Summary
finding that a non-Delaware attorney's provision of legal services for a client in filing its certificate of incorporation in Delaware and in acting for it in connection with a prior Delaware litigation, including calls and letters to corresponding counsel in Delaware, satisfied the long-arm statute and the Due Process Clause when the lawyer was sued in Delaware for malpractice relating to the prior Delaware litigation even though the attorney never appeared in the prior Delaware litigation or physically entered Delaware
Summary of this case from Sample v. MorganOpinion
C.A. No. 06C-04-196.
Submitted: October 6, 2006.
Decided: January 16, 2007.
Upon Consideration of Defendants' Motion to Dismiss
GRANTED IN PART, DENIED IN PARTKevin W. Gibson, Esq., Gibson Perkins, P.C., Wilmington, Delaware for Plaintiff.
Nicholas E. Skiles, Esq., Swartz, Campbell, Wilmington, Delaware for Defendant Margules.
John A. Elzufon, Esq., Elzufon, Austin, Reardon, Tarlov Mondell, Wilmington, Delaware for Defendant Horowitz.
Daniel A. Griffith, Esq., Marshall, Dennehey, Wilmington, Delaware for Defendant Capeling.
M. Duncan Grant, Esq., Pepper, Hamilton, LLP, Wilmington, Delaware for Defendant Montgomery.
OPINION AND ORDER
On April 21, 2006, HealthTrio, Inc. ("HealthTrio"), the Plaintiff, filed a four count legal malpractice action against David J. Margules ("Margules") and Joanne P. Pinckney ("Pinckney") and their firm Bouchard, Margules Friedlander, P.A. ("BMF"); Howard L. Horwitz ("Horwitz") and Norman Oberstein ("Oberstein") and their firm Oberstein, Kibre Horowtiz, LLP ("OKH"); Curtis Capeling ("Capeling") and his firm Harwell, Howard, Hyne, Gabbert Manner, P.C. ("HHHGM"); and John H. Newcomer, Jr. ("Newcomer") and his firm Montgomery, McCraken, Walker Rhoads, LLP ("MMWR"). The four claims raised in the Complaint are: (1) Legal Malpractice against all Defendants, (2) Breach of Fiduciary Duty against all Defendants, (3) Breach of Contract against all Defendants and (4) Respondeat Superior against BMF, OKH, HHHGM and MMWR. While the Plaintiff filed the Praecipe with the Complaint, he also filed a document asking that the Praecipe be held because an Acceptance of Service would be filed by the Defendants. An Acceptance of Service was never filed and instead the Plaintiff released the hold placed on the Praecipe on May 12, 2006, when he filed a second Praecipe. On July 27, 2006, the Plaintiff filed his First Amended Complaint, which removed Pinckney as a defendant and modified the second count of the Complaint, the Breach of Fiduciary Duty claim, to allege a breach solely against Margules/BMF. None of the Defendants answered the Complaint or the First Amended Complaint. Rather, each of the four sets of Defendants has submitted the assorted motions to dismiss.
The Plaintiff's attorney, Kevin W. Gibson, emailed the Defendants on April 21, 2006 and notified them of the fact he was holding sheriff service because it is his custom to offer defendants the option of accepting personal service.
FACTS
While each Defendant is m o ving to dismiss for different reasons, the basic facts of the case are universal. This legal malpractice action arose out of litigation between Immedient Corp. ("Immedient") and HealthTrio in the Delaware Superior Court. The defendant in that case and the plaintiff in the present action, HealthTrio, is in the business of pro ducing computer systems for managed health care organizations. The plaintiff in the underlying action, Immedient, is a software system producer that entered into a professional services agreement ("PSA") with HealthTrio to create certain software programs for HealthTrio. In March, 2001, a dispute arose between Immedient and HealthTrio. On August 23, 2001, Immedient filed suit to recover monies it claimed were due under the PSA. HealthTrio hired Newcomer, Horwitz, Oberstein and Capeling and their law firms to defend them in the litigation.The lawyers consulted, and on October 17, 2001, after being furnished information by HealthTrio, Newcomer filed an Answer and Counterclaim. On January 30, 2002, Margules/BMF agreed to render legal advice to Healthtrio in the Immedient action. On February 11, 2002, HealthTrio filed a Substitution of Counsel in the Immedient action, whereby Newcomer /MMWR withdrew as HealthTrio's local counsel of record and Margules/BMF became HealthTrio's local counsel of record. The applicable scheduling order required that any motions to amend the pleadings be filed by February 8, 2002. Despite new counsel, no such motion was made until Margules/BMF filed a motion to amend HealthTrio's Answer and Counterclaim to assert a counterclaim of breach of contract and an additional counterclaim for fraud and misrepresentation on April 22, 2003. Judge Cooch denied the motion on the first day of trial, April 28, 2003, stating that "[c]utoff dates for amendments and pleadings are important in litigation so we can avoid the very imbroglios that we find ourselves in today." The trial was held April 28 through May 2, 2003, December 1 through December 5, 2003, and March 3 and 4, 2004. On December 12, 2003, Margules/BMF renewed its motion to amend the pleadings. In a February 24, 2004 letter, and in a lengthy March 3, 2004 ruling, Judge Cooch denied HealthTrio's renewed motion to amend the counterclaim. On November 4, 2004, Margules/BMF withdrew as counsel of record and William R. Denny and his firm, Potter Anderson Corroon, LLP were substituted as counsel for HealthTrio. On November 23, 2004, HealthTrio's new counsel requested leave to amend the counterclaim, which Judge Cooch again denied on December 8, 2004. On January 18, 2005, HealthTrio argued for the inclusion of a claim for negligent misrepresentation against Immedient. Judge Cooch, in a Memorandum Opinion issued on June 22, 2005, ruled that HealthTrio could not make such a claim because it came too late. Judge Cooch ultimately ruled against HealthTrio in the amount of $721,579.
In the case at bar, HealthTrio claims, in the first count of the First Amended Complaint, legal malpractice against all the aforementioned Defendants arising from their failure to "counsel, advise, and recommend" that HealthTrio plead "a breach of contract counterclaim, an additional fraud and misrepresentation counterclaim and a negligent misrepresentation counterclaim." In the second count, Plaintiff claims Breach of Fiduciary Duty against Margules/BMF for Margules' failed to notify HealthTrio that it did not have an affirmative claim against Immedient for breach of contract or negligent misrepresentation. Finally, in the third count, the Plaintiff alleges all the Defendants breached their contractual duty to provide "skillful, diligent, competent and professional legal advice." The Plaintiff seeks damages in excess of $100,000. In addition, the Plaintiff claims it is entitled to recoup attorney fees paid to its counsel in the present action, and to disgorge the attorney fees paid to the Defendants in the underlying action.
DISCUSSION
Currently before the Court are four motions to dismiss filed by the four sets of defendants in this action. While each set of defendants has filed its own motions, two of the motions are repeated by multiple defendants, and so will be addressed together. First, Capeling/HHHGM and Newcomer /MMWR filed motions to dismiss due to the expiration of the statute of limitations. Second, Margules/BMF, Capeling/ HHHGM, and Newcomer /MMWR all filed Rule 12(b)(6) motions to dismiss Counts I and III. Each remaining motion is filed singularly. Horwitz and Oberstein/OKH have filed a Rule 12(h)(3) motion to dismiss for lack of jurisdiction based on a forum selection clause. In addition, Capeling/HHHGM have filed a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction. The Court will begin by addressing the three motions raising jurisdictional issues, before proceeding to the Rule 12(b)(6) motion.
The Horwitz and Oberstein/OKH Rule 12(h)(3) Motion to Dismiss for Lack of Jurisdiction Based on a Forum Selection Clause
Defendant Horwitz and Oberstein/OKH seeks a Rule 12(h)(3) dismissal based on the Court's lack of jurisdiction due to the existence of an enforceable forum selection clause between it and the Plaintiff. The forum selection clause is contained within the retainer agreement. It mandates that "any and all disputes arising in connection with this agreement or the services provided pursuant to this agreement must and shall be resolved in the courts of the State of California, County of Los Angeles, which shall have sole and exclusive jurisdiction and venue as to the same." Defendants caption this as a Rule 12(h)(3) motion to dismiss for lack of jurisdiction. The Delaware Court of Chancery has held that the proper procedural rubric for addressing a forum selection clause is under Rule 12(b)(3), improper venue. As the Court of Chancery points out, the Superior Court is in conflict, with some judges holding the correct standard is under 12(b)(6) and others holding it is 12(b)(3). The approach taken here will follow that adopted by the Court of
Simon v. Navellier Series Fund, 2000 WL 1597890, at *3-*7 (Del. Ch.).
Id. at *6. See Simm Associates, Inc. v. PNC Nat'l Bank, 1998 WL 961764, at *3 (Del.Super.) (In which Judge Quillen held that Rule 12(b)(6), and not Rule 12(b)(3), should govern motions); but see Double Z Enterprises, Inc. v. General Marketing Corp., 2000 WL 970718, at *2-*3 (Del.Super.) (In which Judge Del Pesco, without discussion, treats a motion based on a forum selection clause that limited plaintiff to a particular venue as one under Rule 12(b)(3)).
Chancery and the majority of the federal courts, reviewing the Defendant's motion as if it had a Rule 12(b)(3) filing. Hence, the Court can "grant a dismissal motion before the commencement of discovery on the basis of affidavits and documentary evidence if the plaintiff cannot make out a prima facie case in support of its position." However, if the plaintiff "advances a non-frivolous legal argument that would defeat the motion if the facts turn out to be as it alleges, the court usually must allow the plaintiff to take discovery to gather proof of those facts."
Id.
Id.
As to the merits of the Motion, in considering the enforceability of forum selection clauses, Delaware courts have followed the approach adopted by the United States Supreme Court in M/S Bremen v. Zapata Off-Shore Company, 407 U.S. 1 (1972). Delaware courts have held that, if there is a forum selection clause in a contract, even when venue where the suit is filed is proper, the court should decline to proceed when the parties freely agreed that litigation should be conducted in another forum. Furthermore, in M/S Bremen, the U.S. Supreme Court held that, "forum selection clauses are prima facia valid and should be enforced unless the clause is shown by the resisting party to be unreasonable under the circumstances."At least two Delaware courts have held that "the circumstances" are to be assessed at the time of trial. However, our courts have also held that these clauses do not violate due process, if they are the product of a "freely negotiated" agreement and are not "unreasonable and unjust." Furthermore, the Delaware Superior Court has stated:
See Chaplake Holding v. Chrysler Corporation, et al., 1995 WL 653510, at *6 (Del.Super.).
Eisenmann Corp. v. General Motors Corp., 2000 WL 140781, at *7 (Del.Super.).
Id.
See Elia Corp. v. Paul N. Howard Co., 391 A.2d 214, 216 (Del. 1978) and Brandywine Balloons, Inc. v. Custom Computer Service, Inc., 1989 WL 63968, at *3 (Del.Super.).
Hornberger Management Company v. Haws Tingle General Contractors, Inc., 768 A.2d 983, 987 (Del.Super. 2000)
"Such an agreement is only unreasonable when its enforcement would seriously impair the Plaintiff's ability to pursue its cause of action. Mere inconvenience or additional expense is not the test of unreasonableness. In light of present day commercial realities, a forum clause should control absent a strong showing that it should be set aside."
Eisenmann Corp., 2000 WL 140781, at *7.
By requiring a showing of unreasonableness, the Delaware courts have placed a heavy burden on the plaintiff. This burden cannot be overcome by pleading mere inconvenience. As M/S Bremen stated, "it should be incumbent on the party seeking to escape his contract to show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court." Thus, a resisting party must clearly demonstrate grave inconvenience.
M/S Bremen, 407 U.S. at 18.
Chaplake Holding, 1995 WL 653510, at *6-*7.
The Plaintiff argues that the clause does not control due to reasons of judicial economy, Delaware's strong interest in adjudicating the case, and Plaintiff's entitlement to its day in court. First, it is noteworthy that the Defendants argue that OKH became involved in the Delaware litigation only when it secured agreement from HealthTrio that any issues arising out of its representation of HealthTrio in Delaware would be resolved in California. The Defendants support their argument with an affidavit from Dr. Korpman, the CEO and President of HealthTrio at the time the retainer agreement with OKH was negotiated and executed. In that affidavit, Dr. Korpman averred how changes were made by HealthTrio to the initial retainer agreement, an arbitration provision. However, Dr. Korpman stated that he and HealthTrio specifically agreed to the forum selection clause, because he knew OKH would not represent HealthTrio otherwise, and because he and HealthTrio had excessive contacts with California. Thus, it is clear that the clause was freely negotiated.
Turning to Plaintiff's specific efforts aimed at resist ing the motion, the first two arguments, that of judicial economy and Delaware's interest in adjudicating the matter, must fall by the wayside. The U.S. Supreme Court, in M/S Bremen, is clear that the resisting party must demonstrate some grave difficulty that accrues to him as a party, not to the courts. While the third argument attempts to capture the language necessary to overcome the forum selection clause, returning to M/S Bremen reveals the Plaintiff still cannot prevail. The Supreme Court stated that when parties to a freely negotiated agreement "contemplated the claimed inconvenience, it is difficult to see why any such claim of inconvenience should be heard to render the forum clause unenforceable." Dr. Korpman's affidavit indicates that the inconvenience the Plaintiff now cites as creating a denial of it its day in court, the distance, was contemplated during negotiations of the retainer. Dr. Korpman and HealthTrio freely traded the convenience of bringing an action arising from OKH's representation in Delaware in order to obtain OKH's representation against Immedient. Furthermore, this inconvenience also falls into the category of "mere inconveniences or additional expenses" and, in this day and age, would not seriously impair the Plaintiff's ability to pursue its cause of action. As such, the Plaintiff has failed to demonstrate the required grave inconvenience.
Bremen, 407 U.S. at 16.
See Eisenmann Corp., 2000 WL 140781, at *7.
Therefore, because the Plaintiff has not made out a prima facie case in support of its position, Defendant Horwitz and Oberstein/OKH's Motion to Dismiss for Lack of Jurisdiction is GRANTED. The proper venue for the Plaintiff's claims against this Defendant is the courts of the State of California, County of Los Angeles.
The Capeling/HHHGM Rule 12(b)(2) Motion to Dismiss for Lack of Personal Jurisdiction
Defendant Capeling/HHHGM challenges the personal jurisdiction of this Court, contending that the Delaware Long-Arm Statute does not apply, and that maintaining such jurisdiction would violate due process. When a motion to dismiss challenges personal jurisdiction, the burden is on the plaintiff to show a basis for the court's jurisdiction over the nonresident defendant. This burden is met if the plaintiff can make out a prima facie case that personal jurisdiction may be exercised by the Court. To determine whether Delaware courts can obtain personal jurisdiction, a two-step analysis is applied. First, the Court must consider whether the Delaware Long-Arm Statute, 10 Del. C. § 3104, applies; and then must evaluate whether subjecting a defendant to jurisdiction in Delaware violates the due process clause of the Fourteenth Amendment. In determining whether jurisdiction is appropriate, the Court must view all factual disputes in a light most favorable to the plaintiff.
Galasso v. Continental Bank, 1986 WL 7986, at *1 (Del. 1986).
Hart Holding v. Drexel Burnham Lambert, 593 A.2d 535, 593 (Del. Ch. 1991).
LaNuova D B, S.p.A. v. Bowe Co. Inc., 513 A.2d 764, 768 (Del. 1986).
Boone v. Oy Partek Ab, 724 A.2d 1150, 1155 (Del.Super. 1997), aff'd, 707 A.2d 765 (Del. 1998).
In pertinent part, Delaware's Long-Arm Statute provides that a court may exercise personal jurisdiction over a nonresident defendant if the person:
"(1) transacts any business or performs any character of work or service in the State; (2) contracts to supply services or things in this State; (3) causes tortious injury in the State by an act or omission in this State; (4) causes tortious injury in the State or outside of the State by any act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenues from services, or things used or consumed in the State."
The statute is to be construed liberally in favor of exercising jurisdiction. In addition, it has been held to be a "single act" statute, which means that jurisdiction over nonresidents may be predicated on a single act or transaction engaged in by a nonresident within the State. Federal and State courts have held that a reviewing court must undertake "an expansive interpretation to the long arm statute, ruling that § 3104 must be construed as conferring jurisdiction to the maximum perimeters of the due process clause."
Waters v. Deutz Corp., 460 A.2d 1332, 1334 (Del.Super. 1983).
Eudaily v. Harmon, 420 A.2d 1175, 1180 (Del. 1980).
Transportes Aereos de Angola v. Ronair, Inc., 544 F.Supp. 858, 864 (D. Del. 1982).
In the present case, the litigants chiefly rely on two Delaware Superior Court decisions in their arguments on the applicability of the long-arm statute. While the Defendant argues that International Controls Corp. v. Bondi prevents the exercise of personal jurisdiction under the statute, the Plaintiff has cited Lester v. Katzen to support its claim of personal jurisdiction. A review of the facts of International Controls reveals that the case is inapposite. In that case, the plaintiff, International Controls Corp. ("ICC"), sued its general counsel, Shea Gould, a New York law firm, for legal malpractice in Delaware. The plaintiff argued that personal jurisdiction existed based on the defendants' hiring of Richards, Layton Finger ("RL F"), a Delaware law firm. However, RL F was hired merely to offer opinions on Delaware corporate law to the defendant so that the defendant could assist ICC in its sale of the assets of a Delaware corporation that it owned. While ICC was also subject to a lawsuit, through its subsidiary Delaware corporation, that litigation occurred in Oregon's federal district court. The court ultimately concluded that sections (c)(1)-(3) of the long-arm statute did not authorize personal jurisdiction, because the defendants performed no actions in Delaware. They simply received the benefit of services performed by another in Delaware.
1993 WL 331172 (Del.Super.).
1994 WL 750324 (Del.Super.).
International Controls, 1993 WL 331172, at *1.
Id. at *3.
Id. at *1.
Id. at *2.
Id. at *3-*4.
On the other hand, Lester appears similar to the present action. In Lester, the plaintiff was injured in an industrial accident in Delaware, yet lived in Maryland.The plaintiff discharged the previous Maryland attorney assisting him in the matter, and had his file transferred to the defendant, another Maryland attorney. The court held that these facts demonstrated a contract to supply services. The defendant, while advising the plaintiff to obtain Delaware counsel, nevertheless continued to work for the plaintiff. The court found that the defendant's contacts with the Industrial Accident Board and the plaintiff's employer demonstrated that the defendant made "a broad initial undertaking and did in fact serve the plaintiff as an attorn ey, albeit without formal appearance in Delawa re, in the worker's compensation matter." Thus, these facts met 10 Del. C. § 3104(c)(2)'s provision for the court's exercise of personal jurisdiction over a nonresident who has contracted to supply services in this State.
Lester, 1994 WL 750324, at *1.
Id.
Id.
Id. at *2.
Id.
Based on Lester, the Court can exercise personal jurisdiction under section (c)(2) of the long-arm statute. From 2000 to 2004, the Plaintiff retained the Defendant to provide assistance in filing its Certificate of Incorporation with the Delaware Secretary of State and serve as its legal counsel. As part of that contract, the Defendant became involved in the litigation initiated by Immedient, another Delaware corporation, against the Plaintiff in the Delaware Superior Court. As part of that litigation, the Defendant assisted the Plaintiff in obtaining Delaware counsel, and in drafting some language related to a part of its Answer to Immedient's Complaint. Billing records indicate that, following the Plaintiff's Answer, the Defendant called, corresponded with, and generally assisted Delaware counsel in the Delaware litigation. This demonstrates that the Defendant, much like the defendant in Lester, made a broad initial undertaking, and served as one of the Plaintiff's attorneys in the action begun by Immedient in the Delaware Superior Court. Therefore, based on the services provided by the Defendant in the Delaware action, the Court holds that the Plaintiff has made a prima facie case that the Court can exercise personal jurisdiction under our long-arm statute.
While the Court has found the nonresident Defendant subject to our jurisdiction under the long-arm statute, this Court must not exercise personal jurisdiction over a defendant when doing so would violate the defendant's due process. If the defendant is not present within the state, due process requires that he have certain minimum contacts with it to ensure that he has fair warning that a particular activity may subject him to jurisdiction in another state. The required minimum contacts are "such that maintenance of the suit does not offend traditional notions of fairplay and substantial justice." This analysis requires an evaluation of the quality and nature of the activity. Returning to Lester, that court concluded that because the underlying "workers compensation matter had to be resolved in Delaware . . . it [was] not unreasonable to anticipate that defendant may be haled into a Delaware court under notions of fair play and substantial justice."
International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
Id.
Id. at 319.
Lester, 1994 WL 750324, at *2.
As to the due process prong of the analysis in the present case, the Plaintiff has demonstrated that the Defendant had numerous written and oral communications to and from Delaware with Margules and Newcomer, both Delaware attorneys, regarding the Delaware litigation involving the Plaintiff. In addition, the Defendant was aware that the matter was one that was currently in the Delaware court system and had to be resolved in Delaware. Based on the above facts and the reasoning of Lester, the Defendant had notice that it could be haled into a Delaware court for legal malpractice arising from the Delaware litigation.
Therefore, because the Plaintiff has made a prima facie case that section (c)(2) of the long-arm statute covers the Defendant, and because the Court's exercise of jurisdiction does not offend due process, the Defendant's motion is DENIED.
The Capeling and HHHGM and Newcomer and MMWR Motion to Dismiss Due to Expiration of the Statute of Limitations
Defendants Capeling/HHHGM and Newcomer/MMWR argue that the statute of limitations works as a bar to prevent this action from proceeding. Capeling/HHHGM begin by arguing that Tennessee's one year statute of limitations applies to the action. This argument must fail, for parties do not carry the statute of limitations of their home state with them. As the Delaware Court of Chancery has held:
"Where the law of two different states may apply to an action, Delaware Courts apply the Restatement (Second) Conflicts of Laws to determine which state law applies. With respect to questions of which state's statute of limitations to apply, the courts are instructed by the Restatement to apply the statute of limitations of the forum."
Juran v. Bron, 2000 WL 1521478, at *10 (Del.Ch.).
Thus, in this case the Court will apply Delaware's statute of limitations.
Turning to the Delaware statute of limitations, the Delaware case law is clear that 10 Del. C. § 8106 provides a three-year statute of limitations governing these actions. Furthermore, as to legal malpractice actions, Delaware Courts have specifically held that the three year statute of limitations contained in 10 Del. C. § 8106 controls. The statute begins to run at the time of the alleged malpractice. Ignorance of the facts does not act as an obstacle to the operation of the statute. The only exceptions to this rule are in cases of infancy, incapacity, fraud and the absence of observable factors that would place a layman on notice of a problem, such as a title defect. In such cases, the statute begins to run when the defect is, or should have been, discovered. This date of discovery exception applies only in cases "where the negligence was inherently unknowable by a blamelessly ignorant plaintiff."
Certainteed Corp. v. Celotex Corp., 2005 WL 217032, *5 (Del.Ch. 2005).
Began v. Dixon, 547 A.2d 620, 623 (Del.Super. 1988). See also Hood v. McConemy, 53 F.R.D. 435 (D. Del. 1971) ("This section governs actions for legal malpractice, regardless of whether such an action sounds in contract or tort.").
Oropeza v. Maurer, 2004 WL 2154292, at * 1 (Del. 2004).
Id.
Id.
Scott v. Bosari, 1994 WL 682615, at *9 (Del.Super. 1994).
In the present case, Plaintiff defends against the Defendants' claims by arguing that the statute of limitations was tolled by (1) Defendants' fraudulent concealment; (2) the application of the date of discovery exception, and the fact the claims were inherently unknowable, and it was blamelessly ignorant, or (3) the defense of equitable tolling. First, Plaintiff's arguments as to Defendants' fraudulent concealment and the defense of equitable tolling are not made against the Defendants who are claiming that the statute of limitations has run. Instead, the Plaintiff argues that it is Margules who committed fraudulent concealment and the self-dealing necessary to claim equitable tolling. Because there is no claim of fraudulent concealment or self-dealing against these Defendants, these two arguments must fail.
As to the date of discovery exception, the Delaware Superior Court's holding in Began v. Dixon is instructive. The Began Court was faced with a legal malpractice action against a divorce attorney. The divorce attorney, the defendant, Gerald E. Dixon, represented Edward J. Began, the plaintiff, during Began's divorce. On March 16, 1983, the plaintiff, apparently dissatisfied with the legal services being provided by the defendant, sought the assistance and advice of independent counsel. The new attorney entered his appearance on April 4, 1983.By April 2, 1986, the plaintiff had hired a second attorney to file a legal malpractice action against the defendant. The defendant moved to dismiss plaintiff's complaint on the grounds that it was time barred. The Court stated the statute of limitations law discussed above. As to the date of discovery rule, the court held that even, if the rule applied, the court "must presume the plaintiff discovered the allegedly negligent cause of conduct at least by the time he consulted with independent counsel in March of 1983." Thus, the Court concluded that the March 1983 date of independent consultation clearly took the April 1986 complaint outside the statute of limitations.
Began, 547 A.2d 620.
Id. at 622.
Id.
Id.
Id.
Id.
Id.
Id. at 623 (citing Ewing v. Beck, 520 A.2d 653, 664 (Del. 1987) ("[W]e also hold that there shall be a presumption that a patient who actually consults with an independent health care provider about the same condition which is subsequently the subject matter of an alleged negligent medical continuum knew or in the exercise of reasonable diligence could have known about the prior negligent course of conduct on date of the consultation with the independent health care provider. If a patient receives independent medical advice from a skilled health care provider in the form of a second opinion or consultation, that patient has a duty of inquiry not only about his condition but about his prior course of medical treatment.")).
Id. at 624.
In the present case, the Plaintiff states that he consulted with Margules/BMF on January 30, 2002, and signed a retainer that day. By February 11, 2002, Margules/BMF were substituted in place of Newcomer/MMWR. "Independent counsel," as used in the Began case, would include counsel separate and apart from the previously retained counsel, such that the new counsel is free from the control of the previous counsel. There is little doubt that Margules/BMF, an attorney/firm separate and apart from both Newcomer/MMWR and Capeling/HHHGM, is free from the control of the previous counsel such that it qualifies as independent counsel. Based on this conclusion, the Plaintiff cannot prove any set of facts that would support its "blamelessly ignorant" contention. Therefore, the statute of limitations began to accrue against these Defendants on January 30, 2002, and no tolling occurred. Because the Complaint was filed on April 21, 2006, over four years after Plaintiff sought independent counsel, the three year statute of limitations has expired, and the action against Newcomer/MMWR and Capeling/HHHGM is time barred.
Such a determination obviates the need to address the Defendants' argument that the Plaintiff had notice of the alleged legal malpractice by way of the April 22, 2003, motion to amend the Complaint. This determination also obviates the need to discuss the Plaintiff's decision to ask the Prothonotary's Office to hold the Praecipe. Thus, the Plaintiff's eventual released of the Praecipe on May 12, which the Defendants claimed took the Plaintiff outside the statute of limitations by 21 days, is irrelevant.
Therefore, for the foregoing reasons, the Defendants' Motion to Dismiss Due to Expiration of the Statute of Limitations is GRANTED.
Additi onally, t he Plaintiff has alleged that the Defendant, Capeling, filed a false affidavit with the Court. Any such misrepresentations would, presumably, be matters to be argued at an evidentiary hearing. However, since the alleged discrepancies do not affect this statute of limitations issue, these allegations are deemed MOOT.
The Margules/BMF, Capeling/HHHGM and Newcomer/MMWR Superior Court Civil Rule 12(b)(6) Motions to Dismiss Counts I and III
Defendants Margules/BMF, Capeling/HHHGM and Newcomer/MMWR, in their Motions to Dismiss, argue that Counts I and III of the First Amended Complaint should be dismissed under Delaware Superior Court Civil Rule 12(b)(6) for failure to state a claim upon which relief may be granted. Those Defendants also contend that the Plaintiff is not legally permitted to seek recovery of the attorney fees paid to its current counsel, nor is it permitted to seek disgorgement of the fees paid to the Defendants in the underlying matter.
The Court has already ruled in favor of Capeling/HHHGM and Newcomer/MMWR as to their Motion to Dismiss Due to the Expiration of the Statute of Limitations. The Plaintiff's entire Complaint has been dismissed as to them. Therefore, the Court's decision as to this motion will affect only Margules/BMF.
When reviewing a Rule 12(b)(6) motion to dismiss, the Court "will consider all well-pleaded facts in the complaint and accept them as true." The motion should be granted "only where it appears with reasonable certainty that [the plaintiff] would be unable to prevail on any set of facts inferable from the complaint." The motion will be denied "if the plaintiff may recover under any conceivable set of circumstances susceptible to proof under the complaint." In viewing the facts, the Court must draw "all reasonable inferences in favor of t he non-movant." The Court may consider documents that are "integral to the plaintiff's claim and incorporated in the complaint" in deciding a motion to dismiss.
AT T Corp. v. Clarendon America Ins., 2006 WL 2685081, at *3 (Del.Super.).
Lord v. Souder, 748 A.2d 393, 398 (Del. 2000).
Rinaldi v. Iomega Corp., 1999 WL 1442014, at *2 (Del.Super.).
Id.
In re Santa Fe Pacific Corp. S'holder Litig., 669 A.2d 59, 69-70 (Del. 1995).
First, for the Plaintiff to maintain a legal malpractice action in Delaware, it must meet each prong of a three element test, which includes proving: "(1) the employment of an attorney; (2) the attorney's neglect of a professional obligation; and (3) resultant loss." To prove the third element, the damages element, the plaintiff in a legal malpractice action must demonstrate that "but for his lawyer's negligence, [he] would have been successful" in the underlying action. As the Superior Court concluded in Middlebrook v. Ayers: "Thus, in order to sustain a claim of professional negligence against a Delaware attorney, plaintiff must establish the applicable standard of care through the presentation of expert testimony, a breach of that standard of care, and a causal link between the breach and the injury." In the case at bar, the Defendants have elected to attack only the requirement of proximate cause, the third element, in this motion.
Sanders v. Malik, 1997 WL 817854, at *2 (Del.Super.).
Trader v. Streett, 1997 WL 528043, at * 2 (Del.Super.).
Middlebrook v. Ayers, 2004 WL 1284207, at *10 (Del.Super.).
In the present case, the Plaintiff can withstand this motion only if, taking the well-pleaded facts as true and viewing all reasonable inferences in favor of the non-movant, but for the Defendants' negligence it would have been successful in the underlying action.
The Defendants, to support the motion, argue that Judge Cooch's legal rulings and factual findings reflect that the Plaintiff lost on the merits, and consequently would not have succeeded on any additional counterclaims. Therefore, Defendants assert Plaintiff cannot succeed in this legal malpractice action. The Plaintiff contends, citing case law from other jurisdictions, that the judicial upon opinion which Defendants rely is not admissible in the present action. In addition, the Plaintiff argues that the Defendants are essentially making a collateral estoppel argument, and that the doctrine does not apply in legal malpractice cases.
Again, in order for Plaintiff to prevail in this legal malpractice action, it must prove that it would have prevailed on the three counterclaims it contends Defendants were negligent in failing to plead in an amended counterclaim. To do so, it must be able to establish that the facts would have been borne out, at the very least on a prime facie basis, on those counterclaims. If collateral estoppel applies, then it would bar the Plaintiff from relitigating the facts in the underlying suit. The Defendants argue that would mean that their motion must be granted, since the Plaintiff cannot state a claim upon which relief may be granted.
Collateral estoppel is a refinement of the doctrine of res judicata. When the doctrine was originally adopted, the Delaware Supreme Court stated that, "where a question of fact essential to the judgment is litigated and determined by a valid and final judgment, the determination is conclusive between the same parties in a subsequent case on a different cause of action. In such situation, a party is estopped from relitigating the same issue again in the subsequent case." However, the Delaware Supreme Court has since refined the effect of collateral estoppel. While res judicata bars a suit involving the same parties based on the same cause of action, collateral estoppel bars any party from relitigating factual issues previously litigated. "Originally, many jurisdictions required mutuality to assert collateral estoppel. Mutuality requires a party attempting to bar an adversary from relitigating an issue to have been a party in the prior litigation or in privity with a party in the prior litigation." The Delaware Supreme Court, however, has stated that our state, like so many other jurisdictions, has abandoned this requirement. The modern trend of decision and the rule in Delaware expand the use of the doctrine to situations where total mutuality does not exist. The Delaware Supreme Court has explained that "the [current] test for applying collateral estoppel [only] requires that (1) a question of fact essential to the judgment (2) be litigated and (3) determined (4) by a valid and final judgment."
Tyndall v. Tyndall, 238 A.2d 343, 346 (Del. 1968).
Id.
Columbia Cas. Co. v. Playtex FP, Inc., 584 A.2d 1214, 1216 (Del. 1991).
Id., n. 4.
Id. at 1217.
Id.
Id. ("Thus, many jurisdictions [including our own] no longer require a litigant have been a party in the prior litigation or in privity with a party in the prior litigation. It is sufficient that the party against whom collateral estoppel is asserted was a previous party.").
Taylor v. State, 402 A.2d 373 (Del. 1979).
To begin, the Plaintiff's argument that Judge Cooch's opinion is inadmissible evidence is moot because the doctrine of collateral estoppel is applicable in legal malpractice cases. Hence it is the primary source for a subsequent court to turn to in order to ascertain whether the elements of collateral estoppel are met.
See Sanders, 1997 WL 817854, at *2.
Plaintiff argues that Defendants committed legal malpractice by not filing "a breach of contract counterclaim, an additional fraud and misrepresentation counterclaim and a negligent misrepresentation counterclaim." Turning to the collateral estoppel elements, the Court notes that, in addressing the breach of contract claim by Immedient against HealthTrio, Judge Cooch held that HealthTrio had not proved by a preponderance of the evidence that its performance under the contract was excused by Immedient's alleged failure to perform under the same contract.Judge Cooch's ruling indicates that the elements of collateral estoppel have been met as to the Plaintiff's allegation that the Defendants should have included a breach of contract counterclaim, for: (1) a question of fact essential to the judgment in this case, to wit: that Immedient breached its contract with HealthTrio; (2) has been litigated, because there was a trial at which evidence on this point was presented; (3) and determined, because Judge Cooch issued an opinion in the case deciding the point; (4) by a final and binding judgment, because Judge Cooch issued an opinion that the Plaintiff did not appeal. Therefore, collateral estoppel bars the Plaintiff from relitigating the Defendants' alleged failure to plead such a counterclaim.
Immedient Corp. v. HealthTrio, Inc., 2005 Del. Super. LEXIS 262, at *29-34.
Judge Cooch's opinion in Immedient v. HealthTrio also provides the basis for a collateral estoppel ruling as to the additional fraud and misrepresentation counterclaim and the negligent misrepresentation counterclaim, which Plaintiff alleges should have been raised. Judge Cooch held that based on HealthTrio's background and experience in computers, the Court could "only harmonize the evidence by finding that HealthTrio did not contemporaneously believe that Immedient had misled them into executing the contract or that Immedient had breached the contract first." Additionally, the Court held that HealthTrio had "waived any affirmative defense or counterclaim for fraud by entering as it did into subsequent agreements." Thus, the elements of collateral estoppel have been met as to the additional fraud and misrepresentation counterclaim and the negligent misrepresentation counterclaim the Plaintiff asserts Defendants should have raised, because: (1) a question of fact essential to the judgment in this case, to wit: that Immedient committed fraud or negligently misrepresented facts; (2) has been litigated, because there was a trial at which evidence on this point was presented; (3) and determined, because Judge Cooch issued an opinion in the case deciding the point; (4) by a final and binding judgment, because Judge Cooch issued an opinion that the Plaintiff did not appeal. Because the doctrine of collateral estoppel works to prevent this Court from reviewing the facts necessary for Plaintiff to have prevailed in the underlying action there is "no conceivable set of circumstances susceptible to proof under the complaint" upon which the Plaintiff can prevail on the legal malpractice claim. Therefore, the motion is GRANTED as to Count I of the First Amended Complaint.
Id. at 49.
Id. at 36.
Second, the Plaintiff has included a breach of contract claim against all the Defendants. While there is an apparent dearth of Delaware case law on the requirements to maintain a breach of contract action against an attorney, Pennsylvania case law is instructive on the point. The Pennsylvania Superior Court, an intermediate appellate court in that state, has held that "[a] client who sues his attorney on an assumpsit theory must allege that an attorney breached a contract term or failed to follow a specific instruction of the client." In F G Associates v. Pomerantz, the Court of Common Pleas of Philadelphia, the state's trial level court, dealt with a 12(b)(6) motion to dismiss a breach of contract cla im against an at torney. Applying the established case law, the court stated that "a complaint based on the averment that an attorney failed to exercise the requisite duty of care toward them, and which did not aver a breach of a specific provision of their contract, does not state a true contract cause of action." That court, turning to the facts before it, concluded that because plaintiffs' complaint did not plead facts that would support a breach of contract claim it must be dismissed. Specifically, that court found that the plaintiffs failed to identify even a single contract provision that defendants breached, or a specific instruction with which defendants failed to comply. That court, then, concluded that it was impermissible for a plaintiff to assert both negligence and breach of contract claims based on the same conduct "in an attempt to have two bites at the apple." Continuing, that court stated:
Rogers v. Williams, 616 A.2d 1031, 1033 (Pa.Super. 1992).
2000 WL 33155748 (Pa. C.P.).
Id. (citing Hoyer v. Frazee, 470 A.2d 990, 992-993 (Pa.Super. 1984)).
Id.
Id.
Id.
"A contract claim must relate to conduct distinct from a tort claim. In the context of legal malpractice, a tort claim and a breach of contract claim are not alternative theories of recovery for the same conduct. If they were, `claims in tort and claims in breach of contract, at least within the context of service contracts, would be indistinguishable.'"
Id. (citing Guy v. Liederbach, 459 A.2d 744, 752 (Pa. 1983)). See Sherman Indus. Inc. v. Goldenhammer, 683 F.Supp. 502, 506 (E.D. Pa. 1988).
In the present case, the Plaintiff has sought yet another ground on which to hang the success of its complaint, attempting another bite of the same apple. The Plaintiff contends the Defendants failed to fulfill their duty as attorneys when they failed to include, in a timely manner, the aforementioned counterclaims in the pleadings. This claim is a repetition of the legal malpractice claim. Additionally, neither the Plaintiff's Complaint nor its First Amended Complaint identified a single contract provision allegedly breached or a specific client instruction not followed. Therefore, because the Plaintiff cannot "recover under any conceivable set of circumstances susceptible to proof under the complaint" the Defendants' motion is GRANTED as to Count III.
Therefore, for the foregoing reasons, Counts I and III of the First Amended Complaint are DISMISSED as to Margules/BMF.
Additionally, the Plaintiff's First Amended Complaint seeks to recoup all attorneys' fees paid to its counsel in this matter, and to disgorge the attorneys' fees paid to Margules/BMF. The Defendant, Margules/BMF, argues these prayers for relief should be dismissed as contrary to Delaware law. This issue is one to be resolved at trial.
CONCLUSION
Accordingly, the Horwitz and Oberstein/OKH motion to dismiss for lack of jurisdiction due to the forum selection clause is GRANTED and these parties are DISMISSED; the Capeling/HHHGM motion to dismiss for lack of personal jurisdiction is DENIED; the Capeling/HHHGM and Newcomer /MMWR motion to dismiss due to the time barred nature of the action is GRANTED and these parties are DISMISSED; and the Margules/BMF Rule 12(b)(6) motion to dismiss is GRANTED and Counts I and III are DISMISSED as to these parties. All that remains is Count II of the First Amended Complaint against Margules/BMF.
SO ORDERED.