Vertical Resources, Inc. v. Bramlett

Citation837 A.2d 1193
PartiesVERTICAL RESOURCES, INC., Appellee, v. Jessica J. BRAMLETT, Appellant.
Decision Date26 November 2003
CourtSuperior Court of Pennsylvania

T.F. Weiss, Houston, TX, for appellant.

BEFORE: JOYCE, TODD and BOWES, JJ.

OPINION BY BOWES, J.:

¶ 1 Jessica Bramlett has appealed two decisions by the trial court, one denying her petition to compel arbitration and the other disqualifying her counsel. We affirm the order denying arbitration and reverse the order disqualifying counsel.

¶ 2 On April 22, 1999, Appellee, Vertical Resources, Inc. ("Vertical"), instituted this action against Appellant alleging that, in 1997, it made four separate loans to Appellant to fund legal expenses, that Appellant failed to repay those loans, and that she owed Vertical more than $20,000. Vertical sought repayment of those loans. In response, Appellant countered that she had invested $262,000 in a gas project that had been offered by Vertical and that the payments made by Vertical in 1997 represented interest on her investment, not loans. Appellant noted that Vertical had failed to attach to its complaint any written documents supporting the existence of a loan.

¶ 3 After discovery and other proceedings, the case was scheduled for trial. Appellant filed a motion for summary judgment and supporting brief. That motion remained pending when Appellant moved for an uncontested general continuance of the trial. The continuance was granted on September 20, 2000, when the court denied the motion for summary judgment.

¶ 4 Eleven months later, on August 27, 2001, Vertical filed a petition "to enforce judgment," alleging "On September 21, 2000, the parties in the above captioned matter reached agreement for the settlement of all claims ... wherein [Appellant] agreed to have judgment entered against her in the full amount of the claim, and agreed to a monthly payment plan." Petition to Enforce Judgment, 8/27/01, at ¶ 5. Vertical averred that Appellant had not paid in accordance with the agreement. It requested that judgment be entered against Appellant in the full amount requested in this action, $24,230.56. The petition was not answered, and the court entered an ex parte judgment against Appellant.

¶ 5 On January 2, 2002, Appellant filed a petition to open or strike the judgment and also a petition to compel arbitration, asserting the following. In July 1996, Appellant and her former husband, Jay Bramlett, invested $260,000 in an oil and gas drilling program known as the "Hawk 96." Steve Ford, the president of Vertical, was the promoter of Hawk 96 and solicited the Bramletts to make this investment. Hawk 96 was a failure from the beginning, and Mr. Ford misrepresented the possible success of the project in promotional materials. Contrary to the partnership agreement, Vertical also failed to provide production and financial information that would explain the poor results.

¶ 6 Jay Bramlett later was convicted of a criminal offense and sentenced to prison in Texas. He offered Appellant a divorce and as part of the divorce settlement, assigned his interest in Hawk 96 to her. Without notifying Appellant, Mr. Ford began to negotiate a sale of oil and gas assets, including Hawk 96, to Snyder Brothers, Inc. Mr. Ford asked Appellant to sign a release with Vertical and Mr. Ford individually in order to complete the sale to Snyder Brothers. Appellant refused to do so because Vertical never provided her with an accounting. Shortly after Appellant refused to execute the release, Mr. Ford sent her a letter dated November 9, 1998, in which he first claimed that disbursements made by Vertical to Appellant in 1997 were loans.

¶ 7 Further allegations in the petition to open judgment represent that the parties reached a tentative agreement in this matter regarding payment. Then, in June 2001, Appellant instituted an action in federal court in Texas against both Vertical and Snyder Brothers alleging breach of contract in connection with the Hawk 96 program. In retaliation, Mr. Ford resurrected this action and filed the aforementioned petition to enforce the settlement agreement purportedly reached by the parties.

¶ 8 Appellant's petition further averred that the attorney who initially represented Appellant in this action received the notification regarding the petition to enforce judgment from Vertical. The attorney assumed that he no longer represented Appellant and did not notify her of Vertical's request for judgment. Meanwhile, directly contrary to its position in this action, Vertical had represented in tax documents filed with the Internal Revenue Service ("IRS") that the sums distributed to Appellant in 1997 were payments of interest on her investment in Hawk 96. In fact, Vertical sent Appellant IRS form 1099s regarding those sums.

¶ 9 In support of her position that this action should be arbitrated, Appellant quoted the relevant contract language:

All disputes and controversies between the Parties relating to, and arising from interpretation, application, performance, or breach of this Agreement shall, at the demand of any Partner, be determined by arbitration before Three [3] Arbitrators, in Sugar Grove, Pennsylvania and pursuant to the rules of the American Arbitration Association.

Defendant's Petition to Open and Strike Judgment and to Compel Arbitration, 1/2/02, at ¶ 21. However, the partnership agreement, although referenced as an exhibit to her petition, was not attached thereto in the certified record on appeal.

¶ 10 The record indicates that in the meantime, in November and December 2001, based on the existence of the ex parte judgment, Vertical obtained $3,922.37 from Snyder Brothers that should have been paid to Appellant. The next action that the trial court undertook herein was to admit Texas counsel, Theodore F. Weiss, pro hac vice for the purpose of representing Appellant. After a January 2, 2002 hearing, the petition to open the judgment entered against Appellant was granted. The trial court did not rule upon the arbitration request. Vertical then filed a certificate of readiness. The court administrator appointed a board of arbitrators because the matter involved $25,000 or less.

¶ 11 On March 26, 2002, Vertical moved for sanctions based on the following allegations. On February 1, 2002, Mr. Weiss contacted Vertical's president, Mr. Ford, by telephone without permission from Vertical's counsel, James C. Blackman. At the time, Mr. Blackman was away from his office. Mr. Ford filed an affidavit in which he recounted his recollection of the contents of that telephone conversation. The affidavit indicates that Mr. Weiss asked Mr. Ford who was representing Vertical in the federal action in Texas and Mr. Ford provided Mr. Weiss with the name, address and telephone number of his counsel.

¶ 12 Mr. Weiss then began to ask Mr. Ford if he was going to return the $3,922.37 obtained from Appellant during the period that the judgment was in existence because if not, Mr. Weiss planned to request its return, with interest and penalties. Mr. Ford responded that he would act in accordance with his attorney's advice. The conversation then touched upon matters that involved the federal action, including drilling methods. After a one-half hour discussion involving the federal case, Mr. Weiss renewed his request that Mr. Ford return money that Vertical had obtained based on its judgment in this action. Mr. Ford again responded that he would speak with his attorney, Mr. Blackman, and act in accordance with his advice.

¶ 13 In the motion for sanctions based upon this telephone conversation, Vertical asserted that the contact by Mr. Weiss: 1) violated Rule 4.2 of the Pennsylvania Rules of Professional Conduct;1 2) involved an attempt to negotiate a settlement of this action and the pending federal action by Appellant; and 3) continued despite expressions by Mr. Ford that he should not be speaking with Mr. Weiss. Maintaining that the breach of the rules of professional conduct was severe, Vertical asked that Mr. Weiss be disqualified from representing Appellant.

¶ 14 Based on the motion to disqualify, the court issued a rule upon Appellant to show cause why the motion should not be granted. The rule was returnable on May 15, 2002.

¶ 15 On April 4, 2002, Appellant renewed her petition to compel contractual arbitration and also petitioned for a return of the nearly $4,000 collected by Vertical on the strength of the judgment that had been opened. On April 16, 2002, Appellant responded to the motion for sanctions. Appellant contended that disqualification was unnecessary under the facts and improper under the law for the following reasons.

¶ 16 On September 26, 2001, Vertical had obtained default judgment against Appellant. In reliance on the judgment, Vertical seized monthly partnership checks from Snyder Brothers for November and December 2001 that were payable to Appellant, even though it had notice of the hearing on the motion to open the judgment before it seized the December check. After the judgment was opened, Appellant strongly believed that the money taken pursuant to that judgment should be returned.

¶ 17 Accordingly, Mr. Weiss repeatedly contacted Mr. Blackman's office in order to ascertain whether Vertical voluntarily would return the money. Mr. Weiss received no response to his messages. In the meantime, the federal magistrate handling Appellant's federal action against Vertical and Snyder Brothers in Texas had issued an order requiring a scheduling conference that had to occur among counsel for the three parties in the federal action no later than February 4, 2002. A copy of the federal order is attached to the answer to the motion for sanctions. Mr. Blackman had informed Mr. Weiss that he was not going to represent Vertical in the federal matter. To comply with this order, Mr. Weiss contacted Mr. Blackman to determine who would be involved in representing Vertical in the federal action. Despite numerous...

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