Muhammad v. Strassburger, McKenna, Messer, Shilobod and Gutnick

• Decision Date: 15 March 1991
• Docket Number: No. 5,5
• Parties: Pamela MUHAMMAD, Administratrix of the Estate of Nazir Muhammad and Abdullah Muhammad, Appellees, v. STRASSBURGER, McKENNA, MESSER, SHILOBOD AND GUTNICK, a law partnership; Howard Messer and James Thomas, Jr. Appeal of STRASSBURGER, McKENNA, MESSER, SHILOBOD AND GUTNICK, a law partnership; and Howard Messer. W.D. Appeal 1989.
• Court: Pennsylvania Supreme Court

Page 1346

587 A.2d 1346

526 Pa. 541

Pamela MUHAMMAD, Administratrix of the Estate of Nazir

Muhammad and Abdullah Muhammad, Appellees, v. STRASSBURGER, McKENNA, MESSER, SHILOBOD AND GUTNICK, a law

partnership; Howard Messer and James Thomas, Jr.

Appeal of STRASSBURGER, McKENNA, MESSER, SHILOBOD AND

GUTNICK, a law partnership; and Howard Messer.

No. 5 W.D. Appeal 1989.

Supreme Court of Pennsylvania.

Argued March 5, 1990.

Decided March 15, 1991.

James R. Schadel, David L. Haber, Murphy, Taylor & Adams, P.C., Pittsburgh, for appellants.

Kenneth W. Behrend, Behrend & Ernsberger, Pittsburgh, for Pamela Muhammad.

Robert W. Beckwith, S. James Goldman, Pittsburgh, for James Thomas, Jr.

Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, ZAPPALA, PAPADAKOS and CAPPY, JJ.

OPINION OF THE COURT

CAPPY, Justice. ^*

We granted allocatur to determine whether the appellees' claim of legal malpractice stemming from their dissatisfaction with the settlement of their prior medical malpractice action is barred by the doctrine of collateral estoppel and whether, as a matter of law, the appellees have alleged sufficient facts to entitle them to proceed with their action. For the reasons set forth herein, we hold that the case sub judice is not barred by the doctrine of collateral estoppel, but that the appellees have failed to allege sufficient facts, which if proved, would entitle them to relief.

FACTUAL AND PROCEDURAL HISTORY

The facts of this case and its procedural history are so entwined that we must address them together.

On November 7, 1977, Pamela Muhammad and Abdullah Muhammad, husband and wife, had a son, Nazir, born to them at Magee-Womens Hospital in Pittsburgh, Pennsylvania. Upon the parents' request, a circumcision was performed on baby Nazir, but the procedure apparently failed to remove the entire foreskin.

Subsequent to the initial circumcision, a second procedure was scheduled at Childrens' Hospital in Pittsburgh on December 16, 1977. During the surgery, the infant suffered pulmonary edema as a consequence of the general anesthesia and died three days later.

Appellees initially retained the services of the appellant, attorney James Thomas, Jr., to represent them in the claim arising from the death of their son. At the suggestion of Mr. Thomas, the appellees subsequently retained the services of the appellant law firm of Strassburger, McKenna, Messer, Shilobod and Gutnick. Mr. Messer assumed control of the case and filed a complaint against Children's Hospital, Dr. Stuart E. Price, Jr., (the urologist who performed the second circumcision) and Dr. Helen Westman (the attending anesthesiologist).

After the depositions of the above named physicians, settlement negotiations began and the defendants offered a settlement figure of $23,000 to the Muhammads. The Muhammads communicated their acceptance of the offer to their attorneys. At a pre-trial conference, the defendants increased the offer to $26,500 at the suggestion of the court. That settlement offer was accepted by the appellees.

At some point thereafter, the appellees informed their attorneys of their dissatisfaction with the amount of the settlement. The appellants communicated their clients' dissatisfaction to the opposing side, prompting the attorneys for the defendants to petition the trial court for a Rule to Show Cause why the settlement agreement should not be enforced.

After an evidentiary hearing, the court determined that the appellees had agreed to the $26,500 settlement and had communicated such agreement to the appellants. Based on those facts, the trial court upheld the settlement agreement, ordered the defendants to pay the settlement sum, and instructed the prothonotary to mark the docket settled and discontinued when the funds were received.

Appellees obtained new counsel and appealed to the Superior Court, which affirmed the settlement order. Muhammad v. Childrens' Hospital of Pittsburgh, 337 Pa.Super. 635, 487 A.2d 443 (1984) (unpublished memorandum opinion).

The Muhammads then filed the instant legal malpractice suit against the attorneys who had represented them in the medical malpractice case. ¹ In response to appellee's second amended complaint, the appellants filed preliminary objections in the nature of a demurrer, alleging inter alia, that the current action should be dismissed because it sought to relitigate the settlement and because the Muhammads' claim of loss was too speculative and thus failed to state a cause of action. The trial court granted the preliminary objections on the basis that the action was barred by the Superior Court's decision in the medical malpractice case (collateral estoppel).

On appeal, the Superior Court reversed the decision of the trial court, holding that the order sustaining the preliminary objections could not be affirmed upon the doctrine of collateral estoppel.

DISCUSSION

At the outset, we agree with the Superior Court that the appellees' instant action is not barred by the doctrine of collateral estoppel. In order to grant a demurrer pursuant to that doctrine, the objecting party must show that "the fact or facts at issue in both instances were identical; [and] that these facts were essential to the first judgment and were actually litigated in the first cause." Schubach v. Silver, 461 Pa. 366, 377, 336 A.2d 328, 334 (1975). We have also required that the party against whom a plea of collateral estoppel is asserted must have had a full and fair opportunity to litigate the issue in question in a prior action. In re Ellis' Estate, 460 Pa. 281, 287, 333 A.2d 728, 731 (1975). The issue in the first case was whether Mrs. Muhammad had authorized the settlement. The issues in the case before us are whether the attorney appellants were negligent and/or deceitful in their representation of the Muhammads and, if so, whether the Muhammads suffered harm as a result. It is thus evident that the matter is not barred by the doctrine of collateral estoppel as there are issues in this case that were not litigated in the medical malpractice case.

Although we find that collateral estoppel does not bar this action, we do not believe that our inquiry need or should cease there. Rather, the preliminary objections should have been granted due the appellees' failure to state a claim for which relief can be granted.

This case must be resolved in light of our longstanding public policy which encourages settlements. Simply stated, we will not permit a suit to be filed by a dissatisfied plaintiff against his attorney following a settlement to which that plaintiff agreed, unless that plaintiff can show he was fraudulently induced to settle the original action. An action should not lie against an attorney for malpractice based on negligence and/or contract principles when that client has agreed to a settlement. Rather, only cases of fraud should be actionable.

In order to reach this conclusion, we review the facts of this case as they have evolved in the courts of the Commonwealth. In deciding this case, we are mindful of our standard of review for preliminary objections. As we said in the case of Vattimo v. Lower Bucks Hosp., Inc., 502 Pa. 241, 465 A.2d 1231, 1232-33 (1983):

All material facts set forth in the complaint as well as all inferences reasonably deducible therefrom are admitted as true for [the purpose of this review.] Clevenstein v. Rizzuto, 439 Pa. 397, 266 A.2d 623 (1970). The question presented by the demurrer is whether, on the facts averred, the law says with certainty that no recovery is possible. Hoffman v. Misericordia Hospital of Philadelphia, 439 Pa. 501, 267 A.2d 867 (1970). Where a doubt exists as to whether a demurrer should be sustained, this doubt should be resolved in favor of overruling it. Birl v. Philadelphia Electric Co., 402 Pa. 297, 167 A.2d 472 (1960).

Our review of this case begins with the settlement that occurred in the medical malpractice action. The essence of a settlement is contractual in nature. There is an offer (the settlement figure), acceptance, and consideration (in exchange for the plaintiff terminating his lawsuit, the defendant will pay the plaintiff the agreed upon sum). Thus, the trial court's enforcement of that settlement was merely upholding the terms of a binding contract.

In the medical malpractice case which preceded the case sub judice, a binding contract was formed; Mrs. Muhammad agreed to the offered settlement of the defendant-physicians and communicated such agreement to her attorney. The Plaintiffs agreed to dismiss the suit in exchange for the defendants paying the sum of $26,500. It was only after that contract was formed that she decided--for reasons unknown at that time--that it just was not enough money. Her change of mind, however, did not entitle her to have the settlement agreement set aside. As this court has stated:

The law demands of every man who bargains with another that he should do so only after due reflection of the possible consequences of his bargain and if he misjudges the consequences that could have been expected by a reasonably intelligent man, he cannot rely on the law to remedy his fecklessness.

New Charter Coal Co. v. McKee, 411 Pa. 307, 312, 191 A.2d 830, 833 (1963).

This situation has been referred to as the "too bad category" of contracts; although a party to a contract believes he might have made a better deal after he agreed to the original contract, he is nonetheless bound by the terms of that primary agreement. The courts of this Commonwealth, relying on established principles of contract law, upheld the Muhammads' settlement agreement.

Nevertheless, due to their dissatisfaction with the settlement, the Muhammads subsequently filed the instant action against the attorneys who represented them throughout the medical malpractice case; alleging negligence, breach of contract, fraudulent concealment and nondisclosure.

Based on our strong and historical public policy of encouraging settlements, we do...