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Dead Man's Statute Stops Testimony in Law Firm Fee Dispute
The Legal Intelligencer
October 14, 2009
When litigation arose between the wife and son of a deceased lawyer, the lawyer's old firm found out there may have been some referral fees taken for personal use that they alleged should have gone to the firm. And they wanted their money back.
But a Philadelphia judge found recently that Pennsylvania's Dead Man's Statute prohibits the law firm, Segal Wolf Berk Gaines & Liss, from testifying about the oral partnership agreement the firm said it had in place with Edward Wolf because he isn't alive to rebut the testimony and representatives of his estate aren't knowledgeable about the issue.
Other parties, however, are allowed to testify to the issue. Edward Wolf's son, Michael, who also worked at the firm for a time and allegedly used some of the funds, is not precluded from defending himself against the law firm's claims, according to the opinion by Common Pleas Court Judge Albert W. Sheppard Jr.
In Segal Wolf Berk Gaines & Liss v. Arlene Wolf, the law firm sued Arlene Wolf and Stevens & Lee's James Schwartzman in their capacities as executors of Edward Wolf's estate. They also sued Michael Wolf, Deborah Wolf, BEM Enterprises Inc., Hauteur Resources and Wolf Equities Inc.
Edward Wolf joined Segal Wolf in 1981 as a shareholder and remained with the firm until his death in October 2006. Segal Wolf alleges, according to the opinion, that Wolf was bound by an oral partnership agreement stipulating that in return for compensation and employment, all income related to the practice of law that was generated by a firm lawyer belonged to the firm. That includes referral fees, the firm argued.
The firm claimed two such referral fees totaling $446,667 were used for the personal benefit of Edward and Michael Wolf, according to the opinion.
Benjamin Folkman and Lisa Marone of the Folkman Law Offices represented Michael Wolf and the other non-executor defendants. They said Edward and Michael Wolf had a partnership in which they purchased and renovated homes and either sold them or rented them out. The referral fees in question in this case went into an account that was used for the real estate partnership, they said.
The other entities sued were ones that had been used from time to time by the Wolfs in their real estate venture, and who Segal Wolf alleged benefited from some of the funds, Folkman and Marone said.
Defendants Arlene Wolf and Schwartzman filed a motion in limine seeking to apply the Dead Man's Statute to the case, and Michael Wolf and the Segal Wolf firm filed responses in opposition, arguing the statute should not apply.
Michael Wolf and his co-defendants argued, and Sheppard agreed, that the Dead Man's Statute did not apply to them because the executors waived the statute when they deposed Michael Wolf on the same issues in the separate litigation between Michael and Arlene Wolf. Michael Wolf had taken the position in the prior estate litigation that he placed the referral fee into his and his father's personal account based on representations by his father that they could accept the fee, according to their brief.
"It is inherently unfair to allow the estate to discover all of the information in the [non-executor defendants'] possession regarding this issue and then use the protection of the [Dead Man's Statute] to not allow the [non-executor defendants] to use that same information to defend themselves against the allegations of the Segal firm," Michael Wolf and his co-defendants argued in their brief. "The [statute] cannot be used as [a] sword and a shield."
Joel Todd of Dolchin Slotkin & Todd represented Arlene Wolf and Schwartzman in their capacities as executors of the estate. Michael Onufrak of White & Williams represented Arlene Wolf in her individual capacity.
Todd said he is filing a motion for summary judgment on behalf of his clients because the law firm now has no evidence to show there was an agreement between Edward Wolf and the firm that all referral fees belonged to the firm. Todd also wasn't concerned that Michael Wolf was still permitted to testify to the issue because, Todd said, Michael Wolf has only ever testified that Edward Wolf said the fees belonged to him and not the firm.
Segal Wolf's attorney, Robert Fiebach of Cozen O'Connor, said the ruling doesn't preclude the claim against the executors, just some of the evidence. "Judge Sheppard's opinion is an evidentiary opinion that only forecloses the testimony that we might have otherwise offered from the Segal Wolf partners against the estate," Fiebach said.
Todd said he has only seen the Dead Man's Statute raised in one other of his cases in his 36 years of practice and in that case it was applied and it was outcome determinative. He said he thinks that could be the case here as well.
