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The Superior Court has restored a Philadelphia jury’s verdict in a legal malpractice case following a trial judge’s reversal of the verdict in favor of the attorney, who was accused of acting with a conflict of interest in a corporate acquisition. In February 2002, following a six-week trial, a jury awarded $2.5 million to a home health care company that had accused attorney John F. Hunt of the law firm Hunt & Ayres of effectively representing both sides of the acquisition. Three months later, Common Pleas Judge Jacqueline F. Allen overturned the jury award in Capital Care Corp. v. Hunt, granting Hunt’s motion for judgment notwithstanding the verdict and denying the plaintiff’s post-trial motion requesting a molding of the damage award and a motion for additur. In court papers and at trial, the home health care company, Capital Care, claimed that Hunt was representing its company at a shareholders meeting in June 1987 when the shareholders approved a stock purchase agreement with another home health care company, Lifetime Corp. — for which Hunt was also serving as an officer and general counsel. In the deal, Lifetime acquired Capital Care’s two operating subsidiaries, according to the Superior Court opinion. Afterward, Capital Care alleged that at the stockholders meeting, Hunt had misrepresented that a stock proxy granted by Capital Care’s principal shareholder, Butler Holding Co., had been extended when it had actually expired. The proxy vote on behalf of Butler’s shares made the deal possible by appearing to establish a quorum, and Capital Care alleged that without the misrepresentation that a quorum was present, the shareholders wouldn’t have approved the sale of the company’s assets for a lower amount than could have been negotiated at a future sale, according to the opinion. Allen ruled that Hunt was not representing Capital Care at the time of the shareholders meeting because he had withdrawn as the company’s counsel. Therefore, Allen concluded, no cause of action for legal malpractice existed. But Monday, a three-judge panel of the Superior Court vacated Allen’s orders and remanded the case to the trial court for consideration of Hunt’s post-trial motions for a new trial and remittitur. Judge Zoran Popovich, writing for the panel, noted that Pennsylvania law doesn’t require a traditional fee-for-service contract between an attorney and a prospective client for the creation of an attorney-client relationship. After Hunt withdrew as counsel for Capital Care, Popovich noted, he continued to assist the attorney who took over as the company’s lawyer, David Fishbone. At trial, Fishbone testified that after Hunt’s withdrawal, Hunt assisted Fishbone in providing legal services for corporate governance issues, he and his firm helped organize the June 1987 shareholders meeting, and Hunt testified before the U.S. Securities and Exchange Commission in hearings regarding complaints from shareholders about the sales of Capital Care’s securities, according to the opinion. Despite Hunt’s formal withdrawal as Capital Care’s attorney, Popovich explained, “it was reasonable for [Capital Care's] agents to believe that [Hunt] was still representing [Capital Care] at the time of the shareholders meeting.” Therefore, Hunt was providing legal services to Capital Care at the time of the shareholders meeting, and Allen erred when she granted the judgment notwithstanding the verdict based on her conclusion that an attorney-client relationship didn’t exist, Popovich said. The jury had originally found that Hunt had committed fraud by misrepresenting the Butler proxy at the shareholders meeting and that Hunt had a fiduciary duty to Capital Care and had breached it, according to the opinion. The jury, however, did not award damages on those claims, but only on the legal malpractice claim. The Superior Court judges decided that Hunt’s statements at the shareholders meeting had constituted a breach of his duty to Capital Care as its attorney. “An intentional misrepresentation to a client during any transaction where an attorney represents that client is clearly a violation of that attorney’s duty of honesty,” Popovich wrote. In overturning the jury verdict, Allen had also held that Capital Care had failed to prove actual damages as a result of Hunt’s alleged misconduct, saying that the jury’s only method for measuring damages was speculation on the value of the company. The Superior Court also disagreed on that point, highlighting testimony presented by Capital Care at trial on the fair value of the company. “We analogize the present case to one in which a plaintiff has been fraudulently induced into settling an action by their attorney,” Popovich wrote. “In such a case, an action for legal malpractice lies against the defrauding attorney where it can be shown that the attorney’s conduct prevented a plaintiff from exploring, before settlement, whether the terms of the proffered settlement were or were not advantageous to the plaintiff.” Popovich compared this scenario to the jury’s finding that Hunt’s misrepresentation prevented the shareholders from exploring other options that could have resulted in a more favorable sale of the company’s assets. Because Capital Care had shown that what the company sold for was below the company’s estimated fair value, the Superior Court said, it had proved actual damages with sufficient evidence. Michael N. Onufrak and Geoffrey Paul Huling of White & Willams represented Hunt. Onufrak said that he and his client were disappointed with the Superior Court’s decision and that they are contemplating appealing to the state Supreme Court. “If we do not pursue the appeal, we will pursue the post-trial motions for a new trial and remittitur relief that Judge Allen has not yet ruled on,” Onufrak said. Arthur “Terry” Lefco, who represented Capital Care, said he thought the evidence presented at trial compelled the Superior Court’s decision. Lefco had worked on the case with John Hare. Both are attorneys at Marshall Dennehey Warner Coleman & Goggin. Judges Maureen Lally-Green and Justin M. Johnson also participated in Monday’s decision. (Copies of the 19-page opinion in Capital Care Corp. v. Hunt , PICS No. 04-0368, are available from The Legal Intelligencer . Please refer to the order form on Page 7.)

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