Pa. Supreme Court to Reconsider Validity of Legal Malpractice Claims Based on Settlement Advice

In 1991, the Pennsylvania Supreme Court created a bright-line rule barring certain types of legal malpractice claims. Specifically, if a client settled a lawsuit but ultimately was unhappy with the settlement, the client could only sue her lawyers for legal malpractice if the lawyers fraudulently induced her to settle. See Muhammad v. Strassburger, McKenna, Messer, Shilobod, & Gutnick, 587 A.2d 1346, 1358 (Pa. 1991). In such situations, claims based on negligence or breach of contract would not be cognizable. Id.

This bright-line rule has slowly eroded over the years. In Collas v. Garnick, 624 A.2d 117 (Pa. Super. 1993), for example, the Superior Court held that Muhammad did not bar claims based on inaccurate legal advice related to a settlement agreement. In that case, a lawyer advised that certain language in a settlement agreement would not affect the client’s ability to sue other potentially liable parties, but that advice turned out to be wrong. Id. at 119. After the plaintiff’s second lawsuit was dismissed based on the release she signed when settling the first lawsuit, the plaintiff sued her lawyer. Id. The trial court held that the plaintiff’s claims were barred by Muhammad, but the Superior Court reversed. The Superior Court noted that Muhammad dealt with clients who were dissatisfied with the amount of the settlement, whereas the clients in Collas were complaining that they were misinformed as to the effect of the settlement. Id. at 121. The Superior Court held that, in such circumstances, lawyers could be liable for malpractice if they failed to exercise the necessary degree of care. Id.

The Superior Court has since clarified when Muhammad bars legal malpractice claims arising from a settlement agreement and when it does not:

[If] a dissatisfied litigant merely wishes to second guess his or her decision to settle due to speculation that he or she may have been able to secure a larger amount of money, i.e.[,] “get a better deal[,]” the Muhammad rule applies so as to bar that litigant from suing his counsel for negligence. If, however, a settlement agreement is legally deficient or if an attorney fails to explain the effect of a legal document, the client may seek redress from counsel by filing a malpractice action sounding in negligence.

Banks v. Jerome Taylor & Assocs., 700 A.2d 1329, 1332 (Pa. Super. 1997).

The Supreme Court will now consider doing away with Muhammad altogether as part of its review of the Superior Court’s decision in Khalil v. Williams, 244 A.3d 830 (Pa. Super. 2021), allocatur granted 53 EAL 2021 (Pa. Aug. 3, 2021). In Khalil, the plaintiff claimed that she only signed the settlement agreement in question after asking her lawyers to add language making clear that her claims in a related lawsuit would not be affected. Khalil, 244 A.3d at 840-41. After the plaintiff signed the revised release, her counsel allegedly doctored the signed release to remove any limiting language. Id. Her claims thus sounded in fraud and were not barred by Muhammad. Id. Yet, the plaintiff also alleged legal malpractice claims based on negligence and breach of contract. While the plaintiff claimed on appeal that she pleaded facts alleging that her counsel gave incorrect advice about the legal effect of the settlement agreement in the alternative, the Superior Court disagreed. Id. The Superior Court found that the only allegations in the complaint supported the fraud claim, not any claims sounding in negligence or breach of contract. Id. at 841. The Superior Court thus affirmed the dismissal of those claims.

The Supreme Court has now agreed to consider two issues on appeal—whether the plaintiff sufficiently pleaded negligence or breach of contract and, if so, whether Muhammad continues to be valid. Depending on the Court’s outcome and reasoning, Khalil could prove to be very important for understanding both the pleading rules for legal malpractice claims in Pennsylvania, as well as the potential liability for lawyers when advising their clients to accept a settlement offer.

Changes to Notices of Appeal

On December 1, 2021, several welcome amendments to Rule 3 of the Federal Rules of Appellate Procedure will take effect (barring highly unlikely Congressional action). These changes clarify and simplify the requirements for notices of appeal.

First, the amendments make clear that a notice of appeal encompasses all interlocutory orders that merge into the designated judgment or appealable order. Appellants need not specifically designate such interlocutory orders in the notice.

Those provisions eliminate a waiver trap that some courts had created by holding that an appellant’s designation of certain interlocutory orders in the notice of appeal excluded review of undesignated orders. The amendments provide that designations of specific orders will not limit the scope of the notice of appeal without an express statement that the notice is so limited.

Second, the amendments make clear that a notice encompasses the final judgment when it identifies a final order that resolves all remaining claims or an order that resolves a post-judgment motion. That change removes waiver traps that had developed based on Rule 3’s prior requirement that a notice designate the “judgment.”

Some courts had held that where an appellant described a final order as an “order” rather than a “judgment,” the notice was limited to that order, excluding review of interlocutory orders that merged into the judgment. Likewise, some courts treated a notice of appeal that designated only an order disposing of a post-judgment motion as limited to that order, excluding review of the judgment itself. The amendments eliminate both traps.

While the amendments reflect the law that already governed in many jurisdictions, they are still a welcome change. The amendments eliminate ambiguity that had caused problems in certain jurisdictions and provide clarity for practitioners.

Henry Schein, Inc., II: Post-Argument Analysis

The Supreme Court heard argument in the second iteration of Henry Schein, Inc. v. Archer & White Sales, Inc., Case No. 19-963, (Henry Schein II) on December 8, 2020, which was broadcast live on CSPAN and is available here.  During the course of the argument and questioning, the Court made clear that it was only considering a narrow question:  Assume that the contract generally says that an arbitrator decides if a particular dispute must be arbitrated, rather than be litigated in a court. Also assume that the contract says claims for injunctive relief are not subject to arbitration. The parties to the contract have a dispute, and they disagree on whether the dispute seeks injunctive relief. Who decides this threshold dispute—an arbitrator or a court? (For more background on this case, see our pre-argument discussion on the issues presented.)

The question presented to the Court in Henry Schein II seems to be one of pure contract interpretation, which makes it an odd choice for the Court to hear. The Court is ostensibly deciding whether the carve-out for injunctive relief claims in this contract limits just the scope of arbitration or also limits the scope of the contract’s delegation to the arbitrator to decide the threshold issues of arbitrability. Yet, the oral argument revealed a few themes that indicate some of the broader implications of this litigation.

Continue reading “Henry Schein, Inc., II: Post-Argument Analysis”

Arbitrability Returns to the Supreme Court in Henry Schein, Inc. v. Archer & White Sales, Inc., the Sequel

Arbitrability—or who decides what claims are subject to arbitration—is returning to the Supreme Court next week for the second time in as many years.  The first time the matter reached the Court, the Supreme Court  unanimously held that, where a contract clearly and unmistakably delegates questions of arbitrability to an arbitrator, a court cannot decide the issue in the first instance, even if the court thinks the argument for arbitration is “wholly groundless.”  Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019).

The issue has now returned to the Supreme Court following remand and a new decision by the Fifth Circuit.  Archer & White Sales, Inc. v. Henry Schein, Inc., 935 F.3d 274 (5th Cir. 2019).  On December 8, 2020, the Court will hear the case again, this time to decide “[w]hether a provision in an arbitration agreement that exempts certain claims from arbitration negates an otherwise clear and unmistakable delegation of questions of arbitrability to an arbitrator.”

Continue reading “Arbitrability Returns to the Supreme Court in Henry Schein, Inc. v. Archer & White Sales, Inc., the Sequel”

The Record and Matter Outside It

Thomas Newman A fundamental tenet of appellate practice is that the rights of the litigants are to be determined solely on the basis of materials contained between the covers of the record on appeal. With some rare exceptions discussed below, it is a serious breach of appellate decorum to refer to matters outside the record. Counsel who do so run the risk of being reprimanded by the court during oral argument and in a subsequent published opinion.

References in briefs to material not contained in the record may be stricken on motion made by the opposing party and, if granted, this may blemish the offending counsel’s reputation for integrity and reliability before the panel that will decide the appeal. The court may also deny costs to a prevailing party whose brief contained references to matters outside the record. Topal v. Pace University, 167 A.D.2d 387 (2d Dept. 1990) (“since the appendix to the defendant’s brief contains documents dehors the record, the defendant is denied costs on appeal”). This may amount to a significant loss for the prevailing party, far in excess of the $250 statutory costs (CPLR §8203[a]), because the party awarded costs is also entitled to recover its taxable disbursements, including the reasonable cost of printing the record on appeal and briefs. CPLR §8301(a)(6),

It is also improper to annex to a brief affidavits or exhibits that were not presented to the trial court and properly made part of the record on appeal. In City of New York v. Grosfeld Realty Co., 173 A.D.2d 436 (2d Dept. 1991), the court “note[d] with disfavor the attempt on the part of the appellant’s attorneys to submit on this appeal an affidavit specifically rejected by the Supreme Court and, therefore, not properly part of the record on this matter.” The First and Second Departments expressly prohibit the attachment of unauthorized materials to an appellate brief. Rule 600.10(d)(1)(iii) of the First Department provides that “[u]nless authorized by the court, briefs to which are added or appended any matter, other than specifically authorized by this rule, shall not be accepted for filing.” The rule permits an addendum containing “statutes, rules, regulations, etc.” Rule 600.10(d)(1)(i). In the Second Department, Rule 670.10.3(h) similarly provides what materials may be included in an addendum to the brief, e.g., decisions, statutes, cases, etc., cited in the brief that are not published or otherwise readily available, and states that “[u]nless otherwise authorized by order of the court, briefs may not contain maps, photographs, or other addenda.”

To read the full text of this article by Duane Morris partner Thomas R. Newman and Steven J. Ahmuty, Jr.,  originally published in the New York Law Journal, please visit the Duane Morris website.

Pennsylvania Superior Court Confirms that Fair Share Act Applies in Asbestos and Other Strict-Liability Cases and Requires Apportionment of Liability Among Defendants and Settled Tortfeasors Regardless of Bankruptcy Status

In Roverano v. John Crane, Inc., 2017 PA Super 415 (Dec. 28, 2017), the Pennsylvania Superior Court confirmed that Pennsylvania’s Fair Share Act, which prescribes how liability is allocated among multiple defendants, applies to strict-liability personal injury claims arising from asbestos exposure. [Note: Duane Morris was retained as appellate counsel and briefed and argued the appeal for one of the prevailing parties.] This is an important result for defendants in asbestos and products liability litigation throughout Pennsylvania.

To read the full text of this Alert, please visit the Duane Morris LLP website.

 

Pennsylvania Powerhouse Duane Morris Recognized by Law360

This year, Law360 recognized Duane Morris as a Pennsylvania Powerhouse. Leaders from the firm suggested that the high court’s reliance on the 111-year-old firm during the high-profile scandal was a testament to the firm’s status as a major player in a state well-known for a deep bench of legal talent. Duane Morris’ appellate practice and its chair, Robert L. Byer were a focus of this article on the firm as a Pennsylvania Powerhouse.

To read the full text of the article, please visit the Duane Morris website.