N.Y. Cent. Mut. Ins. Co. v. Edelstein, CIVIL ACTION NO. 3:14-0829

• Decision Date: 30 January 2015
• Docket Number: CIVIL ACTION NO. 3:14-0829
• Parties: NEW YORK CENTRAL MUTUAL INSURANCE COMPANY, et al., Plaintiffs v. MARGOLIS EDELSTEIN, et al., Defendants
• Court: U.S. District Court — Middle District of Pennsylvania

NEW YORK CENTRAL MUTUAL INSURANCE COMPANY, et al., Plaintiffs v. MARGOLIS EDELSTEIN, et al., Defendants

CIVIL ACTION NO. 3:14-0829

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF PENNSYLVANIA

January 30, 2015

(JUDGE MANNION)

MEMORANDUM

Pending before the court is the defendants' motion to dismiss the plaintiffs' second amended complaint, (Doc. 14), and to strike the attorneys' fees demand. Based upon the court's review of the relevant documents, the court will GRANT the defendants' motion since it finds plaintiffs' claims to be time-barred.

I. BACKGROUND

By way of relevant background, the plaintiffs, New York Mutual Insurance Company ("NYCM") and St. Paul Mercury Insurance Company ("St. Paul"), filed the instant action alleging one count of legal malpractice on April 29, 2014. (Doc. 1). The defendants were the law firm of Margolis Edelstein and Michael T. Savitsky, Esq. It was alleged that this federal court had subject matter jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. §1332. On April 30, 2014, the court issued an order and dismissed the complaint without prejudice pursuant to Fed.R.Civ.P. 12(h)(3) since plaintiffs failed to show that there was complete diversity. (Doc. 3). An amended complaint was filed by the plaintiffs on April 30, 2014. (Doc. 4). On May 1,2014, the court issued an order and found that plaintiffs' amended complaint still failed to properly establish diversity since it did not properly allege that each of the partners of Margolis Edlestein have diverse citizenship from each of the plaintiffs. Thus, the court again dismissed plaintiffs' pleading and directed plaintiffs to file a second amended complaint within 30 days. (Doc. 5). On May 2, 2014, plaintiffs filed a second amended complaint and alleged that each of the partners of Margolis Edlestein had diverse citizenship from each of the plaintiffs. (Doc. 6). The defendants were then served. (Doc. 8).

On June 30, 2014, plaintiffs filed a Certificate of Merit under Pa.R.Civ.P. 1042.3.¹ (Doc. 9). One of the counsel for plaintiffs certified that a licensed professional has supplied a written statement that there is a reasonable basis to conclude that the care, skill or knowledge exercised or exhibited by the defendants in the work alleged in the complaint fell outside of the acceptable professional standards and that this conduct caused the plaintiffs' alleged harm. (Doc. 9).

On August 4, 2014, defendants filed a motion to dismiss the plaintiffs'second amended complaint with prejudice pursuant to Fed.R.Civ.P. 12(b)(6) as time barred. (Doc. 14). In the alternative, defendants moved to dismiss the plaintiffs' pleading for failure to state a claim for relief with the required specificity pursuant to Fed.R.Civ.P. 8(a), 12(b)(6), and 12(e). Further, defendants moved to strike the attorneys' fees demand from the pleading pursuant to Fed.R.Civ.P. 12(f).

The defendants maintain that "[t]his action alleges a single count of legal malpractice, the gravamen of which is an alleged failure to adhere to professional standards of due care, filed more than two years after the claim arose, and so barred by Pennsylvania's two-year statute of limitations applicable to negligence claims (42 Pa.C.S. §5524(7))." (Doc. 14, at 2). The defendants also state that the second amended complaint is vague and conclusory and fails to sufficiently allege facts to support the conclusion that they were negligent. Further, the defendants argue that plaintiffs' pleading contains an improper demand for attorneys' fees contrary to the "American Rule" and, since it is not authorized by any statute or contract, it should be stricken.

Also, on August 4, 2014, defendants filed their brief in support to their motion to dismiss with attached exhibits, including a copy of plaintiffs' second amended complaint and copies of unpublished decisions as well as relevant correspondence between the parties. (Doc. 15. Docs. 15-1 to 15-3). After being granted an extension of time, plaintiffs filed their opposition brief on September 2, 2014, with attached exhibits, including the Declaration of attorney Richard S. Mills regarding the unpublished decisions cited in plaintiffs' brief as well as copies of the unpublished decisions. (Doc. 24. Docs. 24-1 to 15-3). The defendants filed their reply brief on September 16, 2014. (Doc. 26). As such, defendants' motion to dismiss is ripe for disposition. The court notes that the parties are currently conducting discovery.

II. STANDARD OF REVIEW

The defendants' motion to dismiss is brought pursuant to the provisions of Fed.R.Civ.P. 12(b)(6). This rule provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated, Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005), and dismissal is appropriate only if, accepting all of the facts alleged in the complaint as true, the plaintiff has failed to plead "enough facts to state a claim to relief that is plausible on its face," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1974 (2007) (abrogating "no set of facts" language found in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). The facts alleged must be sufficient to "raise a right to relief above the speculative level." Twombly, 550 U.S. 544, 127 S. Ct. at 1965. This requirement "calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of" necessary elements of the plaintiff's cause of action. Id. Furthermore, in order to satisfy federal pleading requirements, the plaintiff must "provide the grounds of his entitlement to relief," which "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (brackets and quotations marks omitted) (quoting Twombly, 550 U.S. 544, 127 S. Ct. at 1964-65).

In considering a motion to dismiss, the court generally relies on the complaint, attached exhibits, and matters of public record. See Sands v. McCormick, 502 F.3d 263 (3d Cir. 2007). The court may also consider "undisputedly authentic document[s] that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] documents." Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Moreover, "documents whose contents are allegedin the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered." Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002). However, the court may not rely on other parts of the record in determining a motion to dismiss. See Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).

Generally, the court should grant leave to amend a complaint before dismissing it as merely deficient. See, e.g., Fletcher-Harlee Corp. v. Pote Concrete Contractors, Inc., 482 F.3d 247, 252 (3d Cir. 2007); Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002); Shane v. Fauver, 213 F.3d 113, 116-17 (3d Cir. 2000). "Dismissal without leave to amend is justified only on the grounds of bad faith, undue delay, prejudice, or futility." Alston v. Parker, 363 F.3d 229, 236 (3d Cir. 2004).

III. SECOND AMENDED COMPLAINT

Accepted as true, the allegations of the plaintiffs' second amended complaint, as correctly stated by plaintiffs, (Doc. 24, at 5-7), provide:

On March 6, 2003, Marcial Gonzalez, a permissive user of an automobile owned by NYCM's insured, Hildegarber Lopez, was involved in a collision with another vehicle in which Cheryl Shannon sustained physical injuries. Shannon retained counsel, who, on September 6, 2003, made a pre-suit demand to NYCM for the full limits ($25,000) of the policy issued to Lopez. NYCM declined the demand, and later made a final offer of $12,500. When Shannon filed suit against Gonzalez (the underlying "Shannon Litigation"), her demand rose to $200,000,predicated, in part, on NYCM's prior failure to tender the full policy limits. NYCM sought and obtained the advice of Michael T. Savitsky, Esq., a partner at MargolisEdelstein in Scranton, Pennsylvania. In correspondence dated November 19, 2009, Mr. Savitsky agreed to perform legal services for NYCM, which included agreeing to "provide [NYCM] with a Legal Opinion on the validity of any Bad Faith Claim under the confines of Pennsylvania law." See Dckt. Rpt. #6, ¶¶ 101, 128; Dckt. Rpt. #15-1, pp. 23 of 28. Mr. Savitsky outlined the initial steps to be taken "prior to providing our legal opinion to you," which included reviewing documentation and "perform[ing] legal research applicable to the facts of this case," and "prepar[ing] and "circulat[ing]" a thorough outline "to all Counsel in the Scranton office, with an eye toward scheduling a meeting of those Counsel in order to conference this matter." See Dckt. Rpt. #15-1, pp. 23 of 28.

In a letter dated January 29, 2010, Mr. Savitsky advised NYCM that he did not believe that a potential bad faith claim against NYCM resulting from its handling of settlement in the underlying Shannon Litigation would be successful. See Dckt. Rpt. #6, ¶ 102. On April 30, 2010, Mr. Savitsky further advised that "[o]ur prior opinion has not changed," and recommended "that New York Central Mutual and its Counsel should not make any Offer beyond the $25,000, and should not make inquiry as to whether a sum of money above the policy limit of $25,000 would successfully resolve the third party action and also Release any bad faith claim." See Dckt. Rpt. #6, ¶ 105; see also Dckt. Rpt. #15-1, pp. 26 of 28.

Ultimately, Gonzalez stipulated to his sole liability in the Shannon Litigation and the jury returned a verdict on damages that was later remitted to $960,000. Gonzalez then assigned his rights against NYCM to Shannon, who agreed not to execute

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