Superior Court Judge John L. Musmanno
Superior Court Judge John L. Musmanno ()

The Pennsylvania Superior Court has ruled that an investment management company is responsible for paying more than $71,000 in legal fees to a Pittsburgh firm that defended litigation related to a distressed shopping center, despite the company’s contention that its subsidiary should be on the hook for the bills.

In an unreported opinion in Sittig, Cortese & Wratcher v. New York Life Investment Management, a unanimous three-judge panel upheld an Allegheny County trial judge’s ruling that defendant New York Life Investment Management owes Pittsburgh-based real estate law firm Sittig, Cortese & Wratcher more than $71,000 in unpaid legal fees for the firm’s defense of various claims related to a shopping center in which the company had an equity stake.

New York Life argued that it should not have to pay the fees because NYLIM-MM, the subsidiary in which it holds less than a 1 percent interest, was the company that authorized the previous payments of legal fees to the firm.

But Senior Judge John L. Musmanno, writing for the court, agreed with Allegheny County Court of Common Pleas Judge Robert J. Colville’s assessment that New York Life had directed Sittig Cortese’s handling of the litigation because it stood to benefit from protecting the value of the shopping center.

“Given that New York Life, to its own advantage, was ‘calling the shots’ and directing SCW in the defense of the claims, it is clear that New York Life accepted and retained benefits under circumstances that render it inequitable for New York Life not to pay for the value of such legal services,” Musmanno said. “Thus, the trial court’s determination that New York Life was unjustly enriched by SCW’s legal services is supported by competent evidence.”

Musmanno was joined by Judges Jack A. Panella and Judith Ference Olson.

In Sittig Cortese, according to Musmanno, Sittig Cortese was hired by the shopping center’s developer, Dominion Capital Management, to defend various claims related to construction defects and subsurface problems in an effort to preserve the property’s value.

Soon after being retained, Musmanno said, it became clear to Sittig Cortese that Dominion had no money and that New York Life was paying for the shopping center’s expenses, including tax and utility bills.

Over the next year, according to Musmanno, New York Life employees, including managing director and in-house counsel Kevin Smith, dictated SCW’s defense strategy with regard to the shopping center claims.

Musmanno said Dominion forwarded Sittig Cortese’s legal invoices to New York Life, which then approved the payments.

According to Musmanno, New York Life approved the payment, in three installments, of nearly $114,000 in legal fees to Sittig Cortese from a Dominion lockbox before abruptly ceasing to pay the remainder of the firm’s invoices, resulting in an unpaid balance of more than $71,000.

Sittig Cortese filed suit against New York Life, bringing claims of third-party beneficiary and unjust enrichment, according to Musmanno.

Colville found in favor of New York Life on the third-party beneficiary claim but sided with Sittig Cortese on its unjust enrichment claim and on a promissory estoppel/detrimental reliance claim the firm first raised at trial, Musmanno said.

Colville awarded the firm $71,164 in unpaid fees, plus interest, according to Musmanno.

New York Life appealed, arguing that Sittig Cortese should have sued NYLIM-MM to recover the fees. New York Life maintained that it was a separate corporate entity from NYLIM-MM because it had less than a 1 percent stake in the subsidiary, according to Musmanno.

But Musmanno said Colville’s ruling was supported by the record, noting that Sittig Cortese attorney William Sittig had testified that New York Life “‘dictated the play on everything’” related to defense of the shopping center litigation, at times rejecting the law firm’s advice.

Sittig had testified that his firm was used to stave off litigation and foreclosures in an effort to “‘buy time’” for New York Life to determine whether the shopping center could be saved, according to Musmanno.

New York Life’s director and associate general counsel, Lien-Ha Nguyen, testified that NYLIM-MM authorized the first three payments of legal fees to Sittig Cortese because “‘we have a stake’” in the shopping center and that New York Life believed the payments were “‘necessary’” to “‘make sure that our interests are being protected.’”

“Notably, Nguyen was not employed by NYLIM-MM, and had no position with that entity,’” Musmanno said.

New York Life argued on appeal that Sittig Cortese failed to prove that a promise of payment had been made to it by any New York Life entity. Musmanno, however, agreed with Colville’s finding that New York Life’s prior consent to legal fee payments “‘plainly induced’” Sittig Cortese to continue performing legal work that was beneficial to New York Life.

“Our review of the evidence supports the trial court’s determination that New York Life engaged in a course of conduct that it should have reasonably expected would induce SCW to continue to provide legal representation; (2) that SCW continued to represent the interests of the shopping center in reliance on New York Life’s conduct; and (3) injustice can be avoided only by holding New York Life liable for payment of the unpaid balance of SCW’s legal fees,” Musmanno said. “Notably, both Smith and Nguyen conceded at trial that no New York Life entity ever disclosed to SCW that the three installment payments were made by any entity other than New York Life.”

Counsel for New York Life, Bruce C. Fox of Obermayer Rebmann Maxwell & Hippel in Pittsburgh, declined to comment.

Counsel for Sitting Cortese, Robert B. Stein of Rudov & Stein in Pittsburgh, could not be reached.

Zack Needles can be contacted at 215-557-2493 or zneedles@alm.com. Follow him on Twitter @ZNeedlesTLI. •