limitations period was tolled, it expired before Sherman filed its malpractice suit on March 12, 1986.
Plaintiff recognizes that if its only harm occurred when it lost the Proto-Vest litigation, and if the limitations period was not tolled, its tort claim would be time-barred.
Plaintiff asserts, however, that it was unable even by the time that the appeal was decided to appreciate the full extent of its loss, and that the limitations period was therefore tolled under the "discovery rule" until such time as Sherman's officers learned the measure of the damages for which the company was liable.
The discovery rule "arises from the inability of the injured, despite the exercise of due diligence, to know of the injury or its cause." Pocono International Raceway, Inc. v. Pocono Produce, Inc., 503 Pa. 80, 468 A.2d 468, 471 (1983) (emphasis in original). See Trice v. Mozenter, 515 A.2d at 15; Skyline Builders, Inc. v. Kellar, 50 Pa. D. & C. 2d 19, 25 (C.D. Lehigh Cty. 1970). The discovery rule ordinarily is applied in cases in which a plaintiff is unaware initially that it has been harmed, but is inapplicable where a plaintiff knows of the harm, but not of the extent of it. See, e.g., Shadle v. Pearce, 287 Pa. Super. 436, 430 A.2d 683 (1981); Lactaid v. Youtie, No. 85-6751. Even late discovery of a major increase in the extent of harm does not toll the limitations period. See Shadle, 430 A.2d at 686; Lactaid slip op. at 2-3.
Based on the record in this case, it cannot reasonably be controverted that Sherman's officers knew more than two years before they filed suit that Goldhammer's advice had substantially harmed Sherman. Mr. Thacher testified that he understood by the time Sherman lost its appeal that Mr. Goldhammer had wronged Sherman by having been overly optimistic in his assurances that Sherman would win the suit against Proto-Vest. If plaintiff therefore knew or should have known in February of 1984 that it had been harmed by Goldhammer's advice, and merely failed to appreciate until later that year how much that wrong advice had cost it, the limitations period was not tolled.
Plaintiff, however, suggests that the disclosure in the fall of 1984 of the measure of Proto-Vest's damages constitutes a harm separate from the loss of the suit against Proto-Vest, and that the existence of that second harm distinguishes its case from those in which a plaintiff knows it has been harmed but only later learns of the extent of the harm. Plaintiff contends that "the failure of Defendant Goldhammer does not relate only to the amount of damages in question, but to the fact of the existence of those damages insofar as they relate to lost profits rather than merely reasonable royalties." Memorandum of Law of Plaintiff Contra Defendants' Motion to Dismiss, at 10. In other words, in plaintiff's view, the difference between what it initially thought it had lost and what it ultimately paid was so great that the latter should be viewed as a second, separate harm. Plaintiff contends that because Sherman's officers were reasonably unaware of the measure of damages until after Goldhammer had conducted research and discovery regarding damages, the limitations period on the second harm was tolled under the discovery rule until fall of 1984.
I suggested in my bench opinion granting defendants' first motion to dismiss that this issue could not properly go to a jury unless plaintiff had evidence that an accurate measure of damages was fifteen or twenty times what plaintiff had thought it faced. I suggested then that, in the absence of a showing of such a dramatic difference, the calculation of damages could not be viewed as a harm qualitatively distinct from the holding that plaintiff was liable for damages. Because plaintiff has not made such a showing, it must be viewed as having been harmed only once.
The question whether, as a matter of law, the disclosure of plaintiff's liability for damages of a type and magnitude unanticipated when plaintiff lost its suit might constitute a separate harm, and therefore warrant a separate application of the discovery rule, is not presented by the record in this case. Plaintiff has not shown on the record that the difference between what it thought it would owe and what it ultimately paid is of an order of magnitude that would justify characterizing plaintiff's liability for lost gross profits as a harm wholly distinct from that which plaintiff initially perceived. Plaintiff's officers have at various stages contended that they initially understood that the most they stood to lose was a reasonable royalty, and only during damages discovery learned that Proto-Vest sought lost profits, too. See Amended Complaint, para. 34(a). It cannot reasonably be concluded from the record, however, that Sherman's officers were unaware until mid-1984 that they might have to pay some measure of lost profits. Sherman's officers were informed prior to the appeal that they might have to pay lost profits. The record raises an issue only whether plaintiff reasonably remained unaware until the fall of 1984 that profits would be calculated as gross rather than net profits.
I do not find the difference between the two types of lost profits to be such that plaintiff's exposure to damages for lost gross profits constitutes a harm wholly distinct from the underlying liability. After the district judge found plaintiff liable, plaintiff learned it might have to pay for some lost profits, but nonetheless waited more than two years before filing suit. In monetary terms, the size of the discrepancy between gross profits and the net profits that plaintiff first believed it might have to pay is not so great as to demand that the disclosure of plaintiff's liability for lost gross profits be viewed as a separate harm. Mr. Thacher testified that before damages discovery, the most he understood Sherman might have to pay was between $ 200,000 and $ 500,000. Thacher N.T., at 161-62. After September 5, 1984, when plaintiff received the first reports of Proto-Vest's accountant, Mr. Correll, Mr. Goldhammer revised his damages estimate upward to between $ 1,300,000 and $ 1,580,000. Thacher N.T. at 162. Plaintiff eventually paid $ 1,375,000 to settle the litigation. Thus, Sherman ended up paying almost three times more than what Sherman's officers had originally understood to be the maximum exposure to damages.
Although the discrepancy that plaintiff has shown does raise an issue on the merits whether defendants failed to give plaintiff all the information and advice that lawyers in defendants' position are obligated to give, it does not establish that plaintiff was harmed twice. The record indicates that plaintiff did not initially appreciate the extent to which it had been harmed, but under Pennsylvania law such a lack of information has not been held to toll the statute of limitations on a claim of professional negligence. Plaintiff's negligence count accordingly was barred as of February 29, 1986 at the latest, and was untimely when filed on March 12, 1986.
An appropriate order accompanies this memorandum.
For the reasons stated in the accompanying memorandum, defendants' motion to dismiss plaintiff's complaint, which, in view of the evidence in the record, has been treated as a motion for summary judgment, is hereby GRANTED. Judgment is entered in favor of the defendants and against the plaintiff.