United States District Court, W.D. Pennsylvania
November 28, 2005.
KEYBANK NATIONAL ASSOCIATION, Plaintiff,
TODD A. REIDBORD, ESQ., and MICHAEL A. GOLDSTEIN, ESQ., CPA, Defendants.
The opinion of the court was delivered by: WILLIAM STANDISH, Senior District Judge
Pending before the Court are a Motion to Dismiss filed by
Defendant Michael A. Goldstein, Esq. ("Mot. Dis.," Docket No. 8),
a Praecipe for Entry of Non Pros filed by Defendant Todd E.
Reidbord, Esq., and an untitled document filed by Mr. Goldstein,
directing the Clerk of Courts to enter a judgment of non pros in
his favor. (Docket Nos. 12 and 13, respectively.)*fn1 For
the reasons discussed below, the Motion to Dismiss is granted in
its entirety. The Praecipe for Entry of Non Pros is denied as
moot with regard to Mr. Goldstein and denied as to Mr. Reidbord.
A. Factual History*fn2 Walnut Capital Partners ("Walnut Capital"), not a party herein,
is a Pittsburgh real estate developer. Mr. Reidbord is president
and in-house counsel of Walnut Capital; Mr. Goldstein is an
attorney with an unidentified relationship to Walnut Capital
other than a shared street address in Pittsburgh, Pennsylvania.
In March 2000, Plaintiff KeyBank National Association ("KeyBank")
loaned $26.5 million to Walnut Capital ("the Loan.")
As a condition of the Loan, Walnut Capital was required to
enter into an interest rate hedging transaction through any
acceptable entity of its choice. KeyBank and Walnut Capital
entered into a "ten year forward starting interest rate swap"
("the Swap") in the amount of $13.5 million and a two-year
forward period. The Swap was intended to hedge against rising
interest rates during the lifetime of the Loan and to be settled
for cash when the Loan terminated. The direction of the Swap
payment was determined by interest rate movements: if those rates
increased, KeyBank would pay Walnut Capital; if interest rates
fell, Walnut Capital would pay KeyBank.
As a further condition of the Loan and the Swap, KeyBank
required Walnut Capital to provide a legal opinion letter ("the
Opinion Letter"), confirming, inter alia, "the validity and
complete legal enforceability of the documents and transactions
between the parties." (Complaint, "Compl.," ¶ 9.) On March 23, 2000, in a letter signed by Mr. Goldstein, he stated:
We have made such legal and factual examinations and
inquiries as are pertinent or necessary for the
purpose of rendering the opinions herein expressed.
We have examined and are familiar with the originals
or copies, certified or otherwise, identified to our
satisfaction, of such documents, records and other
instruments as are necessary for the furnishing of
this opinion letter.
The Loan Documents executed by the
Guarantors*fn3 . . . are legal, valid and
binding obligations enforceable with respect to each
of the Guarantors in accordance with their terms.
(Compl., ¶ 10; see also Opinion Letter,*fn4
Plaintiff claims that it did not know when it entered into the
Loan and the Swap that the Opinion Letter was written by Mr.
Reidbord, not Mr. Goldstein; further, it claims that had it known
of Defendants' "malfeasance" in this regard, it would not have
entered into the agreements.
In the two years following execution of the Loan, "interest
rates plummeted." (Compl., ¶ 14.) As a result, when Walnut Capital terminated the Swap in November 2002, it was required to
pay KeyBank some $3.6 million.
On February 23, 2003, Walnut Capital sued KeyBank, claiming
fraud and negligent misrepresentation in connection with the
Loan. See Walnut Capital Partners, et al. v. KeyBank
N.A., et al., CA 03-0284 (W.D. Pa. 2003) ("the Swap
Litigation.") Plaintiff claims that in opposition to a motion to
dismiss the amended complaint in the Swap Litigation, Walnut
Capital argued for the first time that the certain statements in
the Swap documents were general disclaimers and, as such, not
enforceable. KeyBank claims this position directly contradicts
the representations made in the Opinion Letter regarding the
validity and enforceability of the transactions and the Loan
B. Procedural History
Plaintiff filed suit in this Court on February 8, 2005. In
Count I of the Complaint, KeyBank seeks indemnification from Mr.
Reidbord and Mr. Goldstein, contending that they are "primarily
liable" for the costs, legal fees, and expenses KeyBank has
incurred in the Swap Litigation. (Compl., ¶ 30.) In Count II,
KeyBank seeks contribution from Defendants, claiming that should
it be found liable in the Swap Litigation, any injury to Walnut
Capital resulted at least in part from Defendants' malfeasance.
(Compl., ¶¶ 34-36.) Plaintiff claims in Count III that Defendants
are liable for "direct legal malpractice" in connection with the Opinion Letter. (Id., ¶¶ 38-46.) In Count
IV, Plaintiff alleges that in order to induce KeyBank to enter
into the Loan and Swap, Defendants fraudulently represented that
Mr. Goldstein wrote the Opinion Letter, knowing that KeyBank
would not have accepted the letter had it known it was written by
Mr. Reidbord. (Id., ¶¶ 48-55.) Finally, in Count V, KeyBank
seeks a declaratory judgment that Defendants are jointly and
severally liable for all of KeyBank's future costs, legal fees
and expenses incurred in the Swap Litigation and for any future
adverse judgment entered against KeyBank. (Id., ¶¶ 57-62.)
Mr. Goldstein filed the pending Motion to Dismiss on March 14,
2005. On April 13, 2005, each Defendant filed a praecipe for
entry of judgment of non pros, seeking to dismiss the entire
Complaint inasmuch as Plaintiff had failed to timely file a
certificate of merit as required by Pa.R.Civ.P. 1042.3. In
response to the latter, Plaintiff filed a certificate of merit
for each Defendant on April 29, 2005, 80 days after the Complaint
was filed. (See Docket Nos. 17 and 18.)
While the motion to dismiss and praecipes were pending, the
Court granted summary judgment in favor of KeyBank on June 14,
2005, in the Swap Litigation, concluding that the parol evidence
rule and the existence of an integrated contract barred each of
Walnut Capital's claims in that suit. (Swap Litigation, Docket
No. 94.) Walnut Capital appealed that decision to the Third Circuit Court of Appeals (id., Docket No. 96) where, as of the
date of this Memorandum, it is still pending.
C. Jurisdiction and Venue
Jurisdiction is appropriate in this Court pursuant to
28 U.S.C. § 1332 inasmuch as KeyBank is a national banking association with
its principal place of business in Cleveland, Ohio, and both
Defendants are residents and citizens of Pennsylvania. The Court
has jurisdiction over Plaintiff's declaratory judgment claim by
virtue of 28 U.S.C. § 2201. Venue is appropriate pursuant to
28 U.S.C. § 1391 because both Defendants are residents of this
district and the claim is brought in diversity.
II. STANDARD OF REVIEW
In deciding a motion to dismiss under Fed.R.Civ.P.
12(b)(6),*fn5 all factual allegations and all reasonable
inferences therefrom must be accepted as true and viewed in a
light most favorable to the plaintiff. Colburn v. Upper Darby
Twp., 838 F.2d. 663, 665-666 (3d Cir. 1988). In ruling on a
motion to dismiss, the court must decide whether there are
sufficient facts pled to determine that the complaint is not
frivolous, and to provide the defendants with adequate notice to
frame an answer. Id. at 666. A motion to dismiss will be granted only if it
appears that the plaintiff can prove no set of facts in support
of his claims which would entitle him to relief. Conley v.
Gibson, 355 U.S. 41, 45 (1957).
The claims brought by KeyBank are based in Pennsylvania, not
federal law, with the exception of the declaratory judgment claim
in Count V. As a federal court sitting in diversity, we will
apply Pennsylvania substantive law to those claims. See Erie
R.R. v. Tompkins, 304 U.S. 64, 78-80 (1938); State Farm Mut.
Auto. Ins. Co. v. Coviello, 233 F.3d 710, 713 (3d Cir. 2000).
The decisions of the Pennsylvania Supreme Court are the
authoritative source of Pennsylvania law, but if that court has
not yet decided a specific issue, this Court will be guided by
decisions of lower state courts and by federal courts
interpreting state law. Coviello, id.
A. Motion to Dismiss*fn6
1. Count I Indemnification: In Count I, KeyBank claims that
it is entitled to indemnification from Defendants "for all of the
costs, legal fees, and expenses incurred to date by KeyBank in
the Swap Litigation." (Compl., ¶ 30.) In Count V, in which it seeks a declaratory judgment, KeyBank expands this
indemnification demand to include "any future adverse judgment
entered against KeyBank in the Swap Litigation." (Id., ¶ 57.)
Defendant Goldstein argues first that this claim is premature
inasmuch as KeyBank has not been found liable to Walnut Capital
in the Swap Litigation and second, that Pennsylvania case law
does not recognize the right of indemnification in fraud cases.
(Mot. Dis., ¶¶ 15-16.) In its brief in opposition to the Motion
to Dismiss, KeyBank urges the Court to address the
indemnification issue now because "given the large costs and fees
being incurred by both parties in the Swap Litigation, such
expenses could be an exercise in futility if Reidbord and
Goldstein will be `on the hook' for the ultimate payment of any
damages to Walnut Capital Partners." (Opposition to Michael A.
Goldstein's Motion to Dismiss, Docket No. 11, "Plf.'s Opp.," at
4-5.) We not only agree with Defendant that KeyBank's claim for
indemnification for any adverse judgment against it has not yet
accrued,*fn7 we also agree that KeyBank has failed to state
a claim for indemnification, given the facts of this suit. Under Pennsylvania law, a person has a right to indemnity only
when "without active fault on his own part, [he] has been
compelled, by reason of some legal obligation to pay damages
occasioned by the initial negligence of another, and for which he
himself is only secondarily liable." Builders Supply Co. v.
McCabe, 77 A.2d 368, 370 (Pa. 1951), Willet v. Pa. Med.
Catastrophe Loss Fund, 702 A.2d 850, 854-55 (Pa. 1997); see
also Allegheny Gen. Hosp. v. Phillip Morris, Inc.,
116 F. Supp.2d 610, 621 (W.D. Pa. 1999). "Secondary liability exists,
for example, where there is a relation of employer and employee,
or principal and agent." Builders Supply Co., id.
Here, KeyBank seeks indemnification for speculative damages it
may be compelled to pay, and/or the costs of defending itself, in
the Swap Litigation. The claims against KeyBank therein arise
from its alleged fraudulent and negligent misrepresentation,
fraudulent concealment of the degree of risk associated with the
Swap, and fraud-suitability. (Swap Litigation, Amended Complaint,
Docket No. 36.) The only reference to Mr. Goldstein in the Swap
Litigation is to identify him as chief financial officer of the
Walnut Capital limited partnerships bringing suit against KeyBank
and its co-defendant, McDonald Investments, Inc. As a non-party,
he could not be found liable in the Swap Litigation for any
injury to Walnut Capital; nor it is claimed in the Swap
Litigation that he was an employee or agent of KeyBank for whose malfeasance KeyBank could be found vicariously liable.
It follows, then, that if Walnut Capital were to prove in the
Swap Litigation that it had been damaged (i.e., if the Court of
Appeals reversed the grant of summary judgment in favor of
KeyBank and remanded for further proceedings), such injury could
logically result only from KeyBank's own conduct.
With regard to the claim that Mr. Goldstein should indemnify
KeyBank for the "costs, legal fees, and expenses" it has incurred
in defending itself in the Swap Litigation, Plaintiff cites no
case law to support such a claim, and the Court has been unable
to independently identify any legal authority that would support
its entitlement to such relief.
The Motion to Dismiss is granted as to Count I.
2. Count II Contribution: Count II alleges that KeyBank is
entitled to contribution from Defendants for costs, legal fees
and expenses, as well as any adverse judgment which it incurs in
the Swap Litigation. (Compl., ¶ 35, see also 42 Pa. C.S. §
8324(a) on which Plaintiff bases this claim.) KeyBank claims that
the alleged injury to Walnut Capital in the Swap Litigation is
"single and indivisible, cannot be apportioned, and results from
(i) Defendants' malfeasance . . . and (ii) any alleged torts of
misrepresentation or omission asserted in the Swap Litigation
against KeyBank." (Compl., ¶ 34.)
Defendant argues that not only is the claim for contribution premature, but under no circumstances could Plaintiff establish
that he and KeyBank could be found to be joint tortfeasors in the
Swap Litigation; thus there is no legal basis for its claim to
contribution. (Brief in Support of Motion to Dismiss, Docket No.
9, "Def.'s Brief," at 4-5.) KeyBank does not address Count II in
its opposition to the motion to dismiss, other than in the
context of its claim for a declaratory judgment. (Plf.'s Opp. at
2-5.) The Court agrees with Defendant that KeyBank's claim for
contribution is without legal basis.
Pennsylvania law recognizes the general rule that "the right of
contribution exists among joint tort-feasors." 42 Pa. C.S. §
8324(a); see also Mattia v. Sears, Roebuck & Co.,
531 A.2d 789, 791 (Pa.Super.Ct. 1987), noting that "the equitable
obligation of contribution may be asserted where: (1) the parties
combined to produce the plaintiff's injury; (2) the parties are
each liable in tort to the plaintiff; and (3) a tortfeasor has
discharged the common liability by paying more than his pro rata
A claim for contribution does not accrue until judgment is
entered in favor of the original plaintiff, which, as Mr.
Goldstein argues, has not occurred in the Swap Litigation. See
cases cited in footnote 7. Although Mr. Goldstein is not a party
to the Swap Litigation, KeyBank may assert a claim against him
for contribution in a separate action such as this. Mattia, 531 A.2d at 791. However, such a claim requires that KeyBank "stand
in the shoes" of Walnut Capital and prove that Mr. Goldstein was
a joint tortfeasor "in that his tortious conduct also caused the
harm at issue." Id. Moreover, in the second action, the party
claiming contribution "must plead sufficient facts to sustain a
cause of action against the new defendant," and "may not rely on
bald assertions." Mattia, id. at 792 (internal citations
omitted.) Here, Plaintiff baldly asserts that Defendant's
malfeasance in connection with the Opinion Letter directly and
proximately damaged KeyBank (Compl., ¶ 36), but fails entirely
to "stand in the shoes" of Walnut Capital and plead sufficient
facts to explain how Mr. Goldstein's alleged malfeasance resulted
in injury to Walnut Capital.
Count II is therefore dismissed as both premature and
3. Count III Direct Legal Malpractice: Plaintiff claims
that Defendants are liable for "direct legal
malpractice"*fn8 in connection with the Opinion Letter. That
is, KeyBank required the Opinion Letter as a condition precedent
to entering into the Loan and relied upon representations
therein; it also relied on Mr. Goldstein's legal expertise to
ensure that the Opinion Letter was complete and accurate in all respects. KeyBank claims it
would not have made the Loan or entered into the Swap if the
Opinion Letter had not been provided or if it had known that the
letter was drafted by Mr. Reidbord. Due to Defendants' legal
malpractice, KeyBank has expended considerable time, effort and
money defending the Swap Litigation and seeks damages to
compensate for those expenditures. (Compl., ¶¶ 38-46.)
In Pennsylvania, a legal malpractice may be based on either
tort or breach of contract. Williams v. Sturm,
110 F. Supp.2d 353, 357 (E.D. Pa. 2000), citing Bailey v. Tucker,
621 A.2d 108, 112 (Pa. 1993). Although KeyBank does not state the legal
basis of its malpractice claim, there is no allegation in the
Complaint that a relationship existed between Mr. Goldstein and
Plaintiff which would require a breach of contract analysis.
Under Pennsylvania tort law, a legal malpractice claim requires
that the plaintiff establish the following elements: "1)
employment of the attorney or other basis for duty; 2) the
failure of the attorney to exercise ordinary skill and knowledge;
and 3) that such negligence was the proximate cause of damage to
the plaintiff." Kituskie v. Corbman, 714 A.2d 1027, 1029-1030
(Pa. 1998), citing Rizzo v. Haines, 555 A.2d 58, 65 (Pa.
We shall assume solely for the sake of analysis that Plaintiff
would be able to establish that its reliance on the Opinion
Letter created a duty on the part of Mr. Goldstein sufficient to satisfy the first element of its malpractice
claim,*fn9 and that Mr. Goldstein failed to "exercise
ordinary skill and knowledge." However, we agree with Defendant
that under no circumstances could KeyBank establish that any
liability it might incur in the Swap Litigation was proximately
caused by the fact that Mr. Reidbord, not Mr. Goldstein, authored
the Opinion Letter.
At this point in time, KeyBank has suffered no damages in the
Swap Litigation; in fact, summary judgment has been granted in
its favor, rendering any claim for damages premature. As in
Trauma Serv. Group, P.C. v. Hunter, MacLean, Exley & Dunn,
P.C., CA No. 99-CV-5979, 2000 U.S. Dist. LEXIS 3712 (E.D. Pa.
Mar. 24, 2000), this appears to be a case in which the plaintiff
is attempting to bring a legal malpractice claim despite a
successful resolution of the underlying claim. As the court in
Trauma Services noted, "one of the elements a plaintiff must
prove in bringing a legal malpractice claim is damages, namely
that he would have prevailed in the underlying action but for the
attorney's negligence." Id. at *10, citing Duke & Co. v.
Anderson, 418 A.2d 613, 617 (Pa.Super.Ct. 1980); McCartney v.
Dunn & Conner, Inc., 563 A.2d 525, 528 (Pa.Super.Ct. 1989). Here, the underlying case has been decided in favor of KeyBank,
thus precluding a claim that it was damaged as a result of
malpractice in connection with the Opinion Letter. Count III is
4. Count IV Fraud: In Count IV, KeyBank claims that
Defendants knowingly, intentionally and purposefully concealed
the following material facts:
(1) Mr. Reidbord, not Mr. Goldstein, drafted the
(2) Mr. Goldstein did not ensure that the Opinion
Letter was complete and accurate in all respects and
fully covered all the transactions between the
parties, including the Swap; and
(3) Mr. Goldstein did not read the Opinion Letter
before sending it to KeyBank.
(Compl., ¶ 48.)
To state a claim for fraud under Pennsylvania law, a plaintiff
(1) a representation;
(2) which is material to the transaction at hand;
(3) made falsely, with the knowledge of its falsity
or recklessness as to whether it is true or false;
(4) with the intent of misleading another into
relying on it;
(5) justifiable reliance on the misrepresentation;
(6) resulting injury proximately caused by the
Foster v. JLG Indus., 372 F. Supp.2d 792, 800 (M.D. Pa. 2005),
quoting Feeney v. Disston Manor Personal Care Home, Inc.,
849 A.2d 590
, 597 (Pa.Super.Ct. 2004). Here, Plaintiff alleges that the material misrepresentation of
fact is that Mr. Goldstein, not Mr. Reidbord, drafted the Opinion
It claims Defendants falsely represented that
he was the author because they knew KeyBank would not have
accepted a letter written by Mr. Reidbord inasmuch as he was a
principal in Walnut Capital as well as a guarantor of the Loan.
Plaintiff also alleges that Defendants made the misrepresentation
with the intent of misleading KeyBank into believing it had
received a legal opinion from a relatively disinterested third
party. KeyBank claims it justifiably relied on that
misrepresentation and consequently entered into the Loan.
(Compl., ¶¶ 48-53.) Thus, elements one through five of a claim
for fraud have been stated in sufficient detail to withstand a
motion to dismiss. However, to the extent KeyBank was injured,
such injury cannot have been proximately caused by reliance on
First, KeyBank suffered no injury from the Loan transaction
itself. That is, when the Swap was settled in November 2002,
Walnut Capital paid the amount due, thus adhering to the terms of
the agreement. Second, although Walnut Capital subsequently sued
KeyBank for fraud in connection with the Loan transaction, summary judgment has been granted in KeyBank's favor, so KeyBank
has suffered no damage has a result of the Swap Litigation. The
only "injury" Plaintiff has incurred is the cost of defending
itself in the Swap Litigation, an injury which cannot, as a
matter of law, have been proximately caused by the fact that
Mr. Reidbord wrote the Opinion Letter.
As the Third Circuit Court of Appeals has explained,
Traditionally, in tort law, "proximate cause" has
been defined as a person's wrongful conduct which is
a substantial factor in bringing about harm to
another. However, an intervening act of a third
party, which actively operates to produce harm after
the first person's wrongful act has been committed,
is a superseding cause which prevents the first
person from being liable for the harm which his
antecedent wrongful act was a substantial factor in
Egervary v. Young, 366 F.3d 238
, 246 (3d Cir. 2004) (citing
Restatement (Second) of Torts §§ 431, 440-441), cert. denied,
__ U.S. ___, 125 S. Ct. 868
Here, the intervening act of Walnut Capital bringing (a so-far
unsuccessful) suit against KeyBank the source of the "injury"
now perceived by Plaintiff prevents Defendants from being
liable for any harm caused to KeyBank by their wrongful conduct
in misrepresenting the authorship of the Opinion Letter. Because
KeyBank has neither suffered any damages to date nor established
that any such damages could be proximately by Defendants' alleged
fraud, Count IV is dismissed.
5. Count V Declaratory Judgment: Finally, KeyBank asserts
that it is entitled to a declaratory judgment pursuant to 28 U.S.C. § 2201 that Defendants are primarily liable for all of
its future costs, legal fees and expenses, as well as any future
adverse judgment against it, arising from the Swap Litigation.
(Compl., ¶ 57.) This claim is based on its indemnification demand
at Count I (id., ¶¶ 58, 59 and 61), even though in its
opposition to the Motion to Dismiss, KeyBank attempts to expand
the declaratory judgment demand to cover the contribution claim
in Count II as well. (Plf.'s Opp. at 2-3.)
Because we have concluded that Plaintiff has failed as a matter
of law to state a claim for indemnification or for contribution,
we need not consider the question of a declaratory judgment with
regard to those claims. Count V is therefore dismissed.
B. Praecipe for Entry of Judgment of Non Pros*fn11
On January 27, 2003, the Pennsylvania Supreme Court adopted a
rule of civil procedure, effective immediately, which requires
that within 60 days following a claim of professional liability
brought against certain designated professionals including
attorneys the plaintiff or his attorney must file a
"certificate of merit" with the court hearing the case.
Pa.R.Civ.P. 1042.3 and 1042.1. Under the circumstances applicable
to this case, the certificate of merit is to be in the form of a written statement by an appropriate licensed
professional (i.e., another attorney) that "there exists a
reasonable probability that the care, skill or knowledge
exercised or exhibited in the treatment, practice or work that is
the subject of the complaint, fell outside acceptable
professional standards and that such conduct was a cause in
bringing about the harm." Pa. Rule 1042.3(a)(1). "For good cause
shown," a plaintiff may file with the court a motion to the
extend the time in which the certificate of merit must be filed.
Pa. Rule 1042.3(d). Plaintiff concedes that it neither filed the
certificates within 60 days of filing the Complaint nor requested
an extension of time in which to do so.
In opposition to the praecipes, KeyBank raises several
arguments. (Opposition to Defendants' Request for Entry of a
Judgment of Non Pros, Docket No. 19, "Plf.'s Non Pros Opp.")
First, Plaintiff argues that if a certificate of merit is
required (which it does not concede), it pertains only to the
legal malpractice claim*fn12 and the other claims of the
Complaint should not be dismissed for failure to file the
certificate. Moreover, according to Plaintiff, the Pennsylvania
rule is inapplicable because it "directly collides" with Federal
Rule of Civil Procedure 41(b). Next, Plaintiff argues that
Defendants will suffer no prejudice if the Court accepts the late-filed
certificates of merit because no initial case management
conference has taken place, nor has discovery begun. Plaintiff
also contends that dismissal for failure to file the certificates
would have little effect on the final outcome of the legal
malpractice claim because it would simply re-file a separate suit
with the required certificate. Finally, in its reply brief,
KeyBank asserts for the first time that the certificate of merit
rule does not apply because it is procedural rather than
substantive law. (Plaintiff's Renewed Opposition to Defendants'
Request for Entry of a Judgment of Non Pros, Docket No. 26,
"Plf.'s Renewed Opp." at 1.) We address each of KeyBank's
arguments in turn.
1. Pa. Rule 1042.3 as Substantive or Procedural Law: We first
address the question of whether the requirement for a certificate
of merit is a procedural or substantive law in light of the fact
that KeyBank's entire "argument" on this point consists of the
conclusory statement "KeyBank denies that the state court
Certificate of Merit Rule applies to this case because it is
procedural not substantive law." (Plf.'s Renewed Opp. at 1.) To
the best of our knowledge, no reported case in either
Pennsylvania federal courts or state courts has held that Pa.
Rule 1042.3 is simply a procedural rule. To the contrary, every
federal district court which has addressed this issue has concluded that it is substantive state law and, as such, is to be
applied by federal courts sitting in diversity or considering
pendant state-law claims. See Abdulhay v. Bethlehem Med. Arts,
L.P., CA 03-04347, 2005 U.S. Dist. LEXIS 21785, *12-*14 (E.D.
Pa. Sept. 27, 2005), and cases cited therein. Our conclusion is
reinforced by the fact that although the Third Circuit Court of
Appeals has not explicitly considered this question with regard
to Pa. Rule 1042.3, it has held that a comparable New Jersey
state statute, N.J. Stat. Ann. § 2A:53A-27, was substantive state
law which should be applied by federal courts sitting in
diversity. Chamberlain v. Giampapa, 210 F.3d 154, 158-161 (3d
Cir. 2000), applying the analysis set out in Hanna v. Plumer,
380 U.S. 460 (1965). As have the numerous courts cited in
Abdulhay, we have reviewed the purpose, content and
applicability of Pa. Rule 1042.3 as outlined in Chamberlain,
and agree that it should be applied as substantive law in this
matter. In light of the exhaustive consideration of this issue by
the court in Abdulhay, we need not reiterate the step-by-step
analysis here. Abdulhay, 2005 U.S. Dist. LEXIS 21785 at
2. Extent to Which Failure to File the Certificates of Merit
Affects the Individual Counts of the Complaint: We next address
Defendants' claim that the certificate of merit requirement not
only applies to this case, but that failure to file such a
certificate in a timely fashion requires dismissal of the entire complaint. (Brief in Support of the Judgment of Non
Pros, Docket No. 23, at 2-4; Defendant Todd E. Reidbord's Reply
in Support of Entry of Non Pros, Docket No. 24, "Reidbord Reply,"
joining in arguments in Goldstein Brief.) Although not clearly
articulated by either Defendant, this argument seems to rest on
their conclusion that all the claims in the Complaint stem
directly from the allegation of legal malpractice.
Based on the reasoning of The Honorable Stanton R. Wettick, a
well-respected jurist in the Allegheny Court of Common Pleas and
a recognized authority on Pennsylvania rules of civil procedure,
we conclude that Plaintiff is correct in its argument that the
requirement for a certificate of merit pertains only to the legal
malpractice claim. In Thompson v. Jannetta, No. GD-03-10662,
slip op. (Allegheny Co., Feb. 13, 2004), Judge Wettick
considered a petition to strike a judgment of non pros and held
that a certificate of merit was not required in connection with a
claim against a physician based on lack of informed consent.
Thompson brought three claims against her physician general
negligence, assault or battery by failure to obtain informed
consent, and a negligence claim against the doctor's employers
all of which were dismissed when she failed to timely file the
certificate of merit. Judge Wettick agreed with the plaintiff
that her lack of informed consent claim should be reinstated,
reasoning that under Pennsylvania law, such a claim arises from battery, not negligence, the foundation of any malpractice claim.
Therefore, the certificate of merit was not required for the
plaintiff to proceed with her claim of lack of informed consent.
Thompson, slip op. at 6. Similarly, in Krauss v. Claar,
879 A.2d 302 (Pa.Super.Ct. 2005), the court held that the
plaintiffs' claims of negligent misrepresentation, intentional
misrepresentation, promissory estoppel, equitable estoppel, and
tortious interference with contractual relations fell outside the
scope of "professional liability claims" and therefore did not
require a certificate of merit. Id. at 306-308; see also,
Jackson v. Gary L. Sweitzer Enter., Inc., 67 Pa. D.&C. 4th 239,
244-245 (York Co. 2004), reaching a similar conclusion with
regard to claims of fraud and consumer protection law violations.
Here, Plaintiff's claims for indemnification, contribution,
fraud, and a declaratory judgment do not depend on a
determination that Defendants' actions "fell outside acceptable
professional standards" for attorneys. Consequently, failure to
file a certificate does not preclude consideration of those
claims. The discussion which follows therefore applies only to
Count III of the Complaint.
3. Prejudice: Next, we reject Plaintiff's contention that we
should accept the certificates of merit despite the fact they
were filed some eighty days after the Complaint because
Defendants have failed to show that any prejudice resulted from their untimely filing. While that may be true, no such showing of
prejudice is required as a precedent to filing for entry of
judgment of non pros. Again, we rely on the opinion of Judge
Wettick, who has specifically addressed this subject, and
determined that requiring such a showing by defendants would, for
all intents and purposes, eliminate the 60-day filing
requirement. In Helfrick v. UPMC Shady Side Hospital, 65 Pa.
D.&C. 4th 420 (Allegheny Co. 2003), Judge Wettick noted:
If a court were to apply Rule 126*fn13 to a
petition to open a judgment of non pros for failure
to file a certificate of merit unless the defendant
can show prejudice, the petition would almost always
be granted. Defendants are not going to be able to
show that they were prejudiced by the late filing of
a certificate of merit regardless of whether the
delay involves 10 days, 30 days, or 90 days.
Consequently, the use of a prejudice standard would
eliminate the rule's deadlines for filing
certificates of merit.
Helfrick, 65 Pa. D.&C. 4th at 424-425; see also
Abdulhay, 2005 U.S. Dist. LEXIS 21785 at * 33, citing
Helfrick, id., commenting that such a requirement would
"emasculate" Pa. Rule 1042.3.
Thus, although as discussed below, we will accept the
certificates of merit, we do not do so because we are persuaded
by Plaintiff's argument regarding lack of prejudice to
Defendants. Rather, in the absence of guidance from the Third
Circuit on this question, we conclude that it is within a court's discretion to accept late filed certificates in light of all the
facts and circumstances of a particular case, including, as here,
whether the underlying claim could be timely refiled.
4. "Direct Collision" with Federal Rule of Civil Procedure
41(b): Plaintiff argues that "no mechanism exists under the
federal rules empowering a Clerk of Court to dismiss an action
simply upon the filing of a praecipe by a defendant." KeyBank
asserts that Pa. Rule 1042.3 directly collides with Federal Rule
of Civil Procedure 41(b) because the Pennsylvania rule requires
that a claim be dismissed for failure to file the certificate of
merit, whereas the Federal rule provides the court with
discretion to dismiss the claim for failure to prosecute a
claim.*fn14 Because application of the Pennsylvania rule
would be in effect an abrogation of the federal court's
discretion, the Court should refuse to apply the state rule.
(Plf.'s Non Pros Opp. at 4-5.)
We note initially that although Plaintiff repeatedly refers to
application of the rule requiring the certificate, i.e., Pa. Rule
1042.3, it is actually objecting to the corollary rule which sets out the procedure for a defendant to achieve dismissal of a
claim if the certificate is not filed, i.e., Pa. Rule 1042.6.
That Rule provides in pertinent part:
The prothonotary, on praecipe of the defendant, shall
enter a judgment of non pros against the plaintiff
for failure to file a certificate of merit within the
required time provided that there is no pending
timely filed motion seeking to extend the time to
file the certificate.
Pa.R.Civ.P. 1042.6(a). Entry of Judgment of Non Pros for Failure
to File Certification.
To date, the only case in this Circuit*fn15 to address the
interplay of Pa. Rule 1042.6 and Federal Rule 41(b) is Abdulhay
v. Bethlehem Med. Arts, supra. There, the plaintiff brought
suit against an architect (a profession also subject to the
certificate of merit requirement) and his firm for purported
federal civil rights violations, based on the racially
discriminatory way in which the architect treated him during
renovation of Abdulhay's offices. One count of the amended
complaint alleged architectural malpractice by the defendant's
firm, thus triggering Pa. Rule 1042.3. When Abdulhay failed to
file the necessary certificate of merit, defendants filed a
praecipe for entry of judgment of non pros pursuant to Pa. Rule
1042.6. The plaintiff moved to strike the praecipe and filed the necessary certificate. Abdulhay, 2005 U.S. Dist. LEXIS 21785 at
*2-*6. Abdulhay did not dispute the applicability of Pa. Rule
1042.3, but argued that Pa. Rule 1042.6 is a state procedural
rule inapplicable in federal court because it conflicts with
Federal Rules 7(b) and 41(b), as well as with a rule of the
Eastern District of Pennsylvania, Local Rule 7.1.*fn16 The
crux of the argument was that the defendants should not have
filed a praecipe, but rather a motion and proposed order in
accordance with the federal and local rules. Id. at *8-*9.
Applying the analysis set out by the Third Circuit in
Chamberlain, the court concluded that Federal Rule 41(b) did
not directly collide with Pa. Rule 1042.3 because the latter did
not address any form of dismissal; that is, filing a certificate
of merit serves a completely different purpose and is a
completely different process from moving for an involuntary
dismissal. Abdulhay, 2005 U.S. Dist. LEXIS 21785 at *12-*23. On
the other hand, the court concluded that Pa. Rule 1042.6 is
procedural and therefore its enforcement remedies are not
available in federal court. First, the court concluded that the
requirement is "merely the form and mode of enforcing the
substantive certificate of merit right," but was not "bound up with the
definition of the right or obligation." Id. at *23-*24. Next,
the court concluded that, to its knowledge, no federal court had
concluded that Pa. Rule 1042.6 was substantive, as opposed to
procedural, law and that no federal court had applied the rule
"as a Pennsylvania state court would in a state action." The
Abdulhay court also found that no federal court had recognized
the device of a praecipe for entry of judgment of non pros as "a
legitimate procedure in federal practice," nor concluded that the
praecipe should be automatically entered by the federal clerk of
court in the absence of a court order directing the clerk to do
so.*fn17 Id. at *24.
Reasoning that a judgment of non pros is, in essence, an
involuntary dismissal for failure to prosecute a case, the court
concluded that this process in federal practice is governed by
Rule 41(b). Because the federal rule is sufficiently broad to
control the issue, the state and federal rules directly collide
and Pa. Rule 1042.6 cannot be applied in federal court.
Abdulhay, 2005 U.S. Dist. LEXIS 21785 at *26-*29. The court
therefore struck the defendants' praecipe for entry of judgment
of non pros from the record.
As noted above, the Third Circuit Court of Appeals has not addressed Pa. Rule 1042.3, nor the enforcement provision in Pa.
Rule 1042.6. Only one other federal court in this Circuit has
considered dismissal of a malpractice claim when that request was
made in the form of an entry of judgment of non pros rather than
as a motion to dismiss.*fn18 In Velazquez v. UPMC Bedford
Mem'l Hosp., 328 F. Supp.2d 549 (W.D. Pa. 2004), on
reconsideration by Velazquez v. UPMC Bedford Mem'l Hosp.,
338 F. Supp. 2d 609 (W.D. Pa. 2004), Judge Kim Gibson of this
district twice considered such an action, treating it as if it
were a motion to dismiss. The Velazquez analyses did not
address the court's authority to rule on a judgment of non pros,
and, in the second opinion, Judge Gibson explicitly directed the
clerk of court to enter the judgment as such. Id. at 613.
Although we do not disagree with the conclusion of our sister
court in the Eastern District, we find the result less than
pragmatic in light of the circumstances herein. Were we to strike
the praecipe, Mr. Reidbord presumably would try to file a motion
to dismiss, leading to unnecessary delay in the resolution of this case. See cases listed in footnote 18, considering such
motions. While we agree with the Abdulhay court that the form
of the document filed by Defendants is incorrect, we find that
striking the praecipes would accomplish no purpose. Since the
Third Circuit has not spoken on this issue,*fn19 we follow
the example of Judge Gibson and treat Mr. Reidbord's praecipe as
if it were a motion to dismiss the malpractice claim.
5. Refiling of the Legal Malpractice Claim within the Statute
of Limitations: Finally, Plaintiff contends that dismissal would
have little effect on the final outcome of the legal malpractice
claim because it would simply re-file a separate suit, resulting
in "needless paper shuffling," increasing the Court's caseload,
and benefitting no one. (Plf.'s Non Pros Opp. at 3-4, quoting
Scaramuzza v. Sciolla, 345 F. Supp.2d 500 (E.D. Pa. 2004).) As
Judge Wettick has pointed out, under Pennsylvania law, an entry
of non pros against a plaintiff does not bar the plaintiff from
re-commencing the same cause of action, assuming the applicable
statute of limitations has not run. Helfrick, 65 Pa. D.&C. 4th at 428.
Although Mr. Reidbord concedes that a judgment of non pros is
not a claim on the merits, he argues that Plaintiff's argument
overlooks the statute of limitations on a legal malpractice
claim. His position is that despite the fact that the Complaint
is less than clear about "who is alleged to have committed
malpractice to whom," any injury KeyBank sustained as a
consequence of his alleged actions began with the filing of the
lawsuit by Walnut Capital on April 1, 2003, or, at the latest, on
April 28, 2003, when KeyBank filed a motion to dismiss Walnut
Capital's complaint. (Reidbord Reply at 1-3.)
Under Pennsylvania law, the statute of limitations for bringing
a claim of legal malpractice based in tort is two years. 42 Pa.
C.S. § 5524; see also Pettit v. Smith, CA No. 98-6707,
1999 U.S. Dist. LEXIS 17835, * 7 (E.D. Pa. Nov. 17, 1999). An action
for malpractice accrues at the point an attorney breaches his or
her professional duties to the client/plaintiff. Pettit, id.,
citing Garcia v. Community Legal Services Corp.,
524 A.2d 980, 984 (Pa.Super.Ct. 1987), and Moore v. McComsey,
459 A.2d 841, 844 (Pa.Super.Ct. 1983). Under the facts of this case, we
conclude that the malpractice alleged by Plaintiff occurred on or
before March 23, 2000, when the Opinion Letter was drafted.
Normally, then, a legal malpractice suit based on that letter
should have been filed not later than March 23, 2002, in order to be timely.
However, Pennsylvania recognizes the discovery rule in cases of
legal malpractice. "Where the existence of the injury is not
known to the complaining party and such knowledge cannot
reasonably be ascertained within the prescribed statutory period,
the limitations period does not begin to run until the discovery
of the injury is reasonably possible." Pettit, 1999 U.S. Dist.
LEXIS 17835 at *9, citing, inter alia, Dalrymple v. Brown,
701 A.2d 164, 167 (Pa. 1997). Applying the discovery rule to Mr.
Reidbord's timetable above, the legal malpractice claim had to
have been brought not later than April 28, 2005. Consequently, if
the judgment for entry of non pros is granted, even the discovery
rule will not save any subsequent attempt by KeyBank to refile
its suit. (Reidbord Reply, passim.)
KeyBank contends it did not discover the legal malpractice when
it learned it had been sued by Walnut Capital, nor when it filed
the motion to dismiss in the Swap Litigation. Rather, it was not
aware of the malpractice until May 4, 2004, when Walnut Capital
for the first time rejected the statements in Opinion Letter that
the Swap documents were legally binding, valid, and enforceable
obligations. (Plf.'s Renewed Opp. at 2, see also Compl., ¶¶
18-19.) Therefore, according to KeyBank, the statute of
limitations continues to run until at least May 4, 2006.
If we treat the praecipe as the functional equivalent of a motion to dismiss, we are compelled to accept KeyBank's
allegation that it did not learn of its potential injury until
May 4, 2004. Therefore, we agree that it could timely file
another suit restating this claim. See Anspach v. City of
Phila., CA No. 05-810, 2005 U.S. Dist. LEXIS 16587, *5-*6 (E.D.
Pa. June 20, 2005) and Scaramuzza, 345 F. Supp.2d at 511-512,
arriving at a similar conclusion. However, as discussed above,
all the claims against Mr. Goldstein including the legal
malpractice claim have been dismissed on their merits; to the
extent Plaintiff might choose to file a new malpractice claim, it
could only be against Mr. Reidbord.
Although we by no means excuse Plaintiff's failure to timely
file the necessary certificate of merit, we agree that in this
case, dismissing the legal malpractice claim against Mr. Reidbord
would simply result in unnecessary paper shuffling, particularly
because the other four claims against him have not been
dismissed. The praecipe for entry of judgment of non pros, Docket
No. 12, is therefore denied.
An appropriate Order follows.
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