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Most Claims in Negligence Suit Against Rawle & Henderson Time-Barred
The Legal Intelligencer
April 27, 2009
Rawle & Henderson may have lost its fight to get a professional negligence suit against the firm thrown out at the preliminary objection stage, but it has succeeded in carving out some of the claims through judgment on the pleadings.
Philadelphia Common Pleas Court Judge Mark I. Bernstein, who issued the order regarding preliminary objections, granted Rawle & Henderson's motion for judgment on the pleadings and dismissed the professional negligence, breach of fiduciary duty and punitive damages claims in Tower Investments Inc. v. Rawle & Henderson.
That leaves only a breach of contract claim, which Rawle & Henderson did not contest in its motion.
Tower Investments, Liberty Homes Philadelphia Inc. and developer Bart Blatstein sued their insurance company, Assurance Company of America, for breach of contract and brought several claims against Rawle & Henderson. Under the terms of Tower Investments' commercial liability insurance policy, the firm was brought in by Assurance to represent it and Tower Investments in an underlying settlement action.
The plaintiffs allege that Rawle & Henderson executed a release it knew the plaintiffs objected to and represented them despite a conflict between their interests and those of Assurance, according to the opinion.
Rawle & Henderson entered its appearance for the plaintiffs in the underlying case in May 2003 and the plaintiffs filed suit in May 2007.
In dismissing the professional negligence and breach of fiduciary duty claims, Bernstein said they were both barred by a two-year statute of limitations. He dismissed the punitive damages claim because, Bernstein said, such damages can't be recovered in an action only involving a breach of contract claim.
In the underlying case, Tower Investments and the other plaintiffs were sued when they damaged an adjoining property to the site they were developing for residential and commercial use, according to the opinion.
The parties agreed to settle for $1.1 million and Assurance agreed to pay $400,000 of that on behalf of Tower Investments. While the financial terms of the deal were settled, the parties never agreed on a settlement agreement and release, Bernstein said.
For two months in early 2005 the parties went back and forth on proposed language for a settlement agreement and release, never agreeing on any. On Feb. 28, 2005, Rawle & Henderson sent a check to the plaintiff in the underlying case for the $400,000 -- paid by Assurance on behalf of Tower Investments -- to extinguish Tower Investment's liability, according to the opinion.
Blatstein's attorney faxed Rawle & Henderson a letter on March 3, 2005, inquiring about the status of the release and the firm responded the same day saying Assurance "ended up being fine with the language in the executed release" and told the attorney that a check was sent out to settle the claims, Bernstein said.
Blatstein's attorney immediately contacted the firm to express his objection to the payment because Tower didn't agree to the terms of the release and demanded Assurance stop payment on the check.
The plaintiff filed a motion to enforce the settlement on Aug. 15, 2005. Litigation continued in the underlying action for another year until the parties reached an agreement and an amendment to the general release was signed. Tower Investments, Blatstein and Liberty Homes Philadelphia filed the lawsuit against Rawle & Henderson May 30, 2007, according to the opinion.
In his April 7 opinion, Bernstein said the statute of limitations began to run at the latest on March 3, 2005, when Tower Investments found out that a check was sent a few days earlier on Feb. 28. He said both the professional negligence and the breach of fiduciary duty claims stem from the same alleged wrongful acts.
"R&H's alleged wrongful acts occurred on or before February 28, 2005 and Tower had knowledge that it was injured at least by March 3, 2005," Bernstein said. "Since the present lawsuit was not filed until May 30, 2007, Tower's" claims for professional negligence and breach of fiduciary duty are barred by the statute of limitations.
Defendants in the case, Assurance and Zurich American Insurance Co., didn't participate in Rawle & Henderson's motion for judgment on the pleadings.
Rawle & Henderson's attorney, Gary Samms of Obermayer Rebmann Maxwell & Hippel, said he thought the opinion further clarifies that Pennsylvania follows the occurrence rule. The rule, Bernstein said, states the statute of limitations starts when the alleged breach happens, not when an actual loss is realized.
Samms said he didn't include the breach of contract claim in the judgment on the pleadings because it would have required relying on certain issues outside the pleadings. He said the other counts were much more clear cut.
Bernstein's ruling leaves a breach of contract claim against Zurich, the owner of Assurance, and Rawle & Henderson, he said.
The deadline for filing summary judgment motions was this past January, so Samms said he filed the motion since the ruling on judgment on the pleadings hadn't been made yet. Most of those issues are now moot, but Samms said the summary judgment motion also included questions about whether there were actual, provable damages in the case.
Elizabeth Cipolletti and Clifford E. Haines of Clifford E. Haines & Associates are representing Tower Investments, Liberty Homes Philadelphia and Blatstein. They were unavailable for comment by the time of publication.
