HomeMy WebLinkAbout2009-4586 Civil
RANDALL WAGNER, : IN THE COURT OF COMMON PLEAS OF
JOHN JARBOE, LARRY : CUMBERLAND COUNTY, PENNSYLVANIA
L. HATTER, :
JAMES J. GREEN, SR., :
KEITH HOSTLER, :
ANGELA HICKEY, :
ORREL E. : CIVIL ACTION
PICKLESIMER, :
EXECUTOR OF THE :
ESTATE OF EDSEL :
PICKLESIMER, :
DECEASED, MARK :
RANDALL and NEIL :
BARR, :
Plaintiffs :
:
v. :
:
THOMAS J. AHRENS, :
ESQUIRE and AHRENS :
LAW FIRM, P.C., :
Defendants : No. 09-4586 CIVIL TERM
IN RE: DEFENDANTS’ PRELIMINARY OBJECTIONS
TO PLAINTIFFS’ AMENDED COMPLAINT
BEFORE HESS, OLER and GUIDO, JJ.
OPINION and ORDER OF COURT
OLER, J., October 23, 2009.
In this civil case, nine plaintiffs have sued an attorney and his law firm for
professional negligence, negligent misrepresentation, and breach of fiduciary duty
in connection with advice allegedly provided to Plaintiffs in the course of
Defendants’ legal representation that Plaintiffs invest in a certain third-party Ponzi
12
scheme. Damages claimed by Plaintiffs exceed eight million dollars.
1
Plaintiffs’ Amended Complaint, filed September 3, 2009 (hereinafter Plaintiffs’ amended
complaint).
2
Plaintiffs’ Amended Complaint, ad damnum clause.
For disposition at this time are preliminary objections filed by Defendants
3
to Plaintiffs’ amended complaint. Defendants seek a dismissal of Plaintiffs’
4
pleading on the basis of (a) improper joinder of parties, (b) failure to plead
5
separate causes of action in separate counts, (c) failure to state a claim for
6
professional negligence, and (d) failure to state a claim for breach of fiduciary
7
duty. In addition, Defendants request that the court strike from Plaintiffs’
complaint (a) a paragraph including references to certain Rules of Professional
8
Responsibility allegedly violated by Defendants as impertinent and (b) language
seeking “all such further relief that the Court determines to be appropriate,” on the
theory that such language would subject Defendants to unlimited remedial
9
consequences.
For the reasons stated in this opinion, Defendants’ preliminary objections
will be denied.
STATEMENT OF FACTS
10
The allegations of Plaintiffs’ complaint may be summarized as follows:
Plaintiffs are eight adult individuals suing in their individual capacities and one
11
personal representative suing on behalf of a decedent’s estate. Defendants are an
attorney practicing in Cumberland County and his law firm, a professional
12
corporation.
3
Preliminary Objections by Thomas J. Ahrens, Esquire, and Ahrens Law Firm, P.C. to Plaintiffs’
Amended Complaint, filed September 23, 2009 (hereinafter Defendants’ preliminary objections).
4
Defendants’ preliminary objections, ¶¶47-55.
5
Defendants’ preliminary objections, ¶¶56-58.
6
Defendants’ preliminary objections, ¶¶61-94.
7
Defendants’ preliminary objections ¶¶99-105.
8
Defendants’ preliminary objections, ¶¶95-98.
9
Defendants’ preliminary objections, ¶¶106-109.
10
In summarizing the allegations of the amended complaint, the court is in no way expressing a
view as to their accuracy.
11
Plaintiffs’ amended complaint, ¶¶7-15.
12
Plaintiffs’ amended complaint, ¶¶16-19.
2
At all times pertinent to this action, an attorney-client relationship existed
13
between each Plaintiff and Defendants. As to each Plaintiff, the relationship
involved financial planning, estate planning, and/or estate representation services
14
provided by Defendants.
At various times in the fall of 2008 and winter of 2008-2009, Defendants
“solicited funds from Plaintiffs for ‘loans’ or for alleged ‘investments’ in gold
futures and other commodities with Pennsylvania resident Alfred Madeira and
15
Florida residents Sean Healy . . . and Shalese Healy . . . .” Defendants actively
promoted the enterprise as “an attractive moneymaking opportunity whereby
16
Plaintiffs could achieve an extraordinarily high rate of return with no risk,”
promising “rates of return between 20% and 150% within a few months” and
17
guaranteeing that, “at worst, Plaintiffs’ principal would be returned in full.”
Defendants did not disclose to any of the Plaintiffs that they anticipated payments
from Mr. Madeira and/or the Healys for legal services in the amount of
18
$8,700,000.
Each Plaintiff reasonably assumed that the advice regarding the
loans/investments was provided by Defendants as part of their legal
1920
representation, and Defendants did not suggest otherwise.
Plaintiffs collectively invested or loaned a total of $8,871,400 in or to the
2122
said enterprise, which, unbeknownst to either Plaintiffs or Defendants, was in
13
Plaintiffs’ amended complaint, ¶23.
14
Plaintiffs’ amended complaint, ¶¶35-36, 60-61, 79, 88, 97-98, 111, 122-23, 132-34,
15
Plaintiffs’ amended complaint, ¶4.
16
Plaintiffs’ amended complaint, ¶26.
17
Plaintiffs’ amended complaint, ¶27.
18
Plaintiffs’ amended complaint, ¶31.
19
Plaintiffs’ amended complaint, ¶¶56, 74, 85, 94, 105, 118, 129, 143.
20
Plaintiffs’ amended complaint, ¶¶58, 75, 86, 95, 106, 119, 130, 144.
21
Plaintiffs’ amended complaint, ¶29.
22
Plaintiffs’ amended complaint, ¶34.
3
23
fact a Ponzi scheme. All of the money provided by Plaintiffs, with the exception
2425
of $150,000 of a Plaintiff who had provided $1,850,000, has been lost.
Plaintiffs’ amended complaint contains nine Plaintiffs, but only three
counts. However, the facts specific to the various Plaintiffs are separately
2627
segregated in the pleading. In addition, the amounts of money provided and
28
lost by each Plaintiff are particularized.
The count in which Plaintiffs assert their claims for professional negligence
on the part of Defendants alleges such negligence in the following particulars, in
paragraph 148:
Defendants . . . failed to investigate whether Mr. or Mrs. Healy were
licensed brokers, whether they actually were purchasing gold futures and,
if so, what the actual results had been.
Defendants . . . (i) failed to keep Plaintiffs reasonably informed about
the status of the matter; (ii) failed to disclose conflicts of interest whereby
Defendants would obtain “fees” from Madeira and/or Mr. and Mrs. Healy
for “delivering” additional funds; and (iii) failed to explain the “loans” and
“investments” in such a manner to permit Plaintiffs to be reasonably
informed prior to forwarding funds.
Defendants . . . failed to disclose to Plaintiffs that Defendants
intended to earn approximately $16,000,000 for the legal services provided
to Plaintiffs and/or Madeira—all for work performed by one attorney and
one paralegal working part time for approximately nine months.
Defendants led Plaintiffs to believe that Defendants were representing
Plaintiffs when, in fact, Defendants . . . did not believe that they were
representing Plaintiffs but instead believed that they were representing
Madeira who had interests adverse to those of Plaintiffs inasmuch as
Madeira was borrowing funds from Plaintiffs and/or investing Plaintiffs’
funds. Moreover, Defendants attempted to protect friends and family by
23
Plaintiffs’ amended complaint, ¶5.
24
Plaintiffs’ amended complaint, ¶71, 76.
25
Plaintiffs’ amended complaint, ¶¶59, 87, 96, 107, 120, 131, 145.
26
Plaintiffs’ amended complaint, ¶¶35-59 (Wagner and Jarboe), 60-76 (Hatter), 77-87 (Green),
88-96 (Hostler), 97-107 (Hickey), 108-20 (Picklesimer, personal representative), 121-131
(Randall), 132-145 (Barr).
27
Plaintiffs’ amended complaint, ¶¶55 (Wagner and Jarboe), 71 (Hatter), 84 (Green), 92
(Hostler), 104 (Hickey), 117 (Picklesimer, personal representative), 127 (Randall), 140 (Barr).
28
Plaintiffs’ amended complaint, ¶29.
4
providing security interests in real property to the detriment of other
clients, including Plaintiffs.
Defendants . . . (i) failed to fully disclose the terms of the transactions
with Plaintiffs; (ii) failed to transmit the terms of the transactions in
writing; (iii) failed to advise Plaintiffs to consult with independent counsel;
(iv) failed to advise Plaintiffs that Defendants also had entered into the
same or similar transactions with Madeira and Mr. and Mrs. Healy; (v)
failed to advise Plaintiffs that Defendants would obtain a fee for their legal
services from third persons in an amount roughly equal to the Plaintiffs’
principal contribution; and (vi) failed to advise whether Defendants were
representing Plaintiffs in the transactions.
Defendants . . . used information regarding Plaintiffs’ net worth and
liquid assets disclosed to Defendants only through confidential attorney-
client communications and exploited such information for the benefit of
Defendants and the detriment of Plaintiffs.
Defendants . . . (i) gave legal advice to Plaintiffs when Defendants did
not believe that they were representing Plaintiffs; (ii) failed to advise
Plaintiffs to secure other counsel; (iii) failed to advise Plaintiffs regarding
Defendants’ role in the transactions; and (iv) failed to correct any
misunderstandings that Plaintiffs had that Defendants were not benefiting
29
substantially from Plaintiffs’ “loans” or “investments.”
These specific acts or omissions are referenced in the above sub-paragraphs to
various Rules of Professional Conduct which purportedly deem them improper,
30
and are each alleged to have deviated from the professional standard.
Finally, Plaintiffs’ claim for relief as to each of the three causes of action
requests an award of money damages “plus costs, interest and all such further
31
relief that the Court determines to be appropriate.”
DISCUSSION
Misjoinder of plaintiffs. Under Pennsylvania Rule of Civil Procedure
2229(a), it is provided as follows:
Persons may join as plaintiffs who assert any right to relief jointly,
severally, separately or in the alternative, in respect of or arising out of the
same transaction, occurrence, or series of transactions or occurrences if
any common question of law or fact affecting the rights to relief of all such
persons will arise in the action.
29
Plaintiffs’ amended complaint, ¶148.
30
Plaintiffs’ amended complaint, ¶148.
31
Plaintiffs’ amended complaint, ad damnum clauses.
5
In the present case, Plaintiffs’ claims against Defendants, if true, are based
upon a series of transactions having common questions of law or fact in the form
of issues as to whether Defendants engaged in a process whereby they utilized
their legal representation of clients to benefit a certain financial enterprise and
whether, if so, the method of operation employed in performing these
representative services fell below the applicable professional standard of care
owed to the clients.
Accordingly, Defendants’ request that Plaintiffs’ amended complaint be
dismissed on the basis of a misjoinder of plaintiffs will be denied.
Failure to plead separate counts for all Plaintiffs. Under Pennsylvania Rule
of Civil Procedure 1020(b), it is provided as follows:
If persons join as plaintiffs under Rule[] . . . 2229(a) . . . , the
complaint shall state the cause of action, any special damage, and the
demand for relief of each plaintiff in a separate count, preceded by a
heading naming the parties to the cause of action therein set forth.
However, Pennsylvania Rule of Civil Procedure 126 cautions against an
unnecessary elevation of form over substance:
The rules shall be liberally construed to secure the just, speedy and
inexpensive determination of every action or proceeding to which they are
applicable. The court at every stage of any such action or proceeding may
disregard any error or defect of procedure which does not affect the
substantive rights of the parties.
In this case, Plaintiffs’ amended complaint contains the information
required in Rule 1020(b) as to each Plaintiff, in a concise and understandable
form. To require strict adherence to the rule that the pleading be structured into
separate counts for each Plaintiff would, at this point, serve only to (a) expand the
volume, repetitiveness and complexity of the pleading without adding to its
substance or clarity and (b) delay the action. Accordingly, Defendants’ request
that Plaintiffs’ amended complaint be dismissed on the basis of a failure to plead
separate counts for all Plaintiffs will be denied.
Failure to state a claim for professional negligence. “When considering
preliminary objections in the nature of a demurrer, we must accept as true all well-
6
pleaded facts and any reasonable inferences thereto. The preliminary objections
may only be sustained where it is established with certainty that recovery is not
possible.” Quest Land Development Group, LLC v. Township of Lower
Heidelberg, 971 A.2d 540, 543 (Pa. Commw. Ct. 2009) (citations omitted).
“[A] claim of legal malpractice requires that the plaintiff plead the
following three elements: employment of the attorney or other basis for a duty; the
failure of the attorney to exercise ordinary skill and knowledge; and that the
attorney’s negligence was the proximate cause of damage to the plaintiff.” Steiner
v. Markel, 600 Pa. 515, ___, 968 A.2d 1253, 1255 (2009).
Under appropriate circumstances, professional liability may be incurred
when an attorney endorses a certain investment. See generally Westport Ins. Corp.
v. Bayer, 284 F.3d 489 (3d Cir. 2002).
Defendants maintain that “Plaintiffs do not establish an attorney-client
3233
relationship” and that “Plaintiffs do not allege actionable conduct” With
respect to the latter contention, Defendants argue that “Plaintiffs cannot base their
34
claim on alleged violations of the Rules of Professional Responsibility.”
Although Plaintiffs’ amended complaint may not “establish” an attorney-
client relationship with respect to the transactions at issue, it alleges the existence
of such a relationship and a conclusion at this stage of the proceeding that no such
relationship existed would be impermissibly preemptive. In addition, a fair reading
of the amended complaint reveals that references to the Rules of Professional
Responsibility are incidental to Plaintiffs’ claims for professional negligence
rather than essential to them. In this regard, the pleading sets forth a number of
specific acts and omissions on the part of Defendants which are alleged to have
fallen below the standard of care applicable to the profession.
32
Defendants’ preliminary objections, at 11.
33
Defendants’ preliminary objections, at 13.
34
Defendants’ preliminary objections, ¶87.
7
Accordingly, Defendants’ preliminary objections in the nature of a
demurrer to Plaintiffs’ claims for professional negligence will be denied.
Impertinent matter. Under Pennsylvania Rule of Civil Procedure
1028(a)(2), it is provided as follows:
Preliminary objections may be filed by any party to any
pleading . . . on the following ground[s]: . . . inclusion of scandalous
or impertinent matter . . . .
“To be scandalous and impertinent, the allegations must be immaterial and
inappropriate to the proof of the cause of action.” Jubelier v. Rendell, 904 A.2d
1030, 1035 (Pa. Commw. Ct. 2006) (quoting Common Cause/Pennsylvania v.
Commonwealth, 710 A.2d 108, 115 (Pa. Commw. Ct. 1998) (citations omitted.))
It is well settled that “simply because a lawyer’s conduct may violate the
rules of ethics does not mean that the conduct is actionable . . . .” Maritrans GP
Inc. v. Pepper, Hamilton & Scheetz, 529 Pa. 241, 255-256, 602 A.2d 1277, 1284
(1992). However, this principle is not to be construed as rendering conduct that
35
violates a given rule inactionable; indeed, ethics rules frequently embody
common law duties of professional care. Id. at 252, 602 A.2d at 1282. Thus, in
Maritrans the Pennsylvania Supreme Court reversed a lower court’s decision
which seemed to regard references to rules of ethics as fatal to a client’s action
against an attorney.
In the present case, as noted previously, references in paragraph 148 of
Plaintiffs’ amended complaint to the Rules of Professional Responsibility are
incidental to the fact-specific allegations of professional negligence, said to fall
below the applicable standard of care, contained therein. To strike the entire
paragraph from the amended complaint on the basis of incidental references to
rules of ethics would be to disregard the Supreme Court’s holding in Maritrans.
35
“The [lower 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 a disciplinary
violation. This is an inversion of logic and legal policy and misunderstands the history of the
disciplinary rules.” Maritrans GP Inc. v. Pepper, Hamilton & Scheetz, 529 Pa. 241, 257, 602
A.2d 1277, 1285 (1992).
8
Failure to state a claim for breach of fiduciary duty. The relationship
between an attorney and client has long been recognized as a fiduciary one. See,
e.g., Stockton v. Ford, 52 U.S. 232, 11 How. 232, 13 L.Ed 676 (1850).
At common law, an attorney owes a fiduciary duty to his client; such
duty demands undivided loyalty and prohibits the attorney from engaging
36
in conflicts of interest, and breach of such duty is actionable.
In the present case, while Defendants do not dispute this principle, they
maintain that no breach of such a duty has been successfully pled because an
attorney-client relationship between Defendants and Plaintiffs has not been
37
successfully pled. However, as noted previously, the court has been unable to
agree with Defendants on this point.
Accordingly, Defendants’ preliminary objections in the nature of a
demurrer to Plaintiffs’ claims for breach of fiduciary duty will be denied.
Impermissibly broad claim for relief. In Connor v. Allegheny General
Hospital, 501 Pa. 306, 461 A.2d 600 (1983), the Pennsylvania Supreme Court held
that the use of the language “otherwise failing to use due care and caution under
the circumstances” enabled the plaintiff to amend the complaint to specify “the
other ways in which [the defendant’ was negligent in [that] case.” Id. at 310, 461
A.2d at 602. The Court elaborated on this holding by noting that “[i]f [the
defendant] did not know how it ‘otherwise fail[ed] to use due care and caution
under the circumstances,’ it could have filed a preliminary objection in the nature
of a request for a more specific pleading or it could have moved to strike that
portion of [the plaintiff’s] complaint.” Id. at 311 n.3, 461 A.2d at 632 n.3. It is no
secret that this seemingly innocuous footnote has prompted a large increase in the
number of preliminary objections filed to complaints in the Commonwealth.
36
Maritrans GP Inc. v. Pepper, Hamilton & Sheetz, 529 Pa. 241, 253, 602 A.2d 1277, 1283
(1992).
37
Memorandum of Law in Support of Defendant[s’] Preliminary Objections to Plaintiff[s’]
Complaint, at 17.
9
In support of their position that language in Plaintiffs’ ad damnum clauses
requesting “such further relief as the court deems appropriate” should be stricken,
Defendants cite only Cicero v. Cominsky, 25 D. & C.4th 422 (Luzerne Co. 1995).
However, Cicero involves the typical negligence generality addressed in Connor,
and does not stand for the proposition that the rule of Connor should be applied to
language in a claim for relief.
The danger to Defendants in a case of the present type involving alleged
financial losses of being confronted with the prospect of a surprising remedy is
not, in the court’s view, comparable to that of a defendant in a negligence action
being confronted with an unexpected theory of liability in the midst of a trial. In
addition, the language complained of in Plaintiffs’ ad damnum clauses is
commonly employed in plaintiffs’ complaints and has, so far as can be
determined, not created problems for the defense. Under these circumstances, the
court is not disposed to use this case as a vehicle to extend the rule of Connor into
the area of ad damnum clauses.
For the foregoing reasons, the following order will be entered:
ORDER OF COURT
rd
AND NOW, this 23 day of October, 2009, upon consideration of the
Preliminary Objections by Thomas J. Ahrens, Esquire, and Ahrens Law Firm, P.C.
to Plaintiffs’ Amended Complaint, and for the reasons stated in the accompanying
opinion, the preliminary objections are denied and Defendants are afforded a
period of twenty days from the date of this order to file an answer to the amended
complaint.
BY THE COURT,
s/ J. Wesley Oler, Jr.
J. Wesley Oler, Jr., J.
10
Thomas R. Hurd, Esq.
Matthew A. Lipman, Esq.
McElroy, Deutsch, Mulvaney & Carpenter, LLP
One Penn Center at Suburban Station
1617 JFK Boulevard—Suite 1500
Philadelphia, PA 19103-1815
Attorneys for Plaintiffs
Jeffrey B. McCarron, Esq.
Robyn D. Finkelman, Esq.
Swartz Campbell LLC
Two Liberty Place
50 S. 16th Street, 28th Floor
Philadelphia, PA 19102
Attorneys for Defendants
11
12
RANDALL WAGNER, : IN THE COURT OF COMMON PLEAS OF
JOHN JARBOE, LARRY : CUMBERLAND COUNTY, PENNSYLVANIA
L. HATTER, :
JAMES J. GREEN, SR., :
KEITH HOSTLER, :
ANGELA HICKEY, :
ORREL E. : CIVIL ACTION
PICKLESIMER, :
EXECUTOR OF THE :
ESTATE OF EDSEL :
PICKLESIMER, :
DECEASED, MARK :
RANDALL and NEIL :
BARR, :
Plaintiffs :
:
v. :
:
THOMAS J. AHRENS, :
ESQUIRE and AHRENS :
LAW FIRM, P.C., :
Defendants : No. 09-4586 CIVIL TERM
IN RE: DEFENDANTS’ PRELIMINARY OBJECTIONS
TO PLAINTIFFS’ AMENDED COMPLAINT
BEFORE HESS, OLER and GUIDO, JJ.
ORDER OF COURT
rd
AND NOW, this 23 day of October, 2009, upon consideration of the
Preliminary Objections by Thomas J. Ahrens, Esquire, and Ahrens Law Firm, P.C.
to Plaintiffs’ Amended Complaint, and for the reasons stated in the accompanying
opinion, the preliminary objections are denied and Defendants are afforded a
period of twenty days from the date of this order to file an answer to the amended
complaint.
BY THE COURT,
__________________
J. Wesley Oler, Jr., J.
14
Thomas R. Hurd, Esq.
Matthew A. Lipman, Esq.
McElroy, Deutsch, Mulvaney & Carpenter, LLP
One Penn Center at Suburban Station
1617 JFK Boulevard—Suite 1500
Philadelphia, PA 19103-1815
Attorneys for Plaintiffs
Jeffrey B. McCarron, Esq.
Robyn D. Finkelman, Esq.
Swartz Campbell LLC
Two Liberty Place
50 S. 16th Street, 28th Floor
Philadelphia, PA 19102
Attorneys for Defendants