Dougherty, J. v. Pepper Hamilton , 133 A.3d 792 ( 2016 )

J-A28043-15
2016 Pa. Super. 23
JOHN J. DOUGHERTY, IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
PEPPER HAMILTON LLP, AMY B.
GINENSKY, MICHAEL E. BAUGHMAN,
PETER M. SMITH AND RAPHAEL
CUNNIFF,
Appellees No. 2455 EDA 2014
Appeal from the Order Dated July 29, 2014
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): February Term, 2013 No. 00848
BEFORE: GANTMAN, P.J., SHOGAN, and LAZARUS, JJ.
OPINION BY SHOGAN, J.: FILED FEBRUARY 03, 2016
Appellant, John J. Dougherty, appeals from the order granting
summary judgment in favor of Pepper Hamilton LLP (“Pepper Hamilton”),
and its attorneys Amy B. Ginensky, Michael E. Baughman, Peter M. Smith,
and Raphael Cunniff (collectively “Appellees”), in this civil action alleging
breach of fiduciary duty and breach of contract. For the reasons that follow,
we reverse and remand for further proceedings.
We summarize the protracted history of this case as follows. On
October 30, 2003, Appellant retained Pepper Hamilton to represent him in
relation to a federal matter involving a grand jury subpoena he received.
Although Appellant was not the target of the grand jury investigation, an FBI
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Affidavit was filed to secure a search of Appellant’s residence (“the FBI
Affidavit”).1 Appellant has alleged that he provided Pepper Hamilton
unfettered access to documents during the firm’s representation of
Appellant. Also, counsel from Pepper Hamilton was present during the
execution of the search warrant at Appellant’s home in November of 2006.
Initially, the FBI Affidavit securing the search warrant was under seal,
but, somehow, the FBI Affidavit inadvertently became attached to a
document presented in an unrelated criminal matter involving an unrelated
person named “Donald Dougherty, Jr.” According to Appellant, on
January 30, 2008, the federal government filed a response to
Donald Dougherty Jr.’s motion to suppress evidence, which was entered as
Document No. 27 on the federal criminal docket for the prosecution of
Donald Dougherty, Jr. (“Document No. 27”). This filing was allegedly made
under “restricted status.” Civil Complaint, 2/13/13, at 7.2 Document No. 27
referenced, as Exhibit “A,” a copy of an affidavit by an FBI agent in support
of the issuance of a search warrant for Donald Dougherty, Jr.’s premises.
____________________________________________
1
Pepper Hamilton represented Appellant until February 2007, and Appellant
paid Pepper Hamilton approximately $200,000.00 for legal services.
2
Documents filed on the federal court’s PACER system are publicly available
for a fee to those who have registered for and received a PACER account.
However, in his memorandum of law in support of his response to Pepper
Hamilton’s motion for summary judgment, Appellant asserts that a
document on “restricted status” is unavailable to anyone but the court and
the parties. Memorandum of Law in Support of Plaintiff’s Response in
Opposition to Defendants’ Motion for Summary Judgment, at 5, n.5.
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However, the affidavit that was attached to Document No. 27 as Exhibit “A”
was actually the FBI Affidavit in support of the search of Appellant’s
premises. Id.
At least some of the documents in Donald Dougherty Jr.’s case were
filed under seal and, thus, not accessible to the public. Subsequently,
however, in April of 2008, certain documents in Donald Dougherty Jr.’s case
were unsealed by Judge Robreno of the United States District Court for the
Eastern District of Pennsylvania. More specifically, Judge Robreno’s April 11,
2008 order authorized the eastern district Clerk of Court to lift the seal on
Documents 31, 32, 48 and 38. Appellant alleges that Document No. 27 was
also, albeit mistakenly, removed from “restrictive status” around this time.
Complaint, 2/11/13, at 8 ¶ 24.
When Appellant was running for a vacant seat in the Pennsylvania
Senate in April of 2008, the Philadelphia Inquirer (“the Inquirer”) published
several articles about Appellant. The articles implied that Appellant had
engaged in criminal conduct in the past and was likely to do so again if
elected to the Pennsylvania Senate. In March of 2009, Appellant initiated a
defamation suit against the Inquirer in state court. In 2011,
Pepper Hamilton assumed representation of the defense for the Inquirer in
the defamation suit filed by Appellant. In 2012, Pepper Hamilton informed
the trial court that the defense of the defamation action would rely on
information relating to the federal investigation in which Pepper Hamilton
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had previously represented Appellant. In 2013, Appellant moved to have
Pepper Hamilton removed as defense counsel in his defamation action
against the Inquirer. The trial court denied the motion to disqualify Pepper
Hamilton. On appeal this Court reversed the decision of the trial court and
remanded the matter for the entry of an order barring Pepper Hamilton and
its attorneys from representing the Inquirer. Dougherty v. Philadelphia
Newspapers, LLC, et al., 85 A.3d 1082 (Pa. Super. 2014).
On December 10, 2012, while Pepper Hamilton and its attorneys were
still representing the Inquirer, the firm filed a motion for summary judgment
in the defamation suit and included in the attached exhibits a copy of the FBI
Affidavit. On December 12, 2012, the Inquirer then published a front-page
article, which included detailed references to the FBI Affidavit.3
____________________________________________
3
Appellant filed a motion to strike the FBI Affidavit and place it under seal.
The trial court initially granted the motion to place the FBI Affidavit under
seal, but Judge Rau then lifted the seal when she denied the motion to strike
and granted summary judgment in favor of the Inquirer on April 28, 2014.
This Court subsequently affirmed the trial court’s grant of summary
judgment in the defamation lawsuit. Dougherty v. Philadelphia
Newspapers, L.L.C., et al., 1635 EDA 2014, ___ A.3d ___, (unpublished
memorandum) (Pa. Super. filed October 14, 2015), reargument denied, ___
A.3d ___ (Pa. Super. December 23, 2015). Appellant also sought injunctive
relief in the United States District Court for the Eastern District of
Pennsylvania with regard to the sealing of the FBI affidavit in state court, to
no avail. United States of America v. Donald Dougherty, Jr., John J.
Dougherty, Appellant, No. 14-3498 (3rd Cir. filed February 12, 2015)
(unpublished opinion), cert. denied, 136 S. Ct. 110 (2015). However, on
December 17, 2012, the district court granted the federal government’s
request to have the FBI Affidavit removed from the [Donald Doughty Jr.]
file. Id. at *3.
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On February 11, 2013, Appellant initiated the instant action by filing a
complaint against Appellees alleging breach of fiduciary duty and breach of
contract. Appellant alleged that, in representing the Inquirer in the
defamation suit, Pepper Hamilton acted against the interests of Appellant, its
former client. The trial court has summarized the subsequent procedural
history of this case as follows:
[Appellees] filed Preliminary Objections on April 3, 2013. These
Preliminary Objections were overruled by this Court by Order
dated June 18, 2013. An Answer was filed [by Appellees] on
July 8, 2013. On May 27, 2014, after some discovery was
conducted and a Revised Case Management Order entered,
[Appellees] filed a Motion for Summary Judgment. An Answer in
response to the Motion for Summary Judgment was filed [by
Appellant] on June 27, 2014. A Reply in Support of the Motion
for Summary Judgment was filed [by Appellees] on July 2, 2014.
A Supplemental Memorandum in Support of the Motion for
Summary Judgment was filed [by Appellees] on July 25, 2014,
and a Supplemental Memorandum in Opposition was filed [by
Appellant] on July 29, 2014. By Order dated July [29], 2014,
[and entered on the docket on July 30, 2014,] Summary
Judgment was granted.
Trial Court Opinion, 12/23/14, at 1. This timely appeal followed. Both
Appellant and the trial court have complied with Pa.R.A.P. 1925.
Appellant presents the following issues for our review:
A. Whether the Trial Court erred in granting [Appellees’] motion
for summary judgment on the mistaken basis that, because
Pepper’s breach of fiduciary duty was also a violation of the
Pennsylvania Rules of Professional Conduct, [Appellant] cannot
assert a claim against Pepper as a matter of law.
B. Whether the Trial Court erred in holding that [Appellees] were
entitled to summary judgment because, although they used
information against [Appellant] that is substantially related to
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their former representation of him, that information is publicly
available and thus cannot form the basis of a disloyalty claim.
C. Whether the Trial Court prematurely granted [Appellees]
motion for summary judgment where the parties had exchanged
limited written discovery and taken no depositions.
Appellant’s Brief at 2-3.
Each of Appellant’s issues challenges the propriety of the trial court’s
determination granting summary judgment. In reviewing matters of
summary judgment, we are governed by the following well-established
principles:
Our scope of review of an order granting summary
judgment is plenary. We apply the same standard as the trial
court, reviewing all the evidence of record to determine whether
there exists a genuine issue of material fact. We view the record
in the light most favorable to the non-moving party, and all
doubts as to the existence of a genuine issue of material fact
must be resolved against the moving party. Chenot v. A.P.
Green Services, Inc., 895 A.2d 55, 60-61 (Pa. Super. 2006)
(citation omitted).
Motions for summary judgment implicate the plaintiff’s
proof of the elements of his cause of action. Chenot, 895 A.2d
at 61 (citation omitted). Summary judgment is proper “if, after
the completion of discovery relevant to the motion, including the
production of expert reports, an adverse party who will bear the
burden of proof at trial has failed to produce evidence of facts
essential to the cause of action or defense which in a jury trial
would require the issues to be submitted to a jury.” Pa.R.C.P.
1035.2(2). In other words, “whenever there is no genuine issue
of any material fact as to a necessary element of the cause of
action or defense which could be established by additional
discovery or expert report,” Pa.R.C.P. 1035.2(1), and the
moving party is entitled to judgment as a matter of law,
summary judgment is appropriate. Thus, a record that supports
summary judgment either (1) shows the material facts are
undisputed or (2) contains insufficient evidence of facts to make
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out a prima facie cause of action or defense. Chenot, 895 A.2d
at 61.
When reviewing a grant of summary judgment, we are not
bound by the trial court’s conclusions of law, but may reach our
own conclusions. Id. We will disturb the trial court’s order only
upon an error of law or an abuse of discretion. “Judicial
discretion requires action in conformity with law on facts and
circumstances before the trial court after hearing and
consideration.” Chenot, 895 A.2d at 61 (citation omitted).
Consequently, the court abuses its discretion if, in resolving the
issue for decision, it misapplies the law, exercises its discretion
in a manner lacking reason, or does not follow legal procedure.
Id. (citation omitted).
Where the discretion exercised by the trial court is
challenged on appeal, the party bringing the challenge bears a
heavy burden. It is not sufficient to persuade the appellate court
that it might have reached a different conclusion if charged with
the duty imposed on the court below; it is necessary to go
further and show an abuse of the discretionary power. Chenot,
895 A.2d at 61 (citation omitted). An abuse of discretion is not
merely an error of judgment, but if in reaching a conclusion the
law is overridden or misapplied or the judgment exercised is
manifestly unreasonable or the result of partiality, prejudice,
bias or ill-will, as shown by the evidence or the record, discretion
is abused. Id. at 61-62 (citation omitted).
Continental Casualty Company v. Pro Machine, 916 A.2d 1111, 1115-
1116 (Pa. Super. 2007).
A legal malpractice claim based on breach of contract, “involves (1)
the existence of a contract, (2) a breach of a duty imposed by the contract,
and (3) damages.” Zokaites Contracting Inc. v. Trant Corp., 968 A.2d
1282, 1287 (Pa. Super. 2009). With respect to a legal malpractice claim
based on breach of contract, this Court has stated the following:
[T]he attorney’s liability must be assessed under the terms of
the contract. Thus, if the attorney agrees to provide … her best
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efforts and fails to do so, an action in assumpsit will accrue. An
attorney who agrees for a fee to represent a client is by
implication agreeing to provide that client with professional
services consistent with those expected of the profession at
large.
Fiorentino v. Rapoport, 693 A.2d 208, 213 (Pa. Super. 1997) (citations
omitted).
With respect to a breach of fiduciary duty claim, “a confidential
relationship and the resulting fiduciary duty may attach wherever one
occupies toward another such a position of advisor or counsellor as
reasonably to inspire confidence that he will act in good faith for the other’s
interest.” Basile v. H & R Block, Inc., 777 A.2d 95, 102 (Pa. Super.
2001). The leading case in Pennsylvania discussing breach of a fiduciary
duty by an attorney with regard to a conflict of interest is Maritrans GP
Inc. v. Pepper, Hamilton & Scheetz, 602 A.2d 1277 (Pa. 1992). In
Maritrans, our Supreme Court upheld the trial court’s issuance of a
preliminary injunction preventing Pepper Hamilton from representing its
former clients’ competitors. The Court found that a cause of action for
breach of a fiduciary duty against a law firm was actionable where the firm
acquired confidential information during the course of its representation. In
discussing actionability for breach of a fiduciary duty, our Supreme Court
reiterated the following long-standing principles:
Activity is actionable if it constitutes breach of a duty
imposed by statute or by common law. Our common law
imposes on attorneys the status of fiduciaries vis a vis their
clients; that is, attorneys are bound, at law, to perform their
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fiduciary duties properly. Failure to so perform gives rise to a
cause of action. It is “actionable.” . . .
At common law, an attorney owes a fiduciary duty to his
client; such duty demands undivided loyalty and prohibits the
attorney from engaging in conflicts of interest, and breach of
such duty is actionable.
Maritrans, 602 A.2d at 1283.
The Maritrans Court highlighted that Pepper Hamilton “was furnished
with substantial confidential commercial information” and “came to know the
complete inner-workings of the company along with Maritrans’ longterm
objectives, and competitive strategies[.]” Id. at 1280; see also id. at 1281
(Pepper Hamilton possessed “confidential commercial information in the
industry”). As explained by the Court, adherence to a fiduciary duty
“ensures that clients will feel secure that everything they discuss with
counsel will be kept in confidence” and that Pepper Hamilton “had a duty to
administer properly their responsibilities to respect the confidences of
Maritrans.” Id. at 1283-1284. It further explained that the rationale behind
this policy is to prevent an attorney from taking “undue advantage of the
confidential communications of such client[.]” Id. at 1284.
In reaching its determination, the Court in Maritrans emphasized the
confidential information that Pepper Hamilton garnered during the course of
its representations. See id. at 1286 (“The greater the involvement
[between the fiduciary and his former client], the greater the danger that
confidences (where such exist) will be revealed. Here Pepper [Hamilton]
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and [the particular attorney’s] involvement was extensive as was their
knowledge of sensitive information provided to them by Maritrans.”); id. at
1286-1287 (“As fiduciaries, Pepper [Hamilton] and [its attorney] can be fully
enjoined from representing Maritrans’ competitors as that would create too
great a danger that Maritrans’ confidential relationship with Pepper and [the
attorney] would be breached.”). Id. at 1287.
Pennsylvania Rule of Professional Conduct 1.9 further addresses
attorney duties to former clients and provides, in relevant part, as follows:
(a) A lawyer who has formerly represented a client in a
matter shall not thereafter represent another person in the same
or a substantially related matter in which that person’s interests
are materially adverse to the interests of the former client unless
the former client gives informed consent.
* * *
(c) A lawyer who has formerly represented a client in a
matter or whose present or former firm has formerly
represented a client in a matter shall not thereafter:
(1) use information relating to the
representation to the disadvantage of the
former client except as these Rules would permit
or require with respect to a client, or when the
information has become generally known; or
(2) reveal information relating to the
representation except as these Rules would permit or
require with respect to a client.
Pa.R.P.C. 1.9(a) & (c) (emphases added).
The explanatory comment to Rule 1.9(c) offers the following pertinent
insight:
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[8] Paragraph (c) provides that information acquired by the
lawyer in the course of representing a client may not
subsequently be used or revealed by the lawyer to the
disadvantage of the client. However, the fact that a lawyer
has once served a client does not preclude the lawyer from using
generally known information about that client when later
representing another client.
Pa.R.P.C. 1.9, cmt ¶ 8 (emphases added).
In addition, section 59 of the Restatement (Third) of the Law
Governing Lawyers defines the term “Confidential Client Information” as
“Confidential client information consists of information relating to
representation of a client, other than information that is generally
known.” (emphasis added). Comment b to the above definition explains
that “[t]he definition includes information that becomes known by others, so
long as the information does not become generally known.” Furthermore,
comment d states the following:
d. Generally known information. Confidential client
information does not include information that is generally
known. Such information may be employed by [a] lawyer who
possesses it in permissibly representing other clients (see § 60,
Comments g & h) and in other contexts where there is a specific
justification for doing so (compare Comment e hereto).
Information might be generally known at the time it is conveyed
to the lawyer or might become generally known thereafter. At
the same time, the fact that information has become known
to some others does not deprive it of protection if it has
not become generally known in the relevant sector of the
public.
Whether information is generally known depends on all
circumstances relevant in obtaining the information. Information
contained in books or records in public libraries, public-record
depositaries such as government offices, or in publicly accessible
electronic-data storage is generally known if the particular
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information is obtainable through publicly available
indexes and similar methods of access. Information is not
generally known when a person interested in knowing the
information could obtain it only by means of special
knowledge or substantial difficulty or expense. Special
knowledge includes information about the whereabouts or
identity of a person or other source from which the
information can be acquired, if those facts are not
themselves generally known.
A lawyer may not justify adverse use or disclosure of
client information simply because the information has
become known to third persons, if it is not otherwise
generally known. Moreover, if a current client specifically
requests that information of any kind not be used or disclosed in
ways otherwise permissible, the lawyer must either honor that
request or withdraw from the representation (see § 32; see also
§§ 16(2) & 21(2)).
Restatement (Third) of the Law Governing Lawyers § 59, cmt. d (emphases
added).
We further observe that there is no Pennsylvania case law directly on
point. However, as the Supreme Court of Ohio aptly stated in Akron Bar
Association v. Holder, 810 N.E.2d 426, 435 (Ohio 2004), “[A]n attorney is
not free to disclose embarrassing or harmful features of a client’s life just
because they are documented in public records or the attorney learned of
them in some other way.” Likewise, in Lawyer Disciplinary Board v.
McGraw, 461 S.E.2d 850 (W.Va. 1995), the Supreme Court of West Virginia
observed that “[t]he ethical duty of confidentiality is not nullified by the fact
that the information is part of a public record or by the fact that someone
else is privy to it.” Id. at 861-862.
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Here, the trial court concluded that because the FBI Affidavit was
inadvertently appended to a document in an unrelated criminal matter, the
information contained therein was public. Trial Court Opinion, 12/23/14, at
5. Specifically, the trial court stated that “the fact that the [FBI] Affidavit in
question was publicly available for many years precludes a determination
that the receipt of the improperly filed [FBI] Affidavit through a breach by
[Appellees] of the attorney[-]client relationship and duty of fidelity is
actionable.” Id.4
____________________________________________
4
We note that in its opinion of December 23, 2014, the trial court made the
following observation:
On April 11, 2008, the Honorable Eduardo C. Robreno of
the United States District Court for the Eastern District of
Pennsylvania held a public hearing to determine whether
documents filed in the Donald Dougherty criminal case which
mentioned or discussed [Appellant] should be publicly available.
[Appellant] herein requested that all such documents be
removed or restricted from the District Court’s online docket.
Judge Eduardo C. Robreno denied the request saying that the
document:
“was disclosed in the Affidavit and was litigated
openly for this court....three or four hours on one
day....so, the one interest that is being protected is
no longer at issue because it's already out in the
open.”
Trial Court Opinion, 12/23/14, at 3. However, we must mention that the
trial court’s observation is not supported by the record. First, Appellant was
not a party to the hearing held in federal court on April 11, 2008. Second,
our review of the transcript of April 11, 2008, reveals that Judge Robreno
was referencing Appellant’s connection or possible connection to the Donald
Dougherty, Jr. case, not a “document,” as being disclosed in the affidavit
(Footnote Continued Next Page)
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Our review of the record, in the light most favorable to Appellant as
the non-moving party, reflects that the trial court erred in granting summary
judgment in this case. Indeed, this case presents genuine issues of fact.
The record reveals that the FBI Affidavit in question became part of another
criminal matter through inadvertence. Even accepting that the FBI Affidavit
was publicly available through PACER prior to December 10, 2012, we are
left to ponder whether the FBI Affidavit was actually “generally known.” All
that is acknowledged at this point in the proceedings is that the FBI Affidavit
was inadvertently appended to a document in a case that did not involve
Appellant as a party. Therefore, it appears that such document was not
“indexed” under Appellant’s name and that a person interested in the FBI
Affidavit “could obtain it only by means of special knowledge.” See
_______________________
(Footnote Continued)
that was litigated in his court. Further, from a fair reading of the transcript
of April 11, 2008, it appears that the affidavit that Judge Robreno mentioned
was actually a different affidavit that pertained to Donald Dougherty, Jr.
Indeed, the record before us on appeal lacks any support for the FBI
Affidavit pertaining to Appellant being litigated openly, as indicated by the
trial court. Rather, it appears that the arguments and material submitted to
Judge Robreno dealt only with the naming of Appellant as the unidentified
union official in the Donald Dougherty, Jr. case, and not the FBI Affidavit.
Moreover, in stipulations reached by the instant parties, as read before
the federal court on June 5, 2014, the Assistant United States Attorneys
assigned to the Donald Dougherty, Jr. case did not know that a copy of the
FBI Affidavit had been included with Document 27 until December of 2012.
The stipulation specifies that at the time of the April 11, 2008, hearing
before Judge Robreno, the Assistant United States Attorneys did not know
that a copy of the FBI Affidavit had been inadvertently included with
Document 27 in Donald Dougherty, Jr.’s matter criminal matter. N.T.,
5/5/14, at 6-7.
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Restatement (Third) of the Law Governing Lawyers § 59, cmt. d.
Furthermore, it is unknown exactly how and when the FBI Affidavit came
into the possession of the Inquirer and eventually became the subject of an
article in the Inquirer during Pepper Hamilton’s representation of the
Inquirer. Whether Pepper Hamilton committed a breach of its duties to
Appellant depends on the answers to these questions. Thus, these questions
are sufficient to establish genuine issues of material fact regarding Pepper
Hamilton’s conduct. Contrary to the trial court’s conclusion, in the event
that the FBI Affidavit was not generally known information, it appears that
Pepper Hamilton breached its duty to Appellant as a former client and such
breach was actionable. Accordingly, we reverse the order granting summary
judgment.
Order reversed. Case remanded for further proceedings. Jurisdiction
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/3/2016
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