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Spector Gadon & Rosen, P.C. v. Fishman

United States District Court, E.D. Pennsylvania

March 30, 2015



JOEL H. SLOMSKY, District Judge.


These consolidated cases involve an action by counsel to collect legal fees from a former client and, in turn, the client's suit against counsel for professional negligence or malpractice.[1] Plaintiff Robert Fishman ("Fishman") retained Defendant Alan Epstein ("Epstein") and his law firm, Spector Gadon & Rosen, P.C. (collectively, "Defendants"), to pursue a claim against Fishman's former employer, United American Indemnity, Ltd. ("UAI"). Fishman contended that UAI breached his employment agreement by depriving him of certain benefits after UAI's Board of Directors terminated his employment. As required by the employment agreement, Fishman commenced an arbitration proceeding against UAI. During the pendency of this proceeding, Epstein attempted to negotiate a settlement with UAI. Fishman contends that he believed that a favorable settlement agreement was reached based upon his conversations with Epstein. The settlement with UAI, however, was never finalized. Fishman claims in this case that Epstein was negligent in several respects for failing to have the settlement finalized, causing him to retain new counsel and settle his claim for less than the original settlement offer.

Presently before the Court is Defendants' Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c). (Doc. No. 26.) Specifically, Defendants seek to have all claims filed against them by Fishman dismissed. The claims are set forth in two counts: Count One against both Epstein and Spector Gadon & Rosen, P.C. for professional negligence and Count Two against Epstein alone for breach of contract. For reasons that follow, the Court will grant Defendants' Motion for Judgment on the Pleadings.


A. Statement of Facts

1. Fishman's employment with and termination by UAI and the subsequent arbitration proceeding

On November 27, 2006, Fishman, who is an attorney, and UAI entered into an employment agreement in which Fishman was hired as the Chief Executive Officer ("CEO") of UAI. (Doc. No. 1, Ex. 1 ¶ 3.) The agreement contained provisions covering Fishman's compensation and benefits, severance benefits Fishman was entitled to receive if he were terminated without cause, and an arbitration clause. (Id.) The agreement also included a provision titled "Actions Requiring Holding Company and/or Board Approval" ("contract approval policy"), which "required Fishman to seek permission from the Board before approving any contract in excess of $500, 000." (Id. ¶ 4.)

During his tenure as CEO, Fishman employed the services of a consulting firm, Keane Worldzen, Inc. ("Keane"), "to assess the scope of the problems within UAI and implement appropriate solutions." (Id. ¶ 5.) On March 13, 2007, Fishman entered into a contract with Keane which provided for an "initial consultation fee" of $462, 500, an amount within Fishman's signature authority under the contract approval policy. On April 24, 2007, Fishman executed a second contract with Keane for work valued up to $2, 500, 000. (Id. ¶ 7.) Fishman alleges that before this contract was signed, he stipulated with representatives of Keane that because the contract would cost more than $500, 000, it would require Board approval before it would become effective. (Id.) ("Fishman only executed the second contract with Keane with the understanding with [sic] that his signature could not bind UAI and that the contract was subject to UAI Board approval.") That same day, Fishman presented the proposed second contract with Keane to the Board, and the Board rejected it. (Id. ¶ 9.)

On May 8, 2007, less than a year after he became CEO, the Board of Directors of UAI terminated Fishman. (Doc. No. 1, Ex. 1 ¶ 10.) Feeling that his termination was unjustified and in violation of the employment agreement, Fishman initiated arbitration proceedings against UAI as required under the terms of his employment agreement. He hired Epstein and his law firm, Spector Gadon & Rosen, P.C., to represent him in the arbitration. (Id. ¶ 11.) In this proceeding, Fishman alleged that his termination constituted a breach of his employment contract.[2]

In response, UAI counterclaimed against Fishman, alleging claims for breach of contract, breach of fiduciary duty, misappropriation of confidential information and trade secrets, and conversion. (Id. ¶ 15.) In particular, UAI alleged that it had cause to terminate Fishman because he violated the contract approval policy which required him to obtain Board approval before entering into the two contracts with Keane, since they were valued at over $500, 000. (Id.) In August 2007, the Board moved to invalidate the Keane contracts by filing a lawsuit against Keane ("Keane litigation"), alleging that the contracts between Keane and UAI were invalid because Fishman lacked authority to execute them and that there was no meeting of the minds with respect to the purported agreements. (Doc. No. 1, Ex. 1 ¶¶ 17, 19.)

Nearly two years later, on July 17, 2009, while the dispute between Fishman and UAI was still in arbitration, Epstein, in his capacity as counsel for Fishman, was scheduled to take the deposition of Saul Fox, Chairman of the UAI Board. (Id. ¶ 18.) Fishman did not attend the scheduled deposition. (Id. ¶ 21.) Before the deposition began, Epstein and counsel for UAI entered into settlement negotiations. (Id.) The conversations appeared to be fruitful. The parties negotiated and allegedly agreed to material terms of a settlement. (Id.) For this reason, Fox's deposition did not proceed. (Id.)

According to paragraph 22 of the Complaint, the terms of the July 17, 2009 purported settlement were as follows:

a) the transfer by Plaintiff to UAI of all of his legal and equitable interest in 22, 457 shares of UAI Common stock; b) the cooperation of the Plaintiff in connection with the litigation pending between UAI and Keane Worldzen, Inc. in the Court of Common Pleas, Montgomery County, Pennsylvania, including the completion of an interview and/or videotaped witness statement under oath in which Fishman would testify that the contract between Keane and UAI was subject to UAI Board approval and that this condition was known and agreed to by Keane; c) payment to Plaintiff by UAI of the total sum of $1, 000, 000.00 without deductions, $550, 000.00 to be paid within thirty days following the completion of the aforesaid interview and/or videotaped statement, $150, 000.00 paid by December 31, 2009, $150, 000.00 by June 30, 2010 and $150, 000.00 by December 30, 2010; d) a maximum contribution of $150, 000.00 by Plaintiff, if the Keane litigation resulted in a final judgment in excess of $500, 000.00 against UAI (i.e., UAI would pay the first $500, 000.00 of that judgment and Plaintiff would be responsible for payment of the first $150, 000.00 in excess of the $500, 000.00; e) confidentiality of the settlement to the extent permitted by law; and f) [t]he dismissal of proceedings before JAMS.[3]

(Id. ¶ 22.)

After the settlement discussion, Epstein called Fishman and spoke to Fishman to confirm the terms of and their agreement to the settlement. (Id. ¶ 21.) Counsel for UAI had the task of preparing the written settlement agreement. (Id. ¶ 25.)

During the next several months, Epstein "made repeated inquiries, by phone and email, as to the status of the written agreement." (Doc. No. 26, Ex. 2, [hereinafter "Melinson Op."], at 4.) On September 20, 2009, UAI forwarded a written agreement to Fishman. (Id.) Three weeks later, on October 5, 2009, Epstein and counsel for UAI "participated in a telephone conference to discuss Fishman's objections to the written agreement, specifically, that it included additional terms that were not part of the oral agreement reached in July." (Id.) The Honorable James R. Melinson, the assigned arbitrator, described the additional terms to include a "forfeiture of sums paid if Fishman breached the confidentiality provisions of the agreement, a Fishman contribution to any settlement' of the Keane litigation, and the forfeiture of sums paid if he failed to cooperate and tell the truth at all times in the Keane litigation." (Id.)[4]

On October 12, 2009, counsel met to discuss these alleged additional terms. (Id.) At the meeting, "counsel for UAI urged' Fishman to accept the additional terms because the ongoing settlement negotiations between Keane and UAI were expected to be concluded soon and for an amount under the $500, 000 ceiling." (Id.) Fishman, however, refused to accept these additional terms and no final settlement was reached at this meeting. (Id. at 5.) Thereafter, the Keane litigation settled on November 23, 2009 for less than $500, 000. (Id.)

On November 29, 2009, Epstein received notification from UAI counsel that effective immediately, UAI was withdrawing its settlement offer to Fishman. (Doc. No. 1, Ex. 1 ¶ 26.) In response, Epstein filed a motion in the arbitration to enforce the terms of the July 17, 2009 settlement discussions. On April 24, 2011, arbitrator Melinson issued an order denying the motion, finding that the UAI Board had not approved the July 17, 2009 settlement agreement, and therefore there was no meeting of the minds with respect to the settlement. (Id. ¶ 27; Melinson Op. at 10-12.) Thereafter, Fishman engaged new counsel to represent him in the UAI arbitration proceeding. (Doc. No. 1, Ex. 1 ¶ 28.) On October 26, 2012, with his newly-hired counsel, Fishman settled his claims against UAI for less than the $1, 000, 000 figure agreed to during the July 17, 2009 settlement negotiations. (Id. ¶ 29.)

2. Fishman's malpractice claims against Epstein

The crux of Fishman's malpractice claim against Epstein and Spector Gadon & Rosen, P.C. arises from Epstein's purported failure to finalize the alleged settlement agreement negotiated on July 17, 2009. Fishman's overarching grievance is that Epstein breached his professional duty to Fishman because he "failed to take steps to ensure that the settlement was documented and/or confirmed in a form which would be binding and enforceable." (Doc. No. 1, Ex. 1 ¶ 24.)

Fishman alleges that Epstein was negligent in several ways. First, Fishman asserts that Epstein's initial instance of negligent conduct took place immediately following the July 17, 2009 settlement discussion. Fishman claims that despite a court reporter being present at Fox's deposition, Epstein negligently "failed to put the settlement on the record in an audible form to be transcribed by the court reporter in the event that either party would allege later that there was no settlement or disputed the terms." (Id.) Further, Fishman claims that Epstein was negligent by not having the terms of the settlement agreement reduced to writing and by not having the parties sign it at the conclusion of the July 17, 2009 meeting. (Id.)

Second, Fishman alleges that Epstein failed to make adequate efforts to consummate the settlement agreement after leaving the July 17, 2009 meeting. He claims that Epstein was negligent in allowing counsel for UAI to control the drafting of the settlement agreement. (Id. ¶ 25.) In this regard, he avers that Epstein's lack of control delayed the preparation of a written agreement, "which allowed UAI to continue to litigate claims with Keane and determine that it no longer required [Fishman's] cooperation in the litigation pending between UAI and Keane Worldzen, Inc." (Id.) According to Fishman, this delay "allowed UAI to avoid enforcement of the settlement by claiming that Fishman failed to cooperate in the UAI/Keane litigation." (Id.) Fishman claims that Epstein knew or should have known that Fishman's cooperation in the Keane litigation was a critical term of the proposed settlement agreement and that "between July 2009 and November 2009, Epstein did nothing to ensure that Fishman's testimony in the Keane litigation occurred and/or arrange for performance of this obligations [sic]." (Id. ¶¶ 23, 26.)

Lastly, Fishman claims that Epstein was dilatory in seeking UAI Board approval of the settlement terms and that he failed to inform Fishman that Board approval of the settlement was required. (Id. ¶ 25.) To this end, Fishman specifically avers the following in the Complaint:

At all relevant times, Epstein knew that: (a) Board approval of contracts was a critical issue in the UAI/Keane litigation; (b) a core issue in the Fishman/UAI arbitration was Fishman's alleged failure to obtain approval of the UAI/Keane contracts; (c) a critical issue in the Keane litigation was Keane's knowledge that UAI Board approval was necessary. Defendant Epstein took no steps to determine that UAI ...

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