Many a law firm client has received an invoice from outside counsel that made their eyes bulge, but a recent case in the Pennsylvania Superior Court shows law firms are not immune to sticker shock.
Despite what it claimed was an oral agreement that an expert report would cost between $7,500 and $10,000, a Pittsburgh law firm has been ordered to pay twice that amount for a report it ultimately was foreclosed from using in an underlying insurance case.
According to the Superior Court’s opinion in MCMP v. Gelman, attorney Bruce Gelman and his firm, the Law Offices of Bruce Gelman, had contracted with Marsico Construction Services and Louis S. Marsico for an expert report to be used in an insurance coverage dispute over tornado damage to the home of Gelman firm clients Richard and Tina Marie Collier.
The Colliers had alleged their homeowner’s carrier had an obligation to pay damages in excess of policy limits because the insurer had negligently underinsured the property to begin with and because the insurer acted in bad faith during negotiations with its insureds, according to the opinion. Gelman, the Colliers’ lawyer, had hired Marsico to provide an expert evaluation of the cost of repairing the Colliers’ home and the cost of rebuilding the home.
Marsico produced the report and Gelman accepted it, but later balked when he received an invoice from Marsico for nearly $30,000, the opinion said.
Gelman refused to pay the invoice and Marsico demanded that the law firm not utilize the report in the underlying litigation. Gelman withdrew the report from the Colliers’ case and did not obtain a substitute. The Colliers’ case ultimately settled for $1.3 million, according to the opinion.
Marsico, meanwhile, sued Gelman and his firm for breach of contract, pointing to a written engagement letter that provided for Marsico Construction to be paid based on the hourly rate of its employees, the opinion said.
The Gelman firm did not dispute that it had agreed to pay Marsico based on an hourly rate, but it filed a counterclaim alleging Marsico had orally agreed to keep the price of the report in the $7,500-to-$10,000 range, according to the opinion.
That ballpark estimate was not mentioned in the written engagement letter, however—a detail that ultimately sunk Gelman’s case.
After a two-day bench trial, an Allegheny County trial judge entered a $20,000 verdict in favor of Marsico and against the law firm, while also ruling in favor of Marsico on the counterclaim. The judge, according to the Superior Court’s opinion, pointed to Gelman’s acknowledgement that he “‘definitely knew’” he would be billed hourly for the report and that he expected to receive an invoice for an amount in excess of $10,000, albeit not double the original estimate.
Gelman and his firm appealed, but a three-judge panel of the Superior Court upheld the trial court’s ruling in a nonprecedential Oct. 26 opinion.
“It was undisputed that Marsico performed its duties under the contract. Attorney Gelman testified that Mr. Marsico ‘did exactly what I asked him to do, and it looked like a good report to me,’” Judge Mary Jane Bowes wrote for the panel. “The law firm accepted the report, tendered it to opposing counsel and the insurance company, and then refused to pay Marsico the fee for the report, which was calculated on an hourly basis per the engagement letter.”
Bowes, joined by Judges Anne E. Lazarus and Paula Francisco Ott, rejected Gelman’s argument that the orally agreed-to ballpark amount Marsico gave him constituted an accepted and enforceable offer under the Superior Court’s 1949 ruling in Western Newspaper Union v. Shaltz.
Bowes said the oral estimate in Western Newspaper Union was found by the trial court to be an express contract.
“Herein, in contrast to Western Newspaper Union … we have an off-the-cuff oral estimate proffered ‘following an hour-long examination of the site on a cold day in late January,’” Bowes said, citing language from the trial court opinion. “The court expressly rejected the law firm’s contention that the estimate was an express contract term. The ballpark figure was followed by a written engagement letter that specifically outlined an offer to perform expert consulting services on an hourly fee basis, which the law firm admittedly accepted.”
The Superior Court also upheld the trial judge’s decision to reject the Gelman firm’s claim that it suffered damages because the Colliers’ insurance case settled for less than it should have since there was no expert report.
“Crediting expert testimony offered by Marsico to the effect that the court in the underlying case would have granted an extension to enable the law firm to obtain a new expert since the case was not listed for trial, the court specifically found that the law firm had sufficient time to procure another expert had it attempted to do so,” Bowes said.
Counsel for Marsico, Dennis M. Blackwell of the Blackwell Law Firm in Pittsburgh, could not be reached for comment.
Gelman, reached Thursday, disputed the notion that he would have been given an extension to find another expert in the Colliers’ case. He also said he offered to settle the dispute with Marsico for $18,000 but that offer was rejected.
“I’ve been a lawyer for 25 years, and this has never, ever, ever happened to me,” he said. “There were five other experts in that case and they were all paid in full as soon as I received their invoices.”
Gelman offered a word advice to other lawyers engaging experts: If the expert gives you a verbal estimate, “make sure you get it in writing.”
(Copies of the 10-page opinion in MCMP v. Gelman, PICS No. 17-1675, are available at http://at.law.com/PICS.)