Wassall v. DeCaro

• Decision Date: 29 July 1996
• Docket Number: No. 95-3531,95-3531
• Parties: Donald B. WASSALL; Populist Party National Committee; Jeff Wilkerson; Bill Chandler; Phil Chesler; Russ Hunt; The Populist Observer; Tom Parker, Appellees, v. Jeffrey R. DeCARO; O'Malley & Miles; DeCaro, Doran, Siciliano, Gallagher, Sonntag & Deblasis, Donald B. Wassall, Populist Party National Committee; Bill Chandler; Phil Chesler, Russ Hunt; The Populist Observer and Tom Parker, Appellants.
• Court: U.S. Court of Appeals — Third Circuit

Page 443

91 F.3d 443

Donald B. WASSALL; Populist Party National Committee; Jeff

Wilkerson; Bill Chandler; Phil Chesler; Russ

Hunt; The Populist Observer; Tom

Parker, Appellees, v. Jeffrey R. DeCARO; O'Malley & Miles; DeCaro, Doran,

Siciliano, Gallagher, Sonntag & Deblasis, Donald B. Wassall,

Populist Party National Committee; Bill Chandler; Phil

Chesler, Russ Hunt; The Populist Observer and Tom Parker, Appellants.

No. 95-3531.

United States Court of Appeals,

Third Circuit.

Argued April 24, 1996.

Decided July 29, 1996.

Donald B. Wassall (argued), Gibsonia, PA, for Appellants.

James A. Wood, Marianne C. Plant (argued), Israel, Wood & Puntil, Pittsburgh, PA, for Appellees Jeffrey R. DeCaro, DeCaro, Doran, Siciliano, Gallagher, Sonntag & DeBlasis.

R. Bruce Morrison, Marshall, Dennehey, Warner, Coleman & Goggin, Philadelphia, PA, Scott G. Dunlop, Marshall, Dennehey, Warner, Coleman & Goggin, Pittsburgh, Pa, for appellee O'Malley & Miles.

Before: BECKER, NYGAARD and LEWIS, Circuit Judges.

OPINION OF THE COURT

NYGAARD, Circuit Judge.

In this diversity action alleging legal malpractice, the Populist Party, its Executive Director and National Chairman, Donald P. Wassall, various other Executive Committee Members, and the Populist Observer ("plaintiffs") sue their former attorney, Jeffrey R. DeCaro, and the two law firms at which DeCaro practiced law while representing plaintiffs ("malpractice defendants"). The district court granted summary judgment for malpractice defendants, interpreting the Pennsylvania Supreme Court case Muhammad v. Strassburger, McKenna, Messer, Shilobod & Gutnick, 526 Pa. 541, 587 A.2d 1346(Pa.), cert. denied, 502 U.S. 867, 112 S.Ct. 196, 116 L.Ed.2d 156 (1991), to bar plaintiffs' claims because plaintiffs had agreed to a dismissal of their defamation action for failure to prosecute. We will reverse.

I.

In July 1991, while DeCaro was a partner at O'Malley and Miles, Wassall and the Populist Party engaged DeCaro's services to sue The Spotlight, a political newspaper, and several other defendants ("defamation defendants"), for printing negative stories about Wassall and the Populist Party. After the defamation suit was removed to federal court by the defamation defendants in October 1991, DeCaro failed to serve three defamation defendants, Mr. Piper, Mr. Tiffany, and Mr. Ryan, within the allotted 120 days. Although the court extended the time for service, DeCaro again failed to serve them.

In December 1992, DeCaro left O'Malley and formed the new firm of DeCaro, Doran Siciliano, Gallagher, Sonntag & DeBlasis, where he continued to represent plaintiffs in the defamation action. Over eighteen months after he filed the complaint, DeCaro still had not served the three defendants. Consequently, in July 1993, the court dismissed the claims as to these three defendants for lack of service.

In litigating the underlying defamation case, DeCaro's stewardship was shoddy at best. The record indicates that he missed several deadlines, misfiled pleadings, and, finally, failed to file a pretrial statement required by the magistrate judge. After DeCaro failed to file the pretrial statement, the magistrate judge held a hearing to determine if plaintiffs' defamation suit should be dismissed for failure to prosecute. At argument, the magistrate judge agreed to give DeCaro two more weeks to work toward settlement and to file the pretrial statement, but Wassall suggested that the plaintiffs' defamation claims and the defamation defendants' counterclaims be dismissed for failure to prosecute. Plaintiffs assert that they agreed to the dismissal because they "did not wish to suffer with defendants any longer and [wanted] to put a merciful end to two and a half years of malpractice...." Defamation defendants agreed to the mutual dismissals, and the magistrate judge recommended that the district court dismiss the claims and counterclaims for failure to prosecute. The district court adopted the magistrate judge's recommendation and dismissed both actions, thus ending the defamation action.

Plaintiffs then filed this legal malpractice action against DeCaro, the DeCaro firm and the O'Malley firm. Plaintiffs allege numerous acts of malpractice by DeCaro, inter alia: failing to work diligently to settle the case, which resulted in an unfavorable settlement; failing to move the case toward trial; failing to serve three of the defendants in the defamation action; failing to object to the magistrate judge's recommendations timely; failing to meet almost every deadline; failing to answer the counterclaim timely; failing to request that the court set aside default judgments; filing a motion to dismiss the counterclaim on behalf of counterclaim-defendants who had not been served, but not on behalf of those who had; failing to amend the complaint to incorporate many alleged ongoing libels; misrepresenting, repeatedly, what services he would perform for plaintiffs; failing to file a motion to dismiss the counterclaims in the case filed by defendants/counterclaim-plaintiffs and instead filing it in plaintiffs' case; misrepresenting himself as an expert in defamation litigation; failing to proceed with discovery; failing to request extension of discovery deadlines and misrepresenting to plaintiffs that he had; and failing to provide plaintiffs with filed documents. Plaintiffs were unsatisfied with DeCaro's stewardship in every aspect.

The malpractice defendants filed a motion to dismiss, which the district court denied. The court granted malpractice defendants' motion to bifurcate discovery and limit discovery to whether Muhammad barred the malpractice suit. After limited discovery, malpractice defendants filed a motion for summary judgment, which the district court granted. The district court believed that, because plaintiffs agreed in the underlying action to permit the court to dismiss for DeCaro's failure to prosecute, the dismissal constituted a settlement, and that, under Muhammad, the settlement barred the malpractice action.

II.

Plaintiffs appeal, arguing that agreeing to dismissal of the underlying defamation suit for failure to prosecute was not a "settlement," and that even if it were a settlement, this would not bar their suit. We need not resolve whether this constituted a settlement.

As a federal court sitting in diversity, we must do what we predict the Pennsylvania Supreme Court would do. See, e.g., Erie Castings Co. v. Grinding Supply, Inc., 736 F.2d 99, 100 (3d Cir.1984). In making this determination, we give proper regard to the opinions of Pennsylvania's intermediate courts. See id. at 100. The policies underlying applicable legal doctrine, current trends in the law and decisions of other courts also inform our decision. See id.

Viewing the facts in the light most favorable to plaintiffs, as we must when reviewing a grant of summary judgment, it appears that DeCaro did not negotiate and complete a settlement, frustrated efforts to have the case amicably resolved, wasted the resources of the courts by his "footdragging," and seriously impaired plaintiffs case, necessitating the agreement to have the case dismissed. We predict that, given these allegations and this record, the Pennsylvania Supreme Court would not extend its holding in Muhammad to bar this action.

A.

Applying Muhammad, the district court held that

[u]nder Pennsylvania law, a dissatisfied plaintiff may not maintain a suit for legal malpractice against his attorney following a settlement to which the plaintiff agreed.

The court erred, however, by not heeding the policy concerns expressed in Muhammad.

Indeed, we believe the district court interpreted Muhammad too broadly, ignoring subsequent opinions by the Pennsylvania Superior Court which are well-reasoned and interpret Muhammad narrowly. We are convinced that the case was meant to bar an action against an attorney who negotiates and consummates a settlement or similar agreement. We predict that the Pennsylvania Supreme Court would consider the policies enunciated in Muhammad and find that they favor allowing the plaintiffs' present action for malpractice.

B.

The Pennsylvania Supreme Court announced in Muhammad that a client who becomes dissatisfied with an attorney's settlement of an action, which the client had accepted, cannot then sue the attorney for malpractice. In Muhammad, the plaintiffs originally sued a hospital and others for medical malpractice. During settlement negotiations, the hospital offered $23,000.00 to settle the case and plaintiffs communicated their acceptance to their attorney. The court suggested that the hospital increase its offer to $26,500.00, which it did. Again, plaintiffs accepted the settlement. Later, plaintiffs informed their attorney that they were no longer satisfied with the amount of the settlement. Notwithstanding the plaintiffs' protest, the court enforced the agreement. Plaintiffs then hired new counsel and appealed, but the enforcement was affirmed on appeal. Undeterred, plaintiffs filed a malpractice suit against their trial attorney. On appeal, the Pennsylvania Supreme Court adopted a rule that important policy considerations supporting settlements barred the subsequent legal malpractice action.

Although motivated by several considerations, the encouragement of settlement was the most important motivating factor for the court's decision. It opined:

The primary reason we decide today to disallow negligence or breach of contract suits against lawyers after a settlement has been negotiated by the attorneys and accepted by the clients is that to allow them will create chaos in our civil litigation system. Lawyers would be reluctant to settle a case for fear some enterprising attorney representing a disgruntled client will find a way to sue them for something that "could have been done, but was not." We refuse to endorse a rule that will discourage settlements and increase substantially the number of legal malpractice cases. A...