Simons v. Royer Cooper Cohen Braunfeld, L.L.C.

587 F.Supp.3d 209

Alan SIMONS, Plaintiff,

v.ROYER COOPER COHEN BRAUNFELD, L.L.C., et al., Defendants.

CIVIL ACTION NO. 21-129

United States District Court, E.D. Pennsylvania.

Filed February 28, 2022

Andrew J. Defalco, Paul R. Rosen, Spector Gadon & Rosen, PC, Philadelphia, PA, for Plaintiff.

Howard M. Klein, Christopher Lucca, Conrad O'Brien PC, Philadelphia, PA, for Defendant Royer Cooper Cohen Braunfeld, L.L.C.

Andrew Hope, Craig Douglas Mills, Buchanan Ingersoll & Rooney PC, Philadelphia, PA, for Defendant Buchanan Ingersoll & Rooney, P.C.

MEMORANDUM OPINION

Rufe, District Judge

Plaintiff Alan Simons has filed this lawsuit for legal malpractice relating to the amendment of a contract between Simons and his former business partner, John Brown. Simons contends that two law firms, Royer Cooper Cohen Braunfeld, LLC, and Buchanan Ingersoll & Rooney, P.C., improperly placed Brown's interests before his own when drafting and negotiating an amendment to a Put-Call Agreement governing the disposition of shares in RDS Vending, LLC, the company Simons and Brown co-owned. Both law firms have moved to dismiss Simons's Amended Complaint. For the reasons stated below, the Buchanan firm's motion will be granted in part and denied in part, and the Royer firm's motion will be granted in part and denied in part.

I. LEGAL STANDARD

Federal Rule of Civil Procedure 8 requires a complaint to contain "a short and plain statement" of facts demonstrating "that the pleader is entitled to relief."¹ When evaluating a motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief may be granted, the claim must be plausible, meaning that "the plaintiff [must] plead[ ] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."² At this stage, "[t]he District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions."³ The Court will consider "the complaint itself, exhibits attached to the complaint, matters of public record, and ‘undisputedly authentic documents that a defendant attaches as exhibits to a motion to dismiss if the plaintiff's claims are based on those documents.’ "⁴

II. FACTS ALLEGED IN THE AMENDED COMPLAINT ⁵

Until 2007 Simons was the sole owner of RDS, a vending machine supplier.⁶ In 2007, Simons sold fifty percent of the company to Brown, but maintained control over the business's operations.⁷ In conjunction with the sale, Simons and Brown executed a Put-Call Agreement that established a mechanism through which Simons could require Brown to purchase Simons's shares of the company.⁸ The Put-Call Agreement was amended in 2011 to extend the deadlines in the original contract.⁹

In 2013, the Buchanan firm and RDS entered into a fee agreement, signed by Simons, in which the firm agreed to "provide legal services to the Company in connection with pursuing vending opportunities with the Philadelphia Airport and other matters as to which we accept your request for legal representation."¹⁰ The Buchanan firm subsequently provided legal advice concerning RDS, other businesses that Simons owned, and Simons's personal matters.¹¹ Simons provided information about his personal finances to the Buchanan firm in the course of this representation.¹² In 2014, "Simons retained the Royer Firm to represent RDS ‘to act as outside counsel with regard to certain employment agreements, contractual issues, and for such other matters as we may agree from time to time.’ "¹³

When Simons and Brown decided to amend the Put-Call Agreement in 2015, Simons asked the Royer firm to prepare an amended agreement that extended the dates and preserved the same rights as the prior agreement.¹⁴ Brown retained the Buchanan firm to represent him in his personal capacity with respect to the Put-Call Agreement.¹⁵ Neither firm informed Simons of the possibility of a conflict of interest, and neither firm obtained waivers from Simons or RDS for services provided in this matter.¹⁶ However, an attorney from the Royer firm told Simons, "don't worry we'll take care of you" with respect to the negotiations.¹⁷

In November 2015, an attorney at the Buchanan firm sent proposed redline edits of the amended Put-Call Agreement to Brown.¹⁸ Brown forwarded this email to Simons, who in turn forwarded it to an attorney at the Royer firm.¹⁹ The amended agreement that Simons signed on December 3, 2015, included language that set the valuation date of RDS. Simons alleges that the valuation date in the agreement that he signed differed from a prior draft, that both firms concealed this change to benefit Brown, and that the change caused Simons to lose millions of dollars when Simons exercised his put option in March 2020.²⁰ Simons became aware of the damage that the changed valuation date caused on or after March 17, 2020.²¹

Based on these allegations, Simons asserts claims for breach of fiduciary duty, professional negligence, and breach of contract against both Defendants.²² The Amended Complaint also asserts claims for negligent misrepresentation and tortious interference with contractual relations against the Buchanan firm.²³

III. DISCUSSION

A. Statutes of Limitations

Defendants first argue that Plaintiff's claims should be dismissed as untimely under the relevant statutes of limitations.²⁴ To determine whether Plaintiff's claims are timely, it is necessary to "look to Pennsylvania law [and] predict[ ] how the Pennsylvania Supreme Court would resolve the statute of limitations issue."²⁵ Under Pennsylvania law, there is a two-year statute of limitations for legal malpractice claims that sound in tort.²⁶ Legal malpractice claims based on breach of contract are subject to a four-year statute of limitations.²⁷ Determining whether a claim is timely is "a question of law for the trial judge, but where the issue involves a factual determination, the determination is for the jury."²⁸ "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."²⁹

In situations "[w]here a plaintiff could not reasonably have discovered his injury or its cause," the discovery rule applies.³⁰ Under such circumstances, the statute of limitations 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."³¹ "Though the reasonable diligence test accounts for the different capacities of different plaintiffs, the test is nonetheless an objective one."³² The Third Circuit recognizes that "in the context of the discovery rule, ... when ‘the pleading does not reveal when the limitations period began to run ... the statute of limitations cannot justify Rule 12 dismissal.’ "³³

The Court therefore must determine whether, on its face, Plaintiff's Amended Complaint demonstrates that his claims are time-barred. Plaintiff alleges that he first discovered his injury around March 17, 2020, when he exercised his put option.³⁴ The Amended Complaint alleges that "Simons’ knowledge of the injury that flowed from that impropriety was not known, and could not have been known, by Simons, a non-attorney, and this injury was not readily ascertainable prior to that time under settled and controlling law."³⁵ Plaintiff argues that the discovery rule should toll the relevant statutes of limitations because Defendants concealed the change to the Put-Call Agreement and that he did not discover the harm until March 2020.³⁶

Defendants assert that Plaintiff's claims are time-barred because the alleged breach of duty occurred in 2015 with the execution of the Second Amendment to the Put-Call Agreement.³⁷ The Buchanan firm contends that Simons signed the amended agreement in 2015, and that he was therefore in possession of the language that forms the basis of his claims at that time.³⁸ The Royer firm adds that "Plaintiff is a sophisticated investor and an experienced and successful businessman and presumably read the 2015 Put and Call Amendment before he executed it."³⁹

The Court cannot determine as a matter of law that the discovery rule does not apply here. The Put-Call Agreement was a legal document, and the Buchanan firm acknowledges that the language which established the valuation date was not straightforward.⁴⁰ Whether Plaintiff failed to exercise reasonable diligence that would have allowed him to discover his potential legal claims before March 2020 is a fact-intensive inquiry, and the Court will not dismiss Plaintiff's claims as time-barred at this juncture.

B. Failure to State a Claim

1. Legal Malpractice Claims

a. Existence of an Attorney-Client Relationship

Pennsylvania courts recognize that "[t]he threshold element of any legal malpractice claim, whether brought in contract or tort, is the existence of an attorney-client relationship."⁴¹ This relationship can be express or implied. An implied attorney-client relationship exists where "1) the purported client sought advice or assistance from the attorney; 2) the advice sought was within the attorney's professional competence; 3) the attorney expressly or impliedly agreed to render such assistance; and 4) it is reasonable for the putative client to believe the attorney was representing him."⁴² A subjective belief that an attorney is representing the plaintiff is insufficient.⁴³ A demonstration of "a specific undertaking by the attorney furnishing professional services" may also satisfy this requirement.⁴⁴ Simons personally did not have a written agreement with either law firm to represent him in his personal capacity, so the Court must determine whether Simons has alleged the existence of an implied relationship.⁴⁵

i. The Buchanan Firm

The Amended Complaint alleges that Plaintiff's partner, John Brown, "retained the Buchanan Firm to represent Brown, individually and adversely to Simons, in negotiations for a Second Amendment to the Put and Call Agreement."⁴⁶ Simons argues...