Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Pa. Super.: Law firm’s withdrawal from damage action against franchisee not shown to be malpractice, (Jul 22, 2013)

By John W. Arden, J.D., LL.M.

A transmission shop franchisor, pursuing an action as an assignee of its franchisees, failed to demonstrate that a law firm’s withdrawal of representation in a damages action, brought by the franchisor and resulting in a default judgment of nearly $596,000, constituted legal malpractice, the Pennsylvania Superior Court has ruled (Cottman Transmission Systems, LLC v. Law Offices of Peter E. Bort, July 19, 2013, Colville, R.).

The franchisor, Cottman Transmission Systems, brought two 2005 actions against its franchisees Brijesh Patel, Sital Patel, and Sea Business Group, LLC. The first sought money damages for an alleged breach of the franchise agreement. The second was an action in equity. Cottman sent the franchisees a settlement agreement, which purportedly resolved both actions. The franchisees indicated they would obtain counsel to review the document and then would execute it. When the franchisees failed to do so, Cottman sent a notice of an intention to take default judgment on the money action.

Rochelle Bobman, an attorney with the Law Offices of Peter E. Bort, entered an appearance for the franchisees in both actions, but withdrew her appearance in the money action on the same day. A default judgment was entered in favor of Cottman in the amount of $595,965. The franchisees, through the Law Offices of Peter E. Bort, later filed a petition to open the default judgment, but the court refused. The franchisees appealed the default judgment, and the court affirmed the judgment.

The franchisees assigned their claims against the law firm to Cottman, which instituted this action for breach of contract and legal malpractice. The law firm filed an answer, claiming that it agreed to represent the franchisees in the equity action only. Cottman filed a motion for summary judgment that was denied. The law firm filed a motion for summary judgment, which the trial court granted.

On appeal, Cottman asked whether the trial court erred by ignoring material issues of fact and by finding that the franchisees did not have a meritorious defense to the default judgment and did not employ the law firm in the money damages action. According to the appellate court, the trial court granted summary judgment to the law firm because there was no meritorious defense to the default judgment.

“The trial court appears to have based its decision on the doctrine of collateral estoppel, which operates to prevent litigation of a question of law or issue of fact that has once been litigated and fully determined in a court of competent jurisdiction,” the appellate court found.

Cottman argued that collateral estoppel did not apply, since the underlying action involved different parties, causes of action, and operative facts than this action. However, Cottman failed to provide any relevant discussion as to why the trial court ruling was not applicable to dispose of the claims in this action and failed to provide any authority to support his argument. Thus, the argument was waived for purposes of review.

Cottman alternatively argued that the trial court incorrectly characterized its ruling in the underlying case as a determination that the franchisees had no meritorious defense to the default judgment, whereas the trial court ruled that the franchisees had failed to sufficiently plead a meritorious defense. However, the trial court determined that none of the alleged defenses to the action for violation of the franchise agreement were meritorious, the appellate court concluded.

Cottman’s claim that there were a “myriad of good faith defenses” which could have been pled to keep the case alive was not supported by any relevant discussion of how these defenses would have provided the franchisees with relief from entry of the default judgment. Thus, Cottman failed to persuade the appellate court of the existence of a genuine issue of material fact as to whether the law firm’s alleged negligence was the proximate cause of the damage to the franchisees.

The case is No. 2390 EDA 2012.

Attorneys: William B. Jameson for Cottman Transmission Systems, LLC. Eugene Joseph Maginnis, Jr. (Dugan, Brinkmann, Maginnis & Pace) for Law Offices of Peter E. Bort.

Companies: Cottman Transmission Systems, LLC; Law Offices of Peter E. Bort

Cases: FranchisingDistribution PennsylvaniaNews