TO: FROM: CLIENT: RE: DATE:

Senior Partner Junior Associate B. Eagleton/S. Broderick (File # 35045-1) Application and Tolling of Statutes of Limitations for Attorney Malpractice Claim Brought Under Contract and Tort Theories Arising out of Same Set of Facts November 11, 2011 INTRODUCTION

We represent Brandon Eagleton and Suzanne Broderick in their legal malpractice lawsuit against Plunkett & Tufnel, LLC (the Firm) and Ms. Plunkett and Mr. Tufnel individually. The Firm previously represented Eagleton and Broderick in a personal injury case filed against Daniel Roberson in the Pennsylvania Court of Common Pleas after they and Roberson were in a car accident. Eagleton and Brodericks claim stems from the Firms failure to respond to Robersons Requests for Admission, which was due on April 1, 2009. Because of this failure, Roberson filed a Motion to Deem Admitted on April 7, 2009. The court granted it on April 28, 2009. The admissions cut to the heart of Eagleton and Brodericks claim against Roberson, and they subsequently lost the case on summary judgment on June 8, 2009. We filed a malpractice lawsuit in the Western District of Pennsylvania against the Firm on May 17, 2011. Our lawsuit alleges that the firm breached both a duty to and a contract with Eagleton and Broderick. We expect that the Firm will file a motion for summary judgment on the grounds that Eagleton and Brodericks claims were filed outside of the applicable statute of limitations. This memo addresses whether the court will treat Eagleton and Brodericks contract claim as a tort claim in order to apply a two-year statute of limitations rather than a four-year statute of limitations.

DISCUSSION It is well-established Pennsylvania law that plaintiffs may bring malpractice claims in both contract and tort. See Bailey v. Tucker, 621 A.2d 108, 112 (Pa. 1993). However, the defense bar and some courts have argued that this flexibility allows plaintiffs suing for malpractice as a tort to take advantage of the longer statute of limitations available for contract claims through artful pleading.1 Joseph S.D. Christof, II, Brett W. Farrar & Michael P. Flynn, Legal Malpractice Statutes of Limitation: Overview and Pennsylvania Case Study, 77 Def. Couns. J. 485, 488 (2010). Authority in Pennsylvania has split over this very issue. Recent Pennsylvania state courts have applied a contract statute of limitations to attorney malpractice claims in civil cases, holding that contracts between attorneys and clients contain an implied promise that the attorney will provide the client with services that are consistent with those expected of the profession at large. See, e.g., Gorski v. Smith, 2002 PA Super 334, 812 A.2d 683, 694. Yet, some Pennsylvania federal district courts have broken with recent state courts and applied a tort statute of limitations to attorney malpractice claims in the absence of evidence that the attorney-defendant breached a specific contractual term or a specific client instruction. See, e.g., Stacey v. City of Hermitage, No. 2:02-cv-1911, 2008 WL 941642, at *5 (W.D. Pa. April 7, 2008). The Western District of Pennsylvania will likely refuse to apply the state court standard and instead apply the specific instruction standard. Our clients can meet this standard and receive the benefit of the four-year statute of limitations.

1 Attorney malpractice claims brought under a breach of duty theory are subject to a two-year statute of limitations. 42 Pa. Cons. Stat. 5524 (West 2004 & Supp. 2011). Attorney malpractice claims brought under a breach of contract theory are subject to a four-year statute of limitations. 42 Pa. Cons. Stat. 5525 (West 2004). 2

I.

Pennsylvania Superior Courts Allow Plaintiffs to Plead a Breach of Contract Even When Defendant Has Not Breached a Specific Contractual Term The Pennsylvania Supreme Court has never addressed whether plaintiffs suing attorneys

for malpractice in a civil context may bring a breach of contract claim in the absence of a specific contractual breach. However, it has addressed this issue in a criminal context, holding that an attorneys liability for breach of contract will be based on the terms of the contract. Thus, if an attorney agrees to provide his or her best efforts and fails to do so, an action will accrue. Bailey, 621 A.2d at 115. Subsequent state appellate court decisions have almost uniformly applied Bailey in the civil context. In doing so, they have taken the position that Bailey overruled the precedent that a legal malpractice claim for breach of contract is limited solely to those instances in which the plaintiff can show that the attorney failed to follow a specific instruction of the client. Gorski v. Smith, 821 A.2d at 693 (overruling e.g., Duke & Co. v. Anderson, 275 PA Super 65, 418 A.2d 613 (Pa. Super. Ct. 1980) on this issue). This proposition was replaced with the proposition that every contract for legal services contains, as an implied term of the contract, a promise by the attorney to render legal services in accordance with the profession at large. Id. at 695 (emphasis added). In Gorski, the court looked outside of the contract and allowed expert testimony to establish the standard of the profession at large. Id. Although post-Gorski Pennsylvania state courts have generally applied this understanding of the Bailey standard, see, e.g., Fiorentino v. Rapoport, 693 A.2d 208 (Pa. Super. Ct. 1997), at least one Pennsylvania Supreme Court justice has indicated his discontent with the rule and expressed a willingness to overrule Bailey on this issue. In Steiner v. Markel, 968 A.2d 1253 (Pa. 2009), the court reversed an appellate court that sua sponte recast an attorney malpractice claim brought under a breach of duty theory as a breach of contract claim. In doing

so, the court declined on procedural grounds the dissents invitation to distinguish breach of contract claims from breach of duty claims. Id. at 1257, n.9. In his dissent, Justice Saylor declared the issue ripe for resolution, indicated his dissatisfaction with post-Bailey jurisprudence, and suggested that a solution may lie in the way Pennsylvania federal district courts have handled the issue. Id. at 1262 (Saylor, J., dissenting). II. Post-Gorski Federal District Courts Have Followed the Pre-Bailey Rule Inconsistently Two Pennsylvania federal district courts continue to prefer the pre-Bailey rule, which requires that a plaintiff show an attorney either ignored specific client instructions or violated specific terms in a written contract. See, e.g., Stacey, 2008 WL 941642 at *5. However, these courts have often applied the pre-Bailey rule in a way that leads to similar results as the Bailey rule. A. Since Gorski, the Western District of Pennsylvania Has Applied the Old Rule In two unpublished cases from 2008, the Western District of Pennsylvania did not follow the Bailey/Gorski rule, and instead required that plaintiffs show that attorneys breached a specific contractual term. In Stacey, a man sued his attorney after the city condemned and demolished his mothers home. See 2008 WL 941642, at *1. The court held no contract claim existed, as the client retained the defendant-attorney without any explanation of the terms of the alleged engagement. Id. at *7. In evaluating the claim, the court said it must look to the terms of the contract allegedly breached and to the nature of the injury asserted. If the damages requested stem from negligence . . . then the action sounds in tort and the two year statute of limitations applies. Id. at *5. A later decision softened the sharp edge of Stacey, however, by applying the longer statute of limitations to a malpractice case where damages stemmed from the attorneys

negligence but the attorney-client contract established the subject matter of the agreement. See Gen. Nutrition Corp. v. Gardere Wynne Sewell, LLP, No. 2:08-cv-831, 2008 WL 3982914 (W.D. Pa. Aug. 20, 2008), rehg denied 2008 WL 4411951 (W.D. Pa. Sept. 28, 2008). In General Nutrition, an attorney provided bad advice to a company looking to end a contract with another party. Id. at *1. Subsequent to the advice, the company was sued by the other party and then forced to settle for a substantial sum of money. Id. at *2. Although adopting the specific contractual term rule articulated in Stacey, the General Nutrition court allowed a breach of contract case to proceed because [the parties] entered into a contract specifically to provide legal advice about the termination of . . . contracts. Id. at *3. B. The Middle District of Pennsylvania Has Applied the Old Rule Strictly The Middle District of Pennsylvania has held that language that would presumably be suitably specific under General Nutrition is not specific enough to state a contract claim. In an unpublished opinion, the Middle District held that a plaintiff may not couch a tort negligence claim as a contract claim simply to side-step the two-year limitations period. Knopick v. Connelly, Civ. No. 09-1287, 2010 WL 411701, at *4 (M.D. Pa. Jan. 25, 2010), overruled on other grounds, 639 F.3d 600 (3rd Cir. 2011). Without acknowledging Bailey or Gorski, the court held that a complaint merely reciting the language specific terms of the contract without citing which terms the parties breached, is insufficient. Id. at *5. In doing so, it held that complaint allegations such as [plaintiff] retained [attorney] for a fee to represent him in his malpractice action against [defendant] do not qualify as a specific contractual provision. Id. at *4. C. The Eastern District of Pennsylvania Has Applied the State Court Standard While Acknowledging Ambiguity Recently, the Eastern District refused to dismiss a plaintiffs contract claim sua sponte, even though it arose from the same conduct as its tort claim. ASTech Intll., LLC v. Husick, 676

F. Supp. 2d 389 (E.D. Pa. 2009). Although it acknowledged a previous line of cases holding that allowing such a contract claim to go forward would leave the two-year tort statute of limitations a dead letter, it noted that Gorski overruled these cases and reasoned, there is no indication that the Pennsylvania Supreme Court would rule differently on the issue than did the Gorski Court. Id. at 398 n.9. In another case, the court noted the Bailey/Gorski standards ambiguity but allowed a contract claim to proceed without discussion. See Bayview Loan Servicing, LLC v. Richard Squire & Associates, LLC, No. 10-1451, 2010 WL 5122003, at *5 n.12 (E.D. Pa. Dec. 14, 2010) III. Pre-Gorski Courts Applying the Specific Instructions Test Have Done So Inconsistently

Even before Gorski, Pennsylvania courts applied the specific instruction/specific breach test inconsistently. A. Some Pre-Gorski Courts Applying the Specific Instruction Test Have Been Lenient Prior to Gorski, the Eastern District of Pennsylvania followed the old rule, but allowed a breach of contract claim to proceed based on a breach of a general provision. It found the following contractual provision to be a contractually specific term: [The firm] will provide the legal services reasonably required to represent you and will take reasonable steps to keep you informed of progress and to respond to your inquiries. Davis v. Grimaldi, Haley & Frangiosa, P.C., No. Civ.A. 97-CV-4816, 1998 WL 967516, at * 6 (E.D. Pa. Sept. 29, 1998). B. Other Pre-Gorski Courts Have Applied a Strict Specific Instruction Test A state trial court applied a far stricter standard to the specific instruction test, and limited the application of the four-year statute to cases where an attorney agrees to specific instructions that expand an ordinary professional duty. When an attorney failed to follow his clients

instruction to either settle the case or prepare for trial, the court held that this instruction was not the kind of specific instruction that creates a contract claim, and that a failure to follow the instructions was instead a breach of duty. Jaworski v. Orton, Joyce & Dunlavey P.C., 45 Pa. D. & C.4th 225, 228 (Ct. Com. Pl. 2000). In reaching this decision, the court held that the attorneys failure was a failure to carry out an ordinary duty to clients and that the clients specific instructions did not expand this duty when they did no more than instruct the attorney to do his job. Id. IV. The Court is Likely to Require A Showing that Defendants Breached a Specific Contractual Provision

It is likely that the Western District will apply the standard that it applied in Stacey and General Nutrition. In the absence of clear precedent, it will need to engage in the same intellectual exercise that previous courts have in trying to determine how the Pennsylvania Supreme Court might rule on this issue. In making such determinations, federal district courts must look to, among other sources, state appellate courts and binding federal courts. See Knopick v. Connelly, 639 F.3d 600, 606 (3d Cir. 2011). Eagleton and Broderick have a strong argument that the court should follow Gorski. Arguably the Third Circuit has accepted the holding of Gorski, citing it in dicta in an unpublished opinion. See Donnelly v. OMalley & Langan, PC, No. 09-3910, 370 F. Appx 347, 349 (3d Cir. 2010). Moreover, since Gorski Pennsylvania state appellate courts have followed this standard universally. However, as set out above, federal district courts have been less consistent. Although the consistency of the Pennsylvania lower appellate courts may appeal to the Western District, these decisions are not binding. In fact, the Western District has not acknowledged Gorski in its recent decisions. Thus, ultimately, the Western District will probably stick with its recent approach.

A. The Court Will Likely Apply a Broad Version of the Specific Instruction Test, Which the Students Can Satisfy While arguing that the court should accept the Gorski standard, we should not rest on it. Rather, we can also prevail on the argument that the facts in our case satisfy the specific instructions test as articulated by the Western District in General Nutrition. See 2008 WL 3982914, at *3. The record clearly shows that Eagleton and Broderick contracted with the Firm for representation in their action against Roberson. In her deposition, Carrie Plunkett unequivocally said that she agreed to represent Eagleton and Broderick in their action and represented that her firm has a strong litigation practice. In his deposition, Eagleton said that Plunkett assured them that the firm has a strong record in car accident injury cases. The students can establish that their contract with the Firm was for specific representation in the personal injury case, a task that fell squarely within the Firms professional competence. By failing to adequately represent them, the Firm breached this specific contractual term. See Id. B. The Court is Unlikely to Apply a Strict Version of the Specific Instruction Test, Which Will Be More Challenging to Satisfy The Western District is unlikely to apply the specific instruction test strictly. If it does, we have less guidance. In that case, we would need to demonstrate that the Firm disregarded the clients specific instructions. Broderick and Eagleton cannot argue confidently that the Firms failure to follow their instruction to provide regular updates was specific enough under a strict standard. Indeed, the court will probably find that such an instruction is similar to an instruction for the Firm simply to do its job. See Jaworski, 45 Pa. D. & C.4th at 228. Admittedly, the instruction is arguably comparable to that in Davis, 1998 WL 967516 at *5, which held that failing to follow any specific instruction, including an instruction for the attorney to remain in contact with his client,

was enough to breach a contract. However, the injured client in Davis was specifically injured by the attorneys failure to remain in contact, having incurred substantial financial obligations on the basis of that failure. Broderick and Eagleton, in contrast, did not specifically identify in their depositions any such injury. If the Western District insists on applying the strict Jaworski approach instead of General Nutrition, it is unlikely it will accept such a general instruction absent any evidence of injury arising out of the attorneys failure to comply with the instruction. Broderick and Eagleton are more likely to argue successfully that the Firm failed to follow their specific instruction to file a response to the Motion to Deem Admitted. The trial court judge angrily noted this failure when he granted the motion. Unlike the students specific instruction to keep them informed, this instruction was distinct and separate from the Firms ordinary professional responsibilities. See Jaworski, 45 Pa. D. & C.4th at 228. As Plunkett testified in her deposition, the Firm was not obligated to file a response to the motion. She said many firms routinely elect to not respond in written briefs to similar motions and instead rely solely on oral argument. Thus, unlike Jaworski, the instruction limited the Firms freedom to choose not to file a written response and was more than simply directing the Firm to do its job. Accordingly, a court will be more likely to find that this instruction is sufficiently specific for the longer statute of limitations to apply.