Fiorentino v. Rapoport

• Decision Date: 22 May 1997
• Citation: 693 A.2d 208
• Parties: Rocco J. FIORENTINO, Appellant, v. Frank RAPOPORT, Alan Gordon and Saul, Ewing, Remick & Saul. Rocco J. FIORENTINO, v. Frank RAPOPORT, Alan Gordon and Saul, Ewing, Remick & Saul, Appellants.
• Court: Pennsylvania Superior Court

Page 208

693 A.2d 208

Rocco J. FIORENTINO, Appellant, v. Frank RAPOPORT, Alan Gordon and Saul, Ewing, Remick & Saul.

Rocco J. FIORENTINO, v. Frank RAPOPORT, Alan Gordon and Saul, Ewing, Remick & Saul,

Appellants.

Superior Court of Pennsylvania.

Argued Dec. 4, 1996.

Filed March 20, 1997.

Reargument Denied May 22, 1997.

Stuart Fiel, Philadelphia, for Fiorentino.

Seymour I. Toll, Philadelphia, for Rapoport, Gordon and Saul, Ewing, Remick & Saul.

Before CIRILLO, President Judge Emeritus, HOFFMAN, J. and CERCONE, President Judge Emeritus.

CERCONE, President Judge Emeritus:

This is a consolidated appeal and cross-appeal from the final judgment entered after the trial court denied post-trial relief to both the plaintiff and the defendants in a legal malpractice case. Appellant Rocco J. Fiorentino instituted the suit underlying this appeal by filing a complaint against cross-appellants Frank Rapoport, Alan Gordon, and the law firm of Saul, Ewing, Remick & Saul. Thomas Rutter, Esquire, sitting as Judge Pro Tem, granted a compulsory nonsuit in favor of defendants and final judgment was entered on December 13, 1995. For the reasons that appear below, we reverse and remand for a new trial.

The Honorable Frederica A. Massiah-Jackson has aptly summarized the factual history of the case in the following manner:

In 1975, the plaintiff, Mr. Fiorentino, went into business with John Converse, establishing a company called J & R Equipment Services ("J & R"). At the time, Mr. Fiorentino was 19 years old, Mr. Converse was 29, and the two individuals knew each other, as Mr. Converse had been Mr. Fiorentino's supervisor at another company. Mr. Fiorentino and Mr. Converse began J & R with approximately $300 each in startup capital, and the business specialized in servicing restaurant equipment, installing serviced equipment for manufacturers, selling equipment, leasing equipment and designing and drafting equipment.

In 1978, J & R incorporated, and Mr. Fiorentino and Mr. Converse were each issued 2,500 shares of stock in the company. By this time, J & R had established many national accounts, servicing such restaurants as Pizza Hut, Friendly's and McDonalds. During the ten years of J & R's operation, the business yielded approximately $3.5 million in gross revenues.

In November, 1985, Mr. Fiorentino and Mr. Converse decided to terminate their business relationship. Pursuant to this decision, the plaintiff and Mr. Converse agreed between themselves that: (1) Mr. Fiorentino would receive the stock in Leasomatic, a smaller company started by J & R; (2) Mr. Converse would keep J & R; and (3) Mr. Fiorentino would receive $1.1 million in payments over a ten year period, payable in monthly installments of $9,166.67 as J & R received 20-5/6 of the company's shares belonging to Mr. Fiorentino on a monthly basis. Mr. Fiorentino and Mr. Converse then enlisted the services of Mr. Frank Rapoport ("Mr. Rapoport") and Mr. Allen Gordon ("Mr. Gordon"), partners at Saul, Ewing to put the terms of their mutual agreement in writing. [See ] Stock Purchase Agreement by and among John D. Converse, Rocco J. Fiorentino, J & R Equipment Service, Inc. and Leasomatic, Inc. ("Stock Purchase Agreement"). All parties met on at least two separate occasions during the course of memorializing the agreement.

At trial, Mr. Gordon described the details and the effect of the agreement and the transaction as follows:

(1) the money owed to Mr. Fiorentino was to be paid by J & R if it had the surplus to pay it; otherwise, it was to be paid by Mr. Converse;

(2) every month J & R would receive 20-5/6 shares of stock from Mr. Fiorentino;

(3) at the end of the transaction, Mr. Converse would own the 2500 outstanding shares of J & R, with Mr. Fiorentino's stock becoming treasury stock;

(4) the stock to be returned monthly was to be held in escrow by Mr. Converse, thus giving him the power to vote all shares of stock;

(5) upon default, Mr. Converse would deliver to Mr. Fiorentino all shares held in escrow not redeemed by J & R and Mr. Fiorentino would become a 50-50 shareholder;

(6) Mr. Converse was able to vote the shares of J & R and vote the company out of business and into bankruptcy; and

(7) payments to Mr. Fiorentino depended on the net worth of J & R and if this was deficient, Mr. Converse became responsible for payments.

See Stock Purchase Agreement, pp 1-5.

During the meetings, there was no discussion relating to what would happen in the event that a default in payment occurred, nor was there discussion relating to potential conflicts of interest or the pursuit of independent counsel for each party to the agreement. Furthermore, the defendants never advised the parties about the possibilities and virtues of establishing an independent escrow arrangement. Finally, there was no discussion of a provision to preclude Mr. Converse from establishing a corporation with transferred J & R assets that would be owned by his family members. The Stock Purchase Agreement was finalized and signed on January 2, 1986.

For the first thirteen months after the finalization of the agreement, Mr. Fiorentino received $9,166.67 per month pursuant to the agreement's terms. However, in February, 1987, Mr. Converse conveyed to Mr. Fiorentino that he could no longer make the full payments, and the two parties agreed to amend temporarily the Stock Purchase Agreement to reflect a reduction in the amount due and payable to Mr. Fiorentino. After an unsuccessful attempt to contact Mr. Gordon at [the] Saul, Ewing offices, Mr. Fiorentino contacted Mr. Bert Martin ("Mr. Martin"), a New Jersey attorney from the law firm Martin, Crawshaw & Mayfield, to draft an addendum to the Stock Purchase Agreement. Pursuant to the addendum, Mr. Fiorentino received $5,500 per month in payments from J & R.

Simultaneously, Mr. Rapoport, pursuant to Mr. Converse's request, established and incorporated Ice Systems of New Jersey and Food Service Equipment Contractors ("Food Service"). These two corporations were not owned by Mr. Converse, but instead, Ice Systems was 65% owned by his wife and his son with 35% of it owned by the employees, and Food Service was 65% owned by his wife and daughter with the employees owning the rest. Mr. Converse served as president of both corporations. The $5,500 per month payments continued for the next twelve months, until Mr. Converse notified Mr. Fiorentino by letter dated February 8, 1988, that he would no longer make further payments under the agreement.

Thereafter, Mr. Converse voted the J & R stock and signed the authorization for the company to go into bankruptcy. On April 5, 1988, Mr. Converse filed a voluntary bankruptcy petition on behalf of J & R in the United States District Court of New Jersey.

Trial Court Opinion dated 12/5/95 at 5-9 (citations to notes of testimony and footnotes have been omitted).

Mr. Fiorentino initiated suit in the United States District Court for the Eastern District of Pennsylvania against John D. Converse, Kathleen Converse, John T. Converse, Maureen Converse, Rick Fargo, Cindy DiFazio, Ice Systems of New Jersey, Inc., Food Service Equipment Contractors, Inc., Frank Rapoport, Alan Gordon, and Saul, Ewing, Remick & Saul.

However, the District Court dismissed the action on the grounds that the conduct alleged in the plaintiff's complaint did not constitute a pattern of racketeering activity under the RICO statute. See Fiorentino v. Converse, et al., 705 F.Supp. 253, 255 (E.D.Pa.1989), aff'd, 884 F.2d 1383 (3d Cir.1989). See also Order for Civil Action No. 88-5065, filed September 7, 1989 (Plaintiff's Motion for Reconsideration denied), aff'd, Fiorentino v. Converse, et al., No. 89 Civ. 1791, 898 F.2d 140 (3d Cir. Feb 8, 1990) (no abuse of discretion for the District Court not to consider belatedly presented depositions on motion to reconsider where those depositions were available when the case was pending in the District Court originally).

Trial Court Opinion dated December 5, 1995 at 2 n. 2. On March 28, 1989, Mr. Fiorentino then filed the complaint underlying this appeal in the Court of Common Pleas of Philadelphia County. The state court action named as defendants only Messrs. Rapoport and Gordon, and the law firm of Saul, Ewing, Remick & Saul ("Saul Ewing"). The complaint alleged that the defendants were liable to Mr. Fiorentino under three separate theories: (1) breach of contract; (2) legal malpractice stemming from negligence; and (3) breach of fiduciary duty.

A jury trial was conducted in September of 1993 before Thomas Rutter, Esquire, sitting as Judge Pro Tem. On the fourth day of trial, Judge Pro Tem Rutter granted a defense motion for compulsory nonsuit and dismissed the case with prejudice. See Order docketed 9/23/93. Judge Pro Tem Rutter explained that the sole basis for his ruling was that Mr. Fiorentino had failed to show "proof as to harm." N.T. 9/21/93 at 777. Mr. Fiorentino filed a motion for post-trial relief on September 30, 1993. Defendants' cross-motion for post-trial relief followed on October 12, 1993. Judge Massiah-Jackson and Judge Pro Tem Rutter entered a joint order on December 5, 1995 denying all post-trial motions. On the same date, Judge Massiah-Jackson filed an opinion explaining the rationale behind the order denying post-trial relief. Final judgment was entered December 13, 1995 and the instant timely appeals followed. ¹

Mr. Fiorentino, appellant, has presented two claims for our consideration:

A. Should a legal malpractice plaintiff be required to demonstrate with absolute certainty what would have happened in circumstances that the defendant lawyers did not permit to come to pass by their actions and omissions?

B. Is the granting of compulsory nonsuit proper where plaintiff's expert provided an opinion as to all relevant elements of the cause of action based upon testimony and documents of record?

Appellant's Brief at 3. Cross-appellants, Mr. Rapoport, Mr. Gordon and Saul Ewing,...