The law firm and its ex-partner sued by the First Judicial District for alleged legal malpractice over a new Philadelphia family courthouse have agreed to settle the lawsuit for $4 million.

The settlement is global and covers not only the FJD’s claims against Obermayer Rebmann Maxwell & Hippel, ex-Obermayer Rebmann partner Jeffrey Rotwitt and Rotwitt’s corporate entity, Deilwydd Property Group FC LLC, but the cross-claims between the defendants.

Obermayer Rebmann agreed to pay $2 million, while the firm’s and Rotwitt’s malpractice insurer, Travelers, agreed to pay $2 million, according to the terms of the settlement.

Rotwitt is not making any personal contribution to the settlement, according to several lawyers familiar with the terms.

The state Department of General Services also signed off on the settlement, even though it was not a party to the lawsuit, in order to address concerns that the state could assert some sort of claim against Travelers’ insured.

Nils Hagen-Frederiksen, a spokesman for the Attorney General’s Office, confirmed that the settlement had been reviewed for form and legality on an expedited basis at the request of the Office of General Counsel.

The FJD filed the lawsuit in the autumn of 2011 because Pennsylvania Chief Justice Ronald D. Castille, as the guardian ad litem for the FJD and the liaison justice to the FJD, said that Rotwitt allegedly kept undisclosed to the Philadelphia court system that he got on the other side of the courthouse deal from representing the FJD legally as its tenant representative by becoming a co-developer.

Castille announced news of the settlement at the Philadelphia Bar Association’s annual meeting luncheon Tuesday as he accepted the Justice William J. Brennan Jr. Distinguished Jurist Award.

Rotwitt said the fact that he is not contributing to the settlement vindicated that he fully disclosed his role as developer.

While Castille said that “we think we were wronged by what Rotwitt did,” the chief justice also said that important legal work was accomplished by Rotwitt and Obermayer Rebmann.

Rotwitt accomplished something important by persuading the General Assembly to approve a capital budget that included $200 million for a county-level courthouse in Philadelphia, Castille said, adding that Obermayer Rebmann “actually did some good legal services” by shepherding the project through the city’s zoning process.

Obermayer Rebmann worked on the city side of the process, while Ballard Spahr worked on the state side of the process, including convincing former Governor Edward G. Rendell, a Democrat, to release the capital funds after they had been approved by the General Assembly. While Rendell approved the release of the capital funds in 2010, Governor Tom Corbett, a Republican, also gave his blessing to the project.

Rotwitt said that he was proud to have made the courthouse happen as the court’s tenant representative because family litigants were “the least powerful constituency,” “the fact of the matter was that the conditions the court was operating in were deplorable,” and the state government had never before paid for a county courthouse.

Rotwitt characterized the settlement as “simply a nuisance settlement because the cost of the litigation far exceeded the value of the case.”

Only two of 35 witnesses had been deposed, and reams of discovery had not yet been delivered, Rotwitt said.

Before the original structure of the family courthouse deal ended in the wake of negative publicity over Rotwitt’s alleged dual role as the FJD’s tenant representative and as a co-developer, the FJD had contracted with Donald W. Pulver’s Northwest 15th Street Associates for the court to become a tenant at a new family courthouse to be built by Northwest in Center City. Rotwitt partnered with Pulver to develop the project for at least two years.

Rotwitt said that 15th and Arch streets, to which Pulver had rights, was the top choice of all three branches of government in Philadelphia, and that he took FJD officials to evaluate an alternative site.

Rotwitt said he is still practicing law as a solo practitioner and doing development work, including a movie studio in Delaware County.

A spokeswoman for Obermayer Rebmann said the firm declines to comment.

All of the settlement funds will go into the FJD’s family court fund, which is populated by filing fees at about $300,000 a month, Castille said.

Castille said the settlement could be used to pay for furniture, fixtures and equipment for the courthouse. But Castille said that court leaders will also seek for furniture, fixtures and equipment to be paid out of a new state capital budget for public works. Castille said Corbett is in support of that endeavor but whether that idea will come to fruition will depend upon the receptiveness from legislators.

The settlement “puts the whole thing behind us and lets us focus on the building,” Castille said.

Conrad O’Brien is Obermayer Rebmann’s personal counsel, while Swartz Campbell is Obermayer Rebmann’s counsel paid for by Travelers.

Dugan, Brinkmann, Maginnis and Pace was Rotwitt’s counsel paid for by Travelers, while Rotwitt’s personal counsel was Catherine Recker of Welsh & Recker.

Vorys, Sater, Seymour and Pease represented Travelers.

Allegheny County Court of Common Pleas Senior Judge R. Stanton Wettick Jr. was specially appointed to preside over the lawsuit.

One key ruling Wettick made in March was that the American Rule would apply under which a litigant cannot recover counsel fees from an adverse party unless there is express statutory authorization, a clear agreement of the parties, or some other established exception.

The FJD, citing a New Jersey Supreme Court case, had argued in court papers that the neighboring jurisdiction established a common law exception to the American Rule for legal malpractice cases because of the rationale that a plaintiff economically injured by an attorney’s legal malpractice should be made whole.

Rotwitt’s attorney, Eugene J. Maginnis Jr. of Dugan Brinkmann, said during a court hearing in front of Wettick that there was only one conversation in which Rotwitt told Castille he was splitting fees with Pulver, who had been engaged as the original developer of the proposed site, but there also were “tons of documents where he was listed” as co-developer or at least as splitting fees with Pulver. Maginnis said it was a jury question to decide if there was a conversation between Castille and Rotwitt.???The settlement is the second one to be struck in the family court affair.

In the fall of 2010, a bankruptcy judge approved the settlement of legal disputes over the courthouse site and architectural plans.

Pulver’s Northwest 15th Street Associates, the owner of the courthouse site’s air, surface and development rights, filed for bankruptcy June 23, 2010, because Northwest’s agreements with the FJD, the Philadelphia Parking Authority — which owns the courthouse site below-ground and mortgaged the site above-ground to Northwest — and with architect EwingCole all were canceled.

The settlement included the agreement of Northwest to sell the air, surface and development rights to DGS in exchange for $1.1 million.

When the FJD settled with Northwest and agreed to pay $350,000 for EwingCole’s work to prepare the courthouse plans, the FJD preserved its right to sue Rotwitt and his former firm.

The courthouse, which is now under construction, is designed to unify the Family Court’s domestic relations and juvenile branches into a modern, integrated facility.

Amaris Elliott-Engel can be contacted at 215-557-2354 or aelliott-engel@alm.com. Follow her on Twitter @AmarisTLI.