The Pennsylvania Superior Court has thrown out two lawsuits against four personal injury attorneys through the rarely invoked legal avenue of champerty.
Alan Frank, a suspended Pennsylvania attorney who purchased claims against the attorneys from their former clients through his “Overcharge Recovery Co.” business, said he either plans to appeal the unanimous three-judge panel’s decision to the state Supreme Court or file for reconsideration by an en banc panel of the Superior Court.
In the lawsuits, Frank alleged that if the attorneys took more than 25 percent of the recovery in two personal injury cases, then the plaintiffs in both those cases “got robbed.” He also complained that the attorneys took their contingency fees off of the gross proceeds of the personal injury suits, rather than the net (notably, several attorneys said that was industry standard, rather than malfeasance).
What he didn’t allege, was a connection between himself and the underlying cause of action he set forth — enough for the panel in Frank v. TeWinkle to affirm an Erie County judge’s ruling that the claims assignment met the common law standard for champerty.
According to Judge Judith Ferrence Olson, who wrote for the panel, the standard for champerty is set forth in a three-prong test from a 1968 Superior Court ruling and Frank failed to pass.
“[Frank's] only interest in the underlying matters arose well after the matters were complete, when, upon solicitation, [he] purchased assignments with the exclusive intent to institute claims against the assignors’ attorneys in consideration of which [Frank] agreed to share in a percentage of the recovery,” Olson said.
The holding affirms the trial court’s sustaining the attorneys preliminary objections — a ruling Frank said was flawed because, under his analysis, champerty requires “existing litigation.”
“I didn’t tamper with existing litigation,” he said. “[The panel] wanted to protect the lower court.”
Olson prefaced a Black’s Law Dictionary definition of champerty by observing that the concept, a common law tort, has been “long considered repugnant to public policy against profiteering and speculating in litigation.”
According to Olson, Black’s defines champerty as: “[A]n agreement between an officious intermeddler in a lawsuit and a litigant by which the intermeddler helps pursue the litigant’s claim as consideration for receiving part of any judgment proceeds; … an agreement to divide litigation proceeds between the owner of the litigated claim and a party unrelated to the lawsuit who supports or helps enforce the claim.”
Pennsylvania case law, which holds that champertous assignments are not valid, offers a similar definition. According to Olson, the Superior Court decided in Belfonte v. Miller that an assignment is champertous when the party involved has no legitimate interest in the suit but for the agreement to take the claim, spends his or her own money prosecuting the suit, and is entitled to share the suit’s proceeds.
Frank failed to clear any of the three hurdles advanced by the 1968 decision. Frank has sued Erie attorneys Laurie TeWinkle and Anthony J. Sciarrino and James J. Stuczynski and Bruce W. Bernard, of Bernard & Stuczynski, which is also in Erie.
In both personal injury cases, Frank alleged the attorneys breached their contracts with clients by making unauthorized disbursements from settlements for attorney fees, according to a trial summary of the facts in the case.
Olson’s 12-page, May 22 opinion does not get into details of the underlying personal injury cases beyond identifying the parties from which Frank purchased the claims against the lawyers.
According to the opinion, Frank paid Arthur Voorhis $250 for the assignment of claims against TeWinkle and Sciarrino. The pair’s agreement states that Voorhis would serve as an “‘independent contractor’” for Frank, providing him with information and assistance in the breach of contract suit in exchange for 25 percent of whatever Frank would net.
Frank reached a similar agreement with Kenneth and Alexis Plonski for any claims they would have against Bernard and Stuczynski, but would claim about 33 percent of any proceeds.
James R. Schadel and Gregory Norton of Pittsburgh firm Weinheimer Schadel & Haber represented Bernard and Stuczynski. Schadel could not be reached for comment and Norton did not respond to a request for comment.
Patrick M. Carey of Marshall Dennehey Warner Coleman & Goggin represented TeWinkle and Sciarrino and declined to comment.
None of the attorneys being sued could be reached for comment.
Frank, who took on the cases pro se, told the Law Weekly that Voorhis’ case settled for about $305,000 and that TeWinkle and Sciarrino took $95,000 in contingency fees.
Frank conceded the clients had signed an engagement letter with their attorneys but insisted that number was extreme because of how quickly the matter passed through court.
According to Frank, the case was a rear-end automobile accident in which Voorhis settled with his insurance company for $305,000. He told the Law Weekly that he had evidence suggesting TeWinkle and Sciarrino put in a half-day of what he called “secretarial work,” which he said did not justify the fees they collected.
“They’re not entitled to $95,000 for half a day’s work,” he said.
In Plonski’s case, Frank wrote in an email, the attorneys collected $83,333 on a $250,000 settlement with a school.
According to Frank, his claim against Stuczynski and Bernard was based on the fact that the lawyers took their fee “off the top” before medical expenses and other lien-holders were paid out.
The panel did address those issues, but a number of plaintiffs attorney interviewed by the Law Weekly said there was no case law, statute or rule that required lien-holders to be paid before the contingency fee comes out of a verdict or settlement.
“That’s not accurate,” said Philadelphia plaintiffs attorney Alan M. Feldman of Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig. “You clearly can take your fee off the top in a contingency situation.”
The defense of champerty, albeit a common law doctrine that has faced “relaxation” over the years, was still grounds for denying someone’s day in court. And it applied in this case.
Frank had challenged the trial court’s application of champerty, citing the state Supreme Court’s decision in Hedlund Manufacturing v. Weiser Stapler & Spivak.
In Hedlund, the Supreme Court decided a company that had purchased a man’s business may sue the attorney who the man had hired to work on a patent for that venture. Broadly, the question before the justices was whether a cause of action for negligence and breach of contract with respect to legal work may be assigned.
Though, in some jurisdictions, courts have blocked assignments of legal malpractice, the justices approved the legal maneuver, holding it would “not allow the concept of the attorney-client privilege relationship to be used as a shield by an attorney to protect him or her from the consequence of legal malpractice.”
According to Olson, Frank argued that because Pennsylvania jurisprudence allows the assignment of legal malpractice, his assignments, so long as the underlying claims are meritorious, were valid.
The panel disagreed, noting that the assignee — Hedlund — was not a stranger to the litigation.
“Nothing in the Supreme Court’s holding in Hedlund, however, determined that as assignment of claims against attorneys cannot be champertous, or that champerty is no longer a viable defense to such claims,” Olson said. “To the contrary, unlike the assignments in this matter, the assignment in Hedlund was not champertous.”
Frank also argued that the assignments were distinguishable from other precedential champerty cases because the assignments granted him, as he put it in his brief, “‘exclusive total ownership of a cause of action,’” according to Olson.
But the panel rejected his position, noting that the “public policy concerns” backing the champerty defense are not solved by the transfer of ownership.
Ben Present can be contacted at 215-557-2315 or firstname.lastname@example.org. Follow him on Twitter @BPresentTLI.
(Copies of the 12-page opinion in Frank v. TeWinkle, PICS No. 12-0983, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •