Macurdy v. Sikov & Love, P.A.

• Citation: 894 F.2d 818
• Decision Date: 24 January 1990
• Docket Number: No. 88-3981,88-3981
• Parties: Tom E. MACURDY, Plaintiff-Appellant, v. SIKOV & LOVE, P.A., et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 818

894 F.2d 818

Tom E. MACURDY, Plaintiff-Appellant, v. SIKOV & LOVE, P.A., et al., Defendants-Appellees.

No. 88-3981.

United States Court of Appeals, Sixth Circuit.

Argued June 13, 1989.

Decided Jan. 24, 1990.

John Ruffalo (argued), Hilton Head Island, S.C., for plaintiff-appellant.

Jack R. Baker (argued), Baker, Meekison & Dublikar, Canton, Ohio, Seymour A. Sikov, Pittsburgh, Pa., for defendants-appellees.

Before JONES and RYAN, Circuit Judges; and PECK, Senior Circuit Judge.

RYAN, Circuit Judge.

Appellant Tom E. Macurdy appeals from an adverse summary judgment dismissing his fraud and breach of contract claim against appellees, a Pennsylvania law firm and several of its members. The principal issue in the case, although there are others, is whether Pennsylvania or Ohio law governs. The district court held that Pennsylvania law controls and requires that the appellant's fraud claim be dismissed as barred by the statute of limitations, and his contract claim be dismissed as violative of public policy.

We disagree with the district court's analysis and, therefore, reverse its order granting summary judgment.

I.

At the time relevant to this lawsuit, appellant Macurdy was an Ohio resident living and practicing law in Ohio. At one time he had been licensed to practice law in Pennsylvania as well, but was suspended from practice in that state in June of 1978. At the time of his suspension in Pennsylvania, Macurdy had six Pennsylvania clients seeking to recover damages in as many unrelated Pennsylvania negligence actions. He arranged, with the permission of his clients, for the Pennsylvania law firm of Sikov & Love to assume responsibility for settlement or litigation of those matters.

Taking Macurdy's pleaded assertions as true, it appears that on September 15, 1978 he had a meeting in an Ohio restaurant with Charles E. Evans of Sikov & Love and orally agreed to turn the six Pennsylvania cases over to Sikov & Love, provided that legal fees recovered from the matters would be split "50-50." Macurdy indicated to Evans that suit had been started in five of the six cases and those matters were ready for trial. The Pennsylvania law firm eventually settled all six cases, recovering legal fees in the amount of $185,719.32, of which Macurdy now claims entitlement to one-half.

In June of 1979, Sikov & Love sent Macurdy a letter indicating that two of the cases had settled, but that Macurdy would only be entitled to compensation based on quantum meruit because Macurdy was no longer licensed to practice law in Pennsylvania and because the disciplinary rules of the Pennsylvania Supreme Court required quantum meruit fee sharing. Sikov & Love tendered a number of checks to Macurdy in partial satisfaction of fees owed him, all of which Macurdy returned uncashed. Eventually Macurdy received and cashed a check for $26,643.99, which was accompanied by a letter that stated: "With this check, we have now forwarded you all monies owed on the various cases."

Macurdy filed suit against Sikov & Love in an Ohio state court on November 29, 1982, alleging both fraud and breach of contract, and seeking recovery of the remainder of his claimed one-half interest in the $185,719.32 contingency fee award. Defendants removed the action to the federal court for the Northern District of Ohio, and eventually moved for summary judgment, alleging that the fraud claim was time barred under applicable Pennsylvania law and that the contract claim was unenforceable on the grounds that it violated both public policy and the statute of frauds. Although defendants did not plead the defense of accord and satisfaction in their answer, they nevertheless argued in their motion for summary judgment that appellant's contractual claim should be denied, based on accord and satisfaction principles.

The district court did not address the accord and satisfaction argument, but, applying Pennsylvania law, ordered summary judgment against Macurdy on the fraud claim because "if fraud was in fact present, it was clearly discernable by June 14,

1979." Macurdy v. Sikov and Love, P.A., 701 F.Supp. 134, 136 (N.D. Ohio 1988). Since Macurdy's lawsuit was filed over two years after the fraud, Pennsylvania's two-year statute of limitations barred its prosecution. The court also determined that Macurdy's contract claim was unenforceable on public policy grounds because the "50-50" fee splitting agreement violated the Model Code of Professional Responsibility DR 2-107(A), ¹ which both Ohio and Pennsylvania had adopted.

II.

Summary judgment is properly granted where a dispute presents no genuine issue of material fact. Fed.R.Civ.P. 56(c). In considering the propriety of a motion for summary judgment, the district and appellate courts must view all facts and inferences in a light most favorable to the nonmoving party. S.E.C. v. Blavin, 760 F.2d 706, 710 (6th Cir.1985). "The moving party has the burden of showing the absence of genuine disputes over facts which, under the substantive law governing the issue, might affect the outcome of the action." Harris v. Adams, 873 F.2d 929, 931 (6th Cir.1989) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). "The disputed issue does not have to be resolved conclusively in favor of the non-moving party, but that party is required to present some significant probative evidence which makes it necessary to resolve the parties' differing versions of the dispute at trial." 60 Ivy Street Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir.1987) (citing First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968)).

A.

We address, first, the question whether Ohio or Pennsylvania law controls the case.

It is well-settled that "[f]ederal courts sitting in diversity must apply the choice-of-law principles of the forum." Tele-Save Merchandising Co. v. Consumers Distrib. Co., 814 F.2d 1120, 1122 (6th Cir.1987) (citing Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). Ohio law still recognizes the traditional doctrine of lex loci delicti, but that principle no longer automatically determines which state's law applies. In Morgan v. Biro Mfg. Co., 15 Ohio St.3d 339, 341, 474 N.E.2d 286 (1984), the Ohio Supreme Court held that Ohio courts confronted with conflicts of law questions should apply the analysis set forth in the Restatement (Second) of the Law of Conflicts.

In this case, the district court analyzed the choice of law principles pertaining to suits for breach of contract claims but not for fraud claims, and apparently concluded that, because Ohio would require that contract claims and defenses be resolved under Pennsylvania contract law, Pennsylvania's shorter statute of limitations also applied to Macurdy's fraud claim. We think the district court erred in failing to recognize that Macurdy's fraud claim derives from tort law, and that the Restatement of Conflicts mandates a different choice-of-law analysis to determine which state's law applies to a tortious fraud claim.

Section 148 of the Restatement (Second) of Conflicts of Law governs choice of law for claims of fraud. ² It establishes a presumption that Ohio law applies to this fraud claim because, according to Macurdy's complaint, the alleged fraud occurred in Ohio when the defendants represented that they would split attorney fees with Macurdy "50-50," and in reliance thereon Macurdy delivered over to Sikov & Love his clients' files, including his work product papers relating to each case. The factors delineated in Sec. 6 of the Restatement of Conflicts, to which Sec. 148(1) refers, do not rebut the presumption that Ohio's statute of limitations applies to Macurdy's fraud claim because all of the contacts for purposes of the fraud claim occurred in Ohio, and Pennsylvania has no real interest in protecting Ohio's citizens from frauds committed against them in Ohio. The defendants have not shown that Pennsylvania would have an interest in adjudicating this fraud claim. Accordingly, the district court should have applied Ohio's statute of limitations to Macurdy's fraud claim.

Ohio's statute of limitations for fraud actions permits suits up to four years after the fraud is discovered. Ohio Rev.Code Ann. Sec. 2305.09 (Anderson 1981). In its opinion, the district court found that the alleged fraud "was clearly discernable by June 14, 1979." 701 F.Supp. at 136. Since Macurdy's fraud claim was filed on November 29, 1982, it is timely. The district court did not, and neither do we, address whether the fraud claim has merit.

B.

Although persuaded that the appellant's claim sounded primarily in fraud, the district court felt obligated to address the pleaded claim of breach of an oral fee-splitting contract. As will be discussed infra, it held that the contract was unenforceable as violative of public policy.

The Ohio Supreme Court applies Sec. 188 of the Restatement (Second) of Conflict of Laws ³ to contract disputes where, as here, the parties did not expressly designate the law of a particular jurisdiction to govern any disputes. Gries Sports Enterprises v. Modell, 15 Ohio St.3d 284, 287, 473 N.E.2d 807 (1984), cert. denied, 473 U.S. 906, 105 S.Ct. 3530, 87 L.Ed.2d 654 (1985). Application of Sec. 188 led the district court to conclude that the validity of plaintiff's contract claim should be determined under Pennsylvania law. The purpose of the agreement was to provide representation for clients in Pennsylvania; and the place of performance was clearly Pennsylvania. Moreover, because this was a service contract, Ohio trial courts would apply Sec. 196 of the Restatement of Conflicts. In pertinent part, that section states:

The validity of a contract for the rendition of services and the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the state where the contract...