A Philadelphia judge has tossed a corporation’s legal malpractice claims against its former attorneys, finding that it suffered no actual loss from a judgment related to a contract dispute because a third party paid the settlement on its behalf.
Philadelphia Court of Common Pleas Judge Albert J. Snite Jr. granted summary judgment in favor of the defendants and outlined his decision in CD Realty Advisors v. Riley Riper Hollin & Colagreco on Dec. 17.
Snite dismissed CD Realty’s claims against firms Riley Riper Hollin & Colagreco and Berger Harris; and lawyers Jeanette N. Simone, Benjamin J. Berger, John G. Harris and Brett M. McCartney.
In the opinion, Snite wrote that CD Realty suffered no damages because a third party not involved in the contract litigation, Silver Lake Office Holdings, paid the judgment amount of $421,933 to real estate brokerage firm Colliers Lanard & Axilbund.
“In this case, CD Realty admits that it did not contribute any money to satisfy the judgment entered in favor of Colliers in the underlying action, and,” Snite said, “is not obligated to repay the funds to satisfy the judgment.”
Snite added that CD Realty’s argument that its lawyers failed to investigate settlement options fell short because there was no indication that Colliers would have settled for any less than $700,000.
On April 26, 2005, CD Realty entered into two exclusive agency agreements on behalf of its subsidiary entities, Silver Lake Office Plaza and Enterprise, with Colliers. According to Snite, the agreements stated that Colliers would be the real estate agent for commercial properties owned by both Silver Lake Office Plaza and Enterprise, and therefore entitled to commissions from the leasing of those properties.
Colliers initiated a civil suit against CD Realty and its subsidiaries for breach of contract in connection to its failure to pay Colliers commissions relating to the renewal of existing leases, according to Snite.
CD Realty hired the Riley firm to provide representation in the contract dispute. Snite said that at the close of the bench trial in 2009, defendants Berger and Harris terminated their employment with the Riley firm and founded law firm Berger Harris. Berger Harris then took over representation of CD Realty.
On Oct. 27, 2009, Philadelphia Court of Common Pleas Judge Idee C. Fox ruled that Silver Lake Office Plaza and Enterprise breached their respective agreements with Colliers and awarded $421,933 in damages to Colliers, according to Snite.
CD Realty and its subsidiaries filed suit against the defendants in December 2010. According to Snite, the plaintiffs’ claims included breach of contract, professional negligence and vicarious liability. The crux of the plaintiffs’ argument was that the defendants did not do enough to explore settlement options and communicate those options to CD Realty.
According to Snite, the defendants asserted that Douglas Sayer—president of Colliers—testified he would not have settled for less than $700,000.
“This testimony shows that Colliers might have settled in the earlier stages of the underlying action for a figure as low as $700,000,” Snite said. “This testimony also shows that Colliers was likely to raise its settlement floor of $700,000 if the underlying action continued to consume more of its time and resources.”
Snite added that the record did not show that Colliers was likely to settle for an amount below Fox’s judgment.
Additionally, the defendants contended that because Silver Lake Office Holdings paid CD Realty’s judgment amount, CD Realty suffered no loss as a result of the case, Snite said.
In support of the defendants’ argument, Berger Harris cited a ruling from the U.S. District Court for the Western District of Pennsylvania in General Nutrition v. Gardere Wynne Sewell.
In that case, Snite said, a company hired a law firm to determine if there was any basis for terminating its contract with a publisher. The firm advised the company that even if the contract termination resulted in a breach, the company could expect to lose no more than $1 million to $3 million.
The publisher sued the company and as a result, the company settled with the publisher for the amount of $12 million. According to Snite, the company did not pay the settlement because a separate non-affiliated entity paid the settlement on the company’s behalf.
Snite said that after the settlement, the company filed a professional malpractice suit against its former legal representation. At summary judgment, the firm argued that the company suffered no economic loss because a separate entity paid its settlement. The federal court found in favor of the defendants.
Snite said that he found the reasoning in General Nutrition persuasive.
“Since CD Realty has not proven damages stemming from the actions of its counsel in the underlying action, it may not maintain the lawsuit against the defendants therein,” he said.
The attorney for CD Realty, Joseph H. Blum of Shook, Hardy & Bacon in Philadelphia, declined to comment.
Jeffrey McCarron of Swartz Campbell in Philadelphia represented the Riley Riper defendants. He said that Snite’s ruling challenged “the deficiencies of proof that the plaintiff experienced to prove actual loss and damages.”
McCarron also said that the ruling General Nutrition was on point and pertinent in relation to the current case.
William F. McDevitt represented the Berger Harris defendants and said that on behalf of his clients, he felt Snite ruled correctly. McDevitt declined to comment further.
(Copies of the 19-page opinion in CD Realty Advisors v.Riley Riper Hollin & Colagreco, PICS No. 13-3423, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •