Servin, J. v. Duane Morris LLP ( 2018 )

J-A03018-18
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
JEFFREY D. SERVIN, ESQUIRE AND : IN THE SUPERIOR COURT OF
OSAGE CORP., D/B/A FIRST CITY : PENNSYLVANIA
COMMUNICATIONS, INC. :
:
Appellant :
:
:
v. :
: No. 1543 EDA 2017
:
DUANE MORRIS LLP :
Appeal from the Order Entered April 18, 2017
In the Court of Common Pleas of Philadelphia County Civil Division at
No(s): December Term, 2016 No. 002825
BEFORE: GANTMAN, P.J., McLAUGHLIN, J., and PLATT*, J.
MEMORANDUM BY McLAUGHLIN, J.: FILED MARCH 13, 2018
Jeffrey D. Servin, Esquire, and Osage Corp., d/b/a First City
Communications, Inc. (“FCC”) (together “Appellants”) appeal from the order
sustaining Duane Morris’s Preliminary Objections and dismissing the claims
asserted in the Amended Complaint. We affirm.
Appellants asserted legal malpractice and misrepresentation claims
against Duane Morris based on Duane Morris’s representation of FCC and
Leonard Berwick, who is not a party to the present litigation, in an appeal to
the United States Court of Appeals for the Second Circuit. Servin and Berwick
are shareholders of FCC. The appeal was from an order dismissing tort claims
filed in the United States District Court for the Southern District of New York.
______________________________
* Retired Senior Judge assigned to the Superior Court.
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In the underlying federal litigation, Berwick and Servin alleged that they,
through FCC, had a business arrangement with Jamaica Fibre Optic Cable Co.
Ltd. (“JFOC”) that gave them rights to a government fiber optics license in
Jamaica. See Preliminary Objections, filed 1/27/17, at Ex. 3, Op. and Order,
No. 06 Civ. 2641, at 1 (S.D.N.Y. filed 3/28/07) (“District Ct. Op.”).1 They then
attempted to acquire, through FCC, a company that owned a fiber optic ring
connecting to locations in the Caribbean (“New World”). Id. When they sought
financing to purchase New World, however, a competing bidder for New World,
Columbus Communications, Ltd. (“Columbus”), allegedly made mis-
representations about JFOC’s fiber optics rights in Jamaica that ultimately
resulted in the failure of their attempt to purchase New World. Id. Berwick,
Servin, and FCC then brought the federal suit against Columbus and other
defendants, claiming interference with prospective contractual relations and
other torts. Id.
The federal district court dismissed the suit for lack of standing. The
court explained that the plaintiffs’ claims were based on “alleged tortious
statements [that] reflected on the validity of JFOC’s license to conduct fiber
optics business in Jamaica.” District Ct. Op. at 19-21. The district court found
the license was owned by JFOC and “the alleged ‘joint enterprise’ between the
plaintiffs and JFOC—or JFOC itself if it was held as a partnership—was the only
entity with standing to bring” the suit. Id. at 21. The district court also found,
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1Servin v. New World Network Int’l, Ltd., No. 06 Civ. 2641, 2007 WL
949767, at *1 (S.D.N.Y. Mar. 28, 2007).
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in the alternative, that it lacked jurisdiction over Columbus and that the
plaintiffs failed to state claims on which relief could be granted. Id. at 21-44.
The plaintiffs in the federal litigation filed an appeal to the Second
Circuit. Duane Morris agreed to represent Berwick and FCC on appeal and
entered its appearance. Servin represented himself. Servin filed a brief with
the Second Circuit, which included arguments that the plaintiffs in the federal
litigation had standing and that the interference with prospective contractual
relations claim had merit. Preliminary Obj., at Ex.4, Brief of Appellant at 24-
29, 34-35, No. 15-1630 (2d Cir. filed 9/9/2015) (“Servin Second Circuit Br.”).
Duane Morris did not file a brief on behalf of Berwick and FCC, and the Second
Circuit dismissed their appeals for failure to file a brief. Regarding Servin’s
appeal, the Second Circuit affirmed the trial court’s order, stating it had
“considered all of Servin’s arguments and f[ound] them to be without merit.”
Preliminary Obj., filed 1/27/17, at Ex. 5, Order, No. 15-1630 (2d Cir. filed Apr.
26 2016). It affirmed “for substantially the reasons stated in the [d]istrict
[c]ourt’s thorough and comprehensive opinion.” Id.
Appellants then filed the instant action against Duane Morris and filed a
Complaint and Amended Complaint. In the Amended Complaint, Appellants
alleged that “[a]fter performing its due diligence and carefully evaluating the
merit of the underlying case/appeal,” Duane Morris agreed to represent
Berwick and FCC and would file a brief on their behalf, and that Servin would
file a separate brief. Amended Complaint, filed 2/16/17, at ¶¶ 19, 28.
Appellants averred that during an “early to mid-August 2015 meeting, [Duane
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Morris] for the first time made comments that Servin, Berwick and FCC never
closed on the initial Jamaica deal, and that they were therefore concerned
about the validity of” the claim. Id. at ¶ 36. Duane Morris informed Servin
they were considering not filing a brief in the Second Circuit, id. at ¶ 37, and
Servin responded that they had an obligation to do so and “I assume that you
will file a timely brief.” Id. at ¶ 39. Servin received a “panicked phone call”
from Duane Morris the day before the brief was due “requesting Servin’s
permission to not file an appellate brief.” Id. at ¶ 41. Servin refused;
nonetheless, Duane Morris did not file a brief. Id. at ¶¶ 42, 50. Appellants
also claimed that Duane Morris stated it would seek an extension of time to
file a brief, but failed to do so. Id. at ¶¶ 130-131. Appellants alleged that as
a direct consequence of Duane Morris’s failure to file a brief, the Second Circuit
dismissed FCC’s and Berwick’s appeals, and that “[w]ithout FCC’s claims, the
[Second Circuit] did not evaluate the merits of Servin’s claims.” Id. at ¶ 75-
76.
Appellants asserted legal malpractice claims, based on tort and contract
theories, and misrepresentation claims based on Duane Morris’s alleged
representations that it would file an appellate brief and would request an
extension of time to do so. Duane Morris filed Preliminary Objections
asserting, among other things, that the claims were legally insufficient
because Appellants could not establish the “case within a case” element of the
legal malpractice claims and could not establish the causation and damages
elements of the misrepresentation claims. On April 18, 2017, the trial court
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sustained the Preliminary Objections, and dismissed the claims asserted in the
Amended Complaint with prejudice for failure to state a claim upon which relief
could be granted.
In its opinion pursuant to Pennsylvania Rule of Appellate Procedure
1925(a), the trial court explained that “[a]s a matter of law, [Appellants]
would never have prevailed on appeal in the [federal litigation], no matter
how many briefs Duane Morris filed, because they lacked, and continue to
lack, standing to assert the claims they raised in the [federal litigation].” Trial
Court Opinion, filed Aug. 23, 2017, at 5 (“1925(a) Op.”). The trial court noted
that to establish a legal malpractice claim, a plaintiff must prove he or she had
a viable underlying cause of action. Because Appellants would not be able to
establish they could have obtained a judgment in the federal litigation, they
could not establish a legally compensable injury to support the malpractice
claims. Id. at 5-6. Further, the trial court found Appellant’s misrepresentation
claims fail because they are unable to show they were damaged by any alleged
false statement. Id. at 6.
Servin raises the following issues on appeal:
1) Since JFOC was acquired and owned by FCC in 2004, it
must be assumed as true that FCC was the proper corporate
Plaintiff, who had standing in the underlying NY District
Court case and that JFOC was not a needed party and
[Duane Morris] was aware of this when they took the case
for FCC 8 months before they refused to file a Brief.
2) Do [Appellants’] averments in the amended complaint, if
proven, support the causes of action averred in the
amended complaint?
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3) Did an implied third party benefit attorney–client
relationship form between [Duane Morris] and Servin as
averred in Counts I and II of the amended complaint?
4) Was Servin as a 50% owner of [Duane Morris’s]
undisputed client FCC an intended beneficiary of the
agreement between FCC and [Duane Morris]?
5) Have [Appellants] sufficiently alleged claims for
misrepresentation when [Duane Morris] represented it
would be filing an opposition and when [Duane Morris]
represented it had requested an extension of time to file its
appellate brief?
6) Would the outcome of FCC and Servin’s appeal been
different had an appellate brief been filed on behalf of
Berwick and FCC?
Appellants’ Br. at 4. Although stated as six issues, Appellants essentially claim
that the trial court erred in dismissing their legal malpractice and
misrepresentation claims and that Servin was either an intended beneficiary
or third-party beneficiary to Duane Morris’s attorney-client relationship with
Berwick and FCC.
We apply the following standard of review to a trial court order
sustaining preliminary objections:
Our standard of review of an order of the trial court
overruling or granting preliminary objections is to determine
whether the trial court committed an error of law. When
considering the appropriateness of a ruling on preliminary
objections, the appellate court must apply the same
standard as the trial court.
Preliminary objections in the nature of a demurrer test the
legal sufficiency of the complaint. When considering
preliminary objections, all material facts set forth in the
challenged pleadings are admitted as true, as well as all
inferences reasonably deducible therefrom. Preliminary
objections which seek the dismissal of a cause of action
should be sustained only in cases in which it is clear and free
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from doubt that the pleader will be unable to prove facts
legally sufficient to establish the right to relief. If any doubt
exists as to whether a demurrer should be sustained, it
should be resolved in favor of overruling the preliminary
objections.
Joyce v. Erie Ins. Exch., 74 A.3d 157, 162 (Pa.Super. 2013) (citation
omitted).
Although a court on preliminary objections to a complaint must as a
general rule accept as true facts alleged in the complaint, that general rule
has an exception. Where a plaintiff avers the existence of a document and
relies on it to establish a claim, a defendant may attach the document to its
preliminary objections and the court may consider it in ruling on the
preliminary objections. Detweiler v. Sch. Dist. of Borough of Hatfield, 104
A.2d 110, 113 (Pa. 1954); Regal Indus. Corp. v. Crum and Forster, Inc.,
890 A.2d 395, 398-99 (Pa.Super. 2005) (defendant properly attached
documents referenced in complaint to preliminary objections). 2 Here, in the
Amended Complaint, Appellants referenced the federal litigation filings,
including the district court opinion, the Second Circuit opinion, and Servin’s
brief. Therefore, Duane Morris properly attached them to its Preliminary
Objections and the trial court properly relied on them.
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2 See also Satchell v. Ins. Placement Facility of Pa., 361 A.2d 375, 377
(Pa.Super. 1976) (noting when plaintiff bases cause of action on a written
agreement, defendant may attach agreement to preliminary objections and
court may refer to it); cf. Jenkins v. County of Schuylkill, 658 A.2d 380,
383 (Pa.Super. 1995) (stating court need not accept as true allegations that
conflict with exhibits attached to complaint).
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Appellants maintain that because FCC’s appeal was dismissed for failure
to file a brief, the Second Circuit “was unable to fully address the merits of
[Servin’s] appeal and unable to address the merits of FCC’s appeal.”
Appellants’ Br. at 6. They argue the plaintiffs in the federal litigation had
standing to assert the claims alleged in the federal litigation.3
To succeed on a legal malpractice claim, a plaintiff must prove the
following elements: “1. The employment of the attorney or other basis for
duty; 2. The failure of the attorney to exercise ordinary skill and knowledge;
and 3. That such negligence was the proximate cause of damage to the
plaintiff.” Heldring v. Lundy Beldecos & Milby, P.C., 151 A.3d 634, 641
(Pa.Super. 2016). “An essential element to this cause of action is proof of
actual loss rather than a breach of a professional duty causing only nominal
damages, speculative harm or the threat of future harm.” Kituskie v.
Corbman, 714 A.2d 1027, 1030 (Pa. 1998). Accordingly, “collectability of
damages in the underlying action” must be part of the analysis. Id. As the
Pennsylvania Supreme Court explained:
A legal malpractice action is different because . . . a plaintiff
must prove a case within a case since he must initially
establish by a preponderance of the evidence that he would
have recovered a judgment in the underlying action . . . . It
is only after the plaintiff proves he would have recovered a
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3 Appellants claim they were relying on Duane Morris to address the
interference with prospective contractual relations claim, which, they allege,
Servin did not address in his brief because it was only viable as to FCC.
Contrary to Appellants’ suggestion, Servin’s brief to the Second Circuit in fact
addressed the interference with prospective contractual relations claim.
Servin’s Second Cir. Br. at 34-35.
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judgment in the underlying action that the plaintiff can then
proceed with proof that the attorney he engaged to
prosecute or defend the underlying action was negligent in
the handling of the underlying action and that negligence
was the proximate cause of the plaintiff’s loss since it
prevented the plaintiff from being properly compensated for
his loss.
Id. at 1030 (footnote omitted).
The district court concluded Servin, Berwick, and FCC lacked standing
to raise the claims asserted in the federal litigation. After considering Servin’s
brief and oral argument, including his claim that the plaintiffs in the federal
litigation had standing, the Second Circuit affirmed the district court’s order
for the reasons included in the district court opinion. Those reasons included
that only JFOC, or a joint venture with JFOC, would have standing to assert
the claims, which alleged the defendants made tortious statements regarding
a licensed owned by JFOC. Such reasoning would preclude any claim FCC had
against the defendants in the federal litigation. Accordingly, the Second Circuit
considered and rejected Appellants’ claim that the plaintiffs in the federal
litigation had standing to assert the claims raised therein.
Because Appellants lacked standing to assert the claims in the federal
litigation, they are unable to establish they would have succeeded on appeal
of the federal litigation, and, therefore, cannot establish their legal malpractice
claims. We conclude that the trial court did not err in sustaining Duane Morris’s
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Preliminary Objections to the legal malpractice claims for failure to state a
claim.4
Appellants also argue the trial court erred in dismissing the
misrepresentation claims, which were based on Duane Morris’s
representations that it would file a brief and that it asked the defendants in
the federal litigation for an extension of time to file an appellate brief.
Appellants argue they justifiably relied on these misrepresentations and if
Duane Morris had not made the misrepresentations, Servin would have
represented FCC. They further claim they were harmed by the
misrepresentations because they would have prevailed in the Second Circuit
had FCC filed a brief.
To establish a negligent misrepresentation claim, a plaintiff must prove:
“(1) a misrepresentation of a material fact; (2) made under circumstances in
which the misrepresenter ought to have known its falsity; (3) with an intent
to induce another to act on it; and; (4) which results in injury to a party acting
in justifiable reliance on the misrepresentation.” Bortz v. Noon, 729 A.2d
555, 561 (Pa. 1999).
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4 In addition to finding the plaintiffs lacked standing, the district court found,
in the alternative, that it lacked jurisdiction over Columbus and that all claims
lacked merit. Appellants maintain that the district court erred in concluding it
lacked jurisdiction over Columbus; finding that New York law should apply to
the claims; and concluding that Columbus’ claim to have an exclusive license
was not defamatory. The Second Circuit affirmed the district court order after
considering Servin’s arguments, which also raised these issues. Appellants
cannot re-litigate the claims here.
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The trial court determined that the Amended Complaint failed to plead
facts to support a conclusion that Appellants were injured because of any
justifiable reliance on a representation made by Duane Morris. 1925(a) Op. at
6-7. The court reasoned that no legally cognizable injury occurred because
they could not establish they would have prevailed in the federal litigation. Id.We agree and conclude the trial court did not err in finding Servin and FCC
failed to state a misrepresentation claim upon which relief could be granted.
Because Appellants’ claims failed on other grounds, we need not address
Servin’s claim that he was an intended or third-party beneficiary.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/13/18
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