Just a few weeks after a malpractice claim against Nixon Peabody was allowed to go forward in New Jersey, a Philadelphia judge has allowed to continue a separate, but similar, malpractice action against the firm in Pennsylvania, denying its motion for judgment on the pleadings.
In Jan Rubin Associates Inc. v. Nixon Peabody LLP, Nixon Peabody said the former client waived its right to file a malpractice claim under Pennsylvania law because they entered a settlement agreement in the underlying action.
Philadelphia Common Pleas Court Senior Judge Albert W. Sheppard Jr. disagreed, ruling in a July 31 opinion the state's law allows exceptions to that rule if the settlement was legally deficient or if the ramifications of the settlement were not fully explained by the attorney.
Nixon Peabody was relying on a 1991 Pennsylvania Supreme Court decision, Muhammad v. Strassburger, in which the plaintiffs decided after settling a case that the amount wasn't enough and sued their lawyer for malpractice. The court held that simple dissatisfaction with the terms of the settlement was not enough for a malpractice claim, according to Sheppard's five-page opinion.
That ruling was modified in a 1997 opinion by the same court, McMahon v. Shea, in which the court said allegations an attorney failed to advise the client of a contract's controlling law could result in a negligence claim.
Sheppard said the case brought by Nixon Peabody's former client, Jan Rubin Associates Inc., was more akin to McMahon.
"Unlike the plaintiffs in Muhammad, the Rubins did not change their minds about the settlement," Sheppard said. "Rather, they complain about Nixon Peabody's failure to advise them regarding the controlling law applicable to Rubin's claim, i.e. application of the statute of limitations and its ramifications."
Nixon Peabody also filed for a motion for judgment on the pleadings arguing that Jan Rubin Associates did not state a claim for which relief could be granted because the company signed a certification claiming no discrimination claims or evidence of discrimination existed in the underlying claim.
Because he found issues of fact still exist as to whether Nixon Peabody pursued a claim without educating its clients to the potential consequences, he denied the firm's motion on that point as well.
The firm represented the company and its owner, Jan Rubin, in an action brought by Rubin in the U.S. District Court for the Eastern District of Kentucky against the Housing Authority of Newport, Ky., and the housing director, Mark H. Brown, according to the opinion.
Rubin alleged claims for breach of contract, promissory estoppel, violation of equal protection rights and violation of due process rights. The housing authority defendants filed a counterclaim, according to the opinion.
In March 2007, the Kentucky court granted the housing defendants' motion for summary judgment. A settlement was then reached in which the defendants agreed to dismiss their counterclaim and Rubin agreed not to appeal the summary judgment order, Sheppard said.
In its malpractice suit, Jan Rubin alleges Nixon Peabody failed to file, within the applicable statute of limitations, one of the claims the company sought to prosecute. The company also alleges the firm continued to prosecute the claims in Kentucky federal court, causing the company to expend $1 million in litigation expenses, according to the opinion.
"Plaintiffs allege that if Nixon Peabody had been honest and forthcoming during the Kentucky representation and Nixon Peabody would have explained to plaintiffs that the statute of limitations had expired on this claim and explained the shortcomings, plaintiffs would have made a decision as to whether they should continue with the claim," Sheppard said.
Alan A. Turner of Turner & McDonald in Philadelphia represented Jan Rubin in the malpractice case. Daniel S. Bernheim III of Wilentz Goldman & Spitzer in Philadelphia represented Nixon Peabody. Both declined to comment on pending litigation.
"We'll just have to proceed as the fine judge directed," Bernheim said.
In the separate case of Schulman v. Wolff & Samson, a New Jersey appeals court overturned the trial court's dismissal of a shareholder derivative and malpractice suit against Nixon Peabody and Wolff & Samson, according to reports by the New Jersey Law Journal, a sister publication of The Legal Intelligencer.
State court precedent in New Jersey bars clients unhappy with a settlement from suing their attorneys, according to the article.
The two law firms represented the underlying company in a dispute between family members over ownership interests. The minority owners in the company sued after they were kicked off the board and eventually settled with the majority owners, calling the settlement fair, according to reports.
The appeals court let the case go forward, ruling it was not the settlement the plaintiffs felt was unfair, but separate conduct by the firms that the plaintiffs said were equal to malpractice and breach of fiduciary duty, the Law Journal reported.
