Dixon Ticonderoga Co. v. Estate of William F. O'Connor
| Citation | 248 F.3d 151 |
| Decision Date | 23 April 2001 |
| Docket Number | 99-6055,No. 99-6055,No. 99-6056,99-6056,No. 99-6054,99-6054 |
| Parties | (3rd Cir. 2001) DIXON TICONDEROGA COMPANY, Appellant inv. ESTATE OF WILLIAM F. O'CONNOR; SCHUMANN HESSION KENNELLY & DORMENT; SCHUMANN HANLON & PANEPINTO; HAROLD FRIEDMAN; KIRSTEN, SIMON, FRIEDMAN, ALLEN, CHERIN & LUTKIN; GREENBERG MARGOLIS; FRANZBLAU DRATCH & FRIEDMAN; STRYKER TAMS & DILL; SCHUMANN HANLON O'CONNOR & MCCROSSIN; HAROLD FRIEDMAN; STRYKER TAMS & DILL, Third-Party Plaintiffs v. DECOTIIS, FITZPATRICK & GLUCK; CONNOLLY EPSTEIN CHICCO FOXMAN ENGELMYER & EWING; STEVEN J. ENGELMYER; LISA E. BRODY, Third-Party Defendants; HAROLD FRIEDMAN, Appellant in; FRANZBLAU DRATCH, F/K/A GREENBERG MARGOLIS, Appellant in |
| Court | U.S. Court of Appeals — Third Circuit |
STEVEN J. ENGELMYER, ESQUIRE (ARGUED), LISA E. BRODY, ESQUIRE, HEATHER R. WEISS, ESQUIRE, Kleinbard, Bell & Brecker, LLP, Philadelphia, PA, Counsel for Dixon Ticonderoga.
ANDREW M. EPSTEIN, ESQUIRE (ARGUED), Lampf, Lipkind, Prupis & Petigrow, West Orange, NJ, Counsel for Harold Friedman.
RICHARD T. GAROFALO, ESQUIRE (ARGUED), THOMAS D. FLINN, ESQUIRE, Garrity, Graham, Favetta & Flinn, Montclair, NJ, Counsel for Franzblau Dratch.
PETER DeSALVO, JR., ESQUIRE (ARGUED), Soriano, Henkel, Salerno, Biehl & Matthews, Roseland, NJ, Counsel for Estate of William F. O'Connor; Schumann Hession Kennelly & Dorment; Schumann Hanlon & Panepinto; Schumann Hanlon O'Connor and McCrossin.
Before: BECKER, Chief Judge, AMBRO and STAPLETON, Circuit Judges.
OPINION FOR THE COURT
These are consolidated appeals from the grant of summary judgment in favor of the defendants in a two-tiered legal malpractice action governed by New Jersey law. The seeds of this case were sown in the early 1980s when Plaintiff Dixon Ticonderoga Company (Dixon) sold a piece of industrial property to a company named the Dixon Venture (Venture). Defendant William O'Connor--who was affiliated with Defendant Schumann Hanlon & Panepinto (the Schumann firm)--represented Dixon in connection with the sale. Between the time Dixon agreed to sell the property to Venture and the time the sale closed, the New Jersey Legislature enacted the Environmental Cleanup Responsibility Act (ECRA), which imposed substantial new clean-up responsibilities on owners of industrial property that wished to sell their land.
In the first tier of this action, Dixon charges that O'Connor committed malpractice by failing to advise it about ECRA, and submits that his failure resulted in its transaction with Venture being subject to ECRA. Dixon did not comply with ECRA prior to transferring ownership of the property to Venture, and Venture sued Dixon to recover clean-up costs that it was forced to incur in connection with the sale. Though a trial court originally dismissed Venture's suit, the appellate courts reinstated it, and Venture ultimately obtained a substantial judgment against Dixon. Dixon claims that this judgment was the direct result of O'Connor's negligence.
The second tier of this case involves Dixon's legal malpractice claims against Defendant Harold Friedman, who during all relevant times was affiliated with Defendant Franzblau Dratch. Friedman represented Dixon during much of the litigation brought against it by Venture. In 1989, Friedman spoke with Dixon's outside counsel about the possibility of suing O'Connor for malpractice. Dixon submits that this conversation created an attorney-client relationship between it and Friedman with respect to a potential malpractice claim against O'Connor, and alleges that Friedman breached his professional duties to it by allowing that claim to become time-barred.
Dixon filed the instant suit against O'Connor, the Schumann firm, Friedman, and Franzblau Dratch in 1996. Soon thereafter, O'Connor and the Schumann firm moved to have the claims against them dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6) as time-barred. Though Friedman and Franzblau Dratch opposed this motion, it was granted by the District Court. Friedman and Franzblau Dratch appeal from this aspect of the District Court's judgment. Later, the District Court granted summary judgment in favor of Friedman and Franzblau Dratch. The court held that, even assuming that he created an attorney-client relationship between himself and Dixon with respect to a potential malpractice action against O'Connor, Friedman had breached no professional duty that he owed to Dixon. Dixon appeals from this portion of the judgment.
To resolve both tiers of this appeal we must first decide when Dixon gained and lost the right to sue O'Connor for malpractice. Under New Jersey law, the time for bringing a legal malpractice claim expires six years after the claim accrued. As we will explain, accrual occurs when a prospective plaintiff gains knowledge of two elements: (1) that his or her lawyer has been at fault; and (2) that he or she has been injured due to the lawyer's error. Because O'Connor's alleged fault in this case lies in his failure to inform Dixon about ECRA prior to the closing of the Venture deal, we conclude that the first element was satisfied in either late 1984 or early 1985, when Dixon learned that ECRA had applied to the transaction. We further determine that Dixon was damaged by O'Connor's purported error by October 21, 1985, when Dixon incurred attorneys' fees in responding to Venture's demands that it comply with ECRA.
In so concluding, we reject several arguments offered by Friedman and Franzblau Dratch in favor of a later accrual date. Friedman submits that the limitations period did not commence until the New Jersey appellate courts first issued a ruling adverse to Dixon in the suit brought against Dixon by Venture. We disagree, both because the Supreme Court of New Jersey has rejected per se rules in this context, and because we believe that the necessary prerequisites for accrual were satisfied long before that time. Franzblau Dratch submits that the statute did not begin to run until Venture first sued Dixon, and that the limitations period was tolled between the time that the trial court threw out the Venture litigation and the time that the appellate courts reinstated it. Based on these premises, Franzblau Dratch contends that the statute of limitations did not run on Dixon's claim against O'Connor until after Friedman left Franzblau Dratch, and it submits that it cannot be held liable as a result. We reject this submission because: (1) it is ultimately irrelevant due to our disagreement with Franzblau Dratch as to when Dixon's claim against O'Connor accrued; (2) the tolling argument rests on a mistaken view of what O'Connor is alleged to have done wrong; and (3) the tolling argument is inconsistent with the policies behind New Jersey's statute of limitations and is unsupported by any relevant New Jersey case law. We therefore hold that Dixon's claims against O'Connor and the Schumann firm accrued by October 21, 1985 and that the limitations period on those claims ran by October 21, 1991. Because the instant suit was not filed until 1996, we will affirm the portion of the District Court's judgment that dismissed the claims against O'Connor and the Schumann firm.
We will, however, reverse the portion of the District Court's judgment that granted summary judgment in favor of Friedman and Franzblau Dratch because we conclude that there are genuine issues of material fact that preclude us from determining whether the 1989 conversation between Friedman and Dixon's outside counsel created an attorney-client relationship with regard to a potential malpractice action against O'Connor, and, assuming that it did, whether Friedman committed malpractice. According to the Restatement of Law Governing Lawyers, whose standards the parties agree govern this case, an attorney-client relationship is created with respect to a given matter when: (1) a person informs a lawyer that he or she wants the lawyer to provide legal services with respect to a given matter; (2) the lawyer does not refuse; and (3) the lawyer knows or should know that the person reasonably relies on the lawyer to provide such services.
The existence of the first factor is essentially conceded. We conclude that there is a genuine issue of fact going to the second element, because our review of the relevant deposition transcripts indicates that there is at least a conflict as to whether Friedman ever refused to undertake the representation. Finally, there is a genuine issue as to whether the third factor is satisfied because: (1) Friedman and Dixon had a preexisting (and ongoing) relationship involving a related matter; (2) Friedman admitted that he gave Dixon legal advice about suing O'Connor in 1989; and (3) a reasonable reading of the deposition transcripts supports an inference that during the 1989 conversation Friedman promised to discuss the matter with Dixon again at a later date. Although two letters that Dixon's outside counsel wrote to Friedman in 1992 could be read as suggesting that Dixon was not relying on Friedman to provide it with legal advice regarding a malpractice action against O'Connor, we do not believe that they so establish as a matter of law.
If the 1989 conversation created an attorney-client relationship, we also believe that there is a genuine dispute as to whether Friedman committed malpractice. A lawyer who assumes a representation must exercise reasonable and ordinary care over the matters entrusted to him or her. Because the undisputed evidence establishes that Friedman did nothing at all between the 1989 conversation and the running of the statute of limitations in 1991, we conclude that there is a genuine issue as to whether he breached a professional duty that he owed to Dixon.
As generations of children and standardized test-takers know, Dixon makes pencils.1 For over a hundred years, it...
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