration,
and (4) the application of the agreement is reasonably limited in both time and territory.°
The oral agreement between the shareholders of Latsha & Capozzi, that any
shareholder who left his employment and then competed with the firm would receive
the amount of his capital contribution for his stock, was held unenforceable because it
was not limited in time and territory. Unlike in Howard, no enforceable agreement
exists. Therefore, the defendants cannot reduce the amount they owe plaintiff for the
costs of his departure and competition with Latsha & Capozzi. Accordingly, we need
not determine if $128,459 fairly reflects the economic consequence of plaintiff leaving
and competing with Latsha & Capozzi.
James Smeltzer calculated the amount due plaintiff on the basis of thirty-five
percent stock ownership in Latsha & Capozzi rather than the thirty-seven and a half
percent of the stock plaintiff actually owned when his employment terminated. That
calculation was based on his understanding that Glenn Davis had met certain levels of
As stated in our opinion of February 27, 2001: "[w]e conclude as a matter of public
policy that in Pennsylvania, attorneys that are shareholders of the professional
corporation may enter into an enforceable agreement that reasonably prevalues the
stock of a departing shareholder who then competes with the law firm."
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97-5584 CIVIL TERM
performance at the end of 1996 that warranted the increase of his stock from ten
percent to fifteen percent. That would decrease plaintiffs actual ownership by two and
a half percent. Plaintiff testified that Davis had not met performances bonuses
warranting an increase of his stock in 1997. More importantly, the shareholders never
increased Davis's stock ownership to fifteen percent or reduced plaintiffs stock to thirty-
five percent by the time plaintiffs employment terminated. As the Superior Court has
already stated, plaintiff "is entitled to a trial to determine the value of his stock in Latsha
& Capozzi, P.C., as of the date of his departure." Plaintiff owned thirty-seven and one-
half percent of the stock on the date of his departure. Smeltzer's valuation at thirty-five
percent is not supported by the evidence.
James Smeltzer concluded that a contingent fee due from HCF, Inc. of $203,319
was substantially earned by Latsha & Capozzi before plaintiff was terminated. In
accrual accounting once an agreement has been reached to settle a case and the
contingent fee can be calculated it is treated as an asset. Robert Murphy also
included the $203,319 as an asset for purposes of valuing plaintiffs stock' Smeltzer,
unlike Murphy, also included a contingent fee of $185,000 of a Latsha &
Capozzi client, IHS. IHS hired plaintiff to continue the case after he left Latsha &
In February, 1997, the parties to the HCF lawsuit agreed to settle for $1,016,595
which generated a contingent fee of $203,319 owing to Latsha & Capozzi. The
settlement proceeds did not reach HCF until about August 1, 1997. Latsha & Capozzi
then made competing claims for the fee, after which HCF interpleaded the $203.319
into federal court.
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99-3542 CIVIL TERM
97-5584 CIVIL TERM
Capozzi. Smeltzer made this calculation based on his understanding that the actual
contingent fee would be between $145,000 to $225,000; therefore, he used an average
of $185,000. Plaintiff testified that he has yet to receive a fee from IHS and that the
case still has not been settled. Obviously, the fee could not be calculated on June 6,
1997. Accordingly, we agree with plaintiff that under accrual basis accounting any
prospective fee from IHS cannot be used in a calculation of the value of plaintiffs
stock on the date of his termination e
James Smeltzer concluded that there was no value in the fixed assets of Latsha
& Capozzi while Robert Murphy concluded that the assets had a value of $137,104
when plaintiff was terminated. Murphy's calculation represented furniture and
fixtures at an original cost of $89,496, with a net book value of $38,200, and office
e On November 10, 2003, defendants tiled a petition to reopen the record. They aver
that on or about October 23, 2003, they leamed that plaintiff had negotiated a
"Stipulation of Settlement' in the IHS suit on August 28, 2003, before he testified on
September 17th. On December 22, 2003, the petition was dismissed. It makes no
difference if in fact a settlement agreement, by which a contingent fee may now finally
be calculated, was reached on August 28, 2003. Any such agreement by IHS that
chose Capozzi Associates as its attorney, would be six years and two months after
plaintiffs termination on June 6, 1997. Under accrual basis accounting, this contingent
fee cannot be used in a calculation of the value of plaintiffs stock on June 6, 1997
because it could not be fairly calculated on that date. To the extent that such evidence,
if true, would attack plaintiffs credibility, the relevance is not sufficient to reopen the
record. Plaintiffs credibility has already been diminished by the verdict of the jury
which determined, contrary to his testimony, that the shareholders of Latsha & Capozzi
had an oral agreement that if any shareholder left his employment, and then competed
with the firm, that shareholder would receive for his stock the amount of his capital
contribution, which was $5,000.
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equipment at an original cost of $183,105 with a net book value of $98,904. ($38,200 +
$98,904 = $137,104). These are the figures actually reported by Latsha & Capozzi on
the firm's financial statement of June 30, 1997. We do not understand how Smeltzer
could conclude that the fixed assets of the law firm had no value as of June 6, 1997.
The firm was incorporated near the end of May, 1994. The total acquisition cost of the
fixed assets was $272,601. Of the amount, $143,754 was acquired prior to 1996,
$89,958 in 1996, and $38,889 in the first five months of 1997. Murphy used the best
evidence available to value the furniture and fixtures as of June 6, 1997, which was the
net book value of $137,104 set by the law firm less than a month after plaintiffs
termination. We agree with that valuation.
Both parties agree that there were accounts receivable billed as of the
termination of plaintiff, of $478,359.74. All of these fees were collected by the law firm.
At plaintiffs termination, the law firm had unbilled time for the entire month of May and
the beginning of June. James Smeltzer, after filing an initial report that failed to account
for the value of this work in progress, filed a supplemental report concluding that the
amount was $114,509. Robert Murphy concluded that the amount was $252,000. The
reason for the large discrepancy is that Smeltzer calculated the amount only to May 21,
1997, while Murphy calculated the amount to plaintiffs termination. Because plaintiff is
entitled to the value of his stock as of his termination, Murphy's calculations are
supported by the evidence while Smeltzer's are not.
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In their brief, the individual defendants maintain, (1) that their law firm and not
them individually is liable to plaintiff for the value of his stock, and (2) plaintiff is not
entitled to prejudgment interest from his date of termination a On December 18, 2000,
the following verdict was entered:
Louis J. Capozzi, Jr., is awarded $5,000 against Latsha & Capozzi, P.C.,
Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe, with legal interest
from June 6, 1997, for the value of his stock ...
On February 27, 2001, the following order was entered:
The motion of plaintiff for a judgment notwithstanding the verdict on
liability as to the value of his stock in Latsha & Capozzi, P.C., IS
GRANTED. Plaintiff is awarded a new trial on damages. (Emphasis
added.)
On defendants' appeal, the order was affirmed by the Superior Court.
Defendants did not raise in their appeal any issue as to their individual liability or the
award of prejudgment interest. Accordingly, the remaining issue is the amount of the
judgment on the liability already found against the law firm and its shareholders with
interest from June 6, 1997. The verdict as to individual liability and prejudgment
These positions are in contrast to the position taken by the individual defendants in
their claim in which they and the law firm were awarded damages with prejudgment
interest for client refunds representing plaintiffs proportional share of the money the law
firm returned to clients who were overbilled by plaintiff ($14,140.78), and the auditing
expenses for identifying those clients and determining the amount of the overbillings
($5,679.02).
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interest is final.10
We have analyzed the major differences in the opinions of James Smeltzer and
Robert Murphy as to the value of plaintiffs stock on his termination. All of these
differences have been decided in favor of plaintiff. While there are other lesser
differences in the opinions of the two accountants, we find overall that the testimony of
Robert Murphy is more credible than James Smeltzer. The real reason for the great
disparity in the valuations of the two accountants can be gleaned from the argument in
defendants' post-hearing brief, which James Smeltzer erroneously bought into:
There is no question that the parties to the implied repurchase
agreement intended for a departing shareholder to share in the diminution
in the value of the firm, resulting from the competing shareholder's erosion
of the firm's client base and corresponding revenue stream while the
firm's fixed costs remained constant. In supplying a price term or stock
value for the implied stock repurchase agreement, this Court at a
minimum should take into account the loss in the value of the firm as
reasonably calculated by Defendants' expert. Accounting for the
economic reality of the loss in the firm's value in evaluating Capozzi's
stock is not a forfeiture. It is merely a reflection of the economic
consequences of the removal of that value from the LDY firm and
transferring it to the new Capozzi firm.
The LDY position on valuation fairly accounts for the economic
impact of Capozzi's departure on the firm and the value of his stock, but
also secures for Capozzi a total return of $66,182, which reflects a
substantial return on his stock purchase price of $5,000. It also prevents
Capozzi from securing a windfall from the IHS contingency fee, and by his
attempt to avoid any financial consequences associated with the loss in
10 There are often disputes as to the amount due to which prejudgment interest is
applicable. The value of plaintiffs stock was ascertainable as of June 6, 1997. Unlike
disputes involving unliquidated damages, prejudgment interest is a matter of right not
discretion, measured from the date payment was due to the time of judgment.
Fernandez v. Levin, 519 Pa. 375 (1988).
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the value of the firm caused by his departure. The adoption of the LDY
position on value will leave the parties much closer to the intent of their
original agreement, and causes no harm to Capozzi.
This is law not equity. It has already been determined that these attorneys had
no enforceable restrictive stock agreement. There can be no implied repurchase
agreement that has any bearing on the value of plaintiffs stock at his termination. The
clients of Latsha & Capozzi choice whether to remain with that firm, go to plaintiffs new
firm, or retain another firm. Plaintiff was an integral part in creating the value to the
stock of Latsha & Capozzi, P.C. While he wrongfully overbilled clients, for which he is
being held accountable for his proportional share of the fees and costs associated with
determining the fees, that is not relevant as to the value of his stock on the date of his
termination. Likewise, the other contentious differences between these attorneys that
resulted in plaintiffs termination are not relevant to that determination. Arguing that
plaintiff will receive a windfall from the IHS contingency fee is to ignore the principles of
accrual accounting applicable to the value of his stock on a date certain. As plaintiff set
forth in his post-trial brief:
Capozzi (and Latsha) began with very little except their ability, their
client contracts, and their willingness to work. They succeeded in building
a law firm, as the $2.6 million in annual billings reflect; similarly, that firm
allowed defendants to pay themselves more than $735,000 in salaries
and bonuses in 1997.... Capozzi was a substantial creator of that value.
He left behind not merely Accounts Receivables and Work In Progress,
but office equipment (fixed assets - $137,000), a substantial quantity of
cash ($252,000), and a finalized contingent fee ($203,000). Both experts
place the value of the firm's equity as of departure at a comparable
amount -- $1.096 million according to plaintiffs expert and $1.014 million
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according to defendants' expert. Capozzi seeks in this proceeding his
portion of the net assets he created and left behind on June 6, 1997.
We agree with plaintiff. It is the value of the stock he owned on the date of his
termination to which he is legally entitled, no more and no less.
Plaintiff was awarded $38,071.50 plus interest of $8,668.48 through December
18, 2000, for a total of $46,685.98 against Latsha & Capozzi for the amount due on his
demand note. Defendants were awarded $14,140.78 against plaintiff for his
proportional share of his overbilling of clients plus $5,679.02 in costs toward
determining the amount of the overbilling. Legal interest was from August 1, 1997.
These verdicts are final. In connection with the matter now before us we find that the
value of plaintiffs thirty-seven and a half percent ownership in the stock of Latsha &
Capozzi was $425,328 as of the date of his termination.
For the foregoing reasons, the following order is entered.
VERDICT
AND NOW, this day of December, 2003, plaintiff, Louis J. Capozzi, Jr., is
awarded $425,328, with legal interest at six percent per annum from June 6, 1997, against
Latsha & Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis and Douglas C. Yohe.
B the C Lr,
Edgar B. Bayley, J.
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Robert B. Hoffman, Esquire
For Louis J. Capozzi, Jr.
Richard H. Wix, Esquire
For Latsha and Capozzi, P.C.
Kimber L. Latsha, Glenn R. Davis and
Douglas C. Yohe
:sal
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LOUIS J. CAPOZZI, JR., : IN THE COURT OF COMMON PLEAS OF
PLAINTIFF : CUMBERLAND COUNTY, PENNSYLVANIA
V.
LATSHA & CAPOZZI, P.C., KIMBER L.
LATSHA, GLENN R. DAVIS AND 97-5584 CIVIL TERM
DOUGLAS C. YORE, 99-3981 CIVIL TERM
DEFENDANTS 99-3542 CIVIL TERM ?
ORDER OF COURT
AND NOW, this 14' day of January, 2004, in light of the post-trial motion
filed, and the interim response, IT IS ORDERED that defendants may, if they
wish, supplement their original brief by filing a supplemental brief in chambers
not later than fifteen (15) days from this date. If such a supplemental brief is
filed, plaintiff may file a response in chambers not later than fifteen (15) days
thereafter. If any briefs are filed, the post-trail motion will be decided on the
briefs unless there is a request in the briefs for oral argument.
By the Court,
•"?Za
Ed r B. Bayley, J.
Aobert B. Hoffman, Esquire
For Plaintiff
? lchard H. Wix, Esquire ,
For Defendants
:sal pl-ly-0`I
LOUIS J. CAPOZZI, JR., : IN THE COURT OF COMMON PLEAS OF
Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA
V. CIVIL ACTION - LAW
LATSHA & CAPOZZI, P.C.,
KIMBER L. LATSHA,
GLENN R. DAVIS, AND 97-5584 CIVIL TERM
DOUGLAS C. YOHE, 99-3981 CIVIL TERM
ncfanriantG 99-3542 CIVIL TERM /
TRANSCRIPT OF PROCEEDINGS
Proceedings held before the
HONORABLE EDGAR B. BAYLEY, J.,
Cumberland County Courthouse, Carlisle, Pennsylvania,
on September 17, 2003,
in Courtroom Number Two.
I APPEARANCES:
ROBERT B. HOFFMAN, Esquire
For the Plaintiff
RICHARD H. WIX, Esquire
For the Defendants
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
Latsha, Davis & Yohe, P.C., f/k/a Latsha &
Capozzi, P.C., Kimber L. Latsha, Glenn R. Davis,
and Douglas C. Yohe,
Plaintiffs,
V.
Capozzi & Associates, P.C.
To the Prothonotary:
Civil Action No. 99-3542
Defendant
PRAECIPE TO DISCONTINUE
Please discontinue the above-captioned matter pursuant to Rule 229, Pa.R.C.P.
.lam
Richard H. Wix, Esquire
Wix, Wenger & Weidner
705 Duke Street
Harrisburg, PA 17109-3099
N
C C7 F
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