The Pennsylvania Superior Court has revived a suit filed against Duane Morris and Baltimore firm Neuberger, Quinn, Gielen, Rubin & Gibber by former Rite Aid General Counsel Franklin Brown, who was convicted on fraud and obstruction charges in connection with the $1.6 billion accounting scandal that sent half-a-dozen Rite Aid executives to prison and cut the company’s stock price in half.
According to court documents, the suit stems from Duane Morris’ representation of Brown and his wife in litigation against Neuberger Quinn related to the Rite Aid fraud scandal.
In Brown v. Duane Morris, a split three-judge panel ruled 2-1 on Monday in an unpublished memorandum that a Philadelphia trial judge was wrong to deny Brown and his wife their right to oral argument on their petition to open an order of non pros.
Senior Judge Robert E. Colville said Pennsylvania Rule of Civil Procedure 211, which states, “‘Any party or the party’s attorney shall have the right to argue any motion and the court shall have the right to require oral argument,’” is clear and unambiguous.
“Indeed, the Supreme Court’s use of ‘shall’ and ‘right’ makes plain the mandatory nature of the rule,” Colville said, citing the Superior Court’s 1987 ruling in Tessier v. Pietrangelo. “Thus, the trial court’s failure to permit appellants their right to oral argument on their petition was in error.”
Colville was joined by Judge David N. Wecht.
Judge Jacqueline O. Shogan filed a dissenting memorandum, however, pointing to the Superior Court’s 1986 ruling in Gerace v. Holmes Protection of Philadelphia, in which it held that the plaintiff was not prejudiced by the denial of oral argument on a summary judgment motion because an extensive record had already been established.
Shogan said an extensive record had also been established in Brown, including a lengthy petition to open the order of non pros, as well as responses by the defendants.
“I fail to see how appellants were prejudiced in this case and conclude there was no abuse of discretion on the part of the trial court in ruling on the petition to open without holding oral argument,” Shogan said.
Brown was convicted in the U.S. District Court for the Middle District of Pennsylvania in October 2003 of 10 counts stemming from accounting irregularities at the drugstore chain in the late 1990s. He was one of six former Rite Aid executives and officers convicted in the investigation and the only one to be found guilty in a jury trial. The others, including Rite Aid’s former chairman and CEO, Martin L. Grass, all pleaded guilty.
Brown was initially sentenced to 10 years in prison, but was resentenced in September 2010 to seven-and-a-half years in prison, according to court documents. When that sentence was overturned on appeal, Brown was resentenced to time served in August 2011 and released from prison, according to court documents.
In Brown, according to the Philadelphia Court of Common Pleas docket, Brown and his wife, Karen Brown, filed a praecipe to issue a writ of summons in November 2011 against Duane Morris and its partner, Matthew A. Taylor, as well as Neuberger Quinn and its partner, Isaac M. Neuberger, but never followed up with a complaint.
In April 2012, Philadelphia Court of Common Pleas Judge Sandra Mazer Moss issued an order of non pros, stating that neither the plaintiffs nor their counsel showed up to the case management conference or the rule hearing, while defense counsel was present for both.
In August 2012, the plaintiffs filed a petition to open the order.
In the memorandum in support of their petition, the plaintiffs argued that they had tried to obtain enough information to file a complaint by serving Duane Morris and Taylor with a request for production of documents in November 2011, but that the defendants never responded.
In a footnote, the plaintiffs said Duane Morris represented them in “four significant matters,” including a civil action in Maryland against Neuberger and his firm.
The plaintiffs alleged in the footnote that Neuberger had contacted a large banking client of Duane Morris in an attempt to get the bank to pressure Duane Morris into withdrawing as the Browns’ counsel.
The plaintiffs said in the footnote that, while they are unaware of the name of the bank or Neuberger’s relationship with the bank, they know that the bank did contact Duane Morris on behalf of Neuberger and that Taylor and another Duane Morris partner attempted to pressure the lead Duane Morris attorney—Ray Shepard, according to court documents—representing the Browns in the four matters to withdraw.
That pressure, the plaintiffs alleged in the footnote, led to Shepard’s departure from Duane Morris, causing “disorder and delay” that impacted the scheduling of a resentencing hearing and prolonged Franklin Brown’s custody, causing mental anguish to Karen Brown.
According to the response to the plaintiffs’ motion to open the order of non pros filed by Duane Morris and Taylor, Shepard, now a partner at Smith, Gildea & Schmidt in Maryland, continued to represent the Browns in those four cases after leaving Duane Morris.
Addressing the plaintiffs’ footnote in their response, Duane Morris and Taylor said the plaintiffs “have no valid claims against Duane Morris and seek only to harass the firm.”
“A close reading of the Browns’ petition suggests that the Browns are seeking to bring an action against Duane Morris for causing Mr. Shepard to postpone a resentencing proceeding to accommodate his own schedule thus prolonging Mr. Brown’s custody,” Duane Morris and Taylor said in their response. “Duane Morris had no control of Mr. Shepard’s decision to request a continuance of the resentencing proceeding. In any event, Mr. Brown’s prolonged custody is not a harm that can be redressed in an action against Duane Morris.”
Duane Morris and Taylor, in their response, called the claim that Karen Brown’s emotional distress was caused by the postponement of her husband’s resentencing hearing “outrageous.”
The plaintiffs further argued in their memorandum that their attorney in the suit against Duane Morris and Neuberger Quinn, George A. Reihner of Wright & Reihner in Scranton, Pa., never received notices of the case management conference or the rule hearing because they were sent to an address he hadn’t practiced at since 2004 and were never forwarded to his present address.
But in their response, Duane Morris and Taylor argued that the plaintiffs commenced an action and simply never followed through with it.
“Mr. Reihner’s alleged failure to receive notices from the court is irrelevant; the Browns are the plaintiffs here, yet they took no action to pursue their case,” Duane Morris said in its response.
Defendants Neuberger and Neuberger Quinn filed a motion to join the response filed by Duane Morris and Taylor.
Counsel for Duane Morris, Abraham C. Reich of Fox Rothschild in Philadelphia, could not be reached for comment at press time.
Reihner also could not be reached for comment.
The attorney for the Neuberger Quinn defendants, H. Robert Fiebach of Cozen O’Connor in Philadelphia, deferred comment to Duane Morris’ counsel.
(Copies of the six-page opinion in Brown v. Duane Morris, PICS No. 13-3068, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.)