While the First Judicial District spent $2 million in legal and investigative costs to prepare and prosecute its legal malpractice claim against its former attorneys on the Philadelphia family courthouse deal, court leaders said that recovering a net $2 million out of a $4 million settlement is a good outcome for the public.

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, alleged that the court’s former lawyer, Jeffrey Rotwitt, failed to disclose to court officials that he had become a co-developer of the site of the proposed facility, an action that Castille said placed the lawyer on both sides of the deal.

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.

According to Castille, the $4 million, which includes $2 million from malpractice carrier Travelers and $2 million from Rotwitt’s former law firm, Obermayer Rebmann Maxwell & Hippel, will be added into the family court fund, which is an account that also is funded with court filing fees. The $2 million or so in fees and costs are accounted as expenses out of the fund, Castille said.

Castille confirmed that about $1 million will be paid to the FJD’s legal counsel, Sprague & Sprague, and $1 million to consultancy Chadwick Associates, whose investigation formed the backbone of the FJD’s malpractice complaint filed in October 2011.

Lynn Marks of the Pennsylvanians for Modern Courts said that “to recover the funds is obviously crucial and we’re glad there’s a settlement, but we were hoping that, in addition to recovering funds, that the investigation would identify if there were gaps in policies and procedures and put forth a plan for how the court system would move forward and how it would operate in the future to avoid similar problems.”

Castille said that the complaint is the report.

Settling the legal claims in the case did not settle the acrimony between the opposing parties.

Rotwitt said the fact that he retained all of his development fees and he was not “putting a nickel” into the settlement vindicated his position that he did obtain Castille’s approval to change from being the court’s attorney to the court’s co-developer.

By December 2007, once former state Senator Vince Fumo changed the state’s capital budget for public works so that funds could only be spent to build a new courthouse at 15th and Arch streets, Rotwitt said the next question was how to get the project built and funded. Rotwitt said he discussed with Castille the proposal that Pulver and he become co-developers and that his legal representation end in favor of a development role. Rotwitt said he got Castille’s permission and that the idea also was reviewed by the Administrative Office of Pennsylvania Courts’ counsel and Ballard Spahr.

Pulver and he sent out RFPs in January 2008 to the design and construction community, Rotwitt said. “If it was a secret, it was a very poor way to keep a secret” to promulgate RFPs across the design and construction communities.

Castille said that, if it had been properly disclosed to him that Rotwitt was on the other side, he would have gotten another lawyer to review the transaction.

Rotwitt further 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.

The FJD’s counsel, Richard A. Sprague of Sprague & Sprague, said that if Rotwitt considers a $4 million settlement a nuisance settlement he would be glad to have Rotwitt on the other side of cases all the time.

“He didn’t have to sign on” to the settlement if he thought there was no merit to the FJD’s claims, Sprague said. “It had to be agreed to by him. His carrier [Travelers] wouldn’t have paid without his agreement.”

When asked what he thought of Rotwitt not making a contribution to the settlement, Sprague also said that he did not care how the defendants came up with the $4 million as long as that was met.

Sprague did agree with Rotwitt’s comment about litigation costs.

“When Rotwitt talks about the expense of litigation he is right on that,” Sprague said. “The expenses of litigation, at least from the First Judicial District, is being borne by taxpayers. To get a settlement and not having to continue to pay lawyers fees, including me, was very wise.”

Castille said that “all we know is we have $4 million and Rotwitt; we canceled his contract because we believe he had not been forthcoming to us.”

Castille, observing also that Rotwitt’s partnership with Obermayer Rebmann had been terminated, added, “I don’t know if that’s any kind of vindication.”

While the $2 million in legal and investigative costs could have gone to the family court building, Castille said the court needed to litigate against Pulver’s bankruptcy in 2010 in order to establish ownership of the courthouse plans and in the legal malpractice suit to ensure the court system was not out even more money.

Obermayer Rebmann, particularly Tom Leonard, stepped up to the plate and “did the right thing” to settle the case, Castille said.

Sprague’s contingency fees are typically higher than 25 percent of a recovery, Castille said, but “we needed a lawyer of Sprague’s caliber because we were going up against a major law firm.”

William G. Chadwick of Chadwick Associates already was on board because he had been retained for a criminal justice reform project, Castille said.

A total of $2.1 million has been paid to Chadwick Associates, Castille said, including for the firm’s work on criminal court, family court and alleged ticket-fixing in traffic court.

Chadwick worked for Castille in the District Attorney’s Office as first assistant district attorney when Castille was district attorney.

One thing both sides agreed on is that the Federal Bureau of Investigation never took a serious look at the situation.

The rumor of an FBI investigation into the situation was a “fabrication in someone’s mind,” Rotwitt said.

Sprague said the matter was handled by his firm and “I never heard a word” from the federal government.

There was some initial contact by the FBI, but they have not been heard from on the family court matter for two years, Castille said.

Another matter of dispute was whether Rotwitt had a hand in getting Fumo, now serving a federal prison sentence on a political corruption conviction unrelated to the courthouse deal, to amend the Pennsylvania capital budget for public works to require that $200 million in construction funds for the family courthouse only be used at 15th and Arch streets in downtown Philadelphia. Rotwitt told The Legal in an interview after the settlement announcement that he did not play any role, while Castille insisted Wednesday that the lawyer did.

Even with all the acrimony, Castille said that Rotwitt is a “really good lawyer” to have gotten a $200 million capital appropriation through Harrisburg for a county courthouse, and that Obermayer Rebmann overall gave good legislative legal services.

Rotwitt said he is still practicing law as a solo practitioner and doing development work, including on a movie studio in Delaware County. Rotwitt also said he is looking to start an investment banking outfit.

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