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Pa. High Court to Eye Law Firm Partnership Questions
The Legal Intelligencer
October 14, 2008
The Pennsylvania Supreme Court has agreed to hear arguments over whether two former partners of a now-defunct law firm could avoid personal liability for defaulting on a commercial lease -- while other partners were held personally liable -- because the two had signed the lease on behalf of the firm.
The case arises out of a lease dispute between former Pittsburgh law firm Titus & McConomy and its landlord Trizechahn Gateway. The dispute started in 2000 when Titus & McConomy decided to wind down operations and leave its lease five years before it was set to expire.
In the cross petitions for appeal in Trizechahn Gateway v. Titus & McConomy, brought after a mixed Superior Court ruling, the Supreme Court has agreed to hear several issues raised by Trizechahn and denied allocatur to Titus & McConomy and several of its former partners. It granted a petition by former name partner Paul H. Titus, now of Schnader Harrison Segal & Lewis, to file a reproduced record under seal.
The high court granted allocatur Oct. 8.
A trial judge had originally awarded the landlord more than $3.2 million after concluding Titus & McConomy breached its lease.
The Superior Court made several findings regarding which of the former partners could be held personally liable, vacated part of the interest tacked onto the award and erased the more than $326,000 granted in attorney fees. It asked the trial court to recalculate the interest.
The Superior Court did, however, disagree with the majority of Titus & McConomy's arguments seeking to avoid any liability in connection with abandoning the lease.
The Supreme Court granted allocatur to Trizechahn on four issues, three of which deal with releasing two former Titus & McConomy partners -- Thomas D. Arbogast and Thomas C. Wettach -- from personal liability. The remaining issue is whether the Superior Court erred in vacating the award of attorney fees.
Arbogast is one of several Titus & McConomy partners who joined Schnader Harrison after the firm split up. Still at Schnader Harrison are Arbogast, Titus and Lindsey Alton. Wettach is with Cohen & Grigsby.
As to Arbogast and Wettach, the Superior Court interpreted an absolution clause in the master lease as removing liability only from those people or entities "'executing this lease as agent, trustee or in any other representative capacity,'" according to the opinion.
The majority, in an opinion written by Senior Judge Patrick Tamilia, said that because Arbogast and Wettach executed the lease on behalf of the firm, they were the only two who could be absolved from liability. Tamilia said the clause could be interpreted as freeing from liability a person in their representative and/or personal capacities, and therefore found the clause to be ambiguous. He interpreted it then in the best light for Arbogast and Wettach, freeing them from personal liability.
In her dissent from the two-judge majority, Judge Joan Orie Melvin said she agreed the two attorneys were the only ones potentially freed from liability under the clause, but said she didn't think it applied to personal liability.
"Here the individual liability of Arbogast and Wettach arises not from the fact that they executed the master lease on behalf of the partnership, but from their separate juridical existence as general partners," Orie Melvin said. "These appellants, in other words, donned their 'representative hat' but did not remove their 'partner hat' when they executed the master lease on behalf of the partnership."
Former Titus & McConomy attorneys Donald T. Dulac, Charles B. Watkins, Henry R. Johnston III, Suzanne K. DeWalt, U.S. District Court Judge Thomas M. Hardiman, Debra M. Parrish and Stephen R. Kaufman were granted summary judgment by the trial court and absolved from personal liability in the case.
They did not participate in the cross-appeals before the Superior Court, but Trizechahn did challenge their dismissals. The Superior Court upheld the summary judgment motions. Those attorneys do not seem to be at issue in the Supreme Court's granting of allocatur.
Trizechahn did not challenge the dismissals of former Titus & McConomy attorneys C. Richter Taylor Jr. and Thomas J. Santone who were found to have left the partnership before the lease in question was issued.
Albert Zangrilli and Tom Anderson of Yukevich Marchetti Liekar & Zangrilli in Pittsburgh represented Trizechahn along with the company's in-house counsel, Ted Jadwin and Mark Aronchick of Hangley Aronchick Segal & Pudlin in Philadelphia.
If the Superior Court ruling as to Arbogast and Wettach were to stand, Jadwin said, it would mean any partner in a general partnership who signed a contract would be personally immune from any problems resulting from that contract. He said the absolution clause is really designed for people like real estate brokers who sign on behalf of a client or vice presidents of corporations who sign documents for their company, all in an effort to protect those classes from personal liability.
Partners in a general partnership, however, are jointly and severally liable, he said.
"The clause the court called the absolution clause is a very, very common clause in commercial documents," Zangrilli said. "It would create havoc, we believe, in the world of commerce and contract interpretation if the Superior Court's construction and application of the clause were to stand."
Anderson said Titus & McConomy and some of its former partners were petitioning the Supreme Court for appeal based on the argument that the lease was terminated after certain actions by Trizechahn and their responsibility was significantly less than the original award or nothing at all.
According to Zangrilli, Trizechahn agreed to the sealing of part of the record, which he said he thought included some of the partners personal tax information. He said it was a very slim piece of the record under seal.
Still listed as respondents before the Supreme Court are Titus & McConomy, Titus, James McConomy, Alton, S. Link Christian, Martin J. Hagan, David B. Mulvihill, David G. Oberdick, Manning J. O'Connor II, Adrian N. Roe and Mark Stadler. Arbogast, Wettach and the remaining respondents, other than Stadler, O'Connor and Titus & McConomy, are all represented by Daniel McLane of Eckert Seamans Cherin & Mellott and Carl Solano and Bruce Merenstein of Schnader Harrison.
Stadler and O'Connor are represented by John R. O'Keefe Jr. in Pittsburgh. The former entity Titus & McConomy is represented by Douglas Campbell of Campbell & Levine in Pittsburgh.
Solano said his clients argued the issues raised by Trizechahn on appeal were mainly contract interpretation issues that didn't need to be decided by the Supreme Court, but he said the high court obviously saw something it wanted to review.
Solano's client sought allowance for appeal as to whether a landlord has a duty to mitigate his losses after a tenant vacates the premises early. They also felt it was double recovery for the landlord to allow the tenant to give back the premises and still be responsible for lost rent if the lease was terminated, Solano said.
Justice Debra Todd did not participate in the consideration or decision to grant allocatur.
