LLMD of Michigan Inc. v. Jackson-Cross Co.

• Decision Date: 26 October 1999
• Citation: 740 A.2d 186,559 Pa. 297
• Parties: LLMD OF MICHIGAN, INC., General Partner t/a Wintoll Associates Limited Partnership v. JACKSON-CROSS COMPANY v. Robert A. Swift, Esquire and Kohn, Nast & Graf, P.C. Appeal of LLMD of Michigan, Inc., General Partner t/a Wintoll Associates Limited Partnership.
• Court: Pennsylvania Supreme Court

740 A.2d 186

559 Pa. 297

LLMD OF MICHIGAN, INC., General Partner t/a Wintoll Associates Limited Partnership v. JACKSON-CROSS COMPANY v. Robert A. Swift, Esquire and Kohn, Nast & Graf, P.C.

Appeal of LLMD of Michigan, Inc., General Partner t/a Wintoll Associates Limited Partnership.

Supreme Court of Pennsylvania.

Argued October 19, 1998.

Decided October 26, 1999.

Stephen J. Mathes, Jan Fink Call, Michael S. Rosenberg, Philadelphia, for LLMD of Michigan, Inc., et al.

Robert J. Reger, King of Prussia, for Jackson-Cross Co.

C. Andre Washington, for Robert A. Swift, Esq. and Kohn, Nast & Graf, P.C.

Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO and NEWMAN, JJ.

OPINION

ZAPPALA, Justice.

This is an appeal by LLMD of Michigan, Inc., a general partner trading as Wintoll Associates Limited Partnership (Wintoll), from the Superior Court's order affirming the order of the Philadelphia County Common Pleas Court, which granted summary judgment in favor of Jackson-Cross Company (Appellee) in an action for professional malpractice. For the following reasons, we reverse.

In 1989, Wintoll commenced an action in the United States District Court for the Eastern District of Pennsylvania against Marine Midland Realty Credit Corporation and USLife Life Insurance Company, alleging breach of contract arising out of the defendants' failure to provide financing for the purchase and rehabilitation of an industrial facility in Springfield, Michigan. After the lawsuit was filed, Robert Swift, Esquire, Wintoll's attorney, contacted Charles Seymour, chairman of Jackson-Cross, to engage Seymour's services as Wintoll's expert on the issue of the lost profits suffered as a result of the defendants' breach of their financing commitment for the industrial rehabilitation project. On December 28, 1990, Seymour responded with a proposal outlining the scope of services that he would perform for Wintoll and the fees that would be charged for those services. The proposal contemplated that Seymour would quantify the damages sustained because of the lenders' failure to close under the mortgage commitments; prepare a signed report outlining what was done, stating the conclusions and supporting them; and participate in pre-trial conferences, depositions and trial. By letter dated January 4, 1991, Wintoll's attorney accepted Seymour's proposal.

Wintoll was subsequently provided with a calculation of the lost profits, which Jackson-Cross estimated to be $6 million. The calculation was prepared by David Anderson, an employee of Jackson-Cross, using a computerized accounting spreadsheet program. The federal trial began on November 24, 1992. Seymour was called by Wintoll to testify as an expert witness on the lost profits calculation on December 7, 1992 and provided his opinion as to the damages sustained by Wintoll.

On cross-examination, defense counsel established that Anderson's lost profits calculation contained a mathematical error that completely undermined the basis for the Jackson-Cross calculation of Wintoll's damages. Seymour conceded that the calculation was wrong because of the error that had been made. Because Seymour had not performed the calculations himself, he was unable to explain the mathematical error in the calculations or to recalculate the lost profits by correcting the error while on the stand. Defense counsel requested that Seymour's opinion be stricken from the record because it was based on inaccurate numbers and on erroneous mathematical calculations. The trial judge granted the motion to strike Seymour's testimony and instructed the jury to completely disregard the testimony during its deliberations.

Without Seymour's testimony, Wintoll's evidence relating to lost profits consisted of the testimony of Leon Winitsky and Michael Winitsky, principals of Wintoll, and a calculation by Wintoll of its estimated profits. The day after Seymour's testimony was stricken, Wintoll accepted a settlement offer from the federal defendants for approximately $750,000. Jackson-Cross subsequently provided Wintoll with a corrected computation of estimated lost profits, which indicated such damages amounted to $2.7 million.

On January 14, 1993, Wintoll filed a civil action in the Philadelphia County Common Pleas Court against Jackson-Cross, asserting causes of action for breach of contract and professional malpractice. Wintoll asserted that Jackson-Cross had breached its agreement to furnish expert services in connection with the federal lawsuit by failing to deliver an accurate or workmanlike lost profits computation, and had failed to exercise the degree of care and skill ordinarily exercised by experts in the field of real estate counselling and computation of lost profits in real estate transactions. Wintoll alleged that it would have received a judgment for lost profits in an amount in excess of $2.7 million plus interest but for the conduct of Jackson-Cross. Wintoll sought damages for the estimated lost profits and reimbursement of the fees paid to Jackson-Cross for its services.

Jackson-Cross filed preliminary objections in the nature of a demurrer to the complaint, which were overruled. In its answer and new matter, Jackson-Cross asserted, inter alia, that Wintoll's causes of action were barred by the doctrine of witness immunity.¹ The immunity issue was then raised by Jackson-Cross in a motion for judgment on the pleadings. The motion was denied. Jackson-Cross renewed the issue in a motion for summary judgment, which was also denied. On June 7, 1996, an order was entered by the common pleas court denying reconsideration of the summary judgment motion.

On July 1, 1996, Jackson-Cross filed a second motion for summary judgment. Jackson-Cross asserted that (1) Wintoll's claim was non-justiciable because the federal action had been settled prior to a jury verdict; (2) Wintoll's settlement of the federal action severed the causal link between the striking of Seymour's testimony and the alleged damages; (3) the pro tanto release given by Wintoll to the additional defendant applied to Jackson-Cross as an agent; and (4) Wintoll had failed to state a claim for breach of contract. The second summary judgment motion was granted by order dated July 10, 1996. Judgment was entered in favor of Jackson-Cross and the case was dismissed.²

On appeal, the Superior Court affirmed the order granting summary judgment on different grounds.³ The Superior Court concluded that the doctrine of witness immunity barred Wintoll's action against Jackson-Cross. We granted Wintoll's petition for allowance of appeal to address the issue of whether the doctrine of witness immunity extends to bar professional malpractice actions against professionals hired to perform services related to litigation.

Wintoll challenges the ruling of the Superior Court, asserting that the witness immunity doctrine should not be extended so as to bar professional malpractice actions against an expert retained by a party to litigation.⁴ Wintoll contends that privately retained and compensated experts should not be immunized from their own negligence, and that the policy concerns underlying the witness immunity doctrine are not advanced by extending immunity under such circumstances. Jackson-Cross asserts that the Superior Court's decision should be affirmed because it is based upon sound public policy.

In Binder v. Triangle Publications, Inc., 442 Pa. 319, 275 A.2d 53 (1971), we recognized, in the context of a defamation action, that participants in judicial proceedings have an absolute privilege for communications related to the proceedings.

[S]tatements by a party, a witness, counsel, or a judge cannot be the basis of a defamation action whether they occur in the pleadings or in open court.

The reasons for the absolute privilege are well recognized. A judge must be free to administer the law without fear of consequences. This independence would be impaired were he to be in daily apprehension of defamation suits. The privilege is also extended to parties to afford freedom of access to the courts, to witnesses to encourage their complete and unintimidated testimony in court, and to counsel to enable him to best represent his client's interests. Likewise, the privilege exists because the courts have other internal sanctions against defamatory statements, such as perjury or contempt proceedings.

275 A.2d at 56 (citation omitted). See also, Post v. Mendel, 510 Pa. 213, 507 A.2d 351, 354 (1986) ("The origin of the rule was the great mischief that would result if witnesses in courts of justice were not at liberty to speak freely, subject only to the animadversion of the court.... The rule is inflexible that no action will lie for words spoken or written in the course of giving evidence.")

The United States Supreme Court addressed the policy concerns underlying the witness immunity doctrine in the oft-cited decision of Briscoe v. LaHue, 460 U.S. 325, 103 S.Ct. 1108, 1112-1114, 75 L.Ed.2d 96 (1983) (footnotes and citations omitted):

The immunity of parties and witnesses from subsequent damages liability for their testimony in judicial proceedings was well established in English common law. Some American decisions required a showing that the witness' allegedly defamatory statements were relevant to the judicial proceeding, but once this threshold showing had been made, the witness had an absolute privilege. The plaintiff could not recover even if the witness knew the statements were false and made them with malice.

In the words of one 19th-century court, in damages suits against witnesses, "the claims of the individual must yield to the dictates of public policy, which requires that the paths which lead to the ascertainment of truth should be left as free and unobstructed as possible." A witness' apprehension of subsequent damages liability might induce two forms of self-censorship. First, witnesses might be reluctant to come forward to testify. And once a witness is on the

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