Javaid v. Weiss
Filing
19
MEMORANDUM OPINION AND ORDER - Accordingly, for the reasons set forth above, IT IS HEREBY ORDERED THAT Defendants motion to dismiss (Doc. 7 ) is GRANTED without prejudice to Plaintiff filing an amended complaint within 30 days from the date of this order.To the extent that Plaintiff fails to file an amended complaint in accordance with this order, this action may be dismissed with prejudice without further notice. Signed by Magistrate Judge Martin C. Carlson on December 19, 2011. (kjn )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ASIF JAVAID,
Plaintiff
v.
ELLIOTT B. WEISS,
Defendant
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Civil No. 4:11-CV-1084
(Magistrate Judge Carlson)
MEMORANDUM OPINION AND ORDER
I.
INTRODUCTION
In this case, which he characterizes as “a professional liability action,” Plaintiff
Asif Javaid has sued Elliott B. Weiss, his former lawyer, alleging that Mr. Weiss is
liable for professional malpractice and breach of contract. It appears that Plaintiff’s
claims arose out of events which transpired between three and nine years ago: a 2002
loan transaction that resulted in 2008 in Mr. Javaid, as a guarantor on the loan, having
a confessed judgment entered against him for $865,910.53 – an amount that was later
reduced to $366,008.79, after Mr. Weiss commenced proceedings in the Court of
Common Pleas for Lycoming County in an effort to open or strike the judgment. Mr.
Weiss was engaged as Mr. Javaid’s counsel both during the original 2002 loan
transaction, and again later in 2008 when he endeavored to have the confessed
judgment set aside.
As explained below, Mr. Javaid has alleged that Mr. Weiss failed adequately
to explain the meaning and significance of a confession-of-judgment clause contained
in the 2002 loan agreement, and later, in 2008, failed to effectively represent Mr.
Javaid in proceedings that Mr. Elliott initiated in an effort to strike or open the
judgment that had been entered against Mr. Javaid following default on the loan. The
action was filed in federal court on the basis of diversity of citizenship, as Mr. Javaid
is a citizen of the state of New York and alleges damages in excess of $75,000, and
Mr. Weiss is a citizen of Pennsylvania who maintains a law practice in Williamsport,
Pennsylvania.
Defendant has moved to dismiss the complaint in its entirety pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim.
Defendant contends that Plaintiff’s claims are inadequately pled, fail under
Pennsylvania substantive law, and are otherwise time-barred. In support of its motion,
Defendant has provided not only legal argument, but also numerous documents that
Plaintiff filed in state-court proceedings relating to the loan transaction and the
subsequent judgment entered against him, which Defendants argue make absolutely
clear that Plaintiff’s claims are meritless. Defendants also urge the Court to find that
at least some claims are time-barred by the applicable statute of limitations. Plaintiff
has responded by generally arguing that his complaint is sufficient, asserting that the
2
liberal pleading rules should permit the complaint to survive, and arguing that the
Court is not permitted to consider application of the statute of limitations on a motion
to dismiss.
Upon careful consideration, and taking the allegations pleaded as true for
purposes of this opinion, we find that Plaintiff’s complaint, as currently drafted, is too
speculative, vague, and conclusory to survive Defendant’s motion to dismiss, and falls
well short of what is now required of a complaint following the Supreme Court’s
decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v.
Iqbal –U.S.–, 129 S.Ct. 1937 (2009) in order to state a claim upon which relief may
be granted. Furthermore, we conclude that Defendants have raised substantial
questions about whether some or all of the claims raised in the complaint are timebarred by the two-year statute of limitations applicable to legal malpractice claims
under Pennsylvania law.
Because of these pleading deficiencies and our conclusion that, as currently
pled, the complaint attempts to seek relief for time-barred claims, we will grant the
motion to dismiss without prejudice to Plaintiff being given a final opportunity to file
an amended complaint to address the deficiencies identified in this opinion. Thus, by
this ruling, we give the plaintiff a final opportunity to amend his claim to properly
articulate a cause of action within the period of the statute of limitations.
3
II.
FACTUAL BACKGROUND1
In 2002, Plaintiff Asif Javaid retained the legal services of attorney Elliott B.
Weiss in connection a loan transaction between ARM Hospitality, Inc. (“ARM”), as
borrower, and BLC Capital Corp. (“BMC”) as lender. In this transaction, BLC loaned
ARM $700,000, which was secured by a stock pledge from ARM’s shareholders, and
by a personal guaranty by Javaid, who at that time was ARM’s president. The express
terms of the guaranty that Javaid executed as part of this transaction authorized the
lender to confess judgment against Javaid for any unpaid part of the note.
In the complaint, Plaintiff claims that he retained Mr. Weiss to serve as his
counsel in connection with this loan transaction, and that Mr. Weiss “explicitly and
implicitly agreed to provide competent legal services to [Mr. Javaid] for all services
which he was contracted to provide.” (Compl., ¶ 6.) Plaintiff does not articulate the
precise nature and scope of the legal services that he claims Mr. Weiss was contracted
to provide, but it appears that he engaged Mr. Weiss to provide him with legal counsel
at the time the loan transaction was being entered into, and again later in 2006 and
2008 when proceedings were commenced in the Court of Common Pleas following
1
The background to this opinion is taken from allegations set forth in
Plaintiff’s complaint, as well as from documents that were originally attached to
court filings in other proceedings that Defendants have attached to their motion to
dismiss, and which have direct bearing on Plaintiff’s claims in this action.
4
an event of default under the loan and the entry of a confessed judgment against Mr.
Javaid. According to Mr. Javaid, at the time the loan transaction was entered into, Mr.
Weiss failed to explain the existence or significance of a confession of judgment
clause that was a part of the loan guaranty, and further failed to explain that as part of
the guaranty, Mr. Javaid was waiving his right to notice and a hearing upon an event
of default under the loan agreement. (Doc. 1, Compl., at ¶ 9.)
After ARM defaulted on its loan obligations, SPCP Group, Inc., the assignee
of BLC’s rights under the loan, commenced foreclosure proceedings against the real
property that secured the note. On February 1, 2008, the subject property was sold at
a sheriff’s sale to Little League Baseball, Inc. for $588,500.00. On February 6, 2008,
the Court of Common Pleas of Lycoming County entered judgment in favor of SPCP
Group, Inc. in the amount of $859,910.53. (Doc. 12, Ex. B.)
Less than one month later, on March 3, 2008, Plaintiff filed a petition to strike
or open the confessed judgment. (Doc. 12, Ex. C.) Plaintiff engaged Mr. Weiss to file
this petition on his behalf. In the petition, Plaintiff argued that the attorney’s fees
claimed by SPCP Group were unreasonably excessive; that Plaintiff was entitled to
a credit equal to the sale price of the subject property; and that the Deficiency
Judgment Act barred the SPCP Group from recovering from Plaintiff. (Id.) On April
22, 2008, the Court of Common Pleas denied the petition, but reduced the judgment
5
to include a credit in the amount of $515,675.92 resulting from the sale of the real
property that had secured the loan. (Doc. 12, Ex. D.) Plaintiff appealed to the
Pennsylvania Superior Court, which affirmed the Court of Common Pleas’s order in
an opinion issued on November 10, 2009. (Doc. 12, Ex. B.)
While Plaintiff’s appeal before the Pennsylvania Superior Court was pending,
SPCP Group took steps to enforce the judgment against Plaintiff in New York state.
Thus, on December 12, 2008, SPCP Group filed a complaint in the Supreme Court of
the State of New York, Dutchess County, seeking enforcement. (Doc. 12, Ex. E.)
Plaintiff, through New York counsel, filed a verified answer in response to the
complaint on January 29, 2009. (Doc. 12, Ex. F.) SPCP Group proceeded to move
for summary judgment on its enforcement action. (Doc. 12, Ex. G.) Plaintiff, who
was at this time apparently represented by other counsel in New York, did not
respond to this motion, and on July 22, 2009, judgment was entered against Plaintiff
in the amount of $366,008.79, plus costs and interest dating from December 12, 2008.
(Doc. 12, Ex. H.)
Plaintiff commenced the instant action in this Court on June 6, 2011. (Doc. 1.)
Defendant filed the instant motion to dismiss on August 19, 2011, and after being
granted an enlargement of time, filed a brief in support of the motion on September
23, 2011. (Docs. 7, 12.) Plaintiff filed a brief in opposition to the motion on October
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10, 2011, to which Defendant replied on October 21, 2011. (Docs. 13, 14.) The
motion is now ripe for disposition, and for the reasons that follow it will be granted.
III.
STANDARD OF REVIEW
Rule 12(b)(6) provides that a complaint should be dismissed for “failure to state
a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). With respect to
this benchmark standard for assessing the legal sufficiency of a complaint, the United
States Court of Appeals for the Third Circuit has recently described the evolving
standards governing pleading practice in federal court, stating that:
Standards of pleading have been in the forefront of jurisprudence in
recent years. Beginning with the Supreme Court's opinion in Bell
Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) continuing with our
opinion in Phillips [v. County of Allegheny, 515 F.3d 224, 230 (3d Cir.
2008)]and culminating recently with the Supreme Court's decision in
Ashcroft v. Iqbal –U.S.–, 129 S.Ct. 1937 (2009) pleading standards have
seemingly shifted from simple notice pleading to a more heightened
form of pleading, requiring a plaintiff to plead more than the possibility
of relief to survive a motion to dismiss.
Fowler v. UPMC Shadyside, 578 F.3d 203, 209-10 (3d Cir. 2009).
In considering whether a complaint fails to state a claim upon which relief may
be granted, the Court must accept as true all allegations in the complaint and all
reasonable inferences that can be drawn therefrom are to be construed in the light
most favorable to the plaintiff. Jordan v. Fox Rothschild, O’Brien & Frankel, Inc., 20
F.3d 1250, 1261 (3d Cir. 1994). However, a court “need not credit a complaint’s bald
7
assertions or legal conclusions when deciding a motion to dismiss.” Morse v. Lower
Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Additionally a court need not
“assume that a ... plaintiff can prove facts that the ... plaintiff has not alleged.”
Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459
U.S. 519, 526 (1983). As the Supreme Court held in Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007), in order to state a valid cause of action a plaintiff must provide
some factual grounds for relief which “requires more than labels and conclusions, and
a formulaic recitation of the elements of a cause of actions will not do.” Id. at 555.
“Factual allegations must be enough to raise a right to relief above the speculative
level.” Id. In keeping with the principles of Twombly, the Supreme Court has
underscored that a trial court must assess whether a complaint states facts upon which
relief can be granted when ruling on a motion to dismiss. In Ashcroft v. Iqbal, __U.S.
__, 129 S.Ct. at 1937 (2009), the Supreme Court held that, when considering a motion
to dismiss, a court should “begin by identifying pleadings that, because they are no
more than conclusions, are not entitled to the assumption of truth.” Id. at 1950.
According to the Supreme Court, “[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.” Id. at 1949. Rather,
in conducting a review of the adequacy of complaint, the Supreme Court has advised
trial courts that they must:
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[B]egin by identifying pleadings that because they are no more than
conclusions are not entitled to the assumption of truth. While legal
conclusions can provide the framework of a complaint, they must be
supported by factual allegations. When there are well-pleaded factual
allegations, a court should assume their veracity and then determine
whether they plausibly give rise to an entitlement to relief.
Id. at 1950.
Thus, following Twombly and Iqbal a well-pleaded complaint must contain
more than mere legal labels and conclusions. Rather, a complaint must recite factual
allegations sufficient to raise the plaintiff’s claimed right to relief beyond the level
of mere speculation. As the United States Court of Appeals for the Third Circuit has
stated:
[A]fter Iqbal, when presented with a motion to dismiss for failure to state
a claim, district courts should conduct a two-part analysis. First, the
factual and legal elements of a claim should be separated. The District
Court must accept all of the complaint's well-pleaded facts as true, but
may disregard any legal conclusions. Second, a District Court must then
determine whether the facts alleged in the complaint are sufficient to
show that the plaintiff has a “plausible claim for relief.” In other words,
a complaint must do more than allege the plaintiff's entitlement to relief.
A complaint has to “show” such an entitlement with its facts.
Fowler, 578 F.3d at 210-11.
“To decide a motion to dismiss, courts generally consider only the allegations
contained in the complaint, exhibits attached to the complaint and matters of public
record.” Pension Benefit Guaranty Corp. v. White Consol. Indus., Inc., 998 F.2d
9
1192, 1196 (3d Cir. 1993) (citations omitted); see also Sands v. McCormick, 502 F.3d
263, 268 (3d Cir. 2007). Thus, the court may 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] document[s].” Pension Benefit, 998 F.2d
at 1196. In addition, “documents whose contents are alleged in 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) (citation omitted); see also U.S. Express Lines, Ltd. v. Higgins,
281 F.3d 383, 388 (3d Cir. 2002) (“Although a district court may not consider matters
extraneous to the pleadings, a document integral to or explicitly relied upon in the
complaint may be considered without converting the motion to dismiss into one for
summary judgment.”). However, a court may not rely on other parts of the record in
rendering a decision on a motion to dismiss. Jordan, 20 F.3d at 1261.
As will be discussed below, guided by the foregoing considerations, we find
that Plaintiff’s complaint falls short of what these pleading standards require. Indeed,
Plaintiff relies almost exclusively on allegations that amount to little more than
“[t]hreadbare recitals of the elements of a cause of action, supported by mere
conclusory statements,” and he includes almost no factual allegations of any substance
of any kind to support his legal theories. However, following Iqbal and Twombly, to
10
pass muster under Rule 8 a complaint must “describe ‘enough facts to raise a
reasonable expectation that discovery will reveal evidence of’ each necessary element
of the claims alleged” in the complaint. Santiago v. Warminster Twp., 629 F.3d 121,
123 (3d Cir. 2010). Judged against these pleading standards, we find, as a threshold
matter, that Plaintiff has failed adequately to plead a cause of action for legal
malpractice within the period of the statute of limitations.
IV.
DISCUSSION
A.
The Nature of Plaintiff’s Legal Malpractice Claims
In the complaint, Plaintiff makes clear that “[t]his is a professional liability
action,” (Doc. 1, ¶ 3), and no claims are asserted in the complaint other than claims
for professional malpractice. Plaintiff has couched his malpractice claims as arising
either in tort or contract. However, as explained below, we do not find that Plaintiff
has adequately pled a separate claim for breach of contract, but has instead simply
repackaged his allegations of negligence and recast them as a breach of contract claim.
Upon consideration, we find that in its current form, Plaintiff’s complaint fails
adequately to plead a separate claim sounding in contract.
The Pennsylvania Superior Court has explained that in professional malpractice
actions, clients have a “choice” to sue their attorney under trespass or assumpsit, and
both theories may be pursued in the same action. Duke & Co. v. Anderson, 418 A.2d
11
613 (Pa. Super. Ct. 1980); see also Stacey v. City of Hermitage, No. 2:02-cv-1911,
2008 U.S. Dist. LEXIS 29359, *11 (W.D. Pa. April 7, 2008) (recognizing both
theories of liability in the legal malpractice context). The trespass theory is based on
a failure to exercise the requisite standard of care, whereas an assumpsit action is
predicated on the theory that a lawyer’s failure to follow instructions constituted a
breach of contract. Duke & Co., 418 A.2d at 616. However, where the claims
brought against a lawyer appear to be essentially grounded in a theory of negligence,
the claims will be evaluated in accordance with tort principles for purposes of
addressing the pending motion to dismiss.
This point was aptly made in Kohn, Savett, Klein & Graf, P.C. v. Cohen, 1990
U.S. Dist. LEXIS 4150, 1990 WL 42244 *5 (E.D. Pa. 1990) (citations omitted), where
the district court explained the relationship between these two theories:
Of course, virtually all legal representation occurs within the scope of a
contract between lawyer and client. This does not, however, mean that
the contractual limitations period automatically applies. Rather, the
courts have looked to the terms of the contract allegedly breached and to
the nature of the injury asserted. If the damages requested stem from
negligence or other tortious misconduct, then the action sounds in tort
and the two-year statute of limitations applies. If the damages arise from
a breach of an explicit contractual term, and if the request is only for
compensatory damages appropriate in contract, then the action sounds
in contract.
In Cohen, the court held that because the malpractice claim was essentially grounded
in a theory of negligence, it sounded in tort. Id. Other courts have similarly treated
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legal malpractice claims that a plaintiff has alleged to be contractual, but where the
allegations actually show that the plaintiff is actually alleging negligence. See Stacey
v. City of Hermitage, 2008 U.S. Dist. LEXIS 29359, *21 (W.D. Pa. April 7, 2008)
(“The gravamen of the Amended Complaint is that Defendants failed to exercise the
appropriate standard of care and Plaintiff cannot repackage the claim under an
assumpsit theory to avoid the obligation to prove a ‘case within a case’ or to avoid the
two-year statute of limitations.”); IBEW Local 380 Pension Fun v. Buck Consultants,
No. 03-4932, 2008 U.S. Dist. LEXIS 7001, *25 (E.D. Pa. Jan. 30, 2008) (“”Failure
to perform a service with the requisite level of professional care typically constitutes
a claim of negligence, not breach of contract.”) (actuarial liability);2 Storm v. Golden,
538 A.2d 61, 65 (Pa. Super. Ct. 1988) (“appellant’s assumpsit claim is not a true
contract claim, but sounds in negligence by alleging [that attorney] failed to exercise
the appropriate standard of care”). We find the analysis of these cases to be
persuasive and entirely applicable to the claims that Plaintiff has actually brought in
this action.
Importantly in this case, the foregoing cases have relevance with respect to the
statute of limitations on malpractice actions under Pennsylvania state law. As
2
In IBEW, the plaintiff acknowledged that its contract-based claim for
malpractice merely restated its negligence claim, and therefore withdrew the
contract claim. Id.
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discussed below, by statute legal malpractice claims sounding in tort are subject to a
two-year statute of limitations. Courts have found that plaintiffs “may not repackage
a negligence-based malpractice claim under an assumpsit theory to avoid the statute
of limitations.” Stacey, 2008 U.S. Dist. LEXIS 29359, at *14. As another federal
court explained:
One important limitation on pleading malpractice claims in Pennsylvania
under a contract theory, however, is that a malpractice plaintiff may not
sidestep the two-year limitation on tort actions by pleading tort claims
as breaches of contract . . . . [I]f allegations of a contractual relationship
between plaintiff and defendants, and of an express or implied term of
the contract establishing an obligation to exercise reasonable care, were
to suffice to state a breach-of-contract malpractice case, the two year
limitations statute for tort actions would be a dead letter in . . .
malpractice cases.
Sherman Indus., Inc. v. Goldhammer, 683 F. Supp. 502, 506 (E.D. Pa. 1988) (citations
omitted).
In this case, we find that regardless of the labels he affixes to his claims,
Plaintiff is proceeding in this professional liability action under the theory that his
lawyer failed to exercise the appropriate duty of care towards him, both in his original
representation of Mr. Javaid in connection with the loan transaction and guaranty
entered into in 2002, and later when Mr. Javaid was attempting to open or strike the
confession of judgment entered against him in the Court of Common Pleas for
Lycoming County in 2008. Plaintiff has not attached an engagement letter or other
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contract to the complaint, and he has supplied only the sparest of allegations regarding
any agreement that he may have had with Mr. Weiss regarding his representation.
Although he has attempted to shore up his contract theory in his brief opposing
Defendant’s motion to dismiss, It is well-settled that a plaintiff cannot amend a
complaint through the filing of a brief, or through arguments set forth in a brief
opposing a dispositive motion. Indeed, "[i]t is axiomatic that the complaint may not
be amended by the briefs in opposition to a motion to dismiss." Pennsylvania ex rel.
Zimmerman v. Pepsico, Inc., 836 F.2d 173, 181 (3d Cir. 1988) (quoting Car Carriers,
Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir. 1984)); cf. Frederico v. Home
Depot, 507 F.3d 188, 202 (3d Cir. 2007) ("[W]e do not consider after-the-fact
allegations in determining the sufficiency of [a] complaint under Rules 9(b) and
12(b)(6)."). Therefore, we are bound to consider only the allegations actually set forth
in the complaint, and upon consideration we conclude that these claims, in their
present form, do not set forth a distinct claim for breach of contract.
In particular, Plaintiff claims that he instructed his lawyer to assert arguments
in the Court of Common Pleas in an effort to open or set aside a judgment that had
been entered against Mr. Javaid, and that his lawyer failed unreasonably to make
unspecified arguments that Plaintiff claims would have given him certain rights or
may even have led to the dissolution of the judgment. Out of this general allegation,
15
Plaintiff endeavors to set forth two distinct legal claims, one for breach of contract and
one sounding in tort. Nevertheless, review of these claims as they are actually pled
in the complaint shows that they are substantially identical, and the complaint is bereft
of distinct factual allegations to support distinct legal claims.
Indeed, in his claim for “Legal Malpractice (Assumpsit),” Plaintiff claims only
that Mr. Weiss “implicitly and explicitly agreed to represent Plaintiff competently and
to the best of his abilities” in accordance with the rules and standards governing
lawyers in Pennsylvania, and that Mr. Weiss breached this “contractual engagement[]”
by “fail[ing] to raise and/or pursue the arguments noted above, in violation of the rules
and standards governing attorneys in the Commonwealth of Pennsylvania.” (Compl.
¶¶ 30, 31.) Plaintiff’s claims for “Legal Malpractice (Trespass)” are substantially the
same. (Compl. ¶¶ 32-36.) Plaintiff’s own generic allegations therefore indicate that
he is essentially bringing the same claims under two separate theories, but based upon
the same essential factual allegations. We therefore will consider Plaintiff’s claims
together, rather than address them separately as distinct contract and tort claims.3
B.
Plaintiff’s Allegations Are Insufficient to Support a Claim for Legal
3
Our findings with respect to this issue, and our treatment of the claims in
this fashion should not be interpreted as a ruling that prevents Plaintiff from filing
an amended complaint more adequately pleading these claims separately in an
amended complaint, provided he reasonably believes that he has a legitimate legal
basis for bringing claims under either or both theories.
16
Malpractice Under Pennsylvania Law, and Fall Short of the
Pleading Standards Applicable in Federal Court.
As a federal court sitting in diversity, we must apply Pennsylvania substantive
law to Plaintiff’s legal malpractice claims. See Erie R.R. v. Tompkins, 304 U.S. 64,
78 (1938); Nat’l Grange Mut. Ins. Co. v. Goldstein, Heslop, Steel, Clapper, Oswalt
& Stoehr, 142 F. App’x 117 (3d Cir. 2005) (applying Erie to legal malpractice claims
under Pennsylvania law). In order to prevail on a claim of legal malpractice under
Pennsylvania law, a plaintiff most establish the following elements: “1) employment
of the attorney or other basis for duty; 2) the failure of the attorney to exercise
ordinary skill and knowledge; and 3) that such negligence was the proximate cause
of damage to the plaintiff.” Kituskie v. Corbman, 714 A.2d 1027, 1029 (Pa. 1998)
(quoting Rizzo v. Haines, 555 A.2d 58, 65 (Pa. 1989)). Moreover, “[a]n essential
element to this cause of action is proof of actual loss rather than a breach of
professional duty causing only nominal damages, speculative harm or the threat of
future harm.” Kituskie, 714 A.2d at 1030.
Beyond showing that the defendant lawyer’s representation was deficient, “a
legal malpractice action in Pennsylvania requires the plaintiff to prove that he had a
viable cause of action against the party he wished to sue in the underlying case.” Id.
Stated differently, “a plaintiff must prove a case within a case since he must initially
establish by a preponderance of the evidence that he would have [prevailed] in the
17
underlying action.,” id., before reaching the attorney’s alleged failure to exercise
ordinary skill and knowledge. Id. Thus, “[i]t is only after the plaintiff proves he
would have recovered a judgment in the underlying action that the plaintiff can
proceed with proof that the attorney he engaged to prosecute or defend the underlying
action was negligent . . . .” Id.
Defendant initially argues that following Twombly and Iqbal, Plaintiff’s
complaint simply falls short of what is required at the pleading stage to survive the
pending motion to dismiss.
Defendant characterizes Plaintiff’s complaint as
conclusory and vague, and essentially predicated on a very generic claim that had Mr.
Weiss done something differently in the state court litigation, Mr. Javaid would have
obtained “substantial rights,” (Doc. 1, ¶ 26), or somehow avoided having judgment
entered against him. Defendant insists that such allegations are insufficient to state
a claim for malpractice, or are otherwise too vague to satisfy the federal pleading
standards.
In response, Plaintiff emphasizes that “[w]hat Plaintiff clearly complains about
is Elliott Weiss’ failure to make an appropriate challenge to the entry of the Judgment
against Asif Javaid based upon Choice of Law principles.” (Doc. 13, at 7.) With the
complaint appropriately clarified in this way, we agree with Defendant that the
complaint lacks sufficient allegations to support a claim for legal malpractice.
18
Reading the complaint in the light most favorable to Mr. Javaid, we find that
Plaintiff has merely alleged that he directed his lawyer to move to open or strike the
judgment on the basis that Mr. Javaid had not originally agreed to the confession of
judgment clause itself in a knowing, intelligent or voluntary manner, and to assert an
entirely unspecified “choice of law” argument that Plaintiff suggests without further
support might have had relevance under New York law, and which might have
resulted in Plaintiff being granted “substantial rights”. (Doc. 1, ¶¶ 19, 20, 21.)
Plaintiff further complains that Mr. Weiss either failed to make these arguments, or
otherwise abandoned them during litigation. (Id. ¶ 21.) Plaintiff also claims that Mr.
Weiss failed to inform him about the Superior Court’s decision on appeal upholding
the decision of the Court of Common Pleas denying the petition to open or strike, and
failed to provide this information to Plaintiff until sometime after November 10, 2009,
when Plaintiff’s lawyer in New York demanded a copy.4 (Id. ¶ 22-23.) Finally,
4
We pause to note that upon review of documents that Defendant attached
to his brief, we find this allegation very difficult to credit, even on a motion to
dismiss. Defendant has submitted a copy of the verified petition that Mr. Weiss
filed on Mr. Javaid’s behalf in the Court of Common Pleas on March 3, 2008.
(Doc. 12, Ex. B.) Notably, it appears that Mr. Javaid verified the allegations made
in this petition, “certify[ing] that the facts set forth in the foregoing Petition are
true, correct and accurate to the best of [his] knowledge, information and belief.”
(Id.) While we do not find it necessary to rely upon the truth of this document in
order to resolve the pending motion, we do note that it is difficult to see how Mr.
Javaid can claim that he was unaware of the allegations made, or not made, in a
petition that he appears to have verified before it was filed. We provide further
19
Plaintiff claims he instructed Mr. Weiss to pursue an appeal to the Pennsylvania
Supreme Court, but Mr. Weiss failed to do so. (Id. ¶ 24.) Plaintiff claims that it was
not until he obtained a copy of the Superior Court’s adverse decision that he became
aware that Mr. Weiss had not pursued the claims that he had been instructed to bring
in the Court of Common Pleas. (Id. ¶ 25.) Plaintiff also alleges that he did not
knowingly, intelligently, or voluntarily agree to the confession of judgment clause as
part of his guarantee of the 2002 loan agreement. (Id. ¶ 26.) Plaintiff speculates in
conclusory fashion that this alleged fact might have prevented the judgment from
having been entered against him under New York law, which he claims should have
governed the validity of the guaranty agreement. (Id.) In addition, Plaintiff claims
that had Mr. Weiss argued these points, as he was instructed to do, Plaintiff would
have prevailed and the judgment would not have been entered against him. (Id.)
Defendant dismisses these arguments, asserting that they are nothing more than
rank speculation and impermissible second-guessing. Indeed, Defendant argues that
under Pennsylvania law, legal malpractice claims can not be based upon raw
conjecture about what might have happened if counsel had employed a different
strategy, or presented a different theory of relief, in court proceedings. Even more
discussion about the documents Defendant has submitted to the Court, and their
potential bearing upon Plaintiff’s amended complaint, in footnote 5, infra.
20
fundamentally, however, Defendant argues persuasively that Plaintiff’s very spare
allegations simply are inadequate to state a claim for “legal malpractice” under the
Twombly and Iqbal pleading standards. Considering the allegations summarized
above, we agree that Plaintiff’s complaint is improperly long on legal conclusions and
vague assertions, and far too short on plausible factual allegations necessary to
support a cause of action.
Our findings in this regard are underscored by the fact that there is no dispute
that Mr. Weiss did, in fact, file a petition on Mr. Javaid’s behalf that had the result of
reducing by more than one half-million dollars the amount of the judgment that had
been entered against him. Thus, despite this manifestly positive outcome of the legal
proceedings that Mr. Weiss prosecuted on Plaintiff’s behalf, Plaintiff claims that more
still should have been done, and that Mr. Weiss’s failure to do more constitutes legal
malpractice. Among the problems we find with Plaintiff’s position as currently
pleaded is that the allegations are speculative, vague, and conclusory. Nowhere in the
complaint does Plaintiff explain what legal arguments could reasonably have been
asserted in the Court of Common Pleas, and he persists in alleging that some
unspecified provision of New York law may have saved him from owing anything on
21
the guaranty that he himself signed in 2002.5
5
We note that the Defendant has also submitted a number of documents that
were apparently attached to court filings in the Court of Common Pleas bearing
Mr. Javaid’s signature, including copies of the guaranty agreement that Mr. Javaid
appears to have executed, which itself included a special acknowledgment form
that Mr. Javaid appears to have initialed indicating his understanding of the very
terms that he now says Mr. Weiss should have argued were not knowingly,
intelligently, and voluntarily entered into. (Doc. 12, Exhibits.)
Although Plaintiff has not expressly disavowed these documents, Plaintiff’s
counsel contends that he had insufficient opportunity to review all of these
materials prior to commencing the action, and he argues he is therefore unable to
“admit anything beyond” the fact that Plaintiff guaranteed ARM’s loan in 2002.
(Doc. 13, at 3.) Because Plaintiff has seemed to raise some question about the
potential veracity of these materials, we decline to rely upon their truth for
purposes of this opinion. However, now that Plaintiff’s counsel has
unquestionably been made aware of these materials, and their obvious significance
to the claims in this case, it is expected that in an amended complaint Mr. Javaid
will take care to make allegations that have a legitimate factual basis that have
been adequately investigated by counsel.
In this regard, we emphasize that in the original complaint Mr. Javaid seems
to be contending that he unknowingly or involuntarily entered into a guaranty of a
substantial loan agreement, and that Mr. Weiss failed to counsel him adequately in
2002 and failed in 2008 to argue that the judgment should be set aside because the
guaranty was not entered into knowingly or voluntarily. In stark contrast,
Defendant has filed copies of loan documents that appear to show Mr. Javaid
expressly acknowledged that he understood exactly what he was doing when he
executed the guaranty. (Doc. 12, Ex. A, Disclosure For Confession of Judgment)
(in which the initials “AJ” appear under a representation that the signatory, inter
alia, “knowingly, understandingly and voluntarily [is] waiving [his] rights to resist
the entry of judgment against [him] at the courthouse” and that he understands the
guaranty contains a confession of judgment clause). Thus, while we credit
counsel’s representation that when he filed the original complaint he had not had
the benefit of reviewing “the entire file,” (Doc. 13, at 3), he has now been placed
on notice of additional information that is acutely relevant to Plaintiff’s claims and
22
Furthermore, we find that the complaint fails to set forth allegations from which
Plaintiff might be able to prove that the damages he alleges were caused by Mr.
Weiss’s failure to raise certain unspecified legal arguments.
Again, under
Pennsylvania law a plaintiff must prove, inter alia, that his attorney’s alleged
negligence was the “proximate cause of damage to the plaintiff.” Kituskie v.
Corbman, 714 A.2d 1027, 1029 (Pa. 1998) (quoting Rizzo v. Haines, 555 A.2d 58, 65
(Pa. 1989)). Moreover, “[a]n essential element to this cause of action is proof of
actual loss rather than a breach of professional duty causing only nominal damages,
speculative harm or the threat of future harm.” Kituskie, 714 A.2d at 1030. In this
case, Plaintiff has failed to allege well-pleaded facts which sufficiently allege that Mr.
theories in this case, and we remind him that Rule 11 of the Federal Rules of Civil
Procedure provides that
“[b]y presenting to the court a pleading . . . an attorney . .
. certifies to the best of the person’s knowledge,
information, and belief, formed after an inquiry reasonable
under the circumstances: . . . (3) the factual contentions
have evidentiary support or, if specifically so identified,
will likely have evidentiary support after a reasonably
opportunity for further investigation or discovery . . . .”
Fed. R. Civ. P. 11(b)(3).
Our ruling here today will give the Plaintiff an ample opportunity to meet these
pleadings standards in a fashion that comports with Rule 11's requirements in the face
of what are, thus far, uncontested records.
23
Weiss could be considered the proximate cause of actual loss to the plaintiff. To the
contrary, the pleadings and other documents that have been submitted indicate only
that the source of Plaintiff’s damages – the confession of judgment entered in the
Court of Common Pleas, and later enforced in New York state – were directly caused
by ARM’s default on its loan obligations, which Plaintiff had previously guaranteed.
Plaintiff’s theory seems to be that if Mr. Weiss had just made one or more
additional unspecified arguments, he might have obtained additional rights for
Plaintiff, or might have had the judgment set aside entirely. This unadorned allegation
is made without any well-pleaded factual support and, as pleaded, simply does not
“describe ‘enough facts to raise a reasonable expectation that discovery will reveal
evidence of’ each necessary element of the claims alleged” in the complaint. Santiago
v. Warminster Twp., 629 F.3d 121, 123 (3d Cir. 2010). We are therefore unable to
find that such a conjectural assertion is sufficient to plead that Mr. Weiss’s
representation was the proximate cause of Plaintiff’s loss, particularly following a
representation that resulted in Plaintiff owing more than $500,000 less than he had
before Mr. Weiss petitioned to reduce the judgment.
Thus, we find that Plaintiff’s complaint, as currently drafted, is subject to
dismissal for failure to state a claim because it does not sufficiently allege a plausible
cause of action of legal malpractice under Pennsylvania law, and fails to conform with
24
the pleading requirements under Rule 8 of the Federal Rules of Civil Procedure, as
clarified by the Supreme Court in Twombly and Iqbal.
B.
Statute of Limitations
In addition, Defendant has asserted that Plaintiff’s negligence claims relating
to Mr. Weiss’s alleged failure to raise certain arguments in the Court of Common
Pleas in February 2008 are now time-barred. Relying on Pennsylvania law, Plaintiff
asserts that the Court is not permitted to consider the statute of limitations on a motion
to dismiss. Plaintiff is wrong.
In the Third Circuit, district courts may consider the application of the statute
of limitations where the complaint demonstrates that the claims are untimely. See
Robinson v. Johnson, 313 F.3d 128, 135 (3d Cir. 2002); Rycoline Prods, Inc. v. C&W
Unlimited, 109 F.3d 883, 886 (3d Cir. 1997) (affirmative defense must be apparent
on the face of the complaint to be subject to a Rule 12(b)(6) motion); Oshiver v.
Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1385 n.1 (3d Cir. 1994) (“While
the language of Fed. R. Civ. P. 8(c) indicates that a statute of limitations defense
cannot be used in the context of Rule 12(b)(6) motion to dismiss, an exception is made
where the complaint facially shows noncompliance with the limitations period and the
affirmative defense clearly appears on the face of the pleading.”). Thus, in cases
where application of the statute of limitations is obvious from the allegations in the
25
complaint, and not reasonably susceptible to dispute, a court may reach the issue of
timeliness on a motion to dismiss.
Pennsylvania imposes a two-year statute of limitations on tortious conduct,
including legal malpractice actions. 42 Pa. Const. Stat. Ann. § 5524. “Pennsylvania
favors strict application of statutes of limitations.” Knopick v. Connelly, 639 F.3d
600, 606 (3d Cir. 2011) (citing Glenbrook Leasing Co. v. Beausang, 839 A.2d 437,
441 (Pa. Super. Ct. 2003)). “Whether a statute has run on a claim is usually a question
of law for the trial judge, but where the issue involves a factual determination, the
determination is for the jury.” Knopick, 639 F.3d at 607 (citations omitted).
In a case addressing the event that triggers the statute of limitations in the
context of a legal malpractice action, the Third Circuit summarized as follows:
The trigger for the accrual of a legal malpractice action is not the
realization of actual loss, but the occurrence of a breach of duty.
Wachovia Bank, N.A. v. Ferretti, 935 A.2d 565, 572, 2007 PA Super 320
(Pa. Super. Ct. 2007). Under the occurrence rule, “the statutory period
commences upon the happening of the alleged breach of duty.” Id. at
572 (quoting Robbins & Seventko Orthopedic Surgeons, Inc. v.
Geisenberger, 449 Pa. Super. 367, 674 A.2d 244, 246-47 (Pa. Super. Ct.
1996)). Where a plaintiff could not reasonably have discovered his injury
or its cause, however, Pennsylvania courts have applied the discovery
rule to toll the statute of limitations. Wachovia, 935 A.2d at 572-74
(citing Pocono Int'l Raceway v. Pocono Produce, Inc., 503 Pa. 80, 468
A.2d 468, 471 (Pa. 1983)). Where the discovery rule does apply, the
two-year period on legal malpractice actions begins to run where the
plaintiff knew or in the exercise of reasonable diligence should have
known of the injury and its cause. Crouse v. Cyclops Indus., 560 Pa.
394, 745 A.2d 606, 611 (Pa. 2000).
26
Id. Although it is true that the Third Circuit has held that Pennsylvania law recognizes
an exception to the occurrence rule in legal malpractice cases known as the “discovery
rule,” which applies “when the injured party is unable, despite the exercise of
diligence, to know of his injury or its cause,” we are unable to find this exception
applicable in this case. Id. at 609 (footnote omitted). Where applicable, “the
discovery rule tolls the running of the statute of limitations until a plaintiff is put in
a position to discover the injury and its cause, either through inquiry or retention of
a new lawyer.” Id. Even in such a case, however, “[k]nowledge may also be imputed
to plaintiffs when an adverse action is taken against them, be it through a court order
or through a third party action, thus initiating the running of the statute of limitations
at that time.” Id.
Plaintiff’s claims appear to be largely predicated on the actions that Mr. Weiss
took in the Court of Common Pleas in early March 2008, when he filed a petition
seeking to open or strike the confessed judgment that had been entered against Mr.
Javaid, and Mr. Weiss’ prior representation of Mr. Javaid in 2002 when these
guarantees were executed. As noted above, Defendant has filed with the Court a copy
of court records, including the verification that accompanied the petition, and it
appears to show that Mr. Javaid verified the petition and its claims on February 28,
2008. In considering a motion to dismiss we may “consider . . . the allegations
27
contained in the complaint, exhibits attached to the complaint and matters of public
record .” Pension Ben. Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192,
1196 (3d Cir. 1993)(citations omitted). Such matters of public record may include “an
undisputedly authentic document that a defendant attaches as an exhibit to a motion
to dismiss if the plaintiff's claims are based on the document.” Id. (citations omitted)
Here we find that, at present, there is no genuine dispute that these documents,
taken from the court records of the underlying case in which Javaid alleges that there
has been legal malpractice, are both authentic and form part of the basis of the
plaintiff’s claim. Therefore, they are properly considered by us at this stage of
proceedings, and based upon this verification attached to a petition that his lawyer
filed in state court, it would appear that Mr. Javaid was representing to the Court of
Common Pleas his awareness of the arguments that Mr. Weiss had made before that
tribunal – as well as the absence of the “choice of law” arguments that Plaintiff
suggests should have been made in those proceedings, but were not. Based on this
verification, without further well-pleaded facts in the Plaintiff’s complaint it is
difficult to understand Plaintiff’s bald allegation that he was entirely unaware of Mr.
Weiss’s arguments before the Court of Common Pleas until sometime in November
2009, when his New York counsel demanded copies of certain documents from Mr.
Weiss.
28
In addition, we observe that on December 12, 2008, SPCP Group filed a
complaint against Mr. Javaid in Dutchess County, New York, in which SPCP Group
made a number of specific allegations about the procedural history in the Lycoming
County litigation. (Doc. 12, Ex. E.) Plaintiff, through his New York counsel,
answered this complaint on January 29, 2009 – and, once again, Mr. Javaid appears
to have verified this answer. (Doc. 12, Ex. F.) Thus, any amended complaint in this
action should also plead facts which show how, in the face of this second verification
and apparent representation by Mr. Javaid, the Plaintiff can claim that he remained
unaware about the Pennsylvania litigation until sometime in November 2009.
Likewise, to the extent Plaintiff is somehow attempting to fold into this
litigation a claim that Mr. Weiss was negligent for failing to counsel him about the
meaning and import of the guaranty he entered into in 2002, Defendant has offered
documents which on their face appear to contradict this claim and call out for further
well-pleaded facts to support the Plaintiff’s claims. In particular, Defendant has
submitted a document that appears to reflect that Mr. Javaid acknowledged that
“counsel of Guarantor’s own choosing has advised Guarantor in the negotiation,
execution and delivery of this Guaranty . . . .” (Doc. 12, Ex. A.) Additionally, the
parties included as part of the loan documents a Disclosure of Confession of Judgment
form that appears to bear Mr. Javaid’s initials acknowledging and agreeing to the
29
terms of the guaranty, and representing that he was knowingly and voluntarily
accepting the terms of the guaranty and the confession of judgment clause that was
included with the agreement.
Taken together, these documents call for the recitation of some further wellpleaded facts to sustain the Plaintiff’s otherwise unsupported insistence in this action
that he was unaware of Mr. Weiss’s alleged shortcomings until November 2009.
Instead, these documents – individually and collectively – appear to show that
Plaintiff was on notice of Mr. Weiss’s professional conduct at the time of the loan
agreement in 2002, during the underlying Pennsylvania litigation in March 2008, and
during the New York litigation in January 2009 – well over two years before he
commenced this action in June 2011.
In the face of this presently undisputed documentary evidence– which consists
of “matters of public record ” along with a “document that a defendant attaches as an
exhibit to a motion to dismiss [where] the plaintiff's claims are based on the
document,” Pension Ben. Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d
1192, 1196 (3d Cir. 1993)(citations omitted)–we find that, in the absence of further
well-pleaded facts, the statute of limitations may ultimately preclude many or all of
the claims in this lawsuit. Therefore, to the extent that Plaintiff continues to believe
that this lawsuit has been timely filed, it is incumbent upon him to include additional
30
well-pleaded factual allegations in his amended complaint to support such a position.6
V.
ORDER
Accordingly, for the reasons set forth above, IT IS HEREBY ORDERED
THAT Defendant’s motion to dismiss (Doc. 7) is GRANTED without prejudice to
Plaintiff filing an amended complaint within 30 days from the date of this order.
To the extent that Plaintiff fails to file an amended complaint in accordance
with this order, this action may be dismissed with prejudice without further notice.
/s/ Martin C. Carlson
Martin C. Carlson
United States Magistrate Judge
Dated: December 19th , 2011
6
We recognize that the statute of limitations is an affirmative defense, and
one we would expect that Defendant to assert again upon the filing of an amended
complaint. Because we believe it likely that such a defense will be raised, and
because this Court clearly may consider the statute of limitations on a motion that
may be filed in response to the amended complaint, Plaintiff would do well to
include factual allegations that bear on the issue of timeliness to any claims that
might be asserted in his amended complaint.
31
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