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Eric C. Coleman and Linda Coleman, Husband and Wife v. Duane Morris

December 20, 2012

ERIC C. COLEMAN AND LINDA COLEMAN, HUSBAND AND WIFE, TIMOTHY G. CARROLL, INDIVIDUALLY AND AS EXECUTOR OF THE ESTATE OF LOUIS CARROLL, DECEASED, APPELLANTS
v.
DUANE MORRIS, LLP, AND KATHLEEN M. SHAY, ESQUIRE, APPELLEES



Appeal from the Order entered on May 26, 2011 in the Court of Common Pleas of Philadelphia County, Civil Division, No. 0917 July 2010

The opinion of the court was delivered by: Musmanno, J.:

BEFORE: MUSMANNO, MUNDY and FITZGERALD*fn1, JJ.

OPINION BY MUSMANNO, J.:

Eric C. Coleman ("Coleman") and Linda Coleman ("Linda"), husband and wife, and Timothy G. Carroll ("Carroll"), individually and as executor of the estate of Louis Carroll, deceased,*fn2 (collectively "Plaintiffs") appeal from the Order granting judgment on the pleadings in favor of Duane Morris, LLP and Kathleen M. Shay (collectively "Defendants").*fn3 We reverse.

The pertinent facts of this case are as follows:

Plaintiffs [] Coleman and [] Carroll owned BCA Management, Inc. Their respective spouses[,] Linda [] and Louise Carroll (now deceased)[,] owned BCA Professional Services, Inc. [BCA Management, Inc. and BCA Professional Services shall hereinafter be referred to as "BCA."] Due to the fact that BCA had accumulated approximately $2.16 million in unpaid employee withholding, wage and sales taxes to state and local taxing authorities and the IRS for which Plaintiffs were personally liable, Plaintiffs began to consider a possible sale of the companies in order to alleviate their tax liability.

[] Coleman and [] Carroll entered into preliminary negotiations with Mirabilis Ventures, Inc. (hereinafter "Mirabilis") for the sale of BCA, and on or about May 19, 2006, [] Coleman sought Attorney Kathleen Shay's ["Attorney Shay"] legal advice concerning a non-binding letter of intent. The letter of intent provided that Mirabilis would purchase 100% of BCA's stock for a minimum of $2.5 million.

Plaintiffs allege that Attorney Shay orally agreed to represent the Plaintiffs and BCA in the sale of stock to Mirabilis. Plaintiffs further allege that it was their understanding that Attorney Shay would bill BCA for her services, and Mirabilis would pay the legal fees after acquiring BCA's stock.

Subsequently, Plaintiffs submitted a Draft Agreement for the sale of BCA to Attorney Shay for her review. The Draft Agreement provided that Plaintiffs would sell 100% of BCA's stock to Mirabilis and resign their positions in exchange for a payment of $300,000[fn] and new positions with Mirabilis. In addition, the draft agreement included a guaranty from Mirabilis that it would pay up to $2.2 million in unpaid taxes. Attorney Shay made certain revisions to the Draft Agreement, not described by Plaintiffs, and returned the Draft Agreement with her revisions to Mirabilis'[s] counsel.

[fn An earn-out that was twice BCA's gross profit in 2007.]

Plaintiffs allege that they asked Attorney Shay for confirmation that the sale of BCA would terminate their personal liability for the unpaid taxes, and she advised them that it would.

The provisions contained in the Draft Agreement[,] in addition to Attorney Shay's revisions[,] were incorporated into the final agreement, "Agreement for the Purchase and Sale of Common Stock." At the closing on July 14, 2006, Plaintiffs and Attorney Shay were advised that Avant Services would be substituted for Mirabilis in the Stock Purchase Agreement. Avant was formed two days prior to the closing and was owned by Mirabilis. Plaintiffs questioned Attorney Shay about the significance of the substitution of Avant, and she allegedly replied that Avant would assume liability for the taxes, assuring Plaintiffs that they had "gotten everything they wanted, and more" in the transaction. Plaintiffs subsequently executed the Stock Purchase Agreement.

BCA retained its identity after the stock transfer, and [] Coleman ... continued to operate the company. Several months after the closing, Plaintiffs learned that, despite the transfer, they would remain personally liable for the taxes until they were paid.

Then, [] Coleman was fired from BCA in the beginning of 2007. In March 2007, [] Coleman petitioned the Court of Common Pleas of Chester County to regain control of BCA after allegedly receiving complaints from former clients that BCA had canceled their contracts and otherwise acted improperly and unprofessionally. The Chester County [common pleas] ...


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